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0016_3_CFD2006-1- Exhibit A- Preliminary Official Statement
PRELIMINARY OFFICIAL STATEMENT DATED _____, 2016 NEW ISSUE—BOOK-ENTRY ONLY NO RATING In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds. $4,175,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016B (IMPROVEMENT AREA FF) Dated: Delivery Date Due: September 1, as shown on inside cover page The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2016B (Improvement Area FF) (the “Bonds”) are being issued by the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”): (i) to finance a portion of certain public facilities eligible to be financed by the District for Improvement Area FF of the District (“Improvement Area FF”); (ii) to fund a reserve account for the Bonds; (iii) to capitalize a portion of the interest on the Bonds through September 1, 2017; and (iv) to pay costs of issuing the Bonds. The Bonds are authorized to be issued by the District for Improvement Area FF pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and pursuant to that certain Bond Indenture, dated as of November 1, 2016 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are payable from Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable parcels within Improvement Area FF and from certain other funds held under the Indenture, all as further described in this Official Statement. The Special Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within Improvement Area FF. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes” and Appendix A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The Bonds will be issued in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable on March 1, 2017 and each September 1 and March 1 thereafter. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity. See the caption “THE BONDS—Redemption.” Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF THE SECURITY OR TERMS OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. MATURITY SCHEDULE (See Inside Cover Page) The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Leibold McClendon, & Mann, Irvine, California, Issuer Counsel, and by Jones Hall, A Professional Law Corporation, Disclosure Counsel, and for the Underwriter by Nossaman LLP, Irvine, California. It is anticipated that the Bonds in book-entry form will be available for delivery on or about November __, 2016. [STIFEL LOGO] Dated: ______, 2016________________________________ *Preliminary; subject to change. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. $4,175,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016B (IMPROVEMENT AREA FF) MATURITY SCHEDULE BASE CUSIP®*_____ Maturity Date (September 1)Principal Amount Interest Rate Yield CUSIP®† $____ _____% Term Bonds Due September 1, 20__ – Price ____% Yield ____% CUSIP ®†___ *Preliminary; subject to change. *†CUSIP® is a registered trademark of the American Bankers Association. Copyright© 1999-2016 Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. All rights reserved. CUSIP® data in this Official Statement is provided by Standard & Poor’s CUSIP Service Bureau. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers. CITY OF LAKE ELSINORE COUNTY OF RIVERSIDE, CALIFORNIA CITY COUNCIL Brian Tisdale, Mayor Robert Magee, Mayor Pro Tem Daryl Hickman, Councilmember Steve Manos, Councilmember Natasha Johnson, Councilmember CITY ADMINISTRATORS Grant Yates, City Manager Jason Simpson, Director of Administrative Services PROFESSIONAL SERVICES Leibold McClendon & Mann Irvine, California Issuer Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Bond Counsel Jones Hall, A Professional Law Corporation San Francisco, California Disclosure Counsel Wilmington Trust, National Association Costa Mesa, California Trustee SCG - Spicer Consulting Group Murrieta, California Special Tax Consultant Urban Futures Incorporated Orange, California Financial Advisor Kitty Siino & Associates, Inc. Tustin, California Appraiser Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those 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 the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as representations of fact. 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. The information and expressions of opinion in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City, the District or any other parties described in this Official Statement since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 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 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate,” “project,” “budget,” or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption “THE COMMUNITY FACILITIES DISTRICT.” THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. The City maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. i TABLE OF CONTENTS Page INTRODUCTION...............................................................................................................................................................................1 The Act.........................................................................................................................................................................................1 The City, District and Improvement Area CC.................................................................................................................................2 Current and Proposed Development Within Improvement Area CC ..............................................................................................2 Sources of Payment for the Bonds................................................................................................................................................4 Developer Letters of Credit and Cash Deposits..............................................................................Error! Bookmark not defined. Description of the Bonds...............................................................................................................................................................4 Tax Exemption..............................................................................................................................................................................5 Appraisal Report...........................................................................................................................................................................5 Professionals Involved in the Offering...........................................................................................................................................6 Continuing Disclosure...................................................................................................................................................................6 Parity Bonds for Refunding Purposes Only ...................................................................................................................................7 Bond Owners’ Risks......................................................................................................................................................................7 Other Information..........................................................................................................................................................................7 ESTIMATED SOURCES AND USES OF FUNDS..............................................................................................................................9 THE BONDS ...................................................................................................................................................................................10 General Provisions......................................................................................................................................................................10 Debt Service Schedule................................................................................................................................................................ 11 Redemption................................................................................................................................................................................ 12 Registration, Transfer and Exchange..........................................................................................................................................15 SOURCES OF PAYMENT FOR THE BONDS.................................................................................................................................16 Limited Obligations .....................................................................................................................................................................16 Special Taxes.............................................................................................................................................................................16 Reserve Account of the Special Tax Fund ..................................................................................................................................22 Parity Bonds for Refunding Purposes Only .................................................................................................................................22 UNIT 13 AND UNIT 16 CASH DEPOSITS.......................................................................................................................................23 THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF..................................................................................25 General Description of the District...............................................................................................................................................25 Improvement Area FF.................................................................................................................................................................25 History of the District and Improvement Area FF.........................................................................................................................25 Appraisal Report.........................................................................................................................................................................26 Direct and Overlapping Indebtedness .........................................................................................................................................27 Estimated Appraised Value-To-Lien Ratios.................................................................................................................................30 Estimated Tax Burden on Single Family Home ...........................................................................................................................33 Concentration of Taxpayers........................................................................................................................................................ 34 Property Tax Delinquencies........................................................................................................................................................ 34 CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF............................................34 Development by Ryland..............................................................................................................................................................34 Development by Unit 13..............................................................................................................................................................39 Development by Unit 16..............................................................................................................................................................44 SPECIAL RISK FACTORS..............................................................................................................................................................48 Risks of Real Estate Secured Investments Generally..................................................................................................................48 Limited Obligations .....................................................................................................................................................................49 Insufficiency of Special Taxes.....................................................................................................................................................49 Natural Disasters ........................................................................................................................................................................ 50 Concentration of Property Ownership .........................................................................................................................................50 Failure to Develop Remaining Homes.........................................................................................................................................51 Hazardous Substances...............................................................................................................................................................51 Payment of the Special Tax is not a Personal Obligation of the Landowners...............................................................................52 Appraised Value .........................................................................................................................................................................52 Parity Taxes and Special Assessments.......................................................................................................................................52 Disclosures to Future Purchasers ...............................................................................................................................................53 Special Tax Delinquencies..........................................................................................................................................................53 FDIC/Federal Government Interests in Properties.......................................................................................................................54 Bankruptcy and Foreclosure .......................................................................................................................................................55 No Acceleration Provision...........................................................................................................................................................56 Loss of Tax Exemption................................................................................................................................................................56 Limited Secondary Market ..........................................................................................................................................................56 Proposition 218...........................................................................................................................................................................57 Ballot Initiatives...........................................................................................................................................................................58 Limitations on Remedies.............................................................................................................................................................58 Recent Case Law Related to the Mello-Roos Act........................................................................................................................ 59 Potential Early Redemption of Bonds from Prepayments............................................................................................................ 60 CONTINUING DISCLOSURE..........................................................................................................................................................60 District Continuing Disclosure Certificate.....................................................................................................................................60 ii Unit 13 and Unit 16 Continuing Disclosure Certificates................................................................................................................ 61 TAX EXEMPTION ...........................................................................................................................................................................62 LEGAL OPINION.............................................................................................................................................................................64 ABSENCE OF LITIGATION.............................................................................................................................................................64 NO RATING .................................................................................................................................................................................... 64 UNDERWRITING............................................................................................................................................................................ 64 FINANCIAL INTERESTS.................................................................................................................................................................65 ADDITIONAL INFORMATION .........................................................................................................................................................66 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX .................................A-1 APPENDIX B ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY OF LAKE ELSINORE.....................................................................................B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL ................................................................... C-1 APPENDIX D SUMMARY OF THE INDENTURE ................................................................................. D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ...............................................E-1 APPENDIX F FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE........................F-1 APPENDIX G BOOK-ENTRY ONLY SYSTEM......................................................................................G-1 APPENDIX H APPRAISAL REPORT ...................................................................................................H-1 [INSERT MAPS of (i) City, (ii) District and (iii) Improvement Area FF] 1 $4,175,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016B (IMPROVEMENT AREA FF) INTRODUCTION The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance by the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) of its Special Tax Bonds, Series 2016B (the “Bonds”). The proceeds of the Bonds will be used: (i) to finance a portion of certain public facilities eligible to be financed by the District for Improvement Area FF of the District (“Improvement Area FF”); (ii) to fund a reserve account for the Bonds; (iii) to capitalize a portion of the interest on the Bonds through September 1, 2017; and (iv) to pay costs of issuing the Bonds. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and a Bond Indenture, dated as of November 1, 2016 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as such term is defined in this Official Statement) and all moneys in the Special Tax Fund (other than the Administrative Expense Account therein) as described in the Indenture. This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined have the meanings set forth in Appendix D. The Act The District and Improvement Area FF were formed, and the District is issuing the Bonds, under the Act. The Act was enacted to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. *Preliminary, subject to change 2 The City, District and Improvement Area FF City. The City is located in the western portion of Riverside County (the “County”), California (the “State”). More information about the City is found in Appendix B - “Economic and Demographic Information Regarding the City of Lake Elsinore.” District.The District comprises a portion of Summerly, a planned residential community located in the southeast portion of the City, to the east of Lake Elsinore. McMillin Summerly, LLC, a Delaware limited liability company (“McMillin”), acquired the partially-developed Summerly project in 2010 and serves as the master developer. At build-out, the Summerly project is expected to include approximately 1,500 single-family detached homes, commercial development, and recreational and open space. The Summerly project will be built in four phases. See the caption “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF - General Description of the District” for further information with respect to the District. Improvement Area FF. Improvement Area FF consists of Neighborhoods 12, 13 and 16 within phase three of the Summerly project and is entitled for development of 187 single- family homes. See “- Current and Proposed Development Within Improvement Area FF” below. Current and Proposed Ownership and Development Within Improvement Area FF Public Infrastructure.The public infrastructure in Improvement Area FF has been completed by McMillin. The Bonds are being issued primarily to reimburse McMillin for public infrastructure costs. Private Development. The single-family residential lots in Improvement Area FF are being developed by one merchant builder and two fee builders on behalf of two single-purpose landowning entities, Summerly Unit 13, LLC, a Delaware limited liability company (“Unit 13”) and Summerly Unit 16, LLC, a Delaware limited liability company (“Unit 16”), whose sole member is McMillin: 3 (i)The merchant builder, Ryland Homes of California, Inc., a Delaware corporation (“Ryland”), which is a direct, wholly-owned subsidiary of CalAtlantic Group, Inc., a Delaware corporation (“CalAtlantic”), is developing a neighborhood called Sunrise Springs II. Sunrise Springs II is entitled for 70 single-family homes. A summary of property development and ownership in Sunrise Springs II as of August 15, 2016, is set forth below: Category Number Completed homes - Conveyed to home buyers 34 Completed homes - Owned by Ryland 10 Homes under construction 9 Finished lots 17 Total 70 (ii)One of the fee builders, Van Daele Development Corporation, a California corporation (“Van Daele”), is constructing and selling homes on the land owned by Unit 13 in a neighborhood called Claiborne pursuant to a construction management and marketing agreement with Unit 13. Claiborne is entitled for 64 single-family homes. A summary of property development and ownership in Claiborne as of August 15, 2016, is set forth below: Category Number Completed homes - Owned by Unit 13 3 Homes under construction 6 Finished lots 55 Total 64 (iii)The other fee builder, SeaCountry Summerly, LLC a California limited liability company, SeaCountry Sales, Inc., a California corporation and RSB Homes, Inc., a California corporation (collectively, “SeaCountry”), is constructing and selling homes on the land owned by Unit 16 in a neighborhood called BlueWater pursuant to a construction management and marketing agreement with Unit 16. BlueWater is entitled for 53 single-family homes. A summary of property development and ownership in BlueWater as of August 15, 2016, is set forth below: Category Number Completed homes - Owned by Unit 16 2 Homes under construction 7 Finished lots 44 Total 53 Concentration of Ownership. As described in greater detail in “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF” and “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF,” there was significant concentration of ownership in Improvement Area FF as of August 15, 2016: If there were no additional homes conveyed to homebuyers, the property owned by Ryland would be responsible for 17.20% of the Special Taxes expected to be levied in fiscal year 2017-18. If there were no additional homes conveyed to homebuyers, the property owned by Unit 13 (38.47%) and Unit 16 (27.90%), which are affiliated entities that are 4 wholly owned by McMillan, would be responsible for 66.37% of the Special Taxes expected to be levied in fiscal year 2017-18. See “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF” for more detailed information about the current and proposed development in Improvement Area FF. Sources of Payment for the Bonds Special Taxes. As used in this Official Statement, the term “Special Tax” means the annual Special Tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within Improvement Area FF. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes” and Appendix A—“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” Under the Indenture, the District has pledged to repay the Bonds from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund (other than the Administrative Expense Account therein) established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Reserve Account of the Special Tax Fund.” Foreclosure Proceeds. The District has covenanted for the benefit of the owners of the Bonds to undertake judicial foreclosure in certain instances. See the caption “SOURCES OF PAYMENT FOR THE BONDS - Proceeds of Foreclosure Sales.” EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Unit 13 and Unit 16 Cash Deposits As security for their respective obligation to pay Special Taxes for a limited period of time, Unit 13 and Unit 16 have each committed to provide the District with a cash deposit (the “Unit 13 Cash Deposit,” “Unit 16 Cash Deposit” and together, the “Cash Deposits”). The Cash Deposits will be held by the Trustee. The Unit 13 Cash Deposit was provided on ______, 2016 in the amount of $138,920.93. The Unit 16 cash deposit was issued on _____, 2016 in the amount of $103,369.06.The Cash Deposits are not pledged as security for the Bonds and the District could instruct the Trustee to release the Cash Deposits at any time without the consent of the Owners or Beneficial Owners of the Bonds. See “LETTERS OF CREDIT” below. Description of the Bonds 5 The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described in this Official Statement. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described in this Official Statement is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See Appendix G—“BOOK-ENTRY ONLY SYSTEM.” Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See Appendix G—“BOOK-ENTRY ONLY SYSTEM.” The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as described in this Official Statement. See the caption “THE BONDS—Redemption.” For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix D—“SUMMARY OF THE INDENTURE.” Tax Exemption In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION.” Set forth in Appendix C is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of Bond Counsel’s opinion and certain tax consequences incident to the ownership of the Bonds, see the caption “TAX EXEMPTION.” Appraisal Report Initial Appraisal Report. An MAI appraisal of the land and existing improvements within Improvement Area FF was prepared by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”). The appraisal is dated October 4, 2016 and is entitled “Appraisal Report Community Facilities District No. 2006-1 of the City of Lake Elsinore, Improvement Area FF of the City of Lake Elsinore” (the “Initial Appraisal Report”). See “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF - Appraisal Report” and APPENDIX H — “APPRAISAL REPORT.” The Appraisal Report provides an estimate of the aggregate market value of the as-is condition of the taxable property within Improvement Area FF as of the date of value, August 15, 6 2016 (the “Date of Value”). The Appraisal Report reached the following market value conclusions as of August 15, 2016. Please note that the ownership information presented in the following tables is current as of August 15, 2016; ownership information as of _____, 2016 is presented elsewhere in this Official Statement. Neighborhood Number of Lots Market Value Sunrise Springs II Ryland Ownership 36 $4,432,113 Individually-Owned Homes 34 10,596,340 Claiborne 64 6,500,454 BlueWater 53 5,175,422 Total 187 $26,704,329 Supplement to Appraisal Report. The Appraiser subsequently issued a Supplement to Appraisal Report dated October 4, 2016 (the “Supplement to Appraisal Report”), in which the Appraiser concluded that the market values of the taxable property in Improvement Area FF are not less than the concluded values in the Initial Appraisal Report. Together, the Initial Appraisal Report and the Supplement to Appraisal Report are referred to in this Official Statement as the “Appraisal Report”. Updated Ownership Information. Ownership information as of _____, 2016 is presented elsewhere in this Official Statement. See “CURRENT PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF.” Professionals Involved in the Offering Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee under the Indenture. Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Bond Counsel. Certain legal matters will be passed on for the City and the District by Leibold McClendon & Mann, Irvine, California, Issuer Counsel, and by Jones Hall, A Professional Law Corporation, San Francisco, California, Disclosure Counsel, and for the Underwriter by Nossaman LLP, Irvine, California. Other professional services have been performed by SCG - Spicer Consulting Group, Murrieta, California, as Special Tax Consultant (the “Special Tax Consultant”), Kitty Siino & Associates, Inc., Tustin, California, as Appraiser and Urban Futures Incorporated, Orange, California, as Financial Advisor (the “Financial Advisor”). For information concerning circumstances in which certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.” Continuing Disclosure The District has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), maintained on the Internet at http://emma.msrb.org, certain annual financial information and operating data and notices of certain enumerated events. These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and 7 Exchange Commission (“Rule 15c2-12”). See Appendix E—“FORM OF CONTINUING DISCLOSURE CERTIFICATE.” Unit 13 and Unit 16 have eachagreed to provide, or cause to be provided, to EMMA certain information relating to Unit 13 and Unit 16 and the property Unit 13 and Unit 16 own within Improvement Area FF for a limited period of time. See Appendix F—“FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.” Parity Bonds for Refunding Purposes Only The District has covenanted not to issue additional indebtedness secured by the Net Taxes on a parity with the Bonds (“Parity Bonds”) other than for refunding all or a portion of the Bonds or any Parity Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS— Parity Bonds for Refunding Purposes Only.” Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied in the future on the property within Improvement Area FF, which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the captions “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF—Direct and Overlapping Indebtedness” and “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” Bond Owners’ Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references in this Official Statement to the Indenture, the Bonds and the Constitution and laws of the State, as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix D. Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 130 S. Main Street, Lake Elsinore, California, 92530, Attention: City Clerk. 8 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 9 ESTIMATED SOURCES AND USES OF FUNDS The District is issuing the Bonds to finance a portion of certain public facilities eligible to be financed by the District, to fund a reserve account for the Bonds, and to pay costs of issuing the Bonds. The following table sets forth the expected sources and uses of Bond proceeds. Sources of Funds Principal Amount of Bonds $ Less Net Original Issue Discount Total Sources $ Uses of Funds: Costs of Issuance Account(1)$ Capitalized Interest(2) Acquisition and Construction Fund Reserve Account of the Special Tax Fund Underwriter’s Discount Total Uses $ (1)To pay costs of issuance, including legal fees, printing costs, and Appraiser, Financial Advisor, Special Tax Consultant and Trustee fees. (2)A portion of the interest on the Bonds will be capitalized through September 1, 2017. 10 THE BONDS General Provisions The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on March 1, 2017 and each September 1 and March 1 thereafter (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on any Bond will 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 will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to the immediately succeeding Interest Payment Date, in which event interest will 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 will be payable from the dated date of the Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on such Bond will 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 such Bond, interest on such Bond will be payable from its dated date. Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate principal amount of Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States. Principal of, premium, if any, and interest on the Bonds due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Costa Mesa, California. The Bonds are issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee for the DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. See Appendix G—“BOOK-ENTRY ONLY SYSTEM.” 11 Debt Service Schedule The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or special mandatory redemptions. See the caption “—Redemption” below. Date (September 1)Principal Interest Total Total _________________________________ Source: Underwriter. 12 Redemption Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Redemption Date Redemption Price Each Interest Payment Date through March 1, 20__103% September 1, 20__ and March 1, 20__102 September 1, 20__ and March 1, 20__101 September 1, 20__ and any Interest Payment Date thereafter 100 In the event that the District elects to redeem Bonds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be given at least 30 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee. Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ and September 1, 20__ (the “Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established by the Indenture, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1)Sinking Payments †Maturity. 13 Term Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1)Sinking Payments †Maturity. If the District purchases Term Bonds during the fiscal year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Term Bonds purchased pursuant to the Indenture will be cancelled pursuant to the Indenture. In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in Improvement Area FF made in accordance with the Rate and Method (the “Prepayments”) deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Date Redemption Price Each Interest Payment Date through March 1, 20__103% September 1, 20__ and March 1, 20__102 September 1, 20__ and March 1, 20__101 September 1, 20__ and any Interest Payment Date thereafter 100 Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be mailed by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book-entry system. See Appendix G—“BOOK-ENTRY ONLY SYSTEM.” The Trustee will give notice, in the name of the District, of the redemption of Bonds; provided, however, that a notice of a redemption to be made from other than from Sinking Fund Payments will 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 will: (i) 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 are subject to redemption, or 14 all of the Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will 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 will cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee will 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 of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will 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 Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption will be sent not later than the date that notice of redemption is mailed to the Owners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating 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 will 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. With respect to any notice of optional redemption of Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. 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 will be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat such Bonds, as applicable, as representing 15 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 procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption. Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the District, 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. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, 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: (i) the Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof, will cease to bear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, 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. Registration, Transfer and Exchange Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds. The ownership of the Bonds will be established by the Bond registration books held by the Trustee. Transfer or Exchange. 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 or Parity Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney. Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but will require the Owner 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 are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not 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. 16 SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Special Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues from Improvement Area FF remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Cap) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expense Account therein). Special Tax revenues include the proceeds of the annual Special Tax levy received by the District, including any scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third party or to the City for 100% of the delinquent amount shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expense Account therein), including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Special Taxes Authorization and Pledge. At a special election held on April 8, 2014, the eligible electors within Improvement Area FF authorized the District to incur indebtedness in an amount not to exceed $5,500,000 in Improvement Area FF and approved the Rate and Method which authorizes the Special Tax to be levied in Improvement Area FF to repay District indebtedness, including the Bonds. The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes in Improvement Area FF pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor’s Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes collected from the annual Special Tax levy and the proceeds of any prepayment of Special Taxes have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds. The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method. See Appendix A-“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will, in all 17 circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS - Insufficiency of Special Taxes.” Unit 13 and Unit 16 Cash Deposits.Unit 13 and Unit 16 have each committed to provide a Cash Deposit to secure payment of Special Taxes levied on the property in Improvement Area FF owned by Unit 13 and Unit 16, respectively, for a limited period. The Cash Deposits will be held by the Trustee. The Cash Deposits are not pledged as security for the Bonds and the District could instruct the Trustee to release the Cash Deposits at any time without the consent of the Owners or Beneficial Owners of the Bonds. See “LETTERS OF CREDIT.” Rate and Method of Apportionment of Special Tax. The District is legally authorized to levy the Special Taxes in Improvement Area FF in an amount determined according to the Rate and Method. The Rate and Method apportions the total amount of Special Taxes to be collected among the taxable parcels in Improvement Area FF as more particularly described below. The full text of the Rate and Method is set forth in Appendix A. Property to be taxed pursuant to the Rate and Method of Apportionment is classified as “Taxable Property.” Taxable Property consists of Developed Property, Taxable Public Property, Taxable Property Owner Association Property or Undeveloped Property, all as defined in the Rate and Method. The amount of Special Tax that the District may levy is limited by the Maximum Special Tax rates set forth in the Rate and Method. The Maximum Special Tax for each Assessor’s Parcel of 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. 18 Maximum Special Tax Levy by Land Use. The table below presents the Assigned Special Tax for fiscal year 2017-18 for each parcel in Improvement Area FF by land use assuming no additional homes are conveyed to homebuyers. The table demonstrates that based on such assumption approximately 58.6% of the fiscal year 2017-18 levy would be levied on Approved Property. Information is presented about the fiscal year 2017-18 special tax levy because the City levied special taxes in fiscal year 2016-17 on only a handful of parcels for which building permits had been issued as of May 1, 2016 in Improvement Area FF and most of the interest on the Bonds is capitalized from proceeds of the Bonds through September 1, 2017. TABLE 1 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA FF) ASSIGNED SPECIAL TAX BY CLASS Land Use Type Residential Floor Area (sq. ft.) Assigned Special Tax Rate FY 2017-18 Estimated Special Tax Rates FY 2017-18 (1) No. of Units No. of Acres Aggregate Estimated Special Taxes FY 2017-18 Percent of Total Residential Property < 1,100 $574.35 $574.35 0 $0.00 0.0% Residential Property 1,100-1,299 $660.50 $660.50 0 $0.00 0.0% Residential Property 1,300-1,499 $746.64 $746.64 0 $0.00 0.0% Residential Property 1,500-1,699 $832.79 $832.79 21 $17,488.59 9.5% Residential Property 1,700-1,899 $918.95 $918.95 40 $36,758.00 19.9% Residential Property 1,900-2,099 $976.39 $976.39 2 $1,952.72 1.1% Residential Property 2,100-2,299 $1,033.82 $1,033.82 5 $5,169.10 2.8% Residential Property 2,300-2,499 $1,119.97 $1,119.97 3 $3,359.91 1.8% Residential Property 2,500-2,699 $1,206.12 $1,206.12 0 $0.00 0.0% Residential Property 2,700-2,899 $1,292.28 $1,292.28 3 $3,876.84 2.1% Residential Property 2,900-3,099 $1,378.42 $1,378.42 2 $2,756.84 1.5% Residential Property 3,100-3,299 $1,464.57 $1,464.57 0 $0.00 0.0% Residential Property 3,300-3,499 $1,550.72 $1,550.72 0 $0.00 0.0% Residential Property > 3,499 $1,636.88 $1,636.88 3 $4,910.64 2.7% Approved Property N/A $10,054.48 $6,617.02 108 16.32 $107,989.86 58.6% Total 187 16.32 $184,262.50 100.0% ___________________ (1)Includes estimated Administrative Expenses of $20,000. Source: Special Tax Consultant. For each fiscal year, the City Council will determine the Special Tax Requirement. The Special Tax will be levied pursuant to the Rate and Method on each Assessor’s Parcel of Taxable Property, up to the applicable Maximum Special Tax, to satisfy the Special Tax Requirement. Notwithstanding the foregoing, under no circumstances will the Special Taxes levied against any Assessor’s Parcel used as a private residence be increased as a consequence of delinquency or default by the owner or owners of any other Assessor’s Parcel or Assessor’s Parcels within Improvement Area FF by more than 10% above the amount that would have been levied in such fiscal year had there never been any such delinquencies or defaults. The Rate and Method provides that Special Taxes may be prepaid in whole under the circumstances described in Section G of the Rate and Method. Estimated Debt Service Coverage. In connection with the issuance of the Bonds, the Special Tax Consultant will certify that the Maximum Special Tax that may be levied in each fiscal year on Assessor’s Parcels within Improvement Area FF classified as Taxable Property as 19 of May 1, 2017 will be at least equal to the sum of: (i) 110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Cap (which is defined in the Indenture as $20,000 for fiscal year 2017-18 and escalating 2% annually thereafter. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. The Rate and Method provides that the Special Tax may not be levied on a parcel of Taxable Property after fiscal year 2052-2053. There are adequate Net Taxes, assuming 100% collection, to pay debt service and provide at least 110% coverage in each year throughout the term of the Bonds. See the caption “SPECIAL RISK FACTORS—Proposition 218” for a discussion of certain provisions of State law that could allow property owners within Improvement Area FF to reduce the maximum amount of Special Taxes that may be levied. Levy, Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer and Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. The District has covenanted in the Indenture that each year it will levy Special Taxes in Improvement Area FF up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses. The District has made certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes in Improvement Area FF to pay debt service on the Bonds and Administrative Expenses when due. First, the District has covenanted that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. Second, the District has covenanted, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for Improvement Area FF, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area FF to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. Third, the District has covenanted that, in the event that any initiative is adopted by the qualified electors in Improvement Area FF which purports to reduce the maximum Special Tax below the levels specified in the previous sentence or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successful. See the caption “SPECIAL RISK FACTORS—Proposition 218.” 20 Fourth, the District has covenanted that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes from Improvement Area FF to pay the principal of and interest on the Bonds and Parity Bonds when due. Although the Special Taxes constitute liens on taxed parcels within Improvement Area FF, they do not constitute a personal indebtedness of the owners of property within Improvement Area FF. Moreover, other liens for taxes and assessments already exist on the property located within Improvement Area FF and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners therein. See the captions “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF —Direct and Overlapping Indebtedness” and “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” There is no assurance that property owners in Improvement Area FF will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK FACTORS.” Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of property within Improvement Area FF resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds under the Indenture. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District has covenanted for the benefit of the owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels in Improvement Area FF with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each fiscal year of the District ending June 30 (each, a “Fiscal Year”) in which such Special Taxes were due; (ii) commence judicial foreclosure proceedings against all parcels in Improvement Area FF with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii)diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” 21 There is no assurance that the property within Improvement Area FF can be sold for the appraised values described in this Official Statement, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future landowners within Improvement Area FF. See the caption “SPECIAL RISK FACTORS—Appraised Value.” The District has further covenanted that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK FACTORS— Bankruptcy and Foreclosure.” Moreover, 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 net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS—Appraised Value.” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes. Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the Treasurer and Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. When the County apportions Special Taxes to the District, the District will transmit the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture. The Trustee is required to disburse moneys in the Special Tax Fund, first to the Administrative Expense Account of the Special Tax Fund in an amount necessary to pay the Administrative Expenses, up to the amount of the Administrative Expenses Cap. Additionally, on the dates specified in the Indenture and if there are sufficient amounts available in the Special Tax Fund for such purposes, the Trustee is to make the following transfers in the priority described below: First:To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date. Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. Second:To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year commencing September 1, 2017, equals the principal payment of the Bonds and any Parity Bonds due on such September 1 and any principal payment due on a 22 previous September 1 which remains unpaid. Moneys in the Principal Account will be used for the payment of the principal of the Bonds and any Parity Bonds as the same become due. Third:To the Redemption Account, an amount sufficient to pay the principal of and interest on and any premiums payable on Bonds and any Parity Bonds called for mandatory sinking fund redemption and optional redemption, in such order. Fourth:To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement. Fifth:To the Administrative Expense Account of the Special Tax Fund the amount of any Administrative Expenses for the current Bond Year in excess of the Administrative Expenses Cap as directed by the City. Sixth:To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture. Seventh:To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers on September 1. Reserve Account of the Special Tax Fund In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. “Reserve Requirement” is defined in the Indenture to mean, as of any date of calculation, the lesser of: (i) 10% of the initial principal amount of the Bonds and any Parity Bonds; (ii) the Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds; or (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds. Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District has covenanted to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, including Sinking Fund Payments, or any Parity Bonds to the extent that other monies are not available therefor; and (ii) to redeem Bonds in accordance with the Indenture and the Rate and Method in the event of prepayment of Special Taxes or to redeem Parity Bonds or in the event of a partial defeasance Parity Bonds for Refunding Purposes Only The District has covenanted not to issue Parity Bonds except as provided in the Indenture and only for the purposes of refunding all or a portion of the Bonds. 23 UNIT 13 AND UNIT 16 CASH DEPOSITS The Cash Deposits are not pledged as security for the Bonds and the District could instruct the Trustee to release the Cash Deposits at any time without the consent of the Owners or Beneficial Owners of the Bonds. Each of Unit 13 and Unit 16 has committed to deposit cash with the Trustee (individually, the “Unit 13 Cash Deposit” and the “Unit 16 Cash Deposit” and cumulatively referred to in this Official Statement as the “Cash Deposits”) to secure payment of Special Taxes levied on the property in Improvement Area FF owned by Unit 13 and Unit 16, respectively. The Cash Deposits will identify the City as beneficiary and will be held by the Trustee. The initial amount of the Unit 13 Cash Deposit is $138,920.93, and the initial amount of the Unit 16 Cash Deposit is $103,369.06, each of which is equal to two years of the Special Tax levy attributable to parcels owned by Unit 13 and Unit 16 respectively, as of the date of issuance of the Bonds. During each fiscal year in which Unit 13 is obligated to maintain the Unit 13 Cash Deposit and/or Unit 16 is obligated to maintain the Unit 16 Cash Deposit, as applicable, it must equal the estimated amount of Special Taxes to be levied on property owned by Unit 13 and Unit 16, respectively, or their successors-in-interest (other than individual homeowners) during that fiscal year and the subsequent fiscal year. When Unit 13 or Unit 16 has conveyed 80% or more of the residential lots that it is developing within Improvement Area FF, the applicable Cash Deposits will be released. Notwithstanding the foregoing, the District may release either of the Cash Deposits at any time. 24 [INSERT AERIAL PHOTOGRAPH] 25 THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF General Description of the District The District consists of approximately 293 acres of contiguous land located at the east end of Lake Elsinore near the I-15 Freeway. The topography of the District is relatively flat with only gradual sloping down to the south and west. The District is within an area covered by an amended East Lake Specific Plan (the “Specific Plan”) which was originally adopted by the City Council in 1993. The Specific Plan covers a 3,000-acre area that provided for up to 9,000 dwelling units and a combination of commercial, recreational and open space uses. The District comprises 293 of these acres and at build-out, is planned to contain just under 1,600 single-family detached homes. Although not part of the District, the Summerly development includes three 1/2-acre neighborhood parks, a larger community park, a community recreation center, open space areas, and a golf course. It is projected that there will be four phases (each, a “Phase”) with a total of 22 different neighborhoods of homes on lots ranging from 3,525 square feet to 7,200 square feet, with a wide range of home sizes and prices. A map of the District is set forth on the preceding page. Improvement Area FF General.Improvement Area FF includes Neighborhoods 12, 13 and 16 and is part of Phase 3 of the Summerly project. Improvement Area FF consists of a total of 187 single-family lots. Public Infrastructure.All in-tract infrastructure necessary to complete the planned development within Improvement Area FF has been constructed. Utilities.Water and sewer service to the property within Improvement Area FF is currently supplied by the Elsinore Valley Municipal Water District. Electricity is currently supplied by Southern California Edison Company, gas by The Gas Company and telephone services by Frontier (formerly Verizon Communications). Although, like all of Southern California, the land within Improvement Area FF is subject to seismic activity, it is not located within an Alquist-Priolo Earthquake Fault Zone. Development of Single-Family Lots.Information about the ownership and planned development of the single-family lots in Improvement Area FF is set forth under the caption “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF.” History of the District and Improvement Area FF The District was formed in 2006 pursuant to the Act. Since then, the District was amended by two sets of change proceedings. Most recently, in 2014, the City completed additional proceedings to amend the District. Pursuant to Resolution No. 2014-10 on February 25, 2014, the City Council, among other things, designated Improvement Area FF, and, pursuant to Resolution No. 2014-011 on February 25, 2014, stated its intention and necessity to incur bonded indebtedness in the amount of not to exceed $5,500,000 for Improvement Area FF for the purpose of financing the 26 purchase, construction, expansion or rehabilitation of certain facilities in Improvement Area FF (the “Facilities”). Subsequent to a noticed public hearing on April 8, 2014, the City Council adopted Resolution No 2014-018 on April 8, 2014, which called an election within Improvement Area FF on the proposition of incurring bonded indebtedness, levying a special tax and setting an appropriations limit On April 8, 2014, an election was held within Improvement Area FF in which the eligible electors within Improvement Area FF approved by more than two-thirds vote the proposition authorizing, among other things, the issuance of bonds in an amount not to exceed $5,500,000, to finance the Facilities. On April 8, 2014, the City Council, acting as the legislative body of the District, introduced Ordinance No. 2014-1325 (the “Ordinance”), which provides for the rate and method of apportionment and levying of the Special Tax (the “Rate and Method”) within Improvement Area FF. The Ordinance was adopted on April 22, 2014. Appraisal Report General.An MAI appraisal of the land and existing improvements within Improvement Area FF was prepared by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”). The appraisal is dated October 4, 2016 and is entitled “Appraisal Report Community Facilities District No. 2006-1 of the City of Lake Elsinore” (the “Appraisal Report”). See APPENDIX H — “APPRAISAL REPORT.” Estimated Market Value.The Appraisal Report provides an estimate of the aggregate market value of the as-is condition of the taxable property within Improvement Area FF as of the date of value, August 15, 2016 (the “Date of Value”). Neighborhood Number of Lots Market Value Sunrise Springs II Ryland Ownership 36 $4,432,113 Individually Owned Homes 34 10,596,340 Total (Sunrise Springs II)70 15,028,453 Claiborne - Owned by Unit 13 64 6,500,454 BlueWater - Owned by Unit 16 53 5,175,422 Total 187 $26,704,329 Method of Valuation.The Appraisal Report utilizes the following methods of valuation of the various properties in Improvement Area FF: Completed-Individually Owned homes: The analysis of the completed- Individually Owned homes is of the aggregate value and on a mass appraisal basis by means of the Sales Comparison Approach. Over 95% Completed-unsold homes: The analysis considers a discount due to the concentrated ownership with the discount reflecting holding/sales costs, finishing costs, risk and profit in order to sell off the homes. Homes under 95% Complete/Finished Lots: The Appraisal values homes that are under construction but are less than 95% complete as of the Date of Value on the basis of a finished lot, rather than attribute value to partially-completed improvements. The 27 analysis of the vacant lots as if in finished condition is based on the Sales Comparison Approach, considering recent sales of residential land or bulk lots from the general area in comparison to the subject property less remaining fees to be paid. See “APPENDIX H - APPRAISAL REPORT.” Supplement to Appraisal Report.The Appraiser prepared a Supplement to the Appraisal Report, dated as of October 10, 2016 (the “Supplement to Appraisal Report”). The Supplement to Appraisal Report concluded as follows: Sunrise Springs II (Ryland). Because of the additional number of completed-sold homes by Ryland (__), and the additional amount of home construction by Ryland that has taken place, the aggregate market value as of October 10, 2016 is not less than the value conclusion as of August 15, 2016 ($15,028,453). Claiborne (Unit 13). Because of the number of completed-sold homes in the Claiborne neighborhood (__), and the additional amount of home construction that has taken place, the aggregate market value as of October 10, 2016 is not less than the value conclusion as of August 15, 2016 ($6,500,454). BlueWater (Unit 16). Because of the number of completed-sold homes in the Bluewater neighborhood (__), and the additional amount of home construction that has taken place, the aggregate market value as of October 10, 2016 is not less than the value conclusion as of August 15, 2016 ($5,175,422). See “APPENDIX H - APPRAISAL REPORT.” Updated Ownership Information. Ownership information as of ______, 2016 is presented elsewhere in this Official Statement. See “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF.” Direct and Overlapping Indebtedness The ability of an owner of land within Improvement Area FF to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. Certain of those taxes and assessments relate to direct and overlapping debt which is set forth in Table 2 below (the “Debt Report”). The Debt Report includes the principal amount of the Bonds. The Debt Report has been derived from data assembled and reported to the District by the Special Tax Consultant as of August 15, 2016. Neither the District, the City nor the Underwriter has independently verified the information in the Debt Report or guarantees its completeness or accuracy. The Debt Report sets forth those entities which have issued debt and does not include entities which only levy or assess fees, charges, ad valorem taxes or other special taxes. The Debt Report is included for general information purposes only. 28 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 29 TABLE 2 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA FF) DIRECT AND OVERLAPPING DEBT(1) I. Appraisal Value (1)$26,704,329 II. Land Secured Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels in CFD 2006-1 IA FF(4) Amount Applicable CITY OF LAKE ELSINORE CFD 2006-1 IA FF CFD $4,175,000 $4,175,000 100%187 $4,175,000* TOTAL OUTSTANDING LAND SECURED BONDED DEBT (2)(3)$4,175,000* Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Unissued % Applicable Parcels in CFD 2006-1 IA FF(4) Amount Applicable CITY OF LAKE ELSINORE CFD NO. 2006-1 IA FF CFD $5,500,000 $0 100%187 $0* LAKE ELSINORE USD CFD NO. 2006-2 IA B CFD $16,000,000 $16,000,000 37%187 $5,920,000* TOTAL UNISSUED LAND SECURED INDEBTEDNESS (2)(3)$5,920,000* TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESS (2)(3) $10,095,000* III. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels in CFD 2006-1 IA FF(4) Amount Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $110,420,000 0.000%187 $308 MT. SAN JACINTO JR COLLEGE DEBT SERVICE GO $70,000,000 $70,000,000 0.009%187 $6,521 TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT (2)$6,829 Authorized but Unissued Overlapping Indebtedness Type Authorized Unissued % Applicable Parcels in CFD 2006-1 IA FF(4) Amount Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $0 0.000%187 $0 MT. SAN JACINTO JR COLLEGE DEBT SERVICE GO $295,000,000 $225,000,000 0.009%187 $20,959 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS (2)$20,959 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $27,787 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $4,181,828* TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS $10,115,959* IV. Ratios to Appraised Valuation* Outstanding Land Secured Bonded Debt 6.40:1 Total Outstanding Bonded Debt 6.39:1 (1) Based on Appraisal Report as of August 15, 2016, date of value. (2) SCG - Spicer Consulting Group is not aware of any additional bonded debt for parcels in CFD No. 2006-1 IA FF for the referenced Fiscal Year 2017-18. Issued, Outstanding and Authorized Amounts are for Improvement Area FF. (3)Amount includes $4,175,000 Special Tax Revenue Bonds Series 2016B. Parity bonds will be issued for refunding only. (4) All parcels have subdivided into 187 individual parcels for Fiscal Year 2017-18 for Improvement Area FF. As of the date of the appraisal, August 15, 2016, 79 parcels are Developed Property, 108 parcels are considered as Approved Property per the Rate and Method of Apportionment. *Preliminary; subject to change. Source: Special Tax Consultant. 30 Estimated Appraised Value-To-Lien Ratios The total appraised value of the property within Improvement Area FF is $26,704,329. The estimated appraised value-to-lien ratio for such property based on the appraised values and the principal amount of the Bonds (there is currently no outstanding overlapping land- secured debt) is 6.40:1*. Tables 3 and 4 below set forth the estimated appraised value-to-lien ratios for parcels within Improvement Area FF subject to a projected Special Tax levy based upon each parcel’s share of the Maximum Special Tax and overlapping land-secured debt. Table 3 covers all of the parcels of Taxable Property in Improvement Area FF; Table 4 only covers the parcels of Developed Property. Please note that the ownership information presented in the following tables is current as of August 15, 2016; ownership information as of _______, 2016 is presented elsewhere in this Official Statement. Information is presented based on a hypothetical fiscal year 2017-18 special tax levy assuming no additional homes are conveyed to homebuyers because the City levied special taxes in fiscal year 2016-17 on only a handful of properties in Improvement Area FF and most of the interest on the Bonds is capitalized from proceeds of the Bonds through September 1, 2017. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] ____________________________ * Preliminary, subject to change 31 TABLE 3 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA FF) ESTIMATED APPRAISED VALUE-TO-LIEN RATIOS ALLOCATED BY PROPERTY TYPE Property Classification Number of Parcels (1) Appraised Property Value (4) % of Appraised Value Maximum Tax % of Maximum Tax Estimated FY 2017-18 Levy (5) % of Estimated FY 2017-18 Levy CFD 2006-1 IA FF Proposed 2016 Bonds *(6) Appraised Value- to- Lien Ratio* Developed Property Individual Owned 34 $10,596,340 39.68%$47,713 17.18%$30,297 16.44%$686,456 15.44:1 Ryland Homes Owned (1)27 $3,686,154 13.80%$37,890 13.65%$23,950 13.00%$542,658 6.79:1 Unit 13 Owned (2)9 $1,579,695 5.92%$14,804 5.33%$12,578 6.83%$284,994 5.54:1 Unit 16 Owned (3)9 $1,241,877 4.65%$13,181 4.75%$9,448 5.13%$214,070 5.80:1 Subtotal Developed 79 $17,104,067 64.05%$113,587 40.91%$76,273 41.39%$1,728,177 9.90:1 Approved Property Ryland Owned 9 $745,959 2.79%$11,764 4.24%$7,742 4.20%$175,416 4.25:1 Unit 13 Owned 55 $4,920,759 18.43%$88,580 31.90%$58,296 31.64%$1,320,865 3.73:1 Unit 16 Owned 44 $3,933,545 14.73%$63,745 22.96%$41,952 22.77%$950,543 4.14:1 Subtotal Approved 108 $9,600,262 35.95%$164,089 59.09%$107,990 58.61%$2,446,823 3.92:1 Total 187 $26,704,329 100.00%$277,676 100.00%$184,263 100.00%$4,175,000 6.40:1 (1) Reflects Appraised Value for 9 Homes Under Construction, 10 Homes that are 95% Complete, and 8 Finished Lots by Ryland which have building permits issued and are therefore considered developed per the RMA. (2) Reflects Appraised Value for 3 Model Homes and 6 Homes Under Construction by Van Daele Homes (on behalf of Unit 13) which have building permits issued and are therefore considered developed per the RMA. (3) Reflects Appraised Value for 2 Model Homes and 7 Homes Under Construction by Sea Country Homes (on behalf of Unit 16) which have building permits issued and are therefore considered developed per the RMA. (4) Reflects the appraised value based on ownership status as of August 15, 2016, the date of value of the Appraisal. (5) Estimated Fiscal Year 2017-18 Special Tax Levy based upon development status as of August 15, 2016 and preliminary debt service with administration of $20,000. (6) Includes the principal amount of the 2016 Series B Bonds. Responsibility for the principal amount of the 2016 Series B Bonds has been allocated based on the projected Fiscal Year 2017-18. *Preliminary; subject to change Source: Special Tax Consultant. 32 TABLE 4 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA FF) VALUE-TO-LIEN STRATIFICATION Appraised Value-to-Lien Ratio Range Number of Parcels of Developed Property % of Developed Property Appraised Value (1) % of Appraised Value CFD 2006-1 IA FF Estimated FY 2017-18 Levy Percent Share of Estimated FY 2017-18 Levy CFD 2006-1 IA FF Proposed 2016 Bonds (2)* Percent Share of Proposed 2016 Bonds(2) Aggregate Value-to- Lien* Less than 3.00:1 (3)7 8.86%$626,139 3.66%$9,477 12.42%$214,722 12.42%2.92:1 Between 3.01:1 to 6.00:1 23 29.11%$1,945,495 11.37%$21,279 27.90%$482,145 27.90%4.04:1 Between 6.01:1 to 9.00:1 0 0.00%$0 0.00%$0 0.00%$0 0.00%N/A Between 9.01:1 to 12.00:1 8 10.13%$2,181,446 12.75%$8,902 11.67%$201,709 11.67%10.81:1 Between 12.01:1 to 15.00:1 30 37.97%$8,922,759 52.17%$27,454 35.99%$622,041 35.99%14.34:1 Greater than 15.01:1 (4)11 13.92%$3,428,228 20.04%$9,161 12.01%$207,562 12.01%16.52:1 Total (5)79 100.00%$17,104,067 100.00%$76,273 100.00%$1,728,178 100.00%9.90:1 (1)Reflects the appraised value for all parcels of Developed Property as of August 15, 2016-the date of the Appraisal. (2) Responsibility of the par amount has been allocated based on the estimated FY 2017-18 special tax levy, based on development status as of August 15,2016. The percent share of proposed 2016 Bonds reflects the percentage share of Developed Property only, not the total of all property in Improvement Area FF including Approved Property. (3) The minimum value to lien in the less than 3.00:1 category is 2.41:1. (4) The maximum value to lien in the greater than 15.01 :1 category is 16.52:1. (5) Totals do not include 108 parcels of Approved Property owned by Ryland, Unit 13 and Unit 16. See Table 3 for more information about these parcels. *Preliminary; subject to change Source: Special Tax Consultant. 33 Estimated Tax Burden on Single Family Home The following table shows a sample property tax bill for a single parcel of Taxable Property in Improvement Area FF, based on the projected fiscal year 2017-18 Special Tax levy and actual tax rates for fiscal year 2016-17 for overlapping Special Taxes and assessments. Information is presented based on the hypothetical fiscal year 2017-18 special tax levy because the City levied special taxes in fiscal year 2016-17 on only a handful of properties in Improvement Area FF and most of the interest on the Bonds is capitalized from proceeds of the Bonds through September 1, 2017. Table 5 Fiscal Year 2017-18 Sample Property Tax Bill Builder Individually Owned (2) TR31920-12 Sunrise Springs II Ryland TR31920-13 Clairborne Unit 13/Van Daele TR31920-16 Blue Water Unit 16/Sea Country Average Parcel Plan Type 1 2 3 1X 2 3 2 3 CFD Tax Category 1,500 to 1,700 to 1,700 to 2,900 to 2,700 to More than 2,100 to 2,300 to 1,699S.F.1,899S.F.1,899S.F.3,099S.F.2,899S.F.3,499 S.F.2,299 S.F.2,499 S.F. Home Size 1,706 1,520 1,735 1,870 2,980 2,828 3,652 2,112 2,350 Appraisal Value (1)$311,657 $300,960 $314,035 $321,640 $393,360 $381,780 $398,068 $337,920 $347,800 $345,247 Ad Valorem Property Taxes: General Purpose $3,117 $3,010 $3,140 $3,216 $3,934 $3,818 $3,981 $3,379 $3,478 $3,452 Metro Water West (0.00350%)$11 $11 $11 $11 $14 $13 $14 $12 $12 $12 Mt. San Jacinto Community College (0.01394%)$43 $42 $44 $45 $55 $53 $55 $47 $48 $48 Total General Property Taxes $3,171 $3,062 $3,195 $3,272 $4,002 $3,884 $4,050 $3,438 $3,539 $3,513 Assessment, Special Taxes and Parcel Charges: Flood Control Stormwater/Cleanwater/Santa Ana $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 CSA #152 LK Elsinore Stormwater $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 City of Lake Elsinore CFD Public Safety $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 City of Lake Elsinore LLMD $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 City of Lake Elsinore LLMD No. 1, Zone 11 $52 $52 $52 $52 $52 $52 $52 $52 $52 $52 Lake Elsinore USD CFD 2006-2 IA B $872 $872 $872 $872 $872 $872 $872 $872 $872 $872 Northwest Mosquito & Vector Control Dist.$8 $8 $8 $8 $8 $8 $8 $8 $8 $8 Metro Water Dist. Standby Charge $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 Elsinore Valley Muni Wtr Dst Standby $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 Lake Elsinore CFD 2006-1 Services $295 $295 $295 $295 $295 $295 $295 $295 $295 $295 Lake Elsinore CFD 2006-1 IA FF Debt (3)$919 $833 $919 $919 $1,378 $1,292 $1,637 $1,034 $1,120 $1,117 Total Assessments & Taxes $2,633 $2,547 $2,633 $2,633 $3,092 $3,006 $3,351 $2,748 $2,834 $2,831 Projected Total Property Tax $5,804 $5,609 $5,828 $5,905 $7,095 $6,891 $7,401 $6,186 $6,373 $6,343 Projected Effective Tax Rate 1.86% 1.86% 1.86% 1.84% 1.80% 1.80% 1.86% 1.83% 1.83% 1.84% (1) Reflects the appraised value based on ownership status as of August 15, 2016, the date of value. (2) TR 31920-12 contains 34 units sold to individual property owners. The average appraised value and square footage for individually owned units is included. (3) Reflects estimated Fiscal Year 2017-18 Special Tax levy based on development as of August 15, 2016 and includes priority Administrative Expenses in the amount of $20,000. Source: Special Tax Consultant. 34 Concentration of Taxpayers Based on the ownership and development status of the taxable property within Improvement Area FF as of August 15, 2016 (and assuming no further development or sales to individual homeowners), the estimated Special Tax levy required for fiscal year 2017-18 would result in approximately 16.44% of the Special Taxes securing the Bonds being paid by individual homeowners and approximately 17.20%, 38.47% and 27.90% being paid by Ryland, Unit 13 and Unit 16 respectively. Unit 13 and Unit 16 are affiliated entities because both are wholly-owned by McMillin, which means that 66.37% of the fiscal year 2017-18 special taxes could be paid by McMillin- controlled entities. Until the construction and sale of all homes to individual homeowners, the receipt of the Special Taxes is dependent, in part, on the willingness and the ability of Ryland, Unit 13, Unit 16, or their successors to pay the Special Taxes when due. See the caption “SPECIAL RISK FACTORS—Concentration of Property Ownership” for a description of the risks associated with a concentration of ownership within. Property Tax Delinquencies . There are no property tax delinquencies in Improvement Area FF for fiscal year 2015- 2016 or any prior year, since taxes were not levied prior to fiscal year 2016-17. CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF The information about the property in Improvement Area FF contained in this Official Statement has been provided by representatives of Ryland, McMillin, Unit 13 and Unit 16, and others, and has not been independently confirmed or verified by the Underwriter, the City or the District. The Underwriter, the City, and the District make no representation as to the accuracy or adequacy of the information contained in this caption. There may be material adverse changes in this information after the date of this Official Statement. Neither the Bonds nor the Net Taxes securing the Bonds, or any bonds issued to refund the foregoing are personal obligations of Ryland, McMillin, Unit 13 and Unit 16, or any affiliate thereof or any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure of the delinquent property but has no direct recourse to the assets of any property owner or any affiliate thereof. See the caption “SPECIAL RISK FACTORS.” Development by Ryland Ryland. As previously defined in this Official Statement, “Ryland” refers to Ryland Homes of California, Inc., a Delaware Corporation. Ryland is a wholly-owned subsidiary of CalAtlantic Group, Inc., a Delaware corporation (“CalAtlantic”), which is a homebuilder incorporated in Delaware in 1991 with principal executive offices located in Irvine, California. CalAtlantic is a publicly traded company with its stock listed on the New York Stock Exchange under the symbol “CAA.” 35 The development of the Sunrise Springs II project within Improvement Area FF is currently being undertaken by the Inland Empire Division of CalAtlantic and marketed under the CalAtlantic brand name. CalAtlantic is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of CalAtlantic and its subsidiaries (e.g. See CalAtlantic’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on February 29, 2016 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, as filed with the SEC on July 29, 2016) as of the dates described therein. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including CalAtlantic. The address of such Internet web site is www.sec.gov. All documents subsequently filed by CalAtlantic pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of CalAtlantic’s annual report, quarterly reports and current reports, including any amendments, will be available from CalAtlantic’s website at www.calatlantichomes.com. These Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. General Description of Development. Ryland acquired 70 residential lots within Improvement Area FF from McMillin in June 2015. Ryland’s planned development within Improvement Area FF is the construction of 70 single family detached homes in a neighborhood called “Sunrise Springs II,” and the sale of such homes to individual homebuyers. A summary of property development and ownership in Sunrise Springs II as of August 15, 2016, is set forth below: Category Number Completed homes - Conveyed to homebuyers 34 Completed homes - Owned by Ryland 10 Homes under construction (under 95% complete)9 Finished lots 17 Total 70 As of August 15, 2016, Ryland owned 10 completed homes (including 3 model homes), 9 homes under construction and 17 finished lots. Ryland expects to complete construction of the 70 proposed homes by October 2016, and convey all such homes to individual homeowners by January 2017. Ryland’s proposed product mix within Improvement Area FF includes three floor plans ranging in size from approximately 1,520 square feet to approximately 1,870 square feet, with estimated base sales prices as of August 15, 2016 ranging from approximately $320,340 to approximately $339,120. Base sales prices exclude options, upgrades, lot premiums and any incentives being offered. There can be no assurance that actual base sales prices of the remaining homes will equal or exceed the base sales prices set forth above. 36 There can be no assurance that Ryland’s development plans described in this Official Statement will be completed or that the development plans will not be modified in the future. Additionally, there can be no assurances of the absorption rate of the homes remaining to be built and sold. In changing market conditions, builders will often revise their product lines and prices and the rate of sales can fluctuate. Ryland continuously evaluates its product lines and prices in light of the then current market conditions. Financing Plan. All infrastructure facilities serving Ryland’s Sunrise Springs II project in Improvement Area FF have been completed. As of August 15, 2016, within the Sunrise Springs II project, Ryland expects to spend approximately $4,567,266 in additional home construction costs (including fees payable at building permit) until full build-out of the homes proposed to be constructed therein (exclusive of internal financing repayment, sales and marketing, corporate overhead and other carrying costs). To date, Ryland has financed its land acquisition costs ($2,919,000) and various site development and home construction costs related to its property in Improvement Area FF through internally generated funds. Ryland expects to use home sales, internal funding and funding under CalAtlantic’s revolving credit facility (described below) to complete its development activities in Improvement Area FF. However, home sales revenues for Ryland’s project in Improvement Area FF are not segregated and set aside for the payment of costs required to complete its activities in Improvement Area FF. Home sales revenue is accumulated and used to pay costs of operations for CalAtlantic and its subsidiaries, to pay debt service on outstanding debt and for other corporate purposes, and may be diverted to pay costs other than the costs of completing Ryland’s activities in Improvement Area FF at the discretion of CalAtlantic’s management. Notwithstanding the foregoing, Ryland believes that it will have sufficient funds available to complete its proposed development activities in Improvement Area FF in accordance with the development schedule described in this Official Statement. As of June 30, 2016, CalAtlantic was party to a $750 million unsecured revolving credit facility (the “Revolving Facility”), which matures in October 2019. The Credit Facility has an accordion feature under which the aggregate commitment may be increased up to $1.2 billion, subject to the availability of additional bank commitments and certain other conditions. The Revolving Facility contains certain covenants and conditions that may limit the amount that CalAtlantic may borrow or have outstanding at any time. As of June 30, 2016, CalAtlantic had no amounts outstanding under the Revolving Facility and had outstanding letters of credit issued under the Revolving Facility totaling $113.4 million, leaving $636.6 million available under the Revolving Facility to be drawn as of such date. CalAtlantic’s ability to renew the Revolving Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and CalAtlantic’s financial condition and strength. Although Ryland expects to have sufficient funds available to complete its development activities in Improvement Area FF in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from Ryland, CalAtlantic or any other source when needed. For example, borrowings under the Revolving Facility may not be available, and home sales revenue, which is accumulated daily for use in operations by CalAtlantic, including to fund costs of other direct and indirect subsidiaries, to pay debt service on outstanding debt and for other corporate purposes, may be diverted to pay costs other than the costs of completing Ryland’s activities in Improvement Area FF at the discretion of CalAtlantic’s management. Ryland, CalAtlantic, their lenders, and any of their related entities 37 are not under any legal obligation of any kind to expend funds for the development of and construction of homes on Ryland’s property in Improvement Area FF. Any contributions by Ryland or CalAtlantic to fund the costs of such development and home construction are entirely voluntary. If and to the extent that internal funding, including but not limited to home sales revenues, and borrowings under the Revolving Facility are inadequate to pay the costs to complete the planned development by Ryland within Improvement Area FF and other financing by Ryland is not put into place, there could be a shortfall in the funds required to complete the proposed development by Ryland in Improvement Area FF and the remaining portions of the development may not be developed. Ryland is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area FF. Based on the ownership information and development status as of August 15, 2016 within Improvement Area FF, the Special Tax Consultant reports that Ryland would be responsible for approximately 17.2% of the projected fiscal year 2017-18 levy of Special Taxes within Improvement Area FF. History of Ryland’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy. Ryland has represented to the District as follows (capitalized terms used in the following summary but not previously defined have the meanings given them below): 1.Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of Ryland or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither Ryland nor, to the Actual Knowledge of Ryland, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect Ryland’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency. 2.Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against Ryland (with proper service of process to Ryland having been accomplished) or, to the Actual Knowledge of Ryland, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of Ryland is threatened in writing against Ryland or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) to restrain or enjoin the development of the Property as described in this Official Statement, (c) in any way contesting or affecting the validity of the Special Taxes, or (d) which is reasonably likely to materially and adversely affect Ryland’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property. 3.As a subsidiary of a large, nation-wide developer of residential projects, Ryland cannot represent with assurance that neither it nor any Affiliate has ever been delinquent in the payment of ad valorem property taxes, special taxes or special assessments. However, to the Actual Knowledge of Ryland, during the last five years, neither Ryland nor any Affiliate has, 38 during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced, against the delinquent Ryland or Affiliate. 4.To the Actual Knowledge of Ryland, Ryland is able to pay its bills as they become due and no legal proceedings are pending against Ryland (with proper service of process having been accomplished) or, to the Actual Knowledge of Ryland, threatened in writing in which Ryland may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5.To the Actual Knowledge of Ryland, Affiliates of Ryland are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of Ryland (with proper service of process having been accomplished) or to the Actual Knowledge of Ryland, threatened in writing in which the Affiliates of Ryland may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of Ryland, the following defined terms and phrases have the following meanings: “Actual Knowledge of Ryland” shall mean the knowledge that the authorized officer or representative of Ryland (the “Authorized Officer”) signing the certificate containing the above representations (the “Ryland Letter of Representations”) currently has as of the date of the Ryland Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Ryland and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Ryland Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the Ryland Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Ryland’s current business and operations. Ryland notes that CalAtlantic underwent a restructuring in 2011, which included new personnel, office closures and employee layoffs at all levels of management and staff. Individuals who are no longer employees of CalAtlantic have not been contacted. Ryland further notes that CalAtlantic recently completed a merger with The Ryland Group, Inc., a Maryland corporation (“Ryland Group”), pursuant to which Ryland Group merged with and into CalAtlantic, with CalAtlantic being the surviving entity. Individuals who were employees and officers of Ryland Group and its subsidiaries prior to the merger have not been consulted or contacted (and are not expected to be responsible for Ryland’s development of the Property or payment of its Special Taxes) and documents entered into by Ryland and its subsidiaries or related to their properties and projects have not been reviewed. “Affiliate” means, with respect to Ryland, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common 39 control with Ryland, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of Improvement Area FF and investment decision regarding the Bonds (i.e., information relevant to (a) Ryland’s development plans with respect to the Property and ability to pay its Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect Ryland’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property. For purposes hereof, Affiliates shall exclude MP CA Homes, LLC and its Affiliates (other than Ryland, CalAtlantic and its direct or indirect subsidiaries). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Property” means the property within Improvement Area FF held in the name of Ryland. Development by Unit 13 Unit 13. As previously defined in this Official Statement, “Unit 13” refers to Summerly Unit 13, LLC, a Delaware limited liability company. Unit 13 is a single-purpose entity formed in 2015 by its sole member, McMillin Summerly, LLC, a Delaware limited liability company (“McMillin”), to acquire the 64 residential lots in Improvement Area FF. The members of McMillin are (i) McMillin Growth Summerly, LLC, a Delaware limited liability company (“MG Summerly”) and Civic Partners-Elsinore, LLC, a California limited liability company (“Civic Partners”). Civic Partners is based in Huntington Beach, California. MG Summerly is the Managing Member of McMillin and is a joint venture between entities affiliated with San Diego based McMillin Communities and Los Angeles-based Oaktree Capital, a global alternative investment management firm with over $100 billion in capital under management and over 900 employees in 17 offices throughout 12 countries. Pacific Ventures Development Management LLC, a Delaware limited liability company (“PVDM”) is the contractually appointed development manager of the overall Summerly project. Pursuant to a Summerly Property Management Agreement with PVDM, PVDM’s role and responsibilities are to carry on the business affairs of McMillin and its subsidiaries, including Unit 13 and Unit 16, with respect to the development, completion, financing, operation, and marketing and sale of the Summerly project. PVDM’s Managing Member is DMB Pacific Ventures LLC, a Delaware limited liability company (“DMBPV”). DMBPV is a privately-held real estate investment and development company with offices in Newport Beach, California, San Francisco, California and Phoenix, Arizona that currently manages real estate holdings throughout California and Hawaii. DMBPV has a history of successfully identifying, visioning, planning, entitling, permitting, developing, managing, and operating significant land development and natural resources conservation holdings over a geographically diverse area. Formerly the Pacific Division of DMB Associates, Inc., a diversified real estate development and investment company based in Scottsdale, Arizona, with holdings throughout 40 the western United States, DMBPV was established as an independent entity in 2012 with an initial real estate portfolio that included projects in California (Martis Camp in Placer County, Tejon Mountain Village in Kern County and Redwood City Saltworks in Redwood City) and Hawaii (Kukui’ula on the Island of Kauai). General Description of Development. Van Daele, pursuant to a Construction Management and Marketing Agreement with Unit 13 (described below), is constructing and selling homes on the 64 lots acquired by Unit 13 within Improvement Area FF following an internal transfer from McMillin, in July 2015. Unit 13’s planned development within Improvement Area FF is in a neighborhood called “Claiborne.” A summary of property development and ownership in Claiborne as of August 15, 2016, is set forth below: Category Number Completed homes - Owned by Unit 13 3 Homes under construction (under 95% complete)6 Finished lots 55 Total 64 As of August 15, 2016, none of the homes in Claiborne have been conveyed to individual homeowners. As of August 15, 2016, Unit 13 owned 3 completed model, 6 homes under construction and 55 lots in a finished lot condition. Unit 13 expects construction of the 64 proposed homes and conveyance of all such homes to individual homeowners will be completed by July 2017. Unit 13’s planned development within Improvement Area FF includes 3 floor plans ranging in size from approximately 2,333 square feet to approximately 3,473 square feet, with estimated base sales prices as of August 15, 2016 ranging from approximately $348,600 to approximately $400,400. Base sales prices exclude options, upgrades, lot premiums and any incentives being offered. There can be no assurance that actual base sales prices of the remaining homes will equal or exceed the base sales prices set forth above. There can be no assurance that Unit 13’s development plans described in this Official Statement will be completed or that the development plans will not be modified in the future. Additionally, there can be no assurances of the absorption rate of the homes remaining to be built and sold. In changing market conditions, builders will often revise the product lines and prices and the rate of sales can fluctuate. Unit 13 will continuously evaluate their product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Description of Construction Management and Marketing Agreement.Pursuant to a Construction Management and Marketing Agreement between Unit 13 and Van Daele, Van Daele is the fee builder of the 64 homes proposed to be constructed within the Unit 13’s Clairborne project and marketed under the “Van Daele” brand. Pursuant to the agreement, Unit 13 determines the type, size and location of the homes, the phasing of the homes and the timing of the commencement of construction. Van Daele’s role is to design, permit, entitle and construct the homes, market, sell and convey the homes to homebuyers and provide warranty services to the homeowners. Title to each home sold by Van Daele is transferred pursuant to double escrow instructions whereby the deed conveying title from Unit 13 to VanDaele is 41 recorded concurrent with the recordation of the deed conveying title from Van Daele to the homebuyer. Van Daele’s sole compensation for constructing and marketing and selling the homes are certain fees paid by Unit 13. Unit 13 is responsible for all approved project costs, including marketing and sales costs, and for the payment of all general and special real estate taxes and assessments, including the Special Taxes, and other charges, including any penalties arising from failure to make such payments, attributable to the property prior to transfer of title to Van Daele. Financing Plan. All infrastructure facilities serving the Claiborne project in Improvement Area FF have been completed. As of August 15, 2016, Unit 13 had expended approximately $______ in home construction costs and other development, marketing and sales costs (exclusive of internal financing repayment). Unit 13 expects the remaining home construction costs and other development, marketing and sales costs within Improvement Area FF to be approximately $18,063,278. To date, Unit 13 has financed its land acquisition and various site development and home construction costs related to its property in Improvement Area FF with internal funding, including cash generated from its homebuilding operations and advances from McMillin. Unit 13 is also utilizing proceeds from a $3,050,000 Acquisition and Development Loan provided by Western Alliance Bank, as well as a $6,000,000 Revolving Construction Loan, also provided by Western Alliance Bank. As of ____, 2016, the amount available for construction costs in Improvement Area FF from the Revolving Construction Loan is $_____ and the amount available under the Acquisition and Development Loan is $______. Unit 13 intends to use these same sources to finance the remaining site development and home construction costs, including carrying costs, for the Claiborne project. Notwithstanding Unit 13’s belief that it will have sufficient funds to complete its planned development in Improvement Area FF, no assurance can be given that sources of financing available to Unit 13 will be sufficient to complete the property development and home construction as currently anticipated. While affiliates of Unit 13 have made such internal financing available in the past, there can be no assurance whatsoever of their willingness or ability to do so in the future. Neither Unit 13 nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. If and to the extent that internal financing, sales revenues, the Acquisition and Development Loan and Revolving Construction Loan are inadequate to pay the costs to complete Unit 13’s planned development within Improvement Area FF and other financing by Unit 13 or its affiliates is not put into place, there could be a shortfall in the funds required to complete the remaining development by Unit 13 or to pay ad valorem property taxes or Special Taxes related to Unit 13’s property in Improvement Area FF and portions of the project may not be developed. Many factors beyond Unit 13’s control, or a decision by Unit 13 to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Unit 13 is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area FF. Based on the ownership information and development status as of August 15, 2016 within Improvement Area FF, the Special Tax Consultant reports that Unit 13 would be 42 responsible for approximately 38.47% of the projected fiscal year 2017-18 levy of Special Taxes within Improvement Area FF. History of Unit 13’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy. Unit 13 has represented to the District as follows (capitalized terms used in the following summary but not previously defined have the meanings given them below): 1.Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of Unit 13 or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither Unit 13 nor, to the Actual Knowledge of Unit 13 (defined below), any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect Unit 13’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency. 2.Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against Unit 13 (with proper service of process to Unit 13 having been accomplished) or, to the Actual Knowledge of Unit 13, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of Unit 13 is threatened in writing against Unit 13 or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) to restrain or enjoin the execution by Unit 13 of the Developer Continuing Disclosure Certificate and performance by Unit 13 of its obligations thereunder, (c) to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is reasonably likely to materially and adversely affect Unit 13’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property. 3.To the Actual Knowledge of Unit 13, during the last five years, neither Unit 13 nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced, against the delinquent Unit 13 or Affiliate. 4.To the Actual Knowledge of Unit 13, Unit 13 is able to pay its bills as they become due and no legal proceedings are pending against Unit 13 (with proper service of process having been accomplished) or, to the Actual Knowledge of Unit 13, threatened in writing in which Unit 13 may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5.To the Actual Knowledge of Unit 13, Affiliates of Unit 13 are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of Unit 13 (with proper service of process having been accomplished) or to the Actual Knowledge of Unit 13, 43 threatened in writing in which the Affiliates of Unit 13 may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of Unit 13, the following defined terms and phrases have the following meanings: “Affiliate” means, with respect to Unit 13, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Unit 13, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of Improvement Area FF and investment decision regarding the Bonds (i.e., information relevant to (a) Unit 13’s development plans with respect to the Property and ability of Unit 13 to pay its Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect Unit 13’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property, or (c) such Person’s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect Unit 13’s ability to comply with its obligations under the Developer Continuing Disclosure Certificate). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Actual Knowledge of Unit 13” means the knowledge that the authorized officer or representative of Unit 13 (the “Authorized Officer”) signing the certificate containing the above representations (the “Unit 13 Letter of Representations”) currently has as of the date of the Unit 13 Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Unit 13 and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Unit 13 Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the Unit 13 Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Unit 13’s current business and operations. Individuals who are no longer employees of Unit 13 and its Affiliates have not been contacted. “Property” means taxable property within Improvement Area FF held in the name of Unit 13. Development by Unit 16 Unit 16. As previously defined in this Official Statement, “Unit 16” refers to Summerly Unit 16, LLC, a Delaware limited liability company. Unit 16 is a single-purpose entity formed in 2015 by its sole member, McMillin Summerly, LLC, a Delaware limited liability company (“McMillin”), to acquire the 53 residential lots in Improvement Area FF. The members of 44 McMillin are (i) McMillin Growth Summerly, LLC, a Delaware limited liability company (“MG Summerly”) and Civic Partners-Elsinore, LLC, a California limited liability company (“Civic Partners”). Civic Partners is based in Huntington Beach, California. MG Summerly is the Managing Member of McMillin and is a joint venture between entities affiliated with San Diego based McMillin Communities and Los Angeles-based Oaktree Capital, a global alternative investment management firm with over $100 billion in capital under management and over 900 employees in 17 offices throughout 12 countries. Pacific Ventures Development Management LLC, a Delaware limited liability company (“PVDM”) is the contractually appointed development manager of the overall Summerly project. Pursuant to a Summerly Property Management Agreement with PVDM, PVDM’s role and responsibilities are to carry on the business affairs of McMillin and its subsidiaries, including Unit 13 and Unit 16, with respect to the development, completion, financing, operation, and marketing and sale of the Summerly project. PVDM’s Managing Member is DMB Pacific Ventures LLC, a Delaware limited liability company (“DMBPV”). DMBPV is a privately-held real estate investment and development company with offices in Newport Beach, California, San Francisco, California and Phoenix, Arizona that currently manages real estate holdings throughout California and Hawaii. DMBPV has a history of successfully identifying, visioning, planning, entitling, permitting, developing, managing, and operating significant land development and natural resources conservation holdings over a geographically diverse area. Formerly the Pacific Division of DMB Associates, Inc., a diversified real estate development and investment company based in Scottsdale, Arizona, with holdings throughout the western United States, DMBPV was established as an independent entity in 2012 with an initial real estate portfolio that included projects in California (Martis Camp in Placer County, Tejon Mountain Village in Kern County and Redwood City Saltworks in Redwood City) and Hawaii (Kukui’ula on the Island of Kauai) General Description of Development.SeaCountry, pursuant to a Construction Management and Marketing Agreement with Unit 16 (described below), is constructing and selling homes on the 53 lots acquired by Unit 16 within Improvement Area FF following an internal transfer from McMillin. in July 2015. Unit 16’s planned development is in a neighborhood called “BlueWater.” A summary of property development in BlueWater as of August 15, 2016, is set forth below: Category Number Completed homes - Owned by Unit 16 2 Homes under construction (under 95% complete)7 Finished lots 44 Total 53 As of August 15, 2016, none of the homes in BlueWater had been conveyed to individual homeowners. As of August 15, 2016, Unit 16 owned 2 completed model homes, 7 homes under construction and 44 lots in a finished lot condition. Unit 16 expects construction of the 53 proposed homes and conveyance of all such homes to individual homeowners will be completed by November 2017. 45 Unit 16’s planned development within Improvement Area FF includes 2 floor plans ranging in size from approximately 1,950 square feet to approximately 2,700 square feet, with estimated base sales prices as of August 15, 2016 ranging from approximately $330,990 to approximately $353,490. Base sales prices exclude options, upgrades, lot premiums and any incentives being offered. There can be no assurance that actual base sales prices of the remaining homes will equal or exceed the base sales prices set forth above. There can be no assurance that Unit 16’s development plans described in this Official Statement will be completed or that the development plans will not be modified in the future. Additionally, there can be no assurances of the absorption rate of the homes remaining to be built and sold. In changing market conditions, builders will often revise their product lines and prices and the rate of sales can fluctuate. Unit 16 continuously evaluates the product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Description of Construction Management and Marketing Agreement. Pursuant to a Construction Management and Marketing Agreement between Unit 16 and SeaCountry, SeaCountry is the fee builder of the 53 homes proposed to be constructed within Unit 16’s BlueWater project and marketed under the name “SeaCountry Homes”. Pursuant to the agreement, Unit 16 determines the type, size and location of the homes, the phasing of the homes and the timing of the commencement of construction. SeaCountry’s role is to design, permit, entitle and construct the homes, market, sell and convey the homes to homebuyers and provide warranty services to the homeowners. Title to each home sold by SeaCountry is transferred pursuant to double escrow instructions whereby the deed conveying title from Unit 16 to SeaCountry is recorded concurrent with the recordation of the deed conveying title from SeaCountry to the homebuyer. SeaCountry’s sole compensation for constructing and marketing and selling the homes are certain fees paid by Unit 16. Unit 16 is responsible for all approved project costs, including marketing and sales costs, and for the payment of all general and special real estate taxes and assessments, including the Special Taxes, and other charges, including any penalties arising from failure to make such payments, attributable to the property prior to transfer of title to SeaCountry. Financing Plan. All infrastructure facilities serving the BlueWater project in Improvement Area FF have been completed. As of _____, 2016, Unit 16 had expended approximately $______ in home construction costs and other development, marketing and sales costs (exclusive of internal financing repayment). Unit 16 expects the remaining home construction costs and other development, marketing and sales costs within Improvement Area FF to be approximately $13,722,846. To date, Unit 16 has financed its land acquisition and various site development and home construction costs related to its property in Improvement Area FF with internal funding, including cash generated from its homebuilding operations and advances from McMillin. Unit 16 is also utilizing proceeds from a $1,965,000 Acquisition and Development Loan provided by Western Alliance Bank, as well as a $5,500,000 Revolving Construction Loan, also provided by Western Alliance Bank. As of ____, 2016, the amount available for construction costs in Improvement Area FF from the Revolving Construction Loan is $_____ and the amount available under the Acquisition and Development Loan is $______. Unit 16 intends to use these same sources to finance the remaining site development and home construction costs, including carrying costs, for the BlueWater project until full sell-out of its proposed single-family detached homes in Improvement Area FF. 46 Notwithstanding Unit 16’s belief that it will have sufficient funds to complete its planned development in Improvement Area FF, no assurance can be given that sources of financing available to Unit 16 will be sufficient to complete the property development and home construction as currently anticipated. While affiliates of Unit 16 have made such internal financing available in the past, there can be no assurance whatsoever of their willingness or ability to do so in the future. Neither Unit 16 nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. If and to the extent that internal financing, sales revenues, and the Acquisition and Development Loan and the Revolving Construction Loan are inadequate to pay the costs to complete Unit 16’s planned development within Improvement Area FF and other financing by Unit 16 or its affiliates is not put into place, there could be a shortfall in the funds required to complete the remaining development by Unit 16 or to pay ad valorem property taxes or Special Taxes related to Unit 16’s property in Improvement Area FF and portions of the project may not be developed. Many factors beyond Unit 16’s control, or a decision by Unit 16 to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Unit 16 is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area FF. Based on the ownership information and development status as of August 15, 2016 within Improvement Area FF, the Special Tax Consultant reports that Unit 16 would be responsible for approximately 27.90% of the projected fiscal year 2017-18 levy of Special Taxes within Improvement Area FF. History of Unit 16’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy. Unit 16 has represented to the District as follows (capitalized terms used in the following summary but not previously defined have the meanings given them below): 1.Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of Unit 16 or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither Unit 16 nor, to the Actual Knowledge of Unit 16 (defined below), any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect SeaCountry’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency. 2.Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against Unit 16 (with proper service of process to Unit 16 having been accomplished) or, to the Actual Knowledge of Unit 16, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of Unit 16 is threatened in writing against Unit 16 or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) to restrain or enjoin the execution by Unit 16 of the Developer Continuing Disclosure Certificate and performance by Unit 16 of its obligations thereunder, (c) to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is 47 reasonably likely to materially and adversely affect Unit 16’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property. 3.To the Actual Knowledge of Unit 16, during the last five years, neither Unit 16 nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced, against the delinquent Unit 16 or Affiliates. 4.To the Actual Knowledge of Unit 16, Unit 16 is able to pay its bills as they become due and no legal proceedings are pending against Unit 16 (with proper service of process having been accomplished) or, to the Actual Knowledge of Unit 16, threatened in writing in which Unit 16 may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5.To the Actual Knowledge of Unit 16, Affiliates of Unit 16 are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of Unit 16 (with proper service of process having been accomplished) or to the Actual Knowledge of Unit 16, threatened in writing in which the Affiliates of Unit 16 may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of Unit 16, the following defined terms and phrases have the following meanings: “Affiliate” means, with respect to Unit 16, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Unit 16, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of Improvement Area FF and investment decision regarding the Bonds (i.e., information relevant to (a) Unit 16’s development plans with respect to the Property and ability of Unit 16 to pay its Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect Unit 16’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property, or (c) such Person’s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect Unit 16’s ability to comply with its obligations under the Developer Continuing Disclosure Certificate). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 48 “Actual Knowledge of Unit 16” means the knowledge that the authorized officer or representative of Unit 16 (the “Authorized Officer”) signing the certificate containing the above representations (the “Unit 16 Letter of Representations”) currently has as of the date of the Unit 16 Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Unit 16 and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Unit 16 Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the Unit 16 Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Unit 16’s current business and operations. Individuals who are no longer employees of Unit 16 and its Affiliates have not been contacted. “Property” means taxable property within Improvement Area FF held in the name of Unit 16. SPECIAL RISK FACTORS The purchase of the Bonds involves significant risks and, therefore, the Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The occurrence of one or more of the events discussed in this Official Statement could adversely affect the ability or willingness of property owners in Improvement Area FF to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed in this Official Statement could adversely affect the value of the property in Improvement Area FF. See the caption “— Appraised Value.” Risks of Real Estate Secured Investments Generally The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area and the market value of property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, wildfire, earthquakes and floods), which may result in uninsured losses. See the caption “—Natural Disasters.” No assurance can be given that the individual landowners will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “— 49 Bankruptcy and Foreclosure” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels. Limited Obligations The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture. The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default. The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “—Payment of the Special Tax is Not a Personal Obligation of the Landowners.” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so. Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “—Bankruptcy and Foreclosure.” Insufficiency of Special Taxes The Rate and Method governing the levy of the Special Tax provides that Property Owner Association Property and/or Public Property are not subject to the Special Tax. The Rate and Method also provides for prepayment of Special Taxes. The Act provides that, if any property within Improvement Area FF 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 enforceable against the public entity that acquired the property. 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 to be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. Due to problems of collecting taxes from public agencies, if a substantial portion of land within Improvement Area FF were to become owned by public 50 agencies, collection of the Special Tax might become more difficult and could result in collections of the Special Tax which might not be sufficient to pay principal of and interest on the Bonds when due, and a default could occur with respect to the payment of such principal and interest. In the event of significant delinquencies causing a default in payment of debt service on the Bonds and depletion of all amounts on deposit in the Reserve Account, there would not be sufficient Special Taxes to pay the full amount of annual debt service on the Bonds until the delinquent Special Taxes were collected through foreclosure action or otherwise. See the caption “—Bankruptcy and Foreclosure” for a discussion of potential delays in foreclosure actions. Natural Disasters The land within Improvement Area FF, like all California communities, may be subject to unpredictable seismic activity, fires, floods or other natural disasters. The occurrence of one of the foregoing natural disasters in Improvement Area FF could result in substantial damage to properties in Improvement Area C, 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 natural disasters could result in a greater reliance on undeveloped property in the payment of Special Taxes. Concentration of Property Ownership Based on the ownership and development status of the taxable property within Improvement Area FF as of August 15, 2016 (and assuming no further development or sales to individual homeowners), the estimated Special Tax levy required for fiscal year 2017-18 would result in approximately 16.44% of the Special Taxes securing the Bonds being paid by individual homeowners and approximately 17.20%, 38.47% and 27.90% being paid by Ryland, Unit 13 and Unit 16, respectively. Unit 13 and Unit 16 are affiliated entities because both are wholly-owned subsidiaries of McMillin, which means that 66.37% of the fiscal year 2017-18 special taxes could be paid by McMillin-controlled entities. Until the construction and sale of all homes to individual homeowners, the receipt of the Special Taxes is dependent, in part, on the willingness and the ability of Ryland, Unit 13 and Unit 16, or their successors to pay the Special Taxes when due. Failure of Ryland, Unit 13 and Unit 16 or their successors to pay the annual Special Taxes prior to delinquency could be a material factor in a default in payments of the principal of, and interest on, the Bonds, when due. See the caption “—Failure to Develop Remaining Homes.” No assurance can be given that Ryland, Unit 13 and Unit 16, or their successors will complete the remaining construction and development in Improvement Area FF in the timeframe or for estimated costs predicted in this Official Statement or that they will complete it at all. See the caption “—Failure to Develop Remaining Homes.” No assurance can be given that the individual homeowners, Ryland, Unit 13 and Unit 16 or their successors will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “—Bankruptcy and Foreclosure” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels. 51 Failure to Develop Remaining Homes Development of property within Improvement Area FF may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of Ryland, Unit 13, Unit 16, or any property owner to pay the Special Taxes when due. See the caption “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF” for a discussion of the remaining homes to be completed and sold within Improvement Area FF. No assurance can be given that the remaining proposed residential development will be partially or fully completed, and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and only partially improved. See the caption “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF.” There can be no assurance that property development within Improvement Area FF will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, an increase in mortgage interest rates, the income tax treatment of real property ownership, or the national economy. In that event, there could be a default in the payment of principal of, and interest on, the Bonds, when due. Hazardous Substances The presence of hazardous substances on a parcel may result in a significant reduction in the value of a parcel. 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. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property 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 taxed parcels 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 owner, will become obligated to remedy the condition just as is the seller. The Appraiser, in its Appraisal Report, assumes that there are no hazardous substances in Improvement Area FF. The District has not independently verified, but is not aware of, the presence of any hazardous substances within Improvement Area FF. Hazardous substance liabilities may arise in the future with respect to any of the parcels within Improvement Area FF resulting from the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise from the method of handling such substance. These possibilities could significantly affect the value of a parcel and could result in substantial delays in completing planned development on parcels that are currently undeveloped. 52 Payment of the Special Tax is not a Personal Obligation of the Landowners An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the District has no recourse against the owner and its only remedy is to pursue judicial foreclosure on the delinquent parcel. Appraised Value The Appraisal Report attached in Appendix H estimates the market value of the taxable property within Improvement Area FF. This market value is merely the present opinion of the Appraiser, and is subject to the assumptions and limiting conditions stated in the Appraisal Report. The City has not sought the present opinion of any other appraiser of the value of the taxable parcels. A different present opinion of value might be rendered by a different appraiser. The opinion of value relates to sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information. In addition, the opinion is a present opinion, based upon present facts and circumstances. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from the present. No assurance can be given that any of the taxable property in Improvement Area FF could be sold for the estimated market value contained in the Appraisal Report if that property should become delinquent in the payment of Special Taxes and be foreclosed upon. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes— Proceeds of Foreclosure Sales.” Parity Taxes and Special Assessments Property within Improvement Area FF is subject to taxes, charges and assessments imposed by public agencies other than the District that also have jurisdiction over the land within Improvement Area FF. See the caption “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF—Direct and Overlapping Indebtedness.” The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation (the “FDIC”). See the captions “—Bankruptcy and Foreclosure” and “—FDIC/Federal Government Interests in Properties” below. 53 Neither the District nor the City has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes, special taxes or assessments levied on all or a portion of the property within Improvement Area FF. In addition, the landowners within Improvement Area FF may, without the consent or knowledge of the District or the City, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for the property within Improvement Area FF described in this Official Statement. See the captions “SOURCES OF PAYMENT FOR THE BONDS,” “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF—Estimated Assessed Value-To-Lien Ratios” and “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA FF—Direct and Overlapping Indebtedness.” Disclosures to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the property is sufficient to justify payment may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, whether or not the owner was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and whether or not the owner, at the time of such a levy, has the ability to pay it as well as other expenses and obligations. The City has caused notices of the Special Tax to be recorded in the Office of the Recorder for the County against each parcel in Improvement Area FF. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within Improvement Area FF or lending of money thereon. California Civil Code Section 1102.6b requires that, in the case of transfers, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of and interest on the Bonds are derived, are customarily billed to the properties within Improvement Area FF on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes— Proceeds of Foreclosure Sales,” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See the captions “—Bankruptcy and Foreclosure” and “— FDIC/Federal Government Interests in Properties” below for a discussion of limitations on the District’s ability to foreclosure on the lien of the Special Taxes in certain circumstances and the policy of the FDIC regarding the payment of special taxes and assessments. 54 FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within Improvement Area FF but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within the Improvement Area FF, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within Improvement Area FF is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that 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. 55 According to the Policy Statement, the FDIC will pay its property 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 the 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 Law 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 federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes levied pursuant to the Law. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within Improvement Area FF in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Bonds. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors’ rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners’ taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Second, the United States Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against a landowner and if the court found that any of such landowner had an interest in such moneys within the meaning of Section 541(a)(1) of the Bankruptcy Code. 56 Although a bankruptcy proceeding would not cause the lien of the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of a property owner could result in a delay in procuring Superior Court foreclosure proceedings. If enough parcels were involved in bankruptcy proceedings, court delays 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 tax installments not being paid in full. 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, including the Bonds, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service. No Acceleration Provision Neither the Bonds, the Indenture nor the Act contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture or in the event that interest on the Bonds becomes included in gross income for federal income tax purposes. Pursuant to the Indenture and further subject to the prior lien of owners of Bonds, an owner is given the right for the equal benefit and protection of all owners of a series similarly situated to pursue certain remedies described in Appendix D under the caption “EVENTS OF DEFAULT; REMEDIES.” Loss of Tax Exemption As discussed under the caption “TAX EXEMPTION,” in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the District has covenanted in the Indenture, not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date that the Bonds were issued, as a result of acts or omissions of the City or the District in violation of the Code. Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional or mandatory sinking fund redemption provisions of the Indenture. Limited 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. Although the 57 District has committed to provide certain statutorily required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See the caption “CONTINUING DISCLOSURE.” Any failure to provide annual financial information, if required, does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bonds 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. Proposition 218 Proposition 218, an initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”), was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the Bonds as described below. 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.” The Act 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, the Act 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 the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that: “Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.” Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. The provisions of the Initiative relating to the exercise of the initiative power have not been interpreted by the courts and no assurance can be given as to the outcome of any such litigation. It may be possible, however, for voters of Improvement Area FF or the City Council, acting as the legislative body of 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 58 amount of Special Taxes that may be levied in any year below the existing levels. 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. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedings under the Act to reduce the Maximum Special Tax rates on parcels of Taxable Property within Improvement Area FF to less than an amount projected to equal 110% of annual debt service each year on the Outstanding Bonds and Parity Bonds plus the Administrative Expenses Cap. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District has also covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes.” However, no assurance can be given as to the enforceability of the foregoing covenants or as to the outcome of any legal action taken by the District. The interpretation and application of Article XIIIC and Article XIIID 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. See the caption “—Limitations on Remedies.” Ballot Initiatives Articles XIIIC and XIIID of the State Constitution were adopted pursuant to measures that qualified for the ballot pursuant to the State’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. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by voters or legislation enacted by the State Legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations. 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 Indenture 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 creditors’ rights, by equitable principles, by the exercise of judicial discretion and by limitations or remedies against public agencies in the State. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. 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. 59 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 applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or later 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 federal 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 governmental entities in the State. See the captions “—Bankruptcy and Foreclosure Delays,” and “—FDIC/Federal Government Interests in Properties.” Recent Case Law Related to the Mello-Roos Act On August 1, 2014, the California Court of Appeal, Fourth Appellate District, issued its opinion in City of San Diego v. Melvin Shapiro, et al.(D063997). The case involved a Convention Center Facilities District (the "CCFD") established by the City of San Diego. The CCFD is a financing district established under the City’s charter (the "Charter") and was intended to function much like a community facilities district established under the Mello-Roos Act. The CCFD was comprised of all of the real property in the entire City. However, the CCFD special tax was to be levied only on properties in the CCFD that were improved with a hotel. At the election to authorize the CCFD special tax, the CCFD proceedings limited the electorate to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel was located. Registered voters in the City of San Diego were not permitted to vote. This definition of the qualified electors of the CCFD was based on Section 53326(c) of the Mello-Roos Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed community facilities district whose property would be subject to the special tax. The San Diego Court held that the CCFD special tax election did not comply with the City’s Charter and with applicable provisions of the California Constitution -- specifically Article XIIIA, section 4 ("Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district….") and Article XIIIC, section 2(d) ("No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.") -- because the electors in the CCFD election should have been the registered voters residing within the CCFD (the boundaries of which were coterminous with the boundaries of the City of San Diego). As to the District, there were no registered voters within the District at the time of the election to authorize the Special Taxes. Significantly, the San Diego Court expressly stated that it was not addressing the validity of a landowner election to impose special taxes on residential property pursuant to the Mello-Roos Act in situations where there are fewer than 12 registered voters. Therefore, by its terms, the San Diego Court’s holding does not apply to the special tax election in the District. Moreover, Sections 53341 and 53359 of the Act establish a limited period of time in which special taxes levied under the Mello-Roos Act may be challenged by a third party: 60 53341. Any action or proceeding to attack, review, set aside, void, or annul the levy of a special tax or an increase in a special tax pursuant to [the Mello-Roos Act] shall be commenced within 30 days after the special tax is approved by the voters…. 53359. An action to determine the validity of bonds issued pursuant to [the Mello-Roos Act] or the validity of any special taxes levied pursuant to [the Mello-Roos Act] … shall …. be commenced within 30 days after the voters approve the issuance of the bonds or the special tax … Landowner voters approved the Special Taxes and the issuance of bonds for the District in compliance with all applicable requirements of the Mello-Roos Act on April 16, 2014. Therefore, pursuant to Sections 53341 and 53359 of the Mello-Roos Act, the statute of limitations period to challenge the validity of the special tax has expired. Because the San Diego Court expressly stated that it did not consider the facts presented by the District and because the period for challenging the Special Taxes has passed, the City believes the Special Taxes are valid and cannot be challenged. Potential Early Redemption of Bonds from Prepayments Property owners within Improvement Area FF are permitted to prepay their Special Taxes at any time. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date following the receipt of the prepayment. CONTINUING DISCLOSURE District Continuing Disclosure Certificate General.Pursuant to a Continuing Disclosure Certificate, dated as of November 1, 2016 (the “District Continuing Disclosure Certificate”), executed by the District, the District has covenanted for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by December 31 of each year (the “Annual Report”), commencing December 31, 2016 for the report for the fiscal year ended June 30, 2016, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the City with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in Appendix E—“FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 (“Rule 15c2-12”). The requirement that the District file its audited financial statements, which constitute a part of the audited financial statements of the City, as a part of the Annual Report has been included in the District Continuing Disclosure Certificate solely to satisfy the provisions of Rule 15c2-12. The inclusion of such information does not mean that the Bonds are secured by any resources or property of the City or any entity other than the District or that the Bonds are payable from any source other than Net Taxes and the other funds pledged under the Indenture. See the captions “SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS—Limited Obligations.” 61 Five-Year Compliance History.During the past five years, the District (with respect to a different improvement area than Improvement Area FF) failed to file its fiscal year 2012-13 audited financial statements (182 days) and annual financial information (76 days) on a timely basis, and failed to file a notice of its failure to file. The District also failed to include two required items of information in its fiscal year 2013-14 annual report, specifically, information pertaining to tax prepayments and improvement fund balances. In addition, although the City and its affiliated entities other than the District (such as the Lake Elsinore Public Financing Authority, the City’s former redevelopment agency and its successor agency, and other community facilities districts formed by the City) are not obligated persons pursuant to Rule 15c2-12 with respect to the Bonds, during the last five years the City and such affiliated entities failed to comply in certain respects with continuing disclosure obligations related to outstanding bonded indebtedness. The failures to comply include late filings with respect to several annual reports and incomplete filings with respect to other annual reports. The incomplete filings omitted one or more of the following items: (1)Comprehensive audited financial statements, including the audited financial statements for fiscal years 2010-11 through 2012-13, which were not linked on EMMA to all required CUSIPs until July 1, 2014; (2)Updated tabular and other operating information; and (3)Material event notices of changes in bond ratings. The City and its affiliated entities have made additional filings to provide certain of the previously omitted information (including the existing ratings of the outstanding bonds). In order to promote compliance by the District with its obligations under the District Continuing Disclosure Certificate, the City has retained SCG - Spicer Consulting Group to serve as the dissemination agent for the Bonds. Additionally, the City had adopted formal policies and procedures with respect to its continuing disclosure practices and has reported the failures to comply with its prior continuing disclosure obligations under the current Municipalities Continuing Disclosure Cooperation Initiative of the U.S. Securities Exchange Commission. Unit 13 and Unit 16 Disclosure Certificates Although the Underwriter has concluded that Unit 13 and Unit 16 are not obligated persons under Rule 15c2-12, each of Unit 13 and Unit 16 will execute a Continuing Disclosure Certificate (the “Unit 13 Continuing Disclosure Certificate” and the (“Unit 16 Continuing Disclosure Certificate”), pursuant to which Unit 13 and Unit 16 have agreed to provide, or cause to be provided, on a semi-annual and annual basis, to EMMA, certain financial information and operating data concerning Unit 13’s and Unit 16’s development within Improvement Area FF as well as notice of certain listed events until such time as Unit 13 and Unit 16 are collectively no longer responsible for more than 20% of the Special Tax levy. A default under the Unit 13 Continuing Disclosure Certificate or the Unit 16 Continuing Disclosure Certificate will not, in itself, constitute an Event of Default under the Indenture, and the sole remedy under the Unit 13 Continuing Disclosure Certificate or the Unit 16 Continuing Disclosure Certificate in the event of any failure of Unit 13, Unit 16 or the dissemination agent, as applicable, to comply with the Unit 13 Continuing Disclosure Certificate or the Unit 16 Continuing Disclosure Certificates will be an action to compel performance. See Appendix F— “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.” 62 The District has no obligation to enforce the continuing disclosure undertakings of Unit 13 or Unit 16. Prior Disclosure Compliance by Unit 13 and Unit 16. Neither Unit 13 nor Unit 16 has ever been a party to an undertaking to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in Southern California. TAX EXEMPTION In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond Owner will increase the Bond Owner’s basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the Owner of the Bond is excluded from the gross income of such Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State personal income tax. The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on 63 the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. 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 municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value. Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Bond Counsel’s engagement with respect to the Bonds terminates upon their issuance and Bond Counsel disclaims any obligation to update the matters set forth in its opinion. The Indenture, the Resolution of Issuance and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any Bond as to which any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS OR THE MARKET VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the 64 Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C. LEGAL OPINION The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix C hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Liebold McClendon & Mann, Irvine, California, Issuer Counsel, and by Jones Hall, A Professional Law Corporation, San Francisco, California, Disclosure Counsel, for the Underwriter by Nossaman LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement. ABSENCE OF LITIGATION No litigation is pending or threatened concerning the validity of the Bonds, and a certificate of the District to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. Neither the City nor the District is aware of any litigation pending or threatened which questions the existence of the District or the City or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Bonds. NO RATING The District has not made and does not contemplate making an application to any rating agency for the assignment of a rating on the Bonds. UNDERWRITING The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), pursuant to a Bond Purchase Agreement, dated ______, 2016 (the “Bond Purchase Agreement”), by and between the District and the Underwriter. The Underwriter has agreed to purchase the Bonds at a price of $______ (being the $_____ aggregate principal amount of the Bonds, less an Underwriter’s discount of $_____ and less net original issue discount of $______. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering price stated on the cover page thereof. The offering price may be changed from time to time by the Underwriter. 65 FINANCIAL INTERESTS The fees being paid to the Underwriter and its counsel, Bond Counsel, Disclosure Counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel and Disclosure Counsel represent the Underwriter on matters unrelated to the Bonds. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 66 ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations, summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City acting in its capacity as the legislative body of the District. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA FF) By: City Manager of the City of Lake Elsinore A-1 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA FF) B-1 APPENDIX B ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY OF LAKE ELSINORE The following information relating to the City of Lake Elsinore (the “City”) and the County of Riverside (the “County”), California (the “State”) is supplied solely for purposes of information. Neither the City nor the County is obligated in any manner to pay principal of or interest on the Bonds or to cure any delinquency or default on the Bonds. The Bonds are payable solely from the sources described in the Official Statement. General Description The City was founded in 1883 and incorporated as a general law city effective April 23, 1888 in San Diego County. In 1893, the Elsinore Valley, previously located in San Diego County, became part of the new County of Riverside. The City encompasses approximately 43 square miles, with over 10 miles of lakeshore, and is located at the southwestern end of the County, 73 miles east of downtown Los Angeles and 74 miles north of downtown San Diego. As of January 1, 2016 the City’s population was approximately 61,006 people. Population The population of the City, the County and the State is shown below for 2012 through 2016. City of Lake Elsinore, County of Riverside and State of California Population Estimates Source:California Department of Finance estimates (as of January 1). Year (January 1)City of Lake Elsinore County of Riverside State of California 2012 53,457 2,239,715 37,881,357 2013 56,039 2,266,549 38,239,207 2014 57,368 2,291,093 38,567,459 2015 59,142 2,317,924 38,907,642 2016 61,006 2,347,828 39,255,883 B-2 Employment and Industry The County of Riverside is a part of the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the “MSA”). The unemployment rate in the MSA was 6.6 percent in August 2016, down from a revised 6.9 percent in July 2016, and below the year-ago estimate of 6.8 percent. This compares with an unadjusted unemployment rate of 5.6 percent for California and 5.0 percent for the nation during the same period. The unemployment rate was 6.9 percent in Riverside County and 6.2 percent in San Bernardino County. The following table summarizes the civilian labor force, employment and unemployment in the County for the calendar years 2011 through 2015. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the City. RIVERSIDE-SAN BERNARDINO-ONTARIO METROPLITAN STATISTICA AREA (Riverside and San Bernardino Counties) Civilian Labor Force, Employment and Unemployment (Annual Averages) March 2015 Benchmark 2011 2012 2013 2014 2015 Civilian Labor Force (1)1,867,000 1,882,200 1,897,700 1,927,600 1,961,800 Employment 1,623,800 1,665,100 1,711,000 1,771,700 1,832,300 Unemployment 243,200 217,100 186,700 155,900 129,500 Unemployment Rate 13.0%11.5%9.8%8.1%6.6% Wage and Salary Employment (2) Agriculture 14,900 15,000 14,500 14,400 15,100 Mining and Logging 1,000 1,200 1,200 1,300 1,300 Construction 59,100 62,600 70,000 77,600 85,200 Manufacturing 85,100 86,700 87,300 91,300 95,600 Wholesale Trade 49,200 52,200 56,400 58,900 61,700 Retail Trade 158,500 162,400 164,800 169,400 173,500 Transportation, Warehousing & Utilities 67,900 73,000 78,400 86,600 97,300 Information 12,200 11,700 11,500 11,300 11,300 Finance & Insurance 24,900 25,400 25,700 26,000 26,100 Real Estate & Rental & Leasing 14,600 14,900 15,600 16,300 17,100 Professional & Business Services 10,200 10,800 11,400 11,900 12,200 Educational & Health Services 126,000 127,500 132,400 139,300 144,400 Leisure & Hospitality 165,400 173,600 187,600 194,800 205,000 Other Services 124,000 129,400 135,900 144,800 151,500 Federal Government 39,100 40,100 41,100 43,000 44,000 State Government 21,300 20,600 20,300 20,200 20,300 Local Government 29,100 28,200 27,800 28,200 28,700 Total, All Industries 1,169,400 1,200,200 1,247,800 1,303,700 1,362,400 (1)Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2)Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3)Totals may not add due to rounding. Source: State of California Employment Development Department. B-3 Major Employers The following table sets forth the top twenty employers located in the County: COUNTY OF RIVERSIDE Largest Employers (Listed Alphabetically) As of March 2015 Employer Name Location Industry Boston Scientific Corp Temecula Physicians & Surgeons Equip & Supls-Mfrs Corrections Dept Norco Government Offices-State Desert Regional Med Ctr Inc Palm Springs Hospitals Eisenhower Medical Ctr Rancho Mirage Hospitals Fantasy Springs Resort Casino Indio Casinos Handsome Rewards Perris Internet & Catalog Shopping Hemet Valley Medical Ctr Hemet Hospitals Hotel At Fantasy Springs Indio Casinos Infusion Beach & Hotel Palm Springs Hotels & Motels Inland Valley Medical Ctr Wildomar Hospitals J W Marriott-Desert Spgs Resrt Palm Desert Hotels & Motels Kaiser Permanente Riverside MD Riverside Hospitals La Quinta Golf Course La Quinta Golf Courses Morongo Casino Resort & Spa Cabazon Casinos Morongo Tribal Gaming Ent Banning Business Management Consultants Pechanga Resort & Casino Temecula Resorts PGA West Resort Clubhouse La Quinta Golf Courses Riverside Community Hospital Riverside Hospitals Riverside County Regl Med Ctr Moreno Valley Hospitals Robertson's Ready Mix Corona Concrete-Ready Mixed Starcrest of California Perris Internet & Catalog Shopping Starcrest Products Perris Gift Shops Sun World Intl LLC Coachella Fruits & Vegetables-Wholesale Universal Protection Svc Palm Desert Security Guard & Patrol Service US Air Force Dept March Air Reserve Base Military Bases Source: State of California Employment Development Department; America’s Labor Market Information System (ALMIS) Employer Database, 2016 2nd Edition. B-4 Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2011 through 2015. CITY OF LAKE ELSINORE COUNTY OF RIVERSIDE Effective Buying Income As of January 1, 2011 through 2015 Year Area Total Effective Buying Income (000’s Omitted) Median Household Effective Buying Income 2011 City of Lake Elsinore $823,005 $43,961 County of Riverside 39,981,683 44,116 California 814,578,458 47,062 United States 6,438,704,664 41,253 2012 City of Lake Elsinore $846,888 $45,195 County of Riverside 40,157,310 43,860 California 864,088,828 47,307 United States 6,737,867,730 41,358 2013 City of Lake Elsinore $852,698 $45,712 County of Riverside 40,293,518 44,784 California 858,676,636 48,340 United States 6,982,757,379 43,715 2014 City of Lake Elsinore $907,205 $48,563 County of Riverside 41,199,300 45,576 California 901,189,699 50,072 United States 7,357,153,421 45,448 2015 City of Lake Elsinore $977,758 $51,040 County of Riverside 45,407,058 48,674 California 981,231,666 53,589 United States 7,757,960,399 46,738 Source: The Nielsen Company (US), Inc. B-5 Commercial Activity A summary of historic taxable sales within the County during the past five years in which data is available is shown in the following table. The following table shows total taxable retail sales, total taxable sales from all outlets and related number of permits in the County on an annual basis for calendar years 2010 through 2014. Annual figures for calendar year 2015 are not yet available. COUNTY OF RIVERSIDE Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number of Permits on August 1 Taxable Transactions Number of Permits on August 1 Taxable Transactions 2010 32,534 $16,919,500 45,688 $23,152,780 2011 33,398 18,576,285 46,886 25,641,497 2012 34,683 20,016,668 48,316 28,096,009 2013 33,391 21,306,774 46,805 30,065,467 2014 34,910 22,646,343 48,453 32,035,687 Source:California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). A summary of historic taxable sales within the City during the past five years in which data is available is shown in the following table. The following table shows total taxable retail sales, total taxable sales from all outlets and related number of permits in the City on an annual basis for calendar years 2010 through 2014. Annual figures for calendar year 2015 are not yet available. CITY OF LAKE ELSINORE Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number of Permits on August 1 Taxable Transactions Number of Permits on August 1 Taxable Transactions 2010 863 $546,623 1,197 $599,836 2011 897 578,301 1,248 634,553 2012 923 604,846 1,274 665,409 2013 828 620,558 1,176 688,483 2014 809 647,941 1,176 728,088 Source:California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). B-6 Construction Activity Provided below are the building permits and valuations for the County and the City for calendar years 2011 through 2015. COUNTY OF RIVERSIDE Total Building Permit Valuations (Valuations in Thousands) 2011 2012 2013 2014 2015 Permit Valuation New Single-family $647,070.8 $904,156.2 $1,138,738.1 $1,296,552.8 $1,313,084.2 New Multi-family 113,170.4 87,878.6 138,636.0 178,116.7 110,458.4 Res. Alterations/Additions 188,468.9 87,370.5 98,219.3 147,081.2 113,200.0 Total Residential 948,710.1 1,079,405.3 1,375,593.4 1,621,750.7 1,536,742.6 New Commercial 166,714.4 508,192.8 263,837.7 197,674.9 211,785.1 New Industrial 10,000.0 26,432.5 141,184.4 161,321.1 180,521.3 New Other 16,576.8 11,115.5 109,795.2 128,666.9 204,554.1 Com. Alterations/Additions 297,356.4 171,263.2 369,502.4 327,327.1 314,604.2 Total Nonresidential 490,647.6 717,004.0 884,319.7 814,990.0 911,464.7 New Dwelling Units Single Family 2,659 3,720 4,716 5,007 5,007 Multiple Family 1,061 909 1,427 1,931 1,189 TOTAL 3,720 4,629 6,143 6,938 6,196 Source: Construction Industry Research Board, Building Permit Summary. CITY OF LAKE ELSINORE Total Building Permit Valuations (Valuations in Thousands) 2011 2012 2013 2014 2015 Permit Valuation New Single-family $12,168.7 $17,061.9 $113,359.4 $79,497.9 $75,724.5 New Multi-family 8,020.6 0.0 0.0 0.0 0.0 Res. Alterations/Additions 1,872.4 858.0 502.0 661.4 254.5 Total Residential 22,061.7 71,919.9 113,861.4 80,159.3 75,979.0 New Commercial 206.8 4,701.2 2,520.7 260.2 229.1 New Industrial 0.0 0.0 0.0 0.0 0.0 New Other 0.0 40.0 440.8 3,319.0 2,829.3 Com. Alterations/Additions 1,859.0 3,300.5 1,301.5 1,811.0 2,821.3 Total Nonresidential 2,065.8 8,041.7 4,272.0 5,390.2 5,879.7 New Dwelling Units Single Family 67 401 685 429 372 Multiple Family 113 0 0 0 0 TOTAL 180 401 685 429 372 Source: Construction Industry Research Board, Building Permit Summary. B-7 Transportation Easy access to job opportunities in the County and nearby Los Angeles, Orange and San Diego Counties is important to the County’s employment figures. Several major freeways and highways provide access between the County and all parts of Southern California. The Riverside Freeway (State Route 91) extends southwest through Corona and connects with the Orange County freeway network in Fullerton. Interstate 10 traverses the width of the County, the western-most portion of which links up with major cities and freeways in the eastern part of Los Angeles County and the southern part of San Bernardino County. Interstate 15 and 215 extend north and then east to Las Vegas, and south to San Diego. The Moreno Valley Freeway (U.S. 60) provides an alternative (to interstate 10) east-west link to Los Angeles County. The County seat, located in the City of Riverside, is within 20 miles of the Ontario International Airport in neighboring San Bernardino County. This airport is operated by the Los Angeles Department of Airports. Four major airlines schedule commercial flight service at Palm Springs Regional Airport. County-operated general aviation airports include those in Thermal, Hemet, Blythe, and French Valley. The cities of Riverside, Corona and Banning also operate general aviation airports. Education There are four elementary school districts, one high school district, eighteen unified (K- 12) school districts and four community college districts in the County. Ninety-five percent of all K-12 students attend schools in the unified school districts. The three largest unified districts are Riverside Unified School District, Moreno Valley Unified School District and Corona-Norco Unified School District. There are eight two-year community college campuses located in the communities of Riverside, Moreno Valley, Norco, San Jacinto, Menifee, Coachella Valley and Palo Verde Valley. There are also two universities and a four-year college located in the City of Riverside -- the University of California, Riverside, La Sierra University and California Baptist College. C-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: D-1 APPENDIX D SUMMARY OF THE INDENTURE The following is a summary of certain provisions of the Indenture which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof. E-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE THIS CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”), dated ______, 2016, is executed and delivered by City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) in connection with the issuance of the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2016B (Improvement Area FF) (the “Bonds”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City of Lake Elsinore, acting as the legislative body of the District on _____, 2016 and a Bond Indenture by and between the District and Wilmington Trust, National Association, as Trustee, dated as of November 1, 2016 (the “Indenture”). The District covenants as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture and the Rate and Method of Apportionment, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including a person holding Bond through a nominee, depository or other intermediary), or (b) is treated as the owner of any Bond for federal income purposes. “City” shall mean the City of Lake Elsinore, County of Riverside, California. “Disclosure Representative” shall mean the Director of Administrative Services of the City, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time. “Dissemination Agent” shall mean, initially, SCG - Spicer Consulting Group, or any successor Dissemination Agent designed in writing by the District. “EMMA” shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future. “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. “Official Statement” shall mean the District’s official statement with respect to the Bonds. E-2 “Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated. “Rate and Method of Apportionment” means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation, as amended in accordance with the Act. “Resolution of Formation” means the Resolution adopted by the City Council pursuant to which the City Council undertook certain change proceedings with respect to the District and established Improvement Area FF therein. “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. “Tax-exempt” shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax. SECTION 3. Provision of Annual Reports. (a)Not later than December 31 of each year commencing December 31, 2016, the District shall, or shall cause the Dissemination Agent to, provide to EMMA and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is other than the District, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the District shall provide the Annual Report (in a form suitable for filing with EMMA) to the Dissemination Agent. 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 Certificate; provided that the audited financial statements of the District may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. Once posted, the Official Statement will serve as the first Annual Report. (b)In the event that the Dissemination Agent is an entity other than the District, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the District shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (c)If the Dissemination Agent is other than the District and if the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send a notice in a timely manner to EMMA, in the form required by EMMA. E-3 (d)If the Dissemination Agent is other than the District, the Dissemination Agent shall: (i)determine each year prior to the date for providing the Annual Report the name and address of the repository if other than the MSRB through EMMA; and (ii)promptly after receipt of the Annual Report, file a report with the District certifying that the Annual Report has been provided to EMMA and the date it was provided. (e)Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in accordance with the MSRB’s EMMA system or in another manner approved under the Rule. SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference: (a)Financial Statements. The audited financial statements of the District, if any, for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements, if any are prepared, are not available by the time the Annual Report is required to be filed pursuant to Section 3, the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they come available. (b)Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information: (i)the principal amount of Bonds outstanding as of the September 2 preceding the filing of the Annual Report; (ii)the balance in each fund under the Indenture as of the September 2 preceding the filing of the Annual Report; (iii)the aggregate assessed valuation of the Taxable Property within Improvement Area FF; (iv)any changes to the Rate and Method of Apportionment of the Special Tax approved or submitted to the qualified electors for approval prior to the filing of the Annual Report; (v)a table setting forth the annual Special Tax delinquency rate within Improvement Area FF at June 30 for each fiscal year on which a delinquency exists, listing for each fiscal year the total Special Tax levy, the amount delinquent and the percent delinquent; (vi)the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes within Improvement Area FF; (vii)if Special Taxes are levied on Undeveloped Property, the amount of Special Taxes levied on Undeveloped Property and the amount of Special Taxes levied on Developed Property (as such terms are defined in the Rate and Method of Apportionment); E-4 (viii)an update of Table 3 and Table 4 of the Official Statement based upon the outstanding principal amount of bonds issued by the District for Improvement Area FF, the most recent Special Tax levy preceding the date of the Annual Report and the estimated assessed value of taxable property within Improvement Area FF; the tables should include such information about the owners of taxable property that are responsible for 5% or more of the most recent Special Tax levy; the tables do not need to reflect Overlapping Land Secured Bonded Debt. (c)Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB through EMMA. The District 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 District shall give, or cause the Dissemination Agent to give, notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds: 1.principal and interest payment delinquencies; 2.unscheduled draws on debt service reserves reflecting financial difficulties; 3.unscheduled draws on credit enhancements reflecting financial difficulties; 4.substitution of credit or liquidity providers, or their failure to perform; 5.adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds; 6.defeasances; 7.tender offers; 8.bankruptcy, insolvency, receivership or similar proceedings; and 9.ratings changes. (b)Additionally, the District shall give or cause the Dissemination Agent to give notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds, if material: 1.mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination; E-5 2.appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent; 3.nonpayment related defaults; 4.modifications to the rights of Bondholders; 5.bond calls; and 6.release, substitution or sale of property securing repayment of the Bonds. (c)In the event that the District’s fiscal year changes, the District shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would be reported pursuant to this Section. (d)The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for determining whether the District’s instructions to the Dissemination Agent under this Section comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the District and the Dissemination Agent under this Disclosure Certificate 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 District shall give notice of such termination in the same manner as for a Listed Event under Section 5. SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing (i) thirty days written notice to the District, and (ii) upon appointment of a new Dissemination Agent hereunder. SECTION 8. Amendment. (a)This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following conditions are satisfied: (1) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the District or the type of business conducted thereby, (2) the undertakings in this Disclosure Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (3) the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners or (ii) does not, in the determination of the District, materially impair the interests of the Owners or Beneficial Owners of the Bonds. (b)To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure E-6 Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (c)If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate 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 Certificate. If the District 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 Certificate, the District 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. SECTION 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner 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 District and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance. E-7 SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the District is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent and 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 their powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any Dissemination Agent shall be paid (i) compensation by the District for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) 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 it by the District pursuant to this Disclosure Certificate. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds; and it shall create no rights in any other person or entity. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] E-8 SECTION 13. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. This Disclosure Certificate is executed as of the date and year first set forth above. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) By: _______________________ Disclosure Representative F-1 APPENDIX F FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE [UNIT 13] CONTINUING DISCLOSURE CERTIFICATE (Property Owner) $__________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016A (IMPROVEMENT AREA FF) This Continuing Disclosure Certificate (Property Owner) (this “Disclosure Certificate”) is executed and delivered by the undersigned (the “Property Owner”) and SCG - Spicer Consulting Group as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the City of Lake Elsinore (the "City") of the bonds captioned above (the “Bonds”) with respect to Community Facilities District No. 2006-1 (Summerly) (Improvement Area FF), City of Lake Elsinore, County of Riverside, State of California (the “District”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City, acting as legislative body of the District on ______, 2016, and a Bond Indenture, dated as of November 1, 2016, (the “Indenture”), by and between the District and Wilmington Trust, N.A., as trustee (the “Trustee”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Property Owner’s ability to pay the Special Taxes related to the Property prior to delinquency. “Assumption Agreement”means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to Improvement Area FF of the District), whereby such Major Owner or Affiliate agrees to provide periodic reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area FF of the District owned by such Major Owner and its Affiliates and, at the option of the Property Owner or such Major Owner, agrees to indemnify F-2 the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof. “Dissemination Agent” means SCG - Spicer Consulting Group, or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the City and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any Report Date, an owner of land in Improvement Area FF of the District that is responsible in the aggregate for 20% or more of the Special Taxes in Improvement Area FF of the District anticipated to be levied at any time during the then-current fiscal year. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Inc., the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means the property owned by the Property Owner in Improvement Area FF of the District. “Report Date” means March 31 and September 30 of any fiscal year. “Rule” means 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” means the special taxes of the District levied on taxable property within Improvement Area FF of the District. Section 3. Provision of Periodic Reports. (a)The Property Owner shall, or, upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2017, file with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this F-3 Disclosure Certificate with a copy to the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Periodic Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Property Owner), the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Trustee, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b)If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the City, the Participating Underwriter and the Property Owner. (c)With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB. Section 4. Content of Periodic Reports. The Property Owner’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Significant Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: F-4 (i)bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii)failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upon discovery thereof; (iii)filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv)material damage to or destruction of any of the improvements on the Property; and (v)any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b)Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c)If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the City and the Participating Underwriter. Section 6. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as property owned by the Property Owner is no longer responsible for payment of 20% or more of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to the Property. The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. F-5 (b)If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of the Property Owner hereunder with respect to the property in Improvement Area FF of the District owned by such Major Owner and its Affiliates may be assumed by such Major Owner or by an Affiliate thereof, and the Property Owner’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the City and the Participating Underwriter. Section 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Property Owner and the Trustee. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (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 type of business conducted; and (b)the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture 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. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and 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 Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under F-6 this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Account of the Special Tax Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable 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 it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows: To the Issuer:City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: Director of Administrative Services To the Trustee: Wilmington Trust, N.A. 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 Attn: Corporate Trust Department Phone: (714) 384-4153 To the Participating Underwriter:Stifel, Nicolaus & Company, Inc. 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Attention: Public Finance To the Dissemination Agent:SCG - Spicer Consulting Group 25220 Hancock Avenue, Suite 300 Murrieta, California 92562 Attention: Chief Executive Officer F-7 To the Property Owner:Summerly Unit 13, LLC [Address To Come] provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid 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 Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Trustee, 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. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. F-8 Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: _______, 2016 SUMMERLY UNIT 13, LLC, a Delaware limited liability company By: Its: By: ACCEPTED AND AGREED TO: SCG - SPICER CONSULTING GROUP, as Dissemination Agent By: Authorized Signatory F-9 EXHIBIT A NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer:City of Lake Elsinore with respect to its Community Facilities District No. 2006-1 (Summerly) (Improvement Area FF), City of Lake Elsinore, County of Riverside, State of California Name of Bond Issue:City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (Improvement Area FF) Special Tax Bonds, Series 2016A Date of Issuance:_______, 2016 NOTICE IS HEREBY GIVEN that Summerly Unit 13, LLC (the “Major Owner”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated ________, 2016. The Major Owner anticipates that the Periodic Report will be filed by _____________. Dated: SCG - Spicer Consulting Group, as Dissemination Agent By: Its: cc:Trustee City Participating Underwriter Property Owner/Major Owner F-10 EXHIBIT B PERIODIC REPORT $________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016A (IMPROVEMENT AREA FF) This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated ______, 2016 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by the City of Lake Elsinore (the "City") with respect to its Community Facilities District No. 2006-1 (Summerly), City of Lake Elsinore, County of Riverside, State of California (the “District”). Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I.Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Periodic Report). A.Property currently owned by the Property Owner in Improvement Area FF of the District (the “Property”): Development name: Number of lots (acreage): B.Status of land development or construction activities with respect to the Property: ______________________________________________________________________ ______________________________________________________________________ C.Status of building permits and any significant amendments to land use or development entitlements for the Property: ______________________________________________________________________ ______________________________________________________________________ F-11 D.Aggregate property in Improvement Area FF of the District sold (closed escrows), optioned or leased by the Property Owner to end users or merchant builders: Since the Date of Issuance of the Bonds Since the Last Periodic Report Acres*____ Lots ____ Bldg. Sq. Ft.____ Acres*____ Lots ____ Bldg. Sq. Ft.____ *For bulk land sales only (excluding sales of finished lots or completed buildings). E.Status of any land purchase contracts with regard to the Property, whether acquisition of land in Improvement Area FF of the District by the Property Owner or sales (closed escrows) of land in Improvement Area FF of the District to other property owners, distinguishing between (i) end users (e.g., condominiums), (ii) Property Owners and (iii) merchant builders. ______________________________________________________________________ ______________________________________________________________________ II.Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the headings “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF - Development by Van Daele for Unit 13” and “- Development by SeaCountry for Unit 16” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement. F-12 ________________________________________________________________________ ________________________________________________________________________ V. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification The undersigned Property Owner hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: SUMMERLY UNIT 13, LLC, a Delaware limited liability company By: Its: By: F-13 [UNIT 16] CONTINUING DISCLOSURE CERTIFICATE (Property Owner) $__________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016A (IMPROVEMENT AREA FF) This Continuing Disclosure Certificate (Property Owner) (this “Disclosure Certificate”) is executed and delivered by the undersigned (the “Property Owner”) and SCG - Spicer Consulting Group as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the City of Lake Elsinore (the "City") of the bonds captioned above (the “Bonds”) with respect to Community Facilities District No. 2006-1 (Summerly) (Improvement Area FF), City of Lake Elsinore, County of Riverside, State of California (the “District”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City, acting as legislative body of the District on ______, 2016, and a Bond Indenture, dated as of November 1, 2016, (the “Indenture”), by and between the District and Wilmington Trust, N.A., as trustee (the “Trustee”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Property Owner’s ability to pay the Special Taxes related to the Property prior to delinquency. “Assumption Agreement”means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to Improvement Area FF of the District), whereby such Major Owner or Affiliate agrees to provide periodic reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area FF of the District owned by such Major Owner and its Affiliates and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof. F-14 “Dissemination Agent” means SCG - Spicer Consulting Group, or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the City and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any Report Date, an owner of land in Improvement Area FF of the District that is responsible in the aggregate for 20% or more of the Special Taxes in Improvement Area FF of the District anticipated to be levied at any time during the then-current fiscal year. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Inc., the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means the property owned by the Property Owner in Improvement Area FF of the District. “Report Date” means March 31 and September 30 of any fiscal year. “Rule” means 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” means the special taxes of the District levied on taxable property within Improvement Area FF of the District. Section 3. Provision of Periodic Reports. (a)The Property Owner shall, or, upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2017, file with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Periodic Report to the Dissemination Agent (if different F-15 from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Property Owner), the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Trustee, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b)If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the City, the Participating Underwriter and the Property Owner. (c)With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB. Section 4. Content of Periodic Reports. The Property Owner’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Significant Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: (i)bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced F-16 by or against any Affiliate of the Property Owner which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii)failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upon discovery thereof; (iii)filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv)material damage to or destruction of any of the improvements on the Property; and (v)any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b)Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c)If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the City and the Participating Underwriter. Section 6. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as property owned by the Property Owner is no longer responsible for payment of 20% or more of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to the Property. The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b)If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of the Property Owner hereunder with respect to the property in Improvement Area FF of the District owned by such Major Owner and its Affiliates may be assumed by such F-17 Major Owner or by an Affiliate thereof, and the Property Owner’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the City and the Participating Underwriter. Section 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Property Owner and the Trustee. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (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 type of business conducted; and (b)the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture 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. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and 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 Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. F-18 Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Account of the Special Tax Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable 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 it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows: To the Issuer:City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: Director of Administrative Services To the Trustee: Wilmington Trust, N.A. 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 Attn: Corporate Trust Department Phone: (714) 384-4153 To the Participating Underwriter:Stifel, Nicolaus & Company, Inc. 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Attention: Public Finance To the Dissemination Agent:SCG - Spicer Consulting Group 25220 Hancock Avenue, Suite 300 Murrieta, California 92562 Attention: Chief Executive Officer To the Property Owner:Summerly Unit 16, LLC [Address To Come] provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid to F-19 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 Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Trustee, 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. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. F-20 Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: _______, 2016 SUMMERLY UNIT 16, LLC, a Delaware limited liability company By: Its: By: ACCEPTED AND AGREED TO: SCG - SPICER CONSULTING GROUP, as Dissemination Agent By: Authorized Signatory A-1 EXHIBIT A NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer:City of Lake Elsinore with respect to its Community Facilities District No. 2006-1 (Summerly) (Improvement Area FF), City of Lake Elsinore, County of Riverside, State of California Name of Bond Issue:City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (Improvement Area FF) Special Tax Bonds, Series 2016A Date of Issuance:_______, 2016 NOTICE IS HEREBY GIVEN that Summerly Unit 16, LLC (the “Major Owner”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated ________, 2016. The Major Owner anticipates that the Periodic Report will be filed by _____________. Dated: SCG - Spicer Consulting Group, as Dissemination Agent By: Its: cc:Trustee City Participating Underwriter Property Owner/Major Owner B-1 EXHIBIT B PERIODIC REPORT $________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2016A (IMPROVEMENT AREA FF) This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated ______, 2016 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by the City of Lake Elsinore (the "City") with respect to its Community Facilities District No. 2006-1 (Summerly), City of Lake Elsinore, County of Riverside, State of California (the “District”). Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I.Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Periodic Report). A.Property currently owned by the Property Owner in Improvement Area FF of the District (the “Property”): Development name: Number of lots (acreage): B.Status of land development or construction activities with respect to the Property: ______________________________________________________________________ ______________________________________________________________________ C.Status of building permits and any significant amendments to land use or development entitlements for the Property: ______________________________________________________________________ ______________________________________________________________________ B-2 D.Aggregate property in Improvement Area FF of the District sold (closed escrows), optioned or leased by the Property Owner to end users or merchant builders: Since the Date of Issuance of the Bonds Since the Last Periodic Report Acres*____ Lots ____ Bldg. Sq. Ft.____ Acres*____ Lots ____ Bldg. Sq. Ft.____ *For bulk land sales only (excluding sales of finished lots or completed buildings). E.Status of any land purchase contracts with regard to the Property, whether acquisition of land in Improvement Area FF of the District by the Property Owner or sales (closed escrows) of land in Improvement Area FF of the District to other property owners, distinguishing between (i) end users (e.g., condominiums), (ii) Property Owners and (iii) merchant builders. ______________________________________________________________________ ______________________________________________________________________ II.Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the headings “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA FF - Development by Van Daele for Unit 13” and “- Development by SeaCountry for Unit 16” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement. B-3 ________________________________________________________________________ ________________________________________________________________________ V. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification The undersigned Property Owner hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: SUMMERLY UNIT 16, LLC, a Delaware limited liability company By: Its: By: G-1 APPENDIX G BOOK-ENTRY ONLY SYSTEM The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. 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 bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual 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 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, 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 is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 a Standard & Poor’s rating of AA+. 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. Purchases of 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 G-2 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 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 may or 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 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 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. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend 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 Trustee, 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 Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend 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 Trustee, 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. G-3 A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. 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 Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical 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, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. H-1 APPENDIX H APPRAISAL REPORT