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HomeMy WebLinkAboutCC Reso No 2006-030RESOLUTION NO. 2006-30 RESOLUTION OF FORMATION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DETERMINING THE VALIDITY OF PRIOR PROCEEDINGS AND ESTABLISHING CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has heretofore adopted Resolution No. 2006-08 ("Resolution of Intention") stating its intention to form City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the "CFD") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "AcY'), and designating portions of the CFD as Improvement Area No. 1, Improvement Area No. 2 and Improvement Area No. 3; and WHEREAS, a copy of the Resolution of Intention is on file with the City Clerk and incorporated herein by reference; and WHEREAS, pursuant to the Act and in accordance with applicable laws, this Council held a public hearing on the formation of the CFD and the incurring of bonded indebtedness with respect to the CFD; and WHEREAS, at said hearing all persons not exempt from the Services Special Tax and the Special Tax desiring to be heard on all matters pertaining to the formation of the CFD were heard and a fiill and fair hearing was held; and WHER~AS, at said hearing evidence was presented to the Council on said matters before it, and this Council at the conclusion of said hearing is fully advised in the premises. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. Pursuant to Section 53325.1(b) of the Government Code, the Council finds and determines that the proceedings prior hereto were valid and in conformity with the requirements of the Act. SECTION 2. A community facilities district to be designated "City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly)" is hereby established pursuant to the Act. SECTION 3. The description and map of the boundaries of the CFD on file in the Clerk's office and as described in the Resolution of Intention and incorporated herein by CITY COUNCIL RESOLUTION NO. 2006-30 Page 2 of 5 reference, shall be the boundaries of the CFD. The map of the proposed boundaries of the CFD has been recorded in the Office of the County Recorder of Riverside County, California (Book 65 of Maps of Assessment and Community Facilities District at page 73 and as Instrument No. 2006-0071321). 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 drains maintenance services (the "Services") that are in addition to those provided in the territory within the CFD prior to the formation of the CFD and do not supplant services already available within the territory proposed to be included in the CFD, the costs of administering the levy and collection of the Services Special Tax and all other costs of the levy of the Services Special TaY, 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 E~ibit A attached hereto and by this reference incorporated herein. The Services are mare fully described in the report presented to this Council at the public hearing (the "Report"). 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, 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 CITY COUNCIL RESOLUTION NO. 2006-30 Page 3 of 5 fees, the costs of administering the levy and collection of the Special Tax and all other costs of the levy of the Special Tax and issuance of the bonds, including any foreclosure proceedings, architectural, engineering, inspection, legal, fiscal, and financial consultant fees, discount fees, interest on bonds due and payable prior to the expiration of one year from the date of completion of facilities (but not to exceed two years), election costs and all costs of issuance of the bonds, including, but not limited to, fees far 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 E~ibit A attached hereto and by this reference incorporated herein. The Special Tax is based upon the cost of financing the Facilities in the CFD, the demand that each parcel will place on the Facilities and the benefit (direct and/or indirect) received by each parcel from the Facilities. The Special Tax is apportioned to each parcel on the foregoing basis pursuant to Section 533253 of the Act. In the event that a portion of the property within the CFD shall become for any reason exempt, wholly or partially, from the levy of the Special TaY, the Council shall, on behalf of the CFD, increase the levy to the extent necessary upon the remaining property within the CFD which is not delinquent or exempt in order to yield the required payments, subject to the maximum tax. Under no circumstances, however, shall the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the CFD by more than 10 percent. Furthermore, the maximum special tax 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. The Facilities are more fully described in the Report. SECTION 7. Upon recordation of a Notice of Special Tax Lien pursuant to Section 3114.5 of the Streets and Highways Code, a continuing lien to secure each levy of the Services Special TaY and the Special Tax shall attach to all real property in the CFD, and the lien with respect to the Special Tax shall continue in force and effect until the Special Tax obligation is prepaid or otherwise permanently satisfied and the lien canceled in accordance with law, and the lien with respect to the Services Special Tax and the Special Tax shall continue in force and effect until collection of the Services Special Tax and the Special Tax by the CFD ceases. CITY COUNCIL RESOLUTION NO. 2006-30 Page 4 of 5 SECTION 8. Neither the proposed Services Special Tax nor the Special Tax to be levied in the CFD has been precluded by protests by owners of one-half or more of the land in the territory included in the CFD pursuant to Government Code Section 53324. SECTION 9. The Report is ordered to be kept on file with the minutes of these proceedings and open for public inspection. SECTION 10. Pursuant to and in compliance with the provisions of Government Code Section 50075.1, the Council hereby establishes the following accountability measures pertaining to the levy by the CFD of the Services Special Tax and the Special Tax: (a) Such Services Special Tax and the Special Tax shall be levied for the specific purposes set forth herein. (b) The proceeds of the levy of such Services Special Tax and the Special Tax shall be applied only to the specific purposes set forth herein. (c) The CFD shall establish an account ar accounts into which the proceeds of such Services Special Tax and the Special Tax shall be deposited. (d) The City Manager, or his or here designee, acting for and on behalf of the CFD, shall annually file a report with the Council as required pursuant to Government Code Section 50075.3. SECTION 11. The City Manager, 130 S. Main Street, Lake Elsinore, California 92530, (951) 674-3124, or his designee, is designated to be responsible for preparing or causing to be prepared annually a current roll of Services Special TaY and the Special Tax levy obligations by assessor's parcei number and for estimating future Services Special Tax and the Special Tax levies pursuant to Section 53340.1 of the Government Code. SECTION 12. The voting procedure with respect to the imposition of the Services Special TaY and the Special Tax, incurring bonded indebtedness and establishing an appropriations limit of the CFD shall be by hand delivered or mailed ballot election. SECTION 13. The City Clerk is directed to certify and attest to this Resolution and to take any and all necessary acts to call, hold, canvass and certify an election or elections on the incurring bonded indebtedness, the levy of the Special TaY, and the establishment of the appropriation limit. CITY COUNCIL RESOLUTION NO. 2006-30 Page 5 of 5 SECTION 14. This Resolution shall take effect from and affer the date of its passage and adoption. PASSED, APPROVED AND ADOPTED this 28~' day of February, 2006, by the following vote: AYES: COUNCILMEMBERS: HICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEMB~RS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: ~ , " c. ~obert E. M~ City of Lake ATTES : ~ Frederick Ray, City Clerk City of Lake Elsinore I~$~rbara Zeid L bold, City Attorney City of Lake sinore EXHIBIT A 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 COMMUNITY 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 (Summerly) ("CFD No. 2006-i (IA No. 1)") and coilected each Fiscal Year commencing in Fiscal Year 2006-2007, in an amount deternuned tluough 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 taaced 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 area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, 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 coliecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Tases 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 Tax 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 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. 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 E[sinore Communiry Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 1(Summer[y) 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 accardance 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 Specia] 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 dweliing 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. 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 ar more series, issued by CFD No. 2006-1 (IA No. 1) and secured solely by the Special Ta~ 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 Elsinore, 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 TaY for Facilities, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Yeaz and a building permit for new construction was issued on City of Lake Elsinore Community Facilities District No. 2006-1 January l6, 2006 lmprovement Area No. l(Sun:mer[y) page 2 or before May 1 of the Fiscal Year preceding the Fiscal Yeaz for which the Special Taac 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 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 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 ciasses listed in Table 1 below. "Maximum Special Tax for Facilities" means the masimum Special Tax for Facilities, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Pazcels of Developed Properiy 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. 1) 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. 1) that was owned by a property owner association, including any master or sub-association, as of January 1 ofthe prior Fiscal Year. "Proportionately" means for Developed Property that the ratio ofthe actual Special Tax for Facilities levy to the Assigned Speciai Tax for Facilities is equal for all Assessor's Pazcels of Developed Property. For Undeveloped Properiy, "Proportionately" means that the ratio of the actual Special Tax for Facilities levy per Acre to the Maximum Special Tax for Facilities per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below. "Public Property" means, far each Fiscal Yeaz, (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 Community Facilities District No. 2006-1 January 16, 2006 lmprovement Area No. I(Sumn:erly) pape 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 taxed and classified according to its use; or (ii) any properiy 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 Pazcel shall be made by reference to the buiiding 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 fonnation 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 taY to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Properly, 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. 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 calendaz year commencing in such Fiscal Year; (iii) pay a proportionate shaze 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 inciusion 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 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 or Section E below. Ciry ofLake E[sinore Commrenity Facilities District No. 2006-I January 16, 2006 Improvemen[ Area No. 1(Summer[y) page q "Taxable Property Owner Association Property" means all Assessor's Pazcels of Property Owner Association Property that are 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 Yeaz, all Taacabie Property not classified as Developed Property, Taxable Property Owner Association Properiy, or Taacabie Public Property. 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 Properiy, Tasable 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. 1) Bonds, the Assigned Special Tax for Facilities on Developed Property (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 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 Properiy exceeds the City's maximum level objective set forth in such document, the Assigned Special Tax for Facilities on Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision, may be reduced to the amount necessary to satisfy the City's objective with respect to the maximum overlapping debt burden level with the written consent of the CFD Administrator. The reductions permitted pursuant to this paragraph shall be reflected in an amended Notice of Special Tax Lien which the City shall cause to be recorded by executing a certificate in substantially the form attached hereto as Exhibit "A". Develoved Propertv (a) Maximum Special Tax for Facilities Ciry of Lake Elsinore Con:munity Facilities District No. 2006-I Jm:uary 16, 2006 Improvement Area No. I(Summerly) pqge 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 ~ j ~ ~ » ~ t~~.:r ~2esi`slenti 7 ~ ~E ,~ ~u ,~ ~r h S e a ~ Land Use .,; ;+ ;? ~ ~ ~ ` Ass igned pe i lxT , ' Class,, ~ DesciipUon ~ .. ~ , : $ Floc~;~:A~~a ~" ~,- ~~~~'or~ae~lities r' ~~~- ~ _ , , :. . , ,__._. ~ , ,~. ,~~:. ....__ _ _ , . , _ r._~_ 3 , _. r ~ ~ ~ t 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 7 Residential Property Less than 2,150 sq. ft. $2,235 per unit 8 Non-Residential Property NA $16,513 per ?,cre City of Lake Elsinore Comn:erniry Facilities District No. 2006-1 January 16, 2006 Improvement Area No. I(Summerly) 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 $18,348, multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special TaY 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 for which building permits for residential construction have or may be issued (i.e., the number or residential lots). The Backup Special Tax for Facilities for each Assessor's Parcel of Non-Residential Property therein shall equal $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 conshuction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Properiy, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of properiy 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 ar 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 pernuts 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 Property that is part of the lot line adjustment or similar instrument for such Fina1 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 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 Tasable 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 Elsinore Communiry Facilities District No. 2006-1 January 16, 2006 Improvement Area No. l(Sun:merly) page ~ The result of paragraph 2 above shall be the Backup Special Tax for Facilities per Acre which shall be applicable to Assessar'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 Tax 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 Taac if the CFD Administratar 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 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. 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 Tax 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 Properiy may contain more than one Land Use Class. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Masimum Special Tax for Facilities for all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Tasable Properlv Owner Association Propertv, Tazcable Public Properiv, and Undeveloped Propertv The Fiscal Year 2006-2007 Maximum Special Tax 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 Maximum Special Tax for Facilities in effect for the previous Fiscal Year. City of Lake Elsinore Commmaity Facilities District No. 2006-1 January 16, 2006 Improvement Area No. ](Summerly) Page 8 D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2006-2007 and for each following Fiscal Yeaz, the City Council shall determine the Special T~ Requirement for Facilities and levy the Special T~ for Facilities until the amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special Taac for Facilities shall be levied each Fiscal Yeaz as follows: First The Special Tax for Facilities shall be levied on each Assessor's Parcei of Developed Property in an amount equal to 100% of the applicable Assigned Special Tax for Facilities; Second: If additional monies aze needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; 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 Properry 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 Pazcel; 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 Tas for Facilities shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property at up to 100% of the Maximum Special TaY for Facilities far 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 Tax for Facilities pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; (ii) all authorized CFD No. 2006-1 (IA 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 andlor 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. 1). Ciry ojLake E[sinore Conimuniry Facilities District No. 2006-1 January 16, 2006 Impravement Area No. 1(Sr~mmerly) Page 9 E. No Special Tas 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). Tas-exempt status will be assigned by the CFD Administrator in the chronologicai order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Tax for Facilities under this section shall be subject to the levy of the Special Tax for Facilities and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% of the MaYimum Special Tax for Facilities for Taxable Properiy 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 properiy taxes; provided, however, that CFD No. 2006-1 (IA No. 1) may directly bill the Special Tax for Facilities, may collect Special Tases at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may achially 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 (IANo. 1), that a11 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 (IANo. 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 Intlation 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 E[sinore Community Facilities District No. 2006-I January 16, 2006 lmprovement 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 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 currently 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 Full Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The obligation of the Assessor's Parcel to pay the Special Tax for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only ifthere 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 TaY far 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 priar 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 Capitalized Interest Credit Total: equals Special Tax for Facilities Prepayment Amount As of the proposed date of prepayment, the Special Tas 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 Commnniry Facilities District No. 2006-1 January 16, 2006 lmprovement Area No. 1(Summerly) Page 11 For Assessor's Parcels of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tas far Facilities. For Assessor's Parcels of Undeveloped Properiy for which a building permit has been issued, compute the Assigned Special Tax for Facilities and Backup Special TaY for Facilities for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has aiready been issued for that Assessor's Parcel. 3. (a) Divide the Assigned Special Tax for Facilities computed pursuant to pazagraph 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 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. 1), 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 Taac for Facilities at Buildout for the entire CFD No. 2006-1 (IA No. i), excluding any Assessor's Parcels which have been prepaid. 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 Year Lmtil the earliest 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. __ Ciry of lake Elsinore Cammunity Facilities District No. 2006-1 Jan~eary 16, 2006 Improvement Area No. 1(Summerly) page IZ 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. i) 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. 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 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 far the Previousiy 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 Indenhue after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax for Facilities prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax for Facilities Prepayment Amount"). From the Special TaY 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 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. 1). The Special Tax 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. 1) Bonds or to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tax for Facilities levy as determined under paragraph 9(above), the CFD Administrator shall remove the current Ciry of Lake Elsinore Community Fncilities District No. 2006-I January I6, 2006 Improvement Aren No. 1(Summerly) Page 13 Fiscal Yeaz'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 TaY 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 Maacimum Special Tax for Facilities that may be levied on TaYable Property within CFD No. 2006-1 (IA No. 1) (after excluding 25.1 Acres of Property Owner Association Property and/or Public Properiy 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 Tas far Facilities on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section G1; 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. P~ = the Special Tax for Facilities Prepayment Amount calculated according to Section G.1. P= the percentage, expressed as a decimal, by which the owner of the 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 TaY 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 ofthe amount required far 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. i) that there has been a partial prepayment of the Special Tax for Facilities and that a portion of the Special Tas 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 E[sinore Comm~mity Facililies District No. 2006-7 January 16, 2006 Improvement Area No. I(Sunrmerly) 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 Year 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 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. 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 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. 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 Year 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 Lske Elsinore Communify Fncilities District No. 2006-I January l6, 2006 Improvement Area No. I(Summerly) Page IS 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 ar Developed Multifamily Unit and (ii) all Assessor's Pazcels ofNon-Residential Property, up to the applicable Masimum Special Tax for Services to fund the Special Tax Requirement for Services. The Maximum Special TaY for Services for Fiscai 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 Pazcel 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 Tas for Services shall be levied in perpetuity to fund the Special Ta~c Requirement for Services, unless no longer required as determined at the sole discretion of the City Cotmcil. 3. Collection of the Special Tax for Services The Special Tax for Services shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-1(IA No. 1) 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 Taac 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 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 annuai administrafion 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:ICLlENTS2Vohn/.ainglSummerlylMe[Io1RMAVAI FinaIRMA.doc City of Lake Elsinore Communiry Fncilities District No. 2006-I January 16, 2006 Improvement Area No. I(Summerly) Page 16 EXHIBIT A CERTIFICATE TO AMEND SPECIAL TAXFOR FACILITIES CITY OF LAKE ELSINORE AND CFD No. 2006-1 QA No. 1) CERTIFICATE Pursuant to Section C of the Rate and Method of Apportionment, the City of Lake Elsinare and City of Lake Elsinore Community Facilities District No. 2006-1 ("CFD No. 2006-1 (IA No. l)") 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 (IANo. 1): (a) The information in Table 1 relating to the Assigned Special Tas for Facilities for Developed Property within CFD No. 2006-i (IA No. 1) shall be modified as follows: I.and irs~ : ~ ~ ' ~ ' , ^f £ `,f ` '' ~~ ~ ~ ~~ ~~, ~ ~ ~ ~ ~Assigried Specia~ _ Class ; , ;~Description ~ ; ~ ,- RescflenfialF'loorAzea rv ~ ~ ~, Ta~farF~citi~i~s~ y . __ ,,~ _r_ _ ~ , E 1 Residential Property More than 3,649 sq. ft. $_ per unit Z Residential Properry 3,350 - 3,649 sq. ft. $ per unit 3 Residential Property 3,050 - 3,349 sq. ft. $_ per unit 4 Residential Property 2,750 - 3,049 sq. ft. $ per unit 5 Residential Properiy 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 Tax for Facilities for TaYable Property Owner Association Property, Taxable Public Property, and Undeveloped Properiy 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 Elsinore 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 ofthe City of Lake Elsinore and CFD No. 2006-1 (IA No. 1), receipt of this Certificate and modification of the Rate and Method of Apportiomnent as set forth in this Certificate. CITY OF LAKE ELSINORE By: CFD Administrator Landowner(s) By: 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 Assessar's Parcels in City of Lake Elsinore 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 determined through the application ofthis Rate and Method of Apportionment as described below. All of the real properiy in CFD No. 2006-1 (IA No. 2), unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recarded 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 Tan 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 TaYes 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 compiying 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. Ciry of Lnke Elsinore Community Facilities District No. 2006-1 Janunry 16, 2006 Improvement Area No. 2(Summerly) page 1 "Assessor's Parcel" means a lot or parcel shown in an Assessor's Pazcel 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 TaY for Facilities for each Land Use Class of Developed Property, as determined in accordance with Section C.1.(b) below. "Authorized Facilities" means those autharized 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 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, ar 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. 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 ofthe City ofLake 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 far Facilities, for each Fiscal Year, all Taxable Properly, exclusive of Tasabie Public Property and Taxable Properly Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a building permit for new construction was issued on City of Lake Elsinore Community Facilities District No. 2006-I January 16, 2006 Improvement Area No. 2(Ssmmerly) 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 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 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 Tabie 1 below. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined in accordance with Section C below, that can be levied in any Fiscal Yeaz on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Pazcels ofDeveloped Properry 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. 2) Bonds which are deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Yeaz, any properry within the boundaries of CFD No. 2006-1 (IA No. 2) that was owned by a property owner association, including any master or sub-association, as of January 1 ofthe prior Fiscal Year. "Proportionately" means for Developed Properiy 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 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 boundaries 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 Communiry Frscilities District No. 2006-I January 76, 2006 lmprovement Area No. 2(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 taYed and classified according to its use; or (ii) any property 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 azea within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similaz area. The determination of Residential Fioor 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. 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 Yeaz on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Properiy, Taxable Public Property, and Undeveloped Property to fund the Special Taac 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 calendaz 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 Tas for Facilities levy in the previous Fiscal Year; (vi) pay directly for acquisition or constnxction 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 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. 2) which are not exempt from the Special TaY for Facilities pursuant to law or Section E below. City of Lake Elsinore Community Fnci/ilies District No. 2006-1 Janunry 16, 2006 Improvement Aren No. 2(Summerly) Page 4 "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 Properiy that aze 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 Properry not classified as Developed Properiy, Tasable Properiy Owner Association Property, or Taxable Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Properry within CFD No. 2006-1(IA No. 2) shall be classified as Developed Property, Tasable Pubiic Properly, Ta~cable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Ta~ces 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 Tax for Facilities on Developed Property (set forth in Table 1), and the Backup Special 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 Tax for Facilities on Developed Properiy, and the Backup Special Tax for Facilities attributabie 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 pazagraph 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 E~ibit "A". Develoned Pronertv (a) Maximum Special Tax for Facilities City of Lake Elsinore Comm~enity Fncilities District A'o. 2006-I January 16, 2006 lmprovemeret Area Na 2(Sermmerly) page 5 The Maximum Special Tax for Facilities for each Assessor's Pazcel 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 Taac for Facilities. (b) Assigned Special Tax for Facilities The Fiscal Year 2006-2007 Assigned Special Tas 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 s ~ ~` ` ` I2es~$e`~tzal ~ ; ' d S l a T and J ~ t t, ~ ~ ~ ~ , .4s~igne ~ecia T ~c Class Descri t on ~~ k'l ~~ a ~ ~ ~ ~~~, ~~r aci~i~i~s~~ ' ~ _,. p ~ t 1 ~ svv.u „ ~,1. ~.. oar Q , ~ ~ ; ~ ~=E~~ ~ ~n., r_„_. .,r~ . s ~;; ~ ~ ~ . ~"~ , ~~ .~~ ~,_~n. . ~_ . 1 Residential Property More than 3,649 sq. ft. $3,ll 2 per tmit Z Residential Property 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 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 Elsinore Co»rneunity Facilities Disirict No. 2006-1 January 16, 2006 7mprovement Area .No. 2(Smnnrerly) 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 Tasable Property, exclusive of any Taxable Property Owner Association Property and Tasable 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 TaY for Facilities attributable to the applicable Final 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 Parcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of properiy for which building perxnits for non-residential construction may be issued. Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in the preceding paragraphs is subsequently changed or modified by recordation of a lot line adjustment or similar instrument, and only if the CFD Administrator determines that such change or modification 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 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 Tas 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 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 sha11 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 ojLnke E[sinore Co~nmunity Fncilities District No. 2006-1 Jnnuary 16, 2006 Improvement Area No. 2(Sinnmerly) 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 Parcels of Developed Property in such changed or modified portion of the Final Subdivision area for all remaining Fiscal Years in which the Special Tas 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 Tax if the CFD Administrator determines that the annual debt service required far the Outstanding Bonds, when compared to the Assigned Special taxes that may be levied against all Assessor's Parcels of Developed Properiy 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. 2) 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 Tax 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 ofDeveloped Properiy may contain more than one Land Use Class. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the M~imum Special Tax for Pacilities for all Land Use Classes located on that Assessor's Parcel. The CFD Admimstrator's allocation to each type of property shall be final. 2. Taxable Property Owner Association Property, Taxable Public Propert~ Undeveloped Propertv The Fiscal Year 2006-2007 Maximum Special Tax for Facilities for Taxable Properiy Owner Association Property, Tasable Public Property, and Undeveloped Property shall be $17,533 per Acre and shall increase thereafter, commencing on July 1, 2007 and on July 1 of each Fiscal Year thereafter, by an amount equal to rivo percent (2%) of the Maximum Special Tax for Facilities in effect for the previous Fiscal Year. City of Lake E[sinore Con:nvm:ity Fncililies District No. 2006-I January 16, 2006 Improvement Area No. 2(Sum»eerly) page g D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the City Council shall determine the Special Tax Requirement for Facilities and levy the Special Taac for Facilities until the amount of Special Tas for Facilities levy equals the Special Tax Requirement for Facilities. The Special Tax for Facilities shall be levied each Fiscal Year as follows: First: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Speciai Tax for Facilities; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the MaYimum Special Tax for Facilities for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities a$er 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 deterniined 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 Masimum Special Tax for Facilities for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Properiy at up to 100% of the Maacimum Special TaY for Facilities for Taxable Property Owner Association Property or Taxable Public Property. Notwithstanding the above, the City Council may, in any Fiscal Year, levy Proportionately less than 100% of the Assigned Special Tax for Facilities in step one (above), when (i) the City Council is no longer required to levy the Special Tax for Facilities pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; (ii) all authorized CFD No. 2006-1 (IA 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) ail Authorized Facilities have been constructed and/or acquired. Further notwithstanding the above, under no circumstances will the Special Tax for Faciliries 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. 2). City of Lnke Elsinore Community Faci/ities District No. 2006-1 January 16, 2006 Improvement Aren No. 2(Summerly) Page 9 E. EXEMPTIONS No Special Tax far 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). Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Properry Owner Association Property or Public Property, its tax-exempt status will be revoked. Property Owner Association Property ar Public Property that is not exempt from Special Tax for Facilities under this section shall be subject to the levy of the Special Tax for Facilities and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% of the Maximum Special Tax for Facilities for Tasable Properiy Owner Association Property or Tasable 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 properiy taxes; 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 following additional definitions apply to this Section G: "BuildouY' 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, 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. 2) under the authorized bonding program for CPD 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 Constniction 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 Cannarenity Fncilities Dislrict No. 2006-1 January 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 "currently 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 Full Only an Assessor's Parcel of Developed Properiy, or Undeveloped Properiy for which a building permit has been issued, may be prepaid. The obligation of the Assessor's Parcel to pay the Special Tax for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Pazcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax for Facilities obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administratar 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. 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 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 Capitalized 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 Communiry Facilities Dishict No. 2006-I January 16, 2006 Improvement Arers No. 2(Sumnrerly) Pnge 11 2. For Assessor's Parceis of Developed Properiy, compute the Assigned Special TaY 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 Properry, based upon the building permit which has already been issued for that Assessor's Parcel. (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. 2) based on the Developed Properiy 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 Pazcels 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. 2), excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to pazagraph 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"). 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 Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax for Facilities Prepayment Amotmt 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 ojLnke Elsinore Community Facilities Disirict No. 2006-1 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 caiculated 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 Ft~nd 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 far 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 cunent Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to pazagraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax for Facilities prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax for Facilities Prepayment Amount"). From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenhue and be used to retire CFD No. 2006-1 (IA No. 2) 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. 2). The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-1 (IANo. 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 paragraph 9(above), the CFD Administrator shall remove the current Ciry of Lake Elsinore Communiry 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 shali cause a suitable notice to be recarded in compliance with the Act, to indicate the prepayment of the Special Tax for Facilities and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax for Facilities shall cease. Notwithstanding the foregoing, no Special Ta~c for Facilities prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Ta~c for Facilities that may be levied on Taxable Property within CFD No. 2006-1 (IA No. 2) (after excluding 22.1 Acres of Property Owner Association Property and/or Public Properiy 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 Ta~c for Facilities on an Assessor's Parcel of Developed Properly ar an Assessor's Parcel of Undeveloped Property far 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 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 Tas 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 TaY 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 Pazcei that is partially prepaid, the City Council shall'(i) distribute the fixnds 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 T~ 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 Lnke Elsinore Communiry Faci(ities District No. 2006-1 January 16, 2006 Improvement Area No. 2(Summerly) page ~q H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied for a period not to exceed forty years commencing with Fiscal Year 2006-2007, provided however that the Special Tax for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-1 (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. I. SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section I: "Developed Multifamily UniY' 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 dweliing unit on or prior to May 1 preceding the Fiscal Year in which the Special Taac 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 ar 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 cunent Fiscal Year, (ii) pay a proportionate share of Administrative Expenses, and (iii) anticipated Special Taac for Services delinquencies based Ciry of Lake E[sinore Community Fncilities District No. 2006-1 January 16, 2006 Improvement Area No. 2(Sumnterly) Page IS on the delinquency rate for the Special Tas for Services levy 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 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 ofNon-Residential Property, up to the applicable Maacimum Special Tax for Services to fund the Special Tas Requirement for Services. The Maximum Special Tax for Services for Fiscal Year 2006-2007 shall be $246.84 per Developed Single Family Unit, $123.42 per Developed Multifamily Unit, and $555.90 per Acre for each Assessor's Parcel of Non-Residential Property. On each July 1, commencing July 1, 2007, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. 2. Duration of the Special Tax for Services The Special Tax for Services shall be levied in perpetuity to fund the Special Tax Requirement for Services, uniess 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 ifnecessary to meet its funding requirements. J. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2006-1 (IA No. 2). The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied shall be appropriately modified. The City Council may interpret this Rate and Method of Apportionxnent 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: ICLIENTS2VohnLain~SummertylMelloIRMAVAI FrnalRhlA.doc City of Lake Elsinore Conlmnnity Faci/ities Dishict No. 2006-1 Jnnuary 16, 2006 Improvement Area No. 2(Summer/y) Page 16 EXHIBIT A CERTIFICATE TO AMEND SPECIAL TAXFOR FACILITIES CITY OF LAKE ELSINORE AND CFD No. 2006-1 (IA 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 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. 2): (a) The information in Table 1 relating to the Assigned Special Tax for Facilities far Developed Property within CFD No. 2006-1 (IA No. 2) shall be modified as follows: __ ~,211CLUSPi , ~'- .. ~ m r,~ .-S ss ` r s ~ r r a' 'r-yk°7 '~' ~: af~~3~1gllC~pE4~3L ; ~Y '13SS ~ ~ = DeS Tl tlOri ; ~ ~ ~ AES CIB ft l~I ~ p ~ M ~'a ~ 11~ ~ ~4 '~; } - .. ~ ~-.. ~, _.~, : C ~ ,..,. ~, . . r..,.~r ri 2 T. P~ I D c1 ....v_.-.. ... ,x..z,. ... z ~.,~x..s ._ . _ , aX.. tl~ Cf iP. S ~ .....m.....iv ._...._~xr~.,.S~rG s 1 Residential Property More than 3,649 sq. ft. $ per unit 2 Residential Property 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 Residentiai 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. 2), as stated in Section C1.(c), shall be reduced from $17,533 per Acre to $ per Acre. (c) The Maximum Special Taac for Facilities for Taxable Property Owner Association Properly, 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 TaY 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 behalfofthe 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 (SUMMERLI~ A Special TaY shall be levied on all Assessor'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 oftrus 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 taaced 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 area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. "AcY' means the Me11o-Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 of the California Govemment 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 (IANo. 3) or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2006-1 (IA No. 3) or any designee thereof related to an appeal of the Speciai Tazc; 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 Taxes. City of Lake Elsinore Comn:unity Facilities District No. 2006-I January 16, 2006 Improvemen[ Arers No. 3(Summer(y) pqge ~ "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 exhibit to the Resolution of Formation. "Backup Special Tax for Facilities" means the Special TaY 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 autharizes 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 Elsinare 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 Tax for Facilities levy on property within the boundazies of CFD No. 2006-1 (IA No. 3) 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 legisla6ve 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 Taxable Property, exclusive of Tasable Public Property and Taxable Properly Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a building permit for new construction was issued on City of Lake Elsinore Community Faci[ities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) paQe Z or before May 1 of the Fiscal Year preceding the Fiscal Yeaz for which the Special Taac 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 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. 3) Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any of the classes listed in Table 1 below. "Maximum Special Tax for Facilities" means the maximum Special Tax far 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 Pazcels 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 Ow~er 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 property owner association, including any master or sub-association, as of January 1 ofthe prior Fiscal Yeaz. "Proportionately" means for Developed Properiy that the ratio ofthe actual Special Taac For Facilities levy to the Assigned Special Tax for Facilities is equal for all Assessor's Pazcels of Developed Properly. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax for Facilities levy per Acre to the Maximum Special Tax for Facilities per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable 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. 3) 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 Eisinore Unified School District, or any City of Lake Elsinore Communiry Faci[ities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) Page 3 local government or other public agency as of January i of the previous Fiscal Year, provided that any property leased by a public agency to a private entity and subject to tasation under Section 53340.1 of the Act shall be taxed and classified according to its use; or (ii) any property within the boundazies 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, 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 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 taY to be levied in each Fiscal Yeaz on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Properiy, and Undeveloped Property to fund the Special TaY Requirement for Facilities. "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year far CFD No. 2006-1 (IA No. 3) to: (i) pay debt service on all Outstanding Bonds due in the calendaz yeaz 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 calendaz 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 Properry; less (vii) a credit for funds available to reduce the annual Special Tas 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 Pazcels 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 of Lake Elsinore Commeinity Fnci[ities District No. 2006-7 January 16, 2006 Improvement Area No. 3(Sr~mmerly) Page 4 "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Properiy that are not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Pazcels of Public Property that are not exempt pursuant to Section E below. "Trustee" means the trustee or fiscai agent under the Indenture. "Undeveloped Property" means, for each Fiscal Yeaz, all Taxabie Property not classified as Developed Property, Taxable Property Owner Association Property, or T~able 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 Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Tases 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 sha11 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 TaY for Facilities on Developed Properiy (set forth in Table 1), and the Backup Special Tas for Facilities attributable to a Final Subdivision, may be reduced in accordance with, and subject to the conditions set forth in this paragraph. ff 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 masimum level objective set forth in such document, the Assigned Special Tax for Facilities on Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision, may be reduced to the amount necessary to satisfy the City's objective with respect to the maa~imum 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 E~ibit "A". Developed Pronerty (a) Maximum Special Tax for Facilities City of Lake E[sinore Communiry Facilities District No. 2006-1 Jannaty 16, 2006 Improvement Area No. 3(Summerly) page 5 The Maximum Special Tax for Facilities for each Assessor's Parcei 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 : ~ Lan tU ...; . ~ X ~ = y . ~~'+ ~ "~; ~ e Fr~`k;t'r ~ Res dect~ial -` <' ~ . ~ ~ ~..m :: `f u~z~.~-; ; 'e 1 c a ~ c se , , ~ t ~ , ~,~;,, * l ~T ~ssr~i z ~Sp i l~Tax ' $ ' Class r,; Description , - F a~# ~ oorAr~ea ~ ;,-~oi~~acilTfies~' ~ ~ ~ 3 r r_ ,, .~;.~.~a. , . 1 Residential Property More than 3,649 sq. fr. $3,112 per unit 2 Residential Properry 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 $16,848 per Acre City of Lake Elsinore Commuieiry Fscilities District No. 2006-I January I6, 2006 Improvement Area No. 3(Summerly) page 6 (c) Backup Special Tas 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 Taacable Property, exclusive of any Tasable Property Owner Association Property and Tasable Public Property, therein. The Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed by dividing the Backup Special Tax for Facilities attributable to the applicable Final Subdivision by the number of Assessor's Parcels for which building permits for residential construction have or may be issued (i.e., the number or residential lots). The Backup Special Taac for Facilities far each Assessor's Parcel ofNon-Residential Property therein shall equal $18,718, multiplied by the Acreage of such Assessor's Pazcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential 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) described in the preceding paragraphs is subsequently or modified by recordation of a lot line adjustment or similaz instrument, and only if the CFD Administrator determines that such change or modification results in a decrease in the number of Assessor's Parcels of Taxable Property for which building permits for residential construction have or may be issued within such Final Subdivision, then the Backup Special Tax for Facilities for each Assessor's Parcel of Developed Property that is part of the lot line adjustment or similar instrument for such Final Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax for Facilities previously determined for an Assessor's Parcel of Developed Property that is not a part of the lot line adjustment or similar instrument for such Final Subdivision shall not be recalculated. 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 Properiy which is ultimately expected to exist in such changed or modified portion of the Final Subdivision area, as reasonably determined by the CFD Administrator. changed City of Lake E(sinore Community Facilities District No. 2006-1 January 16, 2006 Improvement Area No. 3(Summerly) page ~ 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 Properry in such changed or modified portion of the Final Subdivision area for all remaining Fiscal Yeazs in which the Special Tas for Facilities may be levied. (d) Release of Obligation to Pay and Disclose Backup Special Ta~c 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 compazed to the Assigned Special taxes 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 Properry in each remaining Fiscal Yeaz based on then existing development in CFD No. 2006-1 (IA No. 3) is at least equal to the sum of (i) the Administrative ~xpenses and (ii) 110 times maximuxn 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 amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. (~ Multiple Land Use Classes In some instances an Assessor's Parcel ofDeveloped Property may contain more than one Land Use Class. The Maximum Special Taac for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities far all Land Use Ciasses located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Taxable Pro~ertv Owner Association Propertv Taxable Public Propertp and Undevelo ed Propertv The Fiscal Yeaz 2006-2007 Maximum Special Tax for Facilities far TaYabie Property Owner Association Property, Taacable Public Property, and Undeveloped Property shall be $18,761 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 MaYimum Special Tatc for Facilities in effect for the previous Fiscal Yeaz. Ciry of Lake Elsinore Communiry Faci[ities District No. 2006-7 - January 16, 2006 Improvement Area No. 3(Summerly) page g 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 TaY for Facilities until the amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special Tax for Facilities shall be levied each Fiscal Year as follows: First: The Special Tax for Facilities shall be levied on each Assessor's Pazcel of Developed Property in an amount equal to 100% of the appiicable Assigned Special Tax for Facilities; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; THird: If additional monies aze 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 TaY 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 TaY Requirement for Facilities after the first three steps have been completed, then the Special Taac for Facilities shall be levied Proportionately on each Assessor's Parcel of Tasable Property Owner Association Properiy and Taxable Public Property at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or T~able 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 T~ 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. 2006-1 (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 Lske Elsinore Communiry Facilities District No. 2006-I Janer~ry 16, 2006 Improvement Area No. 3(Summerly) Page 9 E. EXEMPTIONS No Special Tax for Facilities shall be levied on up to 19.2 Acres of Properly Owner Association Property and/or Public Property in CFD No. 2006-1 (IA No. 3). Tas-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 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 Tasable 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. 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 financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "Buildout" means, for CFD No. 2006-i (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 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. 3) under the authorized bonding program for CFD No. 2006-1 (IA No. 3), or (ii) sha11 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 Tax for Facilities levy mider 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 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 of Lake Elsinore Commuxity Fncilities District No. 2006-I January 16, 2006 Improvement 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 aze currently available for expenditure to acquire or conshuct 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 Full Only an Assessor's Parcel of Developed Property, or Undeveloped Properiy for which a building permit has been issued, may be prepaid. The obligation of the Assessor's Parcel to pay the Special Tax for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Pazcel only ifthere are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Taac 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. 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 AmoLmt As of the proposed date of prepayment, the Special Tax for Facilities Prepayment Amount shall be calculated as follows: Paraerauh No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. Ciry of Lake Elsiieore Comnurnity Facilities Dishict No. 2006-1 January l6, 2006 Improvement Area No. 3(Summer[y) 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 Properry, based upon the building permit which has already been issued for that Assessor's Parcel. 3. (a) Divide the Assigned Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Assigned Special Tax for Facilities for the entire CFD No. 2006-1 (IA No. 3) based on the Developed Property Special T~ for Facilities which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 2006-i (IA No. 3), 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. 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 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 cunent Future Facilities Costs. 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tas for Facilities levied on the Assessar'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 Improvement Aren No. 3(Summer[}) p~g¢ ~2 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. 3) are as calculated by the CFD Administrator and inciude the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the wsts of redeeming CFD No. 2006-i (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 Indentureafter such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax for Facilities prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax for Facilities Prepayment AmounP'). From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to pazagraphs 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 Tas 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 ar 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 cunent Fiscal Year's Special Tax for Facilities lery as determined under paragraph 9(above), the CFD Administrator shall remove the current Ciry of Lake Elsinore Community Faci[ities District No. 2006-I Janaary l6, 2006 Improvement Area No. 3(Summerly) page 13 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 shail 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 Pazcel, 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 M~imum 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)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 Properiy or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section G.1; except that a partial prepayment shall be calculated according to the following formula: PP =[(PE - A) x F] + A These terms have the following meaning: PP = the partial prepayment. P~ = 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 Tax 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 Tas 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 Pazcel 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 Tas for Facilities with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special TaY for Facilities, shall continue to be levied on such Assessor's Parcel pursuant to Section D above. Ciry of Lake Elsinore Community Faci[ities District No. 2006-1 January 16, 2006 Improvement Area No. .~ (Summerly) Pnge 14 H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied for a period not to exceed forty yeazs commencing with Fiscal Year 2006-2007, provided however that the Special Taac 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 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 Uuit" 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 ar prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. "Masimum Special Tax for Services" means the masimum 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 taxes authorized to be levied within CFD No. 2006-1 (IA No. 3) pursuant to the Act to fund the Special Taat 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 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 Community Facilities District No. 2006-1 January I6, 2006 lmprovement Area No. 3(Summerly) Page I S on the delinquency rate for the Special Tax for Services levy in CFD No. 2006-1 (IANo. 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 Yeaz, 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 ofNon-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. The Masimum 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 Tas for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. 2. Duration of the Special Tax for Services The Special Tax for Services shall be levied in perpetuity to fund the Special Tax Requirement for Services, unless no longer required as determined at the sole discretion of the 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 property taxes, provided, however, that CFD No. 2006-1(IA No. 3) may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its fimding requirements. J. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2006-1(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 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:ICLIENTSIVohnLorngVSummerlylMellaIRMAVAI Fina7RMA.dac Ciry of Lake E[sinore Comnmizity Facilities District No. 2006-I January I6, 2006 Improvement Area 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 Elsinare 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 Tas 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 Taac for Facilities for Developed Property within CFD No. 2006-1 (IA No. 3) shall be modified as follows: I;and Use : ; ` ~F ~'-~ ~ ~`x~~ ~~ ~ta~~Y ' , ' As~i~ e~~' ~sia1~ ~ 1~ _ °~Class Descri tton '° ~ ~eslde~t~a1~'koorArea~~ ~ ~ ~~'fci~~GIlt~i~s ,.;. , , «. ._ _ . p ; ~ a ,._.; ~.. ~ ~. , ~ ~ ~r 1 Residential Property More than 3,649 sq. ft. $ per unit Z Residential Properry 3,350 - 3,649 sq. ft. $_ per unit 3 Residential Property 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 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 Tax for Facilities for Taacable Property Owner Association Property, Taxable Public Property, 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 T~ for Facilities may only be modified prior 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: