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HomeMy WebLinkAboutCC Reso No 2006-008RESOLUTION NO. 2006-OS - RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, TO ESTABLISH CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERL~; AND DESIGNATING IMPROVEMENT AREAS WITHIN SAID COMMUNITY FACILITIES DISTRICT WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has received a petition (the "Petition") requesting the institution of proceedings for (i) formation of a community facilities district (the "CFD") pursuant to the Mello- Roos Community Facilities Act of 1982, as amended (the "AcY'), (ii) designation of improvement areas within the CFD, (iii) authorization of issuance of bonds within each improvement area of the CFD, and (iv) establishment of an appropriations limit for each iinprovement area of the CFD; and WHEREAS, the Council has determined that the Petition complies with the requirements of Government Code Section 53318(c) and now intends to initiate such proceedings;and WHEREAS, it is the intention of the Council to finance parks, open space and storm drain maintenance services that are in addition to those provided in the tenitory within the CFD prior to the formation of the CFD and do not supplant services already available within the territory proposed to be included in the CFD through the formation of the CFD, subject to the levy of a special tax to pay for such services being approved at an election to be held within the boundaries of the CFD; and WHEREAS, it is also the intention of the Council to finance the acquisition and construction of the Facilities (as defined below) or any combination thereof through the formation of the CFD, subject to the authorization of bonds and the levy of a special tax to pay lease payments, insYallment purchase payments or other payments, ar principal and interest on bonds, being approved at an election to be held within the boundaries of the CPD; and WHEREAS, pursuant to Section 53350 of the Act, the Council may designate a portion or portions of the CFD as one or more improvement areas for purposes of financing of, or contributing to the financing of, specified public facilities. NOW, THEREFORE, THE CITY COUNCIL OF TAE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: S~CTION 1. The Councii hereby determines to institute proceedings far the -- formation of a coinmunity facilities district under the terms of the Act. The exterior CITY COUNCIL RESOLUTION NO. 2006-OS Page 2 of 6 boundaries of the CFD are hereby specified and described to be as shown on that certain map now on file in the office of the Clerk entitled "Proposed Boundary of Community Facilities District No. 2006-1 of the City of Lake Elsinore (Summerly)," which map indicates by a boundary line the extent of the territory included in the proposed community facilities district and shall govern for all details as to the extent of the CFD. On the original and one copy of the map of such CFD on file in the City Clerk's office, the City Clerk shall endorse the certificate evidencing the date and adoption of this resolution. The City Clerk shall file the original of such map in his office and, within fifteen (15) days after the adoption of this Resolution, the City Clerk shall file a copy of such map so endorsed in the records of the County Recorder, County of Riverside, State of California. SECTION 2. The name of the proposed CFD shall be "City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly)." SECTION 3. The Council hereby designates the portions of the CFD as described in E~ibit A attached hereto, as Improvement Area No. 1, Improvement Area No. 2 and Improvement Area No. 3, respectively, of City of Lake Elsinare Community Facilities District No. 2006-1 (Summerly). SECTION 4. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Services Special Tax") sufficient to finance a portion of the cost of providing parks, open space and storm drain maintenance services (the "Services") that are in addition to those provided in the territory within the CFD prior to the formation of the CFD and do not supplant services already available within the territory proposed to be included in the CFD, the costs of administering the levy and collection of the Services Special TaY and all other costs of the levy of the Services Special Tax, including any foreclosure proceedings, legal, fiscal, and financial consultant fees, election costs, and all other administrative costs of the tax levy. The Services Special Tax will be secured by recordation of a continuing lien against all real property in the CFD. The schedule of the rate and method of apportionment and manner of collection of the Services Special Tax is described in detail in Exhibit B attached hereto and by this reference incorporated herein. The Services Special Tax is apportioned to each parcel on the foregoing basis pursuant to Section 533253 of the Act. SECTION 5. The facilities proposed to be financed by each improvement area of the CFD are public infrastructure facilities and other governmental facilities with an estimated useful life of five years or longer, which the CFD is authorized by law to construct, own or operate and that are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within the proposed CFD, CITY COUNCIL RESOLUTION NO. 2006-08 Page 3 of 6 including but not limited to streets, streetscape, park and recreation facilities, storm drain, other City facilities and fees, water and sewer facilities and fees of the Elsinore Valley Municipal Water District, and related costs including designs, inspections, professional fees, annexation fees, connection fees and acquisition costs (the "Facilities"). Such Facilities need not be physically located within the CFD. SECTION 6. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Special Tax") sufficient to pay for the costs of financing the acquisition and/or construction of the Facilities, including the principal of and interest on the bonds proposed to be issued to finance the Facilities and other periodic costs, the establishment and replenishment of reserve funds, the remarketing, credit enhancement and liquidity fees, the costs of administering the levy and collection of the Special TaY and all other costs of the levy of the Special Tax and issuance of the bonds, including any foreclosure proceedings, architectural, engineering, inspection, legal, fiscal, and financial consultant fees, discount fees, interest on bonds due and payable prior to the expiration of one year from the date of completion of facilities (but not to exceed two years), election costs and all costs of issuance of the bonds, including, but not limited to, fees for bond counsel, disclosure counsel, financing consultants and printing costs, and all other administrative costs of the tax levy and bond issue. The Special Tax will be secured by recordation of a continuing lien against all real property in the CFD. In the first year in which such a Special Tax is levied, the levy shall include a sum sufficient to repay to the City all amounts, if any, transferred to the CFD pursuant to Section 53314 of the Act and interest thereon. The schedule of the rate and method of apportionment and manner of collection of the Special Tax is described in detail in Exhibit B attached hereto and by this reference incorparated herein. The Special Tax is based upon the cost of financing the Facilities in the CFD, the demand that each parcel will place on the Facilities and the benefit (direct and/or indirect) received by each parcel from the Facilities. The Special Tvc is apportioned to each parcel on the foregoing basis pursuant to Section 533253 of the Act. In the event that a portion of the property within an improvement area of the CFD shall become for any reason exempt, wholly or partially, from the levy of the Special Tax, the Council shall, on behalf of the CFD, increase the levy to the extent necessary upon the remaining property within the same improvement area of the CFD which is not delinquent or exempt in order to yield the required payments, subject to the maximum tax. Under no circumstances, however, shall the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the same improvement area of the CFD by more than 10 percent. Furthermore, the maximum special taY authorized to be levied against any parcel used for private residential purposes shall not be increased over time in excess of 2 percent per year. CITY COUNCIL RESOLUTION NO. 2006-08 Page 4 of 6 SECTION 7. The Council hereby finds that the proposed Facilities are necessary to meet increased demands put upon the City as a result of the new development or rehabilitation within the proposed CFD. SECTION 8. A public hearing (the "Hearing") on the establishment of the CFD and the proposed rate and method of apportionment of the Services Special TaY and the Special Tax shall be held on February 28, 2006, at 7:00 p.m., ar as soon thereafter as practicable, at the chambers of the Council, 130 S. Main Street, Lake Elsinore, California 92530. SECTION 9. At the time and place set forth above far the hearing, any interested person, including all persons owning lands or registered to vote within the proposed CFD, may appear and be heard. SECTION 10. Each City officer who is ar will be responsible for the Services and the Facilities to be financed by the CFD, if it is established, is hereby directed to study the proposed CFD and, at ar before the time of the above-mentioned Hearing, file a report with the Council, which is to be made a part of the record of the Hearing, containing a brief description of the Services and the Facilities by type which will in his or her opinion be required to adequately meet the needs of the CFD and his or her estimate of the cost of providing the Services and the Facilities. The City Manager is directed to estimate the fair and reasonable cost of all incidental expenses, including the cost of planning and designing the Facilities to be financed pursuant to the Act, including the cost of environmental evaluations of such facilities, all costs associated with the creation of the CFD, issuance of bonds, determination of the amount of any special taxes, collection of any special taYes, or costs otherwise incurred in order to carry out the authorized purposes of the City with respect to the CFD, and any other expenses incidental to the construction, completion and inspection of the authorized work to be paid through the proposed financing. SECTION ll. The City may accept advances of funds from any sources, including private persons or private entities, and is authorized and directed to use such funds for any authorized purpose, including any cost incurred by the City in creating the CFD. The City may enter into an agreement to repay all of such funds as are not expended or committed far any authorized purpose at the time of the election on the levy of the Services Special Tax and the Special Tax, if the proposal to levy such tax should fail, and to repay all of such funds advanced if the levy of the Services Special Tax and the Special Tax shall be approved by the qualified electors of the CFD. SECTION 12. The City Clerk is hereby directed to publish a notice ("Notice") of the Hearing pursuant to Section 6061 of the Government Code in a newspaper of general circulation published in the area of the proposed CFD. Such Notice shall contain CITY COUNCIL RESOLUTION NO. 2006-08 Page 5 of 6 information set forth in Section 53322 of the Act. Such publication shall be completed at least 7 days priar to the date of the Hearing. SECTION 13. The Clerk may send a copy of the Notice by first-class mail, postage prepaid, to each registered voter and to each landowner within proposed CFD as shown on the last equalized assessment roll. Said mailing shall be completed not less than fifteen (15) days prior to the date of the Hearing. SECTION 14. Pursuant to Section 53344.1 of the Act, the Council hereby reserves to itself, in its sole discretion, the right and authority by subsequent resolution to allow any owner of property within the CFD, subject to the provisions of Section 53344.1 of the Act and those conditions as it may impose, and any applicable prepayment penalties as prescribed in the bond indenture or comparable instrument or document, to tender to the CFD treasurer in full payment or part payment of any installment of the special taxes or the interest or penalties thereon which may be due or delinquent, but for which a bill has been received, any bond or other obligation secured thereby, the bond ar other obligation to be taken at par and credit to be given for the accrued interest shown thereby computed to the date of tender. SECTION 15. The voting procedure with respect to the establishment of the CFD and Yhe imposition of the special tax shall be by hand delivered or mailed ballot election. SECTION 16. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED this 24`h day of January, 2006, by the following vote: AYES: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEI~4BERS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: City of Lake CITY COUNCIL RESOLUTION NO. 2006-08 Page 6 of 6 ATTES : Frederick Ray, City Clerk City of Lake Elsinore EXHIBIT A IMPROVEMENT AREA DESIGNATION _~..a.M.w~s,_~<~,r< ~„u., ' ~ do t i•+qs ueo-m (ere) ne ~ wrt~s (en) ~ snoax3nm axa s3xn wave ,n xouaw~sm m~m3a r uae ' run n'•w savrv s.dossxsr ur~rw> 3orsania a~u nrv~a3na e~ato~pe~ vp~sran{y ~o Flump RI Y~6'W WN~J K (p+aaumS) 531YIJOSSY V 518NYH ~ >iovlei3 a~q fo 6110 a41 /~ t-BOOZ 'oN Wl+14U eaplllaa,{ 6it¢nw~¢o~ dVW AHtlGNfl09 G3SOdOtld ~ 33~ 3a5xNia d0 uullGt 3:LL JO a3atlN3tl uxmJ 'VINtlOa~IY~ )J LV35 '306H311N M UNM> ]W HI N)OtlWltl AINIpJ 31U f0 A13M JW M AlltldNf109 1JINL514 ~ ~ ~ Orv 1H31YIIN35NI SY ^ NJMyN{ 'SON ?JVd S1JWlilp 5]IIl19Vf 41NlIX/q'J UNY 1N31155355v A $JtlX A MIOB NI "N' qOV.O JJ yMX 31U ltl SML ^ JJ AM - SM( 03111 ~ 3MM'4l3 3HYl 3J Al0 3HL f0 Ntl3lJ AlU ' 'ON lqLLll'q53tl 531 A9 5(KZ M AYO ~ 3M! ~~~ ' ' ~~~'~ . NO Ol3N JJ3tl~ll ~M133h 43V103.Y]5 A bY1lM3tl V LV 31pN613 3M~1 f0 Alq 31LL fJ lONI10~ AID 3W AB 43ApdLlitl $VM YINtl9JIlYJ A lltl15 '306tlN1tl aV A1NIqJ '31!IINISt3 3Mtll )] Alq '(A1b3111V(K) 1-9M2 ON L~MLLSq 53LLITJtlf AIIHMMAJ p 531tlVONlq9 4350dOtld 31LL 'JNMOM tlVIY WXIM 3Xl 1VM( AfLLN3! AB)tl3N I 1~9C'CN I~JOUL 31RHIISV 3MVl }J ALU 3XL 10 Ntl3U A(I~ ~y~9-I SWZ A AYU SIN( 3tlJM$l3 3M'Il J~ AL9 3Ml dJ MtlIU A1Lt 3Xl A UIfM 3W NI 0311f ~{ ~ YlxfqJlN'J A 3LYl5 '30KtlNltl JJ llM1YqJ 3MN69 3N/1 A Alp 3XI ~ Ni'A1H/IOJ 306tlNIN Jp SOM]3Y'SdY11 f~ f~G (S)SJYd 'iEC WN9 NI p30tNJ3tl'I-OLBIC . 'aN 3JYtlt A 1[ lOt 53011V%3 GM' AY 'M/ '9Y 'W StOI Y~M-'J $LOl '9L'02 LOl N{NI ~ 530U~.pJ [ v3bv aH3NN~tlM11 llIN151p 9IlNJVf ~1W(11111D] 0350.Utl! f0 AMVW'MB 3xt 'YINtb3M'J }J ]LY{5 '301SN3'.Itl X) A1N110] 'JIpXSIJ JMVI JJ AlU 3Xl ~~ ~~ NI '4N/IOJ 306tl311tl JJ SOtp]3tl 5JY11 A 1~'.-ii (5)SJVd 'i6C .'~9 NI 030lpJ3tl 'I-OL61C ~ Q ~' YlN 1JYN1 A CC tOl S30~1J%3 OxY N-T Y-S 'n 'l y-0 LOl 'GI-[I 'It-8 SIOI XIMI '4. 530UM1WJ L Y3tlV LN31131WdWl LJItlLSIp 53LLl1qYJ AlINMIHq'1 pypNtl! JO AtlYOHMB 31LL b AYYi1f0-I VINtpJIMJ A 31Y15'306tlNW fJ AlHlq]'3eAN513 ~~~, 3MYt A AtU ]ML NI 'A1NIqJ ]C6tlNly M SUU093L SMII JJ (S~R (5)SIYd "4EC MYJ9 NI Q]pMIJ W'1-OL61C UH 1'JYMI 1J ZC lOl 5]OIIOX3 OM' tl-N'J-Y $10l 'L-2 SIOI NLM . 530UNpJ 1 Y3tlY 1H3X310tltlNl 1JIM{SN 53NIlIJY! AlWMI1N a350ANe JO AtlVGNIIpB 3Xl ~~.~ j~ YWlpJMJ JJ 3tv35 306tl31W lJ A1NfM'3lqHKl3 3MYl 1] ALO 311t W'NNlpJ 346b311U fJ SOGW3N 5GYI1 D T-li (5)3'JVd T6{ MP'~B HI 034tM~3b '1-OLOIC Ox aJYfLL 10 IC pHY tt'LC SIOt 53Mb%3 ON~ AY 'M-tlV 5{Ol 'I-Y $LOl '9L~L ~LI-CI 'll~t $lOl XlM 530pNq] 1JW351p 5]LLIVJY! 41NMYIYO~ 4350.qyd A ALYGMMB 3Hl ~~ AII ~ ICY ~.~ b ~ F~~ ~aw3noadwi tr3ar ~3w3noadwr .~.~,~ ,,,..,~ a-~a~a~ °~~ b~~ zraar Zvawanoaewi ~..,~ ~ ~ Y3av ~ ~awanoadw~ ~ HINaO.~l~d~ .~0 31d1S '301S2J3~R1 ~0 AlN(10~ (,112l3WW(1S) 32~ONIS~3 ~~i`d~ ~0 ,lll~ ~Hl ~0 1-900Z '~N 1~I~ilSla S3111~I~d~ J.11Nf1WW0~ ~o ,~adoNnoa a3sodoad EXHIBIT B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX (IMPROVEMENT AREA NO. 1) (IMPROVEMENT AREA NO. 2) (IMPROVEMENT AREA NO. 3) FINAL RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMiJNITY FACILITIES DISTRICT No. 2006-1 IMPROVEMENT AREA No. 1 (SUMMERLI~ A Special Tax shall be levied on all Assessor's Parcels in City of Lake Elsinore Community Facilities District No. 2006-1 (Suminerly) ("CFD No. 2006-1(IA No. 1)") and collected each Fiscal Year commencing in Fiscal Year 2006-2007, in an amount determined through the application ofthis Rate and Method of Apportionment as described below. All of the real property in CFD No. 2006-1 (IA No. 1), unless exempted by law or by the provisions hereof, shall be taYed for the purposes, to the extent and in the manner herein provided. A. 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 Assessar'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, pazcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 of the California Government Code. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-1 (IA No. 1): 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 Tanes 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 No. 1) or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-1 (IA No. 1) or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-1 (IA No. 1) or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tas disclosure statements and responding to public inquiries regarding the Special Taxes, the costs of the City, CFD No. 2006-1 (IA No. 1) or any designee thereof related to an appeal of the Speciai 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 Ciry or CFD No. 2006-1 (IA No. 1) for any other administrative purposes of CFD No. 2006-1 (IA No. 1), including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 7mprovement Area No. I(Summerly) Page 1 "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. "Assigned Special Tax for Facilities" means the Special Tax for Facilities for each Land Use Class of Developed Property, as determined in accordance with Section C.1.(b) below. "Authorized Facilities" means those authorized improvements, as listed in an e~chibit 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. "Certificate of Occupancy" means a certificate issued by the City that authorizes the actual occupancy of a dwelling unit for habitation by one or more residents. "CFD Administrator" means an official of the City, or designee thereof, responsible far determining the Special Tax Requirement for Facilities, the Special Tax Requirement for Services as determined in accordance with Section I below, and providing for the levy and collection of the Special Taxes. "CFD No. 2006-1" means City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly). "CFD No. 2006-1 (IA No. 1)" means Improvement Area No. 1 of CFD No. 2006-1. as identified on the boundary map for CFD No. 2006-1. "CFD No. 2006-1(IA No. l) Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 2006-1 (IA No. 1) and secured solely by the Special Tax for Facilities levy on property within the boundaries of CFD No. 2006-1 (IA No. 1) under the Act. "City" means the City of Lake Elsinore. "City Council" means the City Council of the City of Lake Elsinare, acting as the legislative body of CFD No. 2006-1 (IA No. 1). "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 Properry, 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 City of Lake Elsinore Community Facilities Disirict No. 2006-1 January 16, 2006 Improvement Area No. 1(Summerly) page Z or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax for Facilities is being levied. "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 Califomia Civil Code Section 1352 that creates individual lots for which building permits may be issued. "Fiscal Year" means the period starting July 1 and ending on the following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2006-1 (IA No. 1) Bonds aze 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 masimum Special TaY for Facilities, determined in accordance with Section C below, that can be levied in any Fiscal Yeaz on any Assessor's Parcel. "Non-Residential Property" means a11 Assessor's Parcels of Developed Properiy for which a building permit permitting the construction of one or more non-residential imits or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2006-1 (IA No. l) Bonds which aze deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Year, any property within the boundaries of CFD No. 2006-1 (IA No. 1) that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year. "Proportionately" means for Developed Property that the ratio ofthe actual Special Tas for Facilities levy to the Assigned Special Tax for Facilities is equal for all Assessor's Pazcels of Developed Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax for Facilities levy per Acre to the Masimum Special Tax far 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 Properry 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 No. 1) 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 Ciry of Lake Elsinore Commrmity Facilities District No. 2006-I January 16, 2006 lmprovement Area No. 1(Summerly) Page 3 local government or other public agency as of January 1 of the previous Fiscal Year, provided that any properiy leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be t~ed and classified according to its use; or (ii) any property within the boundaries of CFD No. 2006-1 (IA No. 1) that was encumbered, as of January 1 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 No. 1). "Special Tax" means any of the special taxes authorized to be levied by CFD No. 2006-1 (IA No. 1) pursuant to the Act. "Special Tax for Facilities" means the special tax to be levied in each Fiscal Yeaz on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, TaYable Public Properiy, and Undeveloped Property to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for CFD No. 2006-1 (IA No. 1) 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 No. 1) Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2006-1 (IA No. 1) Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay a proportionate share of Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax for Facilities delinquencies based on the delinquency rate for the Special Tax for Facilities levy in the previous Fiscal Year; (vi) pay directly far acquisition or conshuction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tas for Facilities levy on 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 No. 1) which are not exempt from the Special Tax for Facilities pursuant to law ar Section E below. City of Lake Elsinore Communiry Facilities District No. 2006-7 January 16, 2006 Improvement Area No. 1(Summerly) pag¢ q "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that aze not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Pazcels of Public Properiy that are not exempt pursuant to Section E below. "Trustee" means the trustee or fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Property, or T~able Public Properry. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2006-1 (IA No. 1) shall be classified as Developed Properiy, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Properiy, 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 7 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Properiy shall be assigned to Land Use Class 8. With respect to Residential Property, the Residential Floor Area shall be determined from the most recent building permit issued prior to the issuance of a Certificate of Occupancy for such Assessor's Parcel. C. MAXIMUM SPECIAL TAX FOR FACILITIES Prior to the issuance of CFD No. 2006-1 (IA No. 1) Bonds, the Assigned Special Tax for Facilities on Developed Properiy (set forth in Table 1), and the Backup Speciai Tax for Facilities attributable to a Final Subdivision, may be reduced in accordance with, and subject to the conditions set forth in this paragraph. If it is reasonably determined by the CFD Administrator that the overlapping debt burden (as defined in the Statement of Goals and Policies for the Use of the Mello-Roos Community Facilities Act of 1982 adopted by the City Council, the "Goals and Policies") calculated pursuant to the Goals and Policies based upon the Assigned Special Tax for Facilities on Developed Property exceeds the City's maximum level objective set forth in such document, the Assigned Special Tas for Facilities on Developed Properiy, and the Backup Special Tax for Facilities attributable to a Final Subdivision, may be reduced to the amount necessary to satisfy the City's objective with respect to the maacimum overlapping debt burden level with the written consent of the CFD Administrator. The reductions permitted pursuant to this paragraph shall be reflected in an amended Notice of Special Tax Lien which the City shall cause to be recorded by executing a certificate in substantially the form attached hereto as Exhibit "A". Develoned Propertv (a) Maximum Special Tax for Facilities Ciry of Lake Elsinore Community Faci[ities District No. 2006-1 January 16, 2006 lmprovement Area No. 1(Summerly) page g The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Developed Properiy shall be the greater of (i) the amount derived by application of the Assigned Special Tax for Facilities or (ii) the amount derived by application of the Backup Special Tax for Facilities. (b) Assigned Special Tax for Facilities The Fiscal Year 2006-2007 Assigned Special Tax for Facilities for each Land Use Class is shown below in Table 1. TABLE 1 Assigned Special Tax for Facilities for Developed Property Community Facilities District No. 2006-1 Fiscal Year 2006-2007 ; Land Use ` ~ ;w~' :` ` , . ~ = ~: ~ ~ ~`- ~ ~`~'~ '' ~~ °' 3 ~~'~' ~' ti~l ~ ;` ~` ~e~de '~'i ~~ Assign d ecxal~'~a~c x h ,Fh , ~ ~ ~ ~ 3 E~ e CTass" Descript an' ~loox i~e ~ ,~ "for F ~lities~ ~ ~r } ;~,~,r ~ _ a a;a ;~,i~~ a ~ ~ ~ 1 Residential Property More than 3,649 sq. ft. $3,112 per unit 2 Residential Properry 3,350 - 3,649 sq. ft. $2,871 per unit 3 Residential Properry 3,050 - 3,349 sq. ft. $2,723 per unit 4 Residential Property 2,750 - 3,049 sq. ft. $2,588 per unit 5 Residential Property 2,450 - 2,749 sq. ft. $2,373 per unit 6 Residential Properry 2,150 - 2,449 sq. ft. $2,321 per unit 7 Residential Property Less than 2,150 sq. ft. $2,235 per unit 8 Non-Residential Property NA $16,513 per Acre Ciry of Lake Elsinore Community Facilities District No. 2006-7 January 16, 2006 Improvement Area No. I(Summer[y) Page 6 (c) Backup Special Tax for Facilities The Fiscal Yeaz 2006-2007 Backup Special Taa~ for Facilities attributable to a Final Subdivision will equal $18,348, multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Properiy Owner Association Properry and Taxable Public Property, therein. The Backup Special Tax for Facilities for each Assessor's Parcel of Residential Properiy shall be computed by dividing the Backup Special Tax for Facilities attributable to the applicable Final Subdivision by the number ofAssessor's Parcels far 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 ofNon-Residential Properry therein shall equal $18,348, 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 Properry, then the Backup Special Tax for Facilities far each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Pazcels of property for which building permits for non-residential construction may be issued. Noh~ithstanding 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 Properiy 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 Pazcel of Developed Properry that is not a part of the lot line adjustment or similar insh~ument for such Final Subdivision shall not be recalculated. 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 1 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. City of Lake EGsinore Coinmuniry Facilities District No. 2006-I January 16, 2006 Improvement Area No. 1(Summerly) Pqge 7 3. The result of paragraph 2 above shall be the Backup Special Taac for Facilities per Acre which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified portion of the Final Subdivision area for all remaining Fiscal Years in which the Special Tax for Facilities may be levied. (d) Release of Obligation to Pay and Disclose Backup Special Tas All Assessor's Parcels within CFD No. 2006-1 (IA No. 1) will be relieved simultaneously and permanently from the obligation to pay and disclose the backup Special Tan if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special tanes that may be levied against all Assessor's Parcels of Developed Property results in 110% debt service coverage (i.e., the Assigned Speciai Taxes that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2006-1 (IA No. 1) 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 2006-2007 Assigned Special Tas for Facilities, identified in Table 1 above, and Backup Special TaY for Facilities shall increase thereafter, commencing on July 1, 2007 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. (fl Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Masimum 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 properiy shall bc final. 2. Taxable Propertv Owner Association Property, Taxable Public Property, and Undeveloped Propertv The Fiscal Year 2006-2007 Maximum Special Tas for Facilities for Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall be $18,348 per Acre and shall increase thereafter, commencing on July 1, 2007 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the M~imum Special Taac for Facilities in effect for the previous Fiscal Year. City of Lake Elsinore Community Faci[ities Distriet No. 2006-1 January I6, 2006 Improvement Area No. 1(Summerly) Page 8 D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the City Council shall determine the Special Tax Requirement for Facilities and levy the Special Ta~c for Facilities until the amount of Special Tax for Facilities levy equals the Special Tas Requirement for Facilities. The Special Tax for Facilities sha11 be levied each Fiscal Year as follows: First: The Special Tax for Facilities shall be levied on each Assessar's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Special Tax for Facilities; Second: If additional monies are needed to satisfy the Special TaY Requirement for Facilities afrer the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Special Tas for Facilities on each Assessor's Pazcel of Developed Property whose Maximtun Special Tax for Facilities is determined through the application of the Backup Special Tax for Facilities shall be increased in equal percentages from the Assigned Special Tax for Facilities up to the Maximum Special Tax for Facilities for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessar's Parcel of Taxable Property Owner Association Property and Taxable Public Properiy at up to 100% of the Maximum Special Tax far Facilities for Tasable Properry Owner Association Properiy or Taxable Public Properiy. Notwithstanding the above, the City Council may, in any Fiscal Yeaz, 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 far Facilities; (ii) all authorized CFD No. 2006-1 (IA No. 1) Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2006-1 (IA No. 1) Bonds (except refunding bonds) to be supported by the Special Tax for Facilities; and (iii) all Authorized Facilities have been constructed and/or acquired. Fmrther notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Parcel of Residential Properiy for which a Certificate of Occupancy has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2006-1 (IA No. 1). City of Lake Elsinore Community Facili[ies District No. 2006-1 January 16, 2006 Improvement Area No. 1(Summerly) Page 9 E. EXEMPTIONS No Special Tax for Facilities shall be levied on up to 25.1 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 (IA No. 1). Tax-exempt status wiil 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 Tas 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 Masimum 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 No. l) may directly bill the Special Tax for Facilities, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "BuildouY' means, for CFD No. 2006-1 (IA No. 1), that all expected building permits have been issued. "CFD Public Facilities" means either $18,635,000 in 2006 dollars, which shall increase by the Construction Inflation Index on July 1, 2007, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No. 2006-1 (IA No. 1) under the authorized bonding program for CFD No. 2006-1 (IA No. 1), 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 No. 1) 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. City of Lake Elsinore Communiry Fncilities District No. 2006-I January 16, 2006 Improvement Area No. 1(Summerly) Page 10 "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire ar consriuct CFD Public 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. l. Prepayment in Full Only an Assessar'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 Parce] 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 particulaz Assessor's Pazcel only if there are no delinquent Special Taxes with respect to such Assessar's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special TaY 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 No. 1) Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax for Facilities Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Caoitalized Interest Credit Total: equals Special T~ for Facilities Prepayment Amount As of the proposed date of prepayment, the Special Tax for Facilities Prepayment Amount shall be calculated as follows: Paraeraph No.: 1. Confirxn that no Special Tas delinquencies apply to such Assessor's Parcel. Ciry of Lake E[sinore Communiry Facilities District No. 2006-1 January 16, 2006 lmprovement Area No. 1(Summerly) Page 1] For Assessor's Parcels of Developed Property, compute the Assigned Special Ta~c 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 Taac for Facilities and Backup Special Tas 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 Parcei. 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 No. 1) based on the Developed Property Special TaY for Facilities which could be levied in the current Fiscal Year on all expected development through Buiidout of CFD No. 2006-1 (IA No. 1), 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 No. 1), 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. Multiply the lazger quotient computed pwsuant to pazagraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Puture Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the f rst bond interest and/or principal payment date following the current Fiscal Year untii the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax for Facilities Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 lmprovement Area No. 1(Summerly) pag¢ ]2 11. Add the amounts computed pursuant to pazagraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance AmounP'). 12. The administrative fees and expenses of CFD No. 2006-1(IA No. 1) are as calculated by the CFD Administrator and inciude the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2006-1 (IA No. 1) 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 vvith 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, ll 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 No. 1) Bonds or make debt service payments. The amount computed pursuant to pazagraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2006-1 (IA No. 1). The Special TaY for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-1 (IA No. 1) 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 No. l) Bonds ar to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tas for Facilities levy as determined under paragraph 9(above), the CFD Administrator shall remove the current City of Lake Elsinore Community Fnci[ities District No. 2006-1 Jaxuary 16, 2006 Improvement Aren No. I(Summerly) Page I3 Fiscal Year's Special Tax for Facilities levy for such Assessor's Parcel from the County tas 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 T~ for Facilities and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax for Facilities shall cease. Notwithstanding the foregoing, no Special Tax for Facilities prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax for Facilities that may be levied on Tasable Property within CFD No. 2006-1 (IA No. 1) (after excluding 25.1 Acres of Properiy Owner Association Property and/ar Public Properry in CFD No. 2006-1 (IA No. 1) 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 far which a building permit has been issued may be partially prepaid. The amount of the prepayment shail be calculated as in Section G.l; 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 = the partial prepayment. PE = the Special Tax for Facilities Prepayment Amount calculated according to Section G.1. F= the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special TaY for Facilities. A= the Administrative Fees and Expenses calculated according 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 No. l) that there has been a partial prepayment of the Special Tax for Facilities and that a portion ofthe Special TaY 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. City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 1(Summerly) Page 14 H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied for a period not to exceed forty years commencing with Fiscal Year 2006-2007, provided however that the Special Tax for Facilities will cease to be levied in an eazlier Fiscal Yeaz if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-1 (IA No. 1) Bonds have been paid; (ii) all Authorized Facilities have been acquired and all reimbursements to the developer have been paid; and (iii) all other obligations of CFD No. 2006-1 (IA No. 1) have been satisfied. I. SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section I: "Developed Multifamily Unit" means a residential dwelling unit within a building in which each of the individual dwelling units has or shall have at least one common wall with another dwelling unit and a building permit has been issued by the City for such dwelling unit on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. "Developed Single Family Unit" means a residential dweiling 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 Tas for Services is being levied. "Maximum Special Tax for Services" means the masimum Special Tax far Services that can be levied by CFD No. 2006-1 (IA No. 1) in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for CFD No. 2006-1 (IA No. 1) for any Fiscal Yearto 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 Fiscai 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 No. 1) pursuant to the Act to fund the Special Tax Requirement for Services. "Special Tax Requirement for Services" means the amount determined in any Fiscal Yeaz for CFD No. 2006-1 (IA No. 1) equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) pay a proportionate share of Administrative Expenses, and (iii) anticipated Special Tax for Services delinquencies based City of Lake Elsinore Commrmity Facilities District No. 2006-1 January I6, 2006 lmprovement Area No. 1(Summerly) Page 15 on the delinquency rate for the Special Tax for Services levy in CFD No. 2006-1 (IA No. 1) for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing with Fiscal Year 2006-2007 and for each subsequent Fiscal Year, the City Council shall levy the Special Tax for Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Parcels of Non-Residential Properiy, up to the applicable Masimum Special Tax for Services to fund the Special Tax Requirement for Services. The Maximum Special Tax for Services for Fiscal Yeaz 2006-2007 shall be $246.84 per Developed Single Family Unit, $123.42 per Developed Multifamily Unit, and $555.90 per Acre for each Assessor's Parcel of Non-Residential Property. On each July 1, commencing July 1, 2007, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Yeaz. 2. Duration of the Special Tax for Services The Special Tax for Services shall be levied in perpetuity to fund the Special Tax Requirement for Services, unless no longer required as determined at the sole discretion of the City Council. 3. Collection of the Special Tax for Services The Special Tax for Services shall be collected in the same manner and at the same time as ordinary ad valorem properiy tases, provided, however, that CFD No. 2006-1 (IA No. l) may collect the Special Tas for Services at a different time or in a different manner if necessary to meet its funding requirements. J. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in enor may submit a written appeal to CFD No. 2006-1 (IA No. 1). The CFD Administrator shali 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 ofthe Special Tax and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. K: ICLIENTS2VohnLaingl SurnmerlyLLlelIoVLL/AVA1 Fina1RMA.dac City of Lake Elsinore Community Facilrties District No. 2006-1 January 16, 2006 /mprovement Area No. 1(Summerly) page I6 EXHIBIT A CERTIFICATE TO AMEND SPECIAL TAXFOR FACILITIES CITY OF LAKE ELSINORE AND CFD No. 2006-1 QA Na 11 CERTIFICATE Pursuant to Section C of the Rate and Method of Apportionment, the City of Lake Elsinore and City of Lake Elsinore Community Facilities District No. 2006-1 ("CFD No. 2006-1 (IA No. 1)") hereby agree to a reduction in the Assigned Special Taac for Facilities for Developed Properry, and the Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-1 (IANo. 1): (a) The information in Table 1 relating to the Assigned Special Tax for Facilities for Developed Property within CFD No. 2006-1 (IA No. 1) shall be modified as follows: Ji(~nl{-~ ~f ,.~:' ~+'r~ ~ 'F 1'~: i.~T ~ ~ #'~ ;. ~ ~il~~. ~~f~~ ~ol~e' P ~U . N " CL i Y K C~ t ~ " ~ ~ ~3~'. y~„r b n~Ix~+.'+ ~~~ ~~~`~P~y~i ~ [ ~I ~ ~ ' i ~~ ~iy i ~ ~ ~'~ _: aSH : ~ L- __ ~3Cy~ir I071. ~ ' ._.,.._,_ ...,_...>-,_..,,~..,. @4~( 3 .. VOll VL4." P^1S .a,~, '*....... ~_ ...__n.__ ~L QL AGtiSSIULCu}~, ..,....._: .._ .._:.:. .....,... 1 Residential Property More than 3,649 sq. ft. $ per unit 2 Residential Properry 3,350 - 3,649 sq. ft. $ per unit 3 Residential Property 3,050 - 3,349 sq. ft. $_ per unit 4 Residential Properry 2,750 - 3,049 sq. ft. $ per unit 5 Residential Property 2,450 - 2,749 sq. ft. $ per unit 6 Residential Property 2,150 - 2,449 sq. ft. $_ per unit 7 Residential Property Less than 2,150 sq. ft. $ per unit 8 Non-Residential Property NA $ per Acre (b) The Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-1 (IA No. 1), as stated in Section C.1.(c), shall be reduced from $18,348 per Acre to $ per Acre. (c) The Maximum Special Tas for Facilities for TaYable Properry Owner Association Properry, Taxable Public Property, and Undeveloped Property within CFD No. 2006-1 (IA No. 1), as stated in Section C.2, shall be reduced from $18,348 per Acre to $ per Acre. 2. The Special Tax for Facilities may only be modified prior to the first issuance of CFD No. 2006- 1 (IA No. 1) Bonds. 3. Upon execution of the Certificate by the City of Lake Elsinare and landowner(s), the City shall cause an amended notice of Special Tax lien for CFD No. 2006-1 (IA No. 1) to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledges, on behalf of the City ofLake Elsinore and CFD No. 2006-1 (IA No. 1), receipt of this Certificate and modification of the Rate and Method of Apportionment as set forth in this Certificate. CITY OF LAKE ELSINORE By: CFD Administrator Landowner(s) By: Date: Date: FINAL RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2006-1 IMPROVEMENT AREA No. 2 (SUMMERLY) A Special Tax shall be levied on all Assessor's Parcels in City of Lake $lsinore Community Facilities District No. 2006-1 (Summerly) ("CFD No. 2006-1 (IA No. 2)") and collected each Fiscal Year commencing in Fiscal Year 2006-2007, in an amount detemuned through the application of this Rate and Method of Apportionment as described below. All of the real property in CFD No. 2006-1 (IA No. 2), unless exempted by law or by the provisions hereof, shall be ta~ced for the purposes, to the extent and in the manner herein provided. A. 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 azea is not shown on an Assessor's Pazcei Map, the land area shown on the applicable final map, parcel map, condominium pian, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 of the California Government Code. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-1 (IA No. 2): the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Specia] 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 No. 2) or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-1 (IA No. 2) or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-1 (IA No. 2) or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2006-1 (IA No. 2) 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 No. 2) for any other administrative purposes of CFD No. 2006-1 (IA No. 2), including attorney's fees and other costs related to commencing and pursuing to completion any Foreclosure of delinquent Special Taxes. City of Lake Elsi~:me Community Fncilities D'utrict No. 2006-1 January 16,1006 lmprovement Area No. 2(Summerly) page I "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. "Assigned Special Tax for Facilities" means the Special Tax for Facilities for each Land Use Class of Developed Property, as determined in accordance with Section C1.(b) below. "Authorized Facilities" means those authorized improvements, as listed in an e~ibit to the Resolution of Formation. "Backup Special Tax for Facilities" means the Special Tax for Facilities applicable to each Assessor's Pazcel of Developed Property, as determined in accordance with Section C.1.(c) below. "Certificate of Occupancy" means a certificate issued by the City that authorizes the actuai occupancy of a dwelling unit for habitation by one or more residents. "CFD Administrator" means an official of the CiTy, or designee thereof, responsible for determining the Special Tax Requirement for Facilities, the Special Tax Requirement far Services as determined in accordance with Section I below, and providing for the levy and collection of the Special Taxes. "CFD No. 2006-1" means City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly). "CFD No. 2006-1 (IA No. 2)" means Improvement Area No. 2 of CFD No. 2006-1. as identified on the boundary map for CFD No. 2006-1. "CFD No. 2006-1(IA No. 2) Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 2006-1 (IA No. 2) and secured solely by the Special Tax for Facilities levy on property within the boundaries of CFD No. 2006-1 (IA No. 2) under the Act. "City" means the City of Lake Elsinore. "City Council" means the City Council of the City of Lake Elsinore, acting as the legislative body of CFD No. 2006-1 (IA No. 2). "County" means the County of Riverside. "Developed Property" means, with respect to the Special Tax for Facilities, for each Fiscal Yeaz, all Tasable Property, exclusive of Taxable Public Properry 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 far new construction was issued on City of Lake E[sinore Community Facilities District No. 2006-I January 16, 2006 Improvement Area No. 2(Summer[y) page 2 or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax for Facilities is being levied. "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 seg.) that creates individual lots for which building permits may be issued, or (ii) for condominiums, a finai 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 starting July 1 and ending on the following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2006-1 (IA No. 2) Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any of the classes listed in Table 1 below. "Maximum Special Tax for Facilities" means the maximum Special Taac 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 a11 Assessor's Parcels ofDeveloped Property for which a building permit permitting the construction of one or more non-residential imits or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2006-1 (IA No. 2) Bonds which are deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Year, any property within the boundaries of CFD No. 2006-1 (IA No. 2) that was owned by a property owner association, inciuding 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 Tas far 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 TaY 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 properiy within the boundazies of CFD No. 2006-1 (IA No. 2) 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 City of Lake Elsinore Commr~nity Facilities Drsirict No. 2006-I January 16, 2006 Improvement Area No. 2(Summer(y) page 3 local government or other public agency as of January 1 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 taYed and classified according to its use; or (ii) any properiy within the boundaries of CFD No. 2006-1 (IA No. 2) that was encumbered, as of January 1 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, gazage, 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 Properiy 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 No. 2). "Special Tax" means any of the special taxes authorized to be levied by CFD No. 2006-1 (IA No. 2) pursuant to the Act. "Special Tax for Facilities" means the special tax to be levied in each Fiscal Year on each Assessor's Pazcei of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for CFD No. 2006-1 (IA No. 2) to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2006- 1(IA No. 2) Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2006-1 (IA No. 2) Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay a proportionate share of Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax for Facilities delinquencies based on the delinquency rate for the Special Tax for Facilities levy in the previous Fiscal Year; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax for Facilities levy on Undeveloped Property; less (vii) a credit for funds available to reduce the annual Specia] 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 No. 2) which are not exempt from the Special Tas for Facilities pursuant to law or Section E below. City of Lake E/sinore Community Faci[ities District No. 2006-1 January 16, 2006 Improvement Area No. 2(Summerly) page q "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that aze not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Parcels of Public Properry that aze not exempt pursuant to Section E below. "Trustee" means the trustee ar fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, a11 Taxable Properiy not classified as Developed Property, Taxable Property Owner Association Property, or Taxable Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2006-1 (IANo. 2) shall be classified as Developed Properiy, Taxable Public Properiy, 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 7 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 8. With respect to Residential Property, the Residential Floor Area shall be determined from the most recent building permit issued prior to the issuance of a Certificate of Occupancy for such Assessor's Parcel. C. MAXIMUM SPECIAL TAX FOR FACILITIES Prior to the issuance of CFD No. 2006-1 (IA No. 2) Bonds, the Assigned Special TaY for Facilities on Developed Property (set forth in Table 1), and the Backup Special Tax for Facilities attributable to a Finai Subdivision, may be reduced in accordance with, and subject to the conditions set forth in this paragraph. If it is reasonably determined by the CFD Administrator that the overlapping debt burden (as defined in the Statement of Goals and Policies for the Use of the Mello-Roos Community Facilities Act of 1982 adopted by the City Council, the "Goals and Policies") calculated pursuant to the Goa1s and Policies based upon the Assigned Special Tax for Facilities on Developed Property exceeds the City's masimum level objective set forth in such document, the Assigned Special Tas for Facilities on Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision, may be reduced to the amount necessary to satisfy the City's objective with respect to the maximum overlapping debt burden levei with the written consent of the CFD Administrator. The reductions permitted pursuant to this paragraph shall be reflected in an amended Notice of Special Tax Lien which the City shall cause to be recorded by executing a certificate in substantially the form attached hereto as Exhibit "A". 1. Develoned Pronertv (a) Maximum Special Tax for Facilities City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 2(Summerly) Page 5 The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax for Facilities or (ii) the amount derived by application of the Backup Special Tax for Facilities. (b) Assigned Special Tax for Facilities The Fiscal Year 2006-2007 Assigned Special Tax for Facilities for each Land Use Class is shown below in Table 1. TABLE 1 Assigned Special Tax for Facilities for Developed Property Community Facilities District No. 2006-1 Fiscal Year 2006-2007 ~ L e ,, ~_ , i~ f ~,s ` ~ ,`~~~~~ ~; ~ ~ ' ~r'~r ~ ~'~ ~ -: f h ~,es~tdei~ s' -~ "~ ~ 3as~~~~ ~ r El d S l T 5 ~ "~ ~ ~~~ ~5 '~ ~`~~ ~` ~ ~ `~ sstgne pecta azF ' C a s ~y ' F ~Desc~p~'ioh k'loor t~ ta~ ~ ~ ~ ~~;~`ac~~zf~es ' , ~ .lk,:_-: t ¢'.1, ..s_?r._`F~~..M- aXds..,..., +, .f?:.. ~ , .._;-.: e . ~iaFi: ..vh.t~~~`db3~ ~_4~_... ~ .,......m ....,..,..' 1 Residential Property More than 3,649 sq. ft. $3,112 per unit 2 Residential Property 3,350 - 3,649 sq. ft. $2,871 per unit 3 Residential Property 3,050 - 3,349 sq. ft. $2,723 per unit 4 Residential Property 2,750 - 3,049 sq. ft. $2,588 per unit 5 Residential Property 2,450 - 2,749 sq. ft. $2,373 per unit 6 Residential Property 2,150 - 2,449 sq. ft. $2,321 per unit 7 Residential Property Less than 2,150 sq. ft. $2,235 per unit 8 Non-Residential Property NA $15,781 per Acre City of Lake E[sinore Community Fncilities Dislrict No. 2006-1 January 16, 2006 Improvement Area No. 2(Summer[y) Page 6 (c) Backup Special Tax for Facilities The Fiscal Year 2006-2007 Backup Special Tax for Facilities attributable to a Final Subdivision will equal $17,533, multiplied by the Acreage of all TaYable Properry, 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 Fina1 Subdivision by the number ofAssessor'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 ofNon-Residential Property therein shall equal $17,533, multiplied by the Acreage of such Assessor's Pazcel. If a Final Subdivision includes Assessor's Pazcels of Taxable Properry for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Properry and Taxable Public Properry, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential Properiy 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) desciibed 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 Properiy 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 Parce] 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 Properry that is not a part of the lot line adjustment or similar instrument for such Final Subdivision shall not be recaiculated. 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 1 above shall be divided by the Acreage of Taxable Properry which is ultimately expected to exist in such changed or modified portion of the Final Subdivision, area, as reasonably determined by the CFD Administrator. City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 2(Summerly) page 7 3. The result of paragraph 2 above shall be the Backup Special Tax for Facilities per Acre which shall be applicable to Assessor's Pazcels of Developed Property in such changed or modified portion of the Final Subdivision azea 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 No. 2) will be relieved simultaneously and permanently from the obligation to pay and disclose the backup Special Tas if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special taaces that may be levied against all Assessor's Parcels of Developed Property results in 110% debt service coverage (i.e., the Assigned Special Taxes that may be levied against ali Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2006-1 (IA No. 2) is at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times maYimum 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 2006-2007 Assigned Special Tax for Facilities, identified in Table 1 above, and Backup Special Tax for Facilities shall increase thereafter, commencing on July 1, 2007 and on July 1 of each Fiscal Year thereafter, by an amoimt equal to two percent (2%) of the amount in effect for the previous Fiscal Year. ( fl Multiple Land Use Classes In some instances an Assessor's Parcel ofDeveloped Properiy may contain more than one Land Use Class. The Ma~cimum Special Taac 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 properry shall be final. 2. Taxable Propertv Owner Association Propertv, Taxable Public Propertv, and Undeveloped Property The Fiscal Year 2006-2007 Maximum Special Taac far Facilities for Taxable Property Owner Association Property, Taacable Public Property, and Undeveloped Property shall be $17,533 per Acre and shall increase thereafrer, commencing on July 1, 2007 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 Yeaz. Ciry of Lake Elsinore Community Facilities District No. 2006-I January 16, 2006 Improvement Area No. 2(Summerly) Page 8 D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the City Council shall determine the Special Taac Requirement for Facilities and levy the Special Taac for Facilities until the amount of Special Tax far Facilities levy equals the Special Tax Requirement for Facilities. The Special Tax for Facilities shall be levied each Fiscal Year as follows: First: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Special Tax for Facilities; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Taac far Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maxunum Special Tax for Facilities for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Special Tax for Facilities on each Assessor's Parcel of Developed Property whose Maximum Special Tax for Facilities is determined through the application of the Backup Special Tax for Facilities shall be increased in equal percentages from the Assigned Special Tax for Facilities up to the Maximum Special Tax for Facilities for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Taxable Properry Owner Association Property and Taxable Public Property at up to 100% of the Maximum Special Tax for Facilities for T~able 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 Ta~c Requirement for Facilities; (ii) all authorized CFD No. 2006-1 (IA No. 2) Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2006-1 (IA No. 2) 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 Properiy for which a Certificate of Occupancy has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2006-1 (IA No. 2). Ciry of Lake Elsinore Community Facilities Dislrict No. 2006-I January 16, 2006 Improvement Area No. 2(Summerly) Page 9 E. EXEMPTIONS No Special Tax for Facilities shall be levied on up to 22.1 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 (IA No. 2). Tas-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 Pubiic Property, its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special TaY 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 t~es; provided, however, that CFD No. 2006-1(IA No. 2) may directly bill the Special Tax for Facilities, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES The follo~ving additional definitions apply to this Section G: "Buildout" means, for CFD No. 2006-1 (IA No. 2), that all expected building permits have been issued. "CFD Public Facilities" means either $17,030,000 in 2006 dollars, which shall increase by the Construction Inflation Index on July 1, 2007, and on each July 1 thereafter, ar such lower number as (i) shail be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No. 2006-1 (IA No. 2) under the authorized bonding program for CFD No. 2006-1 (IA No. 2), or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more CFD No. 2006-1 (IA No. 2) 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. City of Lake Elsinore Communiry Facilities District No. 2006-1 Janl~ary 16, 2006 Improvement Area No. 2(Summerly) Page 10 "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that aze expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currentiy available for expenditure to acquire or construct CFD Public 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 Fu(1 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 TaY for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particulaz Assessor's Pazcel only if there aze 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 No. 2) 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 suminarized below (capitalized terms as defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Cavitalized Interest Credit Total: equals Special T~ for Facilities Prepayment Amount As of the proposed date of prepayment, the Special Tax for Facilities Prepayment Amount shall be calculated as follows: Paraeraph No.: 1. Confirm that no Speciai Tax delinquencies apply to such Assessor's Parcel. City of Lake Elsinore Community Facilities District No. 2006-I January l6, 2006 lmprovement Area No. 2(Summerly) Page 1] 2. For Assessor's Parcels of Developed Properiy, compute the Assigned Special Tax for Facilities and Backup Special TaY for Facilities. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Assigned Special Taac 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 Pazcel. 3. (a) Divide the Assigned Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Assigned Special TaY for Facilities for the entire CFD No. 2006-1 (IA No. 2) 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 No. 2), 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 Taac for Facilities at Buildout for the entire CFD No. 2006-1 (IA No. 2), excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption AmounP'). 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. 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 AmounP'). 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 eazliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessor's Pazcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax for Facilities Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. City of Lnke Elsinore Communiry Facilities District No. 2006-I January 16, 2006 Improvement Area No. 2(Summerly) Page 12 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 No. 2) 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 No. 2) Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund CrediP') shall equal the lesser o£ (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 CrediP'). 15. The Special Tax for Facilities prepayment is equai 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 AmounP'). 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-i (IA No. 2) Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2006-1 (IA No. 2). The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-1 (IA No. 2) 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 No. 2) 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 pazagraph 9(above), the CFD Administrator shall remove the current Ciry of Lake Elsinore Community Fncilities District No. 2006-1 January 16, 2006 Improvement Aren No. 2(Summerly) Page 13 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 Pazcel to pay the Special Tax far Facilities shall cease. Notwithstanding the foregoing, no Special Tax for Facilities prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of M~imum Special Tax for Facilities that may be levied on Taxable Property within CFD No. 2006-1 (IA No. 2) (after excluding 22.1 Acres of Properry Owner Association Property and/or Public Properry in CFD No. 2006-1 (IA No. 2) 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 Parce] 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)xF]+A These terms have the following meaning: PP = the partial prepayment. PE = the Special Tax for Facilities Prepayment Amount calculated according to Section G.1. F= the percentage, expressed as a decimal, by which the owner of the Assessor's Pazcel is partially prepaying the Special Tax for Facilities. A= the Administrative Fees and Expenses calculated according to Section G1. The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administratar 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 No. 2) that there has been a partial prepayment of the Special Tax for Facilities and that a portion ofthe Special Tax for Facilities with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special T~ for Facilities, shall continue to be levied on such Assessor's Pazcel pursuant to Section D above. City of Lake Elsinore Con:meenity Fncilities District No. 2006-I January 16, 2006 Improvement Area No. 2(Summerly) Page 14 H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied for a period not to exceed forty years commencing with Fiscal Year 2006-2007, provided however that the Special T~ far 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 No. 2) Bonds have been paid; (ii) all Authorized Facilities have been acquired and all reimbursements to the developer have been paid; and (iii) all other obligations of CFD No. 2006-1 (IA No. 2) have been satisfied. L 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 far such dwelling unit on or prior to May 1 preceding the Fiscal Year in which the Special TaY 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 No. 2) in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for CFD No. 2006-1 (IA No. 2) 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 No. 2) 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 No. 2) equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) pay a proportionate shaze of Administrative Expenses, and (iii) anticipated Special Tax for Services delinquencies based City of Lake Elsinore Community Facilities District No. 2006-I Jnnuary 16, 2006 /mprovement Area No. 2(Summerly) Page IS on the delinquency rate for the Special Tax for Services lery in CFD No. 2006-1 (IA No. 2) for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing with Fiscal Year 2006-2007 and far each subsequent Fiscal Year, the City Council shall levy the Special Tax for Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Pazcels ofNon-Residential Properry, 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 Yeaz 2006-2007 shall be $246.84 per Developed Single Family Unit, $123.42 per Developed Multifamily Unit, and $555.90 per Acre for each Assessor's Parcel of Non-Residential Property. On each July l, commencing July 1, 2007, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. 2. Duration of the Special Tax for Services The Special Tax for Services shail be levied in perpetuity to fund the Special Tax Requirement for Services, unless no longer required as determined at the sole discretion of the City Council. 3. Collection of the Special Tax for Services The Special Tax for Services shall be collected in the same manner and at the same time as ordinary ad valorem properiy taxes, provided, however, that CFD No. 2006-1(IA No. 2) may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its funding requirements. J. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special TaY levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2006-1 (IA No. 2). The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Ta~c 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. K.~ ICLlENTS2VohnLaingLSummerlyUvlellolRMAVAI FinaIRMA.doc City ojLake Elsinore Community Facilities D'utrict No. 2006-I January 16, 2006 Improvement Area No. 2(Summerly) Page 16 EXHIBIT A CERTIFICATE TO AMEND SPECIAL TAXFOR FACILITIES CITY OF LAKE ELSINORE AND CFD No. 2006-1 QA No. 2) CERTIFICATE 1. Pursuant to Section C of the Rate and Method of Apportionment, the City of Lake Elsinore and City of Lake Elsinore Community Facilities District No. 2006-1 ("CFD No. 2006-1 (IA No. 2)") hereby agree to a reduction in the Assigned Special T~ for Facilities for Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-1 (IA No. 2): (a) The information in Table 1 relating to the Assigned Special Tax for Facilities for Developed Properry within CFD No. 2006-1 (IA No. 2) shall be modified as follows: :Lanc1 Use~: ! C1ass : 1 ; h , "~~ , ;~ ~ T :5 Y . ~ Description' y ,.. ~. _ Residential Property r ~~ ~~ s "~:: ~~ ~~~ :. .t Resid~nttal`~'loor Area ~ _~.~ ~. ~ _ Mare than 3,649 sq. fr. s ~ ~'S e ~1k~ A s~gne ~ cx . '~~~q~r~`aC~~~ties`~; _,._ . $ per unit 2 Residential Properry 3,350 - 3,649 sq. ft. $ per unit 3 Residential Properry 3,050 - 3,349 sq. ft. $_ per unit 4 Residential Property 2,750 - 3,049 sq. ft. $ per unit 5 Residential Property 2,450 - 2,749 sq. ft. $_ per unit 6 Residential Property 2,150 - 2,449 sq. ft. $ per unit 7 Residential Property Less than 2,150 sq. ft. $_ per unit 8 Non-Residential Property NA $ per Acre (b) The Backup Special Tax for Facilities attributable to a Final Subdivision witrun CFD No. 2006-1 (IA No. 2), as stated in Section C.1.(c), shall be reduced from $17,533 per Acre to $ per Acre. (c) The Masimum Special Tax for Facilities for Taxable Property Owner Association Property, Taxable Public Properiy, and Undeveloped Property within CFD No. 2006-1 (IA No. 2), as stated in Section C.2, shall be reduced from $17,533 per Acre to $ per Acre. 2. The Special Tax for Facilities may only be modified prior to the first issuance of CFD No. 2006- 1 (IA No. 2) Bonds. 3. Upon execution of the Certificate by the City of Lake Elsinore and landowner(s), the City shall cause an amended notice of Special Tax lien for CFD No. 2006-1 (IA No. 2) to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledges, on behalf ofthe City ofLake Elsinore and CFD No. 2006-1 (IA No. 2), receipt of this Certificate and modification of the Rate and Method of Apportionment as set forth in this Certificate. CITY OF LAKE ELSINORE By: CFD Administrator Landowner(s) By: Date: Date: FINAL RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2006-1 IMPROVEMENT AREA No. 3 (SUMMERLY) A Speciai Tax shall be levied on all Assessar's Parcels in City of Lake Elsinore Community Facilities District No. 2006-1(Summerly) ("CFD No. 2006-1 (IA No. 3)") and collected each Fiscal Year commencing in Fiscal Year 2006-2007, in an amount determined through the application ofthis Rate and Method of Apportionment as described below. All of the real property in CFD No. 2006-1 (IA No. 3), unless exempted by law or by the provisions hereof, shall be tased 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 azea shown on the applicable final map, pazcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 of the California Government Code. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-1 (IA No. 3): 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 No. 3) or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-1 (IA No. 3) or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-1 (IA No. 3) or obiigated 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 No. 3) or any designee thereof related to an appeal of the Special Tas; 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 No. 3) for any other administrative purposes of CFD No. 2006-1 (IA No. 3), including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special TaYes. City of Lake E[sinore Communiry Faci[ities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) page ~ "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. "Assigned Special Tax for Facilities" means the Special Tax for Facilities for each Land Use Class of Developed Properiy, as determined in accordance with Section C.1.(b) below. "Authorized Facilities" means those authorized improvements, as listed in an exhibit to the Resolution of Formation. "Backup Special Tax for Facilities" means the Special Ta~c for Facilities applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.1.(c) below. "Certificate of Occupancy" means a certificate issued by the City that authorizes the actual occupancy of a dwelling unit for habitation by one or more residents. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities, the Special Tax Requirement for Services as determined in accordance with Section I below, and providing for the levy and collection of the Special Taxes. "CFD No. 2006-1" means City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly). "CFD No. 2006-1 (IA No. 3)" means Improvement Area No. 3 of CFD No. 2006-1. as identified on the boundary map for CFD No. 2006-1. "CFD No. 2006-1(IA No. 3) Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 2006-1 (IA No. 3) and secured solely by the Special Taac for Facilities levy on property within the boundaries of CFD No. 2006-1 (IA No. 3) under the Act. "City" means the City of Lake Elsinore. "City Council" means the City Council ofthe City ofLake Elsinore, acting as the legislative body of CFD No. 2006-1 (IA No. 3). "County" means the County of Riverside. "Developed Property" means, with respect to the Special Tax for Facilities, for each Fiscal Year, all T~abie Property, exclusive of Taacable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January I of the prior Fiscal Year and a building permit for new construction was issued on Ciry of Lake Elsinore Cammunity Facilities Disirict No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) Page 2 or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax for Facilities is being levied. "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 starting July 1 and ending on the foilowing June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2006-1 (IA No. 3) Bonds aze issued, as modified, amended and/or suppiemented 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 TaY 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 No. 3) Bonds which are deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Year, any property within the boundaries of CFD No. 2006-1 (IA No. 3) that was owned by a properiy owner association, inciuding any master or sub-association, as of January 1 ofthe prior Fiscal Yeaz. "Proportionately" means for Developed Property that the ratio ofthe 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 TaY for Facilities levy per Acre to the Maximum Special Tax for Facilities per Acre is equai for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similazly 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 No. 3) owned by, inevocably 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 Ci[y of Lake E[sinore Communiry Faci[ities Dist~ict No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) page j local government or other public agency as of January 1 of the previous Fiscal Yeaz, provided that any property leased by a public agency to a private entity and subject to taxation under Section 533401 ofthe Act shall be t~ed and classified according to its use; or (ii) any property within the boundaries of CFD No. 2006-1 (IA No. 3) that was encumbered, as of January 1 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 No. 3). "Special Tax" means any of the special taxes authorized to be levied by CFD No. 2006-1 (IA No. 3) 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, Tasable Property Owner Association Property, Taxable Public Property, and Undeveloped Properiy to fund the Special Tas Requirement for Facilities. "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for CFD No. 2006-1 (IA No. 3) 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 No. 3) Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2006-1 (IA No. 3) Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay a proportionate share of Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for ali Outstanding Bonds; (v) pay for reasonably anticipated Special Tax for Facilities delinquencies based on the delinquency rate for the Special Tax for Facilities levy in the previous Fiscal Year; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tazc for Facilities levy on Undeveloped Property; less (vii) a credit far funds available to reduce the annual Special Tax for Facilities levy, as determined by the CFD Administratar 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 No. 3) which are not exempt from the Special Tax for Facilities pursuant to law or Section E below. City af Lake Elsinare Comm:~nity Facilities District No. 2006-1 January 76, 2006 Impravement Area No. 3(Summerly) page q "Taxable Property Owner Association Property" means all Assessor's Parcels of Properiy Owner Association Property that are not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Parcels of Pubiic Property that are not exempt pursuant to Section E below. "Trustee" means the trustee or fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Property, or TaYable Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Properry within CFD No. 2006-1 (IA No. 3) shall be classified as Developed Properiy, Taxable Public Property, Taxable Properiy Owner Association Properiy, 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 Properiy shall be assigned to Land Use Classes 1 through 7 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 8. With respect to Residential Property, the Residential Floor Area shall be determined from the most recent building permit issued prior to the issuance of a Certificate of Occupancy for such Assessor's Parcel. C. MAXIMUM SPECIAL TAX FOR FACILITIES Prior to the issuance of CFD No. 2006-1 (IA No. 3) Bonds, the Assigned Special Taac for Facilities on Developed Properry (set forth in Table 1), and the Backup Special Tax for Facilities attributable to a Final Subdivision, may be reduced in accardance with, and subject to the conditions set forth in this pazagraph. If it is reasonably determined by the CFD Administrator that the overlapping debt burden (as defined in the Statement of Goals and Policies far the Use of the Meilo-Roos Community Facilities Act of 1982 adopted by the City Council, the "Goals and Policies") calculated pursuant to the Goals and Policies based upon the Assigned Special Tax for Facilities on Developed Property exceeds the City's maacimum level objective set forth in such document, the Assigned Special TaY for Facilities on Developed Property, and the Backup Special Taac for Facilities attributable to a Final Subdivision, may be reduced to the amount necessary to satisfy the City's objective with respect to the maximum overlapping debt burden level with the written consent of the CFD Administrator. The reductions permitted pursuant to this paragraph shail be reflected in an amended Notice of Special Tax Lien which the City shall cause to be recorded by executing a certificate in substantially the form attached hereto as Exhibit "A". Developed Pronertv (a) Maximum Special Tax for Facilities City of Lake Elsinore Communiry Faci[ities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) page 5 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 Tas for Facilities. (b) Assigned Special Tas for Facilities The Fiscal Year 2006-2007 Assigned Special Tax for Facilities for each Land Use Class is shown below in Table 1. TABLE 1 Assigned Special Tax for Facilities for Developed Property Community Facilities District No. 2006-1 Fiscal Year 2006-2007 i ~ : q- i~ f-: _y4 ~ ' ~ ` ~~.'~'+~, L',~ L S. a-+,t ST~ -' ~2 ~ 'l l s ~ t r.`~~+'"~ v -~-s~~ y~ a a~. ~ ~ Land`I7se z ~ ' "~, ~ ~ , , e, ~e ~~ ta ~ ,, ~ ~~ ~ ~; ,~- , ~-~ ~~„ ~ ~ ~~,ssts 8d ~pa~a QT aX ~~ ~~ Glass ~ ~ rDe5GYi 1~(~7j" ~~ ~ ~ ' ~ ~~loor~,A~ea~ ~ ~ ~'~ ~£or T`aclhYies . ,-..... . : . k.~se. .. :a .v. "_._... 4 , ~F.'r _va. ~ ..5. , 4n _:. ..5~. ..;'E~- okc S b^..u.'!mfU.... _o_.~ P::F. .S . ?.'¢a4k" 9, ...... 1 Residential Property More than 3,649 sq. ft. $3,112 per unit Z Residential Property 3,350 - 3,649 sq. ft. $2,871 per unit 3 Residential Property 3,050 - 3,349 sq. ft. $2,723 per unit 4 Residential Property 2,750 - 3,049 sq. ft. $2,588 per unit 5 Residential Property 2,450 - 2,749 sq. ft. $2,373 per unit 6 Residential Property 2,150 - 2,449 sq. ft. $2,321 per unit ~ Residential Property Less than 2,150 sq. ft. $2,235 per unit 8 Non-Residential Property NA $16,848 per Acre City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) page 6 (c) Backup Special T~ for Facilities The Fiscal Year 2006-2007 Backup Special Tax for Facilities attributable to a Final Subdivision will equal $18,718, multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Properry and Taxable Public Property, therein. The Backup Special Tax for Facilities for each Assessor's Parcel of Residential Properiy shall be computed by dividing the Backup Special Tas 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 far each Assessor's Parcel ofNon-Residential Properiy therein shall equal $18,718, 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 Tasable Public Property, then the Backup Speciai 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 instruxnent, and only if the CFD Administrator determines that such change or modification resuits in a decrease in the number of Assessor's Parcels of Taxable Properiy for which building permits for residential construction have or may be issued within such Final Subdivision, then the Backup Special Tas for Facilities for each Assessor's Parcel of Developed Properiy 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. Determine the total Backup Special Tax far 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 1 above shali be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified portion of the Finai Subdivision area, as reasonabiy determined by the CFD Administrator. City of Lake Elsinore Community Fecilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) pRge 7 3. The result of paragraph 2 above shall be the Backup Special Tax for Facilities per Acre which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified portion of the Final Subdivision area for all remaining Fiscal Years in which the Special Taac 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 No. 3) 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 taYes that may be levied against all Assessor's Parcels of Developed Property results in 110% debt service coverage (i.e., the Assigned Special Taxes that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2006-1 (IA No. 3) 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 Tas for Facilities The Fiscal Year 2006-2007 Assigned Special Tax for Facilities, identified in Table 1 above, and Backup Special Tas for Facilities shall increase thereafter, commencing on July 1, 2007 and on July 1 of each Fiscal Yeaz thereafter, by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. (fl Multiple Land Use Classes In some instances an Assessor's Parcel ofDeveloped Property may contain more than one Land Use Ciass. The Maximum Special Tax for Facilities levied on an Assessor's Pazcel shall be the sum of the Maximum Special Tas for Facilities far all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Ta~cable Propertv Owner Association Pronertv, Taxable Public Pronerty and Undeveloped Pronertv The Fiscal Year 2006-2007 MaYimum Special Tax for Facili6es far Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Properry shall be $18,761 per Acre and shall increase thereafter, commencing on July 1, 2007 and on July 1 of each Fiscal Yeaz thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for Facilities in effect for the previous Fiscal Year. City of Lake E[sinore Community Facilities District No. 2006-I January 16, 2006 Improvement Ares No. 3(Summerly) page 8 D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscai Year 2006-2007 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 Yeaz as follows: First: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Special Taac for Facilities; Second: If additional monies are needed to satisfy the Special Taat Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Special Tax far Facilities on each Assessor's Parcel of Developed Property whose Masimum Special Tax for Facilities is determined through the application of the Backup Special TaY for Facilities shall be increased in equal percentages from the Assigned Special Tax for Facilities up to the Maximum Special Tax for Facilities for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Taacable Property Owner Association Properiy and Taxable Public Properry 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 lery the Special Tas for Facilities pursuant to steps two through four above in order to meet the Special Taac Requirement for Facilities; (ii) all authorized CFD No. 2006-1 (IA No. 3) Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2006-i (IA No. 3) 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 for which a Certificate of Occupancy has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2006-1 (IA No. 3). City of Lake Elsinore Community Faci[ities District No. 2006-1 January l6, 2006 Improvement Area No. 3(Summer[y) pqge 9 E. EXEMPTIONS No Special Ta~c for Facilities shall be levied on up to 19.2 Acres of Property Owner Association Properiy and/or Public Property in CFD No. 2006-1 (IA No. 3). Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Properry or Public Properry. 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 tased 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 taaces; provided, however, that CFD No. 2006-1 (IA No. 3) may directly bill the Special Tax for Facilities, may collect Special Taxes at a different time or in a different manner if necessary to meet its financiai obligations, and may covenant to foreclose and may actually fareclose on delinquent Assessar's Parcels as permitted by the Act. G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "Buildout" means, for CFD No. 2006-1 (IA No. 3), that all expected building permits have been issued. "CFD Public Facilities" means either $16,410,000 in 2006 dollars, which shall increase by the Construction Inflation Index on July 1, 2007, and on each July i thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No. 2006-1 (IA No. 3) under the authorized bonding program for CFD No. 2006-1 (IA No. 3), 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 No. 3) Bonds (except refunding bonds) to be supported by the Special Taac 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 far the City of Los Angeles, measured as of the calendaz yeaz 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. City af Lake Elsinore Community Facilities District No. 2006-I January 16, 2006 lmprovement Area No. 3(Summerly) Page 10 "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct CFD Public Facilities eligible under the Act. "Previousiy Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that aze deemed to be outstanding under the Indenture afrer the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full Only an Assessor's Parcel of Developed Properiy, 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 particulaz Assessar's Parcel only ifthere are no delinquent Special Tases with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tas 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 ofredemption of CFD No. 2006-1 (IA No. 3) Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax for Facilities Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Canitalized Interest Credit Total: equals Special Tax for Facilities Prepayment Amount As of the proposed date of prepayment, the Special Tax for Facilities Prepayment Amount shall be calculated as follows: Paraeraph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) Page 11 2. For Assessor's Parcels of Developed Properiy, 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 TaY for Facilities computed pursuant to paragraph 2 by the total estimated Assigned Special Tax for Facilities for the entire CFD No. 2006-1 (IA No. 3) 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 No. 3), excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax for Facilities computed pursuant to pazagraph 2 by the total estimated Backup Special Tax for Facilities at Buildout for the entire CFD No. 2006-1 (IA No. 3), 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 pazagraph 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. 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 Yeaz until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessar's Parcel in the current Fiscal Yeaz which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax for Facilities Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. Ciry of Lake E(sinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) page ~2 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to pazagraph 10 (the "Defeasance AmounP'). 12. The administrative fees and expenses of CFD No. 2006-1(IA No. 3) 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 No. 3) 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 pazagraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to pazagraphs 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 No. 3) 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 No. 3). The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-1 (IA No. 3) 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 No. 3) 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 pazagraph 9(above), the CFD Administrator shall remove the currenf City of Lake Elsinore Community Faci[i[ies District No. 2006-] January 16, 2006 Improvement Area No. 3(Summer[y) Page 13 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 sha11 cease. Notwithstanding the foregoing, no Special TaY 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 No. 3) (after excluding 19.2 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-1 (IA No. 3) 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) L 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 Properry 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 sha11 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 = the partial prepayment. PE = the Special Taac for Facilities Prepayment Amount calculated according to Section G.1. F= the percentage, expressed as a decimal, by which the owner ofthe Assessor's Parcel is partially prepaying the Special Tax for Facilities. A= the Administrative Fees and Expenses calculated according to Section G.1. The owner of any Assessor's Pazcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special T~ for Facilities and the percentage by which the Special Tas for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required far the partial prepayment of the Special Tax for Facilities for an Assessor's Pazcel 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 No. 3) that there has been a partial prepayment of the Special Tax for Facilities and that a portion ofthe Special Tax for Facilities with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining MaYimum Special Tax for Facilities, shall continue to be levied on such Assessor's Parcel pursuant to Section D above. City of Lake Elsinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summer[y) Page 14 H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied for a period not to exceed forty years commencing with Fiscal Yeaz 2006-2007, provided however that the Special Tax for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-1 (IA No. 3) Bonds have been paid; (ii) all Authorized Facilities have been acquired and all reimbursements to the developer have been paid; and (iii) all other obligations of CFD No. 2006-1 (IA No. 3) have been satisfied. I. SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section I: "Developed Mulfifamily Unit" means a residential dwelling unit within a building in which each of the individual dwelling units has or shall haue 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 Yeaz 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 Yeaz 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 No. 3) in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for CFD No. 2006-1 (IA No. 3) for any Fiscal Year to pay for the actual costs of maintenance related to the Service Area, and the applicable Administrative Expenses. "Operating Fund Balance" means the amount of funds in the Operating Fund at the end of the preceding Fiscal Year. "Service Area" means parks, open space, and storm drains. "Special Tax for Services" means any of the special taaces authorized to be levied within CFD No. 2006-1 (IA No. 3) 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 No. 3) equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or aze reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) pay a proportionate share of Administrative Expenses, and (iii) anticipated Special TaY for Services delinquencies based City of Lake Elsinore Communiry Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) Page 15 on the delinquency rate for the Special Tax for Services levy in CFD No. 2006-1 (IA No. 3) for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing with Fiscal Year 2006-2007 and for each subsequent Fiscal Year, the City Council shall levy the Special Tax far Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Pazcels of Non-Residential Property, up to the applicable Maximum Special TaY for Services to fund the Special Tax Requirement for Services. The Ma~timum Special Tax for Services for Fiscal Year 2006-2007 shall be $246.84 per Developed Single Family Unit, $123.42 per Developed Multifamily Unit, and $555.90 per Acre for each Assessor's Parcel of Non-Residential Property. On each July 1, commencing July 1, 2007, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. 2. Duration of the Special Tax for Services The Special Taac for Services shall be levied in perpetuity to fund the Special Tas Requirement for Services, unless no longer required as determined at the sole discretion of the City Council. 3. Collection of the Special Tax for Services The Special Tax for Services shall be coilected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-1(IA No. 3) may collect the Special Ta~c for Services at a different time or in a different manner if necessary to meet its funding requirements. J. APPEALS AND INTERPRETATIONS Any landowner ar resident who feels that the amount of the Special Tax levied on their Assessor's Pazcel is in error may submit a written appeal to CFD No. 2006-1 (IA No. 3). 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 ofthe Special TaY and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. K: ICL/ENTS2VohnLaingl.SummerlyLNe1loV2MAVAI Fina!lUvfA.dac City of Lake Elsinore Community Fnci(ities D'utrict No. 2006-1 January 16, 2006 Improvement Aren No. 3(Summerly) Page 16 EXHIBIT A CERTIFICATE TO AMEND SPECIAL TAXFOR FACILITIES CITY OF LAKE ELSINORE AND CFD No. 2006-1 (IA No. 31 CERTIFICATE Pursuant to Section C of the Rate and Method of Apportionment, the City of Lake Elsinore and City of Lake Elsinore Community Facilities District No. 2006-1 ("CFD No. 2006-1 (IA No. 3)") hereby agree to a reduction in the Assigned Special Tax for Facilities for Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-1 (IA No. 3): (a) The information in Table 1 relating to the Assigned Special T~ for Facilities for Developed Property within CFD No. 2006-1 (IA No. 3) shall be modified as follows: ~.arid T7se ` = Glass .: '_ _~:: 1 ;~~r~ ~'~ ~ ~~ r ~ u~ ~y" a;' ~~e~or~~ilion . 4_....._ ..~.._....„3' .._:~ i . ~ n r v... Residential Property t~ ~ ~ ~ ~~z ~;x f~ ti ~ L~~`stdent~a7 ~`lsior t~rez_ ~ __ {i,t .u _.. v •_ _••_ 1'iY !: r_.'~ Mare than 3,649 sq. ft. ~s gned ~pecial ' Ta~ fox~acitities~<: ...... =. .,~._..., ::.. .~ le:: ~? $_ per unit 2 Residential Properiy 3,350 - 3,649 sq. ft. $ per unit 3 Residential Property 3,050 - 3,349 sq. ft. $_ per unit 4 Residential Properry 2,750 - 3,049 sq. ft. $ per unit 5 Residential Property 2,450 - 2,749 sq. ft. $ per unit 6 Residential Properry 2,150 - 2,449 sq. ft. $ per unit 7 Residential Property Less than 2,150 sq. ft. $_ per unit 8 Non-Residential Property NA $_ per Acre (b) The Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-1 (IA No. 3), as stated in Section C.1.(c), shall be reduced from $18,718 per Acre to $ per Acre. (c) The Maximum Special Taac for Facilities for Taxable Property Owner Association Property, Tasable Public Properly, and Undeveloped Property within CFD No. 2006-1 (IA No. 3), as stated in Section C.2, shall be reduced from $18,761 per Acre to $ per Acre. 2. The Special Tax for Facilities may only be modified priar to the first issuance of CFD No. 2006- 1 (IA No. 3) Bonds. 3. Upon execution of the Certificate by the City of Lake Elsinore and landowner(s), the City shall cause an amended notice of Special Tax lien for CFD No. 2006-1 (IA No. 3) to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledges, on behalf ofthe City of Lake Elsinore and CFD No. 2006-1 (IA No. 3), receipt of this Certificate and modification of the Rate and Method of Apportionment as set forth in this Certificate. CITY OF LAKE ELSINORE By: CFD Administrator Landowner(s) By: Date: Date: