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HomeMy WebLinkAboutCC Reso No 2005-138RESOLUTION N0.2005-138 A 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. 2005-2 (ALBERHILL RANCH) WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has heretofore adopted Resolution No. 2005-62 ("Resolution of Intention") stating its intention to form City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) (the "CFD") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), and designating portions of the CFD as Improvement Area A, Improvement Area B and Improvement Area C; 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 incumng 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 full and fair hearing was held; and WHEREAS, 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. 2005-2 (Alberhill Ranch)" 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 N0.2005-138 Page 2 of 7 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 63 of Maps of Assessment and Community Facilities District at page 35 and as Instrument No. 2005-0565473). SECTION 4. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Services Special Tax") sufficient to finance a portion of the cost of providing parks, open space and storm drain maintenance services (the "Services") that are in addition to those provided in the territory within the CFD prior to the formation of the CFD and do not supplant services already available within the territory proposed to be included in the CFD, the costs of administering the levy and collection of the Services Special Tax and all other costs of the levy of the Services Special Tax, including any foreclosure proceedings, legal, fiscal, and financial consultant fees, election costs, and all other administrative costs of the tax levy. The Services Special Tax will be secured by recordation of a continuing lien against all real property in the CFD. The schedule of the rate and method of apportionment and manner of collection of the Services Special Tax is described in detail in Exhibit A attached hereto and by this reference incorporated herein. The Services are more 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 53325.3 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 occumng 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, facilities of Cal Trans 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 N0.2005-138 Page 3 of 7 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 for bond counsel, disclosure counsel, financing consultants and printing costs, and all other administrative costs of the tax levy and bond issue. The Special Tax will be secured by recordation of a continuing lien against all real property in the CFD. In the first year in which such a Special Tax is levied, the levy shall include a sum sufficient to repay to the City all amounts, if any, transferred to the CFD pursuant to Section 53314 of the Act and interest thereon. The schedule of the rate and method of apportionment and manner of collection of the Special Tax is described in detail in Exhibit 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 53325.3 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 Tax, 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 Tax 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 N0.2005-138 Page 4 of 7 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 or 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 Tax and the Special Tax levy obligations by assessor's parcel 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 Tax and the Special Tax, incumng 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 Tax, and the establishment of the appropriation limit. CITY COUNCIL RESOLUTION NO. 2005-138 Page 5 of 7 PASSED, APPROVED AND ADOPTED this ~ day of SFPTFMRFR , 2005. AYES: COUNCILMEMBERS: BUCKLEY, NICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE ATTEST: ~~~ R('TINl~ l~£°FLITf CT7if CC~~IL redrick Ray, Deputy City Clerk City of Lake Elsinore City of Lake ara Zeid Le~bolc~; pity Attorney of Lake E sinore STATE OF CALIFORNIA } COUNTY OF RIVERSIDE } SS: CITY OF LAKE ELSINORE } I, FREDERICK RAY, DEPUTY CITY CLERK OF THE CITY OF LAKE ELSINORE, DO HEREBY CERTIFY that the foregoing Resolution duly adopted by the City Council of the City of Lake Elsinore at a regular meeting of said Council on the ~ day ofSEPTEMBEfI 2005, and that it was so adopted by the following vote: AYES: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE FREDERICK RAY, DEPUTY CITY CLERK CITY OF LAKE ELSINORE (SEAL) EXHIBIT RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT N0.2005-2 OF THE CITY OF LAKE ELSINORE (Alberhill Ranch) (IMPROVEMENT AREA A) The following sets forth the Rate and Method of Apportionment for the levy and collection of Special Taxes in Improvement Area A of the City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) ("CFD No.2005-2"). The Special Tax shall be levied on and collected in Improvement Area A of CFD No. 2005-2 each Fiscal Yeaz, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property within Improvement Area A, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. SECTION 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 azea 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 pazcel map or instrument. The square- footage of an Assessor's Pazcel is equal to the Acreage multiplied by 43,560. "Act" means the Mello-Roos Communities Facilities Act of 1982, as amended, being Chapter 2:5, Part 1 of Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of Improvement Area A: the costs of computing the Special Taxes and preparing the Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether bythe City or otherwise); the costs of remitting the Special Taxes for Facilities to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, Improvement Area A or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, Improvement Area A or any designee thereof of complying with disclosure requirements of the City, Improvement Area A 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, Improvement Area A 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. Administration Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or Improvement Area A for any other administrative purposes of Improvement City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 1 Area A, including attorney's fees and other costs related to commencing andpursuing to completion any foreclosure of delinquent Special Taxes. "Apartment Property" means all Assessor's Parcels of Residential Property on which one or more Apartment Units aze constructed. "Apartment Unit" means a dwelling unit within a building comprised of attached residentiai units available for rental by the general public, not For sale to an end user, and under common management. "Approved Property" means all Assessor's Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January ls' preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before May ls` preceding the Fiscal Year in which the Special Tax is being levied. "Assessor's Parcel" means a lot or pazcel of land designated on an Assessor's Parcel Map with an assigned Assessor's Parcel Number. "Assessor's Parcel Map" means an official map of the Assessor ofthe County designating parcels by Assessor's Parcel Number. "Assessor's Parcel Number" means that number assigned to an Assessor's Parcel bythe County for purposes of identification, "Assigned Special Tax for Facilities" means the Special Tax of that name described in Section D below. "Backup Special Tax for Facilities" means the Special Tax of that name described in Section E below. "Bonds" means any obligation to repay a sum of money, including obligations in the form ofbonds, notes, certificates ofparticipation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Taxes for Facilities within Improvement Area A have been pledged. "Building Square Footage" or "BSF" means the square footage of assessable internal living space, exclusive of garages or other structures not used as living space, as determined by reference to the building permit application for such Assessor's Parcel. "Calendar Year" means the period commencing 7anuary 1 of any year and ending the following December 31. "CFI7 Administrator" means an official of the City, or designee thereof, responsible for (i) determining the Special .Tax Requirement for Facilities, (ii) determining the Special Tax Requirement for Services, as defined in Section L, as applicable, and (iii) providing for the levy and collection of the Special Taxes. City of Lake Elsinore June 30, 2005 Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A Page 2 "CFD No.2005-2"means Community Facilities District No.2005-2 (Alberhill Ranch) established by the City 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. 2005-2, or its designee. "County" means the County of Riverside. "Developed Property" means all Assessor's Parcels of Taxable Property that: (i) are included in a Final Map that was recorded prior to the January 151 preceding the Fiscal Year in which the Special Tax is being levied, and (ii) a building permit for new construction was issued on or before May 151 preceding the Fiscal Year in which the Special Tax is being levied. "Exempt Property" means all Assessor's Parcels designated as being exempt from Special Taxes as provided for in Section J. "Final Map" means a subdivision of property by recordation of a final map, parcel 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 maybe issued without further subdivision. "Fiscal Year" means the period commencing on July 1 of any year and ending the following June 30. "Improvement Area A" means Irprovement Area A of CFD No. 2005-2, as identified on the most recent boundary map for CFD No. 2005-2 on file with the County of Riverside Recorder's office. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds aze issued, as modified, amended and/or supplemented from time to time, and. any instrument replacing or supplementing the same. "Land Use Type" means any of the types listed in Table 1 of Section D. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined in accordance with Section C, that can belevied byCFD No.2005-2 within Improvement Area A in any Fiscal Year on any Assessor's Pazcel. "Noa-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit was issued for any type of non-residential use. "Partial Prepayment Amount" means the amount required to prepay a portion of the Special Tax for Facilities obligation for an Assessor's Parcel, as described in Section H. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 3 "Prepayment Amount" means the amount required to prepay the Special Tax for Facilities obligation in full for an Assessor's Parcel, as described in Section G. "Proportionately" means that the ratio ofthe actual Special Tax for Facilities levy to the applicable Assigned Special Tax for Facilities is equal for all applicable Assessor's Parcels. hi case of Developed Property subject to the apportionment of the Special Tax for Facilities under step four of Section F, "Proportionately" in step four means that the quotient of (a) actual Special Tax for Facilities less the Assigned Special Tax for Facilities divided by (b) the Backup Special Tax for Facilities less the Assigned Special Tax for Facilities, is equal for all applicable Assessor's Pazcels. "Provisional Undeveloped Property" means all Assessor's Parcels ofTaxable Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section J, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property. below the required minimum Acreage set forth in Section J. '!Residential Property" means all Assessor's Pazcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units. "Single Family Property" means all Assessor's Parcels of Residential Property other than Apartment Property. "Single Family Unit" means a residential dwelling unit other than an Apartment Unit. "Special Tax" means any of the special taxes authorized to be levied within Improvement Area A by CFD No. 2005-2 pursuant to the Act. "Special Tax for Facilities" means any of the special taxes authorized to be levied within Improvement Area A by CFD No. 2005-Z pursuant to the Act to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means the amount required in any Fiscal Yeaz to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, (v) an amount equal to any anticipated shortfall due to Special Tax for Facilities delinquencies in the prior Fiscal Year, and (vi) the collection or accumulation of funds for the acquisition or construction of facilities authorized by CFD No. 2005-2 provided that the inclusion of such amount does not cause an increase in the levy of Special Tax for Facilities on Undeveloped Property as set forth in Step Three of Section F., less (vii) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture. "Taxable Property" means all Assessor's Parcels within Improvement Area A, which are not Exempt Property. "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. City of Lake Elsinore Community Facilities District No. 2005-2 (AlberhiIl Ranch) Improvement Area A June 30, 2005 Page 4 "Undeveloped. Property" means all Assessor's Parcels of Taxable Property which are not Developed Property, Approved Property or Provisional Undeveloped Property. SECTION B CLASSIFICATION OF ASSESSOR'S PARCELS Each Fiscal Year, beginning with Fiscal Yeaz 2006-07, each Assessor's Pazcel within Improvement Area A shall be classified as Taxable Property or Exempt Property. In addition, each Assessor's Parcel of Taxable Property shall be further classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property. In addition, each Assessor's Parcel of Developed Property shall further be classified as Residential Property orNon-Residential Property. Lastly, each Assessor's Pazcel of Residential Property shall further be classified as a Single Family Property or Apartment Property, and each Assessor's Pazcel of Single Family Property shall be assigned to its appropriate Assigned Special Tax for Facilities rate based on its Building Square Footage. SECTION C MAXIMUM SPECIAL TAX FOR FACILITIES 1. Developed Proaerty The Maximum Special-Tax for Facilities for each Assessor's Pazcel of Single Family Property in any Fiscal Year shall be the greater of (i) the Assigned Special Tax for Facilities or (ii) the Backup Special Tax for Facilities. The Maximum Special Tax for Facilities for each Assessor's Parcel ofAparhnent Property or Non-Residential Property shall be the applicable Assigned Special Tax for Facilities described in Table 1 of Section D. Prior to the issuance of Bonds, the Assigned Special Tax for Facilities on Developed Property set forth in Table 1 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 exceeds the City's maximum level objective set forth in such document, the Maximum Special Tax for Facilities on Developed Property may be reduced (by modifying Table 1) 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. In order to reduce the Maximum Special Tax for Facilities on Developed Property it may be necessary to reduce City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 5 the Maximum Special Tax for Facilities for Undeveloped Property. The reductions pemutted 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". 2. Multiple Land Use Tvae In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Type. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Types located on the Assessor's Parcel. The CFD Administrator's allocation to each type ofproperty shall be final 3. AaProved Property, Undeveloaed Property and Provisional Undeveloped Prouerty The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Approved Property, Undeveloped Property, or Provisional Undeveloped Property in any Fiscal Year shall be the applicable Assigned Special Tax for Facilities. SECTION D ASSIGNED SPECIAL TAX FOR FACILITIES 1. Developed Proaerty Each Fiscal Year, each Assessor's Parcel of Single Family Property, Apartment Property, or Non-Residential Property shall be subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities applicable to an Assessor's Parcel ofDeveloped Property for Fiscal Year 2006-07 shall be determined pursuant to Table 1 below. TABLE 1 .ASSIGNED SPECIAL TAX FOR FACILITIES RATES FOR DEVELOPED PROPERTY FOR FISCAL YEAR 2006-07 Land Use T e Buildin S uare Foota a Rate Sin le Famil Pro e Greater than 3,650 $4,566 er Sin le Famil Unit Sin le Famil Pro e 3,151 - 3,650 $4,280 er Sin le Famil Unit Sin le Famil Pro e 2,551- 3,150 $3,373 er Sin le Famil Unit Sin le Famil Pro e 2,051 - 2,550 $3,220 er Sin le Famil Unit Sin le Famil Pro ert 1,851 - 2,050 $2,896 er Sin le Famil Unit Sin le Famii Pro e Less than ore ual to 1,850 $2,753 er Sin le Famil Unit A artment Pro e N/A $21,330 er Acre Non-Residential Pro erty N/A $21,330 er Acre City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 6 2. Approved Property Undeveloped Property and Provisional Undeveloped Property Each Fiscal Year, each Assessor's Parcel of Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities rate for an Assessor's Pazcel classified as Approved Property, Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2006-07 shall be $21,330 per Acre. 3. Increase in the Assigned Special Tax for Facilities On each July 1, commencing July 1, 2007, the Assigned Special Tax for Facilities rate for Developed Property, Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Yeaz. SECTION E BACKUP SPECIAL TAX FOR FACILITIES At the time a Final Map is recorded, the Backup Special Tax for Facilities for all Assessor's Parcels of Developed Property classified or reasonably expected to be classified as a Single Family Property within such Final Map area shall be determined by (i) multiplying (a) the Maximum Special Tax for Facilities rate for Undeveloped Property by (b) the total Acreage of Taxable Property in such Final Map azea, excluding Acreage classified as Provisional Undeveloped Property, Acreage classified or reasonably expected to be classified as Apartment Property or Non-Residential Property, and any Acreage reasonably expected to be classified as Exempt Property in such Final Map area, and (ii) dividing the results in (i) by the total number of Single Family Units reasonably expected to be constructed within such Final Map area. The resulting quotient shall be the Backup Special Tax for Facilities for each Assessor's Parcel of Single Family Property within such Final Map area. The Backup Special Tax for Facilities shall not apply to Non-Residential Property or Apaztment Property. Notwithstanding the foregoing, if Assessor's Parcels of Developed Property which are classified or to be classified as Single Family Property are subsequently changed or modified by recordation of a lot line adjustment or similar instrument, then the Backup Special Tax for Facilities for the area that has been changed or modified shall be recalculated, based on the methodology above, to equal the amount of Backup Special Tax for Facilities that would have been generated if such change did not take ptace. On each July 1, commencing July 1, 2007, the Backup Special Tax for Facilities rate shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 7 SECTION F METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing Fiscal Yeaz 2006-07 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Facilities on all Taxable Property in accordance with the following steps: Step One: The Special Tax for Facilities shall be levied Proportionately on each Assessor's Pazcel of Developed Property at up to 100% of the applicable Assigned Special Tax for Facilities rates in Table 1 to satisfy the Special Tax Requirement for Facilities. Step Two: If additional moneys 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 Pazcel of Approved Property at up to 100%ofthe Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Three: If additional moneys aze needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Properly up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Four: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities on each Assessor's Parcel of Developed Property whose Maximum Special Tax for Facilities is the Backup Special Tax for Facilities shall be increased Proportionately from the Assigned Special Tax for Facilities up to 100% of the Backup Special Tax for Facilities as needed to satisfy the Special Tax Requirement .for Facilities. Step Five: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Pazcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax .Requirement for Facilities. Notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Pazcel of Residential Property 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 owner of any other Assessor's Pazcel within Improvement Area A. Ciry of Lake Elsinore Tune 30, 2005 Community Facilities District No. 2005-2 (Alberbill Ranch) Improvement Area A Page 8 SECTION G PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "CFD Public Facilities" means $22,000,000 expressed in 2005 dollars, which shall increase by the Construction Inflation Index on July 1, 2006, and on each July 1 thereafter, or such lower amount (i) determined by the City Council as sufficient to provide the public facilities under the authorized bonding program for Improvement Area A, or (ii) determined by the Ciry Council concurrently with a covenant that it will not issue any more Bonds to be supported by Special Taxes for Facilities levied under this Rate and Method of Apportionment. "Construction Fund" means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are currently available for expenditure to acquire or construct public facilities eligible under CFD No. 2005-2. "Construction Inflation Index" means the annual percentage change in the Engineering News- Record Building Cost Index for the city of Los Angeles, measured as of the Calendar Year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News-Record Building Cost Index for the city of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus public facility costs available to be funded through existing construction or escrow accounts or funded by the Outstanding Bonds, and minus public facility costs funded by interest eaznings on the Construction Fund actually earned prior to the date of prepayment. "Outstanding Bonds" means all previously issued Bonds issued and secured by.the levy of Special Taxes for Facilities which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Special Taxes for Facilites. The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property; or an Assessor's Parcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or an Assessor's Parcel of Provisional Undeveloped Property may be prepaid in full, provided that there aze no delinquent Special Taxes, penalties, or interest chazges outstanding with respect to such Assessor's Pazcel at the time. the Special Tax for Facilities obligation would be prepaid. The Prepayment Amount for an Assessor's Parcel eligible for prepayment shall be determined as described below. 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 notice the CFD Administrator shall notify such owner of the Prepayment Amount of such Assessor's Parcel. The CFD Administrator may change a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that City of Lake Elsinore Community Facilifles District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 9 notice of redemption of Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Prepayment Amount for each applicable Assessor's Parcel shall be calculated according to the following formula (capitalized terms defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Cost plus Administrative Fee less Reserve Fund Credit less Capitalized Interest Credit equals Prepayment Amount As of the date of prepayment, the Prepayment Amount shall be calculated as follows: For an Assessor's Parcel of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities, if any, applicable to the Assessor's Parcel: For an Assessor's Parcel of Approved Property or Undeveloped Property, compute the Assigned Special Tax -for Facilities and the Backup Special Tax for Facilities as though it was already designated as Developed Property based upon the building permit issued or expected to be issued for that Assessor's Parcel. For an?,ssessor's Parcel of Provisional Undeveloped Property compute the Assigned Special Tax for Facilities for that Assessor's Parcel. 2. For each Assessor's Parcel of Developed Property, Approved Property, Undeveloped Propertyor Provisional Undeveloped Properlyto be prepaid, (a) divide the Assigned Special Tax. for Facilifies computed pursuant to paragraph 1 for such Assessor's Parcel by the sum of the estimated Assigned Special Tax for Facilities applicable to all Assessor's Parcels of Taxable Property at buildout, as reasonably determined by the City, and (b) divide the Backup Special Tax for Facilities computed pursuant to paragraph 1 for such Assessors Parcel by the sum of the estimated Backup Special Tax for Facilities applicable to all Assessor's Parcels of Taxable Property at buildout, as reasonably determined by the City. Multiply the larger quotient computed pursuant to paragraph 2(a) or 2(b) by the Outstanding Bonds. The product shall be the "Bond Redemption Amount". 4. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed with the proceeds. of the Bond Redemption Amount. This product is the "Redemption Premium." City of lake Elsinore June 30, 2005 Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A Page 10 5. Compute the Future Facilities Cost. 6. Multiply the larger quotient computed pursuant to pazagraph 2(a) or 2(b) by the amount determined pursuant to pazagraph 5 to determine the Future Facilities Cost to be prepaid (the "Future Facilities Amount"). Compute the amount needed to pay interest on the Bond Redemption Amount to be redeemed with the proceeds of the Prepayment Amount until the eazliest redemption date for the Outstanding Bonds. 8. Determine the actual Special Tax for Facilities levied on the Assessor's Pazcel in the current Fiscal Year which has not-yet been paid. 9. Estimate the amount of interest earnings to be derived from the reinvestment of the Bond Redemption Amount plus the Redemption Premium until the earliest redemption date for the Outstanding Bonds. 10. Add the amounts computed pursuant to paragraph 7 and 8 and subtract the amount computed pursuant to pazagraph 9. This difference is the "Defeasance Cost." 11. Estimate the administrative fees and expenses associated with the prepayment, including the costs of computation of the Prepayment Amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption. This .amount is the "Administrative Fee." 12. Calculate the "Reserve Fund Credit" as the lesser of: (a) the expected reduction in the applicable reserve requirements, if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirements in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the applicable reserve funds on the prepayment date. Notwithstanding the foregoing, if the reserve fund requirement is satisfied by a surety bond or other instrument at the time of the prepayment, then no Reserve Fund Credit shall be given. Notwithstanding the foregoing, the Reserve Fund Credit shall in no event be less than 0, 13. If any capitalized interest for the Outstanding 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 2(a) or 2(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment. This amount is the "Capitalized Interest Credit." City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 11 14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Cost, and the Administrative Fee, less the Reserve Fund Credit and the Capitalized Interest Credit: 15. From the Prepayment Amount, the amounts computed pursuant to paragraphs 3, 4,10,12, and 13 shall be deposited into the appropriate fund as established under the Indenture and used to retire Outstanding Bonds or make- debt service payments. The amount computed pursuant to paragraph 6 shall be deposited into the Construction Fund. The amount computed pursuanYto pazagraph 11 shall be retained by Improvement Area A. The Special Tax for Facilities prepayment amount may be insufficient to redeem a full $5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of Bonds or to make debt service payments. With respect to a Special Tax for Facilities obligation that is prepaid pursuant to this Section G, the City Council-shall indicate in the records of Improvement Area A that there has been a prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30)-days of receipt of such prepayment to indicate the prepayment of the Special Tax for Facilities obligation and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay such Special Taxes for Facilities shall cease. Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Special Tax for Facilities that maybe levied on Taxable Property, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently Outstanding Bonds in each future Fiscal Year. SECTION H PARTIAL PREPAYMENT OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property,- or an Assessor's Parcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or and Assessor's Parcel of Provisional Undeveloped Property, as calculated in this Section H below, may be partially prepaid, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time. the Special Tax for Facilities obligation would be prepaid. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 200$ Page 12 The Partial Prepayment Amount shall be calculated according to the following formula: The terms above have the following meanings: PP = the Partial Prepayment Amount. Po = the Prepayment Amount calculated according to Section G. F = the percent bywhich the owner of the Assessor's Pazcel is partiallyprepaying the Special Tax for Facilities obligation. A = the Administrative Fee calculated according to Section G. 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 Tax for Facilities and the percentage bywhich the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing. this service. With respect to any Assessor's Pazcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section G, and (ii) indicate in the records of CFD No. 2005-2 that there has been a partial prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days ofreceipt of such partial prepayment ofthe Special Tax for Facilities obligation to indicate the obligation of such Assessor's Parcel to pay such prepaid portion ofthe Special Tax for Facilities shall cease. Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Special Tax for Facilities that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently Outstanding Bonds in each future Fiscal Year. SECTION I TERMINATION OF SPECIAL TAX For each Fiscal Year that any Bonds are outstanding the Special Tax for Facilities shall be levied on all Assessor's Parcels subject to the Special Tax for Facilities. The Special Tax for Facilities shall cease not later than the 2041-42 Fiscal Year, however, the Special Taxes 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. 2005-2 Bonds have been paid; (ii) all authorized facilities for CFD No. 2005-2 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes for Facilities remain uncollected and (iv) all other obligations of Improvement Area A have been satisfied. City of Lake Elsinoce Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 13 SECTION J EXEMPTIONS The City shall classify as Exempt Property, in order of priority, (i) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor's Pazcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners' association, (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor's Pazcels which aze privately owned and are encumbered by or restricted solely for public uses, or (vi) Assessor's Parcels restricted to othertypes of public uses determined by the City Council, provided that no such classification would reduce the sum of all Taxable Property to less than 70.78 Acres: Notwithstanding the above, the City Council shall not classify an Assessor's Parcel as Exempt Property if such classificationwould reduce the sum of all Taxable Property to less than 70.78 Acres. Assessor's Pazcels which cannot be classified as Exempt Propertybecause such classification would reduce the Acreage of all Taxable Property to less than 70.78 Acres will be classified as Provisional Undeveloped Property, and will be subject to Special Taxes pursuant to Step Five in Section F. SECTION K MANNER OF COLLECTION OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be collected in the same manner and at the same tone as ordinary ad ualorem property taxes, provided, however, that Improvement Area A may collect Special Taxes for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Pazcels as permitted by the Act. SECTION L SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section L: "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 Yeaz in which the Special Tax for Services is being levied. "Developed Single Family Unit" means a residential dwelling unit other than a Developed Multifamily Unit on an Assessor's Parcel for which a building permit has been issued by the City. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 14 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 maxhnum Special Tax for Services that can be levied by hnprovement Area A in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for Improvement Area A 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 pazks, open space, and storm drains. "Special Tax for Services" means any of the special taxes authorized to be levied within CFD No. 2005-2 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 Improvement Area A equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained. during the current Fiscal Year, (ii) Administrative Expenses, and (iii) anticipated delinquent Special Taxes for Services based on the delinquency rate in CFD No. 2005-2 for the previous Fiscal Yeaz, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing Fiscal Year 2005-2006 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Services on (i) all Assessor's Parcels containing a Developed Single Farnily 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 Maximum Special Tax for Services for Fiscal Year 2005-2006 shall be $242 per Developed Single Family Unit, $121 per Developed Multifamily Unit, and $545 per Acre for each Assessor's Parcel ofNon-Residential Property. : On each July 1, commencing July 1, 2006, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Yeaz. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area.A June 30, 2005 Page 15 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 Improvement Area A may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its funding requirements. SECTION M APPEALS Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the CFD Administrator not later than twelve months after having paid the first installment of the Special Tax that is disputed. The CFD Administrator shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal. If the CFD Administrator's decision requires that the Special Tax for an Assessor's Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Special Tax on that Assessor's Parcel in the subsequent Fiscal Year(s). 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 residents appeals. Any decision of the City Council shall be final and binding as to all persons. Ciry.of Lake Elsinore Community Facilifies District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 16 EXHIBIT "A" CITY OF LAKE ELSINORE AND CFD N0.2005-X CERTIFICATE 1. Pursuant to Section _ of the Rate and Method of Apportionment of Special Tax (the "RMA"), the City of Lake Elsinore (the "City") and Community Facilities District No. 2005- X ofthe City of Lake Elsinore ("CFD No. 2005-X") hereby agree to a reduction in the Maximum Special Tax For Facilities for Developed Property [within such Improvement Area]: (a) The information in Table 1 relating to the Maximum Special Tax for Facilities for Developed Property and/or Undeveloped Property within [Improvement Area X or CFD No. 2005-XJ shall be modified as follows: [insert Table I showing effective change to special tax rates and/or insert change to special tax rates for Undeveloped Property] 2. Table 1 may only be modified prior to the issuance of Bonds. Upon execution of the Certificate by the City and CFD No. 2005-X the City shall cause an amended Notice of Special Tax Lien [for the Improvement Area] to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledges; on behalf of the City of Lake. Elsinore and CFD No. 2005-X, receipt of this Certificate and modification of the RMA as set forth in this Certificate. CTi'Y OF LAKE ELSINORE By: CFD Administratot COMMUNITY FACILITIES DISTRICT N0.2005-X OF THE CITY OF LAKE ELSINORE By: Date: Date: Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area A June 30, 2005 Page 17 EXHIBIT RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO.2005-2 OF THE CITY OF LAKE ELSINORE (Alberhill Ranch) (IMPROVEMENT AREA B) The following sets forth the Rate and Method of Apportionment for the levy and collection of Special Taxes in Improvement Area B of the City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) ("CFD No. 2005-2"). The Special Tax shall be levied on and collected in Improvement Area B of CFD No. 2005-2 each Fiscal Yeaz, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property within Improvement Area B, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. SECTION A DEFINITIONS The terms hereinafter set forth have the following meanings:. "Acre or Acreage" means the land azea 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 Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County pazcel map or instrument. The square footage of an Assessor's Parcel is equal to the Acreage multiplied by 43,560. "Act" means the Mello-Roos Communities Facilities Act of 1982, as amended, being Chapter 2.5, Part 1 of Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of Improvement Area B: the costs of computing the Special Takes and preparing the 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 for Facilities to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, Improvement Area B or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, Improvement Area B or any designee thereof of complying with disclosure requirements of the City, Improvement Area B 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, Improvement Area B 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. Administration Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or Improvement Area B for any other administrative purposes of Improvement City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 1 Area B, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes, "Apartment Property" means all Assessor's Parcels of Residential Property on which one or more Apartment Units are constructed. "Apartment Unit" means a dwelling unit within a building comprised of attached residential units available for rental by the general public, not for sale to an end user, and under common management. "Approved Property" means all Assessor's Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January lst preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before May 1st preceding the Fiscal Yeaz in which the Special Tax is being levied. "Assessor's Parcel" means a lot or parcel of land designated on an Assessor's Parcel Map with an assigned Assessor's Pazcel Number. "Assessor's Parcel Map" means an official map ofthe Assessor of the County designating parcels by Assessor's Parcel Number. "Assessor's Parcel Number" means that number assigned to an Assessor's Pazcel by the County for purposes of identification. "Assigned Special Tax for Facilities" means the Special Tax of that name described in Section D below. "Backup Special Tax for Facilities" means the Special Tax of that name described in Section E below. "Bonds" means any obligation to repay a sum of money, including obligations in the form ofbonds, notes, certificates ofparticipation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Taxes for Facilities within Improvement Area B have been pledged. "Building Square Footage" or "BSF" means the square footage ofassessable internal living space, exclusive of gazages or other structures not used as living space, as determined by reference to the building permit application for such Assessor's Pazcel. "Calendar Year" means the period commencing January 1 of any yeaz and ending the following December 31. "CFD Administrator" means an official of the City, or designee thereof, responsible for (i) determining the Special Tax Requirement for Facilities, (ii) determining the Special Tax Requirement for Services, as defined in Section L, as applicable and (iii) providing for the levy and . collection of the Special Taxes. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B Tune 30, 2005 Page 2 "CFD No.2005-2" means Community Facilities District No.2005-2 (Alberhill Ranch) established by the City 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. 2005-2, or its designee. "County" means the County of Riverside. "Developed Property" means all Assessor's Parcels of Taxable Property that: (i) aze included in a Final Map that was recorded prior to the January 1~` preceding the Fiscal Year in which the Special Tax is being levied, and (ii) a building permit for new construction was issued on or before May 15` preceding the Fiscal Yeaz in which. the Special Tax is being levied. "Exempt Property" means all Assessor's Parcels designated as being exempt from Special Taxes as provided for in Section J. "Final Map" means a subdivision of property by recordation of a final map, parcel 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 maybe issued without further subdivision. "Fiscal Year" means the period commencing on July 1 of any year and ending the following June 30. "Improvement Area B" means Improvement Area B of CFD No. 2005-2, as identified on the most recent boundary map for CFD No. 2005-2 on file with the County of Riverside Recorder's Office. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds aze issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Type" means any of the types listed in Table 1 and/or Table 2 of Section D. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined in accordance with Section C, that can be levied by CFD No. 2005-2 within Improvement Area B in any Fiscal Yeaz on any Assessor's Parcel. "Multifamily Property" means all Assessor's Parcels ofResidential Property on which one or more Multifamily Units are constructed. "Multifamily Unit" means a dwelling unit within a building comprised of attached residential units available for sale to an end user. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 3 "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit was issued for any type of non-residential use. "Part'-al Prepayment Amount" means the amount required to prepay a portion of the Special Tax for Facilities obligation for an Assessor's Parcel, as described in Section H. "Prepayment Amount" means the amount required to prepay the Special Tax for Facilities obligation in full for an Assessor's Parcel, as described in Section G. "Proportionately" means that the ratio ofthe actual Special Tax for Facilities levy to the applicable Assigned Special Tax for Facilities is equal for all applicable Assessor's Pazcels. In case of Developed Property subj ect to the apportionment of the Special Tax for Facilities under step four of Section F, "Proportionately" instep four means that the quotient of (a) Special Tax for Facilities less the Assigned Special Tax for Facilities divided by (b) the Backup Special Tax for Facilities less the Assigned Special Tax for Facilities, is equal for all applicable Assessor's Pazcels. "Provisional Undeveloped Property" means all Assessor's Pazcels ofTaxable Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section J, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in Section J for Zone 1 or Zone 2 as applicable. "Residential Property" means all Assessor's Pazcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units. "Single Family Property" means `all Assessor's Parcels of Residential Property other than Apartment Property and Multifamily Property. "Single Family Unit" means. a residential dwelling unit other- than an Apartment Unit or Multifamily Unit. "Special Tax" means any of the special taxes authorized to be levied within Improvement Area B by CFD No. 2005-2 pursuant to the Act. "Special Tax for Facilities" means any of the special taxes authorized to be levied within Improvement Area B by CFD No. 2005-2 pursuant to the Act to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendaz Yeaz that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, (v) an amount equal to any anticipated shortfall due to Special Tax for Facilities delinquencies in the prior Fiscal Year, and (vi) the collection or accumulation of funds for the acquisition or construction of facilities authorized by CFD No.2005-2 provided that the inclusion of such amount does not cause an increase in the levy of Special Tax for Facilities on Undeveloped Property as set forth in Step Three of Section F., less (vii) Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 4 any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture. "Taxable Property" means all Assessor's Parcels within Improvement Area B; which are not Exempt Property. "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means all Assessor's Parcels of Taxable Property which are not Developed Property, Approved Property or Provisional Undeveloped Property. "Zone" means Zone 1 or Zone 2. "Zone I" means a specific geographic area within Improvement Area B as depicted in Exhibit B attached hereto. "Zone 2" means a specific geographic area within Improvement Area B as depicted in Exhibit B attached hereto. SECTION B CLASSIFICATION OF ASSESSOR'S PARCELS Each Fiscal Year, beginning with Fiscal Year 2006-07 ,each Assessor's Parcel within Improvement Area B shall be assigned to Zone 1 or Zone 2 and shall be classified as Taxable Property or Exempt Properly. In addition, each Assessor's Parcel of Taxable Property shall be further classified as Developed Property, Approved Froperty, Undeveloped Property or Provisional Undeveloped Property. hi addition; each Assessor's Parcel of Developed Property shall further be classified as Residential Property or Non-Residential Property. Lastly, each Assessor's Parcel of Residential Property shall further be classified as a Single Family Property, MultifamilyProperty, or Apartment Property, and each Assessor's Parcel of Single Family Property and Multifamily Property shall be assigned to its appropriate Assigned Special Tax for Facilities rate based on its Building Square Footage. SECTION C MAXIMUM SPECIAL TAX FOR FACILITIES 1. Developed Property The Maximum Special Tax for each Assessor's Parcel of Single Family Property and Multifamily Property in any Fiscal Year shall be the greater of (i) the Assigned Annual Special Tax or (ii) the Backup Annual Special Tax. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 5 The Maximum Special Tax for Facilities for each Assessor's Parcel ofAparhnent Property or Non-Residential Property shall be the applicable Assigned Special Tax for Facilities described in Table 1 or Table 2 of Section D Prior to the issuance of Bonds, the Assigned Special Tax for Facilities on Developed Property set forth in Table 1 may be reduced in accordarice with, and subject to the conditions set forth in this pazagraph. If it is reasonably determined by the CFD Administrator that the overlapping debt burden (as defined in the Statement of Goals and Policies 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 exceeds the City's maximum level objective set forth in such document, the Maximum Special Tax for Facilities on Developed Property maybe reduced. (by modifying Table 1) 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.. In order to reduce the Maximum Special Tax for Facilities on Developed Property it may be necessary to reduce the Maximum Special Tax for Facilities for Undeveloped Property. 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 Exhibit "A". 2. Multiple Land Use Tvpe In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Type. The Maximum Special Tax for Facilities levied on an Assessor's Pazcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Types located on the Assessor's Parcel. The CFD Administrator's allocation to each type ofproperty shall be final 3. Approved Property Undeveloped Property and Provisional Undeveloped Property The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Approved Property, Undeveloped Property, or Provisional Undeveloped Properly in any Fiscal Year shall be the applicable Assigned Special Tax for Facilities. SECTION D ASSIGNED SPECIAL TAX FOR FACILITIES 1. Developed Property Each Fiscal Year, each Assessor's Parcel of Single Family Property, Multifarnily Properly, Apartment Property, orNon-Residential Property shallbe subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities applicable to an Assessor's Parcel of Developed Properly for Fiscal Year 2006-07 shall be determined pursuant to Table 1 and Table 2 below. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 6 TABLE 1 ASSIGNED SPECIAL FOR FACILITIES TAX RATES FOR DEVELOPED PROPERTY WITHIN ZONE 1 FOR FISCAL YEAR 2006-07 Land Use T e Buildin S ware Foota a Rate Sin le Famil Pro ert Greater than 4,250 $4,938 er Sin le Famil Unit Sin le Famil Pro ert 3,951- 4,250 $4,661 er Sin le Famil Unit Sin le Famil Pro ert 3,651- 3,950 $4,356 er Sin le Famil Unit Sin le Famil Pro ert 3,351- 3,650 $4,280 er Sin le Famil Unit Sin le Famil Pro e 3,051- 3,350 $3,564 er Sin le Famil Unit Sin le Famil Pro e 2,551 - 3,050 $3,373 er Sin le Famil Unit Sin le Famil Pro e 2,051- 2,550 $3;220 er Sin le Famil .Unit Sin le Famil Pro e 1,851- 2,050 $2,896 er Sin le Famil Unit Sin le Famil Pro e Less than ore ual to 1,850 $2,753 er Sin le Famil Unit Multifamil Pro e Greater than 1,600 $2,292 er Multifamil Unit Multifamil Pro e 1,401.-1,600 $2,148 erMultifamil Unit Multifamil Pro e 1,201-1,400 $2,005 er Multifamil Unit Multifamil Pro e Less than ore ual to 1,200 $1,862- er Multifamil Unit A artment Pro ert N/A $20,167 er Acre Non-Residential Prope N/A $20,167 er Acre TABLE 2 ASSIGNED SPECIAL FOR FACILITIES TAX RATES FOR DEVELOPED PROPERTY WITHIN ZONE 2 FOR FISCAL YEAR 2006-07 Land Use T e Buildin S uare Foota a Rate Sin le Famil Pro e Greater than 4,250 $4,938 er Sin le Famil Unit Sin le Famil Pro ert 3,951- 4,250 $4,661 er Sin le Famil Unit Sin le Famil Pro e 3,651- 3,950 $4,356 er Sin le Famil Unit Sin le Famil Pro e 3,351- 3,650 $4,280 er Sin to Famil Unit Sin le Famil Pro e 3,051- 3,350 $3,564 er Sin le Famil Unit Sin le Famil Pro e 2,551- 3,0$0 $3,373 er Sin le Famil Unit Sin le Famil Pro e 2,051- 2,550 $3,220 er Sin le Famil Unit Sin le Famil Pro ert 1,851 - 2,050 $2,896 ei• Sin Ie Famil Unit Sin le Famil Pro Less than ore ual to 1,850 $2,753 er Sin le Famil Unit Multifamil Pro a Greater than 1,600 $2,292 er Multifamil Unit Multifamil Pro e 1,401-1,600 $2,148 er Multifamil Unit Multifamil Pro a 1,201-1,400 $2,005 er Multifamil - Unit Multifamil Pro e Less than or iral to 1,200 $1,862 er Multifamil Unit A artment Pro e N/A $600 er A artment Unit Non-Residential Pro e N/A $5,000 er Acre City of Lake Elsinore June 30, 2005 Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B Page 7 2. Approved Property Undeveloped Property and Provisional Undeveloped Property Each Fiscal Year, each Assessor's Parcel of Approved Property, Undeveloped Properly and Provisional Undeveloped Property shall be subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities rate for an Assessor's Pazcel classified as Approved Property, Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2006-07 shall be $20,167 per Acre for Zone 1 and $48,865 per Acre for Zone 2. 3. Increase in the Assigned Special Tax for Facilities On each July 1, commencing July 1, 2007; the Assigned Special Tax for Facilities rate for Developed Property, Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. SECTION E BACKUP ANNUAL SPECIAL TAX FOR FACILITIES At the time a Final Map is recorded, the Backup Special Tax for Facilities for all Assessor's Parcels of Developed Property classified or reasonably expected to be classified as a Single Family Property or Multifamily Property within such Final Map area shall be determined by (i) multiplying (a) the Maximum Special Tax for Facilities rate for Undeveloped Property by (b) the total Acreage of Taxable Property in such Final Map area, excluding Acreage classified as Provisional Uhdeveloped Property, Acreage classified or reasonably expected to be classified as Apartment Property or Non-Residential Property, and any Acreage reasonably expected to be classified as Exempt Property in such Final Map area, and (ii) dividing the results in (i) by the total number of Single Family Units or Multifamily Units reasonably expected to be constructed within such Final Map area. The resulting quotient shall be the Backup Special Tax for Facilities for each Assessor's Parcel of Single Family Property or Multifamily Property within such Final Map area. The Maximum Special Tax for Facilities. rate(s) applied in (i) above shall be the applicable Undeveloped Property rate for the Zone in which each Assessor's Parcel is located; provided, however, if an Assessor's Parcel is located in two Zones, the Maximum Special Tax for Facilities rate applied shall be the lower of the two Maximum Special Tax for Facilities rates. The Backup Special Tax for Facilities shall not apply to Non-Residential Property or Apartment Property. Notwithstanding the foregoing, if Assessor's Parcels of Developed Property which are classified or to be classified as either Single Family Property or Multifamily Property are. subsequently changed or modified by recordation of a lot line adjustment or similaz instrument, then the Backup Special Tax for Facilities for the area that has been changed or modified shall be recalculated, based on the methodology above, to equal the amount of Backup Special Tax for Facilities that would have been generated if such change did not take place. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 8 On each July 1, commencing July 1, 2007, the Backup Special Tax for Facilities rate shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Yeaz. SECTION F METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing Fiscal Yeaz 2006-07 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Facilities on all Taxable Properly in accordance with the following steps: Step One: The Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Developed Properly at up to 100% of the applicable Assigned Special Tax for Facilities rates in Table 1 and Table 2 to satisfy the Special Tax Requirement for Facilities. Step Two: If additional moneys 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 ofApproved Property at up to 100%ofthe Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Three: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, the. Annual Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Four: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities on each Assessor's Parcel ofDeveloped Propertywhose Maximum Special Tax for Facilities is the Backup Special Tax for Facilities shall be increased Proportionately from the Assigned Special Tax for Facilities up to 100% of the Backup Special Tax for Facilities as needed to satisfy the Special Tax Requirement for Facilities. Step Five: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Parcel of Residential Property for which an occupancypermit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by owner of any other Assessor's Parcel within Improvement Area B. Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) &nprovement Area B June 30, 2005 Page 9 SECTION G PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "CFD Public Facilities" means $29,000,000 expressed in 2005 dollars, which shall increase by the Construction Inflation Index on July 1, 2006, and on each July 1 thereafter, or such lower amount (i) determined by the City Council as sufficient to provide the public facilities under the authorized bonding program for Improvement Area B, or (ii) determined by the City Council concurrently with acovenant-that it will not issue any more Bonds to be supported by Special Taxes. for Facilities levied under this Rate and Method of Apportionment. "Construction Fund" means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are currently available for expenditure to acquire or construct public facilities eligible under CFD No. 2005-2. "Construction Inflation Index" means the annual percentage change in the Engineering News- Record Building Cost Index for the city of Los Angeles, measured as of the calendar year which .ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News-Record Building Cost Index. for the city of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus public facility costs available to be funded through existing construction or escrow accounts or funded by the Outstanding Bonds, and minus public facility costs funded by interest earnings on the Construction Fund actually eazned prior to the date of prepayment.. "Outstanding Bonds" means all previously issued Bonds issued and secured by the levy of Special Taxes for Facilities which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds. of prior prepayments of Special Taxes for Facilities. The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property,. or an Assessor's Pazcel of Approved Property or Undeveloped Property for which a bullding permit has been issued or is expected to be issued, or an Assessor's Parcel of Provisional Undeveloped Property may be prepaid in full, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time the Special Tax for Facilities obligation would be prepaid. The Prepayment Amount for an Assessor's Parcel eligible for prepayment shall be determined as described;below. An owner of an Assessor's Pazcel 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 notice, the CFD Administrator shall notify such owner of the Prepayment Amount of such Assessor's Pazcel. The CFD Administrator may chazge a reasonable fee for providing City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 10 this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Prepayment Amount for each applicable Assessor's Parcel shall be calculated according to the following formula (capitalized terms defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Cost plus Administrative Fee less Reserve Fund Credit less Capitalized Interest Credit equals Prepayment Amount As of the date of prepayment, the Prepayment Amount shall be calculated as follows: For an Assessor's Parcel of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities, if any, .applicable to the Assessor's Parcel. For an Assessor's Parcel of Approved Property or Undeveloped Property, compute the Assigned Special Tax for Facilities and the Backup Special Tax for Facilities as though it was already designated as Developed Property based upon the building permit issued or expected to be issued for that Assessor's Parcel. For an Assessor's Parcel of Provisional Undeveloped Property compute the Assigned Special Tax for Facilities for that Assessor's Parcel. 2. For each Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property to be prepaid, (a) divide the Assigned Special Tax for Facilities computed pursuant to paragraph 1 for such Assessor's Parcel by the sum ofthe estimated Assigned Special Tax for Facilities applicable to all Assessor's Parcels of Taxable Property at buildout, as reasonably determined by the City, and (b) divide the Backup Special Tax for Facilities computed pursuant to paragraph 1 for such Assessor's. Parcel by the sum of the estimated Backup Special Tax for Facilities applicable to all Assessor's Parcels ofTaxable Property at buildout, as reasonably determined by the City. 3. Multiply the larger quotient computed pursuant to paragraph 2(a) or 2(b) by the Outstanding Bonds. The product shall be the `.Bond Redemption Amount". 4. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed with the proceeds City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 11 of the Bond Redemption Amount. This product is the "Redemption Premium." Compute the Future Facilities Cost. 6. Multiply the larger quotient computed pursuant to paragraph 2(a) or 2(b) by the amount determined pursuant to paragraph 5 to determine the Future Facilities Cost to be prepaid (the "Future Facilities Amount"). 7. Compute the. amount needed to pay interest on the Bond Redemption Amount to be redeemed with the proceeds of the Prepayment Amount until the eazliest redemption date for the Outstanding Bonds. 8. Determine the actual Special Tax for Facilities levied on the Assessor's Pazcel in the current Fiscal Year which has not yet been paid. 9. Estimate the amount ofinterest earnings to be.derived from the reinvestment of the Bond Redemption Amount plus the Redemption Premium until the earliest redemption date for the Outstanding Bonds. 10. Add the amounts computed pursuant to paragraph 7 and 8 and subtract the. amount computed pursuant to paragraph 9. This difference is the "Defeasance Cost." 11. Estimate the administrative fees and expenses associated with the prepayment, including the costs of computation of the Prepayment Amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption. This amount is the "Administrative Fee." 12. Calculate the "Reserve Fund Credit" as the .lesser of: (a) the expected reduction in the applicable reserve requirements, if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirements in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the applicable reserve funds on -the prepayment date. Notwithstanding the foregoing, if the reserve fund requirement is satisfied by a surety bond or other instrument at the time of the prepayment, then no Reserve Fund Credit shall be given. Notwithstanding the foregoing, the Reserve Fund Credit shall in no event be less than 0. 13. If any capitalized interest for the Outstanding 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 2(a) or 2(b) by the expected balance in the capitalized City of Lake Elsinore Community Facilities. District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 12 interest fund or account under the Indenture after such first interest and/or principal payment. This amount is the "Capitalized Interest Credit." 14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Cost, and the Administrative Fee, less the Reserve Fund Credit and the Capitalized Interest Credit. 15. From the Prepayment Amount, the amounts computed pursuant to paragraphs 3, 4, 10, 12, and 13 shall be deposited into the appropriate fund as established under the Indenture and used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to paragraph 6 shall be deposited into the Construction Fund. The amount computed pursuant to paragraph 11 shall be retained by Improvement Area B. The Special Tax for Facilities prepayment amount may be insufficient to redeem a full $5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained inthe appropriate fund established under the Indenture to be used with the next prepayment of Bonds onto make debt service payments. With respect to a Special Tax for Facilities obligation that is prepaid pursuant to this Section G, the City Council shall indicate in the records of Improvement Area B that there has been a prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such prepayment to indicate the prepayment of the Special Tax for Facilities obligation 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 such Special Taxes for Facilities shall cease. Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Special Tax for Facilities that maybe levied on Taxable Properly, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently Outstanding Bonds in each fixture Fiscal Year: SECTION H PARTIAL PREPAYMENT OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property,. or an Assessor's Parcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or and Assessor's Parcel of Provisional Undeveloped Property, as calculated in this Section H below, maybe partially prepaid, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time the Special Tax for Facilities obligation would be prepaid. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 13 The Partial Prepayment Amount shall be calculated according to the following formula: The terms above have the following meanings: PP = the Partial Prepayment Amount. Po = the Prepayment Amount calculated according to Section G. F = the percent by which the owner of the Assessor's Parcel is partially prepaying the Special Tax for Facilities obligation. A = the Administration Fee calculated according to Section G. The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax for Facilities and the percentage by which the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of the request and may chazge 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, and (ii) shall indicate in the records of CFD No. 2005-2 that there has been a partial prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such partial prepayment of the Special Tax for Facilities obligation to indicate the partial prepayment of the Special Tax for Facilities obligation and the partial release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay such prepaid portion of the Special Tax for Facilities shall cease. Notwithstandingthe foregoing, no partial prepayment will be allowed unless the amount of Special Tax for Facilities that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal 'payments on all currently Outstanding Bonds in each future Fiscal Year. SECTION I TERMINATION OF SPECIAL TAX For each Fiscal Year that any Bonds are outstanding the Special Tax for Facilities shall be levied on all Assessor's Parcels subject to the Special Tax for Facilities. The Special Tax for Facilities shall cease not later than the 2043-44 Fiscal Year, however, the Special Taxes 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. 2005-2 Bonds have been paid; (ii) all authorized facilities of CFD No. 2005-2 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes for Facilities remain uncollected and (iv) all other obligations of Improvement Area B have been satisfied. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 14 SECTION J EXEMPTIONS The City shall classify as Exempt Property, in order of priority, (i) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor's Parcels which aze used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners' association, (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor's Parcels which aze privately owned and are encumbered by or restricted solely for public uses, or (vi) Assessor's Pazcels restricted to other types of public uses determined by the City Council, provided that no such classification would reduce the sum of all Taxable Property to less than 85.59 Acres for Zone 1 and 6.80 Acres for Zone 2: Notwithstanding the above, the City Council shall not classify an Assessor's Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than 85.59 Acres for Zone 1 and 6.80 Acres for Zone 2. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 85.59 Acres for Zone 1 and 6.80 Acres for Zone 2 will be classified as Provisional Undeveloped Property, and will be subject to Special Taxes for Facilities pursuant to Step Five in Section F. SECTION K 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 Improvement Area B may collect Special Taxes for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. SECTION L SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section L: "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 City of Lake Elsinore Community Pacilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 15 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 Improvement Area B in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for Improvement Area B 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 pazks, open space, and storm drains. "Special Tax for Services" means any of the special taxes authorized to be levied within CFD No. 2005-2 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 hnprovement Area B equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during. the current Fiscal Year, (ii) Administrative Expenses, and (iii) anticipated delinquent Special Taxes for Services based on the delinquency rate in CFD No. 2005-2 for the previous Fiscal Yeaz, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing Fiscal Yeaz 2005-06 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Parcels. ofNon-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. The Maximum Special'Tax for Services for Fiscal Year 2005-06 shall be $242 per Developed Single Family Unit, $121 per Developed Multifamily Unit, and $545 per Acre for each Assessor's Parcel ofNon-Residential Property. On each July 1, commencing July 1, 2006, 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, unless no longer required as determined at the sole discretion of the City Council. Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 16 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 Improvement Area B may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its funding requirements. SECTION M APPEALS Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the CFD Administrator not later than twelve months after having paid the first installment ofthe Special Tax that is disputed. The CFD Administrator shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal. If the CFD Administrator's decision requires that the Special Tax for an Assessor's Parcel be modified or changed in favor ofthe property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Special Tax on that Assessor's Parcel in the subsequent Fiscal Year(s).. The City CounciLmay interpretthis 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 residents appeals. Any decision of the City Council shall be Snal and binding as to all persons. Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 200$ Page 17 EXHIBIT "A" CITY OF LAKE ELSINORE AND CFD N0.2005-X CERTIFICATE 1. Pursuant to Section _ of the Rate and Method of Apportionment of Special Tax (the "RMA"), the City of Lake Elsinore (the "Cit}~') and Community Facilities District No. 2005- X ofthe City of Lake Elsinore ("CFD No. 2005-X") hereby agree to a reduction in the Maximum Special Tax for Facilities for Developed Property [within such Improvement Areal: (a) The information in Table 1 relating to the Maximum Special Tax for Facilities for Developed Property and/or Undeveloped Property within [Improvement Area X or CFD No. 2005-XJ shall be modified as follows; insert Table 1 showing effective change to special tax rates and/or insert change to special tax rates for Undeveloped Property] 2. Table. l may only be modified prior to the issuance of Bonds. 3. Upon execution of the Certificate by the City and CFD No. 2005-X the City shall cause an amended Notice of Special Tax Lien [for the Improvement Area) to be recorded reflecting the ', modifications set forth herein. By execution hereof, the undersigned acknowledges, on behalf of the City. of Lake Elsinore and CFD No. 2005-X, receipt of this Certificate and modification of the RMA as set forth. in this Certificate. CITY OF LAKE ELSINORE By; Date: CFD Adiniuistrator COMMUNITY FACILITIES DISTRICT N0.2005-X OF THE CITY OF LAKE ELSINOItE By; Date: City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 18 EXHIBIT "B" ZONE MAP City of Lake Elsinore Community Facilifles District No. 2005-2 (Alberhill Ranch) Improvement Area B June 30, 2005 Page 19 ,'~ c y~y ~ {rUM, faD l~ T~ h ~ ~ ~~ m . N o~+ ~ 5• d y z 0 8 a yC P .~. ~. ~ O ~ N~ O ~ ZONE M1i'faP NIT~ ffTCILITIES D15TRICT N0. 20Q5-2 ~~7[~luIU , E ELSINORE A {~ ~!F' THE GITI° ~F L w X~ ~ (gLB~Rryl4. G.H} CQUN'IN k1F R14ER5IDE SikTE OF GALIFnR~IUa ~,a~ - IyPRDV6MENY kREfy'a" - ~~ ~ ~~E ~. I[ApR{JVESf~N7 ~kReg "9" ItARR. i+RT%6 F WREA; ay„ 7'P_ ~ ~~ ' ~ ZQNE MAP c.mmm:y P'~Eµcu.. nxkke w, BPCYE .CU ab ?/A:l. Vim..... ' juaeBa~u tiNUa! fNN~ UE N%BP,9mR:•.:CJ1nmazM eb.aF I pt•..g EXHIBIT RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT N0.2005-2 OF THE CITY OF LAKE ELSINORE (Alberhill Ranch) (IMPROVEMENT AREA C) The following sets forth the Rate and Method of Apportionment for the levy and collection of Special Taxes in Improvement Area C of the City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) ("CFD No.2005-2"). The Special Tax shall be levied on and collected in Improvement Area C of CFD No. 2005-2 each Fiscal Year, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property within Improvement Area C, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. SECTION A DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as, shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan; or other recorded County parcel map or instrument. The square footage of an Assessor's Parcel is equal to the Acreage multiplied by 43,560. "Act" means the Mello-Roos Communities Facilities Act of 1982, as amended, being Chapter 2.5, Part 1 of Division 2 of Title 5 of the Government Code of the State of Califotnia. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of Improvement Area C: the costs of computing the Special Taxes and preparing the Special Tax collection schedules (whether by the City or designee thereofor both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes for Facilities to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, Improvement Area C or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, hnprovement Area C or any designee thereof of complying with disclosure requirements of the City, Improvement Area C 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, Improvement Area C or any designee thereof related to an appeal ofthe 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. Administration Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or improvement Area Cfor-any other administrative purposes of Improvement City of Lake Elsinore Community Facilities Dis[ric[ No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 1 Area C, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Apartment Property" means all Assessor's Parcels of Residential Property on which one or more Aparhnent Units are constructed. "Apartment Unit" means a dwelling unit within a building comprised of attached residential units available for rental by the general public, not for sale to an end user, and under common management. "Approved Property" means all Assessor's Pazcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January ls` preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before May ls` preceding the Fiscal Year in which the Special Tax is being levied. "Assessor's Parcel" means a lot or pazcel of land designated on an Assessor's Parcel Map with an assigned Assessor's Parcel Number. "Assessor's Parcel Map" means an official map ofthe Assessor of the County designating parcels by Assessor's Parcel Number. "Assessor's Parcel Number" means that number assigned to an Assessor's Parcel bythe County for purposes of identification. "Assigned Special Tax for Facilities" means the Special Tax of that name described in Section D below. "Backup Special Tax for Facilities" means the Special Tax of that name described in Section E below: "Bonds" means any obligation to repay a sum of money, including obligations in the form ofbonds, notes, certificates ofparticipation, long-term leases, loans fromgovernment agencies, or loans from banks, other financial institufions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Taxes for Facilities within Improvement Area C have been pledged. "Building Square Footage" or "BSF" means the square footage of assessable internal living space, exclusive of gazages or other structures not used as living space, as determined by reference to the building permit application for such Assessor's Parcel. "Calendar Year" means the period commencing January 1 of any year and ending the following .December 3 L "CFD Administrator" means an official of the City, or designee thereof, responsible for (i) determining the Special Tax Requirement for Facilities, (ii) determining the Special Tax Requirement for Services, as defined in Section L, as applicable and (iii) providing for the levy and collection of the Special Taxes. City of Lake Elsinore June 30, 2005 Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C Page 2 "CFD No.2005-2" means Community Facilities District No. 2005-2 (Alberhill Ranch) established by the City 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. 2005-2, or its designee. "County" means the County of Riverside. "Developed Property" means all Assessor's Parcels of Taxable Propertythat:. (i) are included in a Final Map that was recorded prior to the January 15` preceding the Fiscal Year in which the Special Tax is being levied, and (ii) a building permit for new construction was issued on or before May IS` preceding the Fiscal Year in which the Special Tax is being levied. "Exempt Property" means all Assessor's Parcels designated as being exempt from Special Taxes as provided for in Section J. "Final Map" means a subdivision of property by recordation of a final map, parcel 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 maybe issued without further subdivision. "Fiscal Year" means the period commencing on July 1 of any year and ending the following June 30, "Improvement Area C" means Improvement Area C ofCFD No.2005-2, as identified on the most recent boundary map for CFD No. 2005-2 on file with the County of Riverside Recorder's Office. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Type" means any of the types listed in Table 1 and/or Table 2 of Section D. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilites, determined in accordance with Section C, that can belevied byCFD No.2005-2 within Improvement Area C in any Fiscal Year on any Assessor's Parcel. "Multifamily Property" means all Assessor's Parcels ofResidential Property on which one or more Multifamily Units are constructed. "Multifamily Unit" means a dwelling unit within a building comprised of attached residenfial units available for sale to an end user. Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) hnprovement Area C June 30, 2005 Page 3 "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit was issued for any type of non-residential use. "Partial Prepayment Amount" means the amount required to prepay a portion of the Special Tax for Facilities obligation for an Assessor's Parcel, as described in Section H. "Prepayment Amount" means the amount required to prepay the Special Tax for Facilities obligation in full for an Assessor's Parcel, as described in Section G. "Proportionately" means that the ratio of the actual Special Tax for Facilites levy to the applicable Assigned Special Tax for Facilities is equal for all applicable Assessor's Parcels. m case of Developed Property subject to the apportionment ofthe Special Tax for Facilities under step four of Section F, "Proportionately" instep four means that the quotient of (a) Special Tax for Facilities less the Assigned Special Tax for Facilities divided by (b) the Backup Special Tax for Facilities less the Assigned Special Tax for Facilities, is equal for all applicable Assessor's Parcels. "Provisional Undeveloped Property" means all Assessor's Pazcels ofTaxable Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section J, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in Section J for Zone 1 or Zone 2 as applicable. "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units. "Single Family Property" means all Assessor's Parcels of Residential Property other than ApartmentProperly and Multifamily Property. "Single Family Unit" means a residential dwelling unit other than an Apartment Unit or Multifamily Unit. "Special Tax" means any of the special taxes authorized to be levied within Improvement Area C by CFDNo. 2005-2 pursuant to the Act. "Special Tax for Facilities" means any of the special taxes authorized to be levied within Improvement Area C by CFD No. 2005-2 pursuant to the Act to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account; (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, (v) an amount equal to -any anticipated shortfall due to Special Tax for Facilities delinquencies in the prior Fiscal Year, and (vi) the collection or accumulation of funds for the acquisition or construction of facilities authorized by CFD No. 2005-2 provided that the inclusion of such amount does not cause an increase in the levy of Special Tax for Facilities on Undeveloped Property as set forth in Step Three of Section F., less (vii) City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 4 any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture. "Taxable Property" means all Assessor's Parcels within Improvement Area C, which are not Exempt Property. "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means all Assessor's Parcels of Taxable Property which are not Developed Property, Approved Property or Provisional Undeveloped Property. "Zone" means Zone 1 or Zone 2. "Zone I" means a specific geographic area within Improvement Area. C as depicted in Exhibit B attached hereto. "Zone 2" means a specific geographic area within Improvement Area C as depicted in Exhibit B attached hereto. SECTION B CLASSIFICATION OF ASSESSOR'S PARCELS Each Fiscal Yeaz, beginning with Fiscal Yeaz 2006-07 ,each Assessor's Pazcel within Improvement Area C shall be assigned to Zone 1 or Zone 2 and shall be classified as Taxable Property or Exempt Property. In addition, each Assessor's Parcel of Taxable Property shall be further classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property. In addition, each Assessor's Parcel of Developed Property shall further be classified as Residential Property or Non-Residential Property. Lastly, each Assessor's Parcel of Residential Properly shall further be classified as a Single Family Property, Multifamily Property, or Apartment .Property, and each Assessor's Pazce1 of Single Family Property and Multifamily Properly shall be assigned to its appropriate Assigned Special Tax for Facilities rate based on its Building Square Footage. SECTION C MAXIMUM SPECIAL TAX FOR FACILITIES i. Developed Property The Maximum Special Tax for each Assessor's Parcel of Single Family Property and Multifamily Property in any Fiscal Year shall be the greater of (i) the Assigned Annual Special Tax or (ii) the Backup Annual Special Tax. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 5 The Maximum Special Tax for Facilities for each Assessor's Pazcel of Apartment Property or Non-Residential Property shall be the applicable Assigned Special Tax for Facilities described in Table 1 or Table 2 of Section D Prior to the issuance of Bonds, the Assigned Special Tax for Facilities on Developed Property set forth in Table 1 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 exceeds the City's maximum level objective set forth in such document, the Maximum Special Tax for Facilities on Developed Property may be reduced (by modifying Table 1) 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. In order to reduce the Maximum Special Tax for Facilities on Developed Property it may be necessary to reduce the Maximum Special Tax for Facilities for Undeveloped Property. The reductions permitted parsuant 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 Exhibit "A". 2. Multiple Land Use Tvpe In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Type. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Types located on the Assessor's Parcel. The CFD Administrator's allocation to each typeaf property shall be final. 3. Approved Property Undeveloped Property and Provisional Undeveloped Property The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Approved Property, Undeveloped Property, or Provisional Undeveloped Property in any Fiscal Year shall be the applicable Assigned Special Tax for Facilities. SECTION D ASSIGNED SPECIAL TAX FOR FACILITIES Developed Property Each Fiscal Year, each Assessor's Parcel of Single Family Property, Multifamily Property, Apartment Property, orNon-Residential Property shall be subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities applicable tc an Assessor's Pazcel of Developed Property for Fiscal Yeaz 2006-07 shall be determined pursuant to Table 1 and Table 2 below. City of Lake Elsinore Community Facilities District No. 2005-2 (AlberhIll Ranch) Improvement Area C June 30, 2005 Page 6 TABLE 1 ASSIGNED SPECIAL FOR FACILITIES TAX RATES FOR DEVELOPED PROPERTY WITHIN ZONE 1 FOR FISCAL YEAR 2006-07 Land Use T e Buildin S ware Foota a Rate Sin le Famil Pro e Greater than 4,250 $4,938 er Sin le Famil Unit Sin le Famil Pro e 3,951- 4,230 $4,661 er Sin le Famil Unit Sin le Famil Pro ert 3,651- 3,950 $4,356 er Sin le Famil Unit Sin le Famil Pro ert 3,051- 3,650 $4,000 er Sin le Famil Unit Sin le Famil Pro e 2,751- 3,050 $3,659 er Sin le Famil Unit Sin le Famil Pro e 2,451- 2,750 $3,507 er Sin le Famil Unit Sin le Famil Pro e Less than or a ual to 2,450 $3,373 er Sin le Famil Unit Multifamil Pro e Greater than 1,600 $2,292 er IVlultifamil Unit Multifamil Pro e 1,401-1,600 $2,148 er Multifamil Unit Multifamil Pro ert 1,201-1,400 $2,005 er Multifamil Unit Multifamil Pro e Less than ore ual to 1,200 $1,862 er Multifamil Unit A artment Pro e N/A $24,110 er Acre Non-Residential Pro erty N/A $24,110 er Acre TABLE 2 ASSIGNED SPECIAL FOR FACILITIES TAX RATES FOR DEVELOPED PROPERTY WITHIN ZONE 2 FOR FISCAL YEAR 2006-07 Land Use T e Buildin S uare Foota a Rate Sin le Famil Pro Greater than 4,250 $4,938 er Sin le Famil Unit Sin le Famil Pro e 3,951- 4,250 $4,661 er Sin le Famil Unit Sin le Famil Pro e 3,651- 3;950 $4,356 er Sin le Famil Unit Sin le Famil Pro e 3,051- 3,650 $4,000 er Sin le Famil Unit Sin le Famil Pro ert 2,751- 3,050 $3,659 er Siri le Famil Unit Sin le Famil Pro e 2,451- 2,750 $3,507 er Sin le Famil Unit Sin le Famil Pro e Less than ore ual to 2,450 $3,373 er Sin le Famil Unit Multifamil Pro e Greater than 1,600 $2,292 er Multifamil Unit Multifamil Pro e 1,401-1,600 $2,148 er Multifamil Unit Multifamil Pro 1,201-1,400 $2,005 er Multifamil Unit Multifamil Pro Less than ore ual to 1,200 $1,862 er Multifamil Unit A artment Pro e N/A $600 er• A artment Unit Non-Residential Pro erty N/A $5,000 er Acre City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 7 2. Approved Property Undeveloped Property and Provisional Undeveloped Property Each Fiscal Year, each Assessor's Parcel of Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be subj ect to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities rate for an Assessor's Parcel classified as Approved Property, Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2006-07 shall be $24,110 per Acre for Zone 1 and $55,975 per Acre for Zone 2. 3. Increase in the Assigned Special Tax for Facilities On each July 1, commencing July 1, 2007, the Assigned Special Tax for Facilities rate for Developed Property, Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. v SECTION E BACKUP ANNUAL SPECIAL TAX FOR FACILITIES At the time a Final Map is .recorded, the Backup Special Tax for Facilities for all Assessor's Pazcels of Developed Property classified or reasonably expected to be classified as a Single Family Property or Multifamily Property within such Final Map azea shall be determined by (i) multiplying (a) the Maximum Special Tax for Facilities rate for Undeveloped Property by (b) the total Acreage of Taxable Property in such Final Map azea, excluding Acreage classified as Provisional Undeveloped Property, Acreage classified or reasonably expected to be classified as Apaztment Property or Non-Residential Property, and any Acreage reasonably expected to be classified as Exempt Property in such Final Map area, and (ii) dividing. the results in (i) by the total number of Single Family Units or Multifamily Units reasonably expected to be constructed within such Final Map area. The resulting quotient shall be the Backup Special Tax for Facilities for each Assessor's Parcel of Single Family Property or Multifamily Property within such Final Map area. The Maximum Special Tax for Facilities rate(s) applied in (i) above shall be the applicable Undeveloped Property rate for the Zone in which each Assessor's Pazcel is located; provided, however, if an Assessor's Parcel is located in two Zones, the Maximum Special Tax for Facilities rate applied shall be the lower of the two Maximum Special Tax for Facilities rates. The Backup Special Tax for Facilities shall not apply to Non-Residential Property or Apartment Property. Notwithstanding.the foregoing, if Assessor's Parcels of Developed Property which are classified or to be classified as either Single Family Property or Multifamily Property are subsequently changed or modified by recordation of a lot line adjustment or similaz instrument, then the Backup Special Tax for Facilities for the area that has been changed or modified shall be recalculated, based on the methodology above, to equal the amount of Backup Special Tax for Facilities that would have been generated if such change did not take place. City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 311, 'LW5 Page 8 On each July 1, commencing July 1, 2007, the Backup Special Tax for Facilities rate shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. SECTION F METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing Fiscal Year 2006-07 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Facilities on all Taxable Property in accordance with the following steps: Step One:. The Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax for Facilities rates in Table 1 and Table 2 to satisfy the Special Tax Requirement for Facilities. Step Two: If additional moneys 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 Pazcel ofApproved Property at up to 100%ofthe Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Three: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, the Annual Special Tax for Facilities shall be leviedProportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Four: If additional moneys aze needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities on each Assessor's Pazcel of Developed Property whose Maximum Special Tax for Facilities is the Backup Special Tax for Facilities shall be increased Proportionately from the Assigned Special Tax for Facilities up to 100% of the Backup Special Tax for Facilities as needed to satisfy the Special Tax Requirement for Facilities. Step Five:. If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Pazcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Pazcel of Residential Property 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 owner of any other Assessor's Parcel within hnprovement Area C. City of Lake Elsinore CommuniTy Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 9 SECTION G PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: "CFD Public Facilities" means $20,000,000 expressed in 2005 dollars, which shall increase by the Construction Inflation Index on July 1, 2006, and on each July 1 thereaftet, or such-lower amount (i) determined by the City Council as sufficient to provide the public facilities under the authorized bonding program for Improvement Area C, or (ii) determined by the City Council concurrently with a covenant that it will not issue any more Bonds to be supported by Special Taxes for Facilities levied under this Rate and Method of Apportionment. "Construction Fund" means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are currently available-for expenditure to acquire or construct public facilities eligible under CFD No. 2005-2. "Construction Inflation Index" means the annual percentage change in the Engineering News- Record Building Cost Index for the city of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News-Record Building. Cost Index for the city of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus public facility costs available to be funded through existing construction or escrow accounts or funded by the Outstanding Bonds, and minus public facility costs funded by interest earnings on the Construction Fund actually earned prior to the date of prepayment. "Outstanding Bonds" means all previously issued Bonds issued and secured by the levy of. Special Taxes for Facilities which will remain outstanding after-the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Special Taxes for Facilities. The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property, or an Assessor's Parcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or an Assessor's Parcel of Provisional Undeveloped Property may be prepaid in full, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time-the Special Tax for Facilities obligation would be prepaid. The Prepayment Amount for an Assessor's Parcel eligible for prepayment shall be determined as described below. 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 notice, the CFD Administrator shall notify such owner of the Prepayment Amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee foi• providing City of Lake Elsinore Community Facilifies District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 10 this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Prepayment Amount for each applicable Assessor's Pazcel shall be calculated according to the following formula (capitalized terms defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Cost plus Administrative Fee less Reserve Fund Credit less C~a italized Interest Credit equals Prepayment Amount As of the date of prepayment, the Prepayment Amount shall be calculated as follows: 1. For an Assessor's Parcel of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities, if any, applicable to the Assessor's Pazcel. For an Assessor's Pazcel of Approved Property or Undeveloped Property, compute the Assigned Special Tax for Facilities and the Backup Special Tax for Facilities as though it was already designated as Developed Property based upon the building permit issued or expected to be issued for that Assessor's Parcel. For an Assessor's Parcel of Provisional Undeveloped Property compute the Assigned Special Tax for Facilities for that Assessor's Parcel. 2. For each Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property to be prepaid, (a) divide the Assigned Special Tax for Facilities computed pursuant to paragraph 1 for such Assessor's Parcel bythe sum ofthe estimated Assigned Special Tax for Facilities applicable to all Assessor's Parcels of Taxable Property at buildout, as reasonably determined by the City, and (b) divide the Backup Special Tax for Facilities computed pursuant to paragraph 1 for such Assessor's Parcel by the sum of the estimated Backup Special Tax for Facilities applicable to all Assessor's Parcels ofTaxable Property at buildout, as reasonably determined by the City. Multiply the larger quotient computed pursuant to pazagraph 2(a) or 2(b) by the Outstanding Bonds. The product shall be the "Bond Redemption Amount". 4. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed with the proceeds City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 11 of the Bond Redemption Amount. This product is the "Redemption Premium." 5. Compute the Future Facilities Cost. 6. Multiply the larger quofient computed pursuant to paragraph 2(a) or 2(b) by the amount determined pursuant to paragraph 5 to determine the Future Facilities Cost to be prepaid (the "Future Facilities Amount"). Compute the amount needed to pay interest on the Bond Redemption Amount to be redeemed with the proceeds of the Prepayment Amount until the earliest redemption date for the Outstanding Bonds. 8. Determine the actual Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 9. Estimate the amount of interest earnings to be derived from the reinvestment of the Bond Redemption Amount plus the Redemption Premium until the earliest redemption date for the Outstanding Bonds. 10. Add the amounts computed pursuant to paragraph 7 and 8 and subtract the amount computed pursuant to paragraph 9. This difference is the "Defeasance Cost." 11. Estimate the administrative fees and expenses associated with the prepayment, including the costs of computation of the Prepayment Amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption. This amount is the "Administrative Fee." 12. Calculate the "Reserve Fund Credit" as the lesser. of: (a) the expected reduction in the applicable reserve requirements, if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirements in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the applicable reserve funds on the prepayment date. Notwithstanding the foregoing, if the reserve fund requirement is satisfied by a surety bond or other instrument at the time of the prepayment, then no Reserve Fund Credit shall be given. Notwithstanding the foregoing, the Reserve Fund Credit shall in no event be less than 0. 13. If any capitalized interest for the Outstanding 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 2(a) or 2(b) by the expected balance in the capitalized City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, Page 12 interest fund or account under the Indenture after such first interest and/or principal payment. This amount is the "Capitalized Interest Credit " 14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Cost, and the Administrative Fee, less the Reserve Fund Credit and the Capitalized Interest Credit. 15. From the Prepayment Amount, the amounts computed pursuant to pazagraphs 3, 4,10,12, and 13 shall be deposited into the appropriate fund as established under the Indenture and used to retire Outstanding Bonds or make debt service payments. The amount. computed pursuant to paragraph 6 shall be deposited into the Construction Fund. The amount computed. pursuant to paragraph 11 shall be retained by Improvement Area C. The Special Tax for Facilities prepayment amount may be insufficient to redeem a full $5,000 increment of 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 Bonds or to make debt service payments. With respect to a Special Tax for Facilities obligation that is prepaid pursuant to this Section G,ahe City Council shall indicate in the records of Improvement Area C that there has been a prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such prepayment to indicate the prepayment of the Special Tax for Facilities obligation and the release of the Special. Tax for Facilities lien on such Assessor's Parcel and the obligation of such Assessor's Pazcel to pay such Special Taxes for Facilities shall cease.. Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Special Tax for Facilities that may be levied on Taxable Property, net of Administrative Expenses, shall be at least 1.1 times the regulazly scheduled annual interest and principal payments on all currently Outstanding Bonds in each future Fiscal Year. SECTION H PARTIAL PREPAYMENT OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property, or an Assessor's Pazcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or and Assessor's Parcel of Provisional Undeveloped Property, as calculated in this Section H below, may be partially prepaid, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time the Special Tax for Facilities obligation would be prepaid. City of Lake Elsinore Jmme 30, 2005 Community Facilifles District No. 2005-2 (Alberhill Ranch) Improvement Area C Page 13 The Partial Prepayment Amount shall be calculated according to the following formula: The terms above have the following meanings: PP = the Partial Prepayment Amount. PG = the Prepayment Amount calculated according to Section G. F = the percent by which the owner of the Assessor's Parcel is partially prepaying the Special Tax for Facilities obligation. A = the Administration Fee calculated according to Section G. The owner of any Assessor's Parcel. who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax for Facilities and the percentage by which the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Pazcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section G, and (ii) shall indicate in the records of CFD No. 2005-2 that there has been a partial prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such partial prepayment of the Special Tax for Facilities obligation to indicate the partial prepayment of the Special Tax for Facilities obligation and the paztial release of the Special Tax for Facilities lien on such Assessor's Pazcel, and the obligation of such Assessor's Parcel to pay such prepaid portion of the Special Tax for Facilities shall cease. Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Special Tax for Facilities that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently Outstanding Bonds in each future Fiscal Year. SECTION I TERMINATION OF SPECIAL TAX For each Fiscal Yeaz that any Bonds aze outstanding the Special Tax for Facilities shall be levied on all Assessor's Parcels subject to the Special Tax for Facilities. The Special Tax for Facilities shall cease not later than the 2043-44 Fiscal Year, however, the Special Taxes 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. 2005-2 Bonds have been paid; (ii) all authorized facilities of CFD No. 2005-2 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes for Facilities remain uncollected and (iv) all other obligations of Improvement Area C have been satisfied. City of Iake Elsino;e Community Facilities District No_ 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 14 SECTION J EXEMPTIONS The City shall classify as Exempt Property, in order of priority, (i) Assessor's Pazcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor's Parcels which are used as places of worship and are exempt from ad valorem property taxes because they aze owned by a religious organization, (iii) Assessor's Parcels which aze owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners' association, (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in-the easement, (v) Assessor's Parcels which are privately owned and aze encumbered by or restricted solely for public uses, or (vi) Assessor's Parcels restricted toothertypes of public uses determined by the City Council, provided that no such classification would reduce the sum of all Taxable Property to less than 42.48 Acres for Zone 1 and 8.50 Acres for Zone 2. Notwithstanding the above, the City Council shall not classify an Assessor's Pazcel as Exempt Properly if such classification would reduce the sum of all Taxable Properly to less than 42.48 Acres for Zone l and 8.50 Acres for Zone 2. Assessor's Pazcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 42.48 Acres for Zone 1 and 8.50 Acres for Zone 2 will be classified as Provisional Undeveloped Properly, and will be subject to Special Taxes for Facilities pursuant to Step Five in Section F. SECTION K MANNER OF COLLECTION The Special Tax for Facilities shall be collected in the same manner and at the same time as ordinary ad valorem properly taxes, provided, however, that Improvement Area C may collect Special Taxes for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. SECTION L SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section L: "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 Yeaz in which the Special Tax for Services is being levied. "Developed Single Family Unit" means a residential dwelling unit other than a Developed Multifamily Unit on an Assessor's Parcel for which a building permit has been issued by the City City of Lake Elsinore June 30, 2005 Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C I;age IS 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 Improvement Area C in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for Improvement Area C for any Fiscal Yeaz 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 pazks, open space, and storm drains. "Special Tax for Services" means any of the special. taxes authorized to be levied within CFD No.. 2005-2 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 Improvement Area C equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) Administrative Expenses, and (iii) anticipated delinquent Special Taxes for Services based on the delinquency rate in CFD No. 2005-2 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 Saecia- Tax for Services Commencing Fiscal Yeaz 2005-06 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Parcels ofNon-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. The Maximum Special Tax for Services for Fiscal Year 2005-06 shall be $242 per Developed Single Family Unit, $121 per Developed Multifamily Unit, and $545 per Acre for each Assessor's Parcel ofNon-Residential Property. On each July 1, commencing July 1, 2006, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. .City of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 16 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 Improvement Area C may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its funding requirements. SECTION M APPEALS Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the CFD Administrator not later than twelve months after having paid the fast installment ofthe Special Tax thatis disputed. The CFD Administrator shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal.. If the CFD Administrator's decision requires that the Special Tax for an Assessor's Pazcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Special Tax on that Assessor's Parcel in the subsequent Fiscal Year(s). 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 residents appeals. Any decision of the City Council shall be final and binding as to all persons. CiTy of Lake Elsinore June 30, 2005 Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C Page 17 EXHIBIT "A" CITY OF LAKE ELSINORE AND CFD NO. 2005-X CERTIFICATE 1. Pursuant to Section of the Rate and Method of Apportionment of Special Tax (the "RMA'~, the City of Lake Elsinore (the "Cit}~') and Community Facilities District No. 2005- X ofthe City of Lake Elsinore ("CFD No. 2005-X") hereby agree to a reduction in the Maximum Special Tax for Facilities for Developed Property [within such Improvement Areal: (a) The information in Table 1 relating to the Maximum Special Tax for Facilities for Developed Property and/or Undeveloped Property within [Improvement Area X or CFD No. 2005-XJ shall be modified as follows: insert Table I showing effective change to special tax rates and/or insert change to special tax rates for Undeveloped Property) 2. Table 1 may only be modified prior to the issuance of Bonds. 3. Upon execution of the Certificate by the Ciry and CFD No. 2005-X the City shall cause an amended Notice of Special Tax Lien [for the Improvement Area] to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledges, on behalf of the City of Lake Elsinore and CFD No. 2005-X, receipt of this Certificate and modification of the RMA as set forth in this Certificate. CTI'Y OF LAKE ELSINORE Ey; Date: CFD Administrator COMMUNITY FACILITIES DISTRICT N0. 2005-X OF THE CITY OF LAKE ELSINORE gy; Date: Ciry of Lake Elsinore Community Facilities District No. 2005-2 (Alberhill Ranch) Improvement Area C June 30, 2005 Page 18 o O w n7 N w ~ S' n y d A z 0 O a C' (D w ~ ~ N 20NE TA&P GOMMUNITI` FACILITIES DISTRICT NC7v ~©Q'5-2 QF THE CITY S3'F l,4KE EL5INORE (ALBERHICL W+N,CHj.`. COUfdTY OP RIVER.S16E STATE OF GALIFORNIH ~1 ~.: e~ MPft ' ~~a .; .. ~ ; ~: .. Zd,CJE 2 ~ ~~ ~ - IMPRbVE~}ENT AREA; "C" tv ~r ZpN~' 1 q 6~/mrAY".' .,. IMARfJVEM1IENT FREA ~••,'. 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