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HomeMy WebLinkAboutItem No. 09 Formation of Improvement Areas JJ and KK CFD No. 2006-1Text File City of Lake Elsinore 130 South Main Street Lake Elsinore, CA 92530 www.lake-elsinore.org File Number: RES 2014-017 Agenda Date: 3/28/2017 Status: Public HearingVersion: 1 File Type: ResolutionIn Control: City Council Agenda Number: 9) Page 1 City of Lake Elsinore Printed on 3/23/2017 REPORT TO CITY COUNCIL To:Honorable Mayor and Members of the City Council From:Grant Yates, City Manager Prepared By: Jason Simpson, Assistant City Manager Date:March 28, 2017 Subject: Resolutions and Ordinance Relating to the Formation of Improvement Areas JJ and KK within City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) and Authorization of Special Taxes and Bonded Indebtedness for Improvement Areas JJ and KK Recommendation adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY), ESTABLISHING IMPROVEMENT AREAS JJ AND KK OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY), AUTHORIZING THE LEVY OF SPECIAL TAXES, AND CALLING ELECTIONS THEREIN; and, adopt A RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY), DETERMINING THE NECESSITY TO INCUR BONDED INDEBTEDNESS WITHIN IMPROVEMENT AREAS JJ AND KK OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) AND CALLING ELECTIONS THEREIN; and, adopt A RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY), CERTIFYING THE RESULTS OF THE MARCH 14, 2017 SPECIAL TAX AND BOND ELECTIONS; and, introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006- 1 (SUMMERLY) AUTHORIZING THE LEVY OF A SPECIAL TAX WITHIN EACH OF IMPROVEMENT AREAS JJ AND KK Formation of CFD2006-1 JJ and KK March 28, 2017 Page 2 Background The City of Lake Elsinore (the “City”) formed the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) in 2006 pursuant to the Mello-Roos Community Facilities District Act of 1982. The District generally encompasses the development within the City known as “Summerly.” McMillin Summerly, LLC, a Delaware limited liability company (the “Developer”) is currently the master developer of the Summerly development. Since the District was formed in 2006, the planned product mix within the various portions of the Summerly has changed. To accommodate such changes in product mix and planned development, the Developer has requested, and the City has undertaken proceedings relating to the reorganization of improvement areas within the District and the tax rates within such improvement areas. As a result of further changes in the development plan within the Summerly project, the City received a petition from the Developer requesting the current formation proceedings, which if approved, will form Improvement Areas JJ and KK from the property currently within Improvement Areas DD and GG of the District, respectively. The Developer has also requested the approval of a new rate and method of apportionment for each of Improvement Area JJ and KK and the authorization of bonded indebtedness for Improvement Areas JJ and KK (together, the “Formation Proceedings”). The types of facilities and services to be provided by the District within proposed Improvement Areas JJ and KK will be the same as those approved for the District when it was originally formed. Currently, the property owners within Improvement Areas JJ and KK are the Developer and Western Pacific Housing, Inc. The developments within Improvement Areas JJ and KK are expected to include 211 and 133 single family residential units, respectively. On January 24, 2017, the City Council adopted Resolution Nos. 2017-016 (the “Resolution of Intention”) and 2017-017, which initiated the Formation Proceedings. The Resolution of Intention called for public hearing to be held on March 14, 2017, for the Council to formally consider approval to form Improvement Areas JJ and KK and hold an election on the approval of the special taxes and the need to incur bonded indebtedness to within Improvement Areas JJ and KK. Notice of the public hearing was published in the Press Enterprise and provided to the Developer. On February 28, 2017, the City Council and the Developer agreed to continue the public hearing to March 14, 2017. On March 14, 2017 developer requested (again) to continue the hearing to March 28, 2017. In connection with the public hearing, Spicer Consulting Group has prepared a CFD Report which describes and analyzes the facilities and services to be financed by the District for Improvement Areas JJ and KK and the estimated costs of such facilities and services. Following the close of the public hearing, the City Council will be asked to adopt the resolutions listed above which approve the formation of Improvement Areas JJ and KK, determine the necessity to issue Bonds in an amount not to exceed $7,000,000 for Improvement Area JJ and $5,700,000 for Improvement Area KK, the necessity to levy special taxes annually to pay debt service on such Bonds and for the costs of the facilities and services and calling an election to submit to the qualified voters in the Improvement Areas JJ and KK ballot measures on the approval of the special taxes, the issuance of the bonds and increasing the appropriations limit for the District. Formation of CFD2006-1 JJ and KK March 28, 2017 Page 3 On file with the City Clerk is a Certificate of the Registrar of Voters of Riverside County certifying that there are no registered voters residing within the boundaries of either Improvement Area JJ or KK. Accordingly, under the Mello Roos Act only property owners owning land in each of Improvement Area JJ and KK are eligible to vote at the respective election with each owner having one vote for each acre (or portion thereof) that they own within each improvement area. The current landowners have each executed a Consent and Waiver for each of the elections for Improvement Areas JJ and KK as to certain election procedures that allow the election to be held immediately following the adoption of the resolutions calling the elections. Accordingly, assuming the City Council decides to approve such resolutions, the City Clerk will conduct the election and the City Council will be presented with the Resolution Certifying the Election Results. Assuming each of the ballot measures pass by the requisite 2/3rds vote, the Council would be asked to introduce the Ordinance authorizing the levy of the Special Tax. A notice of special tax lien will be filed on all of the property within each of Improvement Areas JJ and KK. Upon the completion of the Formation Proceedings, Improvement Areas DD and GG of the District will be dissolved and the notices of special tax lien of such improvement areas will be cancelled. Documents to be Approved The attached resolutions forms Improvement Areas JJ and KK and calls elections for the approval of the special taxes, the need to incur bonded indebtedness within Improvement Areas JJ and KK and the increase of the appropriations limit for the District. Fiscal Impact The Developer has made a deposit to pay for the costs of the Formation Proceedings. The Reimbursement Agreement entered into between the City and the Developer provides that the Developer will be reimbursed for such costs if and when bonds are issued for Improvement Areas JJ and KK. The District will annually levy special taxes on all of the taxable property within proposed Improvement Areas JJ and KK in accordance with the applicable rate and method of apportionment in order to pay for the costs of facilities, debt service on bonds, the services and administration of the District. Any bonds issued by the District are not obligations of the City and will be secured solely by the special taxes levied in Improvement Areas JJ or KK, as applicable. Exhibits A Resolution B Resolution C Resolution D Ordinance E Public Hearing Report RESOLUTION NO. 2017 - RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE ESTABLISHING IMPROVEMENT AREAS JJ AND KK OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY), AUTHORIZING THE LEVY OF SPECIAL TAXES, AND CALLING ELECTIONS THEREIN Whereas,after a public hearing, on February 28, 2006, the City Council (the “City Council”) of the City of Lake Elsinore (the “City”) adopted Resolution Nos. 2006-30 (the “Original Resolution of Formation”) and 2006-31 (the “Original Resolution to Incur Bonded Indebtedness”) which formed City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District” or “Community Facilities District No. 2006-1”) pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”) and called a special election for February 28, 2006 within the District and Improvement Area Nos. 1 through 3 therein on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the District, which were approved by more than two-thirds vote by the qualified electors on February 28, 2006; and, Whereas, subsequent to the formation of the District, the District received a petition signed by owners of the land within the boundaries of the District to dissolve Improvement Area Nos. 1 through 3 therein and to establish Improvement Areas A through F of the District, to authorize the levy of the special tax in accordance with rates and methods of apportionment of special taxes for Improvement Areas A through F and to authorize the District to incur bonded indebtedness for Improvement Areas A through F; and, Whereas, on January 25, 2011, the City Council, acting as the legislative body of the District, adopted Resolution Nos. 2011-005 and 2011-006, dissolving Improvement Area Nos. 1 through 3 therein, establishing Improvement Areas A through F of the District and declaring the intention to incur bonded indebtedness of the District for Improvement Areas A through F; and, Whereas,after a public hearing, on March 8, 2011, the City Council adopted Resolution Nos. 2011-119 and 2011-120, which called special elections on March 8, 2011 within Improvement Areas A through F of the District on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the District, which were approved by more than two-thirds vote by the qualified electors on March 8, 2011 (collectively, the “2011 Change Proceedings”); and, Whereas,subsequent to the 2011 Change Proceedings, the District received a petition signed by owners of the land within Improvement Areas C through F of the District to dissolve Improvement Areas C through F and to establish Improvement Areas CC, DD, EE, FF, GG, HH and II of the District from the areas within Improvement Areas C through F of the District; and, Whereas, on February 25, 2014, the City Council, acting as the legislative body of the District, adopted Resolution Nos. 2014-010 and 2011-011, dissolving Improvement Areas C through F therein, establishing Improvement Areas CC, DD, EE, FF, GG, HH and II of the District and declaring the intention to incur bonded indebtedness of the District for Improvement Areas CC, DD, EE, FF, GG, HH and II; and, CC Reso No. 2017 Page 2 of 9 2 Whereas,after a public hearing, on April 8, 2014, the City Council adopted Resolution Nos. 2014- 016 and 2014-017, which called special elections on April 8, 2014 within Improvement Areas CC, DD, EE, FF, GG, HH and II of the District on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the District for Improvement Areas CC, DD, EE, FF, GG, HH and II, which were approved by more than two-thirds vote by the qualified electors on April 8, 2014 (collectively, the “2014 Change Proceedings”); and, Whereas, subsequent to the 2014 Change Proceedings, the District received a petition signed by McMillin Summerly, LLC, a Delaware limited liability company, (the “Owner”) which owns land within Improvement Area DD and GG of the District, which the Owner desires to establish as Improvement Areas JJ and KK of the District, respectively (“Proposed Improvement Area JJ” and “Proposed Improvement Area KK” and together, the “Proposed Improvement Areas”) and to approve rates and methods of apportionment for each of Proposed Improvement Area JJ and Proposed Improvement Area KK; and, Whereas, on January 24, 2017, the City Council of the City adopted Resolution No. 2017-016 stating its intention to establish the Proposed Improvement Areas, to approve rates and methods of apportionment for each of Proposed Improvement Area JJ and Proposed Improvement Area KK attached as Attachments “B” and “C,” to Resolution No. 2017-016 respectively (the “Proposed Rates and Methods”); and, Whereas, on January 24, 2017, the City Council also adopted Resolution No. 2017-017 stating its intention to incur bonded indebtedness within the Proposed Improvement Areas in an amount not to exceed $7,000,000 for Improvement Area JJ and $5,700,000 for Improvement Area KK to finance: (1) the purchase, construction, expansion, improvement or rehabilitation of public improvements identified in Attachment “A” to Resolution No. 2017-017 (collectively, the “Facilities”); and (2) the incidental expenses to be incurred in financing the Facilities and forming and administering the District (the “Facilities Incidental Expenses”); and, Whereas, a copy of Resolution No. 2017-016 setting forth a description of the second amended boundary map of Community Facilities District No. 2006-1 and the Proposed Improvement Areas therein, is on file with the City Clerk and is incorporated herein by reference; and, Whereas, on February 28, 2017, the City Council continued the public hearing called for pursuant to Resolution No. 2017-016 and Resolution No. 2017-017 to March 14, 2017 and on March 14, 2017, such public hearing was continued to March 28, 2017; and, Whereas, a notice of a public hearing, as continued to March 28, 2017, was published and mailed to all landowners of the land proposed to be included within the Proposed Improvement Areas as required by law relative to the intention of the City Council to form the Proposed Improvement Areas and to levy special taxes in accordance with the Proposed Rates and Methods and to incur bonded indebtedness within each Improvement Area; and, Whereas, on March 28, 2017, this City Council held a noticed public hearing as required by law relative to the proposed establishment of the Proposed Improvement Areas within Community Facilities District No. 2006-1, the levy of special taxes therein in accordance with the Proposed Rates and Methods and the issuance of bonded indebtedness by the District with respect to each Proposed Improvement Area; and, CC Reso No. 2017 Page 3 of 9 3 Whereas, at the March 28, 2017 public hearing there was filed with this City Council a report containing a description of the Facilities and Services (as defined in the Proposed Rates and Methods) necessary to meet the needs of the Proposed Improvement Areas and an estimate of the cost of such Facilities and Services as required by Section 53321.5 of the Act (the “Community Facilities District Report”); and, Whereas, at the March 28, 2017 public hearing all persons desiring to be heard on all matters pertaining to the proposed establishment of the Proposed Improvement Areas and the levy of the special taxes within the Proposed Improvement Areas in accordance with the Proposed Rates and Methods and the issuance of bonded indebtedness with respect to each Proposed Improvement Area were heard and a full and fair hearing was held; and, Whereas, at the public hearing, evidence was presented to the City Council on the matters before it, and the proposed establishment of the Proposed Improvement Areas and the levy of special taxes within the Proposed Improvement Areas in accordance with the Proposed Rates and Methods was not precluded by a majority protest of the type described in Section 53324 of the Act, and this City Council at the conclusion of the hearing is fully advised as to all matters relating to the establishment of the Proposed Improvement Areas within the District, the levy of the special taxes in accordance with the Proposed Rates and Methods and the issuance of bonded indebtedness with respect to each Proposed Improvement Area; and, Whereas, the City Council has determined that there have been fewer than twelve registered voters residing in each of the Proposed Improvement Areas for the period of 90 days prior to March 28, 2017 and that the qualified electors in Proposed Improvement Areas are the landowners within Proposed Improvement Areas; and, Whereas, on the basis of all of the foregoing, the City Council has determined at this time to proceed with establishment of the Proposed Improvement Areas within Community Facilities District No. 2006-1 and to call an election within each Proposed Improvement Area to authorize (i) the levy of special taxes pursuant to the respective Proposed Rate and Method, (ii) the issuance of bonds for each Proposed Improvement Area to finance the Facilities and Facilities Incidental Expenses described Attachment “D” to Resolution No. 2017-016 of the City Council, and (iii) to increase the appropriations limit for Community Facilities District No. 2006-1; and, Whereas, the City Council and the Owner desire that upon, and in consideration for, completion of the formation of the Proposed Improvement Areas that the special tax obligation and lien with respect to Improvement Area DD and GG shall be fully satisfied, a notice of cancellation shall be recorded with respect to such property and Improvement Areas DD and GG shall be dissolved; NOW, THEREFORE, THE CITY COUNCIL OF CITY OF LAKE ELSINORE, ACTING HAS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS: 1.Each of the above recitals is true and correct. 2.The City Council hereby finds and determines that all prior proceedings taken with respect to the establishment of the Proposed Improvement Areas, were valid and in conformity with the requirements of law, including the Act. This finding is made in accordance with the provisions of Section 53325.1(b) of the Act. CC Reso No. 2017 Page 4 of 9 4 3.The boundaries of Community Facilities District No. 2006-1 are shown on the map designated “Second Amended Boundary Map of Community Facilities District No. 2006-1 (Summerly) of the City of Lake Elsinore”, which map is on file in the office of the City Clerk and was recorded pursuant to Sections 3111 and 3113 of the Streets and Highways Code in the County of Riverside Book of Maps of Assessment and Community Facilities Districts in the County Recorder’s Office in Book No. 80, Page Nos. 42-43 on January 31, 2017 (the “Map”). In accordance with Section 53350 of the Act, the City Councilhereby designates Improvement Areas JJ through KK of the District, with the boundaries of each Proposed Improvement Area being as set forth on the Map. 4.The types of Facilities, Services, Facilities Incidental Expenses and Services Incidental Expenses (as defined in Resolution No. 2017-016) authorized to be provided for Community Facilities District No. 2006-1 are those set forth in Resolution No. 2017-016. The estimated cost of the Facilities, Services, Facilities Incidental Expenses and Services Incidental Expenses to be financed is set forth in the Community Facilities District Report, which estimates may change as the Facilities are designed and bid for construction and acquisition. 5.The City is authorized by the Act to contribute revenue to, or to construct or acquire the Facilities, all in accordance with the Act. The City Council finds that the proposed Facilities and Services are necessary to meet the increased demand that will be placed upon public infrastructure as a result of new development within the District. 6.The City Council hereby adopts the Proposed Rates and Methods attached as Attachments “B” and “C” to Resolution No. 2017-016 as the applicable rate and method for Improvement Areas JJ and KK of Community Facilities District No. 2006-1, respectively. Except where funds are otherwise available, it is the intention of the City Council, subject to the approval of the eligible voters within each of the Proposed Improvement Areas, to levy the proposed special taxes at the applicable rates for each Proposed Improvement Area set forth in Attachments “B” and “C” to Resolution No. 2017-016 on all non-exempt property within the Proposed Improvement Areas sufficient to pay for (i) the Facilities, (ii) the principal and interest and other periodic costs on the bonds proposed to be issued by the District for each Proposed Improvement Area to finance the Facilities and Facilities Incidental Expenses, including the establishment and replenishment of reserve funds, any remarketing, credit enhancement and liquidity facility fees (including such fees for instruments which serve as the basis of a reserve fund in lieu of cash), administrative expenses and other expenses of the type permitted by Section 53345.3 of the Act; (iii) the Services and (iv) the Services Incidental Expenses. The District expects to incur, and in certain cases has already incurred, Facilities Incidental Expenses and Services Incidental Expenses in connection with the creation of the Proposed Improvement Areas, the issuance of bonds, the levying and collecting of the special tax, the completion and inspection of the Facilities and the annual administration of the bonds and the District. The rate and method of apportionment of the special tax applicable to each Proposed Improvement Area is described in detail in Attachments “B” and “C” to Resolution No. 2017-016 which are incorporated herein by this reference, and the City Council hereby finds that Attachments “B” and “C” to Resolution No. 2017-016 contains sufficient detail to allow each landowner within each Proposed Improvement Area to estimate the maximum amount that may be levied against each parcel. As described in greater detail in the Community Facilities District Report, which is incorporated by reference herein, the special tax is based on the expected demand that each parcel of real property within the Proposed Improvement Areas will place on the Facilities and Services and on the benefit that each parcel will derive from the right to access the Facilities and Services and, accordingly, is hereby determined to be reasonable. CC Reso No. 2017 Page 5 of 9 5 The Facilities Special Tax and Services Special Tax are apportioned to each parcel on the foregoing bases pursuant to Section 53325.3 of the Act and such special tax is not on or based upon the ownership of real property. The Facilities Special Tax shall be levied on each assessor’s parcel for a period not to exceed the Fiscal Year 2058-59 with respect to each of the Proposed Improvement Areas. The Services Special Tax may be levied for such period as the Services are needed, as further described in Attachments “B” and “C” to Resolution No. 2017-016. 7.The City’s Assistant City Manager will be responsible for preparing annually, or authorizing a designee to prepare, a current roll of special tax levy obligations by assessor’s parcel number and will be responsible for estimating future special tax levies pursuant to Section 53340.2 of the Act. 8.In the event that a portion of the property within a Proposed Improvement Area shall become for any reason exempt, wholly or partially, from the levy of the special tax specified in the Proposed Rates and Methods contained in Attachments “B” and “C” to Resolution No. 2017- 016, the City Council shall, on behalf of Community Facilities District No. 2006-1, increase the levy to the extent necessary and permitted by law and these proceedings upon the remaining property within such Proposed Improvement Area which is not delinquent or exempt in order to yield the required debt service payments on any outstanding bonds of such Proposed Improvement Area or to prevent the District from defaulting on any other obligations or liabilities of such Proposed Improvement Area; provided, however, that with respect to the special tax for Facilities, in under no circumstances will such special tax be increased in any fiscal year as a consequence of delinquency or default by the owner of any other parcel or parcels within any Proposed Improvement Area by more than ten percent above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. The amount of the special tax for each Proposed Improvement Area will be set in accordance with the Proposed Rates and Methods contained in Attachments “B” and “C” to Resolution No. 2017-016. 9.Upon recordation of a notice of special tax lien for each Proposed Improvement Area pursuant to Section 3114.5 of the Streets and Highways Code, a continuing lien to secure each levy of the special tax shall attach to all non-exempt real property in the Proposed Improvement Areas and this lien shall continue in force and effect until the special tax obligation is prepaid and permanently satisfied and the lien canceled in accordance with law or until collection of the special tax by the District ceases. 10.Consistent with Section 53325.6 of the Act, the City Council finds and determines that the land within the Proposed Improvement Areas, if any, devoted primarily to agricultural, timber or livestock uses and being used for the commercial production of agricultural, timber or livestock products is contiguous to other land within the Proposed Improvement Areas and will be benefited by the Facilities proposed to be provided within the Proposed Improvement Areas. 11.It is hereby further determined that there is no ad valorem property tax currently being levied on property within the Proposed Improvement Areas of Community Facilities District No. 2006-1 for the exclusive purpose of paying the principal of or interest on bonds or other indebtedness incurred to finance the construction of capital facilities which provide the same services to the territory of the Proposed Improvement Areas as are proposed to be provided by the Facilities to be financed by Community Facilities District No. 2006-1. CC Reso No. 2017 Page 6 of 9 6 12.Written protests against the establishment of the Proposed Improvement Areas have not been filed by one-half or more of the registered voters within the boundaries of any of such Proposed Improvement Areas or by the property owners of one-half or more of the area of land within the boundaries of any of such Proposed Improvement Areas. The City Council hereby finds that the proposed special tax for each Proposed Improvement Area has not been precluded by a majority protest pursuant to Section 53324 of the Act. 13.An election is hereby called for each Proposed Improvement Area of Community Facilities District No. 2006-1 on the propositions of levying the special tax on the property within such Proposed Improvement Area and increasing the appropriations limit for the District pursuant to Section 53325.7 of the Act and shall be consolidated with the election on the proposition of incurring bonded indebtedness for each Proposed Improvement Area, pursuant to Section 53351 of the Act. The propositions to be placed on the ballot for each Proposed Improvement Area are attached hereto as Attachments “A” and “B.” Following certification of a landowner vote in favor of the formation of the Proposed Improvement Areas, the District shall record notices of cancellation of special tax liens with respect to Improvement Area DD and GG. 14.The date of the foregoing elections for each Proposed Improvement Area shall be March 28, 2017, or such later date as is consented to by the City Clerk and the landowners within the Proposed Improvement Areas. The City Clerk shall conduct the elections. Except as otherwise provided by the Act, the elections shall be conducted by personally delivered or mailed ballot and, except as otherwise provided by the Act, the elections shall be conducted in accordance with the provisions of law regulating elections of the City insofar as such provisions are determined by the City Clerk to be applicable. 15.It is hereby found that there are not more than twelve registered voters within the territory of any of the Proposed Improvement Areas, and, pursuant to Section 53326 of the Act, each landowner who is the owner of record on the date hereof, or the authorized representative thereof, shall have one vote for each acre or portion thereof that he or she owns within each Proposed Improvement Area. 16.The preparation of the Community Facilities District Report is hereby ratified. The Community Facilities District Report, as submitted, is hereby approved and made a part of the record of the public hearing regarding the formation of the Proposed Improvement Areas, and is ordered to be kept on file with the transcript of these proceedings and open for public inspection. 17.This Resolution shall be effective upon its adoption. CC Reso No. 2017 Page 7 of 9 7 PASSED and ADOPTED at a regular meeting of the City Council of the City of Lake Elsinore, California, this 28th day of March, 2017. _____________________________ Robert E. Magee, Mayor ATTEST: _____________________________ Susan M. Domen, MMC City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Susan M. Domen, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify that Resolution No. 2017-_________ was adopted by the City Council of the City of Lake Elsinore, California, at the Regular meeting of March 28, 2017, and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: _____________________________ Susan M. Domen, MMC City Clerk ATTACHMENT A ATTACHMENT “A” SAMPLE BALLOT CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA JJ) SPECIAL TAX AND SPECIAL BOND ELECTION March 28, 2017 This ballot represents ___ votes. To vote, write or stamp a cross (“+” or “X”) in the voting square after the word “YES” or after the word “NO”. All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear or deface this ballot, return it to the City Clerk of the City of Lake Elsinore and obtain another. PROPOSITION A: Shall City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) incur an indebtedness and issue bonds for Improvement Area JJ of the District in the maximum principal amount of $7,000,000, with interest at a rate or rates not to exceed the maximum interest rate permitted by law, to finance the Facilities and the Facilities Incidental Expenses for Improvement Area JJ described in Resolution No. 2017-016 (the “Resolution of Intention”), adopted by the City Council of the City of Lake Elsinore, acting as the legislative body of the District? YES______ NO_______ PROPOSITION B: Shall a special tax with a rate and method of apportionment as provided in Attachment “B” to the Resolution of Intention, for Improvement Area JJ of the District, be levied to pay for the Facilities, Facilities Incidental Expenses, the Services and the Services Incidental Expenses (as such terms are defined in the Resolution of Intention) and other purposes described in the Resolution of Intention, including the payment of the principal of and interest on bonds issued to finance the Facilities and Facilities Incidental Expenses for Improvement Area JJ? YES______ NO_______ PROPOSITION C: Shall the annual appropriations limit, as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for the District be increased by an amount equal to $2,000,000? YES______ NO_______ ATTACHMENT B ATTACHMENT “B” SAMPLE BALLOT CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA KK) SPECIAL TAX AND SPECIAL BOND ELECTION March 28, 2017 This ballot represents ___ votes. To vote, write or stamp a cross (“+” or “X”) in the voting square after the word “YES” or after the word “NO”. All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear or deface this ballot, return it to the City Clerk of the City of Lake Elsinore and obtain another. PROPOSITION A: Shall City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) incur an indebtedness and issue bonds for Improvement Area KK of the District in the maximum principal amount of $5,700,000, with interest at a rate or rates not to exceed the maximum interest rate permitted by law, to finance the Facilities and the Facilities Incidental Expenses for Improvement Area KK described in Resolution No. 2017-016 (the “Resolution of Intention”), adopted by the City Council of the City of Lake Elsinore, acting as the legislative body of the District? YES______ NO_______ PROPOSITION B: Shall a special tax with a rate and method of apportionment as provided in Attachment “C” to the Resolution of Intention, for Improvement Area KK of the District, be levied to pay for the Facilities, Facilities Incidental Expenses, the Services and the Services Incidental Expenses (as such terms are defined in the Resolution of Intention) and other purposes described in the Resolution of Intention, including the payment of the principal of and interest on bonds issued to finance the Facilities and Facilities Incidental Expenses for Improvement Area KK? YES______ NO_______ PROPOSITION C: Shall the annual appropriations limit, as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for the District be increased by an amount equal to $1,000,000? YES______ NO_______ RESOLUTION NO. 2017 - RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) DETERMINING THE NECESSITY TO INCUR BONDED INDEBTEDNESS WITHIN IMPROVEMENT AREAS JJ AND KK OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) AND CALLING ELECTIONS THEREIN Whereas,after a public hearing, on February 28, 2006, the City Council (Council) of the City of Lake Elsinore (City) formed City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District” or “Community Facilities District No. 2006-1”) and Improvement Area DD and Improvement Area GG therein pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Act); and, Whereas, subsequent to formation of the District, the District received a petition signed by McMillin Summerly, LLC, a Delaware limited liability company (Owner) which owns land proposed to be established as Improvement Area JJ (Proposed Improvement Area JJ) and as Improvement Area KK of the District (“Proposed Improvement Area KK” and, together with Proposed Improvement Area JJ, the “Proposed Improvement Areas”) and to approve rates and methods of apportionment for each of Proposed Improvement Area JJ and Proposed Improvement Area KK (the “Proposed Rates and Methods”); and, Whereas, on January 24, 2017, the City Council adopted Resolution No. 2017-016 stating its intention to establish the Proposed Improvement Areas, to approve an amended boundary map of the District to include the Proposed Improvement Areas, to issue bonds for the benefit of each Proposed Improvement Area to pay for certain, and to approve the levy of special taxes in accordance with the Proposed Rates and Methods attached as Attachments “B” and “C” to Resolution No. 2017-016 to finance certain Facilities, Facilities Incidental Expenses, Services and Services Incidental Expenses (as such terms are defined in Resolution No. 2017-016), for the purposes described in Resolution No. 2017-016; and, Whereas, on January 24, 2017, the City Council also adopted Resolution No. 2017-017 stating its intention to incur bonded indebtedness within the Proposed Improvement Areas in an amount not to exceed $7,000,000 for Improvement Area JJ and $5,700,000 for Improvement Area KK to finance: (1) the purchase, construction, expansion, improvement or rehabilitation of the Facilities and the Facilities Incidental Expenses; and, Whereas, on February 28, 2017, the City Council continued the public hearing called for pursuant to Resolution No. 2017-016 and Resolution No. 2017-017 to March 14, 2017 and on March 14, 2017, such public hearing was continued to March 28, 2017; and, Whereas, on March 28, 2017, this City Council conducted a noticed public hearing to determine whether it should proceed with the establishment of the Proposed Improvement Areas within Community Facilities District No. 2006-1, issue bonds for the benefit of each Proposed Improvement Area to pay for the Facilities and Facilities Incidental Expenses and authorize the Proposed Rates and Methods to be levied within each Proposed Improvement Area of Community Facilities District No. 2006-1 for the purposes described in Resolution No. 2017-016; and, Whereas, at the March 28, 2017 public hearing all persons desiring to be heard on all matters pertaining to the establishment of the Proposed Improvement Area JJ and Proposed Improvement 2 Area KK from territory within the existing Improvement Area DD and Improvement Area GG, respectively, within Community Facilities District No. 2006-1, the levy of a special tax in accordance with the Proposed Rates and Methods to finance the Facilities, Services, Facilities Incidental Expenses and Services Incidental Expenses and the issuance of bonds within each Proposed Improvement Area to pay for the cost of the proposed Facilities and Facilities Incidental Expenses were heard and a full and fair hearing was held; and, Whereas, the City Council subsequent to such public hearing adopted Resolution No. 2017-___ establishing the Proposed Improvement Areas within Community Facilities District No. 2006-1 and approving the Proposed Rates and Methods (the “Resolution of Formation”); and, Whereas, the City Council desires to make the necessary findings to incur bonded indebtedness within each of the Proposed Improvement Areas of the District, to declare the purpose for said debt, and to authorize the submittal of certain propositions to the voters of each Proposed Improvement Area, being the landowners within such Proposed Improvement Areas, all as authorized and required by law. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS: 1. It is necessary to incur bonded indebtedness of Community Facilities District No. 2006-1 in a maximum aggregate principal amount not to exceed $7,000,000 for the benefit of Improvement Area JJ and $5,700,000 for the benefit of Improvement Area KK. 2. The indebtedness is to be incurred for the purpose of financing the costs of purchasing, constructing, modifying, expanding, improving, or rehabilitating the Facilities, as described in Resolution No. 2017-017 and the Resolution of Formation, financing the Facilities Incidental Expenses, and carrying out the powers and purposes of Community Facilities District No. 2006-1, including, but not limited to, financing the costs of selling the bonds, establishing and replenishing bond reserve funds and paying remarketing, credit enhancement and liquidity facility fees (including such fees for instruments which serve as the basis of a reserve fund in lieu of cash), administrative expenses and other expenses of the type authorized by Section 53345.3 of the Act. 3.The whole of the property within a Proposed Improvement Area, other than property exempted from the special tax pursuant to the provisions of the applicable Proposed Rates and Methods, shall pay for the bonded indebtedness of such Proposed Improvement Area pursuant to the levy of the special tax authorized by the Resolution of Formation. 4. The maximum term of any series of the bonds to be issued shall in no event exceed forty (40) years. 5. The bonds shall bear interest at the rate or rates not to exceed the maximum interest rate permitted by law, payable annually or semiannually, or in part annually and in part semiannually, except the first interest payment may be for a period of less than six months, with the actual rate or rates and times of payment to be determined at the time or times of sale thereof. 3 6. The bonds may bear a variable or fixed interest rate, provided that such variable rate or the fixed rate shall not exceed the maximum rate permitted by Section 53531 of the Act, or any other applicable provision of law limiting the maximum interest rate on the bonds. 7. Pursuant to Section 53351 of the Act, a special election is hereby called for each Proposed Improvement Area of Community Facilities District No. 2006-1 on the proposition of incurring the bonded indebtedness for the Proposed Improvement Areas. The propositions relative to incurring bonded indebtedness for the Proposed Improvement Areas shall be in the forms set forth in Attachments “A” and “B” respectively, of the Resolution of Formation. The election in each Proposed Improvement Area on the proposition of incurring bonded indebtedness shall be consolidated with the election and on the propositions to levy a special tax and to establish an appropriations limits for each Proposed Improvement Area of the District, which propositions shall be in the forms set forth in Attachments “A” and “B” of the Resolution of Formation. 8. The date of the special elections for each Proposed Improvement Area of Community Facilities District No. 2006-1 shall be on March 28, 2017, or such later date as is consented to by the City Clerk of the City and the landowners within the Proposed Improvement Areas. The election shall be conducted by the City Clerk. Except as otherwise provided by the Act, the elections shall be conducted in accordance with the provisions of law regulating elections of the City insofar as such provisions are determined by the City Clerk to be applicable. The City Clerk is authorized to conduct the elections following the adoption of the Resolution of Formation and this resolution, and all ballots shall be received by, and the City Clerk shall close the election by, 11:00 p.m. on the election day; provided the elections shall be closed at such earlier time as all qualified electors have voted as provided in Section 53326(d) of the Act. It is hereby found based on information provided by the Registrar of Voters of the County of Riverside that there are fewer than 12 registered voters within the territory of the Proposed Improvement Areas and, pursuant to Section 53326 of the Act, the ballots for the special elections shall be distributed in person or by mail with return postage prepaid to the landowners of record within the Proposed Improvement Areas as of the close of the March 28, 2017 hearing regarding the establishment of the Proposed Improvement Areas. Each landowner shall have one vote for each acre or portion thereof that he or she owns within each Proposed Improvement Area, as provided in Section 53326 of the Act. 9. This Resolution shall be effective upon its adoption. 4 PASSED and ADOPTED at a regular meeting of the City Council of the City of Lake Elsinore, California, this 28th day of March, 2017. _____________________________ Robert E. Magee, Mayor ATTEST: _____________________________ Susan M. Domen, MMC City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Susan M. Domen, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify that Resolution No. 2017-_________ was adopted by the City Council of the City of Lake Elsinore, California, at the Regular meeting of March 28, 2017, and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: _____________________________ Susan M. Domen, MMC City Clerk RESOLUTION NO. 2017 - RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) CERTIFYING THE RESULTS OF THE MARCH 28, 2017 SPECIAL TAX AND BOND ELECTIONS Whereas, the City Council (the “City Council”) of the City of Lake Elsinore (the “City”) called and duly held consolidated elections on March 28, 2017 within the boundaries of Improvement Areas JJ and KK of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (“Community Facilities District No. 2006-1” or the “District”) pursuant to Resolution Nos. _____ and _____ for the purpose of presenting to the qualified electors within each of Improvement Area JJ and Improvement Area KK of the District (the “Proposed Improvement Areas”) the propositions applicable to each Proposed Improvement Area which are attached hereto as Attachments “A” and “B”; and, Whereas, there has been presented to this City Council certificates of the City Clerk canvassing the results of the elections, copies of which are attached hereto as Attachment “C”; NOW, THEREFORE, THE CITY COUNCIL OF CITY OF LAKE ELSINORE, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS: 1.Each of the above recitals is true and correct and is adopted by the legislative body of the District. 2.Propositions A, B and C presented to the qualified electors of Improvement Area JJ of the District on March 28, 2017 were approved by more than two-thirds of the votes cast at the election held for Improvement Area JJ and Propositions A, B and C each has carried. The City Council, acting as the legislative body of the District, is hereby authorized to levy on the land within Improvement Area JJ of the District the special tax described in Proposition B for the purposes described therein and to take the necessary steps to levy the special tax authorized by Proposition B and to issue bonds in an amount not to exceed $7,000,000 specified in Proposition A. 3.Propositions A, B and C presented to the qualified electors of Improvement Area KK of the District on March 28, 2017 were approved by more than two-thirds of the votes cast at the election held for Improvement Area KK and Propositions A, B and C each has carried. The City Council, acting as the legislative body of the District, is hereby authorized to levy on the land within Improvement Area KK of the District the special tax described in Proposition B for the purposes described therein and to take the necessary steps to levy the special tax authorized by Proposition B and to issue bonds in an amount not to exceed $5,700,000 specified in Proposition A. 4. The City Clerk is hereby directed to record in the Office of the County Recorder within fifteen days of the date hereof a notice of special tax lien for each of Improvement Area JJ and Improvement Area KK of the District which Bond Counsel to the District shall prepare in the form required by Streets and Highways Code Section 3114.5. The City Clerk is further directed to record a notice of cancellation of special tax lien for each of Improvement Area DD and 2 Improvement Area GG of the District which Bond Counsel to the District shall prepare in accordance with Government Code Section 53330.5. PASSED and ADOPTED at a regular meeting of the City Council of the City of Lake Elsinore, California, this 28th day of March, 2017. _____________________________ Robert E. Magee, Mayor ATTEST: _____________________________ Susan M. Domen, MMC City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Susan M. Domen, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify that Resolution No. 2017-_________ was adopted by the City Council of the City of Lake Elsinore, California, at the Regular meeting of March 28, 2017, and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: _____________________________ Susan M. Domen, MMC City Clerk ATTACHMENT A ATTACHMENT “A” SAMPLE BALLOT CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA JJ) SPECIAL TAX AND SPECIAL BOND ELECTION March 28, 2017 This ballot represents ___ votes. To vote, write or stamp a cross (“+” or “X”) in the voting square after the word “YES” or after the word “NO”. All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear or deface this ballot, return it to the City Clerk of the City of Lake Elsinore and obtain another. PROPOSITION A: Shall City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) incur an indebtedness and issue bonds for Improvement Area JJ of the District in the maximum principal amount of $7,000,000, with interest at a rate or rates not to exceed the maximum interest rate permitted by law, to finance the Facilities and the Facilities Incidental Expenses for Improvement Area JJ described in Resolution No. 2017-016 (the “Resolution of Intention”), adopted by the City Council of the City of Lake Elsinore, acting as the legislative body of the District? YES______ NO_______ PROPOSITION B: Shall a special tax with a rate and method of apportionment as provided in Attachment “B” to the Resolution of Intention, for Improvement Area JJ of the District, be levied to pay for the Facilities, Facilities Incidental Expenses, the Services and the Services Incidental Expenses (as such terms are defined in the Resolution of Intention) and other purposes described in the Resolution of Intention, including the payment of the principal of and interest on bonds issued to finance the Facilities and Facilities Incidental Expenses for Improvement Area JJ? YES______ NO_______ PROPOSITION C: Shall the annual appropriations limit, as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for the District be increased by an amount equal to $2,000,000? YES______ NO_______ ATTACHMENT B ATTACHMENT “B” SAMPLE BALLOT CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA KK) SPECIAL TAX AND SPECIAL BOND ELECTION March 28, 2017 This ballot represents ___ votes. To vote, write or stamp a cross (“+” or “X”) in the voting square after the word “YES” or after the word “NO”. All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear or deface this ballot, return it to the City Clerk of the City of Lake Elsinore and obtain another. PROPOSITION A: Shall City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) incur an indebtedness and issue bonds for Improvement Area KK of the District in the maximum principal amount of $5,700,000, with interest at a rate or rates not to exceed the maximum interest rate permitted by law, to finance the Facilities and the Facilities Incidental Expenses for Improvement Area KK described in Resolution No. 2017-016 (the “Resolution of Intention”), adopted by the City Council of the City of Lake Elsinore, acting as the legislative body of the District? YES______ NO_______ PROPOSITION B: Shall a special tax with a rate and method of apportionment as provided in Attachment “C” to the Resolution of Intention, for Improvement Area KK of the District, be levied to pay for the Facilities, Facilities Incidental Expenses, the Services and the Services Incidental Expenses (as such terms are defined in the Resolution of Intention) and other purposes described in the Resolution of Intention, including the payment of the principal of and interest on bonds issued to finance the Facilities and Facilities Incidental Expenses for Improvement Area KK? YES______ NO_______ PROPOSITION C: Shall the annual appropriations limit, as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for the District be increased by an amount equal to $1,000,000? YES______ NO_______ ATTACHMENT D-1 ATTACHMENT C CERTIFICATE OF CITY CLERK AS TO THE RESULTS OF THE CANVASS OF THE ELECTION RETURNS CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA JJ) I, Susan M. Domen, MMC, City Clerk of City of Lake Elsinore, do hereby certify that I have examined the returns of the Special Tax and Bond Election for Improvement Area JJ of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly). The election was held in the chambers of the City Council at 183 North Main Street, Lake Elsinore, California, on March 28, 2017. I caused to be delivered a ballot to the authorized representative of each qualified elector. _______ (__) ballots were returned. I further certify that the results of said election and the number of votes cast for and against Propositions A, B and C are as follows: PROPOSITION A PROPOSITION B PROPOSITION C YES: YES: YES:___ NO:___NO:___NO:___ TOTAL: TOTAL: TOTAL:___ Dated this 28th day of March, 2017. Susan M. Domen, MMC, City Clerk City of Lake Elsinore ATTACHMENT D-2 CERTIFICATE OF CITY CLERK AS TO THE RESULTS OF THE CANVASS OF THE ELECTION RETURNS CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA KK) I, Susan M. Domen, MMC, City Clerk of City of Lake Elsinore, do hereby certify that I have examined the returns of the Special Tax and Bond Election for Improvement Area KK of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly). The election was held in the chambers of the City Council at 183 North Main Street, Lake Elsinore, California, on March 28, 2017. I caused to be delivered a ballot to the authorized representative of each qualified elector. _______ (__) ballots were returned. I further certify that the results of said election and the number of votes cast for and against Propositions A, B and C are as follows: PROPOSITION A PROPOSITION B PROPOSITION C YES: YES: YES:___ NO:___NO:___NO:___ TOTAL: TOTAL: TOTAL:___ Dated this 28th day of March, 2017. Susan M. Domen, MMC, City Clerk City of Lake Elsinore ORDINANCE NO. 2017 - ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1(SUMMERLY) AUTHORIZING THE LEVY OF A SPECIAL TAX WITHIN EACH OF IMPROVEMENT AREAS JJ AND KK OF SUCH DISTRICT Whereas,after a public hearing, on February 28, 2006, the City Council (the “City Council”) of the City of Lake Elsinore (the “City”) adopted Resolution Nos. 2006-30 (the “Original Resolution of Formation”) and 2006-31 (the “Original Resolution to Incur Bonded Indebtedness”) which formed City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District” or “Community Facilities District No. 2006-1”) pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”) and called a special election for February 28, 2006 within the District and Improvement Area Nos. 1 through 3 therein on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the District, which were approved by more than two-thirds vote by the qualified electors on February 28, 2006; and, Whereas, subsequent to the formation of the District, the District received a petition signed by owners of the land within the boundaries of the District to dissolve Improvement Area Nos. 1 through 3 therein and to establish Improvement Areas A through F of the District, to authorize the levy of the special tax in accordance with rates and methods of apportionment of special taxes for Improvement Areas A through F and to authorize the District to incur bonded indebtedness for Improvement Areas A through F; and, Whereas, on January 25, 2011, the City Council, acting as the legislative body of the District, adopted Resolution Nos. 2011-005 and 2011-006, dissolving Improvement Area Nos. 1 through 3 therein, establishing Improvement Areas A through F of the District and declaring the intention to incur bonded indebtedness of the District for Improvement Areas A through F; and, Whereas,after a public hearing, on March 8, 2011, the City Council adopted Resolution Nos. 2011-119 and 2011-120, which called special elections on March 8, 2011 within Improvement Areas A through F of the District on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the District, which were approved by more than two-thirds vote by the qualified electors on March 8, 2011 (collectively, the “2011 Change Proceedings”); and, Whereas,subsequent to the 2011 Change Proceedings, the District received a petition signed by owners of the land within Improvement Areas C through F of the District to dissolve Improvement Areas C through F and to establish Improvement Areas CC, DD, EE, FF, GG, HH and II of the District from the areas within Improvement Areas C through F of the District; and, Whereas, on February 25, 2014, the City Council, acting as the legislative body of the District, adopted Resolution Nos. 2014-010 and 2011-011, dissolving Improvement Areas C through F therein, establishing Improvement Areas CC, DD, EE, FF, GG, HH and II of the District and declaring the intention to incur bonded indebtedness of the District for Improvement Areas CC, DD, EE, FF, GG, HH and II; and, 2 Whereas,after a public hearing, on April 8, 2014, the City Council adopted Resolution Nos. 2014- 016 and 2014-017, which called special elections on April 8, 2014 within Improvement Areas CC, DD, EE, FF, GG, HH and II of the District on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the District for Improvement Areas CC, DD, EE, FF, GG, HH and II, which were approved by more than two-thirds vote by the qualified electors on April 8, 2014 (collectively, the “2014 Change Proceedings”); and, Whereas, subsequent to the 2014 Change Proceedings, the District received a petition signed by McMillin Summerly, LLC, a Delaware limited liability company, (the “Owner”) which owns land within Improvement Area DD and GG of the District, which the Owner desires to establish as Improvement Areas JJ and KK of the District, respectively (“Proposed Improvement Area JJ” and “Proposed Improvement Area KK” and together, the “Proposed Improvement Areas”) and to approve rates and methods of apportionment for each of Proposed Improvement Area JJ and Proposed Improvement Area KK; and, Whereas, on January 24, 2017, the City Council of the City adopted Resolution No. 2017-016 stating its intention to establish the Proposed Improvement Areas, to approve rates and methods of apportionment for each of Proposed Improvement Area JJ and Proposed Improvement Area KK attached as Attachments “B” and “C,” to Resolution No. 2017-016 respectively (the “Proposed Rates and Methods”); and, Whereas, on January 24, 2017, the City Council also adopted Resolution No. 2017-017 stating its intention to incur bonded indebtedness within the Proposed Improvement Areas in an amount not to exceed $7,000,000 for Improvement Area JJ and $5,700,000 for Improvement Area KK to finance: (1) the purchase, construction, expansion, improvement or rehabilitation of public improvements identified in Attachment “A” to Resolution No. 2017-017 (collectively, the “Facilities”); and (2) the incidental expenses to be incurred in financing the Facilities and forming and administering the District (the “Facilities Incidental Expenses”); and, Whereas, pursuant to Resolution No. 2017-016, the City Council also stated its intention to levy special taxes within the Proposed Improvement Areas to finance certain services as identified in Attachment “D” to Resolution No. 2017-016 (the “Services”) and certain incidental expenses related thereto (the “Services Incidental Expenses”); and, Whereas, on February 28, 2017, the City Council continued the public hearing called for pursuant to Resolution No. 2017-016 and Resolution No. 2017-017 to March 14, 2017 and on March 14, 2017, such public hearing was continued to March 28, 2017; and, Whereas, a notice calling a public hearing, as continued to March 28, 2017 was published as required by law relative to the intention of the City Council to establish the Proposed Improvement Areas within Community Facilities District No. 2006-1 and to incur bonded indebtedness within each Proposed Improvement Area; and, Whereas, on March 28, 2017, this City Council conducted a noticed public hearing to determine whether it should proceed with the formation of the Proposed Improvement Areas, to issue bonds for the benefit of each Proposed Improvement Area to pay for the Facilities and Facilities Incidental Expenses and authorize the levy of the special taxes to finance the Facilities, Facilities Incidental Expenses, Services and Services Incidental Expenses in accordance with the Proposed Rates and Methods, all as described in the Resolution of Intention; and, 3 Whereas, at the March 28, 2017 public hearing all persons desiring to be heard on all matters pertaining to the formation of the Proposed Improvement Areas, the levy of special taxes in accordance with the Proposed Rates and Methods and the issuance of bonds within each Proposed Improvement Area to pay for the cost of the proposed Facilities and Facilities Incidental Expenses were heard and a full and fair hearing was held; and Whereas, on March 28, 2017, following the close of the public hearing, the City Council adopted Resolution Nos. _____ (the “Resolution of Formation”) and ______ (the “Resolution to Incur Bonded Indebtedness”) which called a special election on March 28, 2017 within each Proposed Improvement Area on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the increase of the appropriations limit for the District; and Whereas, on March 28, 2017, a special election was held within each of the Proposed Improvement Areas of the District at which the qualified electors approved by more than a two-thirds vote Propositions A, B and C authorizing the levy of a special tax within each of the Proposed Improvement Areas for the purposes described in the Resolution of Formation and the issuance of bonded indebtedness for each of the Proposed Improvement Areas as described in the Resolution to Incur Bonded Indebtedness and the appropriations limit; and NOW, THEREFORE, THE CITY COUNCIL, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY), ORDAINS AS FOLLOWS: 1. The above recitals are all true and correct. 2. By the passage of this Ordinance, the City Council authorizes the levy of a special tax within each of Improvement Area JJ and Improvement Area KK of Community Facilities District No. 2006-1 at the maximum rates and in accordance with the Proposed Rates and Method. 3. The City Council is hereby further authorized to determine in each subsequent fiscal year, by ordinance, or by resolution if permitted by then applicable law, on or before August 10 of each year, or such later date as is permitted by law, the specific special tax rate and amount to be levied on each parcel of land in the Proposed Improvement Areas pursuant to the applicable Proposed Rate and Method. The special tax rates to be levied pursuant to the Proposed Rates and Methods shall not exceed the applicable maximum rates set forth therein, but the special tax may be levied at a lower rate. 4. Properties or entities of the state, federal or other local governments shall be exempt from the special tax, except as otherwise provided in Sections 53317.3 and 53317.5 of the Act and the Proposed Rates and Methods. No other properties or entities are exempt from the special tax unless the properties or entities are expressly exempted in the Resolution of Formation, or in a resolution of consideration to levy a new special tax or special taxes or to alter the rate or method of apportionment of an existing special tax as provided in Section 53334 of the Act. 5. All of the collections of the special tax pursuant to the Proposed Rates and Methods shall be used as provided for in the Act and the Resolution of Formation. The special tax shall be levied within the Proposed Improvement Areas only so long as needed for the purposes described in the Resolution of Formation. 4 6. The special tax levied pursuant to the Proposed Rates and Methods shall be collected in the same manner as ordinary ad valorem property taxes are collected and shall be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes (which such procedures include the exercise of all rights and remedies permitted by law to make corrections, including, but not limited to, the issuance of amended or supplemental tax bills), as such procedure may be modified by law or by this City Council from time to time. 7. As a cumulative remedy, if any amount levied as a special tax for payment of the interest or principal of any bonded indebtedness of the District, together with any penalties and other charges accruing under this Ordinance, are not paid when due, the City Council may, not later than four years after the due date of the last installment of principal on the Bonds, order that the same be collected by an action brought in the superior court to foreclose the lien of such special tax. 8.The Mayor shall sign this Ordinance and the City Clerk shall attest to the Mayor’s signature and then cause the same to be published within fifteen (15) days after its passage at least once in a newspaper of general circulation published and circulated in City of Lake Elsinore. 9. This Ordinance relating to the levy of the special tax within the Proposed Improvement Areas shall take effect 30 days following its final passage, and the specific authorization for adoption is pursuant to the provisions of Section 53340 of the Act. 10. The City Clerk is hereby authorized to transmit a certified copy of this ordinance to the Riverside County Assessor and Treasurer-Tax Collector, and to perform all other acts which are required by the Act, this Ordinance or by law in order to accomplish the purpose of this Ordinance. INTRODUCED ON the 28th day of March, 2017. _____________________________ Robert E. Magee, Mayor ATTEST: _____________________________ Susan M. Domen, MMC City Clerk 5 STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Susan M. Domen, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify that Ordinance No. 2017-_________ was adopted by the City Council of the City of Lake Elsinore, California, at the Regular meeting of April __, 2017, and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: _____________________________ Susan M. Domen, MMC City Clerk City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report March 14, 2017 Table of Contents Sections Page _____________________________________________ 1 Introduction ________________________________________________ 1 2 Description of Improvements and Services ______________________________ 2 3 Cost Estimate ________________________________________________ 4 4 Proposed Development _____________________________________________ 6 5 Rate and Method of Apportionment ____________________________________ 7 6 Certifications ________________________________________________ 8 Tables Page 2-1 Authorized Bond Amount ____________________________________________ 3 3-1 Improvement Cost Estimate _________________________________________ 4 3-2 Services Cost Estimate _____________________________________________ 5 4-1 Proposed Development _____________________________________________ 6 Appendices Page _____________________________________________ A Rate and Method of Apportionment _____________________________________ B Boundary Map _________________________________________________ C Resolution of Intention _______________________________________________ 1 Introduction Page | 1 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report Background On January 24, 2017, the City Council of the City of Lake Elsinore (the “City”), did, pursuant to the provisions of the “Mello- Roos Community Facilities Act of 1982”, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California, (the “Act”) ordered the filing of a written Public Report (the “Public Hearing Report”) with the City for the proposed Community Facilities District. This Community Facilities District shall be referred to as Community Facilities District No. 2006-1 (Summerly) Improvement Areas JJ and KK of the City of Lake Elsinore (the “CFD No. 2006-1 IA JJ and KK” or the “District”). Purpose of Public Hearing Report On January 24, 2017, the City Council adopted a Resolution of Intention to form CFD No. 2006-1 IA JJ and KK, Resolution No. 2017-016 (the “Resolution of Intention”), and ordering said Public Hearing Report. This Public Hearing Report is submitted pursuant to Section 53321.5 of the Act, as well as the Resolution of Intention. The law and the Resolution of Intention directs that said Public Hearing Report generally contain a description of the public improvements and services to be provided, and an estimate of the costs of providing such improvements and services. For particulars, reference is made to the Resolution of Intention as previously approved and adopted and is included in Appendix C. 2 Description of Improvements and Services Page | 2 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report NOW, THEREFORE, the undersigned, authorized representative of Spicer Consulting Group, LLC, the appointed responsible officer, or person directed to prepare the Public Hearing Report, does hereby submit the following data: Improvements A Community Facilities District may pay for facilities which may include all amounts necessary to eliminate any fixed special assessment liens or to pay, repay, or defease any obligation to pay for any indebtedness secured by any tax, fee, charge, or assessment levied, provide for the purchase, construction, expansion, or rehabilitation for any real or other tangible property with an estimated useful life of five (5) years or longer, which is necessary to meet increased demands placed upon local agencies as a result of development and/or rehabilitation occurring within the District. The types of facilities that are proposed by CFD No. 2006-1 IA JJ and KK and financed with the proceeds of special taxes and bonds issued by CFD No. 2006-1 IA JJ and KK consist of the construction, purchase, modification, expansion, rehabilitation and/or improvement of (i) drainage, library, park, roadway and other public facilities of the City, including the foregoing public facilities which are included in the City’s fee programs with respect to such facilities and authorized to be financed under the Mello-Roos Community Facilities Act of 1982, as amended (the “City Facilities”); (ii) water and sewer facilities including the acquisition of capacity in the sewer system and/or water system of the Elsinore Valley Municipal Water District which are included in Elsinore Valley Municipal Water District’s water and sewer capacity and connection fee programs (the “Water District Facilities” and together, with the City Facilities, the “Facilities”); and (iii) all appurtenances and appurtenant work in connection with the foregoing Facilities, including the cost of engineering, planning, designing, materials testing, coordination, construction staking, construction management and supervision for such Facilities (the “Facilities Incidental Expenses”), and to finance the incidental expenses to be incurred, including: a) The cost of engineering, planning and designing the Facilities; and b) All costs, including costs of the property owner petitioning to form the District, associated with the creation of the District, the issuance of the bonds, the determination of the amount of special taxes to be levied and costs otherwise incurred in order to carry out the authorized purposes of the District; and c) Any other expenses incidental to the construction, acquisition, modification, rehabilitation, completion and inspection of the Facilities. Such Facilities need not be physically located within the District. Capitalized terms used and not defined herein shall have the meaning set forth in the Rate and Method of Apportionment of Special Taxes for the District. Services The services which may be funded with proceeds of the Services Special Tax, as provided by Section 53313 of the Act, will include all costs attributable to maintaining, servicing, cleaning, repairing and/or replacing parks, open space and storm drains (may include reserves for replacement) (collectively, the “Services”). In addition to payment of the cost and expense of the forgoing services, proceeds of Services Special Tax may be expended to pay “Administrative Expenses,” as said term is defined in the Rate and Method of Apportionment (together, the “Services Incidental Expenses”). Incidental Expenses The Incidental Expenses to be paid from bond proceeds and/or special taxes include: All costs associated with the creation of CFD No. 2006-1 IA JJ and KK, the issuance of bonds, the determination of the amount of special taxes to be levied, costs incurred in order to carry out the authorized purposes of CFD No. 2006-1 IA JJ and KK, including legal fees, fees of consultants, engineering, planning, designing and the annual costs to administer CFD No. 2006-1 IA JJ and KK and any obligations. The description of the eligible public facilities, services and incidental expenses above are preliminary and general in nature. The final plans and specifications approved by the applicable public agency may show substitutes or modifications in order to accomplish the work or serve the new development and any such substitution or modification shall not constitute a change or modification in the proceedings relating to CFD No. 2006-1 IA JJ and KK. 2 Description of Improvements and Services Page | 3 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report Bond Authorization Amounts The maximum authorized bonded indebtedness for CFD No. 2006-1 is as follows: Table 2-1 Authorized Bond Amount Improvement Area Authorized Bond Amount A $4,000,000 B $6,500,000 CC $4,000,000 EE $7,500,000 FF $5,500,000 HH $9,000,000 II $12,500,000 JJ $7,000,000 KK $5,700,000 1 $0 Total $61,700,000 3 Cost Estimate Page | 4 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report Below is the estimated cost of services to be provided to the District. a) The cost estimate of facilities, including incidental expenses, to be financed through the issuance of CFD No. 2006- 1 IA JJ and KK Bonds is estimated to be $5,055,000 for Improvement Area JJ and $4,050,000 for Improvement Area KK based upon current dollars (Fiscal Year 2017-18). b) For further particulars please reference Table 3-1 below and incorporated herein by reference. c) Pursuant to Section 53340 of the Act, the proceeds of any special tax levied and collected by CFD No. 2006-1 IA JJ and KK may be used only to pay for the cost of providing public facilities, services, and incidental expenses. As defined by the Act, incidental expenses include, but are not limited to, the annual costs associated with determination of the amount of special taxes, collection of special taxes, payment of special taxes, or costs otherwise incurred in order to carry out the authorized purposes of the Community Facilities District. The incidental expenses associated with the annual administration of CFD No. 2006-1 IA JJ and KK are estimated to be $20,000 for each Improvement Area in the initial Fiscal Year. However, it is anticipated that the incidental expenses will vary due to inflation and other factors that may not be foreseen today, and the actual incidental expenses may exceed these amounts accordingly. Table 3-1 Facilities Cost Estimate City of Lake Elsinore Facilities Total Cost Estimate 1 Previously Financed2 Remaining 3 Flood Control/Storm Drain Improvements $11,721,206 $3,169,125 $8,552,081 Park/Landscape Improvements Phase 1 (Approx. 12 Acres) $6,960,000 $0 $6,960,000 Phase 2 (Approx. 4 Acres) $1,740,000 $0 $1,740,000 Phase 3 (Approx. 8 Acres) $3,050,000 $0 $3,050,000 Total City Facilities $23,471,206 $3,169,125 $20,302,082 City of Lake Elsinore Fees Total Cost Estimate1 Previously Financed2 Remaining3 City Impact Fees $5,914,441 $2,847,887 $3,066,554 Total City Fees $5,914,441 $2,847,887 $3,066,554 Elsinore Valley Municipal Water District Total Cost Estimate1 Previously Financed2 Remaining3 Sewer/Water/Reclaimed Water Facilities $13,215,000 $0 $13,215,000 Water and Sewer Connection Fee $25,412,534 $4,988,042 $20,424,492 Total EVMWD $38,013,181 $4,988,042 $33,639,492 Total Eligible Fees and Improvements $68,013,181 $11,005,054 $57,008,127 Estimated Net Bond Proceeds from IA JJ $4,006,031 Estimated Net Bond Proceeds from IA KK $3,159,259 Total Funded by Bond Proceeds from IA JJ and KK 4 $7,165,290 Total Fees/Improvements Remaining to be Funded $49,842,837 1 Represents the total facilities and fees eligible for funding. 2 Represents the actual amount reimbursed to the master developer through issuance of bonds in the past for various IA’s for CFD 2006-1. 3 Represents the amount to be reimbursed to the master developer through the issuance of bonds in the future for various IA’s for CFD 2006-1. 4 Represents the estimated net bond proceed amounts for IA JJ and KK, subject to change based on market conditions. 3 Cost Estimate Page | 5 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report Table 3-2 Services Cost Estimate Description IA JJ IA KK Parks/Open Space/Storm Drain Maintenance $48,569 $30,614 Administration $9,714 $6,123 Reserves $6,476 $4,082 Total Services $64,759 $40,819 4 Proposed Development Page | 6 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report The CFD No. 2006-1 Improvement Area JJ and KK encompasses five phases of the 293-acre master planned community known as Summerly being developed by multiple merchant builders owned by McMillan Summerly, LLC. CFD No. 2006-1 Improvement Area JJ and KK will develop 211 and 133 single family residential units within each Improvement Area respectively. These Improvement Areas consists of Tracts 31920-14, 31920-15, and 31920-24 for IA JJ and Tracts 31920- 21 and 31920-22 for IA KK located in the City on approximately 62.22 gross acres. A summary of the development phases within CFD 2006-1 IA JJ and KK and the estimated number of units to be developed within each Improvement Area is shown below: Table 4-1 Proposed Development Improvement Area Development Phase Net Acres Single Family Units JJ TR 31920-14 9.68 51 TR 31920-15 9.77 65 TR 31920-24 8.99 95 KK TR 31920-21 9.86 75 TR 31920-22 8.65 58 Totals 46.95 344 The boundaries of the District are included within the development generally known as Summerly. The primary entrance to CFD No. 2006-1 IA JJ and KK is located at the intersection of Village Parkway with Diamond Drive approximately 0.8 miles from the I-15 freeway. Although not in CFD No. 2006-1 IA JJ and KK, the Links at Summerly, a par 72 golf course, is part of the greater Summerly development. The Lake Elsinore Diamond Stadium is located adjacent to the Summerly development across Diamond Drive. As of Fiscal Year 2016-17 the proposed CFD 2006-1 IA JJ includes the following Assessor’s Parcel Numbers: 371-270-004, 371-270-020, 371-270-022, 371-270-049, and a portion of 371-270-054. The following Assessor’s Parcel Numbers are included in CFD 2006-1 IA KK: 371-040-015 and 371-040-016 A map showing the boundaries of CFD No. 2006-1 is included in Appendix B. 5 Rate and Method of Apportionment Page | 7 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report The Rate and Method of Apportionment allows each property owner within CFD No. 2006-1 IA JJ and KK to estimate the annual Special Tax amount that would be required for payment. The Rate and Method of Apportionment of the Special Tax established pursuant to these proceedings, is attached hereto as Appendix A (the “Rate and Method”). The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the CFD Administrator may directly bill the Special Taxes, may collect Special Taxes at a different time or in a different manner if necessary to meet the financial obligations, and provided further that CFD No. 2006-1 IA JJ and KK may covenant to foreclose and may actually foreclose on parcels having delinquent Special Taxes as permitted by the Act. All of the property located within CFD No. 2006-1 IA JJ and KK, unless exempted by law or by the Rate and Method proposed for CFD No. 2006-1 IA JJ and KK, shall be taxed for the purpose of providing necessary facilities to serve the District. On each July 1, commencing on July 1, 2018 the Maximum Special Tax shall increase by two percent (2.0%). The Boundary Map for CFD No. 2006-1 IA JJ and KK is attached hereto as Appendix B. Pursuant to Section 53325.3 of the Act, the tax imposed “is a Special Tax and not a special assessment, and there is no requirement that the tax be apportioned on the basis of benefit to any property.” The Special Tax may be based on the benefit received by property, the cost of making facilities or authorized services available or other reasonable basis as determined by the City, although the Special Tax may not be apportioned on an ad valorem basis pursuant to Article XIIIA of the California Constitution. A property owner within the District may choose to prepay in whole or in part the Special Tax. The available method for so doing is described in Section G of the Rate and Methods (“Prepayment of Special Tax for Facilities”). For each year that any Bonds are outstanding the Special Tax shall be levied on all parcels subject to the Special Tax. If any delinquent Special Taxes remain uncollected prior to or after all Bonds are retired, the Special Tax may be levied to the extent necessary to reimburse CFD No. 2006-1 IA JJ and KK for uncollected Special Taxes associated with the levy of such Special Taxes, but the Special Tax shall not be levied after 2058-2059 Fiscal Year. For particulars as to the Rate and Methods for CFD No. 2006-1 IA JJ and KK, see the attached and incorporated in Appendix A. 6 Certifications Page | 8 City of Lake Elsinore CFD No. 2006-1 (Summerly) IA JJ and KK Public Hearing Report Based on the information provided herein, it is my opinion that the described services herein are those that are necessary to meet increased demands placed upon the City of Lake Elsinore as a result of development occurring within the CFD No. 2006-1 IA JJ and KK and benefits the lands within said CFD No. 2006-1 IA JJ and KK. Further, it is my opinion that the special tax rates and method of apportionment, as set forth herein, are fair and equitable, uniformly applied and not discriminating or arbitrary. Date: March 14, 2017 SPICER CONSULTING GROUP, LLC SHANE SPICER SPECIAL TAX CONSULTANT FOR CITY OF LAKE ELSINORE RIVERSIDE COUNTY STATE OF CALIFORNIA Appendix A ™Rate and Method of Apportionment City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 1 RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) IMPROVEMENT AREA JJ A Special Tax shall be levied on all Assessor's Parcels in City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area JJ ("CFD No. 2006-1 IA JJ") and collected each Fiscal Year commencing in Fiscal Year 2017-2018, in an amount determined through the application of this Rate and Method of Apportionment as described below. All of the real property in CFD No. 2006-1 IA JJ, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-1 IA JJ: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2006-1 IA JJ or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-1 IA JJ or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-1 IA JJ or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2006-1 IA JJ or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2006-1 IA JJ for any other administrative purposes of CFD No. 2006-1 IA JJ, including attorney's fees and other costs, and attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Approved Property" means all Assessor's Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied. "Assessor’s Parcel" means a lot or parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number. "Assessor’s Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 2 "Assessor’s Parcel Number" means that number assigned to an Assessor’s Parcel by the County for purposes of identification. "Assigned Special Tax for Facilities" means the Special Tax for Facilities for each Land Use Class of Developed Property, as determined in accordance with Section C.1.(b) below. "Authorized Facilities" means those authorize improvements, as listed in an exhibit to the Resolution of Formation. "Backup Special Tax for Facilities" means the Special Tax for Facilities applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.1.(c) below. “CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities, the Special Tax Requirement for Services as determined in accordance with Section I below, and providing for the levy and collection of the Special Taxes. "CFD” or “CFD No. 2006-1 IA JJ" means Improvement Area JJ of CFD No. 2006-1 as identified on the boundary map for CFD No. 2006-1. “CFD No. 2006-1" means City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) established by the City under the Act. "CFD No. 2006-1 IA JJ Bonds" means any obligation to repay a sum of money, including obligations in the form of bonds, notes, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Tax for Facilities within CFD No. 2006-1 IA JJ have been pledged. “City” means the City of Lake Elsinore. "City Council" means the City Council of the City of Lake Elsinore, acting as the Legislative Body of CFD No. 2006-1 IA JJ, or its designee. "County" means the County of Riverside. "Developed Property" means, with respect to the Special Tax for Facilities, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a building permit for new construction was issued on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax for Facilities is being levied. Once an Assessor's Parcel has been designated Developed Property, the Maximum Special Tax for Facilities cannot be reduced for any reason unless a prepayment in full or partial prepayment is made pursuant to Section G. "Final Subdivision" means (i) a final map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) that creates individual lots for which building permits may be issued, or (ii) for condominiums, a final map, or portion thereof, approved by the City and a condominium plan recorded pursuant to California Civil Code Section 1352 that creates individual lots for which building permits may be issued. "Fiscal Year" means the period commencing on July 1st of any year and ending the following June 30th. "Funding Agreement" means the Funding, Construction and Acquisition Agreement entered into by the City, on behalf of CFD No. 2006-1, as it may be amended. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 3 “Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2006-1 IA JJ Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. “Land Use Class” means any of the classes listed in Table 1 below. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction of one or more non-residential units or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2006-1 IA JJ Bonds which are deemed to be outstanding under the Indenture. “Property Owner’s Association Property” means, for each Fiscal Year, any property within the boundaries of CFD No. 2006-1 IA JJ that was owned by a property owner association, including any master or sub- association, as of January 1 of the prior Fiscal Year. “Proportionately” means for Developed Property that the ratio of the actual Special Tax for Facilities levy to the Assigned Special Tax for Facilities is equal for all Assessor's Parcels of Developed Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax for Facilities levy per Acre to the Maximum Special Tax for Facilities per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below. “Public Property” means , for each Fiscal Year, (i) any property within the boundaries of CFD No. 2006-1 IA JJ owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public use has been granted, to the federal government, the State, the County, the City, the Lake Elsinore Unified School District, or any local government or other public agency as of January I of the previous Fiscal Year, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use; or (ii) any property within the boundaries of CFD No. 2006-1 IA JJ that was encumbered, as of January I of the previous Fiscal Year, by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement. "Residential Floor Area" means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit(s) issued for such Assessor's Parcel. "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. "Resolution of Formation" means the resolution of formation for CFD No. 2006-1 IA JJ. "Special Tax(es)" means any of the special taxes authorized to be levied within CFD No. 2006-1 IA JJ pursuant to the Act. "Special Tax for Facilities" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement for Facilities. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 4 "Special Tax for Facilities Requirement " means that amount required in any Fiscal Year for CFD No. 2006- 1 IA JJ to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2006- 1 IA JJ Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2006-1 IA JJ Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax for Facilities delinquencies; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax for Facilities levy on Approved Property and Undeveloped Property; less (vii) a credit for funds available to reduce the annual Special Tax for Facilities levy, as determined by the CFD Administrator pursuant to the Indenture. "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 2006-1 IA JJ which are not exempt from the Special Tax for Facilities pursuant to law or Section E below. “Trustee” means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Approved Property, Taxable Property Owner Association Property, or Taxable Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2006-1 IA JJ shall be classified as Developed Property, Approved Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D below. Residential Property shall be assigned to Land Use Classes 1 through 5 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Property shall be assigned to Land Use Class 6. With respect to Residential Property, the Residential Floor Area shall be determined from the most recent building permit issued for such Assessor's Parcel. C. MAXIMUM SPECIAL TAX FOR FACILITIES 1. Developed Property (a) Maximum Special Tax for Facilities The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax for Facilities or (ii) the amount derived by application of the Backup Special Tax for Facilities. (b) Assigned Special Tax for Facilities The Fiscal Year 2017-2018 Assigned Special Tax for Facilities for each Land Use Class is shown below in Table 1. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 5 TABLE 1 ASSIGNED SPECIAL TAX FOR FACILITIES FOR DEVELOPED PROPERTY COMMUNITY FACILITIES DISTRICT NO. 2006-1 IMPROVEMENT AREA JJ FISCAL YEAR 2017-2018 Land Use Class Description Residential Floor Area Assigned Special Tax for Facilities 1 Residential Property Less than 1,700 sq. ft $1,280 per unit 2 Residential Property 1,700 – 1,999 sq. ft $1,320 per unit 3 Residential Property 2,000 – 2,299 sq. ft $1,570 per unit 4 Residential Property 2,300 – 2,599 sq. ft $1,580 per unit 5 Residential Property Greater than 2,599 sq. ft. $1,590 per unit 6 Non-Residential Property N/A $12,032 per Acre (c) Backup Special Tax for Facilities The Fiscal Year 2017-2018 Backup Special Tax for Facilities attributable to a Final Subdivision will equal $12,032, multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed by dividing the Backup Special Tax for Facilities attributable to the applicable Final Subdivision by the number of Assessor's Parcels for which building permits for residential construction have or may be issued (i.e., the number or residential lots). The Backup Special Tax for Facilities for each Assessor's Parcel of Non-Residential Property therein shall equal $12,032 multiplied by the Acreage of such Assessor's Parcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of property for which building permits for non-residential construction may be issued. Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in the preceding paragraphs is subsequently changed or modified by recordation of a lot line adjustment or similar instrument, and only if the CFD Administrator determines that such change or modification results in a decrease in the number of Assessor's Parcels of Taxable Property for which building permits for residential construction have or may be issued within such Final Subdivision, then the Backup Special Tax for Facilities for each Assessor's Parcel of Developed Property that is part of the lot line adjustment or similar instrument for such Final Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax for Facilities previously determined for an Assessor's Parcel of Developed Property that is not a part of the lot line adjustment or similar instrument for such Final Subdivision shall not be recalculated. 1. Determine the total Backup Special Tax for Facilities anticipated to apply to the changed or modified portion of the Final Subdivision area prior to the change or modification. 2. The result of paragraph I above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified portion of the Final Subdivision area, as reasonably determined by the CFD Administrator. 3. The result of paragraph 2 above shall be the Backup Special Tax for Facilities per Acre which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 6 portion of the Final Subdivision area for all remaining Fiscal Years in which the Special Tax for Facilities may be levied. (d) Release of Obligation to Pay and Disclose Backup Special Tax All Assessor's Parcels within CFD No. 2006-1 IA JJ will be relieved simultaneously and permanently from the obligation to pay and disclose the backup Special Tax if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Taxes for Facilities that may be levied against all Assessor's Parcels of Developed Property results in 110% debt service coverage (i.e., the aggregate Assigned Special Taxes for Facilities that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2006-1 IA JJ is at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds). (e) Increase in the Assigned Special Tax for Facilities and Backup Special Tax for Facilities The Fiscal Year 2017-2018 Assigned Special Tax for Facilities, identified in Table 1 above, and Backup Special Tax for Facilities shall increase thereafter, commencing on July 1, 2018 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. (f) Multiple Land Use Classes In some instances, an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Approved Property. Taxable Property Owner Association Property. Taxable Public Property. and Undeveloped Property The Fiscal Year 2017-2018 Maximum Special Tax for Facilities for Approved Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall be $12,032 per Acre and shall increase thereafter, commencing on July 1, 2018 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for Facilities in effect for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2017-2018 and for each following Fiscal Year, the City Council shall determine the Special Tax Requirement for Facilities and levy the Special Tax for Facilities until the amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special Tax for Facilities shall be levied each Fiscal Year as follows: Step One: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Special Tax for Facilities; Step Two: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the Maximum Special Tax for Facilities for Approved Property; City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 7 Step Three: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; Step Four: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the levy of the Special Tax for Facilities on each Assessor's Parcel of Developed Property whose Maximum Special Tax for Facilities is determined through the application of the Backup Special Tax for Facilities shall be increased in equal percentages from the Assigned Special Tax for Facilities up to the Maximum Special Tax for Facilities for each such Assessor's Parcel; Step Five: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property. Notwithstanding the above, the City Council may, in any Fiscal Year, levy Proportionately less than 100% of the Assigned Special Tax for Facilities in step one (above), when (i) the City Council is no longer required to levy the Special Tax for Facilities pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; (ii) all authorized CFD No. 2006-1 IA JJ Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2006-1 IA JJ Bonds (except refunding bonds) to be supported by the Special Tax for Facilities; and (iii) all Authorized Facilities have been constructed and/or acquired. Further notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Parcel of Residential Property be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2006-1 IA JJ. E. EXEMPTIONS No Special Tax for Facilities shall be levied on up to 12.82 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 IA JJ. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Tax for Facilities under this section shall be subject to the levy of the Special Tax for Facilities and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property. F. MANNER OF COLLECTION The Special Tax for Facilities shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-1 IA JJ may collect Special Tax for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 8 G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "Buildout" means, for CFD No. 2006-1 IA JJ, that all expected building permits have been issued. "CFD Public Facilities Costs" means either $5,125,000 in 2017 dollars, which shall increase by the Construction Inflation Index on July 1, 2018, and on each July I thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to fund the Authorized Facilities to be provided by CFD No. 2006-1 IA JJ under the authorized bonding program for CFD No. 2006-1 IA JJ, or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more CFD No. 2006- 1 IA JJ Bonds (except refunding bonds) to be supported by the Special Tax for Facilities levy under this Rate and Method of Apportionment as described in Section D above. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities Costs minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund established pursuant to the Indenture that are expected to be available to finance the cost of Authorized Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct Authorized Facilities eligible under the Act. "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The obligation of the Assessor's Parcel to pay the Special Tax for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax for Facilities obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of CFD No. 2006-1 IA JJ Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax for Facilities Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 9 Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Equals: Prepayment Amount The Prepayment Amount shall be determined as of the proposed prepayment date as follows: 1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel. 2. For Assessor's Parcels of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. 3. (a) Divide the Assigned Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Assigned Special Tax for Facilities for the entire CFD No. 2006-1 IA JJ based on the Developed Property Special Tax for Facilities which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 2006-1 IA JJ, excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Backup Special Tax for Facilities at Buildout for the entire CFD No. 2006-1 IA JJ, excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount") 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price-100%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 10 reinvestment of the Special Tax for Facilities Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The administrative fees and expenses of CFD No. 2006-1 IA JJ are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2006-1 IA JJ Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax for Facilities prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax for Facilities Prepayment Amount"). From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire CFD No. 2006-1 IA JJ Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2006-1 IA JJ. The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-1 IA JJ Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of CFD No. 2006-1 IA JJ Bonds or to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tax for Facilities levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax for Facilities levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax for Facilities and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax for Facilities shall cease. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 11 Notwithstanding the foregoing, no Special Tax for Facilities prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax for Facilities that may be levied on Taxable Property within CFD No. 2006-1 IA JJ (after excluding 12.82 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 IA JJ as set forth in Section E) both prior to and after the proposed prepayment is at least equal to the sum of (i) the Administrative Expenses, as defined in Section A above, and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds. 2. Prepayment in Part The Special Tax for Facilities on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section G.1.; except that a partial prepayment shall be calculated according to the following formula: PP = ((PE –A) x F) +A These terms have the following meaning: PP = Partial Prepayment Amount PE = the Prepayment Amount calculated according to Section G.1 F = the percent by which the owner of the Assessor’s Parcel(s) is partially prepaying the Maximum Special Tax for Facilities obligation A = the Administrative Fees and Expenses determined pursuant to Section G.1 The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax for Facilities and the percentage by which the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section G.1, and (ii) indicate in the records of CFD No. 2006-1 IA JJ that there has been a partial prepayment of the Special Tax for Facilities and that a portion of the Special Tax for Facilities with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax for Facilities, shall continue to be levied on such Assessor's Parcel pursuant to Section D above. H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied until Fiscal Year 2058-2059, provided however that the Special Tax for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-1 IA JJ Bonds have been paid; (ii) all Authorized Facilities have been acquired and all reimbursements required by the Funding Agreement have been paid; and (iii) all other obligations of CFD No. 2006-1 IA JJ have been satisfied. Bonds shall not be issued after eighteen (18) months have elapsed following the final inspection of the last Residential Property within CFD No. 2006-1 IA JJ, except as otherwise provided in the Funding Agreement. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 12 I. SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section I: “Developed Multifamily Unit” means a residential dwelling unit within a building in which each of the individual dwelling units has or shall have at least one common wall with another dwelling unit and a building permit has been issued by the City for such dwelling unit on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. “Developed Single Family Unit” means a residential dwelling unit other than a Developed Multifamily Unit on an Assessor’s Parcel for which a building permit has been issued by the City on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. “Maximum Special Tax for Services” means the maximum Special Tax for Services that can be levied by CFD No. 2006-1 IA JJ in any Fiscal Year on any Assessor’s Parcel. “Operating Fund” means a fund that shall be maintained for CFD No. 2006-1 IA JJ for any Fiscal Year to pay for the actual costs of maintenance related to the Service Area, and the applicable Administrative Expenses. “Operating Fund Balance” means the amount of funds in the Operating Fund at the end of the preceding Fiscal Year. “Service Area” means parks, open space, and storm drains. “Special Tax for Services” means any of the special taxes authorized to be levied within CFD No. 2006-1 IA JJ pursuant to the Act to fund the Special Tax Requirement for Services. “Special Tax Requirement for Services” means the amount determined in any Fiscal Year for CFD No. 2006-1 IA JJ equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) Administrative Expenses, and (iii) anticipated delinquent Special Taxes for Services based on the delinquency rate in CFD No. 2006-1 IA JJ for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing Fiscal Year 2017-2018 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Services on (i) all Assessor’s Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor’s Parcels of Non-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. The Maximum Special Tax for Services for Fiscal Year 2017-2018 shall be $306.91 per Developed Single Family Unit, $153.47 per Developed Multifamily Unit, and $691 per Acre for each Assessor’s Parcel of Non-Residential Property. On each July 1, commencing July 1, 2018, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. City of Lake Elsinore Community Facilities District No. 2006-1 IA JJ (Summerly) Page 13 J. DURATION OF SPECIAL TAX FOR SERVICES The Special Tax for Services shall be levied in perpetuity to fund the Special Tax for Services Requirement, unless no longer required as determined at the sole discretion of the City Council. K. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2006-1 IA JJ. The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied shall be appropriately modified. The City Council may interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 1 RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) IMPROVEMENT AREA KK A Special Tax shall be levied on all Assessor's Parcels in City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area KK ("CFD No. 2006-1 IA KK") and collected each Fiscal Year commencing in Fiscal Year 2017-2018, in an amount determined through the application of this Rate and Method of Apportionment as described below. All of the real property in CFD No. 2006-1 IA KK, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-1 IA KK: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2006-1 IA KK or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-1 IA KK or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-1 IA KK or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2006-1 IA KK or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2006-1 IA KK for any other administrative purposes of CFD No. 2006-1 IA KK, including attorney's fees and other costs, and attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Approved Property" means all Assessor's Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied. "Assessor’s Parcel" means a lot or parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number. "Assessor’s Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 2 "Assessor’s Parcel Number" means that number assigned to an Assessor’s Parcel by the County for purposes of identification. "Assigned Special Tax for Facilities" means the Special Tax for Facilities for each Land Use Class of Developed Property, as determined in accordance with Section C.1.(b) below. "Authorized Facilities" means those authorize improvements, as listed in an exhibit to the Resolution of Formation. "Backup Special Tax for Facilities" means the Special Tax for Facilities applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.1.(c) below. “CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities, the Special Tax Requirement for Services as determined in accordance with Section I below, and providing for the levy and collection of the Special Taxes. "CFD” or “CFD No. 2006-1 IA KK" means Improvement Area KK of CFD No. 2006-1 as identified on the boundary map for CFD No. 2006-1. “CFD No. 2006-1" means City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) established by the City under the Act. "CFD No. 2006-1 IA KK Bonds" means any obligation to repay a sum of money, including obligations in the form of bonds, notes, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Tax for Facilities within CFD No. 2006-1 IA KK have been pledged. “City” means the City of Lake Elsinore. "City Council" means the City Council of the City of Lake Elsinore, acting as the Legislative Body of CFD No. 2006-1 IA KK, or its designee. "County" means the County of Riverside. "Developed Property" means, with respect to the Special Tax for Facilities, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a building permit for new construction was issued on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax for Facilities is being levied. Once an Assessor's Parcel has been designated Developed Property, the Maximum Special Tax for Facilities cannot be reduced for any reason unless a prepayment in full or partial prepayment is made pursuant to Section G. "Final Subdivision" means (i) a final map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) that creates individual lots for which building permits may be issued, or (ii) for condominiums, a final map, or portion thereof, approved by the City and a condominium plan recorded pursuant to California Civil Code Section 1352 that creates individual lots for which building permits may be issued. "Fiscal Year" means the period commencing on July 1st of any year and ending the following June 30th. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 3 "Funding Agreement" means the Funding, Construction and Acquisition Agreement entered into by the City, on behalf of CFD No. 2006-1, as it may be amended. “Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2006-1 IA KK Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. “Land Use Class” means any of the classes listed in Table 1 below. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction of one or more non-residential units or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2006-1 IA KK Bonds which are deemed to be outstanding under the Indenture. “Property Owner’s Association Property” means, for each Fiscal Year, any property within the boundaries of CFD No. 2006-1 IA KK that was owned by a property owner association, including any master or sub- association, as of January 1 of the prior Fiscal Year. “Proportionately” means for Developed Property that the ratio of the actual Special Tax for Facilities levy to the Assigned Special Tax for Facilities is equal for all Assessor's Parcels of Developed Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax for Facilities levy per Acre to the Maximum Special Tax for Facilities per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below. “Public Property” means , for each Fiscal Year, (i) any property within the boundaries of CFD No. 2006-1 IA KK owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public use has been granted, to the federal government, the State, the County, the City, the Lake Elsinore Unified School District, or any local government or other public agency as of January I of the previous Fiscal Year, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use; or (ii) any property within the boundaries of CFD No. 2006-1 IA KK that was encumbered, as of January I of the previous Fiscal Year, by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement. "Residential Floor Area" means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit(s) issued for such Assessor's Parcel. "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. "Resolution of Formation" means the resolution of formation for CFD No. 2006-1 IA KK. "Special Tax(es)" means any of the special taxes authorized to be levied within CFD No. 2006-1 IA KK pursuant to the Act. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 4 "Special Tax for Facilities" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement for Facilities. "Special Tax for Facilities Requirement " means that amount required in any Fiscal Year for CFD No. 2006- 1 IA KK to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2006- 1 IA KK Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2006-1 IA KK Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax for Facilities delinquencies; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax for Facilities levy on Approved Property and Undeveloped Property; less (vii) a credit for funds available to reduce the annual Special Tax for Facilities levy, as determined by the CFD Administrator pursuant to the Indenture. "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 2006-1 IA KK which are not exempt from the Special Tax for Facilities pursuant to law or Section E below. “Trustee” means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Approved Property, Taxable Property Owner Association Property, or Taxable Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2006-1 IA KK shall be classified as Developed Property, Approved Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D below. Residential Property shall be assigned to Land Use Classes 1 through 4 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Property shall be assigned to Land Use Class 5. With respect to Residential Property, the Residential Floor Area shall be determined from the most recent building permit issued for such Assessor's Parcel. C. MAXIMUM SPECIAL TAX FOR FACILITIES 1. Developed Property (a) Maximum Special Tax for Facilities The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax for Facilities or (ii) the amount derived by application of the Backup Special Tax for Facilities. (b) Assigned Special Tax for Facilities The Fiscal Year 2017-2018 Assigned Special Tax for Facilities for each Land Use Class is shown below in Table 1. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 5 TABLE 1 ASSIGNED SPECIAL TAX FOR FACILITIES FOR DEVELOPED PROPERTY COMMUNITY FACILITIES DISTRICT NO. 2006-1 IMPROVEMENT AREA KK FISCAL YEAR 2017-2018 Land Use Class Description Residential Floor Area Assigned Special Tax for Facilities 1 Residential Property Less than 1,600 sq. ft $1,740 per unit 2 Residential Property 1,600 – 1,799 sq. ft $1,850 per unit 3 Residential Property 1,800 – 1,999 sq. ft $1,916 per unit 4 Residential Property Greater than 1,999 sq. ft. $1,990 per unit 5 Non-Residential Property N/A $15,099 per Acre (c) Backup Special Tax for Facilities The Fiscal Year 2017-2018 Backup Special Tax for Facilities attributable to a Final Subdivision will equal $15,099, multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed by dividing the Backup Special Tax for Facilities attributable to the applicable Final Subdivision by the number of Assessor's Parcels for which building permits for residential construction have or may be issued (i.e., the number or residential lots). The Backup Special Tax for Facilities for each Assessor's Parcel of Non-Residential Property therein shall equal $15,099 multiplied by the Acreage of such Assessor's Parcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of property for which building permits for non-residential construction may be issued. Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in the preceding paragraphs is subsequently changed or modified by recordation of a lot line adjustment or similar instrument, and only if the CFD Administrator determines that such change or modification results in a decrease in the number of Assessor's Parcels of Taxable Property for which building permits for residential construction have or may be issued within such Final Subdivision, then the Backup Special Tax for Facilities for each Assessor's Parcel of Developed Property that is part of the lot line adjustment or similar instrument for such Final Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax for Facilities previously determined for an Assessor's Parcel of Developed Property that is not a part of the lot line adjustment or similar instrument for such Final Subdivision shall not be recalculated. 1. Determine the total Backup Special Tax for Facilities anticipated to apply to the changed or modified portion of the Final Subdivision area prior to the change or modification. 2. The result of paragraph I above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified portion of the Final Subdivision area, as reasonably determined by the CFD Administrator. 3. The result of paragraph 2 above shall be the Backup Special Tax for Facilities per Acre which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 6 portion of the Final Subdivision area for all remaining Fiscal Years in which the Special Tax for Facilities may be levied. (d) Release of Obligation to Pay and Disclose Backup Special Tax All Assessor's Parcels within CFD No. 2006-1 IA KK will be relieved simultaneously and permanently from the obligation to pay and disclose the backup Special Tax if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Taxes for Facilities that may be levied against all Assessor's Parcels of Developed Property results in 110% debt service coverage (i.e., the aggregate Assigned Special Taxes for Facilities that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2006-1 IA KK is at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds). (e) Increase in the Assigned Special Tax for Facilities and Backup Special Tax for Facilities The Fiscal Year 2017-2018 Assigned Special Tax for Facilities, identified in Table 1 above, and Backup Special Tax for Facilities shall increase thereafter, commencing on July 1, 2018 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. (f) Multiple Land Use Classes In some instances, an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Approved Property. Taxable Property Owner Association Property. Taxable Public Property. and Undeveloped Property The Fiscal Year 2017-2018 Maximum Special Tax for Facilities for Approved Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall be $15,099 per Acre and shall increase thereafter, commencing on July 1, 2018 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for Facilities in effect for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2017-2018 and for each following Fiscal Year, the City Council shall determine the Special Tax Requirement for Facilities and levy the Special Tax for Facilities until the amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special Tax for Facilities shall be levied each Fiscal Year as follows: Step One: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Special Tax for Facilities; Step Two: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the Maximum Special Tax for Facilities for Approved Property; City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 7 Step Three: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; Step Four: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the levy of the Special Tax for Facilities on each Assessor's Parcel of Developed Property whose Maximum Special Tax for Facilities is determined through the application of the Backup Special Tax for Facilities shall be increased in equal percentages from the Assigned Special Tax for Facilities up to the Maximum Special Tax for Facilities for each such Assessor's Parcel; Step Five: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property. Notwithstanding the above, the City Council may, in any Fiscal Year, levy Proportionately less than 100% of the Assigned Special Tax for Facilities in step one (above), when (i) the City Council is no longer required to levy the Special Tax for Facilities pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; (ii) all authorized CFD No. 2006-1 IA KK Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2006-1 IA KK Bonds (except refunding bonds) to be supported by the Special Tax for Facilities; and (iii) all Authorized Facilities have been constructed and/or acquired. Further notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Parcel of Residential Property be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2006-1 IA KK. E. EXEMPTIONS No Special Tax for Facilities shall be levied on up to 7.13 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 IA KK. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Tax for Facilities under this section shall be subject to the levy of the Special Tax for Facilities and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property. F. MANNER OF COLLECTION The Special Tax for Facilities shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-1 IA KK may collect Special Tax for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 8 G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "Buildout" means, for CFD No. 2006-1 IA KK, that all expected building permits have been issued. "CFD Public Facilities Costs" means either $4,125,000 in 2017 dollars, which shall increase by the Construction Inflation Index on July 1, 2018, and on each July I thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to fund the Authorized Facilities to be provided by CFD No. 2006-1 IA KK under the authorized bonding program for CFD No. 2006-1 IA KK, or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more CFD No. 2006- 1 IA KK Bonds (except refunding bonds) to be supported by the Special Tax for Facilities levy under this Rate and Method of Apportionment as described in Section D above. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities Costs minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund established pursuant to the Indenture that are expected to be available to finance the cost of Authorized Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct Authorized Facilities eligible under the Act. "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The obligation of the Assessor's Parcel to pay the Special Tax for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax for Facilities obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of CFD No. 2006-1 IA KK Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax for Facilities Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 9 Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Equals: Prepayment Amount The Prepayment Amount shall be determined as of the proposed prepayment date as follows: 1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel. 2. For Assessor's Parcels of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. 3. (a) Divide the Assigned Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Assigned Special Tax for Facilities for the entire CFD No. 2006-1 IA KK based on the Developed Property Special Tax for Facilities which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 2006-1 IA KK, excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Backup Special Tax for Facilities at Buildout for the entire CFD No. 2006-1 IA KK, excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount") 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price-100%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 10 reinvestment of the Special Tax for Facilities Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The administrative fees and expenses of CFD No. 2006-1 IA KK are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2006-1 IA KK Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax for Facilities prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax for Facilities Prepayment Amount"). From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire CFD No. 2006-1 IA KK Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2006-1 IA KK. The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-1 IA KK Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of CFD No. 2006-1 IA KK Bonds or to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tax for Facilities levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax for Facilities levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax for Facilities and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax for Facilities shall cease. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 11 Notwithstanding the foregoing, no Special Tax for Facilities prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax for Facilities that may be levied on Taxable Property within CFD No. 2006-1 IA KK (after excluding 7.13 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 IA KK as set forth in Section E) both prior to and after the proposed prepayment is at least equal to the sum of (i) the Administrative Expenses, as defined in Section A above, and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds. 2. Prepayment in Part The Special Tax for Facilities on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section G.1.; except that a partial prepayment shall be calculated according to the following formula: PP = ((PE –A) x F) +A These terms have the following meaning: PP = Partial Prepayment Amount PE = the Prepayment Amount calculated according to Section G.1 F = the percent by which the owner of the Assessor’s Parcel(s) is partially prepaying the Maximum Special Tax for Facilities obligation A = the Administrative Fees and Expenses determined pursuant to Section G.1 The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax for Facilities and the percentage by which the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section G.1, and (ii) indicate in the records of CFD No. 2006-1 IA KK that there has been a partial prepayment of the Special Tax for Facilities and that a portion of the Special Tax for Facilities with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax for Facilities, shall continue to be levied on such Assessor's Parcel pursuant to Section D above. H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied until Fiscal Year 2058-2059, provided however that the Special Tax for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-1 IA KK Bonds have been paid; (ii) all Authorized Facilities have been acquired and all reimbursements required by the Funding Agreement have been paid; and (iii) all other obligations of CFD No. 2006-1 IA KK have been satisfied. Bonds shall not be issued after eighteen (18) months have elapsed following the final inspection of the last Residential Property within CFD No. 2006-1 IA KK, except as otherwise provided in the Funding Agreement. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 12 I. SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section I: “Developed Multifamily Unit” means a residential dwelling unit within a building in which each of the individual dwelling units has or shall have at least one common wall with another dwelling unit and a building permit has been issued by the City for such dwelling unit on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. “Developed Single Family Unit” means a residential dwelling unit other than a Developed Multifamily Unit on an Assessor’s Parcel for which a building permit has been issued by the City on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. “Maximum Special Tax for Services” means the maximum Special Tax for Services that can be levied by CFD No. 2006-1 IA KK in any Fiscal Year on any Assessor’s Parcel. “Operating Fund” means a fund that shall be maintained for CFD No. 2006-1 IA KK for any Fiscal Year to pay for the actual costs of maintenance related to the Service Area, and the applicable Administrative Expenses. “Operating Fund Balance” means the amount of funds in the Operating Fund at the end of the preceding Fiscal Year. “Service Area” means parks, open space, and storm drains. “Special Tax for Services” means any of the special taxes authorized to be levied within CFD No. 2006-1 IA KK pursuant to the Act to fund the Special Tax Requirement for Services. “Special Tax Requirement for Services” means the amount determined in any Fiscal Year for CFD No. 2006-1 IA KK equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) Administrative Expenses, and (iii) anticipated delinquent Special Taxes for Services based on the delinquency rate in CFD No. 2006-1 IA KK for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing Fiscal Year 2017-2018 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Services on (i) all Assessor’s Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor’s Parcels of Non-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. The Maximum Special Tax for Services for Fiscal Year 2017-2018 shall be $306.91 per Developed Single Family Unit, $153.47 per Developed Multifamily Unit, and $691 per Acre for each Assessor’s Parcel of Non-Residential Property. On each July 1, commencing July 1, 2018, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. City of Lake Elsinore Community Facilities District No. 2006-1 IA KK (Summerly) Page 13 J. DURATION OF SPECIAL TAX FOR SERVICES The Special Tax for Services shall be levied in perpetuity to fund the Special Tax for Services Requirement, unless no longer required as determined at the sole discretion of the City Council. K. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2006-1 IA KK. The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied shall be appropriately modified. The City Council may interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. Appendix B ™Boundary Map Appendix C ™Resolution of Intention