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HomeMy WebLinkAboutCC Reso No 2006-072RESOLUTION NO. 2006-72 RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE TO INCUR BONDED INDEBTEDNESS IN THE AMOUNT OF NOT TO EXCEED $33,000,000 WITHIN IMPROVEMENT AI2EA NO. 2 OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2004-3 (ROSETTA CANYOl~ AND A RESOLUTION OF CONSIDERATION TO ALTER THE EXISTING RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has received a petition from the landowner of Improvement Area No. 2 of Community Facilities District No. 2004-3 (Rosetta Canyon) (the "CFD") to institute proceedings to increase the amount of bonded indebtedness authorized to be incurred within Improvement Area No. 2 from $28,000,000 to $33,000,000, the proceeds of which will be used to finance the acquisition and/or conshuction of public infrastructure facilities, all pursuant to the Mello-Roos Community ' Facilities Act of 1982, as amended, commencing with Section 533ll of the ' Government Code of the State of California (the "Act"), and to alter the existing rate and method of apportionment of special taxes with respect to Improvement Area No. 2 of the CFD. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The facilities proposed to be financed by the CFD within Improvement Area No. 2 of the CFD are public infrastructure facilities and other govemmental facilities with an estimated useful life of five years or longer, which the CFD is authorized by law to conshuct, 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 CFD, including but not limited to streets, streetscape, storm drain, water and sewer facilities, fire station, fire equipment, City fees and fees of the Elsinore Valley Municipal Water District, and related costs including design, inspection, professional fees, annexation fees, connection fees and acquisition costs (the "Facilities"). CITY COUNCIL RESOLUTION NO. 2006-72 Page 2 of 4 SECTION 2. It is necessary to incur bonded indebtedness within Improvement Area No. 2 of the CFD in the amount not to exceed $33,000,000 to finance the costs of the Faciliries. SECTION 3. The indebtedness will be incurred for the purpose of financing the costs of designing, constructing and acquiring the Facilities, the acquisition of necessary equipment and property therefore and fulfilling contractual commitments and carrying out the powers and purposes of the CFD, including, but not limited to, the financing of the costs associated with the issuance of the bonds and all other costs necessary to finance the Facilities which are pernutted to be financed pursuant to the Act. SECTION 4. Improvement Area No. 2 shall pay for its bonded indebtedness. SECTION 5. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Special Tax") sufficient to pay for the costs of financing the acquisition and/or construction of the Facilities, including the principal of and interest on the bonds proposed to be issued to finance the Facilities and other periodic costs, the establishment and replenishment of reserve fiznds, the remarketing, credit enhancement and liquidity fees, the costs of administering the levy and collection of the Special Tax and all other costs of the levy of the Special Tax and issuance of the bonds, including any foreclosure proceedings, architectural, engineering, inspection, legal, fiscal, and financial consultant fees, discount fees, interest on bonds due and payable prior to the expiration of one year from the date of completion of faciliries (but not to exceed two years), election costs and all costs of issuance of the bonds, including, but not limited to, fees for bond counsel, disclosure counsel, financing consultants and printing costs, and all other administrative costs of the tax levy and bond issue. The Special Tax will be secured by recordation of a continuing lien against all real property in Improvement Area No. 2 of the CFD. In the first year in which such a Special T~ 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 revised rate and method of apportionment and manner of collection of the Special T~ is described in detail in Exhibit A attached hereto and by this reference incorporated herein. The Special Tax is based upon the cost of financing the Facilities in the CFD, the demand that each parcel will place on the Facilities and the benefit (direct and/or indirect) received by each parcel from the Facilities. CITY COUNCIL RESOLUTION NO. 2006-72 Page 3 of 4 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 Improvement Area No. 2 of the CFD shall become for any reason exempt, wholly or partially, from the levy of the Special Tax, the Council shall, on behalf of the CFD, increase the levy to the extent necessary upon the remaining property within Improvement Area No. 2 of the CFD which is not delinquent or exempt in order to yield the required payments, subject to the maximum tax. Under no circumstances, however, shall the Special T~ levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within Improvement Area No. 2 of the CFD by more than 10 percent. Furthermore, the maa~imum special tax authorized to be levied against any parcel used for private residential purposes shall not be increased over time in excess of 2 percent per year. SECTION 6. A public hearing (the "Hearing") on the proposed increase in the amount of bonded indebtedness authorized to be incurred within Improvement Area No. 2 and the alteration of the existing rate and method of apportionment of special taxes shall be held on June 27, 2006, at 7:00 p.m., or as soon thereafter as practicable, at the Lake Elsinore Cultural Center located at 183 North Main Street, Lake Elsinare, California 92530. SECTION 7. The City Clerk is hereby directed to publish a notice ("Notice") of the Hearing pursuant to Section 6061 of the Government Code iri a newspaper of general circulation published in the area of Improvement Area No. 2 of the CFD. Such Notice shall contain the text or a summary of this Resolution, state the time and place of the Hearing, and a statement that the testimony of all interested persons for or against the proposed debt issuance will be heard. Such publication shall be completed at least 7 days prior to the date of the Hearing. SECTION 8. This Resolurion shall take effect from and after the date of its passage and adoption. CITY COUNCIL RESOLUTION NO. 2006-72 Page 4 of 4 PASSED, APPROVED AND ADOPTED this 23rd day of May, 2006. AYES: COiJNCILMEMBERS: Buckley, Hickman, Kelley, Schiffner, Magee NOES: COLJNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ABSTAIN: COUNCILMEMBERS: NONE ~ ; ~ - Robert E. Magee, Ma City of Lake Elsinor ~ Frederick Ra~ City Clerk City of Lake Elsinore APPROVED AS TO FORM: ~. Barbara Zeid La~Ibold, City Attorney City of Lake Elsinore ATTEST: EXHiBIT A RATE AND METHOD OF APPORTIONMENT 45749085.2 AMENDED RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMiJNITY FACILITIES DISTRICT No. 2004-3 IMPROVEMENT AREA No. 2(ROSETTA CANYOI~ A Special Taac shall be levied on all Assessor's Parcels i,n City of Lake Elsinore Community Facilities District No. 2004-3 (Improvement Area No. 2) (Rosetta Canyon) ("CFD No. 2004-3 (IA No. 2)") and collected each Fiscal Year commencing in Fiscal Year 2005-2006, in an amount determined through the application of the Rate and Method of Apportionxnent as described below. All of the real properiy in CFD No. 2004-3 (IA No. 2), unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land azea is not shown on an Assessor's Pazcel Map, the land area shown on the applicable final map, parcel map, condomnuum plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Division 2 of Title 5 of the California Government Code. "Administrative Expenses" means the following actual or reasonably estimated costs direcUy related to the administration of CFD No. 2004-3 (IA No. 2): the costs of computing the Special Taxes and preparing the annual Special Tas 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 SpeciaY Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2004-3 (IA No. 2) or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2004-3 (IA No. 2) or any designee thereof of complying with disclosure requirements of the City, CFD No. 2004-3 (IA No. 2) or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2004-3 (IA No. 2) or any designee thereof related to an appeal 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 pariy expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2004-3 (IA No. 2) for any other administrative purposes of CFD No. 2004-3 (IA No. 2), including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taaces. "Assessor's Parcel" means a lot or pazcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number. City of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (lA No. 2) Page 1 "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. "Assigned Special Tax" means the Special Tax for each Land Use Class of Developed Property in each Zone, as determined in accordance with Section C.l.b. below. "Authorized Facilities" means those authorized improvements, as listed on Exhibit "A" to the Resolution of Formation. "Backup Special Tax" means the Special Taa~ applicable to each Assessor's Pazcel of Developed Property, as determined in accordance with Section C.l.d. below. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the lery and collection of the Special Taafes. "CFD No. 2004-3" means City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon). "CFD No. ~004-3 (IA No. 2)" means Improvement Area No. 2 of CFD No. 2004-3, as identified on the boundary map for CFD No. 2004-3. "CFD No. 2004-3 (IA No. 2) Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 2004-3 and secured solely by Special Taxes levied on property within the boundaries of CFD No. 2004-3 (IA No. 2) under the Act. "City" means the City of Lake Elsinore. "City Council" means the City Council ofthe City of Lake Elsinore, acting as the legislative body of CFD No. 2004-3 (IA No. 2). "County" means the County of Riverside. "Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Tasable Public Property and Taxable Properiy Owner Association Property, for which the Final Subdivision was recorded on or before January 1 ofthe prior Fiscal Year and a building permit for new construction was issued after January 1, 2004 and on or before May 1 of the Fiscal Year preceding the Fiscal Yeaz for which the Special Taxes are being levied. "Final Subdivision" means a subdivision of property by recordation of a final map, pazcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that creates individual lots for which building permits may be issued without further subdivision. Ciry ojLake Elsinore December l6, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA Na. 2) Page 2 "Fiscal Year" means the period starting July 1 and ending on the following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2004-3 (IA No. 2) Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any of the classes listed in Table 1. "Maximum Special Tax" means the maacimum Special Tas, 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 consttuction of one or more non-residential units or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2004-3 (IA No. 2) Bonds which aze deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Year, any properry within the boundaries of CFD No. 2004-3 (IA No. 2) that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year. "Proportionately" means for Developed Property that the ratio of the actual Special Tax levy to the Assigned Special Tax is equal for all Assessor's Parcels of Developed Property, or where the Backup Special Tas is being levied, that the ratio ofthe actual Special Tax levy to the M~imum Special Tax is equal for all Assessor's Parcels upon which a Backup Special Tax is being levied. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Taac levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Tasable Properiy as listed in Section D below. "Public Properly" means properry within the boundaries of CFD No. 2004-3 (IA No. 2) owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public right-of-way has been granted, to the federal government, the State, the County, the City, or any local government or other public agency, provided that any properiy leased by a public agency to a private entity and subject to tarcation under Section 53340.1 of the Act shall be taxed and classified according to its use. "Residential Floor Area" means all of the squaze footage of living azea within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit(s) issued for such Assessor's Parcel. Ciry of Lake EGsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page 3 "Residential Property" means all Assessor's Pazcels of Developed Properiy for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. "Resolution of Formation" means the Resolution of Formation for CFD No. 2004-3 (IA No. 2). "Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Ta~cable Property Owner Association Properiy, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement. "Special Taa RequiremenY' means that amount required in any Fiscal Yeaz for CFD No. 2004-3 (IA No. 2) to: (i) pay debt service on all Outstanding Bonds due in the calendar yeaz commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2004-3 (IA No. 2) Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2004-3 (IA No. 2) Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax delinquencies based on the delinquency rate for the Special Taac levy in the previous Fiscal Year; (vi) pay directly for acquisition ar construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tas levy on Undeveloped Property; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundazies of CFD No. 2004-3 (IA No. 2) which are not exempt from the Special Tax pursuant to law or Section E below. "Taxable Properly 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 are not exempt pursuant to Section E below. "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means, for each Fiscal Yeaz, all Taxable Property not classified as Developed Properly, T~able Properry Owner Association Property, or Taxable Public Property. "Zone" means Zone 1 or Zone 2, as applicable. "Zone 1" means the land geographically identified within the boundaries of zone 1 as delineated in Exhibit A to this Rate and Method of Apportionment. Ciry of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (7A No. 2) Page 4 "Zone 2" means the land geographically identified within the boundaries of zone 2 as delineated in E~ibit A to this Rate and Method of Apportionment. B. C. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Yeaz, all Taxable Properry within CFD No. 2004-3 (IA No. 2) shall be assigned to a Zone and further classified as Developed Property, Taacable Public Properry, T~able Properiy Owner Association Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment deterxnined pursuant to Sections C and D below. Residential Property shall be assigned to Land Use Classes 1 through 11 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Properry shall be assigned to Land Use Class 12. MAXIMUM SPECIAL TAX RATE 1. Developed Property a. Maximum Special Taac The Maximum Special Tax for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Taac or (ii) the amount derived by application of the Backup Special Tax. b. Assi ng ed Special Taac The Assigned Special Ta~c for each Land Use Class is shown below in Table 1. City of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page 5 TABLE 1 c. Increase in the Assi ned S ecial Tas The Assigned Special Taxes identified in Table 1 above shall be applicable for Fiscal Year 2005-2006, and shall increase thereafter, commencing on July 1, 2006 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Assigned Special Ta~c for the previous Fiscal Yeaz. d. Backun Special Taac The Fiscal Year 2005-2006 Backup Special Tax attributable to a Final Subdivision in Zone 1 or Zone 2 will equal $19,868 multiplied by the Acreage of all T~able Properry, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for each Assessor's Parcel of Residential Property shall be computed by dividing the Backup Special Taac amibutable to the applicable Final Subdivision by the number of Assessor's Pazcels for which building permits for residential construction have or may be issued (i.e., the number or City of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page 6 Assigned Special Taxes for Developed Property Community Facilities District No. 2004-3 Improvement Area No. 2 Fiscal Year 2005-2006 residentiallots). The Backup Special Taac for each Assessor's Parcel ofNon- Residential Properry therein shall equal $19,868 multiplied by the Acreage of such Assessor's Pazcel. If a Fina1 Subdivision includes Assessor's Parcels of Taxable Property for which building pernuts for both residential and non-residential construction may be issued, exclusive of Taacable Property Owner Association Property and Taxable Public Property, then, the Backup Special Taac for each Assessor's Parcel of Residential Property shall be computed exclusive of ttte Acreage and Assessor's Pazcels of properiy for which building permits for non-residential conshuction may be issued. Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in the preceding paragraphs is subsequently changed or modified, then the Backup Special Tax for each Assessor's Parcel of Developed Properiy in such Final Subdivision area that is changed or modified shall be a rate per square foot of Acreage calculated as follows: 1. Determine the total Backup Special Taaces anticipated to apply to the changed or modified Final Subdivision area prior to the change or modification. 2. The result of pazagraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision azea, as reasonably determined by the CFD Administrator. 3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup Special Taac per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified Final Subdivision azea for all remaining Fiscal Yeazs in which the Special Tax may be levied. i. Release of Obligation to Pay and Disclose Backup Special Tax All Assessors' Parcels within CFD No. 2004-3 (IA No. 2) will be relieved simultaneously and permanently from the obligation to pay and disclose the Backup Special Tas if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Taxes that may be levied against all Assessors' Parcels of Developed Property result in 110% debt service coverage (i.e., the Assigned Special Taaces that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2004-3 (IA No. 2) is at least equal to the sum of (i) the Administrative City of Lake E[sinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page 7 Expenses and (ii) 1.10 times maacimum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds). e. Increase in the Backup Special Tax On each July 1, commencing on July 1, 2006, the Backup Special Tax shall be increased by an amount equal to two percent (2%) of the Backup Special Tas for the previous Fiscal Yeaz. £ Multiple Land Use Classes In some instances an Assessor's Pazcel of Developed Properry may contain more than one Land Use Class. The Maximum Special T~ levied on an Assessor's Pazcel shall be the sum of the Maximum Special Tax for all Land Use Classes located on that Assessor's Pazcel. The CFD Administrator's allocation to each type of properry shall be final. 2. Tasable Property Owner Association Property, Taxable Public Property, and Undeveloped Property The Fiscal Yeaz 2005-2006 M~imum Special Tas for Tasable Properiy Owner Association Property, Taacable Public Property, and Undeveloped Property in Zone 1 or Zone 2 shall be $19,868 per Acre, and shall increase thereafter, commencing on July 1, 2006 and on July 1 of each Fiscal Yeaz thereafter, by an amount equal to two percent (2%) of the Maximum Special TaY for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2005-2006 and for each following Fiscal Year, the City Council shall levy the Special Tax until the amount of Special Taaces levied equals the Special Tax Requirement. The Special Tax shall be levied each Fiscal Year as follows: First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 in an amount equal to 100% of the applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Taac Requirement after the first step has been completed, the Special Tas shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the applicable Maa~imum Special Tax for Undeveloped Property; Third: If additional monies aze needed to satisfy the Special Taac Requirement after the first two steps have been completed, then the levy ofthe Special Tax on each Assessor's Pazcel of Developed Property in Zone 1 and Zone 2 whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Taa~ up to the Maacimum Special Tas for each such Assessor's Pazcel; City of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD Na. 2004-3 (L4 No. 2) Page 8 Fourth: If additional monies aze needed to satisfy the Special Taac Requirement after the first three steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Properly Owner Association Property and Taa~able Public Property in Zone 1 and Zone 2 at up to the applicable Maximum Special Taaf for Taacable Property Owner Association Property or Taxable Public Property. Notwithstanding the above the City Council may, in any Fiscal Yeaz, levy Proportionately less than 100% of the Assigned Special Tax in step one (above), when (i) the City Council is no longer required to lery the Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement; and (ii) all authorized CFD No. 2004-3 (IA No. 2) Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2004-3 (IA No. 2) Bonds (except refixnding bonds) to be supported by the Special Taac. Further notwithstand'mg the above, under no circumstances will the Special Tax levied against any Assessor's Pazcel of Residential Properiy for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2004-3 (IA No. 2). E. EXEMPTIONS The City shall classify Properiy Owner Association Properiy and/or Public Property in CFD No. 2004-3 (IA No. 2) as exempt property, provided that no such classification would reduce the Acreage of all Taxable Property to less than 75.86 Acres. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Properiy or Public Properiy. 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. Properry Owner Association Property or Public Property that is not exempt from Special Ta~ces under this section shall be subject to the levy of the Special Taac and shall be taaced Proportionately as part of the fourth step in Section D above, at up to 100% ofthe applicable Maximum Special Tax for Ta~cable Property Owner Association Property or T~able Public Property. F. MANNER OF COLLECTION The Special Tas shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 2004-3 (IA No. 2) may directly bill the Special Taac, may collect Special Taaces at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually fareclose on delinquent Assessor's Parcels as perxnitted by the Act. Ciry of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (L4 No. 2) Page 9 G. x. APPEALS Any landowner or resident who feels that the amount of the Special Taac levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2004-3 (IA No. 2). The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied shall be appropriately modified. The City Council may interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Taac and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. PREPAYMENT OF SPECTAL TAX The following definitions apply to this Section H: "Buildout" means, for CFD No. 2004-3 (IA No. 2), that all expected building permits have been issued. "CFD Public Facilities" means either $27,000,000 in 2006 dollars, which sha11 increase by the Construction Inflation Index on July 1, 2007, and on each July 1 thereafter, or such lower number as (i) shall be deterxnined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No. 2004-3 (IA No. 2) under the authorized bonding program for CFD No. 2004-3 (IA No. 2), or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more CFD No. 2004-3 (IA No. 2) Bonds (except refunding bonds) to be supported by the Special Taxes levied under this Rate and Method of Apportionment as described in Section D. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index far 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 sha11 be another index as determined by the CFD Administrator that is reasonably compazable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct CFD Public Facilities eligible under the Act. City of Lake Elsino~e December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (L4 No. 2) Page 10 "Previously Issued Bonds" means, far any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payxnent date following the current Fiscal Yeaz. 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 Pazcel to pay any Special Tax may be permanently satisfied as described herein, provided that a prepayment may be made ~+ith respect to a particulaz Assessor's Parcel only if there aze no delinquent Special Taxes with respect to such Assessor's Pazcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner 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. 2004-3 (IA No. 2) Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax Prepayment Amourtt (defined below) shall be calculated as suminarized below (capitalized terms as defined below): Bond Redemption Amount plus plus plus plus less less Total: equals Redemption Premiuxn, Future Facilities Amount Defeasance Amount Administrative Fees and Expenses Reserve Fund Credit Canitalized Interest Credit Prepayment Amount As ofthe proposed date ofprepayment, the Special Tax Prepayment Amount shall be calculated as follows: Paragraph No.• Confirm that no Special Tax delinquencies apply to such Assessor's Pazcel. 2. For Assessor's Parcels of Developed Properry, compute the Assigned Special Tax and Backup Special Tas. For Assessor's Pazcels of Undeveloped Properiy for which a building permit has been issued, compute the Assigned Special Taac and Backup Special Taac for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Pazcel. Ciry of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (L4 No. 2) Page Il 3. (a) Divide the Assigned Special Tas computed pursuant to paragraph 2 by the total estimated Assigned Special Taxes for the entire CFD No. 2004-3 (IA No. 2) based on the Developed Property Special Taxes which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 2004-3 (IA No. 2), excluding any Assessor's Pazcels which have been prepaid, and (b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the total estimated Backup Special Taxes at Buildout for the entire CFD No. 2004-3 (IA No. 2), excluding any Assessor's Parcels which have been prepaid. 4. Multiply the lazger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption AmounP'). 5. Multiply the Bond Redemption Amount computed pursuant to 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 deterxnined 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 Tas levied on the Assessor's Pazcel in the current Fiscal Yeaz which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax 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. I 1. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to pazagraph 10 (the "Defeasance Amount"). 12. The administrative fees and expenses of CFD No. 2004-3 (IA No. 2) are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2004-3 City af Lake Elsinme December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page 12 (IA No. 2) Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund CrediP') shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pwsuant to paragraphs 13 and 14 (the "Prepayment Amount"). From the 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. 2004-3 (IA No. 2) Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed parsuant to paragraph 12 shall be retained by CFD No. 2004-3 (IA No. 2). The Special Tax Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2004-3 (IA No. 2) Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of CFD No. 2004-3 (IA No. 2) Bonds or to make debt service payments. As a result of the payment ofthe current Fiscal Year's Special Tas levy as determined under paragraph 9(above), the CFD Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County taac rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable norice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Pazcel, and the obligation of such Assessor's Parcel to pay the Special Tax shall cease. City of Lake Elsinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page 13 Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Nfaximum Special Taaces that may be levied on Taxable Property within CFD No. 2004-3 (IA No. 2) both prior to and after the proposed prepayment is at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times masimum annual debt service, in each remaining Fiscal Yeaz on the Outstanding Bonds. 2. Prepayment in Part The Special Taac on an Assessor's Pazcel 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 sha11 be calculated as in Section H.1; except that a partial prepayment shall be calculated according to the following formula: PP =[(PE - A) x F] + A These terms have the following meaning: PP = the partial prepayment. PE = the Special Tax Prepayment Amount calculated according to Section H.1. F= the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax. A= the Administrative Fees and Expenses calculated according to Section H.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 and the percentage by which the Special Tax shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section H.1, and (ii) indicate in the recards of CFD No. 2004-3 (IA No. 2) that there has been a partial prepayment of the Special Tas and that a portion of the Special Tax with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) ofthe remaining Maximum Special Tax, shall continue to be levied on such Assessor's Parcel pursuant to Section D. I. TERM OF SPECIAL TAX The Special Tax shall be levied for a period not to exceed forly years commencing with Fiscal Year 2005-2006, provided however that Special Taxes 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. 2004-3 (IA No. 2) Bonds have been paid; and (ii) all Authorized Facilities have been constructed. City of Lake E[sinore December 16, 2004 (Amended May 23, 2006) CFD No. 2004-3 (IA No. 2) Page l4 RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMiTNITY FACILITIE5 DISTRICT No. 20043 IMPROVEMENT AREA No. 2(ROSETTA CANYON) EXHIBIT A MAP OF ZONE 1 AND ZONE 2