$8,800,000 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 SPECIAL TAX BONDS, SERIES 2017

Transcription

1 NEW ISSUE - BOOK-ENTRY-ONLY NO RATING In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Series 2017 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2017 Bonds. See TAX MATTERS. $8,800,000 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 SPECIAL TAX BONDS, SERIES 2017 Dated: Date of Delivery Due: September 1, as shown on the inside cover page The County of San Bernardino Community Facilities District No (Lytle Creek North) Improvement Area No. 5 Special Tax Bonds, Series 2017 (the Series 2017 Bonds ) are being issued and delivered: (i) to finance a portion of certain public facilities eligible to be financed by the District (as defined herein); (ii) to fund a reserve fund; (iii) to fund an initial deposit to an administrative expense fund; and (iv) to pay costs of issuance of the Series 2017 Bonds. The County of San Bernardino Community Facilities District No (Lytle Creek North) (the District ) has been formed by and is located in the County of San Bernardino, California (the County ). Improvement Area No. 5 ( Improvement Area No. 5 ) is located within the District. The Series 2017 Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section et seq. of the Government Code of the State of California), and pursuant to an Indenture, dated as of December 1, 2017 (the Indenture ), by and between the District and U.S. Bank National Association, as trustee (the Trustee ). The Series 2017 Bonds are special obligations of the District and are payable solely from Net Special Tax Revenues (as defined herein) and other assets pledged therefor under the Indenture, all as further described herein. Special Taxes (as defined herein) are to be levied according to the rate and method of apportionment approved by the Board of Supervisors of the County and the qualified electors within Improvement Area No. 5 of the District, as more fully described herein. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS and Appendix A. The Special Taxes will be collected in the same manner and at the same time as ad valorem property taxes. The County Board of Supervisors is the legislative body of the District. Pursuant to the Indenture, Additional Bonds payable from Net Special Tax Revenues on a parity with the Series 2017 Bonds may be issued by the District for Improvement Area No. 5, but only to refund the Series 2017 Bonds or any outstanding Additional Bonds (as defined herein). See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS No Additional Bonds Except for Refunding. The Series 2017 Bonds are being issued in fully registered book-entry form only in denominations of $5,000 or any integral multiple thereof; and, when issued, they will be registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York, which will act as securities depository for the Series 2017 Bonds. Purchasers will not receive certificates representing their interests in the Series 2017 Bonds. Interest on the Series 2017 Bonds is payable on March 1 and September 1 of each year, commencing March 1, Payment of the principal of and interest on the Series 2017 Bonds, and redemption premiums, if any, thereon will be made by the Trustee, to Cede & Co. for subsequent disbursement to DTC Participants, which are expected to remit such payments to the Beneficial Owners of the Series 2017 Bonds. See the caption THE SERIES 2017 BONDS Book Entry Only System and Appendix G. The Series 2017 Bonds are subject to optional, mandatory, and sinking fund redemption as described herein. See the caption The Series 2017 Bonds Redemption. EXCEPT FOR THE NET SPECIAL TAX REVENUES AND AMOUNTS HELD IN THE SPECIAL TAX FUND, THE BOND FUND AND THE RESERVE FUND UNDER THE INDENTURE, NO OTHER FUNDS ARE PLEDGED TO THE PAYMENT OF THE SERIES 2017 BONDS. THE SERIES 2017 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE COUNTY BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAX REVENUES AND AMOUNTS HELD IN THE SPECIAL TAX FUND, THE BOND FUND AND THE RESERVE FUND UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE COUNTY, OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2017 BONDS. THE PURCHASE OF THE SERIES 2017 BONDS INVOLVES CERTAIN RISKS AND THE SERIES 2017 BONDS ARE NOT SUITABLE INVESTMENTS FOR ALL TYPES OF INVESTORS. SEE THE CAPTION SPECIAL RISK FACTORS FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, IN EVALUATING THE INVESTMENT QUALITY OF THE SERIES 2017 BONDS. This cover page contains certain information for general reference only. It is not a summary of this issue. Prospective investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. MATURITY SCHEDULE (See Inside Cover Page) The Series 2017 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel to the District, and subject to other conditions. Certain legal matters will be passed on for the County and the District by County Counsel and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel, for Lennar Homes of California, Inc. by Holland & Knight LLP, San Francisco, California, for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California, and for the Trustee by its counsel. It is anticipated that the Series 2017 Bonds in book-entry form will be available for delivery through the facilities of DTC on or about December 13, Dated: November 21, 2017

2 $8,800,000 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 SPECIAL TAX BONDS, SERIES 2017 MATURITY SCHEDULE BASE CUSIP $4,490,000 Serial Bonds Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP 2018 $185, % 1.220% RM , RN , RP , RQ , RR , RS , RT , RU , RV , CC RW , C RX , C RY , C RZ , C SA , C SB , SC , SD , SE , SF , SG4 $1,730, % Term Bonds Due September 1, 2042 Yield 3.750% Price C % CUSIP SH2 $2,580, % Term Bonds Due September 1, 2048 Yield 3.800% Price C % CUSIP SJ8 CC Priced to the optional redemption date of September 1, 2024, at 103%. C Priced to the optional redemption date of September 1, 2027, at par. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of The American Bankers Association. This information is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers are provided for convenience of reference only. None of the County, the District or the Underwriter takes any responsibility for the accuracy of such numbers.

3 SAN BERNARDINO COUNTY BOARD OF SUPERVISORS Robert A. Lovingood, Chair, First District Curt Hagman, Vice Chair, Fourth District Janice Rutherford, Supervisor, Second District James Ramos, Supervisor, Third District Josie Gonzales, Supervisor, Fifth District COUNTY OFFICIALS Gary McBride, County Executive Officer Oscar Valdez, Auditor-Controller/Treasurer/Tax Collector Vacant, Chief Financial Officer Michelle Blakemore, County Counsel Jeff Rigney, Director-Special Districts Department SPECIAL SERVICES BOND COUNSEL Orrick, Herrington & Sutcliffe LLP Los Angeles, California SPECIAL TAX CONSULTANT David Taussig and Associates, Inc. Newport Beach, California REAL ESTATE APPRAISER Harris Realty Appraisal Newport Beach, California DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth Newport Beach, California FINANCIAL ADVISOR CSG Advisors Incorporated San Francisco, California TRUSTEE U.S. Bank National Association Los Angeles, California

4 No dealer, broker, salesperson or other person has been authorized by the County, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Series 2017 Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the County, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2017 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Series 2017 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information set forth herein which has been obtained by the County or the District from third party sources is believed to be reliable but is not guaranteed as to accuracy or completeness by the County, the District or the Trustee. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the County or the District, the property owners within the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the County for further information in connection therewith. While the County maintains an internet website for various purposes, none of the information on such website is incorporated by reference herein or intended to assist investors in making any investment decision or to provide any continuing information with respect to the Series 2017 Bonds or any other bonds or obligations of the County. Any such information that is inconsistent with the information set forth in this Official Statement should be disregarded. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, project, budget or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the captions IMPROVEMENT AREA NO. 5, DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5 and PROPERTY OWNERSHIP. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN CONNECTION WITH THE OFFERING OF THE SERIES 2017 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH SERIES 2017 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE SERIES 2017 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE SERIES 2017 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

5 TABLE OF CONTENTS Page INTRODUCTION... 1 General... 1 The District... 1 The Appraisal... 3 Sources of Payment for the Series 2017 Bonds... 4 Continuing Disclosure... 5 Bond Owners Risks... 5 Other Information... 5 ESTIMATED SOURCES AND USES OF FUNDS... 5 THE SERIES 2017 BONDS... 6 Authority for Issuance... 6 Purpose of the Series 2017 Bonds... 6 Description of the Series 2017 Bonds... 6 Book-Entry Only System... 7 Redemption... 7 DEBT SERVICE SCHEDULE SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Special, Limited Obligations of the District; Pledge of Net Special Tax Revenues Special Taxes Rate and Method of Apportionment of Special Taxes Collection and Application of Special Taxes Covenant for Superior Court Foreclosure Maximum Special Tax Capacity Property Values Special Tax Fund Bond Fund Reserve Fund No Additional Bonds Except for Refunding Subordinate Obligations IMPROVEMENT AREA NO Location Description of the Authorized Facilities DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO Rosena Ranch Development Improvement Area No Infrastructure Development Lennar Homes Financing Plan PROPERTY OWNERSHIP Lennar Homes of California, Inc Lennar Lytle SPECIAL RISK FACTORS Risks of Real Estate Secured Investments Generally Limited Obligations Insufficiency of Special Taxes Failure to Develop Remaining Homes Soils and Seismic Conditions and Natural Disasters i

6 TABLE OF CONTENTS (Continued) Endangered Species Hazardous Substances Parity Taxes, Special Assessments and Land Development Costs Disclosures to Future Purchasers Non-Cash Payments of Special Taxes Payment of the Special Tax is Not a Personal Obligation of the Owners Property Values FDIC/Federal Government Interests in Properties Bankruptcy and Foreclosure No Acceleration Provision Loss of Tax Exemption Audit of Tax-Exempt Bond Issues Limitations on Remedies Limited Secondary Market; Potential Reductions in Bond Values Funds Invested in the County Investment Pool Potential Early Redemption of Series 2017 Bonds from Prepayments Proposition Shapiro Decision Ballot Initiatives CONTINUING DISCLOSURE TAX MATTERS FINANCIAL ADVISOR LEGAL MATTERS LITIGATION NO RATING UNDERWRITING FINANCIAL INTERESTS ADDITIONAL INFORMATION Page APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES... A-1 APPENDIX B APPRAISAL REPORT AND UPDATE APPRAISAL REPORT... B-1 APPENDIX C GENERAL INFORMATION CONCERNING SAN BERNARDINO COUNTY... C-1 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE... D-1 APPENDIX E FORM OF OPINION OF BOND COUNSEL... E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT... F-1 APPENDIX G BOOK-ENTRY ONLY SYSTEM... G-1 ii

7

8

9 $8,800,000 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 SPECIAL TAX BONDS, SERIES 2017 INTRODUCTION General This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of the Series 2017 Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined have the meaning set forth in Appendices A or D. The purpose of this Official Statement, which includes the cover page, inside cover page, the table of contents and the attached appendices (collectively, the Official Statement ), is to provide certain information concerning the issuance of the $8,800,000 County of San Bernardino Community Facilities District No (Lytle Creek North) Improvement Area No. 5 Special Tax Bonds, Series 2017 (the Series 2017 Bonds ). The proceeds of the Series 2017 Bonds will be used: (i) to finance a portion of certain public facilities eligible to be financed by the District (as such term is defined herein); (ii) to fund a reserve fund; (iii) to fund an initial deposit to an administrative expense fund; and (iv) to pay costs of issuance of the Series 2017 Bonds. The Series 2017 Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section et seq. of the Government Code of the State of California) (the Act ) and an Indenture, dated as of December 1, 2017 (the Indenture ), by and between the District and U.S. Bank National Association, as trustee (the Trustee ). See the caption THE SERIES 2017 BONDS. Subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms set forth therein, the Series 2017 Bonds are secured under the Indenture by a pledge of and lien upon Net Special Tax Revenues (as such term is defined herein) and other assets pledged therefor under the Indenture. Under certain circumstances, the District may issue additional bonds on behalf of Improvement Area No. 5 (as defined below) of the District which are payable on a parity with the Series 2017 Bonds pursuant to the provisions of the Indenture (the Additional Bonds and, together with the Series 2017 Bonds, the Bonds ) provided that such Additional Bonds may be issued solely for the purposes of refunding the Series 2017 Bonds or any Additional Bonds. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS No Additional Bonds Except for Refunding. The District General. The District is approximately coterminous with a master planned community being developed by Lennar Lytle, LLC ( Lennar Lytle ) known as Rosena Ranch. The Rosena Ranch development consists of approximately 386 gross acres planned for the development of 2,086 residential units. Improvement Area No. 5 (as defined below) comprises 270 of the planned units within the Rosena Ranch development and is the fifth area within the District to be developed. Formation Process. The District was formed on March 13, 2007, by the County of San Bernardino (the County ) pursuant to the Act to finance wastewater treatment facilities, road improvements, culvert crossings and traffic signals, bridge improvements, trails and trail-related landscape improvements, sanitary sewer system improvements, domestic water system improvements, landscaping improvements, storm system, 1

10 storm water retention basins, water detention basins, drainage and flood protection improvements, community park improvements, fire and police protection facilities and land, rights-of-way and easements necessary for any of such facilities (collectively, the Facilities ) and certain services, including fire protection services, maintenance of parks, parkways and open space and flood and storm protection services (collectively, the Services ). Neither the proceeds of the Series 2017 Bonds nor the proceeds of any Additional Bonds will be used to finance the Services. At the time that the District was formed, the District had designated two improvement areas within the District known as Improvement Area No. 1 of County of San Bernardino Community Facilities District No ( Improvement Area No. 1 ) and Improvement Area M of County of San Bernardino Community Facilities District No (Lytle Creek North) ( Improvement Area M ). In 2011, certain property within Improvement Area M was designated as Improvement Area No. 2 of County of San Bernardino Community Facilities District No (Lytle Creek North) ( Improvement Area No. 2 ). In 2012, certain property within Improvement Area M was designated as Improvement Area No. 3 of County of San Bernardino Community Facilities District No (Lytle Creek North) ( Improvement Area No. 3 ). In 2014, certain property within Improvement Area M was designated as Improvement Area No. 4 of County of San Bernardino Community Facilities District No (Lytle Creek North) ( Improvement Area No. 4 ). In 2016, certain property within Improvement Area M was designated as Improvement Area No. 5 of County of San Bernardino Community Facilities District No (Lytle Creek North) ( Improvement Area No. 5 ). In 2017, certain property within Improvement Area M and property annexed to the District was designated as Improvement Area No. 6 of County of San Bernardino Community Facilities District No (Lytle Creek North) ( Improvement Area No. 6 ). There is no longer any property that is expected to be developed into residential lots within Improvement Area M. This Official Statement contains information relating to the issuance of the Series 2017 Bonds on behalf of Improvement Area No. 5 only. The Series 2017 Bonds are not secured by Net Special Tax Revenues from any of Improvement Area No. 1, Improvement Area No. 2, Improvement Area No. 3, Improvement Area No. 4, or Improvement Area No. 6 but are secured solely by Net Special Tax Revenues from Improvement Area No. 5. The Act was enacted by the State of California (the State ) Legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as such term is defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a community facilities district may issue bonds to finance the costs of public facilities and may levy and collect a special tax within such district to repay such indebtedness. The Board of Supervisors of the County (the Board of Supervisors ) acts as the legislative body of the District. Pursuant to the Act, the Board of Supervisors adopted the necessary resolutions stating its intent to establish the District and undertook certain proceedings to designate Improvement Area No. 5 therein, to authorize the levy of special taxes on taxable property within the boundaries of the District and Improvement Area No. 5, and to have the District and Improvement Area No. 5 incur bonded indebtedness for the purpose of financing the authorized Facilities. Following public hearings conducted pursuant to the provisions of the Act, the Board of Supervisors adopted resolutions establishing the District and designating Improvement Area No. 5 therein, and calling special elections to submit the levy of the special taxes and the incurring of bonded indebtedness to the qualified voters of Improvement Area No. 5. On April 19, 2016, at an election held pursuant to the Act, the landowners who comprised the qualified voters of Improvement Area No. 5 authorized the District to incur bonded indebtedness in the aggregate principal amount not to exceed $9,000,000 for Improvement Area No. 5 and approved the Rate and Method of Apportionment for Improvement Area No. 5 of the District (the Rate and Method ), which establishes a special tax to fund the Special Tax Requirement (as such term is defined in the Rate and Method), which Special Tax Requirement includes amounts required in 2

11 any Fiscal Year to pay the principal of and interest on the Series 2017 Bonds and any Additional Bonds when due. See the captions SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Special Taxes and SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Rate and Method of Apportionment of Special Taxes and Appendix A. At the time of the establishment of the District, a special tax was also approved for the District, including Improvement Area No. 5 to fund: (i) certain costs of fire protection ( Special Tax A ); (ii) maintenance of open space and flood and storm drain protection services ( Special Tax B ); and (iii) maintenance of parks and parkways, but only if such maintenance services are not provided by the property owner association ( Special Tax C, and together with Special Tax A and Special Tax B, collectively, the Services Special Taxes ). The Services Special Taxes are not pledged to pay the Series 2017 Bonds. Improvement Area No. 5. Improvement Area No. 5 encompasses approximately 46.4 gross acres. The property in Improvement Area No. 5 is proposed for 270 detached residential dwellings. Lennar Lytle was the original owner of the property within Improvement Area No. 5 but had previously transferred all of such property to Lennar Homes of California, Inc. ( Lennar Homes ), the developer within Improvement Area No. 5. As of August 1, 2017 (the date of value set forth in the Appraisal (defined below)), Improvement Area No. 5 had 218 completed homes owned by homeowners; 14 completed but unclosed homes owned by Lennar Homes and 38 homes in various stages of unit construction owned by Lennar Homes. As of October 1, 2017, Improvement Area No. 5 had (i) 250 completed homes owned by homeowners, (ii) five completed homes which have been sold but ownership of which had not yet transferred to individual homeowners, and (iii) 15 homes in various stages of unit construction owned by Lennar Homes, of which 14 have been sold to individual homeowners and are expected to close upon completion of home construction. See the caption DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5. Improvement Area No. 5 is located north of the City of Fontana s northern boundary, in unincorporated San Bernardino County. Improvement Area No. 5 is bounded by Interstate 15 Freeway on the north/northwest and Lytle Creek on the south. The property is near the foot of the San Gabriel Mountains at the mouth of Lytle Creek Canyon. Ownership of the property in Improvement Area No. 5 is described under the caption PROPERTY OWNERSHIP. The Appraisal An appraisal report for the land and existing improvements within Improvement Area No. 5 was prepared by Harris Realty Appraisal, Newport Beach, California (the Appraiser ). The appraisal report (the Appraisal ), which is dated August 22, 2017, is entitled Appraisal Report County of San Bernardino Community Facilities District No Improvement Area No. 5 Lytle Creek North and establishes a date of value of August 1, 2017 (the Date of Value ). The Appraisal is set forth in Appendix B. The Appraisal provides an estimate of the minimum market value of the fee simple interest subject to special tax and special assessment liens of the property within Improvement Area No. 5 consisting of approximately 46.4 gross acres planned for development into approximately 270 detached single-family residential units. As of the Date of Value, the property within Improvement Area No. 5 was owned by the 218 individual homeowners and Lennar Homes. The Appraiser is of the opinion that the minimum market value of the land and improvements in existence within Improvement Area No. 5 as of the Date of Value, was $103,400,000. This value results in an estimated overall appraised value-to-lien ratio (including the Series 2017 Bonds and all direct and overlapping tax and assessment debt and general obligation debt) for Improvement Area No. 5 of approximately to- 1. Excluding the outstanding general obligation debt, the estimated appraised value to lien ratio would be approximately to-1. The value-to-lien ratios for individual properties in Improvement Area No. 5 vary 3

12 significantly from this overall average. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Property Values Estimated Appraised Value-to-Lien. The Appraiser has prepared an Update Appraisal Report with an effective date of October 1, 2017 (the Update Appraisal Report ) which is attached hereto as Appendix B. In the Update Appraisal Report, the Appraiser concludes that the value of the appraised properties as of the date of the Update Appraisal Report, is not less than the conclusion of value for such property set forth in the Appraisal Report. The Appraisal is based upon a variety of assumptions and limiting conditions that are described in the full text of the Appraisal attached to this Official Statement as Appendix B. The Appraiser s opinions reflect conditions prevailing in the applicable market as of the Date of Value. None of the County, the District or the Underwriter makes any representation as to the accuracy of the Appraisal. There is no assurance that the property within Improvement Area No. 5 can be sold for the amounts set forth in the Appraisal or that any parcel can be sold for a price sufficient to pay the Special Taxes for such parcel in the event of a default in payment of Special Taxes by the owner of such parcel. See the caption SPECIAL RISK FACTORS Property Values and Appendix B. Sources of Payment for the Series 2017 Bonds Under the Indenture, the District has pledged to repay the Series 2017 Bonds from Net Special Tax Revenues and other assets pledged therefor under the Indenture, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. Net Special Tax Revenues consist of Special Tax Revenues less the amount required to pay Administrative Expenses. Special Tax Revenues are defined in the Indenture to include the proceeds of the Special Taxes received by or on behalf of the District for Improvement Area No. 5, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes, which will be limited to the amount of said lien and interest and penalties thereon. The Services Special Taxes are not pledged to pay the Series 2017 Bonds. The Net Special Tax Revenues are the primary security for the repayment of the Series 2017 Bonds and any Additional Bonds. In the event that the Special Taxes are not paid prior to delinquency, the only sources of funds available to pay the debt service on the Series 2017 Bonds and any Additional Bonds are amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund. Amounts held in the Rebate Fund, the Improvement Fund and the Administrative Expense Fund are not available to pay the debt service on the Series 2017 Bonds and any Additional Bonds. See the caption SECURITY AND SOURCES OF PAYMENT FOR SERIES 2017 BONDS No Additional Bonds Except for Refunding for a description of the conditions precedent to the issuance of Additional Bonds, including, among other requirements, the requirement that Annual Debt Service in each Bond Year, calculated for all Bonds that will be Outstanding after the issuance of such Additional Bonds, will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds which are Outstanding immediately prior to the issuance of such Additional Bonds. EXCEPT FOR THE NET SPECIAL TAX REVENUES AND AMOUNTS HELD IN THE SPECIAL TAX FUND, THE BOND FUND AND THE RESERVE FUND UNDER THE INDENTURE, NO OTHER FUNDS ARE PLEDGED TO THE PAYMENT OF THE SERIES 2017 BONDS. THE SERIES 2017 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE COUNTY BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAX REVENUES AND AMOUNTS HELD IN THE SPECIAL TAX FUND, THE BOND FUND AND THE RESERVE FUND UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE COUNTY, OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2017 BONDS. 4

13 Continuing Disclosure The District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System ( EMMA ) of the Municipal Securities Rulemaking Board (the MSRB ), certain annual financial information and operating data and notice of certain enumerated events in order to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (the Rule ). See the caption CONTINUING DISCLOSURE and Appendix F for a description of the specific nature of the annual reports and enumerated event notices to be filed by the District or its representatives. Bond Owners Risks Certain events could affect the timely repayment of the principal of, premium, if any and interest on the Series 2017 Bonds when due. See the caption SPECIAL RISK FACTORS for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Series 2017 Bonds. The Series 2017 Bonds are not being rated by any nationally recognized rating agency. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Series 2017 Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Series 2017 Bonds and the Constitution and laws of the State, as well as the proceedings of the Board of Supervisors, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Series 2017 Bonds, by reference to the Indenture. Copies of the Indenture and other documents referred to herein are available for inspection and (upon request and payment to the County of a charge for copying, mailing and handling) for delivery from the Special Districts Department of the County at 157 West 5th Street, 2nd Floor, San Bernardino, California , Attention: Mr. Jeff Rigney, Director. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of Series 2017 Bonds proceeds: Sources Principal Amount of Bonds $ 8,800, Plus Net Original Issue Premium 236, Total Sources $ 9,036, Uses Improvement Fund $ 8,245, Reserve Fund (1) 494, Administrative Expense Fund 30, Costs of Issuance Fund (2) 176, Underwriter s Discount 90, Total Uses $ 9,036, (1) (2) An amount equal to the initial Reserve Requirement. Includes legal fees, Trustee fees, Financial Advisor fees, Special Tax Consultant fees, Appraiser fees, printing costs and certain other Series 2017 Bond issuance costs. 5

14 THE SERIES 2017 BONDS Authority for Issuance The Series 2017 Bonds are being issued pursuant to the Act and the Indenture. The Act was adopted by the State Legislature to provide an alternate method of financing certain public capital facilities and services. Once duly established by a local governmental agency, a community facilities district is itself a legally constituted governmental entity, with the governing board or legislative body of the local agency that established it constituting the legislative body of the community facilities district. Subject to approval by a two-thirds vote of a community facilities district s qualified electors and compliance with the provisions of the Act, the legislative body may authorize the issuance of bonds for the community facilities district in order to finance certain public improvements, and the legislative body may levy and collect a special tax within such community facilities district to repay such indebtedness. The total aggregate principal amount of the Series 2017 Bonds and any Additional Bonds will at no time exceed $9,000,000. The District has covenanted not to issue any Additional Bonds except for refunding purposes. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS No Additional Bonds Except for Refunding and Appendix D. Purpose of the Series 2017 Bonds The Series 2017 Bonds are being issued to provide funds to: (i) to finance a portion of certain public facilities eligible to be financed by the District; (ii) to fund a reserve fund; (iii) fund an initial deposit to an administrative expense fund; and (iv) to pay costs of issuance of the Series 2017 Bonds. See the caption ESTIMATED SOURCES AND USES OF FUNDS. Description of the Series 2017 Bonds The Series 2017 Bonds will be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof ( Authorized Denominations ) and will be dated the date of issuance thereof. The Series 2017 Bonds are scheduled to mature on September 1 in the years and in the principal amounts and will bear interest at the rates shown on the inside front cover page of this Official Statement. Interest on the Series 2017 Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months and will be payable semiannually on March 1 and September 1 of each year, commencing March 1, 2018 (each, an Interest Payment Date ). Interest on each Series 2017 Bond will be payable from the Interest Payment Date next preceding the date of authentication thereof unless: (i) such Series 2017 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date (the fifteenth calendar day of the month preceding each Interest Payment Date, whether or not such day is a Business Day), in which event interest thereon will be payable from such Interest Payment Date, (ii) such Series 2017 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date or (iii) interest on such Series 2017 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been previously paid or duly provided for. The interest on and principal of and redemption premiums, if any, on the Series 2017 Bonds are payable in lawful money of the United States on each Interest Payment Date. Interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Series 2017 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. Notwithstanding the foregoing, interest on any Series 2017 Bond which is not punctually paid or duly provided for on any Interest Payment Date will, if and to the extent that amounts subsequently become available therefor, be paid on a payment date established by the Trustee to the Person in whose name the ownership of such Series 2017 Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee for the payment of such defaulted interest, 6

15 notice of which will be given to such Owner not less than ten days prior to such special record date. The principal of the Series 2017 Bonds will be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee. The Series 2017 Bonds are not general obligations of the District but are special, limited obligations of the District payable solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the County, the District (except to the limited extent set forth in the Indenture), the State or any political subdivision thereof is pledged to the payment of the Series 2017 Bonds. See the caption SPECIAL RISK FACTORS Limited Obligations. Book-Entry Only System Except as otherwise provided in the Indenture, the registered Owner of all of the Series 2017 Bonds while they are in book-entry form will be DTC. As long as DTC is the registered owner of the Series 2017 Bonds, references in this Official Statement to the Owners of the Series 2017 Bonds refer to DTC and not to the Beneficial Owners (as such term is defined in Appendix G) of the Series 2017 Bonds. None of the District, the County, or the Trustee gives any assurance that DTC, its Participants or others will distribute payments with respect to the Series 2017 Bonds or notices with respect thereto to the Beneficial Owners thereof or that DTC will otherwise serve and act in the manner described in this Official Statement. See Appendix G for a further description of DTC and its book-entry system. The information presented therein is based solely on material provided by DTC. Redemption Optional Redemption. The Series 2017 Bonds maturing on or after September 1, 2025, shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date on or after September 1, 2024, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2017 Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price September 1, 2024 and March 1, % September 1, 2025 and March 1, September 1, 2026 and March 1, September 1, 2027 and any Interest Payment Date thereafter 100 Mandatory Redemption from Special Tax Prepayments. The Series 2017 Bonds shall be subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date, from and to the extent of prepaid Special Taxes required to be applied thereto pursuant to the Indenture, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2017 Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price March 1, 2018 through March 1, % September 1, 2025 and March 1, September 1, 2026 and March 1, September 1, 2027 and any Interest Payment Date thereafter 100 Mandatory Sinking Fund Redemption. The Series 2017 Bonds maturing September 1, 2042, (the 2042 Term Bonds ) are subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 2038, at a Redemption Price equal to the principal amount of the 2042 Term Bonds 7

16 to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: * Maturity. Sinking Fund Redemption Date (September 1) Principal Amount to Be Redeemed 2038 $320, , , , * 375,000 The Series 2017 Bonds maturing September 1, 2048, (the 2048 Term Bonds and, together with the 2042 Term Bonds, the Term Bonds ) are subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 2043, at a Redemption Price equal to the principal amount of the 2048 Term Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: * Maturity. Sinking Fund Redemption Date (September 1) Principal Amount to Be Redeemed 2043 $390, , , , , * 475,000 If some but not all of the Term Bonds of a maturity are optionally redeemed, as described above under the caption Optional Redemption, the principal amount of such Term Bonds to be subsequently redeemed from mandatory sinking fund payments will be reduced by the aggregate principal amount of such Term Bonds so optionally redeemed, such reduction to be allocated among redemption dates in amounts of $5,000 or integral multiples thereof, as designated by the District in a Written Certificate of the District filed with the Trustee. If some but not all of the Term Bonds of a maturity are redeemed pursuant to mandatory redemption from Special Tax prepayments, as described above under the caption Mandatory Redemption from Special Tax Prepayments, the principal amount of such Term Bonds to be subsequently redeemed from mandatory sinking fund payments will be reduced by the aggregate principal amount of such Term Bonds so redeemed from Special Tax prepayments, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination will be given by the Trustee to the District. Selection of Series 2017 Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Series 2017 Bonds, the Trustee will select the Series 2017 Bonds to be redeemed from all Series 2017 Bonds not previously called for redemption: (a) with respect to any optional redemption of Series 2017 Bonds, among maturities of Series 2017 Bonds as directed in a Written Request by the District; (b) with respect to any redemption from prepayment of Special Taxes and the corresponding 8

17 provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole discretion shall deem appropriate. For purposes of such selection, all Series 2017 Bonds will be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Series 2017 Bonds which may be separately redeemed. Notice of Redemption. If the Series 2017 Bonds are held in book-entry form, notice of redemption will be mailed to DTC and not to the Beneficial Owners of the Series 2017 Bonds under the DTC book-entry system. Neither the District nor the Trustee is responsible for giving notice of redemption to the Beneficial Owners. See the caption Book-Entry Only System and Appendix G. The Indenture provides that the Trustee will mail (by first class mail) notice of any redemption to the respective Owners of any Series 2017 Bonds designated for redemption at their respective addresses appearing on the Registration Books, at least 30 but not more than 60 days prior to the date fixed for redemption. Such notice must state the date of the notice, the redemption date, the redemption place and the Redemption Price and designate the CUSIP numbers, if any, the Series 2017 Bond numbers and the maturity or maturities of the Series 2017 Bonds to be redeemed (except in the event of redemption of all of the Series 2017 Bonds of such maturity or maturities in whole), and must require that such Series 2017 Bonds be then surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Series 2017 Bonds will not accrue from and after the date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the Series 2017 Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. With respect to any notice of any optional redemption of Series 2017 Bonds, unless at the time such notice is given the Series 2017 Bonds to be redeemed will be deemed to have been paid within the meaning of the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the Redemption Price of, and accrued interest on, the Series 2017 Bonds to be redeemed, and that if such moneys have not been so received said notice will be of no force and effect and the District will not be required to redeem such Series 2017 Bonds. In the event that a notice of redemption of Series 2017 Bonds contains such a condition and such moneys are not so received, the redemption of Series 2017 Bonds as described in the conditional notice of redemption will not be made and the Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there will be no redemption of Series 2017 Bonds pursuant to such notice of redemption. Partial Redemption of Series 2017 Bonds. Upon surrender of any Series 2017 Bonds redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the District, a new Series 2017 Bond or Series 2017 Bonds in Authorized Denominations in an aggregate principal amount equal to the unredeemed portion of the Series 2017 Bonds surrendered. Effect of Notice of Redemption. Notice having been mailed as described under the caption Notice of Redemption, and moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside with the Trustee, the Series 2017 Bonds will become due and payable on said date, and, upon presentation and surrender thereof at the Office of the Trustee, such Series 2017 Bonds will be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date. If, on the date fixed for redemption, moneys for the Redemption Price of all the Series 2017 Bonds to be redeemed, together with interest to said date, will be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof has been mailed as aforesaid and not canceled, then, from and after said date, interest on such Series 2017 Bonds will cease to accrue and become payable. All moneys held 9

18 by or on behalf of the Trustee for the redemption of Series 2017 Bonds will be held in trust for the account of the Owners of the Series 2017 Bonds so to be redeemed without liability to such Owners for interest thereon. All Series 2017 Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of the Indenture will be canceled upon surrender thereof and destroyed. Registration of Exchange or Transfer. So long as the Series 2017 Bonds remain in book-entry form, transfer and exchange of any of the Series 2017 Bonds will be accomplished in accordance with the provisions of such book-entry system. In the event and only in the event of termination of such book-entry system with respect to the Series 2017 Bonds, the Series 2017 Bonds may be transferred and exchanged in accordance with the terms of the Indenture. See Appendix D. DEBT SERVICE SCHEDULE The following is the annual debt service schedule for the Series 2017 Bonds, assuming that no Series 2017 Bonds are redeemed prior to maturity except from mandatory sinking fund redemption. Bond Year Ending September 1 Principal (1) Interest Total Annual Debt Service 2018 $ 185,000 $ 239, $ 424, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 87, , ,000 71, , ,000 54, , ,000 37, , ,000 19, , Total $ 8,800,000 $ 6,383, $ 15,183, (1) Includes mandatory sinking fund redemption. 10

19 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Special, Limited Obligations of the District; Pledge of Net Special Tax Revenues EXCEPT FOR THE NET SPECIAL TAX REVENUES AND AMOUNTS HELD IN THE SPECIAL TAX FUND, THE BOND FUND AND THE RESERVE FUND UNDER THE INDENTURE, NO OTHER FUNDS ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE SERIES 2017 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE COUNTY BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAX REVENUES AND AMOUNTS HELD IN THE SPECIAL TAX FUND, THE BOND FUND AND THE RESERVE FUND UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE COUNTY, OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2017 BONDS. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms and with the provisions of the Indenture and the Act, the District will pledge to the Owners, and grant thereto a lien on and a security interest in, all of the Net Special Tax Revenues with respect to Improvement Area No. 5 and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. Such pledge constitutes a first lien on and security interest in such assets, which will immediately attach to such assets and be effective, binding and enforceable against the District, its successors, purchasers of any of such assets, creditors and all others asserting rights therein, to the extent set forth in and in accordance with the Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery, recordation, filing or further act. The Net Special Tax Revenues are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid prior to delinquency, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund. Amounts held in the Rebate Fund, the Improvement Fund and the Administrative Expense Fund are not available to pay the debt service on the Bonds. Special taxes levied on property within the District outside of Improvement Area No. 5 are not available to pay debt service on the Bonds. Special Taxes Pursuant to the Indenture, the District will fix and levy the amount of Special Taxes within Improvement Area No. 5 in each Fiscal Year in accordance with the Rate and Method and, subject to the limitations in the Rate and Method as to the maximum Special Tax that may be levied, in an amount sufficient to yield Special Tax Revenues in the amount required for: (i) the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the Corresponding Bond Year; (ii) any necessary replenishment of the Reserve Fund; and (iii) the payment of Administrative Expenses estimated to be paid from such Special Tax Revenues, taking into account the balances in the funds and accounts established under the Indenture. Notwithstanding the foregoing, the amount of Special Taxes actually collected each year may be less than the amount described for a variety of different reasons. See the caption SPECIAL RISK FACTORS Insufficiency of Special Taxes. The Special Taxes are expected to be payable and collected in the same manner and at the same time and in the same installments as general taxes on real property are payable (or in such other manner as the Board of Supervisors will determine, including direct billing of the affected property owners). Although the applicable Special Tax constitutes a lien on each Assessor s Parcel of Taxable Property within Improvement Area No. 5, it does not constitute the personal indebtedness of the owner of such Assessor s Parcel. There is 11

20 no assurance that the owner of such Assessor s Parcel will be financially able to pay the applicable Special Taxes or that such owner will do so, even if it is financially able to make such payment. See the caption SPECIAL RISK FACTORS Payment of the Special Tax is Not a Personal Obligation of the Owners. Neither the Services Special Taxes nor the special taxes levied in Improvement Area No. 1, Improvement Area No. 2, Improvement Area No. 3, Improvement Area No. 4, or Improvement Area No. 6 within the District are available to pay debt service on the Series 2017 Bonds. Rate and Method of Apportionment of Special Taxes The District is legally authorized and has covenanted to cause the levy of the Special Taxes for Improvement Area No. 5 in an amount determined according to a methodology, i.e., the Rate and Method, which the Board of Supervisors and the qualified electors within Improvement Area No. 5 have approved. The Rate and Method apportions the total amount of Special Taxes to be collected among the taxable parcels in Improvement Area No. 5 as more particularly described below. The Rate and Method does not address any other special taxes which may be levied on the property in Improvement Area No. 5, such as Services Special Taxes (which are not available to pay the Series 2017 Bonds). The following is a summary of the provisions of the Rate and Method and is not intended to be a full recitation of the provisions thereof. The full text of the Rate and Method is set forth in Appendix A. The meanings of the defined terms used below are as set forth in Appendix A. The summary below is qualified by more complete and detailed information contained in the Rate and Method. Each Fiscal Year, all Taxable Property within Improvement Area No. 5 will be classified as Developed Property, Other Taxable Property or Undeveloped Property and will be subject to Special Taxes in accordance with the Rate and Method. Developed Property will be classified as Residential Property or Non- Residential Property. The Assigned Special Tax rates are set forth in Table 1 and Table 2 of Section C of the Rate and Method attached hereto as Appendix A. Pursuant to Section D of the Rate and Method, at least 30 days before the first series of Bonds are expected to be issued, if the Total Effective Tax Rate for any Plan Type in a Land Use Class exceeds 1.95%, the Assigned Special Tax rate for such Land Use Class will be reduced such that the Total Effective Tax Rate will not exceed 1.95%. In order to satisfy the requirement of the Rate and Method, the District engaged Empire Economics, Inc. to conduct a Price Point Study (the Price Point Study ) to determine the current base prices for the homes within Improvement Area No. 5. Based on the Price Point Study, the District has determined that there was no Plan Type in any Land Use Class for which the Total Effective Tax Rate exceeded 1.95% (based on a levy at 100% of the Assigned Special Tax rate). Therefore, the Assigned Special Tax rates will not be reduced pursuant to Section D of the Rate and Method. The Rate and Method only requires the foregoing analysis and the preparation of the Price Point Study prior to the issuance of the initial series of Bonds. Under the Act, under no circumstances will the Special Tax levied in any Fiscal Year against any taxable parcel of residential property within Improvement Area No. 5 be increased by more than 10% as a consequence of a delinquency or default by the owner of any other parcel within Improvement Area No. 5 above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. Such limitation would not apply to increases in Special Taxes levied for other purposes, such as the issuance of Additional Bonds or to pay directly for the acquisition or construction of the Facilities as authorized by the Rate and Method. In Fiscal Year , the District is levying the Special Tax at 100% of the Assigned Special Tax rates on Developed Property, as set forth in the Rate and Method. See Appendix A. Maximum Special Tax, Assigned Special Tax and Backup Special Tax. The Maximum Special Tax, Assigned Special Tax and Backup Special Tax in the Rate and Method are as follows: 12

21 Developed Property. The Maximum Special Tax for each Assessor s Parcel classified as Developed Property will be the greater of: (i) the amount derived by application of the Assigned Special Tax; or (ii) the amount derived by application of the Backup Special Tax. Assigned Special Tax. The Assigned Special Tax for each Land Use Class within Zone A and Zone B is listed in Table 1 and Table 2, respectively, of Section C of the Rate and Method. The Assigned Special Tax applicable to an Assessor s Parcel classified as Developed Property and Residential Property ranges: (i) in Zone A from $1,825 per unit for units with a Residential Floor Area less than 1,301 square feet to $2,366 per unit for units with a Residential Floor Area greater than 2,900 square feet; and (ii) in Zone B from $2,020 per unit for units with a Residential Floor Area of less than 1,901 square feet to $2,563 per unit for units with a Residential Floor Area greater than 3,500 square feet. The Assigned Special Tax applicable to an Assessor s Parcel classified as Non- Residential Property: (I) for Zone A is $17,407 per Acre; and (II) for Zone B is $15,010 per Acre. Backup Special Tax. The Backup Special Tax attributable to Developed Property within a Final Map for Zone A is $17,407 per acre and for Zone B is $15,010 per Acre. Undeveloped and Other Taxable Property. The Maximum Special Tax for Undeveloped Property and Other Taxable Property will be $17,407 per Acre for Property in Zone A and $15,010 per Acre for Property in Zone B. Method of Apportionment of Special Tax. For each Fiscal Year, the Board of Supervisors will determine the Special Tax Requirement and, subject to the Maximum Special Tax rates described above, will levy the Special Tax until the total Special Tax levy equals the Special Tax Requirement. The Special Tax will be levied each Fiscal Year as follows: First: The Special Tax will be levied Proportionately on each Assessor s Parcel of Developed Property at up to 100% of the Assigned Special Tax for Developed Property. Notwithstanding the foregoing, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor s Parcel of Residential Property be increased as a consequence of delinquency or default by owner or owners of any other Assessor s Parcel(s) within Improvement Area No. 5 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax on each Assessor s Parcel of Non-Residential Property will continue in equal percentages at up to 100% of the Assigned Special Tax; Second: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax will be levied Proportionately on each Assessor s Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Undeveloped Property; Third: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy of the Special Tax on each Assessor s Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax will be increased in equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor s Parcel. Notwithstanding the foregoing, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor s Parcel of Residential Property be increased as a consequence of delinquency or default by owner or owners of any other Assessor s Parcel(s) within Improvement Area No. 5 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax on each Assessor s Parcel of Non- 13

22 Residential Property will continue in equal percentages from the Assigned Special Tax up to the Maximum Special Tax; and Fourth: If additional moneys are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax will be levied Proportionately on each Assessor s Parcel of Other Taxable Property at up to the Maximum Special Tax for Other Taxable Property. Pursuant to the Rate and Method (as stated above) and under the Act, under no circumstances will the Special Tax levied in any Fiscal Year against any taxable parcel of residential property within Improvement Area No. 5 be increased by more than 10% as a consequence of a delinquency or default by the owner of any other parcel within Improvement Area No. 5 above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. Such limitation would not apply to increases in Special Taxes levied for other purposes, such as the issuance of Additional Bonds or the acquisition of Facilities. See Appendix A. Prepayment of Special Taxes. The obligation of an Assessor s Parcel to pay the Special Tax may be prepaid and permanently satisfied as described in the Rate and Method; provided that a prepayment may be made only for Assessor s Parcels of Developed Property or Undeveloped Property for which a building permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor s Parcel at the time of prepayment, provided that the terms set forth under Section I of the Rate and Method are satisfied. The Prepayment Amount is calculated based on the Bond Redemption Amount, plus Redemption Premium, plus the Future Facilities Amount, plus Defeasance Amount, plus Administrative Fees and Expenses, less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), all as specified in Appendix A. See the captions THE SERIES 2017 BONDS Redemption Mandatory Redemption from Special Tax Prepayments and SPECIAL RISK FACTORS Potential Early Redemption of Series 2017 Bonds from Prepayments. Exempt Property. No Special Taxes may be levied on Property Owner Association Property and Public Property, so long as the Acreage of Taxable Property within Improvement Area No. 5 is at least Acres within Zone A and 9.84 Acres within Zone B. Tax-exempt status will be assigned by the District Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor s Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. To the extent that the exemption of an Assessor s Parcel of Property Owner Association Property or Public Property would reduce the Acreage of Taxable Property within Improvement Area No. 5 below Acres in Zone A or 9.84 Acres in Zone B, such Assessor s Parcel will be classified as Taxable Property Owner Association Property or Taxable Public Property, as applicable, and will be subject to the levy of the Special Tax and will be taxed as part of the Fourth step described above under the caption Method of Apportionment of Special Tax, at up to 100% of the applicable Maximum Special Tax for Other Taxable Property. Collection and Application of Special Taxes The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes; provided, however, that the District may directly bill the Special Taxes, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor s Parcels as permitted by the Act. The District has made certain covenants in the Indenture for the purpose of ensuring that the current maximum rates and method of collection of the Special Taxes are not altered in a manner that would impair the District s ability to collect sufficient Special Taxes to pay debt service on the Bonds and Administrative 14

23 Expenses when due. First, the District has covenanted that, to the extent that it is legally permitted to do so, it will not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds and that, if an initiative is adopted that purports to modify the Rate and Method in a manner that would adversely affect the security for the Bonds, the District will, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds. See the caption SPECIAL RISK FACTORS Proposition 218. Second, the District has covenanted not to authorize owners of taxable parcels within Improvement Area No. 5 to satisfy Special Tax obligations by the tender of Bonds unless the District has first obtained a report of an Independent Consultant certifying that doing so would not result in the District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due. See the caption SPECIAL RISK FACTORS Non-Cash Payments of Special Taxes. Although the Special Taxes constitute liens on Taxable Property within Improvement Area No. 5, they do not constitute a personal indebtedness of the owners of such property within Improvement Area No. 5. Moreover, other liens for taxes and assessments already exist on the property located within Improvement Area No. 5 and other such liens could come into existence in the future in certain situations without the consent or knowledge of the County or the landowners therein. See the caption SPECIAL RISK FACTORS Parity Taxes, Special Assessments and Land Development Costs. There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described in under the caption SPECIAL RISK FACTORS. Under the terms of the Indenture, the Trustee will establish and maintain a separate fund designated the Special Tax Fund. No later than 10 Business Days after the receipt of any Special Tax Revenues, the District will transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that with respect to any such Special Tax Revenues that represent prepaid Special Taxes, the provisions described under the captions Special Tax Fund and THE SERIES 2017 BONDS Redemption Mandatory Redemption from Special Tax Prepayment apply. Covenant for Superior Court Foreclosure In the event of a delinquency in the payment of any installment of Special Taxes, the District is authorized by the Act to institute an action in the County Superior Court to foreclose any lien therefor. In such action, the real property subject to the Special Taxes may be sold at a judicial foreclosure sale. Such judicial foreclosure proceedings are not mandatory. However, in the Indenture, the District has covenanted for the benefit of the Owners of the Bonds that it will determine or cause to be determined, no later than September 15 of each year, whether or not any owners of property within Improvement Area No. 5 are delinquent in the payment of Special Taxes and, if such delinquencies exist, the District will order and cause to be commenced no later than November 1, and thereafter diligently prosecute, an action in the County Superior Court to foreclose the lien of any Special Taxes or installment thereof not paid when due; provided, however, that the District is not required to order the commencement of foreclosure proceedings if: (a) the total Special Tax delinquency in Improvement Area No. 5 for such Fiscal Year is less than 5% of the total Special Tax levied in such Fiscal Year; and (b) the amount then on deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the District determines that any single property owner in Improvement Area No. 5 is delinquent in excess of $3,500 in the payment of the Special Tax, then the District will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. The mere commencement of foreclosure proceedings will not assure a prompt and favorable resolution of Special Tax delinquencies. The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited. See the captions SPECIAL RISK FACTORS Bankruptcy and Foreclosure and SPECIAL RISK FACTORS FDIC/Federal Government Interests in Properties. Moreover, even if a judgment of foreclosure and order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 120 days from the date of service of the notice of levy in which to 15

24 redeem the subject property. If the property owner fails to redeem the property and it is sold, the property owner s only remedy is an action to set aside the sale, which action must be brought within 90 days of the date of sale. If such an action results in the setting aside of the foreclosure sale, the judgment is revived, and the District would be entitled to receive interest on the revived judgment as if the sale had not been made. Under former law a property owner had a period of one year within which to redeem property to be sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested. There can be no assurance that, even if the subject property is sold, the proceeds from such sale will be sufficient to pay the delinquent installments of the Special Tax. The Act does not require the District or any other governmental agency to purchase or otherwise acquire any Assessor s Parcel being sold if there is no other purchaser at such sale. The Act does require that property being sold pursuant to foreclosure under the Act must be sold for not less than the judgment amount (which must include reasonable attorneys fees, together with interest, penalties, and other authorized charges and costs) plus post-judgment interest and authorized costs, unless a lower bid price is authorized by the Owners of at least 75% by value of the Bonds Outstanding. Maximum Special Tax Capacity The following Table 1 shows debt service coverage capacity on the Series 2017 Bonds from Net Special Tax Revenues levied at the Assigned Special Tax rate on Developed Property. For Fiscal Year , the Undeveloped Property Special Taxes is shown as $0.00 due to the fact that there is no actual levy on Undeveloped Property. For the Fiscal Year Special Tax levy, all 270 parcels within Improvement Area No. 5 will be classified as Developed Property. In Table 1 below, the Developed Property Special Taxes for Fiscal Year and thereafter assume a levy at 100% of the Assigned Special Tax rate on 270 parcels of Developed Property. The District expects to levy the Special Taxes in order to pay debt service on the Series 2017 Bonds and estimated administrative expenses, which levy is expected to be less than 100% of the Assigned Special Tax rate. Pursuant to the Act, under no circumstances will the Special Tax levied in any Fiscal Year against any taxable parcel of residential property within Improvement Area No. 5 be increased by more than 10% as a consequence of a delinquency or default by the owner of any other parcel within Improvement Area No. 5 above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. Investors should not assume actual capacity from Assigned Special Taxes on Developed Property in excess of 110% of debt service plus administrative expenses. 16

25 Fiscal Year TABLE 1 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 DEBT SERVICE COVERAGE CAPACITY Special Tax Revenues (1) Administrative Expenses (2) Net Special Tax Revenues Series 2017 Bonds Debt Service (3) Debt Service Coverage Capacity 2018 $ 467,658 $ 0 $ 467,658 $ 424, % ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , ,121 30, , , TOTAL $ 17,691,288 $ 900,000 $ 16,791,288 $ 15,183,633 (1) For Fiscal Year , Developed Property Special Tax Revenues are equal to 100% of the Assigned Special Tax on 220 parcels of Developed Property. The District did not levy Special Taxes on Undeveloped Property in Fiscal Year All 270 parcels within Improvement Area No. 5 will be classified as Developed Property for the Fiscal Year Special Tax levy. Fiscal Year and thereafter reflect a Special Tax levy at 100% of the Assigned Special Tax rate on all 270 parcels of Developed Property. (2) Based on the estimated administrative expenses of $30,000 in Fiscal Year and thereafter. (3) May not sum due to rounding. Source: David Taussig & Associates, Inc. Property Values Assessed Values. According to the County of San Bernardino Assessor, the property within Improvement Area No. 5 had a Fiscal Year net assessed value of $40,588,845, based on a January 1, 2017 lien date. 17

26 Appraisal. In order to provide information with respect to the value of the property within Improvement Area No. 5, the County engaged the Appraiser to prepare the Appraisal. The president of the Appraiser, who was actively involved in the preparation of the Appraisal, has an MAI designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was selected by the County through a competitive process and has no material relationships with the County, the District, Lennar Lytle or Lennar Homes other than the relationship represented by the engagement to prepare the Appraisal. The County instructed the Appraiser to prepare its analyses and reports in conformity with County-approved guidelines and the Appraisal Standards for land-secured financings published by the California Debt and Investment Advisory Commission, the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. A copy of the Appraisal is included as Appendix B to this Official Statement. The purpose of the Appraisal was to estimate the as is aggregate minimum market value for the fee simple estate, subject to special tax and special assessment liens, of all of the Taxable Property within Improvement Area No. 5 under the ownership of Lennar Homes and 218 individual homeowners as of the Date of Value. Any lands within Improvement Area No. 5 designated for park, open space or civic uses were not subject to the Appraisal. Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal, the Appraiser concluded that, as of the Date of Value, the minimum market value of all of the property within Improvement Area No. 5 that is expected to be subject to the Special Tax was $103,400,000. Of this value, $88,200,000 was attributable to property owned by individual homeowners and $15,200,000 to the property owned by Lennar Homes, in each case as of the Date of Value. The District is situated in the central submarket region of the County, which includes the cities and communities of Fontana, Bloomington, Colton, and Rialto. According to the Appraiser, this region experienced a 0.5% decrease in median base sales prices between the second quarter of 2016 and the second quarter of Between June 2016 and June 2017, the County experienced a median home sales price increase of approximately 12.3%. In determining the minimum market value for the 218 completed and sold dwelling units, the Appraiser used certain mass appraisal techniques, including determining a conservative estimated price per square foot for an average size unit. Based on information provided by Lennar Homes, the Appraiser determined that the weighted average unit size of all of the completed and sold units in Improvement Area No. 5 is 2,186 square feet. Based on the actual sales in Improvement Area No. 5, the Appraiser s knowledge of the current residential market and current projections of the near-term residential market in San Bernardino County, the Appraiser estimated a conservative value of $ per square foot for the 2,186 square foot average size home. Pursuant to the Appraisal, as of the Date of Value: (i) the indicated minimum market value for the average size unit, based on the 218 closed sales was $404,410; and (ii) the indicated minimum market value for the 218 completed and sold dwellings units within Improvement Area No. 5 was rounded to $88,200,000. As of the Date of Value, the property within Improvement Area No. 5 varied from completed, sold and occupied dwelling units to homes under construction. In addition to the completed and sold dwelling units, as of the Date of Value, there were 14 completed dwellings units and 38 dwellings units under construction. All lots under construction as of the Date of Value were owned by Lennar Homes. As of the Date of Value, the minimum market value for the 14 completed dwelling units which had not closed to individual homeowners and the 38 dwellings units under construction (eight of which were close to complete and 30 of which were in various stages of construction ranging from framing to fully wrapped) was $15,200,000. These units are valued based on the Appraiser s estimate of completion as applied to the Appraiser s estimated average value per unit. The Appraiser has prepared an Update Appraisal Report with an effective date of November 1, In the Update Appraisal Report, the Appraiser concludes that the value of the appraised properties as of 18

27 November 1, 2017, is not less than the conclusion of value for such property set forth in the Appraisal Report. The Appraiser s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. The contingencies, assumptions and limiting conditions identified in the Appraisal are set forth therein. Reference is made to Appendix B for a complete list and full discussion thereof. In the event that any of the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within Improvement Area No. 5 may be less than the amount reported in the Appraisal. In any case, there can be no assurance that any portion of the property within Improvement Area No. 5 would actually sell for the price indicated by the Appraisal. Estimated Appraised Value-to-Lien. Table 2 below sets forth the ownership and other information with respect to the parcels for which individual estimates of value are included in the Appraisal. Pursuant to the Rate and Method, Developed Property is property for which a building permit was issued on or before March 1 of the preceding Fiscal Year. As of the Date of Value, building permits had been issued for all 270 parcels planned for residential development within Improvement Area No. 5. Table 2 allocates the Special Tax lien and share of Series 2017 Bonds based on the estimated Fiscal Year , Special Tax levy and ownership status as of the Date of Value. Based on the foregoing and assuming no additional home closings to individual owners, 80.3% of the estimated Fiscal Year Special Tax levy is expected to be levied on individual homeowners. Based on ownership status as of October 1, 2017, and assuming no additional home closings to individual owners, approximately 92.7% of the estimated Fiscal Year Special Tax levy is expected to be levied on individual homeowners. The District did not levy Special Taxes on Undeveloped Property in Fiscal Year See the caption Special Taxes for a discussion of the sizing of the Series 2017 Bonds. See DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5 for an updated status of development in Improvement Area No. 5 since the Date of Value. 19

28 Property Classification / Owner / Construction Status (1) Number of Parcels TABLE 2 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 VALUE-TO-LIEN ANALYSIS BASED ON ESTIMATED FISCAL YEAR LEVY Estimated Fiscal Year Special Tax Levy CFD No (IA 5) Outstanding Bond Amount (2) Rialto Unified School District Bonds Outstanding (3) San Bernardino Unified School District Bonds Outstanding (3) San Bernardino County Community College District Bonds Outstanding (3) Total Direct and Overlapping Debt Appraised Value (1) Appraised Value-to- Lien Ratio Developed Property (4) Individual Owner Completed/Sold 218 $ 417,444 $ 7,067,164 $ 418,166 $ 61,157 $ 266,852 $ 7,813,338 $ 88,200, to 1 Lennar Homes Completed (5) 14 29, ,866 2,503 12,298 7, ,084 4,092, to 1 Lennar Homes Under Construction (6) 38 73,006 1,235,971 14,016 13,371 14,466 1,277,824 11,107, to 1 Grand Total 270 $ 519,800 $ 8,800,000 $ 434,685 $ 86,826 $ 288,734 $ 9,610,245 $ 103,400, to 1 (1) Based on the Appraisal with a Date of Value of August 1, As of the Date of Value, building permits had been issued for all 270 parcels within Improvement Area No. 5. (2) Allocated based on the estimated Fiscal Year Special Tax levy. (3) As of September 2, Allocated based on Fiscal Year levy. (4) Per the Rate and Method, Developed Property is property for which a building permit is issued prior to March 1 of the prior Fiscal Year. (5) According to Lennar Homes, as of October 1, 2017, 12 of such 14 homes have closed to individual owners. (6) According to Lennar Homes, as of October 1, 2017, 20 of such 38 homes have closed to individual owners. Source: David Taussig & Associates, Inc. 20

29 Table 3 below shows the estimated Fiscal Year Special Tax levy within Improvement Area No. 5, based on development status and ownership information as of the Date of Value. Based on development status as of the Date of Value, 100% of the estimated Fiscal Year Special Tax levy will be on Developed Property. Based on ownership status as of October 1, 2017, and assuming no additional home closings to individual owners, approximately 92.7% of the estimated Fiscal Year Special Tax levy is expected to be levied on individual homeowners. TABLE 3 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 ESTIMATED FISCAL YEAR LAND OWNERSHIP SUMMARY Owner (1) / Property Classification (2) Number of Parcels Estimated Fiscal Year Special Tax Levy Percent of Total Fiscal Year Special Tax Levy (3) Individual Owners - Developed Property 218 $ 417, % Lennar Homes - Developed Property (4) , Total 270 $ 519, % (1) Based on the Appraisal. (2) Reflects building permits issued as of August 1, Per the Rate and Method, Developed Property is property for which a building permit is issued prior to March 1 of the prior Fiscal Year. As of the Date of Value, building permits for all 270 parcels within Improvement Area No. 5 had been issued. (3) No single individual owner owns more than one parcel within Improvement Area No. 5 or is expected to be responsible for more than 0.45% of the estimated Fiscal Year Special Tax levy unless such homeowner were to acquire additional homes in Improvement Area No. 5. (4) According to Lennar Homes, as of October 1, 2017, 32 of such 52 homes have closed to individual owners. Source: David Taussig & Associates, Inc. Table 4 below sets forth the stratification of value-to-liens of the parcels within Improvement Area No. 5 based on estimates of value as set forth in the Appraisal and such parcels respective shares of the principal amount of the Series 2017 Bonds and other direct and overlapping debt within Improvement Area No. 5, allocated to each parcel based upon its respective share of the estimated total Special Tax levy for Fiscal Year All 270 parcels within Improvement Area No. 5 will be classified as Developed Property for the Fiscal Year Special Tax levy. Appraised Value-to-Lien Ratio TABLE 4 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 VALUE-TO-LIEN ANALYSIS (ESTIMATED FISCAL YEAR ) Fiscal Year Number of Parcels Taxed Appraised Value (1) CFD No (IA No. 5) Outstanding Bond Amount (2) Total Overlapping Debt (3) Total Direct and Overlapping Debt Between 7:1 and 10:1 90 $ 30,574,312 $ 3,093,224 $ 257,646 $ 3,350,869 Greater than 10: ,825,688 5,706, ,600 6,259,376 Total 270 $ 103,400,000 $ 8,800,000 $ 810,245 $ 9,610,245 (1) Based on the Appraisal. (2) Allocated based on the estimated Fiscal Year Special Tax levy. (3) Includes direct and overlapping debt set forth in Table 5 below. Source: David Taussig & Associates, Inc. 21

30 Development and Home Sales Since the Date of Value. Development of the property has progressed and additional home sales have occurred since the Date of Value. As of October 1, 2017, 250 homes were owned by individual homeowners and Lennar Homes had entered into contracts to sell 19 of the 20 remaining homes planned within Improvement Area No. 5 (five of which are complete and 14 of which are various stages of construction). See DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5. Direct and Overlapping Indebtedness. The ability of an owner of land within Improvement Area No. 5 to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. Such other taxes and assessments securing the repayment of overlapping debt in Improvement Area No. 5 are set forth in Table 5 (the Debt Report ). The Debt Report sets forth those entities which have issued debt and does not include entities that only levy or assess fees, charges, ad valorem taxes or special taxes. The Debt Report includes the principal amount of the Series 2017 Bonds. The Debt Report has been derived from data assembled and reported to the District by David Taussig & Associates, Inc. as of September 2, None of the District, the County or the Underwriter has independently verified the information in the Debt Report and do not guarantee its completeness or accuracy. See Tables 6A through 6D for all entities levying taxes, assessments or other charges on property in Improvement Area No. 5. Overlapping Debt TABLE 5 COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 DIRECT AND OVERLAPPING DEBT (1) Fiscal Year Total Levy Amount of Levy on Parcels in Improvement Area No. 5 Percent of Levy on Parcels in Improvement Area No. 5 (2) Total Debt Outstanding (1) Improvement Area No. 5 Share of Total Debt Outstanding Rialto Unified School District $ 6,820,115 $ 32, % $ 90,099,319 $ 434,685 San Bernardino USD G.O. Bonds 13,491,415 5, ,854,445 86,826 San Bernardino CCD G.O. Bonds 23,110,365 15, ,458, ,734 Estimated Share of Overlapping Debt Allocable to the Improvement Area $ 810,245 Plus the Series 2017 Bonds 8,800,000 Estimated Share of Direct and Overlapping Debt Allocable to the Improvement Area $ 9,610,245 As of September 2, Increases in the assessed value of the property within Improvement Area No. 5 may result increases in such property s share of the overlapping levy of such entities. Source: David Taussig & Associates, Inc.; County of San Bernardino Auditor-Controller. (1) (2) Expected Tax Burden. The expected tax burden of the Special Taxes and other taxes and assessments on individual parcels located within Improvement Area No. 5 will vary among parcels. Taxing jurisdictions may increase rates of taxation from time to time, sales prices of homes fluctuate, buildout of Improvement Area No. 5 may not occur as scheduled, if at all, and there can be no assurance that an effective tax rate of 2.00% or less within Improvement Area No. 5 will be achieved with respect to the other homes within Improvement Area No. 5. Set forth in Tables 6A through 6D below are sample property tax bills within Zone A and Zone B of Improvement Area No

31 TABLE 6A COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 ESTIMATED FISCAL YEAR SAMPLE TAX BILL RESIDENTIAL PROPERTY ZONE A TAX CLASS 5 (SRF 2,101 2,300 SQUARE FEET) TRA Property Value and Property Taxes TOTAL VALUE (1) $416,913 NET VALUE (1) $409,913 Lot Size for Residential Property (2) Unit Size for Residential Property (2) 5,696 Square Feet 2,209 Square Feet Percent of Net Value Expected Amount AD VALOREM PROPERTY TAXES (3) Basic Levy % $ 4, Rialto Unified School District Bonds San Bernardino Community College Bonds San Bernardino Valley Municipal Water District Bonds Total General Property Taxes and Overrides % $ 5, ASSESSMENTS, SPECIAL TAXES AND PARCEL CHARGES Vector Control Charge (4) $ 5.62 County Service Area #70, Improvement Zone GH (Street Lighting) (5) LEA-Enforcement (6) 5.30 County of San Bernardino CFD No Special Tax A (7) County of San Bernardino CFD No Special Tax B (7) County of San Bernardino CFD No Special Tax C (8) 0.00 County of San Bernardino CFD No , Improvement Area No. 5 (9) 2, Total Assessments and Parcel Charges $ 2, (1) PROJECTED TOTAL PROPERTY TAXES $ 7, Projected Total Effective Tax Rate (as % of Total Value) % Based on the base sale price for units in Tax Class 5 of Zone A set forth in the Price Point Study. Total Value includes $7,000 homeowner s exemption. Total Value used to determine the Total Effective Tax Rate. (2) Based on the average unit and lot size for 62 Tax Class 5 units in Zone A. (3) Based on actual Fiscal Year ad valorem rates. (4) Based on the actual Fiscal Year rate of $5.62 per benefit unit. Residential units are assessed at 1.00 benefit unit. (5) Based on the actual Fiscal Year rate of $52.39 per parcel. (6) Based on the actual Fiscal Year rate of $5.30 per parcel, charged by the San Bernardino County Fire Department for administering waste management. (7) Expected amount based on the actual Fiscal Year rates. The maximum rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (8) Special Tax C is only levied to pay for the maintenance of parks and parkways, but only if such services are not being provided by the property owner association. Special Tax C is not being levied in Fiscal Year The Special Tax C Fiscal Year Maximum Special Tax rate is $ per unit. The Maximum Special Tax C rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (9) Expected amount based on the Fiscal Year Special Tax rate of $2, per unit for Tax Class 5 property in Zone A, which is 100% of the Assigned Special Tax rate. The Assigned Special Tax rate does not escalate. Source: David Taussig and Associates, Inc. 23

32 TABLE 6B COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 ESTIMATED FISCAL YEAR SAMPLE TAX BILL RESIDENTIAL PROPERTY ZONE A TAX CLASS 7 (SRF 1,701 1,900 SQUARE FEET) TRA Property Value and Property Taxes TOTAL VALUE (1) $395,409 NET VALUE (1) $388,409 Lot Size for Residential Property (2) Unit Size for Residential Property (2) 5,350 Square Feet 1,829 Square Feet Percent of Net Value Expected Amount AD VALOREM PROPERTY TAXES (3) Basic Levy % $ 3, Rialto Unified School District Bonds San Bernardino Community College Bonds San Bernardino Valley Municipal Water District Bonds Total General Property Taxes and Overrides % $ 4, ASSESSMENTS, SPECIAL TAXES AND PARCEL CHARGES Vector Control Charge (4) $ 5.62 County Service Area #70, Improvement Zone GH (Street Lighting) (5) LEA-Enforcement (6) 5.30 County of San Bernardino CFD No Special Tax A (7) County of San Bernardino CFD No Special Tax B (7) County of San Bernardino CFD No Special Tax C (8) 0.00 County of San Bernardino CFD No , Improvement Area No. 5 (9) 2, Total Assessments and Parcel Charges $ 2, (1) PROJECTED TOTAL PROPERTY TAXES $ 7, Projected Total Effective Tax Rate (as % of Total Value) % Based on the base sale price for units in Tax Class 7 of Zone A set forth in the Price Point Study. Total Value includes $7,000 homeowner s exemption. Total Value used to determine the Total Effective Tax Rate. (2) Based on the average unit and lot size for 94 Tax Class 7 units in Zone A. (3) Based on actual Fiscal Year ad valorem rates. (4) Based on the actual Fiscal Year rate of $5.62 per benefit unit. Residential units are assessed at 1.00 benefit unit. (5) Based on the actual Fiscal Year rate of $52.39 per parcel. (6) Based on the actual Fiscal Year rate of $5.30 per parcel, charged by the San Bernardino County Fire Department for administering waste management. (7) Expected amount based on the actual Fiscal Year rates. The maximum rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (8) Special Tax C is only levied to pay for the maintenance of parks and parkways, but only if such services are not being provided by the property owner association. Special Tax C is not being levied in Fiscal Year The Special Tax C Fiscal Year Maximum Special Tax rate is $ per unit. The Maximum Special Tax C rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (9) Expected amount based on the Fiscal Year Special Tax rate of $2, per unit for Tax Class 7 property in Zone A, which is 100% of the Assigned Special Tax rate of $2, per unit. The Assigned Special Tax rate does not escalate. Source: David Taussig and Associates, Inc. 24

33 TABLE 6C COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 ESTIMATED FISCAL YEAR SAMPLE TAX BILL RESIDENTIAL PROPERTY ZONE B TAX CLASS 1 (> 3,500 SQUARE FEET) TRA Property Value and Property Taxes TOTAL VALUE (1) $501,264 NET VALUE (1) $494,264 Lot Size for Residential Property (2) Unit Size for Residential Property (2) 6,543 Square Feet 4,199 Square Feet Percent of Net Value Expected Amount AD VALOREM PROPERTY TAXES (3) Basic Levy % $ 4, Rialto Unified School District Bonds San Bernardino Community College Bonds San Bernardino Valley Municipal Water District Bonds Total General Property Taxes and Overrides % $ 6, ASSESSMENTS, SPECIAL TAXES AND PARCEL CHARGES Vector Control Charge (4) $ 5.62 County Service Area #70, Improvement Zone GH (Street Lighting) (5) LEA-Enforcement (6) 5.30 County of San Bernardino CFD No Special Tax A (7) County of San Bernardino CFD No Special Tax B (7) County of San Bernardino CFD No Special Tax C (8) 0.00 County of San Bernardino CFD No , Improvement Area No. 5 (9) 2, Total Assessments and Parcel Charges $ 2, (1) PROJECTED TOTAL PROPERTY TAXES $ 9, Projected Total Effective Tax Rate (as % of Total Value) % Based on the base sale price for units in Tax Class 1 of Zone B set forth in the Price Point Study. Total Value includes $7,000 homeowner s exemption. Total Value used to determine the Total Effective Tax Rate. (2) Based on the average unit and lot size for 13 Tax Class 1 units in Zone B. (3) Based on actual Fiscal Year ad valorem rates. (4) Based on the actual Fiscal Year rate of $5.62 per benefit unit. Residential units are assessed at 1.00 benefit unit. (5) Based on the actual Fiscal Year rate of $52.39 per parcel. (6) Based on the actual Fiscal Year rate of $5.30 per parcel, charged by the San Bernardino County Fire Department for administering waste management. (7) Expected amount based on the actual Fiscal Year rates. The maximum rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (8) Special Tax C is only levied to pay for the maintenance of parks and parkways, but only if such services are not being provided by the property owner association. Special Tax C is not being levied in Fiscal Year The Special Tax C Fiscal Year Maximum Special Tax rate is $ per unit. The Maximum Special Tax C rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (9) Expected amount based on the Fiscal Year Special Tax rate of $2, per unit for Tax Class 1 property of Zone B, which is 100% of the Assigned Special Tax rate of $2, per unit. The Assigned Special Tax rate does not escalate. Source: David Taussig and Associates, Inc. 25

34 TABLE 6D COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) IMPROVEMENT AREA NO. 5 ESTIMATED FISCAL YEAR SAMPLE TAX BILL RESIDENTIAL PROPERTY ZONE B TAX CLASS 2 (SRF 3,301 3,500 SQUARE FEET) TRA Property Value and Property Taxes TOTAL VALUE (1) $489,003 NET VALUE (1) $482,003 Lot Size for Residential Property (2) Unit Size for Residential Property (2) 7,820 Square Feet 3,489 Square Feet Percent of Net Value Expected Amount AD VALOREM PROPERTY TAXES (3) Basic Levy % $ 4, Rialto Unified School District Bonds San Bernardino Community College Bonds San Bernardino Valley Municipal Water District Bonds Total General Property Taxes and Overrides % $ 6, ASSESSMENTS, SPECIAL TAXES AND PARCEL CHARGES Vector Control Charge (4) $ 5.62 County Service Area #70, Improvement Zone GH (Street Lighting) (5) LEA-Enforcement (6) 5.30 County of San Bernardino CFD No Special Tax A (7) County of San Bernardino CFD No Special Tax B (7) County of San Bernardino CFD No Special Tax C (8) 0.00 County of San Bernardino CFD No , Improvement Area No. 5 (9) 2, Total Assessments and Parcel Charges $ 2, (1) PROJECTED TOTAL PROPERTY TAXES $ 8, Projected Total Effective Tax Rate (as % of Total Value) % Based on the base sale price for units in Tax Class 2 of Zone B set forth in the Price Point Study. Total Value includes $7,000 homeowner s exemption. Total Value used to determine the Total Effective Tax Rate. (2) Based on the average unit and lot size for 15 Tax Class 2 units in Zone B. (3) Based on actual Fiscal Year ad valorem rates. (4) Based on the actual Fiscal Year rate of $5.62 per benefit unit. Residential units are assessed at 1.00 benefit unit. (5) Based on the actual Fiscal Year rate of $52.39 per parcel. (6) Based on the actual Fiscal Year rate of $5.30 per parcel, charged by the San Bernardino County Fire Department for administering waste management. (7) Expected amount based on the actual Fiscal Year rates. The maximum rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (8) Special Tax C is only levied to pay for the maintenance of parks and parkways, but only if such services are not being provided by the property owner association. Special Tax C is not being levied in Fiscal Year The Special Tax C Fiscal Year Maximum Special Tax rate is $ per unit. The Maximum Special Tax C rate escalates each year by CPI, with a minimum increase of two percent (2.00%) and a maximum increase of four percent (4.00%). (9) Expected amount based on the Fiscal Year Special Tax rate of $2, per unit for Tax Class 2 property of Zone B, which is 100% of the Assigned Special Tax rate of $2, per unit. The Assigned Special Tax rate does not escalate. Source: David Taussig and Associates, Inc. Delinquency History. Fiscal Year was the first year in which Special Taxes were levied within Improvement Area No. 5. In Fiscal Year , Special Taxes totaling $24,490 were levied on 12 26

35 parcels within Improvement Area No. 5. As of September 8, 2017, there were no delinquent Special Taxes within Improvement Area No. 5. Special Tax Fund Pursuant to the Indenture, the Trustee will establish and maintain a separate fund designated the Special Tax Fund. No later than ten Business Days after the receipt by the District of any Special Tax Revenues, the District will transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that with respect to any such Special Tax Revenues that represent prepaid Special Taxes: (i) said prepaid Special Taxes will be identified as such in a Written Certificate of the District delivered to the Trustee at the time when such prepaid Special Taxes are transferred to the Trustee; (ii) the portion of such prepaid Special Taxes that, pursuant to the Rate and Method, is to be applied to the Redemption Price of the Bonds will be identified in such Written Certificate of the District, will be deposited by the Trustee in the Redemption Fund and applied to the redemption of Bonds pursuant to the Indenture and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued; and (iii) the portion of such prepaid Special Taxes that, pursuant to the Rate and Method, is to be applied to the payment of interest on the Bonds to be so redeemed will be identified in such Written Certificate of the District, will be deposited by the Trustee in the Interest Account and will be applied to the payment of such interest. Upon receipt of a Written Request of the District, the Trustee will withdraw from the Special Tax Fund and transfer to the Administrative Expense Fund the amount specified in such Written Request of the District as the amount necessary to be transferred thereto in order to have sufficient amounts available therein to pay Administrative Expenses. On the Business Day immediately preceding each Interest Payment Date, after having made any requested transfer to the Administrative Expense Fund, the Trustee will withdraw from the Special Tax Fund and transfer, first, to the Interest Account in the Bond Fund, Net Special Tax Revenues in the amount, if any, necessary to cause the amount on deposit in the Interest Account in the Bond Fund to be equal to the interest due on the Bonds on such Interest Payment Date; second, to the Principal Account in the Bond Fund, Net Special Tax Revenues in the amount, if any, necessary to cause the amount on deposit in the Principal Account to be equal to the principal, if any, due on the Bonds on such Interest Payment Date, including principal due and payable by reason of mandatory sinking fund redemption of such Bonds; and, third, to the Reserve Fund, Net Special Tax Revenues in the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement. Bond Fund Pursuant to the Indenture, the Trustee will establish and maintain a separate fund designated the Bond Fund. Within the Bond Fund, the Trustee will establish and maintain a separate account designated the Principal Account and a separate account designated the Interest Account. The Trustee will deposit in the Bond Fund from time to time the amounts required to be deposited therein pursuant to the Indenture. In the event that, on the Business Day prior to an Interest Payment Date, amounts in the Interest Account are insufficient to pay the interest on the Bonds due and payable on such Interest Payment Date, the Trustee will withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and will transfer any amounts so withdrawn to the Interest Account. On each Interest Payment Date, the Trustee will withdraw from the Interest Account for payment to the Owners of the Bonds the interest on the Bonds then due and payable. In the event that, on the Business Day prior to a September 1 on which principal of the Bonds is due and payable, including principal due and payable by reason of mandatory sinking fund redemption of the Bonds, amounts in the Principal Account are insufficient to pay such principal, after having withdrawn any amounts from the Reserve Fund required to be withdrawn therefrom on such date pursuant to the Indenture, the Trustee will withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and transfer any amounts so withdrawn to the Principal Account. On each 27

36 September 1 on which principal of the Bonds is due and payable, including principal due and payable by reason of mandatory sinking fund redemption of the Bonds, the Trustee will withdraw from the Principal Account for payment to the Owners of the Bonds such principal then due and payable. Reserve Fund Pursuant to the Indenture, the Trustee will establish and maintain a special fund designated the Reserve Fund. The Trustee will deposit $494, in the Reserve Fund in connection with the issuance of the Series 2017 Bonds. There will additionally be deposited in the Reserve Fund, in connection with the issuance of Additional Bonds, the amount required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued. Except as otherwise provided in the Indenture, all amounts deposited in the Reserve Fund will be used and withdrawn by the Trustee solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of and interest on the Bonds or, in accordance with the provisions of the Indenture, for the purpose of redeeming Bonds. Transfers will be made from the Reserve Fund to the Bond Fund in the event of a deficiency in the Bond Fund, in accordance with the Indenture. Whenever Bonds are to be redeemed pursuant to the provisions of the Indenture pertaining to optional redemption or mandatory redemption from prepayments of Special Taxes, a proportionate share, determined as provided below, of the amount on deposit in the Reserve Fund will, on the date on which amounts to redeem such Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee pursuant to the Indenture, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or to such deposit held by the Trustee and will be applied to the redemption of such Bonds; provided, however, that such amount will be so transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share will be equal to the largest integral multiple of $5,000 that is not larger than the amount equal to the product of: (a) the amount on deposit in the Reserve Fund on the date of such transfer; multiplied by (b) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed. Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee will, upon receipt of a Written Request of the District, transfer the amount in the Reserve Fund to the Bond Fund or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds. If, as a result of the scheduled payment of principal of or interest on Bonds, the Reserve Requirement is reduced, the Trustee will transfer an amount equal to the amount of such reduction to the Interest Account within the Bond Fund. No Additional Bonds Except for Refunding The Indenture provides that the District may at any time issue one or more series of Additional Bonds payable from Net Special Tax Revenues secured on a parity with the Series 2017 Bonds and any other series of Additional Bonds solely for the purposes of refunding the Series 2017 Bonds or any other Series of Additional Bonds and provide funds to pay Costs of Issuance and make a deposit to the Reserve Fund in connection therewith, upon the satisfaction of certain conditions set forth in the Indenture including the requirement that Annual Debt Service in each Bond Year, calculated for all Bonds that will be Outstanding after the issuance of such Additional Bonds, will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds which are Outstanding immediately prior to the issuance of such Additional Bonds. 28

37 Nothing contained in the Indenture limits the issuance of any special tax bonds payable from Special Taxes if, after the issuance and delivery of such special tax bonds, none of the Bonds theretofore issued under the Indenture will be Outstanding. See Appendix D for additional terms and conditions applicable to the issuance of Additional Bonds. Subordinate Obligations The Indenture provides that the District may issue obligations payable from Net Special Tax Revenues on a basis subordinate to the Bonds without complying with the provisions of the Indenture relative to Additional Bonds. Location IMPROVEMENT AREA NO. 5 Improvement Area No. 5 of the District encompasses approximately 46.4 gross acres and is proposed for 270 detached residential dwellings. The property in Improvement Area No. 5 is part of the master-planned community known as Rosena Ranch. As of the Date of Value, within Improvement Area No. 5 there were 218 completed homes owned by homeowners, 14 completed homes and 38 homes in various stages of unit construction. Development has progressed and additional home sales have occurred since the Date of Value. As of October 1, 2017, within Improvement Area No. 5 there were (i) 250 completed homes owned by homeowners, (ii) five completed homes which have been sold but ownership of which had not yet transferred to individual homeowners, and (iii) 15 homes in various stages of unit construction, of which 14 are sold to individual homeowners and are expected to close upon completion of home construction. See the caption DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5. Improvement Area No. 5 is located north of the City of Fontana s northern boundary, in unincorporated western San Bernardino County. Improvement Area No. 5 is bounded by Interstate 15 on the north/northwest and Lytle Creek on the south. The property is near the foot of the San Gabriel Mountains at the mouth of Lytle Creek Canyon. Description of the Authorized Facilities The Facilities authorized to be constructed and acquired by the District with the proceeds of the Series 2017 Bonds and bonds issued by the District for Improvement Area Nos. 1, 2, 3, 4 and 6 within the District, consist of certain public facilities, including certain street improvements such as street lights and parkway and landscaping related thereto, water facilities, sewers, sewer treatment plants, storm drains, flood control facilities, public parks and recreation facilities, and fire and police protection facilities. Lennar Lytle anticipates that the proceeds of the Series 2017 Bonds will be used to finance all or a portion of the acquisition price of certain of the authorized facilities. Series 2017 Bond proceeds available to finance such Facilities will be disbursed to purchase such Facilities from Lennar Lytle pursuant to the terms of the Amended and Restated Acquisition and Funding Agreement, dated as of November 1, 2010 (the Acquisition Agreement ), by and among the District, the County and Lennar Lytle, or available to the Fire District (as defined herein) to fund authorized Facilities. DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5 The information about the property in Improvement Area No. 5 contained in this Official Statement has been provided by representatives of Lennar Lytle, Lennar Homes, and others, and has not been independently confirmed or verified by the Underwriter, the County or the District. The Underwriter, the County, and the District make no representation as to the accuracy or adequacy of the information contained in this caption. There may be material adverse changes in this information after the date of this Official Statement. Neither the Series 2017 Bonds nor the Special Taxes securing the Series 2017 Bonds and any Additional Bonds are personal obligations of either of Lennar Lytle, Lennar Homes, or any affiliate thereof or 29

38 any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of any property owner or any affiliate thereof. See the caption SPECIAL RISK FACTORS. Rosena Ranch Development General. The property in Improvement Area No. 5 is part of the master-planned community being developed by Lennar Lytle, LLC, a Delaware limited liability company, known as Rosena Ranch and is hereinafter referred to as the Rosena Ranch Development. The Rosena Ranch Development is coterminous with the District. The Rosena Ranch Development consists of approximately 386 gross acres of residential property which are divided into six improvement areas. Improvement Areas No. 1, Improvement Area No. 2, Improvement Area No. 3 and Improvement Area No. 4 include approximately 102, 45, 62 and 57 net acres, respectively, and are all fully built out with homes owned by individual homeowners. Improvement Area No. 6 includes approximately 44 acres and the property therein is currently owned by Lennar Homes, D.R. Horton and individual homeowners. The Rosena Ranch Development is planned for approximately 2,086 residential units. From property in Improvement Area M, Lennar Lytle has created Improvement Area No. 2, Improvement Area No. 3, Improvement Area No. 4, Improvement Area No. 5, and Improvement Area No. 6. The remaining property in Improvement Area M is not expected to be developed as residential units. Subdivision Map Status. Tract Map No for the Rosena Ranch Development was recorded on June 7, Subsequent to the recordation of Tract Map No , final tract maps were recorded over the property in Improvement Area No. 1. On July 15, 2010, Tract Map No was recorded which created 15 large lot parcels. Subsequent to the recordation of Tract Map No , final tract maps were recorded over these large lot parcels in Improvement Area No. 2, Improvement Area No. 3, Improvement Area No. 4, Improvement Area No. 5, and Improvement Area No. 6, as shown below: 30

39 (1) Final Tract Map Total Number of Parcels Map Recorded Improvement Area August 24, August 24, August 24, August 24, October 6, April 21, March 15, November 28, March 28, December 19, February 13, August 21, December 18, October 22, August 12, March 3, (1) November 8, December 22, April 20, July 27, (2) December 8, Tract includes the model homes for the various products being marketed and sold by Lennar Homes. (2) Tract will be developed, marketed and sold by D.R. Horton. Source: Lennar Lytle. Environmental Review. The Rosena Ranch Development has received extensive environmental review and has acquired all of the required environmental permits from regulatory agencies that Lennar Lytle currently believes will be required to complete the Rosena Ranch Development. All appeal periods with respect to such approvals have expired. Notwithstanding the foregoing, it is possible that future events relating to environmental issues could impact the development. Utilities. It is expected that utility services for the taxable property in the Rosena Ranch Development will be provided by the following: Electricity: Water: Gas: Sewer: Telephone: Southern California Edison West Valley Water District Southern California Gas Company County of San Bernardino AT&T The property in Improvement Area No. 1, Improvement Area No. 2, Improvement Area No. 3, Improvement Area No. 4 and Improvement Area No. 6 is not subject to the levy of the Special Taxes and is not security for the Series 2017 Bonds. The foregoing is provided for informational purposes only. Improvement Area No. 5 Development by Lennar Homes. All of the property in Improvement Area No. 5 was originally owned by Lennar Lytle. Lennar Homes acquired lots directly from Lennar Lytle through takedowns at the time that Lennar Homes planned to begin construction on such lots. Lennar Lytle no longer owns any taxable property in Improvement Area No. 5. After acquisition of finished lots from Lennar Lytle, Lennar Homes 31

40 constructs, markets, and sells single-family detached homes on such lots. As of the Date of Value, Lennar Homes had completed and conveyed 218 homes to individual homeowners and owned 14 completed but unclosed homes and 38 homes under construction. Development and home sales have progressed since the Date of Value. As of October 1, 2017, Lennar Homes had completed and conveyed 250 homes to individual homeowners (an increase of 32 since the Date of Value of the Appraisal) and owned five completed but unclosed homes, and 15 homes under construction. Improvement Area No. 5 is being developed into three product lines known as Sage, Rosewood, and Chaparral, as described below. The development status of the three product lines being constructed and sold within Improvement Area No. 5 is summarized in the tables below as of October 1, The estimated base pricing set forth in the tables does not reflect the actual sales prices of homes that have been sold, but represents the current (as of October 1, 2017) expected base price for the unsold homes within each product line. Floor Plan Home Square Footage Number of Units Number of Closed Units SAGE (Tract ) Number of Completed Units Sold But Not But Not Closed Closed Under Construction Finished Lots Base Price Plan 2 1, Sold Out Plan 3 1, Sold Out Plan 4A 2, Sold Out Plan 4B 2, Sold Out Plan 4C 2, Sold Out Total Floor Plan Home Square Footage Number of Units ROSEWOOD/SAGE (Tract ) Number Completed of Closed But Not Units Closed Number of Units Sold But Not Closed (1) Under Construction Finished Lots Base Price Rosewood Plan 1 1, Sold Out Plan 2 1, Sold Out Plan 3 1, Sold Out Plan 4 2, Sold Out Sage Plan 2 1, $378,490 Plan 3 1, Sold Out Plan 4B 2, Sold Out Total

41 Floor Plan Home Square Footage Projected Number of Units CHAPARRAL (Tract ) Number Completed of Units But Not Sold But Closed Not Closed (1) Number of Closed Units Under Construction Finished Lots Base Price Plan 2 2, Sold Out Plan 3 2, Sold Out Plan 4 2, Sold Out Plan 4X 3, Sold Out Plan 6 4, Sold Out Plan 7 3, Sold Out Total (1) Includes homes under construction. Source: Lennar Homes. Infrastructure Development Off-site Infrastructure Development. Lennar Lytle has expended over $106 million on improvements to the Rosena Ranch Development and intends to finish constructing certain backbone infrastructure improvements in the District (the Improvements ). All of the Improvements have been constructed by Lennar Lytle, except for certain water and fire district improvements described below. Of the Improvements that have been constructed and that will be constructed, approximately $35.5 million are eligible for financing by the District from the 2017 Bonds and from future bond issues in the District. Lennar Lytle intends to finance the remaining Improvements using bond proceeds (including proceeds from the Series 2017 Bonds as well as special taxes and bond proceeds from the other improvement areas within the District) and internal sources. The Improvements that remain to be constructed include the following: A. Fire Station. Originally, as a condition to development, Lennar Lytle was required to substantially complete a regional fire station with storage building, car port fuel island canopy and portable generator building and on-site helipad prior to the issuance of the final inspection on the 1,000 th dwelling unit constructed in the Rosena Ranch Development. In addition to the construction of the fire station, Lennar Lytle was required to advance a portion of the costs to acquire a fire engine and certain fire station equipment one year prior to the substantial completion of the fire station, with the remaining balance due upon the delivery of the fire engine and fire station equipment. The San Bernardino County Fire Protection District (the Fire District ) and Lennar Lytle subsequently amended the requirement. Instead of constructing improvements and advancing the costs for the fire engine and fire station equipment, Lennar Lytle advanced $6,062, from the proceeds of the Improvement Area No. 4 bonds issued in November 2016 to the Fire District, and the Fire District will construct the improvements, purchase the fire engine, and purchase fire station equipment as and when the Fire District determines. In addition, Lennar Lytle is responsible for paying any shortfalls in funding operating costs until the issuance of the final inspection on the 1,900 th dwelling unit constructed in the Rosena Ranch Development. B. Water Facilities. Lennar Lytle was assigned a portion of the Water Facilities and Service Agreement (the Water Agreement ) with the West Valley Water District (the Water District ). The Water Agreement provides for hook-up rights for property identified as (i) Phase I, which includes all of the property in the District as well as additional property within Tract Map No , and (ii) Phase II, which includes property located outside of the District. Subject to the satisfaction of certain conditions set forth therein, the Water Agreement provides for hook up rights up to 2,217 equivalent dwelling units within Phase I and hook up rights to 2,083 equivalent dwelling units within Phase II. For Phase I, the Water Agreement: 33

42 required the completion of certain improvements in order to provide water to the first unit in Phase I, and those improvements have been completed; required the completion of certain improvements in order to provide water up to 1,800 units in Phase I, and those improvements have been completed; and requires that the Water District complete a reservoir in order to provide water on the 1,801 st unit in Phase I and all other units up to the 2,217 equivalent dwelling units, and construction on this reservoir has not started. Subsequent to the execution of the Water Agreement, the Water District and Lennar Lytle have agreed that Lennar Lytle may construct the reservoir and other improvements, or may, in lieu of constructing the reservoir and other improvements (a well and pipelines), pay, or cause to be paid, a mitigation amount to the Water District that would cover the costs of those facilities. The construction of these facilities or the financing of the mitigation payment will satisfy all remaining obligations to the Water District. As of October 1, 2017, Lennar Lytle has expended approximately $8,267,453 on water improvements. The completion of the foregoing Improvements is required as a condition of development for the Rosena Ranch project, but is not required to be completed as a condition of developing Improvement Area No. 5. Intract Infrastructure Development. As a lot is developed for home construction, the lot-specific horizontal improvements need to be constructed (e.g., driveway, sidewalk, utility laterals, retaining walls, street capping (excluding home construction)), impact fees need to be paid (e.g., library, sewer, and school fees), and building permit fees need to be paid. See Lennar Homes Financing Plan for a discussion of some of these costs. Amenities. There are several amenities associated with Rosena Ranch Development. These amenities include a recreational center on 4.25 acres featuring a pool, fitness center, and clubhouse (completed by Lennar Lytle), an 8-acre passive park and joint use site (completed by Lennar Lytle), and a K-8 neighborhood school (constructed by the San Bernardino School District). Lennar Lytle Financing Plan Consolidated Joint Venture. Lennar Lytle was, at one point, a joint venture between a subsidiary of Lennar Corporation and outside companies. However, in 2008, Lennar Lytle was restructured to have only one member (Lennar Fresno, Inc.) and thus became a wholly-owned subsidiary of Lennar Corporation. Lennar Lytle continues to operate as a consolidated joint venture of Lennar Homes. As such, the internal sources of Lennar Homes and Lennar Lytle are available to finance the development obligations of both Lennar Homes and Lennar Lytle, in addition to bond proceeds. During the course of development, Lennar Lytle also secured lines of credit with certain banks to assist in financing certain development costs of the Rosena Ranch Development, however, such lines of credit have been fully repaid. Notwithstanding the belief of Lennar Lytle that it will have sufficient funds to complete its planned development in the Rosena Ranch Development, no assurance can be given that sources of financing available to Lennar Lytle will be sufficient to complete the property development as currently anticipated. While Lennar Lytle has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Lennar Lytle nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Lennar Lytle to provide internal financing in the past, Lennar Lytle has not represented in any way that it will do so in the future. If and to the extent that internal financing or bond proceeds are inadequate to pay the costs to complete the Rosena Ranch Development and other financing by 34

43 Lennar Lytle is not put into place, there could be a shortfall in the funds required to complete the proposed development by Lennar Lytle and portions of the project may not be developed. Lennar Homes Financing Plan As of October 1, 2017, Lennar Homes owned five completed homes and was constructing homes on the remaining 15 lots that it owned within Improvement Area No. 5. As of October 1, 2017, Lennar Homes estimate of the costs to build the remaining homes within Improvement Area No. 5 is set forth in the table below. The following table excludes costs incurred by Lennar Homes and Lennar Lytle prior to October 1, 2017, in connection with the development of Rosena Ranch, including Improvement Area No. 5. Further, the table assumes all homes are sold and closed by the end of November LENNAR HOMES ESTIMATED COSTS FROM OCTOBER 1, 2017 THROUGH PROJECT COMPLETION Site Development $ 225,000 Direct Construction of Homes 462,853 Indirect Construction Costs 26,896 Selling and Marketing 45,395 Service and Warranty 12,153 Property Taxes 1,072 Total $773,369 Source: Lennar Homes Lennar Homes is financing a portion of its development activities in Improvement Area No. 5 through internal sources and intends to use these sources of funds, together with proceeds of future home sales, to finance home construction costs and carrying costs for its property in Improvement Area No. 5 (including property taxes and the Special Taxes while it owns the property) until full sell-out of its proposed single-family residential homes in Improvement Area No. 5. Lennar Homes believes that it will have sufficient funds to provide the internal funding needed to complete the development of the lots it currently owns in Improvement Area No. 5 of the District. Notwithstanding the belief of Lennar Homes that it will have sufficient funds to complete its planned development in Improvement Area No. 5, no assurance can be given that sources of financing available to Lennar Homes will be sufficient to complete the property development and home construction as currently anticipated. While Lennar Homes has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Lennar Homes nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Lennar Homes to provide internal financing in the past, Lennar Homes has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete Lennar Homes planned development in Improvement Area No. 5 and other financing by Lennar Homes is not put into place, there could be a shortfall in the funds required to complete the proposed development by Lennar Homes and portions of the project may not be developed. Lennar Homes of California, Inc. PROPERTY OWNERSHIP As of the date of this Official Statement, Lennar Homes is Lennar Homes of California, Inc., a California corporation, which is based in Aliso Viejo, California, and has been in the business of developing residential real estate communities in California since

44 Lennar Homes is owned by U.S. Home Corporation, a Delaware corporation ( U.S. Home ), and two other entities, Lennar Land Partners Sub, Inc. (7.331% interest) and Lennar Land Partners Sub II, Inc. (11.933% interest). U.S. Home, Lennar Land Partners Sub, Inc., and Lennar Land Partners Sub II, Inc. are each wholly-owned by Lennar Corporation. Lennar Corporation, founded in 1954 and publicly traded under the symbol LEN since 1971, is one of the nation s largest home builders, operating under a number of brand names, including Lennar Homes and U.S. Home. Lennar Homes develops residential communities both within the Lennar family of builders and through consolidated and unconsolidated partnerships in which Lennar Homes maintains an interest. Lennar Homes is an indirect wholly owned subsidiary of Lennar Corporation ( Lennar Corporation ). Lennar Corporation is subject to the informational requirements of the Securities Exchange Act of 1984, as amended, and in accordance therewith files reports, proxy statements and other information with the SEC. Such filings, particularly the Annual Report on Form 10-K and its most recent Quarterly Report on Form 10- Q, may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C at prescribed rates. Such files can also be accessed over the internet at the SEC s website at This internet address is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site. Copies of Lennar Corporation s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Lennar Corporation s website at This internet address is included for reference only and the information on the Internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site. Lennar Lytle The master developer for all the property within the Rosena Ranch Development is Lennar Lytle, LLC, a Delaware limited liability company. Lennar Fresno, Inc., a California corporation, is the sole member of Lennar Lytle. Lennar Fresno, Inc. is owned entirely by Lennar Homes Holding, LLC, a Delaware limited liability company, which, in turn, is a 100% subsidiary of Lennar Corporation. Lennar Lytle was the original owner of all of the property in Improvement Area No. 5. Lennar Lytle has since sold all of the taxable property in Improvement Area No. 5 to Lennar Homes (see DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5 Improvement Area No. 5 ). As the master developer, Lennar Lytle intends to construct certain on-site and off-site improvements in the District. Most of the improvements have been completed but there are certain improvements that Lennar Lytle intends to construct for the Rosena Ranch Development (see DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5 Infrastructure Development ). Notwithstanding the belief of Lennar Lytle that it will have sufficient funds to complete its planned development in the Rosena Ranch Development, no assurance can be given that sources of financing available to Lennar Lytle will be sufficient to complete the property development as currently anticipated. While Lennar Lytle has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Lennar Lytle nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Lennar Lytle to provide internal financing in the past, Lennar Lytle has not represented in any way that it will do so in the future. If and to the extent that internal financing, loan proceeds, or bond proceeds are inadequate to pay the costs to complete the Rosena Ranch Development and 36

45 other financing by Lennar Lytle is not put into place, there could be a shortfall in the funds required to complete the proposed development by Lennar Lytle and portions of the project may not be developed. SPECIAL RISK FACTORS The purchase of the Series 2017 Bonds involves significant investment risks and, therefore, the Series 2017 Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Series 2017 Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Series 2017 Bonds. Furthermore, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in Improvement Area No. 5 to pay their respective Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Series 2017 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property within Improvement Area No. 5. See the captions Property Values and Limited Secondary Market; Potential Reduction in Bond Values below. Risks of Real Estate Secured Investments Generally The Series 2017 Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors. No assurance can be given that the individual property owners will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption Bankruptcy and Foreclosure for a discussion of certain limitations on the District s ability to pursue judicial proceedings with respect to delinquent parcels. Limited Obligations The Series 2017 Bonds and the interest thereon are not general obligations of or payable from the general funds of the County or the District. The Series 2017 Bonds are special obligations of the District, payable, as provided in the Indenture, solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the County or the State, or any political subdivision thereof, is pledged to the payment of the Series 2017 Bonds or the interest thereon and, except as provided in the Indenture, no Owner of the Series 2017 Bonds may compel the exercise of any taxing power by the District or the County or force the forfeiture of any District or County property. The principal of, premium, if any, and interest on the Series 2017 Bonds are not a debt of the County or a legal or equitable pledge, charge, lien or encumbrance upon any of the County s or the District s property or upon any of the County s or the District s income, receipts or revenues, except the Special Taxes and other amounts pledged under the Indenture. Special Tax proceeds could be insufficient to pay debt service on the Series 2017 Bonds as a result of delinquencies in the payment of Special Taxes or the insufficiency of proceeds derived from the sale of property within Improvement Area No. 5 following a delinquency in the payment of the applicable Special 37

46 Taxes. The amount of annual installments of Special Taxes that are collected could be insufficient to pay principal of and interest on the Series 2017 Bonds due to non-payment of such Special Taxes levied or due to insufficient proceeds received from a judicial foreclosure sale of land within Improvement Area No. 5 following delinquency. The County s and District s legal obligations with respect to any delinquent Special Taxes are limited to: (1) payments from the Reserve Fund to the extent of funds on deposit therein; and (2) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Covenant for Superior Court Foreclosure. The Series 2017 Bonds cannot be accelerated in the event of any default. The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the County Superior Court. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so. Insufficiency of Special Taxes Under the Rate and Method, the annual amount of Special Tax to be levied on each taxable parcel within Improvement Area No. 5 will generally be based on whether such parcel is categorized as Undeveloped Property or as Developed Property and on the land use class to which a parcel of Developed Property is assigned. See the captions SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Special Taxes and SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Rate and Method of Apportionment of Special Taxes and Appendix A. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of a particular property and the amount of the levy of the Special Tax against such property. Thus, there will rarely, if ever, be a uniform relationship between the value of a property and the proportionate share of debt service on the Series 2017 Bonds, and certainly not a direct relationship. The Rate and Method governing the levy of the Special Tax permits the exemption of Public Property and Property Owner Association Property so long as the acreage of Taxable Property within Zone A and Zone B of Improvement Area No. 5 is at least acres and 9.84 acres, respectively. If for any reason property within Improvement Area No. 5 becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency (as discussed further under the caption FDIC/Federal Government Interests in Properties ), subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within Improvement Area No. 5. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due. Moreover, if a substantial portion of property within Improvement Area No. 5 became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining property within Improvement Area No. 5 might not be sufficient to pay principal of and interest on the Series 2017 Bonds and any Additional Bonds when due, and a default could occur with respect to the payment of such principal and interest. Reduction in the amount of property subject to the Special Tax, for such reasons as acquisition of such property by a government and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, could result in an increased tax burden on the remaining parcels of Taxable Property. The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable 38

47 against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. Due to the problems of collecting taxes from public agencies, if a substantial portion of land within the District were to become owned by public agencies, collection of the Special Tax might become more difficult and could result in collections of the Special Tax which might not be sufficient to pay principal of and interest on the Series 2017 Bonds when due, and a default could occur with respect to the payment of such principal and interest. See the caption FDIC/Federal Government Interests in Properties. Under the Act, under no circumstances will the Special Tax levied in any Fiscal Year against any taxable parcel of residential property within Improvement Area No. 5 be increased by more than 10% as a consequence of a delinquency or default by the owner of any other parcel within Improvement Area No. 5 above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. Such limitation would not apply to increases in Special Taxes levied for other purposes, such as the issuance of Additional Bonds. The Net Special Tax Revenues are the primary security for the repayment of the Series 2017 Bonds and any Additional Bonds. In the event that the Special Taxes are not paid prior to delinquency, the only sources of funds available to pay the debt service on the Series 2017 Bonds and any Additional Bonds are amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund, funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The District notes that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described under the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Covenant for Superior Court Foreclosure and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes, as well as the same risk of delays in collection. Pursuant to these procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Series 2017 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Fund is depleted. Failure to Develop Remaining Homes Development of property within Improvement Area No. 5 may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of Lennar Homes or any property owner to pay the Special Taxes when due. Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. See the caption DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5 for a discussion of the remaining homes to be completed and sold within Improvement Area No. 5. No assurance can be given that the remaining proposed residential development will be partially or fully completed, and for purposes of evaluating the investment quality of the Series 2017 Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and only partially improved. See the caption DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA NO. 5. Undeveloped or partially developed property is inherently less valuable than developed property and provides less security to the Series 2017 Bond Owners should it be necessary for the District to foreclose on the property due to the nonpayment of Special Taxes. The failure to complete development within 39

48 Improvement Area No. 5 due to litigation or other causes may reduce the value of the property within Improvement Area No. 5 and increase the length of time during which Special Taxes will be payable from partially developed property, and may affect the willingness and ability of the owners of property within Improvement Area No. 5 to pay the Special Taxes prior to delinquency. There can be no assurance that property development within Improvement Area No. 5 will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, an increase in mortgage interest rates, the income tax treatment of real property ownership, or the national economy. In that event, there could be a default in the payment of principal of, and interest on, the Series 2017 Bonds and any Additional Bonds, when due. The Special Taxes that may be levied on Developed Property exceed the amount required to pay debt service on the Series 2017 Bonds. However, in the event of significant delinquencies in the payment of Special Taxes by individual homeowners, Special Taxes would be levied on property with partially completed homes owned by Lennar Homes. Property without completed homes provides less security to the Series 2017 Bond Owners should it be necessary for the District to foreclose on such property due to the nonpayment of the Special Taxes. Based on development status as of the Date of Value, all parcels within Improvement Area No. 5 will be classified as Developed Property for the Fiscal Year Special Tax levy. Soils and Seismic Conditions and Natural Disasters Improvement Area No. 5, like all communities in the State, may be subject to unpredictable seismic activity, wildfires, flood, landslide, high winds or other natural disasters. The District is located in a seismically active region in Southern California. There is significant potential for destructive ground-shaking during the occurrence of a major seismic event, which represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, property along fault lines may be subject to liquefaction during the occurrence of such an event. While the property within Improvement Area No. 5 subject to the lien of Special Taxes is not located in a known fault zone, such property may nevertheless be subject to unpredictable seismic activity. In recent years, portions of Southern California have experienced outbreaks of wildfires that have burned thousands of acres at a time and destroyed thousands of homes and structures. In recent years, such wildfires occurred in the County and the adjacent counties of Los Angeles, Orange, Riverside and San Diego, affecting parts of the County near the District and resulting in the destruction of homes. In the event of a severe earthquake, wildfire, flood, landslide, high winds or other natural disaster, there may be significant damage to both property and infrastructure within Improvement Area No. 5. As a result, Lennar Homes or the homeowners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of property within Improvement Area No. 5 could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. Endangered Species During the 1990s, there was an increase in activity at the State and federal level related to the possible listing of certain plant and animal species found in the Southern California area as endangered species. An increase in the number of endangered species would curtail development in a number of areas. At present, the property within Improvement Area No. 5 is not known to be inhabited by any plant or animal species which is on the endangered species list or which either the State Fish and Wildlife Commission or the United States Fish and Wildlife Service has proposed for addition to the endangered species list. Notwithstanding this fact, new species are proposed to be added to the State and federal protected lists on a regular basis. Any action by the State or federal governments to protect species located on or adjacent to the property within Improvement 40

49 Area No. 5 could negatively impact Lennar Homes ability to complete its development in Improvement Area No. 5 as planned. This, in turn, could reduce the likelihood of timely payment of the Special Tax and would likely reduce the value of the property estimated by the Appraiser and the potential revenues available at a foreclosure sale for delinquent Special Taxes. See the captions Failure to Develop Remaining Homes and Property Values. Lennar Homes represents that it is not aware of any endangered species located on its property within Improvement Area No. 5. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as CERCLA or the Superfund Act, is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The value of the property within Improvement Area No. 5, as set forth in this Official Statement and in the Appraisal, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the property. The District has not independently verified, but is not aware, that any owner (or operator) of any of the parcels within Improvement Area No. 5 has such a current liability with respect to any such parcel. However, it is possible that such liabilities do currently exist and that the District is not aware of them. Furthermore, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel and the willingness or ability of the owner of any parcel to pay the Special Taxes. Parity Taxes, Special Assessments and Land Development Costs Property within Improvement Area No. 5 is subject to tax and assessment liens of several overlapping public agencies. See the caption SECURITY AND SOURCE OF PAYMENT OF THE SERIES 2017 BONDS Property Values Direct and Overlapping Indebtedness. The total tax payments due on a parcel as a percentage of value could increase as a result of the issuance of additional debt of the overlapping public agencies or a decrease in home values. The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of property on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by the County and other public agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation (the FDIC ). See the caption FDIC/Federal Government Interests in Properties. 41

50 Neither the County nor the District has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes or assessments payable from all or a portion of the property within Improvement Area No. 5. In addition, the property owners within Improvement Area No. 5 may, without the consent or knowledge of the County, petition other public agencies to issue public indebtedness secured by special taxes or assessments. Any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within Improvement Area No. 5 described herein as the debt on the property within Improvement Area No. 5 increases without any corresponding increase in the value of the property therein. Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given that the proceeds of any foreclosure sale of property with delinquent Special Taxes would be sufficient to pay the delinquent Special Taxes. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Property Values Direct and Overlapping Indebtedness. Disclosures to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time when the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and the risk of such a levy and, at the time of such a levy, has the ability to pay the Special Tax as well as pay other expenses and obligations. The County has caused a notice of the Special Tax lien to be recorded in the Office of the Recorder for the County against each parcel. While title companies normally refer to such notices in title reports, there can be no assurance that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation when purchasing a property within Improvement Area No. 5 or lending money thereon. The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Non-Cash Payments of Special Taxes Under the Act, the Board of Supervisors, as the legislative body of the District, may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Series 2017 Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Series 2017 Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if Series 2017 Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes applicable thereto by tendering a Series 2017 Bond. Such a practice would decrease the cash flow available to the District to make payments with respect to other Series 2017 Bonds then outstanding; and, unless the practice was limited by the District, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Series 2017 Bonds. In order to provide some protection against the potential adverse impact on cash flows which might be caused by the tender of Series 2017 Bonds in payment of Special Taxes, the Indenture includes a covenant pursuant to which the County will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of Series 2017 Bonds unless the District has first obtained a report of an Independent Consultant certifying that doing so would not result in the District having insufficient Special Tax Revenues to 42

51 pay the principal of and interest on all Outstanding Bonds when due. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Collection and Application of Special Taxes. Payment of the Special Tax is Not a Personal Obligation of the Owners An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the County has no recourse against the property owner and its only remedy is to pursue judicial foreclosure proceedings on the delinquent parcel. Property Values The value of the property within Improvement Area No. 5 is a critical factor in determining the investment quality of the Series 2017 Bonds. If a property owner within Improvement Area No. 5 is delinquent in the payment of Special Taxes, the District s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Prospective purchasers of the Series 2017 Bonds should not assume that the property within Improvement Area No. 5 could be sold for the assessed values described herein at a foreclosure sale for delinquent Special Tax installments or for an amount adequate to pay delinquent Special Tax installments. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Covenant for Superior Court Foreclosure. Reductions in property values due to a downturn in the economy or the real estate market, physical events such as earthquakes, wildfires, droughts or floods, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See the caption SECURITY AND SOURCE OF PAYMENT OF THE SERIES 2017 BONDS Property Values Estimated Appraised Value to Lien. The Appraiser has estimated, on the basis of certain definitions, assumptions and limiting conditions contained in the Appraisal, that as of the Date of Value, the value of the property within Improvement Area No. 5 was approximately $103,400,000. The Appraisal is based on a number of assumptions and limiting conditions as stated in Appendix B. The Appraisal does not reflect any possible negative impact which could occur by reason of future slow or no growth voter initiatives, a further economic downturn, any potential limitations on development occurring due to time delays, an inability of any property owner to obtain any needed development approval or permit, the presence of hazardous substances or other adverse soil conditions within Improvement Area No. 5, the listing of endangered species or the determination that habitat for endangered or threatened species exists within Improvement Area No. 5, or other similar situations. During the most recent economic recession, many counties in the State, including the County, reassessed certain properties acquired during the peak of the real estate market. The District is aware that the County Assessor made reductions in Fiscal Year and assessed values within the District and the County generally. The District cannot predict whether the County will reduce assessed values within Improvement Area No. 5 in future years. If the County did decide to broadly reassess property values in the County, it is possible that in future years assessed values could be adjusted downward. No assurance can be given that Fiscal Year assessed values reflect market values or that a parcel could actually be sold for its assessed value. In arriving at its estimate of market value, the Appraiser assumed that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix B for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser s assumptions to be untrue could result in a reduction of the value of the property within Improvement Area No. 5 from that estimated by the Appraiser. 43

52 No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. FDIC/Federal Government Interests in Properties General. The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the FDIC, the Drug Enforcement Agency, the Internal Revenue Service, or other federal agencies such as the Federal National Mortgage Association ( FNMA ) or Freddie Mac, has or obtains an interest. The supremacy clause of the United States Constitution reads as follows: This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding. The foregoing is generally interpreted to mean that, unless the United States Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within Improvement Area No. 5 but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable State and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government s mortgage interest. In Rust v. Johnson 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the Ninth Circuit ), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within Improvement Area No. 5 becoming owned by the federal government, federal government entities or federal government sponsored entities, see the caption Insufficiency of Special Taxes. The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Series 2017 Bonds are outstanding. FDIC. In the event that any financial institution making a loan which is secured by parcels within Improvement Area No. 5 is taken over by the FDIC and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC s policy statement regarding the payment of state and local real property taxes (the Policy Statement ) provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution s affairs, unless abandonment of the FDIC s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent that the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of 44

53 fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC s consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent that it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC s federal immunity. The Ninth Circuit issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes imposed pursuant to the Act. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes from foreclosure at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Series 2017 Bonds. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors rights could adversely impact the interests of owners of the Series 2017 Bonds in at least two ways. First, the payment of property owners taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors rights (such as the Soldiers and Sailors Relief Act of 1940) or by the laws of the State relating to judicial foreclosure. See the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2017 BONDS Covenant for Superior Court Foreclosure. In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Second, the United States Bankruptcy Code might prevent moneys on deposit in the funds and accounts created under the Indenture from being applied to pay interest on the Series 2017 Bonds and/or to redeem Series 2017 Bonds if bankruptcy proceedings were brought by or against the property owner and if the court found that the property owner had an interest in such moneys within the meaning of Section 541(a)(1) of the United States Bankruptcy Code. Although a bankruptcy proceeding would not cause the lien of the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, the bankruptcy of a property owner could result in stay of enforcement or a delay in prosecuting Superior Court foreclosure proceedings or adversely affect the willingness of a property owner to pay the Special Taxes. Such delay would increase the likelihood of a delay or default in payment of delinquent Special Tax installments and the possibility of delinquent Special Tax installments not being paid in full. If enough parcels were subject to bankruptcy proceedings, court delays would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Series 2017 Bonds and the possibility of delinquent tax installments not being paid in full. 45

54 The various legal opinions to be delivered concurrently with the delivery of the Series 2017 Bonds (including Bond Counsel s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, by the application of equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against governmental entities such as the County and the District in the State. Other laws generally affecting creditors rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service. No Acceleration Provision The Act, the Series 2017 Bonds and the Indenture do not contain a provision allowing for the acceleration of the Series 2017 Bonds in the event of a payment default or other default under the Series 2017 Bonds or the Indenture or in the event that interest on the Series 2017 Bonds becomes included in gross income for federal income tax purposes. Pursuant to the Indenture and further subject to the prior lien of owners of the Series 2017 Bonds, an owner is given the right for the equal benefit and protection of all owners of a series similarly situated to pursue certain remedies described in Appendix D. See the caption Limitations on Remedies. Loss of Tax Exemption As discussed under the caption TAX MATTERS, the interest on the Series 2017 Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2017 Bonds as a result of a failure of the District to comply with certain provisions of the Code or acts or omissions of the District or the County in violation of the Code and covenants set forth in the Indenture. In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Series 2017 Bonds, the District has covenanted in the Indenture not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Series 2017 Bonds under Section 103 of the Code. Should such an event of taxability occur, the Series 2017 Bonds are not subject to early redemption as a result of such event and will remain outstanding to maturity or until redeemed under the optional redemption provisions of the Indenture. See the caption THE SERIES 2017 BONDS Redemption. Pending or future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2017 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation. Audit of Tax-Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Series 2017 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Series 2017 Bonds might 46

55 be affected as a result of such an audit of the Series 2017 Bonds (or by an audit of similar municipal obligations). Limitations on Remedies Remedies available to the owners of the Series 2017 Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Series 2017 Bonds or to preserve the tax-exempt status of the Series 2017 Bonds. Bond Counsel has limited its opinion as to the enforceability of the Series 2017 Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, by the application of equitable principles, by the exercise of judicial discretion in appropriate cases and the limitations on legal remedies against governmental entities such as the County and the District in the State. Additionally, the Series 2017 Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners of the Series 2017 Bonds. Enforceability of the rights and remedies of the Owners of the Series 2017 Bonds, and the obligations incurred by the District, may become subject to the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the federal Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against governmental entities in the State. See the captions Bankruptcy and Foreclosure and FDIC/Federal Government Interests in Properties. Limited Secondary Market; Potential Reductions in Bond Values There can be no guarantee that there will be a secondary market for the Series 2017 Bonds or, if a secondary market exists, that such Series 2017 Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information on an annual basis, there can be no assurance that such information will be available to Series 2017 Bond Owners on a timely basis. See the caption CONTINUING DISCLOSURE. The failure to provide annual financial information, if required, does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Funds Invested in the County Investment Pool On January 24, 1996, the United States Bankruptcy Court for the Central District of California held that a State statute providing for a priority of distribution of property held in trust conflicted with, and was preempted by, federal bankruptcy law. In that case, the court addressed the priority of the disposition of moneys held in a county investment pool upon bankruptcy of the county. Following payment of the Special Taxes to the District, such funds may be invested in the name of the County or the District for a period of time in the County investment pool. In the event of a petition of or the adjustment of County debts under Chapter 9 of the United States Bankruptcy Code, a court might hold that the Series 2017 Bond Owners do not have a valid and/or prior lien on the Special Taxes or debt service payments where such amounts are deposited in the County investment pool and may not provide the Series 2017 Bond Owners with a priority interest in such 47

56 amounts. In that circumstance, unless the Series 2017 Bond Owners could trace the funds that have been deposited in the County investment pool, the Series 2017 Bond Owners would be unsecured (rather than secured) creditors of the County. There can be no assurance that the Series 2017 Bond Owners could successfully so trace the Special Taxes or debt service payments. Potential Early Redemption of Series 2017 Bonds from Prepayments Property owners within Improvement Area No. 5 are permitted to prepay their Special Taxes at any time. Such prepayments will result in a redemption of Series 2017 Bonds following the receipt of the prepayment. See the caption THE SERIES 2017 BONDS Redemption Mandatory Redemption from Special Tax Prepayments. As of the date of this Official Statement, there have not been any prepayments of Special Taxes in Improvement Area No. 5. Proposition 218 An initiative measure commonly referred to as the Right to Vote on Taxes Act (the Initiative ) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and Article XIIID to the State Constitution. According to the Title and Summary of the Initiative prepared by the State Attorney General, the Initiative limits the authority of local governments to impose taxes and property-related assessments, fees and charges. The provisions of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The Initiative could potentially impact the Special Taxes available to the County to pay the principal of and interest on the Series 2017 Bonds as described below. Among other things, Section 3 of Article XIII states that... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that: Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Series 2017 Bonds. It may be possible, however, for voters within Improvement Area No. 5 or the Board of Supervisors, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Series 2017 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Series 2017 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted not to initiate proceedings under the Act to modify the Rate and Method if such 48

57 modification would adversely affect the security for the Series 2017 Bonds. If an initiative is adopted that purports to modify the Rate and Method in a manner that would adversely affect the security for the Series 2017 Bonds, the District shall, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Series 2017 Bonds. See Appendix D. No assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See the caption Limitations on Remedies. Shapiro Decision The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997) (the San Diego Decision ). The case involved a Convention Center Facilities District (the CCFD ) established by the City of San Diego ( San Diego ). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD. The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district. The facts of the San Diego Decision show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). The elections held in Improvement Area No. 5 had less than 12 registered voters at the time of the election to authorize the Special Tax. In the San Diego Decision, the Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court s holding does not apply to the Special Tax election in Improvement Area No. 5. Moreover, Section of the Act provides that any action or proceeding to attack, review, set aside, void or annul the levy of a special tax shall be commenced within 30 days after the special tax is approved by the voters. Similarly, Section of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. Based on Sections and of the Act and analysis of existing laws, regulations, rulings and court decisions, the County believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. Ballot Initiatives The Initiative was adopted pursuant to measures qualified for the ballot pursuant to the State s Constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by State voters or 49

58 legislation enacted by the State Legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the County or local districts to increase revenues or appropriations or on the ability of Lennar Homes or any future property owner to complete the remaining proposed development. See the caption Failure to Develop Remaining Homes. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement, dated as of December 1, 2017 (the Continuing Disclosure Agreement ), by and between the District and the Trustee, the District has covenanted to provide, or cause to be provided, certain financial information and operating data concerning the District (the Annual Report ) on an annual basis by not later than the Annual Report Date (March 1 of each year, commencing March 1, 2018) and to provide notices of the occurrence of certain enumerated events. The Annual Reports and notices of any such enumerated events will be filed by the District with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system. The full text of the Continuing Disclosure Agreement is set forth in Appendix F. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the Rule ) adopted by the U.S. Securities and Exchange Commission. The District previously entered into certain continuing disclosure undertakings under the Rule in connection with the issuance of certain bonds of the District for the improvement areas therein. In four of its last five Fiscal Years, the District filed the County s Comprehensive Audited Financial Statements (the CAFR ) as part of its annual reports. The District s understanding was that the CAFRs constituted financial statements of the District and its improvement areas. However, the District was made aware that the CAFRs do not contain financial information that would constitute financial statements, as required by the District s undertakings. In the one remaining year of the last five Fiscal Years, no CAFR was filed. Audited financial statements for the District and its improvement areas are not prepared. The District has filed unaudited financial reports for each improvement area, bonds of the District for which are outstanding, for each of the years in which a filing of financial information therefor was required under the District s continuing disclosure undertakings. Additionally, the District has filed a notice of a failure to comply with its continuing disclosure undertakings relating to the financial statements for each of the previous five Fiscal Years. The District will in the future file unaudited financial reports with its annual reports required to be filed pursuant to its continuing disclosure undertakings under the Rule. The District is a legally constituted governmental entity separate and apart from the County. However, pursuant to the Act, the Board of Supervisors of the County is the legislative body of the District. In the last five years, there have been incomplete and late continuing disclosure filings regarding certain bonds of community facilities districts formed by the County, certain single family housing bonds of the County and certain bonds of the former redevelopment agency of the County. All such historical non-compliance has been remedied. To ensure compliance with the continuing disclosure undertakings of the County and the District, the County Administrative Office, Finance and Administration division is tasked with preparing and filing annual disclosure reports. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel to the District ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the Code ) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2017 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes 50

59 that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. As discussed further below, legislation has been introduced which, if enacted, would repeal the alternative minimum tax for tax years beginning after December 31, A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto. To the extent the issue price of any maturity of the Series 2017 Bonds is less than the amount to be paid at maturity of such Series 2017 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2017 Bonds), the difference constitutes original issue discount, the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2017 Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2017 Bonds is the first price at which a substantial amount of such maturity of the Series 2017 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2017 Bonds accrues daily over the term to maturity of such Series 2017 Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series 2017 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2017 Bonds. Beneficial Owners of the Series 2017 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2017 Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Series 2017 Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2017 Bonds is sold to the public. Series 2017 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ( Premium Bonds ) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2017 Bonds. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2017 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2017 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2017 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel s attention after the date of issuance of the Series 2017 Bonds may adversely affect the value of, or the tax status of interest on, the Series 2017 Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Series 2017 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Series 2017 Bonds may otherwise affect a Beneficial Owner s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. 51

60 Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2017 Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. Legislation has been introduced in Congress which, if enacted, would significantly change the income tax rates for individuals and corporations and would repeal the alternative minimum tax for tax years beginning after December 31, The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel s judgment as to the proper treatment of the Series 2017 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ( IRS ) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code. Bond Counsel s engagement with respect to the Series 2017 Bonds ends with the issuance of the Series 2017 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Series 2017 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the District and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2017 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2017 Bonds, and may cause the District or the Beneficial Owners to incur significant expense. FINANCIAL ADVISOR The District has retained CSG Advisors Incorporated, San Francisco, California, as Financial Advisor for the sale of the Series 2017 Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. CSG Advisors Incorporated, is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. LEGAL MATTERS The legal opinion of Orrick, Herrington & Sutcliffe, LLP, Los Angeles, California, approving the validity of the Series 2017 Bonds, in the form set forth in Appendix E, will be made available to purchasers at the time of original delivery. Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain legal matters will be passed upon for the County and the District by County Counsel and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, California, as Disclosure Counsel, for Lennar Homes by Holland & Knight LLP, San Francisco, California, for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California, and for the Trustee by its counsel. 52

61 LITIGATION No litigation is pending or threatened concerning the validity of the Series 2017 Bonds or the pledge of Net Special Tax Revenues to repay the Series 2017 Bonds and a certificate of the District to such effect will be furnished to the Underwriter at the time of the original delivery of the Series 2017 Bonds. The District is not aware of any litigation pending or threatened which questions the existence of the District or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Series 2017 Bonds. NO RATING The District has not made and does not contemplate making application to any rating agency for the assignment of a rating of the Series 2017 Bonds. UNDERWRITING The Series 2017 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the Underwriter ) pursuant to a Bond Purchase Agreement, dated the date hereof (the Purchase Agreement ), by and between the Underwriter and the District. The Underwriter has agreed to purchase the Series 2017 Bonds at a price of $8,945, (being $8,800, aggregate principal amount thereof, plus a net original issue premium of $236, and less Underwriter s discount of $90,918.75). The Purchase Agreement provides that the Underwriter will purchase all of the Series 2017 Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Series 2017 Bonds to certain dealers and others at prices lower than the offering price stated on the inside front cover page hereof. The offering prices may be changed from time to time by the Underwriter. FINANCIAL INTERESTS The fees being paid to the Underwriter, the Financial Advisor, Disclosure Counsel and Bond Counsel are contingent upon the issuance and delivery of the Series 2017 Bonds. From time to time, Bond Counsel and Disclosure Counsel represent the Underwriter and the County on matters unrelated to the Series 2017 Bonds. ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Series 2017 Bonds. Quotations, summaries and explanations of the Series 2017 Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. 53

62 The execution and delivery of this Official Statement by the Chair of the County Board of Supervisors has been duly authorized by the County, acting in its capacity as the legislative body of the District. COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) By: /s/ Robert A. Lovingood Robert A. Lovingood, Chair of the Board of Supervisors of San Bernardino County, acting in its capacity as the legislative body of County of San Bernardino Community Facilities District No (Lytle Creek North) 54

63 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) A Special Tax as hereinafter defined shall be levied on all Assessor s Parcels in Improvement Area No. 5 ( IA No. 5 ) of County of San Bernardino Community Facilities District No (Lytle Creek North) ( CFD No ) and collected each Fiscal Year commencing in Fiscal Year , in an amount determined by the Board, through the application of the Rate and Method of Apportionment as described below. All of the real property in IA No. 5, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: Acre or Acreage means the land area of an Assessor s Parcel as shown on an Assessor s Parcel Map, or if the land area is not shown on an Assessor s Parcel Map, the land area shown on the applicable Final Map, parcel map, condominium plan, or other recorded County parcel map. Act means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, 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 IA No. 5: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the County or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the County, CFD No or any designee thereof of complying with arbitrage rebate requirements; the costs to the County, CFD No or any designee thereof of complying with County, IA No. 5 or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the County, CFD No or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; the costs associated with the Special Tax reduction described in Section D; the costs associated with the issuance of Bonds; and the County s annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated or advanced by the County or CFD No for any other administrative purposes of IA No. 5, including attorney s fees and other costs related to commencing and pursuing to completion any foreclosure, or otherwise addressing the disposition of delinquent Special Taxes. Assessor s Parcel means any real property to which an Assessor s parcel number is assigned as shown on an Assessor s Parcel Map. Assessor s Parcel Map means an official map of the County Assessor of the County designating parcels by Assessor s Parcel number. A-1

64 Assigned Special Tax means the Special Tax for each Land Use Class of Developed Property within IA No. 5, as determined in accordance with Section C below. Backup Special Tax means the Special Tax applicable to each Assessor s Parcel of Developed Property within IA No. 5, as determined in accordance with Section C below. Board means the Board of Supervisors of the County. Bonds means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No for IA No. 5 under the Act. Building Permit means, with respect to an Assessor s Parcel, the first building permit for new construction of a structure thereon issued after January 1, 2006, regardless of whether such building permit, after its date of issuance, expires or is terminated or withdrawn; provided, however, that if, after the date of issuance of such a building permit for a residential dwelling unit on such Assessor s Parcel (a) such building permit expires or is terminated or withdrawn and (b) a new building permit for the same Assessor s Parcel is subsequently issued for an amount of Residential Floor Area that would cause such Assessor s Parcel to be in a lower numerical Land Use Class than its then current Land Use Class, then, from and after the date of such subsequently issued building permit, Building Permit, with respect to such Assessor s Parcel, shall mean such subsequently issued building permit. Building Permit shall not include any building permit issued for an addition to, or the remodel or reconstruction of, any previously constructed structure. Notwithstanding the foregoing, to the extent that building permit(s) for additions or options are issued to the original builder of a residential dwelling unit during the period between the issuance of the first building permit and the issuance of a certificate of occupancy for such residential dwelling unit for an amount of Residential Floor Area that would cause such Assessor s Parcel to be in a lower numerical Land Use Class than its then current Land Use Class, then, from and after the date of such subsequently issued building permit(s), Building Permit, with respect to such Assessor s Parcel, shall mean both the original and such subsequently issued building permit(s). CFD Administrator means the Director of the Special Districts Department of the County, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of the Special Taxes. CFD No means the County of San Bernardino Community Facilities District No (Lytle Creek North). County means the County of San Bernardino. Developed Property means, for each Fiscal Year, all Taxable Property, exclusive of Other Taxable Property, (i) for which a Building Permit was issued prior to March 1 of the prior Fiscal Year, and (ii) that is located within a Final Map that was recorded as of January 1 of the prior Fiscal Year. Final Map means (i) a final map, or portion thereof, approved by the County pursuant to the Subdivision Map Act (California Government Code Section et seq.) that creates individual lots or parcels for which building permits may be issued without further subdivision, or (ii) for condominiums, a final map approved by the County and a condominium plan recorded pursuant to California Civil Code Section 1352 creating such individual lots or parcels. Fiscal Year means the period starting July 1 and ending on the following June 30. Improvement Area No. 5 or IA No. 5 means Improvement Area No. 5 of CFD No A-2

65 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. Independent Price Point Consultant means any consultant or firm of such consultants selected by CFD No that (a) has substantial experience in performing price point studies for residential units within community facilities districts or otherwise estimating or confirming pricing for residential units in community facilities districts, (b) is well versed in analyzing economic and real estate data that relates to the pricing of residential units in community facilities districts, (c) is in fact independent and not under the control of CFD No or the County, (d) does not have any substantial interest, direct or indirect, with or in (i) CFD No , (ii) the County, (iii) any owner of real property in CFD No , or (iv) any real property in CFD No , and (e) is not connected with CFD No or the County as an officer or employee thereof, but who may be regularly retained to make reports to CFD No or the County. Land Use Class means any of the classes listed in Tables 1 and 2 below. Maximum Special Tax means the Maximum Special Tax, determined in accordance with Section C and Section D below, that can be levied in any Fiscal Year on any Assessor s Parcel within IA No. 5. Non-Residential Property means Developed Property for which a Building Permit(s) was issued for a non-residential use. Outstanding Bonds means all Bonds which are deemed to be outstanding under the Indenture. Other Taxable Property means Taxable Public Property and Taxable Property Owner Association Property. Plan Type means, for each Zone, a discrete residential plan type (generally consisting of residential dwelling units that share a common product type (e.g., single family, multi-family, senior) and that have nearly identical amounts of living area) that is constructed or expected to be constructed within IA No. 5 as identified in the Price Point Study. Price Point means, with respect to the residential dwelling units in each Plan Type, as of any date, the minimum base price of such residential dwelling units, estimated as of such date, including any incentives and concessions, but excluding potential appreciation or premiums, options or upgrades, based upon their actual or expected characteristics, such as living area and lot size. Price Point Study means a price point study or a letter updating a previous price point study, which (a) has been prepared by an Independent Price Point Consultant, (b) sets forth the Plan Types constructed or expected to be constructed within IA No. 5, (c) sets forth the estimated number of constructed and expected residential dwelling units for each Plan Type, (d) sets forth such Independent Price Point Consultant s estimate of the Price Point for each Plan Type and (e) uses a date for establishing such Price Points that is no earlier than 60 days prior to the date the Price Point Study is delivered to the CFD Administrator pursuant to Section D herein. Proportionately means, for Developed Property, that the ratio of the actual Special Tax levy to the Assigned Special Tax is equal for all Assessor s Parcels of Developed Property, except to the extent that the Special Tax levy on Residential Property is limited as described in the first step in Section E below. For Undeveloped Property, Proportionately means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor s Parcels of Undeveloped Property. For Other Taxable Property, Proportionately means that the ratio of the A-3

66 actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor s Parcels of Other Taxable Property. Property Owner Association Property means, for each Fiscal Year, any property within the boundaries of IA No. 5 that was owned by a property owner association, including any master or subassociation, as of January 1 of the prior Fiscal Year. Public Property means, for each Fiscal Year, any property within IA No. 5 that is owned by, irrevocably offered for dedication to, or dedicated to the federal government, the State, the County, or any other public agency as of June 30 of the prior Fiscal Year; provided however that any property leased by a public agency to a private entity and subject to taxation under Section of the Act shall be taxed and classified in accordance with its use. To ensure that property is classified as Public Property in the first Fiscal Year after it is acquired by, irrevocably offered for dedication to, or dedicated to a public agency, the property owner shall notify the CFD Administrator in writing of such acquisition, offer, or dedication not later than June 30 of the Fiscal Year in which the acquisition, offer, or dedication occurred. Residential Floor Area means all of the square footage of living area within the perimeter of a residential dwelling unit, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The CFD Administrator shall determine the Residential Floor Area based upon the Building Permit(s) issued for such residential dwelling unit. Residential Property means Developed Property for which a Building Permit has been issued for purposes of constructing one or more residential dwelling units. Special Tax means the special tax to be levied in each Fiscal Year on each Assessor s Parcel of Taxable Property to fund the Special Tax Requirement. Special Tax A or Special Tax B or Special Tax C means the maximum special tax A, maximum special tax B, or maximum special tax C, as applicable, that may be levied for annual services as described in the rate and method of apportionment for CFD No Special Tax Requirement means that amount required in any Fiscal Year to: (i) pay debt service on all Outstanding Bonds; (ii) pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay directly for the acquisition or construction of facilities authorized to be financed by IA No. 5 to the extent that inclusion of such amount does not increase the Special Tax levy on Undeveloped Property; and (vi) pay for reasonably anticipated Special Tax delinquencies based on the historical delinquency rate for IA No. 5 as determined by the CFD Administrator; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. State means the State of California. Taxable Property means all of the Assessor s Parcels within the boundaries of IA No. 5 which are not exempt from the Special Tax pursuant to law or Section F below. Taxable Property Owner Association Property means all Assessor s Parcels of Property Owner Association Property that are not exempt pursuant to Section F below. Taxable Public Property means all Assessor s Parcels of Public Property that are not exempt pursuant to Section F below. A-4

67 Total Effective Tax Rate means, for a Plan Type, the quotient of (a) the Total Tax and Assessment Obligation for such Plan Type divided by (b) the Price Point for such Plan Type, converted to a percentage. Total Tax and Assessment Obligation means, with respect to a Plan Type, for the Fiscal Year in which the calculation is being performed, the quotient of (a) the sum of the Assigned Special Tax, Special Tax A and Special Tax B, and only if Special Tax C is levied in such Fiscal Year, Special Tax C, and estimated ad valorem property taxes, special assessments, special taxes for any overlapping community facilities districts, and any other governmental taxes, fees and charges levied or imposed on all residential dwelling units of such Plan Type in such Fiscal Year or that would have been levied or imposed on all such residential dwelling units had such residential dwelling units been completed, sold and subject to such levies and impositions in such Fiscal Year divided by (b) the number of residential dwelling units in such Plan Type. The Total Tax and Assessment Obligation for each Plan Type shall be calculated based on the applicable Residential Floor Area, Price Point, and number of constructed and expected residential dwelling units for such Plan Type as identified in the Price Point Study. Trustee means the trustee or fiscal agent under the Indenture. Undeveloped Property means, for each Fiscal Year, all Taxable Property not classified as Developed Property or Other Taxable Property. Zone means Zone A and/or Zone B, as applicable. Zone A means Zone A of IA No. 5, as identified on the boundary map for IA No. 5 included as Exhibit A. Zone B means Zone B of IA No. 5, as identified on the boundary map for IA No. 5 included as Exhibit A. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within IA No. 5 shall be classified as Developed Property, Other Taxable Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment as determined pursuant to Sections C through E below. Developed Property shall be further classified as Residential Property or Non-Residential Property. C. MAXIMUM SPECIAL TAX 1. Developed Property Residential Property in Zone A shall be assigned to Land Use Classes 1 through 10 of Table 1 below, and Non-Residential Property in Zone A shall be assigned to Land Use Class 11 of Table 1 below. Residential Property in Zone B shall be assigned to Land Use Class 1 through 10 of Table 2 below, and Non-Residential Property in Zone B shall be assigned to Land Use Class 11 of Table 2 below. The Assigned Special Tax for Residential Property shall be based on the Residential Floor Area of the dwelling unit(s) located on the Assessor's Parcel. The Assigned Special Tax for Non-Residential Property shall be based on the Acreage of the Assessor's Parcel. A-5

68 (a) Maximum Special Tax The Maximum Special Tax for each Assessor s Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax or (ii) the amount derived by application of the Backup Special Tax. The Maximum Special Tax (including the Assigned Special Taxes and the Backup Special Tax set forth in Sections C.1.(b), C.1.(c) and C.1.(d) below) may be reduced in accordance with, and subject to the conditions set forth in, Section D below. (b) Assigned Special Tax Zone A The Assigned Special Tax for each Land Use Class within Zone A is shown below in Table 1. TABLE 1 Assigned Special Tax for Developed Property in Zone A Land Use Class Description Residential Floor Area Assigned Special Tax 1 Residential Property > 2,900 s.f. $2,366 per unit 2 Residential Property 2,701 2,900 s.f. $2,303 per unit 3 Residential Property 2,501 2,700 s.f. $2,239 per unit 4 Residential Property 2,301 2,500 s.f. $2,175 per unit 5 Residential Property 2,101 2,300 s.f. $2,121 per unit 6 Residential Property 1,901 2,100 s.f. $2,048 per unit 7 Residential Property 1,701 1,900 s.f. $2,010 per unit 8 Residential Property 1,501 1,700 s.f. $1,951 per unit 9 Residential Property 1,301 1,500 s.f. $1,856 per unit 10 Residential Property < 1,301 s.f. $1,825 per unit 11 Non-Residential Property NA $17,407 per Acre (c) Assigned Special Tax Zone B The Assigned Special Tax for each Land Use Class within Zone B is shown below in Table 2. A-6

69 Land Use Class TABLE 2 Assigned Special Tax for Developed Property in Zone B Description Residential Floor Area Assigned Special Tax 1 Residential Property > 3,500 s.f. $2,563 per unit 2 Residential Property 3,301 3,500 s.f. $2,500 per unit 3 Residential Property 3,101 3,300 s.f. $2,452 per unit 4 Residential Property 2,901 3,100 s.f. $2,402 per unit 5 Residential Property 2,701 2,900 s.f. $2,371 per unit 6 Residential Property 2,501 2,700 s.f. $2,304 per unit 7 Residential Property 2,301 2,500 s.f. $2,180 per unit 8 Residential Property 2,101 2,300 s.f. $2,125 per unit 9 Residential Property 1,901 2,100 s.f. $2,052 per unit 10 Residential Property < 1,901 s.f. $2,020 per unit 11 Non-Residential Property NA $15,010 per Acre (d) Backup Special Tax The Backup Special Tax for an Assessor's Parcel of Developed Property will equal the amount indicated in Table 3 below for the applicable Zone. TABLE 3 Backup Special Tax for Final Maps in Zone A and Zone B Zone A B Backup Special Tax $17,407 per Acre $15,010 per Acre 2. Undeveloped Property and Other Taxable Property The Maximum Special Tax for Undeveloped Property and Other Taxable Property will equal the amount indicated in Table 4 below for the applicable Zone. A-7

70 TABLE 4 Undeveloped Property and Other Taxable Property in Zone A and Zone B Zone A B Maximum Special Tax $17,407 per Acre $15,010 per Acre 3. Multiple Land Uses In some instances an Assessor's Parcel may contain both Undeveloped Property and Developed Property. Furthermore, Developed Property may contain more than one Land Use Class. In such cases, the Acreage of the Assessor s Parcel shall be allocated between Developed Property and Undeveloped Property based the portion of the Assessor s Parcel for which Building Permits had been issued prior to March 1 of the prior Fiscal Year and portion of the Assessor s Parcel for which Building Permits had not been issued prior to March 1 of the prior Fiscal Year. The Acreage that is considered Developed Property shall be allocated between Residential Property and Non-Residential Property based on the site plan. The Maximum Special Tax that can be levied on such Assessor s Parcel shall be the sum of the Maximum Special Tax that can be levied on each type of property located on such Assessor s Parcel. The CFD Administrator s allocation to each type of property shall be final. D. SPECIAL TAX REDUCTION Prior to the issuance of the first series of Bonds, the following steps shall be taken: Step No.: 1. At least 30 days prior to the expected issuance date of the first series of Bonds, CFD No shall cause a Price Point Study to be delivered to the CFD Administrator. 2. As soon as practicable after receipt of the Price Point Study, the CFD Administrator shall calculate the Total Effective Tax Rate for each Plan Type. 3. Separately, for each Land Use Class, the CFD Administrator shall determine whether or not the Total Effective Tax Rate for all Plan Types in a Land Use Class is less than or equal to 1.95%. a. If the Total Effective Tax Rate for all Plan Types in a Land Use Class is less than or equal to 1.95%, then there shall be no change in the Assigned Special Tax for such Land Use Class. b. If the Total Effective Tax Rate for any Plan Type in a Land Use Class is greater than 1.95%, the CFD Administrator shall calculate a revised Assigned Special Tax for such Land Use Class, which revised Assigned Special Tax shall be the highest amount (rounded to the nearest whole dollar) that will not cause the Total Effective Tax Rate for any Plan Type in such Land Use Class to exceed 1.95%. A-8

71 4. If the Assigned Special Tax for any Land Use Class in a Zone is revised pursuant to step 3.b. above, the CFD Administrator shall calculate a revised Backup Special Tax for all property within such Zone. The revised Backup Special Tax for such Zone shall be an amount (rounded to the nearest whole dollar) equal to the Backup Special Tax for such Zone as set forth in Section C.1.(d), reduced by a percentage equal to the weighted average percentage reduction in the Assigned Special Taxes for all Land Use Classes of Residential Property in such Zone resulting from the calculations in steps 3.a. and 3.b. above. The weighted average percentage will be calculated by taking the sum of the products of the number of units constructed or expected to be constructed in each Land Use Class multiplied by the percentage change for each Land Use Class (or 0 for Land Use Classes that are not changing). This amount is then divided by the total number of units constructed or expected to be constructed within the Zone and converted to a percentage. 5. If the Assigned Special Tax for any Land Use Class is revised pursuant to step 3.b. above, the CFD Administrator shall prepare and execute a Certificate of Reduction in Special Taxes substantially in the form of Exhibit B hereto and shall deliver such Certificate of Reduction in Special Taxes to CFD No The Certificate of Reduction in Special Taxes shall be completed for all Land Use Classes and shall set forth, as applicable, either (i) the reduced Assigned Special Tax for a Land Use Class as calculated pursuant to step 3.b., or (ii) the Assigned Special Tax as identified in Table 1 or Table 2 in Section C for a Land Use Class that was not revised as determined pursuant to step 3.a.; as well as either (i) the revised Backup Special Tax for a Zone as calculated pursuant to step 4, or (ii) the Backup Special Tax as identified in Table 3 in Section C.1.(d) for a Zone that was not revised as determined pursuant to step If the first series of Bonds is issued within 90 days of the date of receipt of the Price Point Study by the CFD Administrator, CFD No shall execute the acknowledgement on such Certificate of Reduction in Special Taxes, dated as of the date of such issuance, and, upon the issuance of such first series of Bonds, the Assigned Special Tax for each Land Use Class and the Backup Special Tax shall, ipso facto, be, for all purposes, as set forth in such Certificate of Reduction in Special Taxes. If the first series of Bonds is not issued within 90 days of the date of receipt of the Price Point Study by the CFD Administrator, such Certificate of Reduction in Special Taxes shall not be acknowledged by CFD No and shall, as of such date, be void and of no further force and effect. In such case, if subsequently, a first series of Bonds is expected to be issued, at least 30 days prior to the expected issuance date of such first series of Bonds, the CFD Administrator shall cause a new Price Point Study to be delivered to the CFD Administrator and, following such delivery, steps 2 through 5 of this section shall be performed based on such new Price Point Study. 7. As soon as practicable after the execution by CFD No of the acknowledgement on the Certificate of Reduction in Special Taxes, CFD No shall cause to be recorded in the records of the County Recorder an Amended Notice of Special Tax Lien for IA No. 5 reflecting the Assigned Special Taxes and the Backup Special Tax for each Zone set forth in such Certificate of Reduction in Special Taxes. 8. If the Assigned Special Tax is not required to be changed for any Land Use Class based on the calculations performed under step 3 above, there shall be no reduction in the Maximum Special Tax, and no Certificate of Reduction in Special Taxes shall be required. However the CFD Administrator shall prepare and deliver to CFD No a Certificate of No Reduction in Special Taxes substantially in the form of Exhibit C hereto dated as of the date of the issuance of the first series of Bonds that states that the calculations required pursuant to this Section D have been made and that no changes to the Maximum Special Tax are necessary. A-9

72 9. CFD No and the CFD Administrator shall take no further actions under this Section D upon the earlier to occur of the following: (i) the execution of the acknowledgement by CFD No on a Certificate of Reduction in Special Taxes pursuant to step 6; or (ii) the delivery by the CFD Administrator of a Certificate of No Reduction in Special Taxes pursuant to step 8. E. APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year and for each following Fiscal Year, the Board shall determine the Special Tax Requirement and shall levy the Special Tax until the total Special Tax levy equals the Special Tax Requirement. The Special Tax shall be levied each Fiscal Year as follows: First: The Special Tax shall be levied Proportionately on each Assessor s Parcel of Developed Property at up to 100% of the Assigned Special Tax for Developed Property. Notwithstanding the foregoing, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor s Parcel of Residential Property be increased as a consequence of delinquency or default by the owner or owners of any other Assessor s Parcel(s) within IA No. 5 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax on each Assessor s Parcel of Non- Residential Property shall continue in equal percentages at up to 100% of the Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor s Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy of the Special Tax on each Assessor s Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor s Parcel. Notwithstanding the foregoing, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor s Parcel of Residential Property be increased as a consequence of delinquency or default by the owner or owners of any other Assessor s Parcel(s) within IA No. 5 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax on each Assessor s Parcel of Non-Residential Property shall continue in equal percentages from the Assigned Special Tax up to the Maximum Special Tax; Fourth: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Other Taxable Property at up to the Maximum Special Tax for Other Taxable Property. F. EXEMPTIONS No Special Taxes shall be levied on Property Owner Association Property and Public Property, so long as the Acreage of Taxable Property is at least Acres within Zone A and 9.84 Acres within Zone B. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor s Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. A-10

73 To the extent that the exemption of an Assessor s Parcel of Property Owner Association Property or Public Property would reduce the Acreage of Taxable Property below Acres in Zone A or 9.84 Acres in Zone B, such Assessor s Parcel shall be classified as Taxable Property Owner Association Property or Taxable Public Property, as applicable, and shall be subject to the levy of the Special Tax and shall be taxed as part of the fourth step in Section E above, at up to 100% of the applicable Maximum Special Tax for Other Taxable Property. G. APPEALS AND INTERPRETATIONS Any taxpayer may file a written appeal of the Special Tax on his/her property with the CFD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, the CFD Administrator shall eliminate or reduce the Special Tax on the appellant s property and/or provide a refund to the appellant. If the CFD Administrator disagrees with the appellant and the appellant is dissatisfied with the determination, the appellant then has 30 days in which to appeal to the Board by filing a written notice of appeal with the clerk of the Board, provided that the appellant is current in his/her payments of Special Taxes. The second appeal must specify the reasons for its disagreement with the CFD Administrator s determination. Interpretations may be made by the Board by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Rate and Method of Apportionment. H. MANNER OF COLLECTION The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No may directly bill the Special Tax, may collect the Special Tax 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. I. PREPAYMENT OF SPECIAL TAX The following definitions apply to this Section I: CFD Public Facilities means either $6.6 million in 2016 dollars, which shall increase by the Construction Inflation Index on July 1, 2017, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No on behalf of IA No. 5 under the authorized bonding program for IA No. 5, or (ii) shall be determined by the Board concurrently with a covenant that it will not issue any more Bonds to be supported by Special Tax levied under this Rate and Method of Apportionment as described in Section E. Construction Fund means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct public facilities eligible under the Act. Construction Inflation Index means the annual percentage change in the Engineering News-Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is A-11

74 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 (i) public facility costs previously paid from the Construction Fund, (ii) moneys currently on deposit in the Construction Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance facilities costs. Outstanding Bonds means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. Previously Issued Bonds means all Bonds that have been issued by CFD No for IA No. 5 prior to the date of prepayment. 1. Prepayment in Full The obligation of an Assessor's Parcel to pay the Special Tax may be prepaid and permanently satisfied as described herein; provided that a prepayment may be made only for Assessor s Parcels of Developed Property or Undeveloped Property for which a Building Permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given to the Trustee pursuant to the Indenture. The Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit Total: equals Prepayment Amount As of the proposed date of prepayment, the Special Tax Prepayment Amount (defined below) shall be calculated as follows: Paragraph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor s Parcel. 2. For Assessor s Parcels of Developed Property, compute the Assigned Special Tax and Backup Special Tax applicable for the Assessor s Parcel to be prepaid. For Assessor s Parcels of Undeveloped Property (for which a Building Permit has been issued) to be prepaid, compute the Assigned Special Tax and Backup Special Tax for that Assessor s Parcel as though it was already designated as Developed Property, based upon the Building Permit which has already been issued for that Assessor s Parcel. A-12

75 3. (a) Divide the Assigned Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Special Tax for the entire IA No. 5 based on the Developed Property Special Tax which could be charged in the current Fiscal Year on all expected development at buildout of IA No. 5, excluding any Assessor s Parcels which have been prepaid, and (b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the estimated total Backup Special Tax at buildout of IA No. 5, excluding any Assessor s Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Outstanding Bonds to compute the amount of Outstanding Bonds to be retired and prepaid (the Bond Redemption Amount ). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the Redemption Premium ). 6. Compute the current Future Facilities Costs. 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the Future Facilities Amount ). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 9. Determine the Special Tax levied on the Assessor s Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the Defeasance Amount ). 12. Verify the administrative fees and expenses of CFD No related to the IA No. 5 prepayment, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the Administrative Fees and Expenses ). 13. The reserve fund credit ( Reserve Fund Credit ) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. 14. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amount computed pursuant to paragraph 13 (the Prepayment Amount ). A-13

76 15. From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, and 13 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Construction Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No The Special Tax Prepayment Amount may be sufficient to redeem other than a $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. As a result of the payment of the current Fiscal Year s Special Tax levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year s Special Tax levy for such Assessor s Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the Board shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Tax and the release of the Special Tax lien on such Assessor s Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Assigned Special Tax that may be levied on Taxable Property (based on expected development at build out), both prior to and after the proposed prepayment, less expected Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all Outstanding Bonds (excluding Bonds to be redeemed by such prepayment and all prior prepayments) in each future Fiscal Year and such prepayment will not impair the security of all Outstanding Bonds, as reasonably determined by the CFD Administrator. 2. Prepayment in Part The Special Tax on an Assessor s Parcel of Developed Property or an Assessor s Parcel of Undeveloped Property for which a Building Permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section I.1; except that a partial prepayment shall be calculated according to the following formula: PP = [(P E -AE) x F] + AE These terms have the following meaning: AE = the Administrative Fees and Expenses PP = the partial prepayment P E = the Prepayment Amount calculated according to Section I.1 F = the percentage by which the owner of the Assessor's Parcel is partially prepaying the Special Tax. The owner of any Assessor s Parcel who desires such prepayment shall notify the CFD Administrator of such owner s intent to partially prepay the Special Tax and the percentage by which the Special Tax shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for an Assessor s Parcel within thirty (30) days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor s Parcel that is partially prepaid, the County shall (i) distribute the funds remitted to it according to Section I.1, and (ii) indicate in the records of CFD No that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such A-14

77 Assessor s Parcel, equal to the outstanding percentage ( F) of the remaining Maximum Special Tax, shall continue to be levied on such Assessor s Parcel pursuant to Section E. Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Assigned Special Tax that may be levied on Taxable Property (based on expected development at build out), both prior to and after the proposed prepayment, less expected Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all Outstanding Bonds (excluding Bonds to be redeemed by such prepayment and all prior prepayments) in each future Fiscal Year and such partial prepayment will not impair the security of all Outstanding Bonds, as reasonably determined by the CFD Administrator. J. TERM OF SPECIAL TAX The Special Tax shall be levied until the earlier of (i) Fiscal Year or (ii) five years after the latest scheduled maturity of all the Bonds. A-15

78 EXHIBIT A BOUNDARY MAP A-16

79 EXHIBIT B CERTIFICATE OF REDUCTION IN SPECIAL TAXES County of San Bernardino IA No. 5 of CFD No Pursuant to Section D of the Rate and Method of Apportionment, the Maximum Special Tax for Developed Property for [certain or all] Land Use Classes within IA No. 5 has been reduced. 2. The calculations made pursuant to Section D were based upon a Price Point Study that was received by the CFD Administrator on. 3. Tables 1A and 2A below show the Assigned Special Tax for each Land Use Class in Zones A and B after such reduction. Land Use Class TABLE 1A Assigned Special Tax for Developed Property in Zone A Description Residential Floor Area Assigned Special Tax 1 Residential Property > 2,900 s.f. $ per unit 2 Residential Property 2,701 2,900 s.f. $ per unit 3 Residential Property 2,501 2,700 s.f. $ per unit 4 Residential Property 2,301 2,500 s.f. $ per unit 5 Residential Property 2,101 2,300 s.f. $ per unit 6 Residential Property 1,901 2,100 s.f. $ per unit 7 Residential Property 1,701 1,900 s.f. $ per unit 8 Residential Property 1,501 1,700 s.f. $ per unit 9 Residential Property 1,301 1,500 s.f. $ per unit 10 Residential Property < 1,301 s.f. $ per unit 11 Non-Residential Property NA $ per Acre A-17

80 Certificate of Reduction in Special Taxes Page 2 Land Use Class TABLE 2A Assigned Special Tax for Developed Property in Zone B Description Residential Floor Area Assigned Special Tax 1 Residential Property > 3,500 s.f. $ per unit 2 Residential Property 3,301 3,500 s.f. $ per unit 3 Residential Property 3,101 3,300 s.f. $ per unit 4 Residential Property 2,901 3,100 s.f. $ per unit 5 Residential Property 2,701 2,900 s.f. $ per unit 6 Residential Property 2,501 2,700 s.f. $ per unit 7 Residential Property 2,301 2,500 s.f. $ per unit 8 Residential Property 2,101 2,300 s.f. $ per unit 9 Residential Property 1,901 2,100 s.f. $ per unit 10 Residential Property < 1,901 s.f. $ per unit 11 Non-Residential Property NA $ per Acre 4. The Backup Special Tax for each Assessor's Parcel of Developed Property shall equal $ per Acre in Zone A and $ per Acre in Zone B after such reduction. 5. Upon execution of this certificate by CFD No , CFD No shall cause an amended notice of Special Tax lien for IA No. 5 to be recorded reflecting the Assigned Special Tax and Backup Special Tax set forth herein. Submitted CFD ADMINISTRATOR By: Date: By execution hereof, the undersigned acknowledges, on behalf of CFD No , receipt of this certificate and modification of the Rate and Method of Apportionment as set forth in this certificate. COUNTY OF SAN BERNARDINO CFD NO By: Date as of: [date of issuance of Bonds] A-18

81 EXHIBIT C CERTIFICATE OF NO REDUCTION IN SPECIAL TAXES County of San Bernardino IA No. 5 of CFD No All calculations required pursuant to Section D of the Rate and Method of Apportionment have been made based upon a Price Point Study that was received by the CFD Administrator on. 2. Total Effective Tax Rate for all Plan Types in all Land Use Classes is less than or equal to 1.95% 3. The Maximum Special Tax for Developed Property within IA No. 5, including the Assigned Special Taxes set forth in Sections C.1.(b) and C.1.(c) and the Backup Special Tax set forth in Section C.1.(d) of the Rate and Method of Apportionment, shall remain in effect and not be reduced. Submitted CFD ADMINISTRATOR By: Date as of: [date of issuance of Bonds] A-19

82 [THIS PAGE INTENTIONALLY LEFT BLANK]

83 APPENDIX B APPRAISAL REPORT AND UPDATE APPRAISAL REPORT

84 [THIS PAGE INTENTIONALLY LEFT BLANK]

85 APPRAISAL REPORT COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO IMPROVEMENT AREA NO.5 LYTLE CREEK NORTH Prepared for: COUNTY OF SAN BERNARDINO Special Districts Department 157 West 5th Street, Second Floor San Bernardino, CA James B. Harris, MAl Berri Cannon Harris Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA August 2017

86 Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, California FAX August 22,2017 Mr. Jeffrey Rigney Director COUNTY OF SAN BERNARDINO Special Districts Department 157 West 5th Street, Second Floor San Bernardino, CA Re: Community Facilities District No Improvement Area No.5 Dear Mr. Rigney: In response to your authorization, I have prepared a self-contained appraisal report that addresses all of the property within the boundaries of Improvement Area No. 5 of Community Facilities District No (CFD No ). This appraisal includes an estimate of Minimum Market Value of all the property subject to special tax. As of August 1, 2017, the property is under the ownership of one merchant builder, and 218 individual homeowners. The merchant builder is Lennar Homes of California, Inc. All of the land in this Improvement Area is in a physically finished lot condition with 232 completed production dwellings (218 closed dwellings and.14 completed dwellings which are not closed, 11 of which are sold) and 38 dwellings under construction (33 of which are sold). According to the specific guidelines of the California Debt and Investment Advisory Commission (CDIAC), each ownership is valued in bulk, representing a discounted value to that ownership as of the date of value. Based on the investigation and analyses undertaken, my experience as a real estate appraisers and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinions of Minimum Market Value are formed as of August 1,2017. Community Facilities District No , IA 5 ONE HUNDRED THREE MILLION FOUR HUNDRED THOUSAND DOLLARS $103,400,000 Individual Homeowners Completed Dwellings EIGHTY-EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS $88,200,000

87 Mr. Jeffrey Rigney August22,2016 Page 2 Lennar Homes of California, Inc. FIFTEEN MILLION TWO HUNDRED THOUSAND DOLLARS $15,200,000 The self-contained report that follows sets forth the results of the data and analyses upon which my opinion of value are, in part, predicated. This report has been prepared for the County of San Bernardino for use in the sale of Community Facilities District No Improvement Area No. 5 bonds. The intended users of this report are the County of San Bernardino, its underwriter, legal counsel, consultants, and potential bond investors. This appraisal has been prepared in accordance with and is subject to the requirements of the Appraisal Standards for Land Secured Financing as published by the California Debt and Investment Advisory Commission; the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. I meet the requirements of the Competency Provision of the Uniform Standards of Professional Appraisal Practice. A statement of my qualifications appears in the Addenda. Respectfully submitted,?t:'h~rri~ U~~~~ AG001846

88

89 SUMMARY OF FACTS AND CONCLUSIONS EFFECTIVE DATE OF APPRAISAL August 1, 2017 DATE OF REPORT August22,2017 INTEREST APPRAISED Fee Simple Estate, subject to special tax liens LEGAL DESCRIPTION Tract Nos , & OWNERSHIP Lennar Homes of California, Inc. and 218 individual homeowners SITE CONDITION Various stages of vertical development to completed dwelling units HIGHEST AND BEST USE Continued development of subdivisions similar to products currently being offered VALUATION CONCLUSIONS $103,400,000 Minimum Market Value 218 Homeowners Lennar Homes of California, Inc. $88,200,000 $15,200,000 iv

90 TABLE OF CONTENTS Section Transmittal Letter... Summary of Facts and Conclusions... iv Table of Contents... v Introduction Area Description Site Analysis Improvement Description Highest and Best Use..." Valuation Methodology Valuation of Dwelling Units Valuation Conclusions Certification Addenda Qualifications Assessed Valuations Ownership Summary of Sold Dwelling Units v

91 HRA INTRODUCTION Purpose of the Report The purpose of this appraisal is to estimate the Minimum Market Value for the fee simple estate, subject to special tax liens for all the property within Improvement Area No. 5 of CFD No , located in the unincorporated area of San Bernardino County. The purpose of this appraisal is to estimate the "As Is" Minimum Market Value of the property under the ownership of the merchant builder and 218 homeowners. Irnprovement Area NO.5 of CFD No generally conforms to recorded Tract Nos , and in unincorporated San Bernardino County. The master planned community is known as Rosena Ranch. The opinions set forth are subject to the assumptions and limiting conditions set forth in this appraisal, and the appraisal guidelines as set forth by the County of San Bernardino. Function of the Report and Intended Use It is my understanding that this appraisal report is to be used for Community Facilities District bond financing purposes only. The subject property is described more particularly within this report. The bonds are issued pursuant to the Mello-Roos Community Facilities District Act of 1982, as amended. The maximum authorized bonded indebtedness for Improvement Area NO.5 of CFD No is $9,000,000. Client and Intended Users of the Report This report was prepared for our client, the County of San Bernardino. The intended users of the report include the County, its legal counsel, underwriter, consultants, and potential bond purchasers. Scope of the Assignment According to the CDIAC guidelines, the total value conclusion includes the "As Is" estimate of Minimum Market Value for each ownership. The District includes 218 completed and closed dwellings, 14 completed, but not closed dwellings and 38 CONSULTING REAL ESTATE APPRAISERS 1

92 HRA dwellings under construction and under the ownership of the merchant builder, subject to special tax within the boundary of Improvement Area No.5 of CFD No This is a fully documented self-contained appraisal report. Any lands designated for park, open space or civic uses within this CFD and not subject to special tax are not included in this assignment. The residential land and any improvements are valued in their "as is" condition as of the date of value. Development within Improvement Area NO.5 of CFD No consists of 232 completed dwellings (218 closed dwellings, 14 completed but not closed dwellings), and 38 dwellings under construction. We have analyzed the subject property based upon the proposed uses and our opinion of its highest and best use. We have searched for sales of residential land to estimate the value of the property. The following paragraphs summarize the process of collecting, confirming and reporting of data used in the analysis. 1. Gathered and analyzed demographic data from sources including the Califomia Department of Finance (population data), Employment Development Department of the State of California (employment data), County of San Bernardino (zoning information, building permit trends), Fontana Chamber of Commerce (local demographic trends), MetroStudy (housing sales, inventory levels, and absorption), and sales personnel of comparable projects (market trends of individual home sales). Subject property information was gathered from the developer/ builder and their consultants. 2. Inspected the subject's neighborhood and reviewed existing product and similar products for consideration of Highest and Best Use of the proposed lots. 3. Gathered and analyzed comparable residential land sales, within the subject's primary and secondary market areas. Data was gathered from sources including Comps.com, brokers, appraisers, builders active in the area and developers within the San Bernardino County area. Where feasible, data were confirmed with both the buyer and seller. CONSULTING REAL ESTATE APPRAISERS 2

93 HRA Date of Value and Report The opinions of Minimum Market Value expressed in this report are stated as of August 1, The date of the appraisal report is August 22,2017. Date of Inspection The subject property was inspected on several occasions, with the most recent on August 1, Property Rights Appraised The property rights appraised are those of the fee simple estate subject to special tax liens of the real estate described herein. Property Identification Improvement Area No.5 The portion of Rosena Ranch within Improvement Area No. 5 is proposed for three products on the 270 lots. Currently, Sage is in an active sales program, having closed 92 of 110 dwellings, additionally, 15 dwellings are in escrow. Rosewood is in an active sales program, having closed escrow on 84 of 99 dwellings. Additionally, 13 dwellings are in escrow. Chaparral is in an active sales program, having closed escrow on 42 of 61 dwellings. Additionally, 16 dwellings are in escrow. In Improvement Area No.5 there are 232 completed production dwellings, 218 have closed to homeowners. The balance of the Improvement Area includes 14 completed, but not closed dwellings and 38 dwellings under construction. Please refer to the map on the following page, which outlines the boundary of Improvement Area No.5 of CFD No Legal Description and Ownership As previously mentioned, the subject of this appraisal includes three recorded tract maps with 218 individual homeowners as of the valuation date. The table which follows the map identifies the merchant builder's ownerships and homeowner ownerships. Please refer to the Addenda of this report for a lot-by-iot summary of the 218 sold dwellings. CONSULTING REAL ESTATE APPRAISERS 3

94 SHEET 1 OF 1 PROPOSED BOUNDARIES OF IMPROVEMENT AREA NO.5 OF COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO (LYTLE CREEK NORTH) COUNTY OF SAN BERNARDINO STATE OF CALIFORNIA LEGEND B<XJndories of county of Son Bernardino Communit y Facilities Dist rict No (Lytle Creek North) ~~ Improyemcn l flrca No. 5 (1) Filed in the office of the Clerk of the Board of Supervisors of the County of San Bernardino this ~dayof f,201k Laura H elch, Clerk of the Board, County of San Bernardino (2) I hereby certify that the within map showing the proposed boundaries of Improvement Area NO.5 of County of San Bernardino Community Facilities District No (Lytle Creek North), San Bernardino County, State of California, was approved by Ihe Board of Supervisors of the County of San Bernardino at a regular meeting thereof, held on ttle~day of Maul.. 201~,by its Resolution No. 'lell... )(P. La~'" ofthe Baaed. county of San Bernardino ZONE A ZONE A Assessor Parcels within the Boundaries of Improvement Area No.5: ZONE A ZONE B Reference is made to the Assessor Maps of the County of San Bernardino for a description of the lines and dimensloos of each lot and parcel. end the map of the BoulKlaries of County of San Bernardino Community Facilitias District No (Lytle Creel!: North) recorded on December at Book No. 81. Page 72 of Maps of Assessment alkl Community Facilities Districts. in the office of the County Recordar for the County of San Barnardino. State of California. (3) Filed this ~ day of /0iH2c.H=, 201 {Q, at the hour of 11J:..Ci2... o'clock, ---B:...m. in Book B? of Maps of Assessment and Community Facilities Districts at Page I!. in the office of the oounty recorder in the County of San Bernardino, State of California. Bob Dutton. Assessor-RecordeF Get::tPot) CieRI -- County of ~an Bernardino ~ By:.?!iu"/': ~.LO_ Deputy Recorder Exempt recording requested. per CA Government Code Prepared by David Taussig & Assoc ia~t~'~'. ~I~''~.~~~~~~~~._~~~~~~~~~~ ~~~~-.l

95 HRA Legal Description, Ownership and Site Condition CFD , IA-5 Ownership Tract Lot Nos. No. Lots Site Condition (August 1,2017) 218 HOMEOWNERS Zone A 82 Completed and occupied dwellings Zone A , Completed and occupied dwellings Zone B , , , , Completed and occupied dwellings LENNAR HOMES of CALIFORNIA, INC ,218 Zone A , , 5 Completed 8 Nearly complete 20 Under construction , , 365 Zone B 371, , 359, Completed 10 Under construction 270 CONSULTING REAL ESTATE APPRAISERS 5

96 HRA Property History One-half of the Rosena Ranch property was purchased by Lennar Homes/Lennar Lytle in August The second half of the property was purchased by Lennar Homes/Lennar Lytle in March No purchase price has been reported by Lennar. For Improvement Area No.5, various transactions between Lennar Homes and Lennar Lytle resulted in Lennar Homes building 232 dwellings and selling 218 dwellings to homeowners. Additionally, 14 dwellings care complete, of which 11 are in escrow and owned by Lennar Homes. Thirty-eight dwellings are under construction, of which 33 are in escrow and owned by Lennar Homes of California, Inc. Definitions Market Value 1 The most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (a) (b) (c) (d) (e) Buyer and seller are typically motivated. Both parties are well informed or well advised, and each acting in what he considers his own best interest. A reasonable time is allowed for exposure in the open market. Payment is made in terms: of cash in U.S. dollars or in terms of financial arrangements comparable thereto. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Minimum Market Value It may be appropriate for projects that have built-out and occupied product to use mass appraisal techniques. When conforming groups of property types within the same CFD are built and have achieved a stabilized occupancy, appraisers may use a limited valuation analysis to value a sampling of similar properties. In this analysis, the overall average sales price per square foot is compared for each year. A conservative estimate of value 1 Part 563, subsection a(b)(2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations. CONSULTING REAL ESTATE APPRAISERS 6

97 HRA per square foot is used in estimating Minimum Market Value for the 218 built and sold dwellings within CFD No , Improvement Area No.5. Mass Appraisal When a tract or project is built-out and absorbed, the appraiser may use an aggregate value estimate based upon conservative per dwelling unit estimates. It is implicit in mass appraisal that some individual value conclusions will not meet standards of reasonableness, consistency and accuracy. However, appraisers engaged in mass appraisal have a professional responsibility to ensure that, on an overall basis, the value conclusions meet attainable standards of accuracy. The appraisers have used an average conservative per square foot value for the average size unit within Improvement Area No.5. By utilizing average value estimates, individual home values could be higher or lower, depending on unit size. However, on an overall basis, the value conclusions are reasonable and meet attainable standards of accuracy. Fee Simple Estate 2 Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government. Fee Simple Estate Subject to Special Tax and Special Assessment Liens Empirical evidence (and common sense) suggests that the selling prices of properties encumbered by such liens are discounted compared to properties free and clear of such liens. In new development projects, annual special tax and/or special assessment payments can be substantial, and prospective buyers take this added tax burden into account when formulating their bid prices. Taxes, including special taxes, are legally distinct from assessments. The Minimum Market Value included herein, reflects the value potential buyers would consider given the special tax lien of CFD No , Improvement Area No.5. Retail Value Retail value should be estimated for all fully improved and sold properties. Retail value is an estimate of what an end user would pay for a finished property under the conditions requisite to a fair sale. 2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page 140 CONSULTING REAL ESTATE APPRAISERS 7

98 HRA Physically Finished Site Near finished site condition, requiring final street cap, sidewalks and development fees. Finished Site 3 Land that is improved so that it is ready to be used for a specific purpose. (Improvements include padded lot, streets and utilities to the lot, and all fees required to issue a building permit paid.) Assumptions and Limiting Conditions The analyses and opinions set forth in this report are subject to the following assumptions and limiting conditions: Standards Rule ("S.R.") 2-1 (c) of the "Standards of Professional Appraisal Practice" of the Appraisal Institute requires the appraisers to "clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects an appraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1 (c) and to assist the reader in interpreting the report, the following contingencies, assumptions and limiting conditions are set forth as follows: Contingencies of the Appraisal The appraisal is contingent upon the successful funding of these bonds for Improvement Area No. 5 of CFD No through the County of San Bernardino. The special tax formula was prepared on behalf of the County of San Bernardino by David Taussig & Associates, Special Tax Consultants. The opinions of value rely on the information provided by the District's Special Tax Consultant, which we have assumed to accurately describe the properties within CFD No , IA 5. It is a specific assumption of this appraisal that the appraisers have been provided with a summary of all the parcels subject to special tax within the CFD. The opinions of value expressed in this report do not apply to any specific dwelling unit. The individual parcel sizes have been calculated by Dawson Surveying, Inc. We have relied on their calculations in estimating taxable acreage. Our value estimate is, in part, based on the accuracy of this information. 3 Ibid, Page 334 CONSULTING REAL ESTATE APPRAISERS 8

99 HRA Assumptions and Limiting Conditions No responsibility is assumed by your appraiser for matters that are legal in nature. No opinion of title is rendered, and the property is appraised as though free of all encumbrances and the title marketable. No survey of the boundaries of the property was undertaken by your appraiser. All areas and dimensions furnished to your appraiser are presurned to be correct. The date of value for which the opinions of Minimum Market Value are expressed in this report is August 1, The dollar amount of this value opinion is based on the purchasing power of the United States dollar on that date. Maps, plats, and exhibits included herein are for illustration only, as an aid for the reader in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report. Oil, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwise stated and are not a part of the appraisal, if any exist. The appraiser was provided with soil reports for Lytle Creek North, dated April 5, 2005, prepared by Petra Geotechnical, Inc. This report also summarizes various other reports dating back to Site construction recommendations are assumed to have been followed. All of CFD No has been graded and improved to 2000± mass-graded to finished lots, with 276 completed and closed dwellings in Improvement Area NO.4. For purposes of this appraisal, the soil is assumed to be of adequate loadbearing capacity to support all uses considered under our conclusion of Highest and Best Use. The appraiser was provided with one title report dated June 22, 2017 for a portion of Tract No The report was prepared by North American Title Company. For purposes of this appraisal, I am not aware of any easements, encroachments or restrictions that would adversely impact the value of the subject properties. Special taxes for CFD No were listed on the title report. Information contained in this report has been gathered from sources which are believed to be reliable, and, where feasible, has been verified. No responsibility is assumed for the accuracy of information supplied by others. Since earthquakes are common in the area, no responsibility is assumed for their possible effect on individual properties, unless detailed geologic reports are made available. CONSULTING REAL ESTATE APPRAISERS 9

100 HRA The appraiser has inspected as far as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representations are made as to these matters unless specifically considered in the report. The appraiser assumes no responsibility for economic or physical factors that may occur after the date of this appraisal. The appraiser, in rendering these opinions, assumes no responsibility for subsequent changes in management, tax laws, environmental regulations, economic, or physical factors that mayor may not affect said conclusions or opinions. No engineering survey, legal, or engineering analysis has been made by us of this property. It is assumed that the legal description and area computations fumished are reasonably accurate. However, it is recommended that an analysis be made for exact verification through appropriate professionals before demising, hypothecating, purchasing or lending occurs. Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which mayor may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraiser become aware of such during the appraisers' inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser, however, is not qualified to test for such substances or conditions. The presence of such substances such as asbestos, urea formaldehyde, foam insulation, or other hazardous substances or environmental conditions may affect the value of the property. The value estimated herein is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in the field of environmental impacts upon real estate if so desired. The cost and availability of financing help determine the demand for and supply of real estate and therefore affect real estate values and prices. The transaction price of one property may differ from that of an identical property because financing arrangements vary. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. CONSULTING REAL ESTATE APPRAISERS 10

101 HRA The forecasts of future events that influence the valuation process are predicated on the continuation of historic and current trends in the market. The property appraised is assumed to be in full compliance with all applicable federal, state, and local environmental regulations and laws, and the property is in conformance with all applicable zoning and use ordinances/restrictions, unless otherwise stated. The Americans with Disabilities Act ("ADA') became effective January 26, We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of the ADA in estimating the value of the property. I shall not be required, by reason of this appraisal, to give testimony or to be in attendance in court or any governmental or other hearing with reference to the property without prior arrangements having first been made with the appraiser relative to such additional employment. In the event the appraiser is subpoenaed for a deposition, judicial, or administrative proceeding, and is ordered to produce his appraisal report and files, the appraiser will immediately notify the client. The appraiser will appear at the deposition, judicial, or administrative hearing with the appraisal report and files and will answer all questions unless the client provides the appraiser with legal counsel who then instructs him not to appear, instructs him not to produce certain documents, or instructs him not to answer certain questions. These instructions will be overridden by a court order which the appraiser will follow if legally required to do so. It shall be the responsibility of the client to obtain a protective order. The appraisers has personally inspected the subject property; however, no opinion as to structural soundness of existing improvements or conformity to any applicable building code is made. The appraiser assumes no responsibility for undisclosed structural deficiencies/conditions. No consideration has been given in this appraisal to personal property located on the premises; only the real estate has been considered unless otherwise specified. James B. Harris is a Member of the Appraisal Institute. The Bylaws and Regulations of the Institute require each Member to control the uses and distribution of each appraisal report signed by such Member. Except as hereinafter provided, possession of this report, or a copy of it, does not carry CONSULTING REAL ESTATE APPRAISERS 11

102 HRA with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser and in any event only with properly written qualification and only in its entirety. San Bernardino County, its underwriter and legal counsel may publish this report in the Official Statement for this Community Facilities District. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the firm with which he is connected, or any reference to the Appraisal Institute or the MAl designation) shall be disseminated to the public through advertising media, public relations, news media or any other public means of communication without the prior consent and approval of the undersigned. The acceptance of and/or use of this appraisal report by the client or any third party constitutes acceptance of the following conditions: The liability of Harris Realty Appraisal and the appraisers responsible for this report is limited to the client only and to the fee actually received by the appraisers. Further, there is no accountability, obligation or liability to any third party. If the appraisal report is placed in the hands of anyone other than the client for whom this report was prepared, the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer's written consent, does so at his own risk. If the client or any third party brings legal action against Harris Realty Appraisal or the signer of this report and the appraiser prevails, the party initiating such legal action shall reimburse Harris Realty Appraisal and/or the appraiser for any and all costs of any nature, including attorneys' fees, incurred in his defense. CONSULTING REAL ESTATE APPRAISERS 12

103 HRA AREA DESCRIPTION The following section of this report will summarize the major demographic and economic characteristics such as population, employment, income and other pertinent characteristics for San Bemardino County, City of Fontana and the subject market areas. Characteristics for Fontana are reported since it is the nearest incorporated City to CFD No , Improvement Area NO.5. San Bernardino County San Bernardino County consists of 24 individual cities and numerous unincorporated communities. San Bernardino County is typically grouped with adjacent Riverside County to form the Riverside-San Bernardino Metropolitan Statistical Area. This area is commonly called the Inland Empire. San Bernardino County is bounded by Los Angeles County to the west, Kern County to the north, the state of Nevada to the east, and Riverside County to the south. San Bernardino County covers 20,160 square miles, of which 90% is desert. The major urbanized areas are located in the western portion of the County. The major incorporated cities include the cities of San Bernardino, Fontana, Ontario, Chino, and Rancho Cucamonga. These areas are the most active areas for new growth. Please refer to the Regional Map on the next page. Population San Bernardino County has added over 1,240,000 new residents since 1980 as illustrated in the following exhibit. As of January 2017, the countywide population stood at 2,160,300 residents. Since 2011, annual population gains, from natural increase and immigration, have ranged from 9,400 persons in 2014 up to 35,300 persons in During the decade of the 1980's, the average annual increase was 52,336 persons. During the 1990's the average annual increase was 29,106 persons. From 2000 to 2009 the average annual increase was 38,485. However, over the last seven years, the average annual increase was only 17,727 persons per year. This shows the weaknesses caused by the past recession and the collapse of the real estate market. Recent trends over the last seven years represent annual changes of a 0.5% to 1.7%. CONSULTING REAL ESTATE APPRAISERS 13

104 Regional Map. Moo"' Baden-P(1WeII San Gabriel Wilderness Falling ospfings Moo,,,,, Antonio. troo Moullain. 10,06411 it Angeles National Forest Cucamonga Witderness ),~:~~,~""io San Bernardino National 'o,,"s", <-Silverado Cleveland National Forest omodjeska. Santiago Peak T~ "", T""N~ '~~ " 0 mi Copyright and (P) Microsoft Corporation and/or its suppliers. All rights reserved. Certain mapping and direction data 2012 NAVTEQ. All rights reserved. The Data for areas of Canada includes information taken with permission from Canadian authorities, including: Her Majesty the Queen in Right of Canada, Queen's Printer for Ontario. NAVTEQ and NAVTEQ ON BOARD are trademarks of NAVTEQ Tele Atlas North America, Inc. All rights reserved. Tele Atlas and Tele Atlas North America are trademarks of Tele Atlas, Inc by Applied Geographic Solutions. All rights reserved. Portions Copyright 2012 by Woodall Publications Corp. All rights reserved.

105 HRA The decline in 2010 was due to the different methodologies between the U.S. Census count and the State of California projections. Year' San Bernardino County Population Trends Average Annual Change Population Number Percent ,016 1,418,380 52, % 1,709,434 29, % 1,741,400 31, % 1,788,500 47, % 1,833,000 44, % 1,886,500 53, % 1,946,200 59, % 1,991,800 45, % 2,028,000 36, % 2,055,800 27, % 2,057,300 1, % 2,035,210 (22,090) (1.1 %) 2,052,400 17, % 2,063,900 10, % 2,076,300 12, % 2,085,700 9, % 2,104,300 18, % 2,139,600 35, % 2,160,300 20, % 'April 1, 1980, 1990, 2000, 2010; all other years January 1 Source: California Departrnent of Finance, SAN BAG, U.S. Census 5/17 The future rate of growth within the County will depend on a number of factors. Some of the major factors include availability of developable land, availability of water, national and regional economic climate and public policy toward growth. The recent resurgence of the real estate market should improve the growth rate of the population. Employment Employment data for San Bernardino County are compiled for the entire MSA, which includes San Bernardino and Riverside Counties. These counties have a diverse CONSULTING REAL ESTATE APPRAISERS 15

106 HRA economy, with manufacturing, construction and tourism being the major industry groups. In conjunction with the rapid population growth experienced in the past two decades, the employment base continued to grow and diversify until The Inland Empire's unemployment rate is significantly above the Southem California average and higher than the State. The higher unemployment rate is due to the seasonal nature of agricultural employment in the area and a sharp decline in construction, manufacturing and logistics jobs. The following exhibit illustrates the area's unemployment compared to California as of July Unemployment rates are near the record low of 5%± in The unemployment rate peaked in July 2010 at 15.1 %. California Inland Empire Labor Force 19,285,000 1,996,200 Unemployment 5.4% 6.1% The most common measure of employment growth is the increase in nonagricultural employment. Nonagricultural employment is outlined in the following exhibit. Beginning in the 1980's, the Inland Empire's employment base expanded rapidly as the area moved away from its military and government oriented employment base to a more fully diversified economy. Nonagricultural employment has grown from an annual average of 443,100 jobs in 1983 to 1,400,800 jobs in This represents an increase of over 950,000 new jobs created in San Bernardino and Riverside Counties during the past 33 years. Job gains peaked in 1990 with 67,000 new jobs. Since 2000, job increases have ranged from a negative 79,900 new jobs in 2009, to a near record increase of 62,900 new jobs in However, during 2008, 2009 and 2010, the Inland Empire had losses of over 140,000 jobs. That reduced employment back to levels. During 2013 and 2014 there was an increase of 105,100 jobs. In 2015, there was an increase of 61,900 jobs, a 4.8% increase. In 2016, employment increased 4.0% to 1,400,800. Employment levels in 2015 and 2016 are at record high levels. Over the last five years, job growth has ranged from 2.8% to 4.8%. The following table illustrates the annual employment trends from 1983 through CONSULTING REAL ESTATE APPRAISERS 16

107 HRA In July 2017, the non-agricultural employment was 1,419,700, a 3.0% increase from July San Bernardino-Riverside MSA Employment Trends Average Annual Change Year Employment Number Percent , , ,100 1,037,300 1,073,000 1,110,100 1,173,300 1,236,200 1,282,400 1,286,200 1,243,100 1,163,200 1,144,700 1,148,000 1,180,000 1,231,900 1,285,100 1,347,000 1,400,800 41,700 25,990 42,200 35,700 37,100 63,200 62,900 46,200 3,800 (43,100) (79,900) (18,500) 3,300 32,000 51,900 53,200 61,900 53, Benchmark Source: Employment Development Department 5/17 9.4% 3.5% 4.2% 3.4% 3.5% 5.7% 5.4% 3.7% 0.3% (3.4%) (6.4%) (1.6%) 0.3% 2.8% 4.4% 4.3% 4.8% 4.0% Employment among the individual industry categories reflects changes in the Inland Empire economy during the past decade. Construction employment gains generally mirror the regional economy. In response to the high level of construction activity that occurred in the County during the period from 1984 to 1989, construction employment reached nearly three times the level recorded in From 1992 through 1995, construction employment declined in response to decreased building activity. The 2006 levels were more than triple the 1993 low. However, since 2006, construction jobs are down 27.5% to 92,500 jobs in The 2016 employment is up 56.5% from the low mark of 59,100 construction jobs in CONSULTING REAL ESTATE APPRAISERS 17

108 HRA The number of manufacturing jobs in the Inland Empire has increased over 25% from the levels recorded in However, manufacturing jobs declined 5.5% from the 2000 high of 119,200 jobs to 115,400 jobs by 2002, then increased back to 123,400 in 2006, but declined to 85,100 in Small increases occurred over the last five years, up to 98,900 jobs in Due to the high labor and capital costs in Los Angeles and Orange Counties, manufacturing firms have expanded or relocated some of their manufacturing operations to Riverside and San Bernardino Counties to take advantage of the labor force and lower land costs. The following table lists the largest employers in San Bemardino and Riverside Counties. Name of Company county of Riverside, Riverside Stater Bros. Markets, San Bernardino Arrowhead Regional Medical Center, Colton County of San Bernardino, San Bernardino National Training Center, Fort Irwin U.S. Marine Corp Air, Twenty Nine Palms Abbott Vascular, Temecula March Air Reserve Base, Moreno Valley S.B. City Unified School District Ontario International Airport, Ontario University of California, Riverside Claremont Colleges, Claremont Kaiser Permanente, Fontana Riverside Unified School District, Riverside Pechanga Resort and Casino, Temecula Loma Linda University Med. Center Guidant Corp (now Abbott Labs), Temecula Fontana Unified School District Inland Empire Major Employers Local Employees 18,291 18,000 18,000 17,395 13,805 12,486 12,000 8,750 8,574 7,510 6,657 6,500 5,682 5,099 4,800 4,676 4,500 3,953 Type of Business or Entity Local Government Supermarket Healthcare Local Government Military Military Healthcare Military Education Aviation Higher Education Higher Education Health Care Public Education Casino/Resort Healthcare Healthcare Public Education Source: San Bernardino Chamber of Commerce Transportation and public utilities employment tends to mirror population growth. In the Inland Empire, the finance, insurance and real estate ("FIRE") category is still a small segment of the employment picture. CONSULTING REAL ESTATE APPRAISERS 18

109 HRA A significant number of the new jobs created in the last 15 years have been created in the service sector. The service sector will continue to playa major role in employment growth during the next few years. Government employrnent is a major employment sector in the Inland Empire due to the rapid population growth; however, government employment declined from 235,200 jobs in 2009 to 224,600 jobs in In 2016, employment had increased to 240,500, a record high government employment. The Inland Empire has finally started to show signs of improvement in employment over the last several years. The Inland Empire has seen larger employment growth compared to most other Metropolitan Statistical Areas in California and its unemployment rate has finally shown significant declines. The Inland Empire unemployment rate peaked at 15.1% in July 2010, which is 148% above the current rate. Income The average household income in San Bernardino County in 2017 is estimated to be $73,205. The median household income stands at $55,589. These figures are moderately below the Southern California region average. Almost 46% of all households earn less than $50,000 per year. The lower income level is due to the lower wages in agriculture, manufacturing, service and government employment. The household income distribution for San Bernardino County is illustrated in the following table. CONSULTING REAL ESTATE APPRAISERS 19

110 HRA County of San Bernardino Household Income Distribution 2017 Income Range Households Less than $15,000 $15,000 - $24,999 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 - $149,999 $150,000 - $199,999 $200,000 or more Total Median Household Income Average Household Income 77,364 68,002 61,169 86, ,821 79,271 90,296 32,823 26, ,253 Percent % 10.64% 9.57% 13.61% 18.27% 12.40% 14.13% 5.13% 4.15% % $55,589 $73,205 1 Percent of total distribution Source: Claritas 5/17 Retail Sales Retail demand continues to be fueled by the growth in population as outlined previously. For San Bernardino County, taxable retail sales increased from $8.9 billion in 1996 to over $22.1 billion in However, in 2007, 2008 and 2009 retail sales declined. The 2015 total of $ billion is at a new peak retail sales level. During the past five years, retail sales growth has ranged from a low of $0.902 billion in 2016 to $1.427 billion in is the most recent annual total released by the State of California. CONSULTING REAL ESTATE APPRAISERS 20

111 HRA Year Taxable Retail Sales (OOO's\ $4,964,279 $7,809,826 $12,801,364 $13,525,375 $14,319,508 $15,905,360 $18,468,023 $21,120,406 $22,130,160 $21,335,824 $19,065,786 $16,330,138 $17,308,880 $18,736,053 $19,980,937 $21,173,875 $22,240,376 $23,142,828 San Bernardino County Retail Sales Trends Average Annual Change Number (OOO's\ Percent $ 544,662 $ 569,109 $ 499,154 $ 724,011 $ 794,133 $1,585,852 $2,562,663 $2,652,383 $1,009,754 ($ 794,336) ($2,270,038) ($2,735,648) $ 978,742 $ 1,427,173 $1,244,884 $1,192,938 $ 1,066,501 $ 902, % 11.5% 6.4% 5.7% 5.9% 11.1% 16.1% 14.4% 4.8% (3.6%) (10.6%) (14.3%) 6.0% 8.2% 6.6% 6.0% 5.0% 4.1% Retail Stores, Taxable Retail Sales Total Source: State Board of Equalization 5/17 The increases, up to 2007, in retail sales were due to the exceptionally high County population growth rates experienced during the period from 1985 through During the period from 1991 through 1993, retail sales declined due to the economic recession. From 1994, and continuing through 2006, there was a significant growth in retail sales. Retail sales declined in 2007, 2008, and 2009 and were 26.2% below the 2006 sales levels. Although retail sales increased 6.0% in 2010, they were only at the sales level. During 2011, retail sales were up 8.2% over In 2012 retail sales increased 6.6%. In 2013, retail sales increased 6.0%, to $21,173,875,000. In 2014, retail sales increased 5.0% to $22,240,376,000. In 2015, retail sales totaled $23,142,820,000, a 4.1 % and 2015 were record high retail sales levels, finally exceeding the previous high level in In the future, retail sales growth should reflect the population growth in the County. CONSULTING REAL ESTATE APPRAISERS 21

112 HRA Transportation San Bernardino County is served by a major airport, Ontario International, located within 15 miles of the subject property. Several major airlines have flights into Ontario, while international flights can originate at Los Angeles International Airport. A network of freeways links most urbanized areas of the County. The major north-south arterial is the Mojave/Ontario Freeway (1-15) and the Riverside Freeway (1-215). The Pomona Freeway (SH-60) and San Bernardino Freeway (1-10) provide eastwest access to the Los Angeles area. The Foothill Freeway (1-210) parallels the San Bernardino Freeway in an east-west direction. The subject property is east of the 1-15 Freeway, just south of the Glen Helen Parkway interchange. Real Estate The following table shows San Bernardino County in relation to the remaining Southern California counties for median price and number of dwellings sold. Southern California Home Sales No. Sold - All Homes Median Price - All Homes June June Pet. June June Pet. County Chg Chg. Los Angeles 8,059 8, % $530,000 $569, % Orange County 3,768 3, % $655,000 $695, % Riverside 4,226 4, % $332,000 $357, % San Bernardino 2,843 3, % $285,000 $320, % San Diego 4,410 4, % $495,000 $543, % Ventura 1,163 1, % $550,000 $565, % Southern California 24,469 25, % $465,000 $500, % Source: CoreLogic 7/17 During the period from 1988 through 1989, housing values appreciated at rates approaching an average of 15% per annum throughout much of San Bernardino County and Southern California. In Southern California, during the period from 1990 through 1993 as the economic recession influenced all segments of potential homebuyers, the rate of home price appreciation fell dramatically with declines of approximately 4% to 6% per annum. During 1996 home prices stabilized, and most new subdivisions experienced significant price increases from 1997 to mid-2005, with annual double digit CONSULTING REAL ESTATE APPRAISERS 22

113 HRA appreciation. Over the subsequent 6::,:: years sales prices significantly decreased. However, over the last 5::,:: years, sales prices have increased on a year over year basis in almost every month. The June 2017 sales were the highest June sales since The change in sales was up 8.5% from May 2017 and up 4.3% since June The region's median sale price has increased for 63 straight month, with the last 37 months having single digit increases. Southem Califomia's June median sale price was 1.0% below the peak median price of $505,000 reached in July In San Bernardino County, 3,243 homes were reportedly sold in June 2017, which is an increase of 14.1% from June This is primarily due to a reduction in inventory. Prices are reportedly back to their 2006 level. Over the past 12 months, the median sales price has increased 12.3% to $320,000, according to CoreLogic. This is a vast improvement from the 20% to 25% annual declines on a monthly basis in 2007 and Conclusion In summary, the region exhibited very strong population and employment growth during the 1980 to 1989 period. The recession of the early 1990s significantly slowed population growth and resulted in overall job losses from 1990 to During the following decade, as the economy recovered, population and employment growth were stronger than during the prior growth years of the 1980s. As the past recession took hold in 2008, San Bernardino County was impacted particularly hard, with plummeting home prices and related job losses. However, during 2012/2013, the double digit year-over-year price increases indicated that the market was in a rebounding phase of the cycle. The more recent price gains of 4% to 10% are considered a return to a more normal and stable market which should be sustainable over the next several years, assuming the economy continues to be strong and the labor force continues to grow. The long-term outlook for the region remains positive as the elements of abundant affordable land and labor still exist. Future growth will continue to be affected by the trends in the overall economy. San Bernardino County's economic environment should follow a path similar to that of the other Southern California counties. CONSULTING REAL ESTATE APPRAISERS 23

114 HRA City of Fontana The City of Fontana is located in the central west valley area of San Bernardino County. Please refer to the following page for a neighborhood map. Fontana is located approximately 50 miles east of Los Angeles and 13 miles west of the City of San Bernardino. The City was incorporated in The Fontana area was primarily an agricultural area, from the early part of the century, until urban development began in the 1950's. The Kaiser Steel Mill located in Fontana in 1942, and closed in The "California Speedway" opened for auto racing on the Kaiser site in June The City of Fontana encompasses an area of approximately 42.4 square miles and is bounded by the following local cities and counties. City/Area San Bernardino County (subject property) Rancho Cucamonga and Ontario Rialto Riverside Count Dir. From Fontana North West East South The majority of the City land area is developed with primarily residential uses. The major commercial area is adjacent to the San Bernardino Freeway (1-10) at Sierra Avenue. This area is now being improved with new large industrial uses. The City limits of Fontana contain approximately 27,100 acres of land. Of this amount, there are 3,623 acres of industrial land. Within this area, 510 acres are zoned for specialized employment such as research, development and technology. There are also some 13,259 acres designated for residential use, 2,402 acres for commercial use, and the remaining acreage is utilized for public/quasi-public, and open space. Within the City limits of Fontana, there are 45 schools including, 29 public elementary schools, 7 middle schools, and 5 high schools, plus 2 continuation high schools, a community college and private college. There are 366 acres of parks located throughout the City. CONSULTING REAL ESTATE APPRAISERS 24

115 Neighborhood Map San Beri~~J(lino Cajon Wash San Bernardino National Forest 0 mi Copyright and (P) Microsoft Corporation and/or its suppliers. All rights reserved. Certain mapping and direction data 2012 NAVTEQ. All rights reserved. The Data for areas of Canada includes information taken with permission from Canadian authorities, including: Her Majesty the Queen in Right of Canada, Queen's Printer for Ontario. NAVTEQ and NAVTEQ ON BOARD are trademarks of NAVTEQ Tele Atlas North America, Inc. All rights reserved. Tele Atlas and Tele Atlas North America are trademarks of Tele Atlas, Inc by Applied Geographic Solutions. All rights reserved. Portions Copyright 2012 by Woodall Publications Corp. All rights reserved.

116 HRA Population The City of Fontana has had significant population growth since the 1970's. Although the growth has been rapid, there is still significant area for future residential development. The following exhibit illustrates the City's growth and population since The January 2010 population, according to the U.S Census, was 195,453 residents. As of 2017, the city's population has increased to 212,800 persons. The City's growth rate is generally higher than the County's growth rate. Over 90,000 of the City's residents live in North Fontana, just south of the subject property. Most of the growth in this area has occurred over the last 15 years. North Fontana has the highest median price of any zip code in Fontana, at $420,000. About 12,000 of the population growth was due to the 2007 annexation of 29 "island" areas. Without these annexations, growth in 2007 would have been under 3.0% and 2013 were the slowest growth rates in last 20 years at 0.7% and 0.1 %.2014 and 2015 had growth rates of 1.0%, while 2016 increase was 2.7%. In 2017 the growth rate is 1.4%. Population Trends Fontana Average Annual Year Population Change , , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % Source: California Department of Finance. 7/17 CONSULTING REAL ESTATE APPRAISERS 26

117 HRA Employment and Income Levels The City of Fontana is within a labor market area that includes the nearby communities of Rancho Cucamonga and Ontario. Within the immediate Fontana area there is an estimated 96,700 person labor force with a 6.4% unemployment rate, as reported by the State of California. Within the Fontana, Ontario, Rancho Cucamonga area, there is a 274,300-person labor force with a 5.5% unemployment rate. The largest employers in Fontana are: Major Employers Employer Kaiser Hospital & Medical Group Fontana USD City of Fontana Target Costco USF Reddaway Estes West Sierra Aluminum Crown Technical Walmart Source: City of Fontana No. of Employees 5,430 5,000 1, The adjacent area of Ontario is manufacturing facilities and the Ontario International Airport. home to many large distribution and According to the Nielsen Company, the Fontana area has a slightly higher income level than other sections of San Bernardino County. The median household income for 2017 is $68,125 compared to the County median of $54,975. The City's average household income is $81,305. Retail Sales Retail sales in the City of Fontana increased significantly prior to the recent recession. The table below shows the growth of retail store sales since The annual increases are significantly higher than the County increases. Fontana did not suffer from negative retail sales growth until 2008, when sales declined 8.5%. In 2009, retail sales again declined, down 12.0%. Sales increased significantly in 2010 and retail sales again increased 14.4%. Sales increased significantly in 2010 and CONSULTING REAL ESTATE APPRAISERS 27

118 HRA retail sales again increased 14.4% from 2009 and 2011 sales increased 12.5% from Retail sales for 2012, increased 14.0% over The upward trend continued in 2013 with a 5.0% increase. In 2014 retail sales increased 6.6% to $2,115,344,000. Retail sales reached a record high level in 2015, at $2,235,493,000. This was up 5.7% over the previous high level in Annual retail sales for 2016 have not been reported as of the date of value Fontana Retail Store Sales Amount Annual Change $593,138,000 $699,612,000 $781,177,000 $836,388,000 $874,005,000 $989,080,000 $1,153,583,000 $1,439,207,000 $1,584,602,000 $1,729,978,000 $1,538,275,000 $1,353,055,000 $1,547,871,000 $1,741,252,000 $1,890,323,000 $1,984,068,000 $2,115,341,000 $2,235,493,000 Source: California Board of Equalization 18.0% 12.8% 7.1% 4.5% 13.2% 14.3% 24.8% 10.1% 9.2% -8.5% -12.0% 14.4% 12.5% 14.0% 5.0% 6.6% 5.7% Housing The City of Fontana has 43,650 housing units. Single-family Detached Single family Attached 2-4 Units Over 5 Units Mobile Homes 42,689 1,231 2,126 5,772 1,540 CONSULTING REAL ESTATE APPRAISERS 28

119 HRA The June 2017 median single-family home price for the City is $378,750, decreasing 2.6% in the last year. However, the median price is still 26% off the March 2007 record high median price. Current median rent is $2,200 per month As previously mentioned, the City of Fontana encompasses 42.4 square miles or 27,1002:. acres. An additional 16.7 square miles or 10,660 acres are adjacent to the City and are within its sphere of influence. Approximately 60% of the City and its sphere of influence has been built-out. The majority of the vacant land is located in the northwestern section of the City. A land use breakdown for the City and its sphere of influence (based on the General Plan) is summarized below: Land Use Low-Density Residential Medium Density Residential High Density Residential Commercial Development Industrial Development Public Uses/Open Space Infrastructure Total Land Use Percent OfTotal 37.2% 8.4% 2.5% 12.2% 21.7% 14.1% 3.9% 100.0% As indicated, residential land uses are the dominant component in the City, totaling 48.1 % of the total land area. Industrial uses are also significant, totaling almost 22% of the land area. Comrnercial development is less significant, approximating 12% of the total land area. Most commercial development is geared to serving the local population. Transportation Major highways and railroads cross Fontana, making shipping and transportation throughout Southern California and the Western States convenient and reliable. Fontana has access to seven major highways. Interstate 10 traverses the southern section of the City and Interstate 15 borders the City to the west. Interstate 210 travels in an east/west direction through the northerly section of the city. State CONSULTING REAL ESTATE APPRAISERS 29

120 HRA Route 66, Foothill Boulevard, travels an east/west path through the middle of the City. State Highway 91 and Interstate 215 are within 2 to 20 minutes driving distance of Fontana. The Foothill Freeway (S-210) is completed from Pasadena to Redlands. Burlington Northern Santa Fe and Union Pacific provide rail service to Fontana. The rail switchyard facilities include 24-hour rail car switching service and reciprocal switching between both rail lines. The Ports of Long Beach and Los Angeles are located within an hour drive from Fontana and are easily accessible by truck. The Ontario International Airport is located 5 miles to the west of Fontana, and is used by the United Parcel Service as its main Southern California regional cargo distribution point. Fontana is the first City in California to designate an area specifically for trucking and truck-related uses. The City is the highway distribution center of San Bernardino County. There are approximately 57 trucking firms located in Fontana, which provide regional and national service. Immediate Surroundings CFD No , Rosena Ranch, is located along the easterly side of the 1-15 Freeway south of Glen Helen Parkway. Glen Helen Parkway has a full interchange to the 1-15 with access in both directions. Northerly along the Interstate, land is generally vacant and forms the foothills of the San Bernardino Mountains. The easterly boundary of CFD No is an active sand and gravel mining operation. Much of the surrounding property to the north, east and south is either vacant, developed with low-density residential use, or under construction as part of other approved Specific Plans. Surrounding uses include the Glen Helen Regional Park, San Manuel Amphitheater at Glen Helen, the Glen Helen Rehabilitation Center, and a County Sheriffs facility. The regional park totals 1,340 acres with camping and water park amenities. The 65,000 seat San Manuel Amphitheater at Glen Helen is the largest concert amphitheater in the United States. A rock and sand quarry, then vacant land runs east of the subject property for a distance of about three miles to the CONSULTING REAL ESTATE APPRAISERS 30

121 HRA City of San Bernardino where development consists of mainly older single family detached neighborhoods. There are dwellings to the south in the Citrus Heights North Specific Plan, now known as Shady Trails. The Sierra Crest Specific Plan Area is northerly of the Shady Trails community. The Coyote Canyon Specific Plan area is to the southwest and the Sierra Lakes Specific Plan area is to the southeast. All four of these Specific Plans are in Fontana. Several major development projects have been approved and built in Fontana near the vicinity of Rosena Ranch, including: Sierra Crest Specific Plan, Sierra Lakes Specific Plan; Hunter's Ridge Specific Plan; Westgate Specific Plan; Coyote Canyon Specific Plan; Summit Heights Specific Plan; Citrus Heights North Specific Plan; and the Citrus Heights Specific Plan. Only Citrus Heights North has significant land remaining to be built-out. Conclusion The local economy previously experienced economic decline from 2008 into 2012, due largely to the national and state recessions. However, beginning in mid-2012 the markets have stabilized and home price increases have returned. Inflation is reported to remain low, which should keep mortgage rates from rising too steeply while the economy gains strength. Nationally, the economy has rebounded from the past recession lows. As of August 1, 2017, the Dow Jones Industrial Average (OJIA) and S&P 500 are near historical highs at 21,960 and 2,475 respectively. Home buyer demand in San Bernardino County and all of Southern California currently meets the supply of homes on the market. San Bernardino County experienced an increase of 12.3% in the median home price from a year ago. The median home price in San Bernardino County was $320,000 in July Riverside's median home price was $357,000. Home prices continue to increase, although the percentage change has been decreasing on a monthly basis over the past 6+ months. The subject's market area has experienced moderate dernand for detached single family homes on 4,000 to 7,200 square foot lots. As long as the economy continues to grow, employment opportunities improve closer to the subject CONSULTING REAL ESTATE APPRAISERS 31

122 HRA area, and the cities close to the more urbanized areas become even more expensive areas in which to live and operate a business. The City of Fontana and the nearby communities are anticipated to continue to experience moderate growth. CONSULTING REAL ESTATE APPRAISERS 32

123 HRA SITE ANALYSIS General The subject property of this appraisal is Improvement Area NO.5 of CFD No Improvement Area NO.5 is in a finished lot condition, with 218 completed and closed dwellings. Improvement Area No. 5 is proposed for 270 detached residential dwellings. Improvement Area NO.5 has 232 completed production dwellings, (of which 218 dwellings have closed to homeowners) and 38 dwellings under construction. Location The subject site is located north of the City of Fontana's northern boundary, in unincorporated San Bernardino County. It is bounded by the Interstate 15 Freeway on the north/northwest and Lytle Creek on the south. The property is near the foot of the San Gabriel Mountains at the mouth of Lytle Creek Canyon. Specific Plan The Lytle Creek North specific plan is a acre master planned community that includes a variety of single-family residential and commercial development in conjunction with an array of amenities and recreational opportunities. The commercial development encompasses approximately 43.4 acres and may include community commercial uses, general/highway commercial uses, service commercial uses, office/business park development, and light industrial uses. The community commercial development is designed to serve as a buffer between the single-family residential areas and the 1-15 freeway. The Land Use Plan for all of Lytle Creek North (Rosena Ranch) provides for a mix of residential uses, community commercial development, parks, an elementary school, and open space. The plan includes development of detached single-family homes in four land use categories: SF4 (single-family residences on minimum 4,000 square foot lots), SF-5 (single-family residences on minimum 5,000 square foot lots), SF-6 (single-family residences on minimum 6,000 square foot lots), and SF-7 (singlefamily residences on minimum 7,200 square foot lots). A total of 2,234 detached single- CONSULTING REAL ESTATE APPRAISERS 33

124 HRA family homes are permitted on-site, Since an elementary school on 10 acres is built within Lytle Creek North, an additional 172 dwelling units may be constructed as Multi Family Attached Residential (MF) at a maximum density of 13,0 dwellings per acre, The following table summarizes in greater detail the land uses proposed for the different planning areas as outlined in the Lytle Creek North Draft Specific Plan, Please note that the phasing illustrated below does not reflect the current phasing of the District. Lytle Creek North Specific Plan Proposed Land Use by Phase Phase I Phase II Phase III The Lytle Creek North Specific Plan property lies on a broad alluvial plain formed by Lytle Creek, Topographically, the site is characterized as flat to gently sloping in a southwesterly direction, The property does not have any distinguishing geologic formations or topographic features due to its relative flatness, The subject site is generally devoid of vegetation, except for isolated locations, The majority of native vegetation on-site exists in a disturbed condition as a result of past wildfire and grazing livestock, Disturbed native vegetation consists primarily of successional buckwheat scrub and non-native grasslands, Over the years, the site has regularly been cleared for weed and fire control purposes, Previously, the site was used as a rock, gravel and sand mine, CONSULTING REAL ESTATE APPRAISERS 34

125 HRA Current Land Use As of the date of value of this appraisal, Improvement Area No.5 is improved to at least finished lot condition. As of the date of value, 232 dwellings have been completed and 218 dwellings have closed escrow to individual homeowners. An additional 38 lots are under construction. The developer reported that the entire Lytle Creek North site development cost, including fees, totaled approximately $153,000,000 or $73,000± per lot. An elementary school and a park are completed within the Rosena Ranch Community. Size and Shape The overall shape of the subject property is generally irregular and contains 50.6± gross acres, according to the Tract Maps. Improvement Area No. 5 has been subdivided into three final tracts. Improvement Area No.5 has taxable area of acres according to the District's Special Tax Consultant. Please refer to the table below which summarizes the Improvement Area. CFD No Soils and Geology One soil report was previously provided for Lytle Creek North covering all of Improvement Area No.5. The report was prepared by Petra Geotechnical and dated May The report indicates that the development as proposed is feasible from a geotechnical viewpoint, provided recommendations included in their report are implemented. All of Improvement Area No.5 of CFD No has been graded and improved to at least a finished lot condition to completed dwelling units. The appraiser CONSULTING REAL ESTATE APPRAISERS 35

126 HRA assumes that the soil conditions allow all of the proposed development as discussed in the Highest and Best Use section of this report and as proposed by the builder. Topography and Drainage Improvement Area NO.5 is mostly level. No lots/sites offer views. Drainage is via natural sheet flow and percolation. There are storm drains serving the subject property. Storm drain capacity for the subject was constructed during the site development process. During our inspection of the site, we did not observe any drainage problems. Within Lytle Creek North the highest elevations on-site are found in the northernmost portion of the property and exceed an elevation of 2,200 feet above mean sea level. The remainder of the site slopes gently to the southeast and drains into Lytle Creek. The lowest elevation found on-site is approximately 1,800 feet above sea level. Zoning In December 2001, the San Bernardino County Board of Supervisors granted the following approvals for implementation of a proposed development known as the Lytle Creek North Development Project. General Plan Land Use District Amendment from Resource Conservation (RC) and Floodway (FW) to Planned Development (PO) for the acre site; General Plan Hazard Overlay Map Amendment to modify the site's Floodplain Safety Overlay District designation; General Plan Improvement Level Amendment from Improvement Level 3 (IL3) to Improvement Level 1 (IL 1); Preliminary Development Plan (PDP) for construction of up to 2,466 units, 44.5 acres of commercial use, 2 acres of public facilities, a 10-acre elementary school 29 acres of community parks, 66.3 acres of open space, 30.0 acres of parkways and trails, Glen Helen Wastewater Treatment Plan (WTP) to Lytle Creek WTP, and such other entitlements as may be authorized there under, and Tentative Tract Map No for 34 parcels and such other roadway parcels and related on-site and off-site easements as may be required therewith. Final Tract Map No recorded June 7,2005. Final Tract Map No , recorded July 15, CONSULTING REAL ESTATE APPRAISERS 36

127 HRA Final Tract Map Nos , and recorded August 21,2014, February 13, 2014 and December 18, 2014, respectively. Final Tract Map Nos , and recorded October 22,2015, August 12, 2016, and March 3, 2016 respectively. In conjunction with these approvals the County certified the Project EIR and adopted Facts, Findings and Statements of Overriding Consideration for the project. As a part of this approval process, the parcels in CFD No , Improvement Area NO.5 were zoned SF-4, SF-5 and SF-6. These zones designate detached singlefamily residential uses on minimum lot sizes of 4,000 square feet, 5,000 square feet and 6,000 square feet, respectively. Access and Circulation Regional access to the area is provided by the Ontario (1-15) Freeway. Interstate 15 runs in a northeasterly direction from San Diego and Riverside counties through San Bernardino County, bisecting the West San Bernardino Valley. Access to subject property is provided by an on and off-ramp from Interstate 15 at Glen Helen Parkway. The subject site is also accessed via Clear Water Parkway and Sycamore Creek Loop Parkway. Sycamore Creek Loop Parkway is the primary loop road within the immediate area of the property appraised. Sycamore Creek Loop Parkway is dedicated 127 feet wide and is improved with two lanes of paving in both directions, concrete curbs, gutters, sidewalks and street lights. All interior streets are dedicated 50 or 60 feet wide and are improved with one lane of paving in each direction, concrete curbs and gutters, sidewalks and street lights. Sidewalks will be completed as dwellings are completed. Easements The appraiser was provided with one title report for portions of Tract No The report was dated June 22, The title report was prepared by North America CONSULTING REAL ESTATE APPRAISERS 37

128 HRA Title Company. For purposes of this appraisal, we are not aware of any easements, encroachments or restrictions that would adversely impact the value of the subject properties. Special taxes for CFD No were listed on the title reports There did not appear to be any easements, restrictions or conditions that would adversely impact the value of the subject property. It is a specific assumption of this appraisal that all easements and encumbrances affecting the property are not detrimental to value. Utilities The subject property is served by the following companies/agencies: Electricity Water Gas Sewer Telephone Police Fire Southem California Edison West Valley Water District Southern California Gas Company County of San Bernardino AT&T San Bernardino County San Bernardino County Earthquake, Flood Hazards, and Nuisances Improvement Area No. 5 as of the date of valuation was not located in a designated Earthquake Study Zone as determined by the State Geologist. However, all of Southern California is subject to seismic activity. The major active and potentially active fault systems that could produce significant ground shaking at the subject include the San Andreas, Cucamonga, and San Jacinto faults. The closest segment of the San Andreas Fault to the subject is the Southern segment, which is located approximately 12 miles north of the subject. This segment is thought to be capable of producing a maximum credible earthquake of Magnitude 7.4. The closest segment of the Cucamonga Fault Zone to the subject is located about two miles to the northwest. This fault segment is thought to be capable of producing an earthquake of up to Magnitude 7.0. The Cucamonga fault is considered to be one of the most active segments, based on several scarps along its trace. The closest segment of the San Jacinto Fault Zone is the San Bernardino Segment located about one-quarter mile to the northeast of the CONSULTING REAL ESTATE APPRAISERS 38

129 HRA subject. This fault segment is thought to be capable of producing an earthquake of up to Magnitude 7.1. Liquefaction is characterized by saturated soils that behave like liquid during ground shaking, associated with perched water conditions and loose soils. The groundwater level at the subject is about feet below the ground surface. Thus, the potential for perched water conditions and liquefaction hazard is low. The subject property is located in a Zone "X" flood designated area according to Federal Emergency Management Agency Community Panel Nos C-91 OH and C7-920H, dated August 28, This designation references an area of minimal flooding, which is outside the 500-year flood plain. Flood insurance is not required. Environmental Issues The subject parcels had been quarried for many years. The property is reportedly not impacted by any negative environmental issues. Taxes and Special Assessments The individual assessor parcels have property taxes as shown on the five pages of tables in the Addenda of this report. Pursuant to Proposition 13, passed in California in 1978, current Assessed Values mayor may not have any direct relationship to current Market Value. Real estate tax increases are limited to a maximum of 2% per year plus bonds, if any, according to Proposition 13. If the property is sold, real estate taxes are normally subject to modification to the then current Market Value. The office of David Taussig & Associates has estimated the Special Taxes on the developed residential land within CFD No The Special Taxes for the individual homes are also estimated. The table in the Addenda lists the Assessed Values and taxes for each of the assessed parcels in CFD No , Improvement Area No. 5. The total Assessed Value for all 270 parcels is $40,588,845. The total property tax is $106, These assessed values and taxes do not reflect the current completion status of the 270 individual assessor parcels. CONSULTING REAL ESTATE APPRAISERS 39

130 HRA The subject property falls within the taxing jurisdiction of the San Bernardino County Assessor's office. The applicable tax rate areas are and The published annual base tax rates are % and %. In addition to the base tax rate, there is additional bond indebtedness related to school debt service, water districts, and vector control district debt service. According to the Special Tax Consultant, no assessor parcel is delinquent in its tax. The special tax for parcels in Improvement Area No ranges from $1,951 to $2,563 per lot, for tax year The overall effective tax rate for the existing and proposed homes will range from approximately 1.85% to approximately 2.00% of the individual Assessed Values. This tax burden is comrnon for San Bernardino County where tax rates in new home communities typically range from 1.50% to 2.00%. A survey of the subject market area revealed that special Assessment Districts or CFDs encumber most of the competing residential subdivisions. There does not appear to be a great deal of resistance to the special tax assessments that do not increase the overall tax rate significantly above 2.00% of Assessed Value. The current Assessed Values for the 270 assessor parcels, which comprise Improvement Area NO.5 of CFD No , are shown in the Addenda of th is report. CONSULTING REAL ESTATE APPRAISERS 40

131 HRA IMPROVEMENT DESCRIPTION General The subject property, CFD No , Improvement Area No.5, is proposed with three products known as Sage, Rosewood and Chaparral. All three projects are built and marketed by Lennar Homes. In Improvement Area No.5, Sage will contain 110 dwelling units upon completion. Rosewood will contain 99 units upon completion. Chaparral will contain 61 units upon completion. Outside of Improvement Area No.5, there is one other project, Aster, being built and marketed in Rosena Ranch. Aster has four floorplans ranging from 2,389 to 2,690 square feet and priced from $439,790 to $464,690. In Improvement Area No.5, Sage IV has built 93 dwellings and closed 92 dwellings. The absorption period was 20 months, for an average of 4.6 dwelling units per month. Rosewood has built 88 dwellings, with 84 closed and occupied. Four are completed but not closed. Rosewood has an average absorption of 5.2 dwelling units per month. Chaparral is proposed for 61 dwellings with 51 built and 42 closed. The balance are completed but not closed or under construction. Chaparral has an average absorption of 4.2 dwelling units per month. Sage is proposed for 110 single family dwellings on minimum 4,000 square foot lots. As of the date of value, 107 dwellings are sold and 92 dwellings have closed escrow. This product began closing homes in May The appraisers did not receive building plans for Sage. The appraisers did review a sales brochure which included floor plans. For purposes of this appraisal, we have assumed that the quality of construction, functional utility, amenities and features are similar to the currently selling projects and meet market demand for new product in the subject's market area. The following table represents the dwelling unit sizes, lot size and bedroom/bathroom count of the units. CONSULTING REAL ESTATE APPRAISERS 41

132 HRA Sage IV Minimum Home Floor Plan Lot Size Sq.Ft. Bdrm/Ba Plan 2 4,000 1,597 3/2Yz Plan 3 1,821 3/2Yz Plan 4 2,292 4/3 Rosewood is proposed for 99 single family dwellings on 5,000 square foot minimum lots. As of the date of value, 97 dwellings are sold and 84 dwellings have closed escrow. This product began closing homes in July The appraisers did not receive building plans for Rosewood. The appraisers did review a sales brochure which included floor plans. For purposes of this appraisal, we have assumed that the quality of construction, functional utility, amenities and features are similar to the currently selling projects and meet market demand for new product in the subject's market area. The table below represents the dwelling unit sizes, lot size and bedroom/bathroom count of the units. I Rosewood Minimum Home Floor Plan Lot Size Sq.Ft. Bdrm/Ba Plan 1 5,000 1,555 3/2 Plan 2 1,782 3/2 Plan 3 1,874 3/2 Plan 4 2,131 4/2 Chaparral is proposed for 61 single family dwellings on 6,000 square foot minimum lots. As of the date of value, there are 42 closed dwellings and nine additional dwellings are completed, with eight dwellings in escrow, 10 dwellings are under construction, with eight in escrow. This product began closing homes in January The appraisers did not receive building plans for Chaparral. The appraisers did review a sales brochure which included floor plans. For purposes of this appraisal, we have assumed that the quality of construction, functional utility, amenities and features CONSULTING REAL ESTATE APPRAISERS 42

133 HRA are similar to the currently selling projects and meet market demand for new product in the subject's market area. The table. below represents the dwelling unit sizes, lot size and bedroom/bathroom count of the units. Chaparral Minimum Home Floor Plan Lot Size Sq.Ft. Bdrm/Ba Plan 2 6,000 2,690 4/3 Plan 3 2,899 4/3 Plan ,994 5/4 Plan 7 3,489 5/3 Plan ,152 5/4 Plan ,199 6/4.5 The following list summarizes the construction specifications for the detached single-family homes of the three projects being built by Lennar Homes. Construction Units are of Class "D" construction; wood frame and stucco siding with several elevation choices. Foundations Foundations are poured concrete. Particle board over wood floor joists for the second floor. Structural Frame Consists of 2" x 4" and 2" x 6" wood framing. Roofs Roofs are of concrete tile. Windows Dual glazed low E white vinyl framed windows and sliding glass door. Floor Covering Floor coverings are wall-to-wall carpet in all living areas. Entries and kitchens are of ceramic tile and bathrooms and laundry room are of vinyl. Interior Finish Custom trowelled ceiling and painted drywall. CONSULTING REAL ESTATE APPRAISERS 43

134 HRA Heating/HVAC Energy efficient central air conditioning and gas forced air heating. Kitchens Kitchens will be equipped with maple cabinets and granite countertops. Each kitchen will include GE appliances with 30" self-cleaning oven/4-bumer gas drop-in range, microwave oven and dishwasher. Bathrooms Master bathrooms will have double sinks with ceramic marble vanities, oak cabinets, and separate shower and tub. Secondary bathrooms will have cultured marble vanities, combination tub/shower, and oak cabinets. Garage Garage doors are two or three car sectional steel roll-up with concrete driveways. Fireplace One fireplace per dwelling. Laundry Facilities Interior laundry rooms Options Numerous options and upgrades are available including flooring, cabinet and countertop upgrades. Most options and upgrades provided at competing, similar quality developments will be offered. Conclusion of the Improvements We have not been provided with detailed information regarding quality of construction or specifications for the existing floor plans. Therefore, it is a specific assumption of this appraisal that the quality and utility of the floorplans are similar to the products currently being constructed in the subject's marketplace and that it will generally meet buyer expectations. Functional Utilitv It is an assumption of this appraisal that all of the floor plans are functional, and competitive with current design standards. CONSULTING REAL ESTATE APPRAISERS 44

135 HRA Remaining Economic Life The total/remaining economic life, according to the Marshall Valuation Service, is considered to be 50 years from date of completion. Homeowner's Association All three projects are located within the Rosena Ranch Homeowners Association. The monthly fee is approximately $132 per dwelling. CONSULTING REAL ESTATE APPRAISERS 45

136 HRA HIGHEST AND BEST USE follows: The term highest and best use is an appraisal concept that has been defined as The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. 4 The determination of highest and best use, therefore, requires a separate analysis for the land as legally permitted, as if vacant. Next, the highest and best use of the property with its improvements must be analyzed to consider any deviation of the existing improvements from the ideal. "The highest and best use of both land as though vacant and property as improved must meet four criteria. The highest and best use must be: legally permissible, physically possible, financially feasible, and maximally productive. These criteria are often considered sequentially.,,5 The four criteria interact and, therefore, may also be considered in concert. A use may be financially feasible, but it is irrelevant if it is physically impossible or legally prohibited. Legally Permissible Use The legal factors affecting the site and its potential uses are often the most restrictive. These would typically be government regulations such as zoning and building codes. CFO No , Improvement Area No. 5 is located in unincorporated San Bernardino County, north of Fontana. The subject is zoned for residential development, by the County of San Bernardino. This designation allows for single-family detached residential use with a minimum 4,000, 5,000 and 6,000 square foot lot size for the " The Dictionary of Real Estate Appraisal, 4th Edition, Pub. by the Appraisal Institute, Chicago, IL., P. 135., The Appraisal of Real Estate, 10 th Edition, Pub. By the Appraisal Institute, Chicago, IL., P CONSULTING REAL ESTATE APPRAISERS 46

137 HRA existing 270 dwelling units. The existing uses are considered a legal and conforming use. Physically Possible Use The subject property is irregular in shape, and consists of three recorded final tract maps. The site is in unincorporated San Bernardino County just north of the City of Fontana. The site has a level topography. The land was previously used for gravel rnining uses. The site contains 50.6:1: gross acres. North of the District is a rocky foothill and further north is a regional park. South of the District is Lytle Creek and vacant land. All normal utilities are available to serve the subject site. Utility and street improvements have been completed to all of the lots as of the date of value. Access is considered to be adequate via Glen Helen Parkway, Sycamore Creek Loop Parkway and the 1-15 Freeway. The size, access, and topography of the subject property make it physically suited for several types of development; however, the zoning that has occurred on the site is for single-family detached residential use. Additionally, the land has been graded to at least a finished lot condition with 232 dwellings completed and 218 dwellings closed; 38 dwellings are currently under unit construction. Based on the physical analysis, the subject property appears to be viable for several types of development based on its size and topography; however, the current site condition would suggest the land has a primary use of residential development due to its location and site development. Financial Feasibility and Market Conditions The financial feasibility of the development of the subject property is based on its ability to generate sufficient income and value in excess of the costs to develop the property to its highest and best use. Please refer to the Valuation sections of this report, which give support to the financial feasibility of Improvement Area No. 5 of CFD No CONSULTING REAL ESTATE APPRAISERS 47

138 HRA General Market Conditions - San Bernardino County The attractiveness of residential development anywhere in San Bernardino County is evidenced by market activity which has taken place over the last 20:1: years. Beginning in 1996/1997 and continuing through 2005, significant price increases occurred and incentives and concessions disappeared. The general consensus was that demand for residential land exceeded supply over the 10± year period. Both land sales and home sales showed annual double-digit appreciation from 1996/1997 through The past recession had a significant negative impact on the residential market. The current condition of the housing market is that there has been a significant increase in demand over the past 5:1: years, which has positively impacted price. The decline in sales and prices between the end of 2005 through 2011 has ended. As reported by Metrostudy, there was a significant increase in new home sales during 2012 and 2013 which positively impacted the sales price. The median new home price increased by over 18%, to $415,000± during During the second quarter of 2017 (the most recent report), new home sales increased by almost 4%. The sales price has stabilized, with an increase of only 0.5% since June 2017 existing home sales are about 10% below the average June sales over the last 29 years. Based on current market conditions, it appears that the upward pressure on price due to demand outpacing supply could be over. Inland Empire homes are more affordable than on the coast. The Inland Empire is expected to continue to draw homebuyers from Orange, Los Angeles and San Diego counties where home prices are significantly higher, especially as those three markets continue to improve. According to Corelogic, San Bernardino County's June 2017 existing home sales increased 14.1% to 3,243 dwellings compared to June The San Bernardino County median home price in June 2017 rose 12.3% to $320,000 from June During 2016, new home sales increased 22.8% compared to 2015, in San Bernardino County. In 2016, new home sales totaled 2,247 detached dwellings compared to 1,830 detached dwellings in The median new home sales price during the second quarter of 2017 was $460,800,3.7% more than the median price for the second quarter of One of the reasons for the Inland Empire's current weakness in housing CONSULTING REAL ESTATE APPRAISERS 48

139 HRA demand is due to a shortage of dwellings currently listed for sale. Both short sales and foreclosures are at their lowest levels in over eight years. Most economists are forecasting that sales rates and sales prices will continue to stabilize or even improve during Builders within San Bernardino County sold 1,960 new single-family detached homes and 325 attached new homes during the last 12 months. This was up 44.5% for detached homes and down 21.5% for attached homes compared to 12-month period ending in the second quarter of Most of the detached homes sold in San Bernardino County during were priced under $500,000, and comprise 65%:t of the total sales. Sales of homes priced over $500,000 in comprised 35%:t of the detached market. The number of active detached projects in San Bernardino County was up 10 projects to 164 projects from According to Metrostudy, there are 1,048 detached dwellings under construction in San Bernardino County as of In addition, there are a reported 4,558 lots that are improved to a finished lot condition in San Bernardino County. At the end of there were 718 detached dwellings under construction and 3,928 lots were in a finished lot condition. Based on the current closing rate per project per quarter, the 1,048 detached homes under construction, assuming a similar number of active projects, would have an approximate 5.5 month absorption time. The estimated absorption time for the 4,558 finished lots is 21.4 months. Total inventory, which includes units under construction, units built but not occupied and model homes; indicates 8.5 months of absorption for the detached dwellings. The current total inventory absorption of 8.5 months is down from the reported 10.3 months one year ago. San Bernardino - Central Submarket Improvement Area NO.5 of CFD No is situated in the Central submarket region, which includes the cities and communities of Fontana, Bloomington, Colton, and Rialto. The Central submarket region accounted for 224 detached sales during , or a 33.5% market share of the San Bernardino County market. This sales rate is CONSULTING REAL ESTATE APPRAISERS 49

140 HRA up 3.9% from the Q sales rate. The Central submarket had average quarterly sales per project of 9.7± units which is the highest sales rate of any county sub-market. The Q median sales price in the Central submarket is $429,000, down from $431,200 in Q2 of 2016, a 0.5% decrease. The Central submarket is in the low midrange of the median sales price as of the end of Q2 2017, in San Bernardino County. It is an affordable submarket in San Bernardino County with an average price per square foot of $ The average size of a detached home in the subject's submarket decreased by 10.4% during Q to 2,235 square feet. During Q2 of 2017, the subject's submarket sold 0 detached homes priced under $350,000,65 detached homes priced between $350,000 and $399,999 were sold; 132 detached homes priced between $400,000 and $499,000 were sold; and 27 homes priced over $500,000 were sold. There were 2 attached units sold in the subject's submarket in Q2 of Within the Central submarket there are 23 active projects, which is the same number of projects as of last year at this time. The subject's market area reports 245 units under construction. This is a 3.8 month absorption time for the units under construction. A year earlier, the absorption time was 4.3 months. This is slightly less than the average absorption time of San Bernardino County, in total. Total lot inventory, which includes finished lots without home construction, totals 562 lots which equates to a 9.2 month supply at the current sales rate. One year ago finished lot inventory was at 580 lots, and the absorption time based on last year's sales rate was 9.3 months. Feasibility The financial feasibility of the development of the subject property is based on its ability to generate sufficient income and value in excess of the costs to develop the property to its highest and best use. Please refer to the Valuation sections of this report, which give support to the financial feasibility of the District. Most projects throughout Fontana and surrounding markets started to plateau during the first quarter of Incentives and price reductions were apparent in most CONSULTING REAL ESTATE APPRAISERS 50

141 HRA tracts in an attempt to find the "new" equilibrium in absorption and sales price, given market conditions at that time. A decline in sales activity and price occurred over the next 6± years. It appears that current prices have achieved an affordability level more consistent with current economic growth. Most economists are predicting current market conditions will continue into Currently, the market appears to have entered a phase of stabilization. Please refer to the table on the next page that summarizes the actively selling projects most comparable to the subject. As indicated, demand has improved and projects similar to that of the subject are experiencing sales rates of 1.4± to 5.8 dwelling units per month. Four of the eight projects included in the summary are within Rosena Ranch. The overall absorption for the three subject projects within Rosena Ranch is 4.8± to 5.3± dwellings per month. Maximally Productive In considering what uses would be maximally productive for the subject property, we must consider the previously stated legal considerations. We are assuming the land uses allowed under the zoning of the County of San Bernardino are the most productive uses that will be allowed at the present tirne. Current zoning and approved uses indicate that other alternative uses are not feasible at this time. Given the improving demand for residential product in San Bernardino County and the Central Submarket, it is our opinion that development, as built and as planned, provides the highest land value and is, therefore, maximally productive. Conclusion Legal, physical, and market considerations have been analyzed to evaluate the highest and best use of the property. This analysis is presented to evaluate the type of uses that will generate the greatest level of future benefits possible from the land. CONSULTING REAL ESTATE APPRAISERS 51

142 Competitive Market Area Comparable Residential Project Summary Detached Single Family Homes August 1, 2017 Total Size No. Sold Overall No. Project/Developer/Location Units Lot Size Base Price Sq. Ft. $/Sq. Ft. Start Dt. Mo. Abs. 1 Rosewood at Rosena Ranch 99 5,000 $379,990 1,555 $ Lennar Homes $391,040 1,782 $ Jan-16 San Bernardino $422,990 1,874 $ Subject $439,540 2,130 $ Sage at Rosena Ranch 110 4,000 $379,415 1,597 $ Lennar Homes $395,690 1,821 $ Dec-15 San Bernardino $415,740 2,292 $ Subject 3 Chaparral at Rosena Ranch 61 6,000 $451,990 2,690 $ Lenarr Homes $454,890 2,899 $ Aug-16 San Bernardino $492,190 2,994 $ Subject $494,990 3,489 $ $499,940 3,152 $ $544,500 4,199 $ Aster at Rosena Ranch 288 5,000 $439,790 2,649 $ Lennar Homes $440,140 2,389 $ Feb-14 San Bernardino $448,640 2,690 $ $464,690 2,649 $ The Yosemite Collection 54 4,500 $422,990 2,673 $ Meritage Homes $435,990 2,842 $ Aug-14 Fontana $440,990 2,915 $ The Rocky Mountain Collection 65 5,000 $459,990 3,066 $ Meritage Homes $477,990 3,438 $ Aug-14 Fontana $486,990 3,700 $ S/O Jun-17 7 Cypress Pointe 148 4,000 $409,990 2,185 $ Express Homes $432,990 2,489 $ Oct-15 Fontana $445,990 2,760 $ $456,990 3,112 $146.85

143 HRA After reviewing the alternatives available and considering this and other information, it is the opinion of the appraiser that the highest and best use for the subject property, as vacant and as improved, is for residential development similar to the existing and proposed subject properties. As Vacant After reviewing the alternatives available, it is this appraiser's opinion that ultimate development of single-family detached for-sale products, similar to the existing products, is considered the highest and best use of the subject property, if there were any vacant lots. As Improved The existing use is a legal use of the land and the value of the land as improved far exceeds the value of the site if vacant. This means that the existing improvements contribute substantial value to the site. Based on these considerations, it is my opinion that the existing improvements constitute the highest and best use of the subject property. CONSULTING REAL ESTATE APPRAISERS 53

144 HRA VALUATION METHODOLOGY Basis of Valuation Valuation is based upon general and specific background experience, opinions of qualified informed persons, consideration of all data gathered during the investigative phase of the appraisal, and analysis of all market data available to the appraiser. Valuation Approaches Three basic approaches to value are available to the appraiser: Cost Approach This approach entails the preparation of a replacement or reproduction cost estimate of the subject property improvements new (maintaining comparable quality and utility) and then deducting for losses in value sustained through age, wear and tear, functionally obsolescent features, and economic factors affecting the property. This is then added to the estimated land value to provide a value estimate. Income Approach This approach is based upon the theory that the value of the property tends to be set by the expected net income therefrom to the owner. It is, in effect, the capitalization of expected future income into present worth. This approach requires an estimate of net income, an analysis of all expense items, the selection of a capitalization rate, and the processing of the net income stream into a value estimate. Direct Comparison Approach This approach is based upon the principle that the value of a property tends to be set by the price at which comparable properties have recently been sold or for which they can be acquired. This approach requires a detailed comparison of sales of comparable properties with the subject property. One of the main requisites, therefore, is that sufficient transactions of comparable properties be available to provide an accurate indicator of value and that accurate information regarding price, terms, property description, and proposed use be obtained through interview and observation. CONSULTING REAL ESTATE APPRAISERS 54

145 HRA As previously discussed, there are 218 completed and sold production dwelling units in Improvement Area No.5. Due to the mostly built-out status of this portion of the District, the appraisers have utilized a mass appraisal technique in the valuation of the completed dwelling units. When implementing a mass appraisal, conservative estimates are to be used in the valuation. It is implicit in mass appraisal that some individual value conclusions will not meet standards of reasonableness, consistency and accuracy. However, appraisers engaged in mass appraisal have a professional responsibility to ensure that, on an overall basis, the value conclusions meet attainable standards of accuracy. The appraisers have used an average conservative value, for the average size unit of the sold dwellings within Improvement Area No.5 of CFD No By utilizing average value estimates, individual home values could be higher or lower, depending on unit size. However, on an overall basis, the value conclusions are reasonable and meet attainable standards of accuracy. Sales prices have increased generally 60%, since the trough of the market in The subject dwellings have conservatively been valued based on recent sales within the District of similar sized dwelling units. In addition to the 218 completed and closed dwelling units, there are 14 completed but not closed dwellings (11 of which are in escrow), and 38 dwelling units under construction (33 of which are sold). Traffic and acceptance of the products have been good, with stabilizing market conditions. These dwellings have been conservatively valued based on current base asking prices. The 38 dwellings under construction are valued based on the estimated completion of construction with consideration given to current market conditions. CONSULTING REAL ESTATE APPRAISERS 55

146 HRA VALUATION OF DWELLING UNITS Valuation of Completed and Sold Dwelling Units As previously discussed, there are 218 completed and closed dwelling units, as of August 1, Please refer to the Addenda of this report for a unit by unit summary of each ownership, date of sale, and sales price. Due to the built-out status of this portion of the District, the appraisers have utilized a mass appraisal technique in the valuation of the completed dwelling units. When implementing a mass appraisal, conservative estimates are to be used in the valuation. It is implicit in mass appraisal that some individual value conclusions will not meet standards of reasonableness, consistency and accuracy. However, appraisers engaged in mass appraisal have a professional responsibility to ensure that, on an overall basis, the value conclusions meet attainable standards of accuracy. The appraisers have used an average conservative value, for the average size unit within the District. By utilizing average value estimates, individual home values could be higher or lower, depending on unit size. However, on an overall basis, the value conclusions are reasonable and meet attainable standards of accuracy. The 218 completed and closed dwelling units are located within all three tract maps of Improvement Area NO.5 of CFD No Escrow closings began in May 2016 and have continued to the present time. The 218 dwellings are within the three projects as summarized in the Improvement Description section of this report. The appraisers have been provided with a lot by lot summary of floor plans. From this information, we have calculated the average size for all 270 dwellings. The indicated average unit size is 2,221 square feet. The 218 dwellings which have closed to homeowners have an average size of 2,186 square feet. To estimate a conservative price per square foot for the average size unit of the projects we have reviewed the average price per square foot for sales from May 2016 through August 1, Also included is the number of sales that were available for analysis each year and the year's average unit size. The appraisers have utilized the public information available to them for all sales up to August 1,2017. The average price per square foot of similar projects in an active sales program, as illustrated in the Highest and Best Use section of this CONSULTING REAL ESTATE APPRAISERS 56

147 HRA report, were also analyzed. Current incentives in the actively selling tracts were considered as well as the projects absorption rates. Assuming a relatively similar average size dwelling unit, it would be reasonable to expect the average price per square foot to be above that of the previous year's average price per square foot. Price increases have continued to the present time. However, the average dwelling size is 17.1% larger during the first seven months of 2017, compared to The average price per square foot is 8.5% below the 2016 average price per square foot for the smaller average size dwelling. Current prices are over 30% more than the average sales price experienced during the trough of the market in It is also important to note, that as a dwelling unit size increases, all else being similar, the price per square foot typically decreases. Please refer to the following table which summarizes our findings. The actual sales within the subject tracts reflect the state of the residential market over the two years. For the nearby Improvement Area No.1, the change in price per square foot from 2007 to 2012 was a decrease of over 20%. The unit size decreased about 17%. The lowest price per square foot was experienced in 2012 at $ for a 2,470 square foot home. For the subject property, Improvement Area No. 5, during 2017, the average unit size increased 332 square feet from that in 2016; from 1,947 square feet to 2,279 square feet. During 2016, with only the Sage and Rosewood products, the average size of the sold dwellings was 1,947 square feet, much less than the overall size of the 218 closed dwelling units over the 16-month timeframe. The Chaparral project began closings in February This project is significantly larger than Sage and Rosewood. CONSULTING REAL ESTATE APPRAISERS 57

148 HRA Based on the actual sales in the subject tracts, our knowledge of the current residential market and current projections of the near-term residential market in San Bernardino County, we have estimated a conservative value of $ per square foot for the 2, 186-square foot average size home. The indicated Minimum Market Value for the average size unit, based on the 218 closed sales is $404,410. The indicated Minimum Market Value for the 218 completed and closed dwellings within Improvement Area NO.5 of CFD No is: $88,161,380, rounded to $88,200,000. $404,410 per Dwelling UnitX 218 DUs = $88,161,380 Rounded to: $88,200,000 Valuation of Builder Owned Dwelling Units In addition to the 218 completed and closed dwelling units within the District, there are 14 completed dwellings that have not closed escrow, 8 nearly complete production dwellings, 10 dwellings in the stucco stage of unit construction, 16 dwellings in the wrapped stage and 4 dwellings in the framing stage of unit construction. The 14 completed, but not closed and eight nearly completed production homes are valued at 80% of the average base selling price for the individual floor plan. The discounting is to reflect any risk of closing escrow and the remaining interior improvements that could be required to close escrow for a particular homebuyer. The dwelling units in various stages of unit construction are valued at an estimated percent complete applied to the base sales price of the floor plan. The ten dwelling units with stucco and with roofs under construction are conservatively valued at 65% of the base sales price. The 16 dwellings in the wrapped stage are conservatively valued at 55% of the base sales price. The wrapped stage is in-between the framing stage and the stucco stage. It occurs when the dwelling is completely wrapped with a water-proof barrier. The four dwelling units in the framing stage are conservatively valued as 50% of the base sales price. Please refer to following page which summarizes the estimated Minimum Market Values for the dwellings in various stages of unit construction under the ownership of the merchant builder. CONSULTING REAL ESTATE APPRAISERS 58

149 HRA The indicated Minimum Market Value for the 52 dwellings built or under construction within the Sage, Rosewood and Chaparral products under the ownership of the builder, Lennar Homes of California, Inc. is: $15,183,977, Say $15,200,000. CONSULTING REAL ESTATE APPRAISERS 59

150 County of San Bernardino CFD NO , IA-5 Lytle Creek North Value Builder Owned Bldg. Area APN Tract Lot Owner Name Sq. Ft. % Complete Description of Dwelling Base S/P As Is Value Est Lennar Homes Of Californis Inc 3,152 80% Complete, not closed $499,940 $399, Lennar Homes Of Californis Inc 4,199 80% Complete, not closed $542,990 $434, Lennar Homes Of Californis Inc 3,489 80% Complete, not closed $494,990 $395, Lennar Homes Of Californis Inc 3,152 80% Complete, not closed $499,940 $399, Lennar Homes Of Californis Inc 3,152 80% Complete, not closed $499,940 $399, Lennar Homes Of Californis Inc 4,199 80% Complete, not closed $544,500 $435, Lennar Homes Of Californis Inc 3,489 80% Complete, not closed $499,990 $399, Lennar Homes Of Californis Inc 2,899 80% Complete, not closed $454,890 $363, Lennar Homes Of Californis Inc 2,994 80% Complete, not closed $492,190 $393, Lennar Homes Of Californis Inc 1,894 80% Complete, not closed $422,190 $337, Lennar Homes Of Californis Inc 1,730 80% Complete, not closed $391,040 $312, Lennar Homes Of Californis Inc 2,111 80% Complete, not closed $439,540 $351, Lennar Homes Of Californis Inc 1,730 80% Complete, not closed $391,040 $312, Lennar Homes Of Californis Inc 1,821 80% Complete, not closed $395,690 $316, Lennar Homes Of California Inc 3,152 65% Stucco $480,190 $312, Lennar Homes Of California Inc 3,489 65% Stucco $479,240 $311, Lennar Homes Of California Inc 2,690 65% Stucco $451,990 $293, Lennar Homes Of California Inc 3,489 65% Stucco $479,240 $311, Lennar Homes Of California Inc 2,899 65% Stucco $454,890 $295, Lennar Homes Of California Inc 2,690 65% Stucco $451,990 $293, Lennar Homes Of California Inc 2,899 65% Stucco $454,890 $295, Lennar Homes Of California Inc 3,489 65% Stucco $479,240 $311, Lennar Homes Of California Inc 4,199 65% Stucco $542,990 $352, Lennar Homes Of California Inc 2,690 65% Stucco $451,990 $293, Lennar Homes Of California Inc 1,580 50% Framed $379,990 $189, Lennar Homes Of California Inc 1,730 50% Framed $391,040 $195, Lennar Homes Of California Inc 1,580 50% Framed $379,990 $189, Lennar Homes Of California Inc 1,580 50% Framed $379,990 $189, Lennar Homes Of California Inc 2,111 55% Wrapped $439,540 $241, Lennar Homes Of California Inc 1,730 55% Wrapped $391,040 $215, Lennar Homes Of California Inc 1,894 55% Wrapped $422,990 $232, Lennar Homes Of California Inc 2,111 55% Wrapped $439,540 $241, Lennar Homes Of California Inc 1,894 55% Wrapped $422,990 $232, Lennar Homes Of California Inc 1,730 55% Wrapped $391,040 $215, Lennar Homes Of California Inc 2,111 55% Wrapped $439,540 $241, Lennar Homes Of California Inc 2,292 80% Near Complete $415,740 $332, Lennar Homes Of California Inc 1,597 80% Near Complete $379,415 $303, Lennar Homes Of California Inc 1,821 80% Near Complete $395,690 $316, Lennar Homes Of California Inc 1,597 80% Near Complete $379,415 $303, Lennar Homes Of California Inc 2,292 80% Near Complete $415,740 $332, Lennar Homes Of California Inc 1,821 80% Near Complete $395,690 $316, Lennar Homes Of California Inc 1,597 80% Near Complete $379,415 $303, Lennar Homes Of California Inc 1,821 80% Near Complete $395,690 $316, Lennar Homes Of California Inc 2,292 55% Wrapped $415,740 $228, Lennar Homes Of California Inc 1,597 55% Wrapped $379,415 $208, Lennar Homes Of California Inc 1,821 55% Wrapped $395,690 $217, Lennar Homes Of California Inc 1,597 55% Wrapped $379,415 $208, Lennar Homes Of California Inc 2,292 55% Wrapped $415,740 $228, Lennar Homes Of California Inc 1,821 55% Wrapped $395,690 $217, Lennar Homes Of California Inc 1,597 55% Wrapped $379,415 $208, Lennar Homes Of California Inc 1,821 55% Wrapped $395,740 $217, Lennar Homes Of California Inc 1,597 55% Wrapped $379,415 $208, $15,183,977 $15,200,000

151 HRA VALUATION CONCLUSION Based on the investigation and analyses undertaken, our experience as real estate appraisers and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinions of Minimum Market Value are formed as of August 1, Community Facilities District No , LA. 5 ONE HUNDRED THREE MILLION FOUR HUNDRED THOUSAND DOLLARS $103,400,000 Individual Homeowners Completed Dwellings EIGHTY-EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS $88,200,000 Lennar Homes of California, Inc. FIFTEEN MILLION TWO HUNDRED THOUSAND DOLLARS $15,200,000 CONSULTING REAL ESTATE APPRAISERS 60

152 HRA CERTIFICATION I hereby certify that during the completion of this assignment, I personally inspected the property that is the subject of this appraisal and that, except as specifically noted: I have no present or contemplated future interest in the real estate or personal interest or bias with respect to the subject matter or the parties involved in this appraisal. I have not provided appraisal services regarding the subject property within the last three years to our client, the County of San Bemardino. To the best of my knowledge and belief, the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct. My engagement in this assignment was not contingent upon developing or reporting predetermined results. The compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. As of the date of this report, James B. Harris has completed the requirements of the continuing education program of the Appraisal Institute. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. Berri Cannon Harris provided significant real property appraisal assistance to the persons signing this certificate. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In furtherance of the aims of the CONSULTING REAL ESTATE APPRAISERS 61

153 HRA Appraisal Institute to develop higher standards of professional performanc~ by its Members, we -may. be required to submit-to authorized committees 'of the Appraisal Institute copies of this appraisal and any subsequent changes or modifications thereof. Respectfully submitted, ~H~m~ U~~~~! AG CONSULTING REAL ESTATE APPRAISERS 62

154 HRA ADDENDA CONSULTING REAL ESTATE APPRAISERS

155 HRA HARRIS REALTY APPRAISAL 5100 Birch Street, Suite 200 Newport Beach, CA (949) CONSULTING REAL ESTATE APPRAISERS

156 HRA QUALIFICATIONS OF JAMES B. HARRIS, MAl PROFESSIONAL BACKGROUND Actively engaged as a real estate analyst and consulting appraiser since 1971, Principal of Harris Realty Appraisal, with offices at: 5100 Birch Street, Suite 200 Newport Beach, California Before forming Harris Realty Appraisal, in 1982, was employed with Real Estate Analysts of Newport, Inc, (REAN) as a Principal and Vice President. Prior to employment with REAN was employed with the Bank of America as the Assistant Urban Appraisal Supervisor. Previously, was employed by the Verne Cox Company as a real estate appraiser. PROFESSIONAL ORGANIZA nons Member of the Appraisal Institute, with MAl designation No, 6508 Director, Southern California Chapter , 1999 Chair, Orange County Branch, Southern California Chapter Vice-Chair, Orange County Branch, Southern California Chapter Member, Region VII Regional Governing Committee to 1995,1997,1998 Member, Southern California Chapter Executive Committee , 1997 to 1999 Chairman, Southern California Chapter Seminar Committee Chairman, Southern California Chapter Workshop Committee Member, Southern California Chapter Admissions Committee to 1989 Member, Regional Standards of Professional Practice Committee Member of the International Right-of-Way Association, Orange County Chapter 67 California State Certified Appraiser, Number AG EDUCA TIONAL ACTIVITIES B,S" California State Polytechnic University, Pomona Successfully completed the following courses sponsored by the Appraisal Institute and the Right-of Way Association: Course I-A Course I-B Course II Course IV Course VI Course VIII Course SPP Course 401 Principles of Real Estate Appraisal Capitalization Theory Urban Properties Litigation Valuation Investment Analysis Single-Family Residential Appraisal Standards of Professional Practice Appraisal of Partial Acquisitions Has attended numerous seminars sponsored by the Appraisal Institute and the International Rightof-Way Association, CONSULTING REAL ESTATE APPRAISERS

157 HRA TEACHING AND LECTURING ACTlVJTJES Seminars and lectures presented to the Appraisal Institute, the University of California-Irvine, UCLA, California Debt and Investment Advisory Commission, Stone & Youngberg and the National Federation of Municipal Analysts. MISCELLANEOUS Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004) LEGAL EXPERIENCE Testified as an expert witness in the Superior Court of the County of Los Angeles and the County of San Bernardino and in the Federal Bankruptcy Courts five times concerning the issues of Eminent Domain, Bankruptcy, and Specific Performance. He has been deposed numerous times concerning these and other issues. This legal experience has been for both Plaintiff and Respondent clients. He has prepared numerous appraisals for submission to the IRS, without having values overturned. He has worked closely with numerous Bond Counsel in the completion of 300 Land Secured Municipal Bond Financing appraisals over the last twenty years. Feasibility and Consultive Studies SCOPE OF EXPERIENCE Feasibility and market analyses, including the use of computer-based economic models for both land developments and investment properties such as shopping centers, industrial parks, mobile home parks, condominium projects, hotels, and residential projects. Appraisal Projects Has completed all types of appraisal assignments from San Diego to San Francisco, California. Also has completed out-of-state appraisal assignments in Arizona, Florida, Georgia, Hawaii, Nevada, New Jersey, Oklahoma, Oregon, and Washington. Residential Residential subdivisions, condominiums, planned unit developments, mobile home parks, apartment houses, and single-family residences. Commercial Office buildings, hotels, motels, retail store buildings, restaurants, power shopping centers, neighborhood shopping centers, and convenience shopping centers. Industrial Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilities. Vacant Land Community Facilities Districts, Assessment Districts, master planned communities, residential, commercial and industrial sites; full and partial takings for public acquisitions. CONSULTING REAL ESTATE APPRAISERS

158 HRA PARTIAL LIST OF CLIENTS Lending Institutions Bank of America Bank One Commerce Bank Downey S&L Assoc. Fremont Investment and Loan First Los Angeles Bank Institutional Housing Partners NationsBank Preferred Bank Santa Monica Bank Tokai Bank Union Bank Universal S&L Assoc. Wells Fargo Bank Public Agencies Army Corps of Engineers California State University Caltrans City of Aliso Viejo City of Beaumont City of Corona City of Costa Mesa City of Encinitas City of Fontana City of Fullerton City of Hemet City of Hesperia City of Honolulu City of Huntington Beach City of Indian Wells City of Irvine City of Lake Elsinore City of Loma Linda City of Los Angeles City of Moreno Valley City of Newport Beach City of Oceanside City of Palm Springs City of Perris City of Riverside City of San Marcos City oftustin City of Victorville County of Orange County of Riverside County of San Bernardino Eastern Municipal Water District Orange County Sheriff's Department Ramona Municipal Water District Rancho Santa Fe Comm. Services District Capistrano Unified School District Hemet Unified School District Hesperia Unified School District Romoland School District Saddleback Valley Unified School District Santa Ana Unified School District Val Verde Unified School District Yucaipa-Calimesa Unified School District Law Firms Arter & Hadden Bronson, Bronson & McKinnon Bryan, Cave, McPheeters & McRoberts Richard Clements Cox, Castle, Nicholson Gibson, Dunn & Crutcher Hill, Farrer & Burrill McClintock, Weston, Benshoof, Rochefort & MacCuish Palmiri, Tyler, Wiener, Wilhelm, & Waldron Sonnenschein Nath & Rosenthal Strauss & Troy. Wyman, Bautzer, Rothman, Kuchel & Silbert CONSULTING REAL ESTATE APPRAISERS

159 HRA SUMMARY OF ASSESSED VALUES CONSULTING REAL ESTATE APPRAISERS

160 County of San Bernardino CFD NO , IA-5 Lytle Creek North Assessed Values & Taxes APN Land Value Imp. Value Total Value Prop. Tax Tax Area $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $89,218 $0 $89,218 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $

161 County of San Bernardino CFD NO , IA-5 Lytle Creek North Assessed Values & Taxes APN Land Value Imp. Value Total Value Prop. Tax Tax Area $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $91,002 $0 $91,002 $ $134,522 $249,826 $384,348 $2, $133,700 $248,300 $382,000 $2, $126,144 $234,267 $360,411 $2, $131,283 $243,811 $375,094 $2, $135,339 $251,344 $386,683 $2, $116,182 $215,767 $331,949 $2, $128,646 $238,915 $367,561 $ $133,298 $247,553 $380,851 $ $131,229 $243,711 $374,940 $ $102,000 $0 $102,000 $ $128,979 $239,532 $368,511 $ $134,953 $250,626 $385,579 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $135,424 $251,500 $386,924 $ $125,966 $233,935 $359,901 $ $128,692 $238,998 $367,690 $ $126,553 $235,026 $361,579 $2, $123,233 $228,860 $352,093 $2, $132,832 $246,658 $379,490 $2, $128,800 $239,200 $368,000 $2, $132,300 $245,700 $378,000 $2, $125,125 $232,374 $357,499 $2, $129,243 $240,022 $369,265 $ $131,350 $243,935 $375,285 $ $128,517 $238,673 $367,190 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $

162 County of San Bernardino CFD NO , IA-5 Lytle Creek North Assessed Values & Taxes APN Land Value Imp. Value Total Value Prop. Tax Tax Area $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $35,807 $0 $35,807 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $141,379 $262,561 $403,940 $ $134,222 $249,268 $383,490 $ $141,518 $262,819 $404,337 $ $132,629 $246,311 $378,940 $ $136,799 $254,055 $390,854 $ $145,296 $269,834 $415,130 $ $138,266 $256,779 $395,045 $ $142,131 $263,956 $406,087 $ $133,574 $248,066 $381,640 $ $63,995 $223,386 $287,381 $ $148,192 $275,213 $423,405 $ $136,847 $254,143 $390,990 $ $135,634 $251,891 $387,525 $

163 County of San Bernardino CFD NO , IA-5 Lytle Creek North Assessed Values & Taxes APN Land Value Imp. Value Total Value Prop. Tax Tax Area $133,111 $247,204 $380,315 $ $130,179 $241,761 $371,940 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $100,000 $0 $100,000 $ $147,219 $273,406 $420,625 $ $134,052 $248,953 $383,005 $ $151,504 $281,362 $432,866 $ $143,185 $265,915 $409,100 $ $100,000 $0 $100,000 $ $134,747 $250,243 $384,990 $ $148,250 $275,319 $423,569 $ $136,147 $252,843 $388,990 $ $153,023 $284,185 $437,208 $ $138,890 $257,938 $396,828 $ $136,322 $253,168 $389,490 $ $136,536 $253,565 $390,101 $ $145,250 $269,750 $415,000 $ $132,997 $246,993 $379,990 $ $141,050 $261,950 $403,000 $ $135,972 $252,518 $388,490 $ $138,820 $257,807 $396,627 $ $145,250 $269,750 $415,000 $ $132,787 $246,603 $379,390 $ $134,871 $250,474 $385,345 $ $146,433 $271,946 $418,379 $ $133,525 $247,975 $381,500 $ $147,805 $274,950 $422,755 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $

164 County of San Bernardino CFD NO , IA-5 Lytle Creek North Assessed Values & Taxes APN Land Value Imp. Value Total Value Prop. Tax Tax Area $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $39,594 $0 $39,594 $ $25,495,452 $15,093,393 $40,588,845 $106,669.35

165 HRA OWNERSHIP CONSULTING REAL ESTATE APPRAISERS

166 County of San Bernardino CFD NO , IA-5 Lytle Creek North Ownership by Name APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built Crabapple Ct San Bernardino, Ca Aba Mario/aba Kimberly 1,821 $383,500 $ /12/ , Cloudberry Dr San Bernardino, Ca Aguilar Michael/aguilar Susan 1,894 $398,000 $ /24/ , Crabapple Ct San Bernardino, Ca Alam Mahboob/habib Sima 1,821 $394,500 $ /29/ , Bilberry Rd San Bernardino, Ca Alexander Devonne 1,597 $380,000 $ /31/ , Cloudberry Dr San Bernardino, Ca Ali Jennifer C 1,894 $404,500 $ /10/ , Crabapple Ct San Bernardino, Ca Amezcua Mario A 2,111 $432,000 $ /29/ , Chamomile Ct San Bernardino, Ca Ancurio Albert/stebbins Veronica 2,690 $432,000 $ /13/ , Milkweed Ln San Bernardino, Ca Anton Robert B Sr/anton Angela M 1,894 $379,500 $ /29/ , N/A San Bernardino, Ca Antuna Michael 1,580 $364,500 $ /28/ , Milkweed Ln San Bernardino, Ca Armendariz Peter/harris Carla 2,111 $424,000 $ /24/ , Flowering Plum San Bernardino, Ca Armstead Ondra/johnson Laneeshia 3,489 $472,000 $ /12/ , Crabapple Ct San Bernardino, Ca Arostegui Mabel 1,894 $422,500 $ /28/ , Bur Oak Rd San Bernardino, Ca Aspa Ivanna 2,292 $360,000 $ /2/ , Crabapple Ct San Bernardino, Ca Avina Jose L/avina Sally 1,580 $392,500 $ /24/ , Milkweed Ln San Bernardino, Ca Bailey Jeanne L 1,894 $390,500 $ /16/ , N/A San Bernardino, Ca Balog Michael/balog Cynthia 2,292 $387,000 $ /28/ , Milkweed Ln San Bernardino, Ca Barajas Carlos F/barajas Diana S 1,894 $391,000 $ /25/2016 N/A 5, N/A San Bernardino, Ca Barraza Loraine 2,111 $417,500 $ /3/2017 N/A 8, Bur Oak Rd San Bernardino, Ca Becerra Perla M/becerra Nestor Jr 1,821 $375,500 $ /23/ , Cedrela Way San Bernardino, Ca Belicki David C/elmlinger Tryphena D N 1,821 $386,000 $ /23/ , Rosena Ranch Rd San Bernardino, Ca Bell John R/bell Maria Teresa 2,292 $379,500 $ /30/ , Milkweed Ln San Bernardino, Ca Bonifaz Elena 1,730 $397,000 $ /24/ , Crabapple Ct San Bernardino, Ca Bowen Lloyd A/bowen Kira R 2,292 $388,500 $ /11/ , N/A San Bernardino, Ca Bowman Alexis 1,597 $372,500 $ /19/ , Bilberry Rd San Bernardino, Ca Braun Micah R/abriam Ched C 1,821 $391,000 $ /31/ , N/A San Bernardino, Ca Briones Eric 1,821 $387,000 $ /28/ , Bilberry Rd San Bernardino, Ca Brown Doris/watts Brenda J 2,292 $397,500 $ /26/ , N/A San Bernardino, Ca Brown Maria E 1,821 $380,000 $ /18/ , Chamomile Ct San Bernardino, Ca Buranahiran Setthaporn/camarda Nicole 3,152 $476,000 $ /14/ , Chamomile Ct San Bernardino, Ca Burnett Candyce 3,489 $486,000 $ /25/ , Bur Oak Rd San Bernardino, Ca Caires Joseph Robert 1,597 $345,500 $ /3/ , Milkweed Ln San Bernardino, Ca Campos George Jr/crockett Angela 1,730 $385,500 $ /29/ , Bur Oak Rd San Bernardino, Ca Cantu Kyle Patrick/cantu Andrea Christine 2,292 $369,500 $ /18/ , Cloudberry Dr San Bernardino, Ca Cantwell Hope R 2,111 $436,500 $ /16/ , N/A San Bernardino, Ca Carrillo Gilberto/carrillo Wendy 2,292 $381,500 $ /26/ , Crabapple Ct San Bernardino, Ca Carrillo Vanessa 1,894 $410,000 $ /28/ , Milkweed Ln San Bernardino, Ca Carter Lonnie Carl Iii/carter Tanoah Rekesha 2,111 $406,500 $ /13/ , N/A San Bernardino, Ca Casey Wavel 3,152 $473,000 $ /28/ , Bilberry Rd San Bernardino, Ca Catingub Jessica & Evan/speaks Catherine A 1,821 $382,000 $ /13/ , Crabapple Ct San Bernardino, Ca Cervantes Joe/cervantes Darlene S 1,894 $413,000 $ /1/ , N/A San Bernardino, Ca Cetina Juan A Jr/cetina Ana M 1,821 $382,000 $ /30/ , Crabapple Ct San Bernardino, Ca Clark Julian C/clark Linda L 2,111 $436,000 $ /31/ , N/A San Bernardino, Ca Cochee Melonese 1,730 $389,500 $ /27/ , Rosena Ranch Rd San Bernardino, Ca Colbert Avis D 1,597 $353,500 $ /31/ , N/A San Bernardino, Ca Cook Mia S/afarid Michael A 1,597 $351,500 $ /28/ , N/A San Bernardino, Ca Cooke Christopher R/cooke Anita L 1,597 $364,000 $ /28/ , N/A San Bernardino, Ca Coria Victor M 1,821 $369,000 $ /31/ , Rosena Ranch Rd San Bernardino, Ca Cortez Wendy Michelle 1,821 $375,000 $ /26/ , N/A San Bernardino, Ca Costantino Joseph V 1,821 $382,500 $ /21/ , N/A San Bernardino, Ca Cracraft Christian/cracraft Rebekah 2,690 $442,000 $ /23/ , Chamomile Ct San Bernardino, Ca Craig Crystal/craig Larry Jr 4,199 $540,500 $ /24/ ,

167 County of San Bernardino CFD NO , IA-5 Lytle Creek North Ownership by Name APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built N/A San Bernardino, Ca Crow Marcus 1,580 $355,000 $ /28/2017 N/A 5, N/A San Bernardino, Ca Cruz Judith 3,152 $470,000 $ /17/2017 N/A 6, Bilberry Rd San Bernardino, Ca Cuellar Rene R/cuellar Stephanie M 1,821 $377,500 $ /31/ , Bilberry Rd San Bernardino, Ca Darlington Ronald T Jr/darlington Valerie A 2,292 $402,000 $ /30/ , Milkweed Ln San Bernardino, Ca De La Piedra Andrea A/thomason Steven M 2,111 $391,000 $ /25/ , Bur Oak Rd San Bernardino, Ca Dees Lydia Michelle 2,292 $379,500 $ /11/ , Bur Oak Rd San Bernardino, Ca Devine Lydia Jean 2,292 $375,500 $ /7/ , N/A San Bernardino, Ca Dixon Emily/dixon Craig 1,894 $388,500 $ /24/ , Bur Oak Rd San Bernardino, Ca Dominguez Tyler B 1,597 $350,500 $ /22/ , Milkweed Ln San Bernardino, Ca Duarte Lorena A/ramirez Sergio D 1,894 $389,500 $ /12/ , Milkweed Ln San Bernardino, Ca Duarte Salvador Jr 1,730 $379,000 $ /30/ , N/A San Bernardino, Ca Ducharme Jason T/ducharme Denise G 2,292 $376,500 $ /27/ , N/A San Bernardino, Ca Dunnington Wendy R 1,597 $371,500 $ /28/ , Cloudberry Dr San Bernardino, Ca Duong Phi M 2,111 $431,500 $ /22/ , Cloudberry Dr San Bernardino, Ca Encina David P/encina Iris M 1,894 $411,500 $ /25/ , Cloudberry Dr San Bernardino, Ca Eng May L 1,730 $395,500 $ /31/ , Milkweed Ln San Bernardino, Ca Escalante Ivonne E 1,894 $383,500 $ /29/ , Cloudberry Dr San Bernardino, Ca Espinoza Carmen/espinoza Victoria 1,894 $413,000 $ /29/ , N/A San Bernardino, Ca Fajardo Edel F/fajardo Marife A 2,292 $382,000 $ /28/ , N/A San Bernardino, Ca Farrer Kari 4,199 $528,500 $ /24/ , Milkweed Ln San Bernardino, Ca Figueroa Alek P/figueroa Felicia M 1,730 $382,000 $ /14/ , Crabapple Ct San Bernardino, Ca Fitzgerald Brian/fitzgerald Brianna 1,730 $395,500 $ /30/ , Cloudberry Dr San Bernardino, Ca Flores Albert C/flores Victoria D 1,894 $405,500 $ /28/ , Rosena Ranch Rd San Bernardino, Ca Franklin Mauchese Edward/allen-franklin Tiffany Monique 2,292 $386,000 $ /31/ , Rosena Ranch Rd San Bernardino, Ca Frazer Stephen/frazer Damesha 2,292 $382,000 $ /14/ , Cloudberry Dr San Bernardino, Ca Frieson Russell E/dorado Elizabeth M 1,894 $440,000 $ /30/ , N/A San Bernardino, Ca Giron Taide D/giron Victor H 1,821 $370,000 $ /24/ , Cloudberry Dr San Bernardino, Ca Glover Raymond A/glover Michele A 1,894 $400,000 $ /28/ , N/A San Bernardino, Ca Goulding Julie A 2,111 $445,000 $ /22/ , Irish Moss Ln San Bernardino, Ca Greenwood David B 3,152 $499,500 $ /9/ , Irish Moss Ln San Bernardino, Ca Griffith Brandon & Sonia/villarreal Delia M & Daniel A 4,199 $545,500 $ /17/ , Crabapple Ct San Bernardino, Ca Guerrero Yadira/guerrero Rudy C 1,821 $382,000 $ /7/ , N/A San Bernardino, Ca Hackett Andrew R/hackett Sandra 2,111 $415,500 $ /30/ , Milkweed Ln San Bernardino, Ca Handy Dean S/handy Keishia L 2,111 $415,000 $ /30/ , Crabapple Ct San Bernardino, Ca Hansen Ryan S/hansen Anna M 1,821 $382,000 $ /30/ , Milkweed Ln San Bernardino, Ca Hawkins Rosalind 2,111 $415,500 $ /31/ , Milkweed Ln San Bernardino, Ca Henley Nannette S/henley Gregory A 2,111 $423,500 $ /31/ , Milkweed Ln San Bernardino, Ca Hernandez Jesse A & Claudine/castillo Alejandro & Heather A 1,580 $372,000 $ /16/ , Cloudberry Dr San Bernardino, Ca Hernandez Juan/hernandez Silda M 1,580 $378,000 $ /15/ , Rosena Ranch Rd San Bernardino, Ca Higham Jonathan/freire Victoria 1,597 $352,500 $ /31/ , Irish Moss Ln San Bernardino, Ca Hill Charlie L Jr/hill Tamara D 2,994 $485,000 $ /1/ , N/A San Bernardino, Ca Horn Tiffany M 1,730 $391,500 $ /27/ , N/A San Bernardino, Ca Huerta Jose/kelly-huerta Lashelle 2,292 $368,500 $ /31/ , Chamomile Ct San Bernardino, Ca Hundal Sukhbir S 2,899 $436,000 $ /22/ , Rosena Ranch Rd San Bernardino, Ca Hunt Jeremy 1,597 $346,500 $ /31/ , Milkweed Ln San Bernardino, Ca Huntspon Andrew E 2,111 $380,500 $ /31/ , Chamomile Ct San Bernardino, Ca Imes Chad C/imes Laura I 2,994 $478,500 $ /23/ , N/A San Bernardino, Ca Inay Wellington C 1,821 $377,500 $ /28/ , N/A San Bernardino, Ca Isom Jaime/isom Maria 2,292 $396,500 $ /26/ , N/A San Bernardino, Ca Isom Nataliya/isom Dante L 2,292 $394,500 $ /25/ , N/A San Bernardino, Ca Jackson Stephanie 2,111 $414,500 $ /19/ ,

168 County of San Bernardino CFD NO , IA-5 Lytle Creek North Ownership by Name APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built Cloudberry Dr San Bernardino, Ca Jacobo Ivan G/marshall-jacobo Staci J 1,894 $410,000 $ /22/ , Bilberry Rd San Bernardino, Ca Jacoby Janae M/jacoby Brandon M 1,597 $371,500 $ /30/ , Bur Oak Rd San Bernardino, Ca Jacquez Stephanie A 1,821 $354,500 $ /21/ , Bilberry Rd San Bernardino, Ca Jamora Jennifer L 1,597 $368,000 $ /19/ , Bilberry Rd San Bernardino, Ca Javier Emmanuel/vazquez Nicole 1,821 $369,000 $ /31/ , N/A San Bernardino, Ca Johnson-wolf Brittany A/wolf Bret M 1,821 $376,500 $ /14/ , Tansy Way San Bernardino, Ca Keller Robin E 1,580 $370,000 $ /29/2016 N/A 5, N/A San Bernardino, Ca Kimball Jonathan/apodaca Cassandra 1,821 $367,500 $ /24/ , Bilberry Rd San Bernardino, Ca King Brent/king Helena 1,597 $383,500 $ /19/ , Crabapple Ct San Bernardino, Ca Lara Mario G/lara Mildred M 1,597 $362,500 $ /10/ , N/A San Bernardino, Ca Lee John E Iii/lee Camary R 1,597 $367,000 $ /19/ , Irish Moss Ln San Bernardino, Ca Lemire Michael P 4,199 $575,500 $ /23/ , Chamomile Ct San Bernardino, Ca Li Jason S/zhao Joanna Y W 3,489 $469,000 $ /12/ , N/A San Bernardino, Ca Lin Shu H 4,199 $591,000 $ /11/ , N/A San Bernardino, Ca Little Damien J/little Natalie N 2,690 $437,500 $ /31/ , Bilberry Rd San Bernardino, Ca Lomeli Brenda J 1,597 $372,000 $ /23/ , N/A San Bernardino, Ca Lorenzo Carlos 4,199 $532,000 $ /13/2017 N/A 7, Crabapple Ct San Bernardino, Ca Lorenzo Mayra E 2,292 $392,500 $ /30/ , Cloudberry Dr San Bernardino, Ca Luo Heng/shen Xiao Y D 2,111 $422,500 $ /18/ , Bilberry Rd San Bernardino, Ca Madamba Marie G 2,292 $393,500 $ /26/ , Bur Oak Rd San Bernardino, Ca Maher Jemma 2,292 $387,000 $ /8/ , N/A San Bernardino, Ca Maher Steven T/maher Shelly M 1,730 $393,500 $ /27/ , Bur Oak Rd San Bernardino, Ca Maldonado Marisella 2,291 $377,000 $ /24/ , N/A San Bernardino, Ca Maldonado Ramiro 4,199 $524,000 $ /10/2017 N/A 6, Milkweed Ln San Bernardino, Ca Manansala Gary J/manansala Darlene 2,111 $437,500 $ /25/ , Bur Oak Rd San Bernardino, Ca Mariscal-ross Giovonna A/ross Anthony G 1,821 $370,000 $ /23/ , N/A San Bernardino, Ca Marks Danial W/marks Devin T 1,597 $357,500 $ /30/ , Flowering Plum San Bernardino, Ca Martinez Fernando 2,899 $441,500 $ /26/ , Milkweed Ln San Bernardino, Ca Martinez Richard Gilbert/martinez Deborah 1,894 $380,000 $ /30/ , N/A San Bernardino, Ca Matos Roberto 2,690 $425,000 $ /28/ , Chamomile Ct San Bernardino, Ca Meister Joseph P 4,199 $539,500 $ /31/ , Crabapple Ct San Bernardino, Ca Meserve Gary M/meserve Sandra J 2,111 $451,000 $ /28/ , Rosena Ranch Rd San Bernardino, Ca Mier Manuel Castillo/pineda Katherine 1,821 $368,000 $ /24/ , N/A San Bernardino, Ca Molina Ryan R/molina Katie I 1,597 $364,500 $ /28/ , Crabapple Ct San Bernardino, Ca Monfreda Joseph 1,894 $410,000 $ /30/ , N/A San Bernardino, Ca Moore Shauna D 1,730 $401,500 $ /24/ , Bilberry Rd San Bernardino, Ca Morales Robert A/morales Crystal M 2,292 $398,500 $ /12/ , Milkweed Ln San Bernardino, Ca Morquecho Paige/zemlock Michael Jr 1,730 $397,000 $ /26/ , N/A San Bernardino, Ca Murray Cristina/murray Michael 2,292 $380,000 $ /27/ , Milkweed Ln San Bernardino, Ca Narciso Antonio Jr/narciso Jill 2,111 $418,500 $ /26/ , Chamomile Ct San Bernardino, Ca Naulls James W Iii/naulls Brandy A 3,489 $514,000 $ /26/ , N/A San Bernardino, Ca Navarro Miguel H 3,489 $479,500 $ /28/ , Chamomile Ct San Bernardino, Ca Nelson Nicole J 2,690 $447,000 $ /30/ , N/A San Bernardino, Ca Novelo Carlos E 2,899 $453,500 $ /31/ , Milkweed Ln San Bernardino, Ca Nunez Herry Tan 1,580 $375,000 $ /31/2016 N/A 5, Irish Moss Ln San Bernardino, Ca Nunez Ruben/nunez Maria I 2,690 $441,000 $ /19/ , Chamomile Ct San Bernardino, Ca Oba Angelina M 2,899 $446,500 $ /31/ , Crabapple Ct San Bernardino, Ca Olusanya Adebukola E 1,730 $391,500 $ /31/ , N/A San Bernardino, Ca Orozco Alexander/soria Lorraine 2,292 $380,500 $ /24/ , Tansy Way San Bernardino, Ca Overson Andrew M/overson Ashley B 1,580 $380,500 $ /13/ , Irish Moss Ln San Bernardino, Ca Paras Marylou B 3,489 $482,500 $ /31/ ,

169 County of San Bernardino CFD NO , IA-5 Lytle Creek North Ownership by Name APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built Crabapple Ct San Bernardino, Ca Patridge Joseph T Ii/patridge Petra 1,597 $381,000 $ /29/ , N/A San Bernardino, Ca Perea Jonathan E/perea Erica N 3,489 $468,500 $ /24/ , N/A San Bernardino, Ca Perez Adrian M/bride Jenny L 1,597 $362,500 $ /19/ , N/A San Bernardino, Ca Perez Emanuel 2,292 $384,000 $ /28/ , Irish Moss Ln San Bernardino, Ca Perez Raul J/aviles Roberta 4,199 $543,000 $ /1/ , Irish Moss Ln San Bernardino, Ca Peterson Derrick 3,489 $480,000 $ /15/ , Crabapple Ct San Bernardino, Ca Phillips James M 1,580 $397,000 $ /28/ , Milkweed Ln San Bernardino, Ca Pompa Richard James 1,580 $388,000 $ /28/ , N/A San Bernardino, Ca Ponto Victor 3,489 $467,000 $ /20/2017 N/A 8, Tansy Way San Bernardino, Ca Potter James B/potter Christina E Mason 2,111 $433,000 $ /23/ , Irish Moss Ln San Bernardino, Ca Puga Jason R/puga Charles R & Lydia 2,890 $444,500 $ /13/ , Bilberry Rd San Bernardino, Ca Rayburn Mathew 1,597 $367,000 $ /26/ , N/A San Bernardino, Ca Reguero Mario P 2,690 $432,000 $ /10/ , Milkweed Ln San Bernardino, Ca Reuland Leslie M 1,894 $395,500 $ /30/ , Bur Oak Rd San Bernardino, Ca Reyes Albert/reyes Amanda 2,292 $368,000 $ /1/ , Milkweed Ln San Bernardino, Ca Reyes Jesus/silva Irma 1,894 $389,000 $ /25/ , N/A San Bernardino, Ca Ricotta Jason 1,821 $363,500 $ /9/ , Milkweed Ln San Bernardino, Ca Roach Wade/harp Betty Lou 1,894 $391,000 $ /31/ , Milkweed Ln San Bernardino, Ca Rockn Tarick/rockn Stella Rose 2,111 $423,000 $ /21/ , Bur Oak Rd San Bernardino, Ca Rodriguez Rafael Jr 2,292 $367,500 $ /16/ , Rosena Ranch Rd San Bernardino, Ca Romero Edgar Ramirez/hernandez Nora Esmeralda 1,821 $375,500 $ /5/ , Milkweed Ln San Bernardino, Ca Romero Peter Norman/romero Susan Ann 1,730 $390,500 $ /14/ , Crabapple Ct San Bernardino, Ca Rossi Kathleen M/borrmann Oliver 1,597 $378,000 $ /13/ , Crabapple Ct San Bernardino, Ca Ruvalcaba Leonel/ruvalcaba Vanessa M 1,597 $357,500 $ /20/ , Rosena Ranch Rd San Bernardino, Ca Salcido Christian Riboto/de Santis Marcella Francesca 1,821 $377,000 $ /27/ , Bilberry Rd San Bernardino, Ca Salcido Juan/salcido Jaclyn 2,292 $390,500 $ /26/ , Milkweed Ln San Bernardino, Ca Saldana Daniel Perez/saldana Yolanda Parrilla 1,730 $388,000 $ /22/2016 N/A 6, N/A San Bernardino, Ca Sanchez Gerard Jr/dudka Rachel 1,730 $380,000 $ /20/2016 N/A 5, Rosena Ranch Rd San Bernardino, Ca Sanchez Joseph A/sanchez Angela 2,292 $381,000 $ /25/ , Rosena Ranch Rd San Bernardino, Ca Santacruz Raymond/santacruz Nita 1,821 $369,000 $ /28/ , Milkweed Ln San Bernardino, Ca Sardina Deborah 1,894 $388,500 $ /25/ , Cloudberry Dr San Bernardino, Ca Sauers George G/sauers Irene 2,111 $430,500 $ /15/ , Cloudberry Dr San Bernardino, Ca Sawyer Alan/sawyer Tina G 2,111 $436,500 $ /17/ , Chamomile Ct San Bernardino, Ca Sayegh Rajaie 2,899 $440,500 $ /22/ , N/A San Bernardino, Ca Schlottman Jacob A 2,292 $392,000 $ /11/ , Bilberry Rd San Bernardino, Ca Sciarrotta Dustin R/sciarrotta Jessie M 2,292 $394,500 $ /31/ , N/A San Bernardino, Ca Sester Charles W Jr 1,580 $374,000 $ /28/ , N/A San Bernardino, Ca Shane Kathleen K 1,894 $399,000 $ /18/ , N/A San Bernardino, Ca Shelby Olive K O 2,292 $392,500 $ /13/ , N/A San Bernardino, Ca Shupe Peter R 1,597 $357,500 $ /14/ , Bur Oak Rd San Bernardino, Ca Smith Dareyale S/fisher Jasmine J N 1,821 $367,000 $ /26/ , N/A San Bernardino, Ca Solis Victor M Jr 1,821 $364,500 $ /28/ , Irish Moss Ln San Bernardino, Ca St Pierre Daniel/st Pierre Lauren 2,690 $444,500 $ /18/ , N/A San Bernardino, Ca Steger Anthony 2,111 $408,000 $ /20/2017 N/A 5, Bilberry Rd San Bernardino, Ca Stringer Tanisha N/stringer Thomas S 2,292 $405,000 $ /28/ , Milkweed Ln San Bernardino, Ca Tarin Leah R/tarin Roberto C 1,730 $385,000 $ /30/ , N/A San Bernardino, Ca Taylor Curtis L 1,821 $367,500 $ /27/ , Milkweed Ln San Bernardino, Ca Tolley Kenneth Lee 1,730 $381,500 $ /22/ , Crabapple Ct San Bernardino, Ca Trillana Myrna Y 1,894 $421,500 $ /7/ , N/A San Bernardino, Ca Trimmer Kevin M/trimmer Sophia R 2,690 $432,000 $ /15/ , Milkweed Ln San Bernardino, Ca Tucker Fred Jr 2,111 $409,500 $ /22/ ,

170 County of San Bernardino CFD NO , IA-5 Lytle Creek North Ownership by Name APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built N/A San Bernardino, Ca Tuner Mary 2,111 $413,500 $ /27/2017 N/A 5, Bur Oak Rd San Bernardino, Ca Tung Hui Ping 2,292 $378,000 $ /29/ , N/A San Bernardino, Ca Ubovich Bradley S 1,894 $413,000 $ /31/ , N/A San Bernardino, Ca Van Scoit Hugo 1,580 $373,000 $ /28/2017 N/A 6, Bilberry Rd San Bernardino, Ca Velarde Gari D/velarde Justin I 1,821 $381,000 $ /22/ , Tansy Way San Bernardino, Ca Wagner John Christian/wagner Sherrie Lynn 2,111 $421,000 $ /21/ , Chamomile Ct San Bernardino, Ca Walker Leland C 4,199 $555,000 $ /28/ , Milkweed Ln San Bernardino, Ca Webster Joseph/webster Lucy 2,111 $404,000 $ /29/ , Chamomile Ct San Bernardino, Ca White Cornell J/white Ida L 2,690 $438,000 $ /13/ , N/A San Bernardino, Ca Wilson Kim D/wilson Victor L 1,821 $362,500 $ /26/ , N/A San Bernardino, Ca Wolfe Samuel 1,894 $394,000 $ /25/2017 N/A 5, N/A San Bernardino, Ca Woodard Robert 1,821 $382,000 $ /31/ , Irish Moss Ln San Bernardino, Ca Yang Bryan K 3,489 $497,500 $ /13/ , Bur Oak Rd San Bernardino, Ca Zebarth Ronald G Jr/auldridge Lauren R 1,821 $368,000 $ /11/ , ,186 $406,151 $ ,694 APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built N/A San Bernardino, Ca Lennar Homes Of California Inc 3,152 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 3,152 N/A 7, N/A San Bernardino, Ca Lennar Homes Of California Inc 3,489 N/A 8, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,690 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 3,489 N/A 7, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,899 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,690 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,899 N/A 12, N/A San Bernardino, Ca Lennar Homes Of California Inc 4,199 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 3,489 N/A 6, Irish Moss Ln San Bernardino, Ca Lennar Homes Of California Inc 3, , N/A San Bernardino, Ca Lennar Homes Of California Inc 3,152 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 4,199 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 3,489 N/A 6, Irish Moss Ln San Bernardino, Ca Lennar Homes Of California Inc 2,899 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,994 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 3,489 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 4,199 N/A 6, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,690 N/A 6, Catury Ln San Bernardino, Ca Lennar Homes Of California Inc 1,580 N/A 5, Catury Ln San Bernardino, Ca Lennar Homes Of California Inc 1,730 N/A 5, Catury Ln San Bernardino, Ca Lennar Homes Of California Inc 1,580 N/A 5, Catury Ln San Bernardino, Ca Lennar Homes Of California Inc 1,580 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,111 N/A 12, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,730 N/A 4, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,894 N/A 4, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,111 N/A 4, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,894 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,730 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,111 N/A 12, Crabapple Ct San Bernardino, Ca Lennar Homes Of California Inc 1,894 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,730 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,111 N/A 5,

171 County of San Bernardino CFD NO , IA-5 Lytle Creek North Ownership by Name APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built N/A San Bernardino, Ca Lennar Homes Of California Inc 1,730 N/A 5, Crabapple Ct San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,297 N/A 8, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 8, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,292 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 8, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,292 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 2,292 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 4, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 4, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,821 N/A 5, N/A San Bernardino, Ca Lennar Homes Of California Inc 1,597 N/A 7,

172 HRA SUMMARY OF SOLD DWELLING UNITS CONSULTING REAL ESTATE APPRAISERS

173 County of San Bernardino CFD NO , IA-5 Lytle Creek North Sales by Year APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built Crabapple Ct San Bernardino, Ca Cervantes Joe/cervantes Darlene S 1,894 $413,000 $ /1/ , Irish Moss Ln San Bernardino, Ca Perez Raul J/aviles Roberta 4,199 $543,000 $ /1/ , Bilberry Rd San Bernardino, Ca Braun Micah R/abriam Ched C 1,821 $391,000 $ /31/ , Crabapple Ct San Bernardino, Ca Clark Julian C/clark Linda L 2,111 $436,000 $ /31/ , Crabapple Ct San Bernardino, Ca Olusanya Adebukola E 1,730 $391,500 $ /31/ , Crabapple Ct San Bernardino, Ca Arostegui Mabel 1,894 $422,500 $ /28/ , Crabapple Ct San Bernardino, Ca Phillips James M 1,580 $397,000 $ /28/ , Crabapple Ct San Bernardino, Ca Avina Jose L/avina Sally 1,580 $392,500 $ /24/ , Crabapple Ct San Bernardino, Ca Ruvalcaba Leonel/ruvalcaba Vanessa M 1,597 $357,500 $ /20/ , Irish Moss Ln San Bernardino, Ca St Pierre Daniel/st Pierre Lauren 2,690 $444,500 $ /18/ , Irish Moss Ln San Bernardino, Ca Griffith Brandon & Sonia/villarreal Delia M & Daniel A 4,199 $545,500 $ /17/ , Crabapple Ct San Bernardino, Ca Rossi Kathleen M/borrmann Oliver 1,597 $378,000 $ /13/ , Irish Moss Ln San Bernardino, Ca Yang Bryan K 3,489 $497,500 $ /13/ , Crabapple Ct San Bernardino, Ca Aba Mario/aba Kimberly 1,821 $383,500 $ /12/ , Crabapple Ct San Bernardino, Ca Bowen Lloyd A/bowen Kira R 2,292 $388,500 $ /11/ , Crabapple Ct San Bernardino, Ca Lara Mario G/lara Mildred M 1,597 $362,500 $ /10/ , Crabapple Ct San Bernardino, Ca Guerrero Yadira/guerrero Rudy C 1,821 $382,000 $ /7/ , Crabapple Ct San Bernardino, Ca Trillana Myrna Y 1,894 $421,500 $ /7/ , Crabapple Ct San Bernardino, Ca Fitzgerald Brian/fitzgerald Brianna 1,730 $395,500 $ /30/ , Crabapple Ct San Bernardino, Ca Hansen Ryan S/hansen Anna M 1,821 $382,000 $ /30/ , Bilberry Rd San Bernardino, Ca Jacoby Janae M/jacoby Brandon M 1,597 $371,500 $ /30/ , Crabapple Ct San Bernardino, Ca Lorenzo Mayra E 2,292 $392,500 $ /30/ , Crabapple Ct San Bernardino, Ca Monfreda Joseph 1,894 $410,000 $ /30/ , Crabapple Ct San Bernardino, Ca Alam Mahboob/habib Sima 1,821 $394,500 $ /29/ , Crabapple Ct San Bernardino, Ca Amezcua Mario A 2,111 $432,000 $ /29/ , Crabapple Ct San Bernardino, Ca Patridge Joseph T Ii/patridge Petra 1,597 $381,000 $ /29/ , Crabapple Ct San Bernardino, Ca Carrillo Vanessa 1,894 $410,000 $ /28/ , Crabapple Ct San Bernardino, Ca Meserve Gary M/meserve Sandra J 2,111 $451,000 $ /28/ , Bilberry Rd San Bernardino, Ca Stringer Tanisha N/stringer Thomas S 2,292 $405,000 $ /28/ , Bilberry Rd San Bernardino, Ca Brown Doris/watts Brenda J 2,292 $397,500 $ /26/ , Cedrela Way San Bernardino, Ca Belicki David C/elmlinger Tryphena D N 1,821 $386,000 $ /23/ , Irish Moss Ln San Bernardino, Ca Lemire Michael P 4,199 $575,500 $ /23/ , Bilberry Rd San Bernardino, Ca Lomeli Brenda J 1,597 $372,000 $ /23/ , Bilberry Rd San Bernardino, Ca Velarde Gari D/velarde Justin I 1,821 $381,000 $ /22/ , Bilberry Rd San Bernardino, Ca King Brent/king Helena 1,597 $383,500 $ /19/ , Irish Moss Ln San Bernardino, Ca Nunez Ruben/nunez Maria I 2,690 $441,000 $ /19/ , Irish Moss Ln San Bernardino, Ca Peterson Derrick 3,489 $480,000 $ /15/ , Bilberry Rd San Bernardino, Ca Catingub Jessica & Evan/speaks Catherine A 1,821 $382,000 $ /13/ , Irish Moss Ln San Bernardino, Ca Puga Jason R/puga Charles R & Lydia 2,890 $444,500 $ /13/ , Bilberry Rd San Bernardino, Ca Morales Robert A/morales Crystal M 2,292 $398,500 $ /12/ , Irish Moss Ln San Bernardino, Ca Greenwood David B 3,152 $499,500 $ /9/ , Irish Moss Ln San Bernardino, Ca Hill Charlie L Jr/hill Tamara D 2,994 $485,000 $ /1/ , Bilberry Rd San Bernardino, Ca Alexander Devonne 1,597 $380,000 $ /31/ , Bilberry Rd San Bernardino, Ca Cuellar Rene R/cuellar Stephanie M 1,821 $377,500 $ /31/ , Cloudberry Dr San Bernardino, Ca Eng May L 1,730 $395,500 $ /31/ , Bilberry Rd San Bernardino, Ca Javier Emmanuel/vazquez Nicole 1,821 $369,000 $ /31/ , Chamomile Ct San Bernardino, Ca Meister Joseph P 4,199 $539,500 $ /31/ , Chamomile Ct San Bernardino, Ca Oba Angelina M 2,899 $446,500 $ /31/ , Irish Moss Ln San Bernardino, Ca Paras Marylou B 3,489 $482,500 $ /31/ , Bilberry Rd San Bernardino, Ca Sciarrotta Dustin R/sciarrotta Jessie M 2,292 $394,500 $ /31/ , Bilberry Rd San Bernardino, Ca Darlington Ronald T Jr/darlington Valerie A 2,292 $402,000 $ /30/ ,

174 County of San Bernardino CFD NO , IA-5 Lytle Creek North Sales by Year APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built Cloudberry Dr San Bernardino, Ca Frieson Russell E/dorado Elizabeth M 1,894 $440,000 $ /30/ , Chamomile Ct San Bernardino, Ca Nelson Nicole J 2,690 $447,000 $ /30/ , Bilberry Rd San Bernardino, Ca Madamba Marie G 2,292 $393,500 $ /26/ , Chamomile Ct San Bernardino, Ca Naulls James W Iii/naulls Brandy A 3,489 $514,000 $ /26/ , Bilberry Rd San Bernardino, Ca Rayburn Mathew 1,597 $367,000 $ /26/ , Bilberry Rd San Bernardino, Ca Salcido Juan/salcido Jaclyn 2,292 $390,500 $ /26/ , Bur Oak Rd San Bernardino, Ca Smith Dareyale S/fisher Jasmine J N 1,821 $367,000 $ /26/ , Chamomile Ct San Bernardino, Ca Burnett Candyce 3,489 $486,000 $ /25/ , Cloudberry Dr San Bernardino, Ca Encina David P/encina Iris M 1,894 $411,500 $ /25/ , Chamomile Ct San Bernardino, Ca Craig Crystal/craig Larry Jr 4,199 $540,500 $ /24/ , Bur Oak Rd San Bernardino, Ca Maldonado Marisella 2,291 $377,000 $ /24/ , Bur Oak Rd San Bernardino, Ca Becerra Perla M/becerra Nestor Jr 1,821 $375,500 $ /23/ , Chamomile Ct San Bernardino, Ca Imes Chad C/imes Laura I 2,994 $478,500 $ /23/ , Bur Oak Rd San Bernardino, Ca Mariscal-ross Giovonna A/ross Anthony G 1,821 $370,000 $ /23/ , Chamomile Ct San Bernardino, Ca Sayegh Rajaie 2,899 $440,500 $ /22/ , Bilberry Rd San Bernardino, Ca Jamora Jennifer L 1,597 $368,000 $ /19/ , Cloudberry Dr San Bernardino, Ca Luo Heng/shen Xiao Y D 2,111 $422,500 $ /18/ , Cloudberry Dr San Bernardino, Ca Cantwell Hope R 2,111 $436,500 $ /16/ , Cloudberry Dr San Bernardino, Ca Hernandez Juan/hernandez Silda M 1,580 $378,000 $ /15/ , Cloudberry Dr San Bernardino, Ca Sauers George G/sauers Irene 2,111 $430,500 $ /15/ , Cloudberry Dr San Bernardino, Ca Ali Jennifer C 1,894 $404,500 $ /10/ , N/A San Bernardino, Ca Balog Michael/balog Cynthia 2,292 $387,000 $ /28/ , N/A San Bernardino, Ca Briones Eric 1,821 $387,000 $ /28/ , Cloudberry Dr San Bernardino, Ca Flores Albert C/flores Victoria D 1,894 $405,500 $ /28/ , N/A San Bernardino, Ca Isom Jaime/isom Maria 2,292 $396,500 $ /26/ , Flowering Plum San Bernardino, Ca Martinez Fernando 2,899 $441,500 $ /26/ , N/A San Bernardino, Ca Isom Nataliya/isom Dante L 2,292 $394,500 $ /25/ , N/A San Bernardino, Ca Costantino Joseph V 1,821 $382,500 $ /21/ , N/A San Bernardino, Ca Steger Anthony 2,111 $418,000 $ /20/ , N/A San Bernardino, Ca Perez Adrian M/bride Jenny L 1,597 $362,500 $ /19/ , N/A San Bernardino, Ca Brown Maria E 1,821 $380,000 $ /18/ , Cloudberry Dr San Bernardino, Ca Sawyer Alan/sawyer Tina G 2,111 $436,500 $ /17/ , Chamomile Ct San Bernardino, Ca Buranahiran Setthaporn/camarda Nicole 3,152 $476,000 $ /14/ , N/A San Bernardino, Ca Johnson-wolf Brittany A/wolf Bret M 1,821 $376,500 $ /14/ , N/A San Bernardino, Ca Shupe Peter R 1,597 $357,500 $ /14/ , Chamomile Ct San Bernardino, Ca Ancurio Albert/stebbins Veronica 2,690 $432,000 $ /13/ , N/A San Bernardino, Ca Shelby Olive K O 2,292 $392,500 $ /13/ , Chamomile Ct San Bernardino, Ca White Cornell J/white Ida L 2,690 $438,000 $ /13/ , Chamomile Ct San Bernardino, Ca Li Jason S/zhao Joanna Y W 3,489 $469,000 $ /12/ , N/A San Bernardino, Ca Lin Shu H 4,199 $591,000 $ /11/ , N/A San Bernardino, Ca Schlottman Jacob A 2,292 $392,000 $ /11/ , N/A San Bernardino, Ca Little Damien J/little Natalie N 2,690 $437,500 $ /31/ , N/A San Bernardino, Ca Novelo Carlos E 2,899 $453,500 $ /31/ , N/A San Bernardino, Ca Ubovich Bradley S 1,894 $413,000 $ /31/ , N/A San Bernardino, Ca Cetina Juan A Jr/cetina Ana M 1,821 $382,000 $ /30/ , N/A San Bernardino, Ca Hackett Andrew R/hackett Sandra 2,111 $415,500 $ /30/ , Cloudberry Dr San Bernardino, Ca Espinoza Carmen/espinoza Victoria 1,894 $413,000 $ /29/ , N/A San Bernardino, Ca Horn Tiffany M 1,730 $391,500 $ /27/ , Cloudberry Dr San Bernardino, Ca Aguilar Michael/aguilar Susan 1,894 $398,000 $ /24/ , N/A San Bernardino, Ca Dixon Emily/dixon Craig 1,894 $388,500 $ /24/ , N/A San Bernardino, Ca Perea Jonathan E/perea Erica N 3,489 $468,500 $ /24/ ,

175 County of San Bernardino CFD NO , IA-5 Lytle Creek North Sales by Year APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built N/A San Bernardino, Ca Goulding Julie A 2,111 $445,000 $ /22/ , N/A San Bernardino, Ca Reguero Mario P 2,690 $432,000 $ /10/ , N/A San Bernardino, Ca Antuna Michael 1,580 $364,500 $ /28/ , N/A San Bernardino, Ca Casey Wavel 3,152 $473,000 $ /28/ , N/A San Bernardino, Ca Cook Mia S/afarid Michael A 1,597 $351,500 $ /28/ , N/A San Bernardino, Ca Cooke Christopher R/cooke Anita L 1,597 $364,000 $ /28/ , N/A San Bernardino, Ca Crow Marcus 1,580 $363,000 $ /28/ , N/A San Bernardino, Ca Dunnington Wendy R 1,597 $371,500 $ /28/ , N/A San Bernardino, Ca Fajardo Edel F/fajardo Marife A 2,292 $382,000 $ /28/ , Cloudberry Dr San Bernardino, Ca Glover Raymond A/glover Michele A 1,894 $400,000 $ /28/ , N/A San Bernardino, Ca Inay Wellington C 1,821 $377,500 $ /28/ , N/A San Bernardino, Ca Matos Roberto 2,690 $425,000 $ /28/ , N/A San Bernardino, Ca Molina Ryan R/molina Katie I 1,597 $364,500 $ /28/ , N/A San Bernardino, Ca Navarro Miguel H 3,489 $479,500 $ /28/ , N/A San Bernardino, Ca Perez Emanuel 2,292 $384,000 $ /28/ , N/A San Bernardino, Ca Sester Charles W Jr 1,580 $374,000 $ /28/ , N/A San Bernardino, Ca Solis Victor M Jr 1,821 $364,500 $ /28/ , N/A San Bernardino, Ca Van Scoit Hugo 1,580 $381,500 $ /28/ , Chamomile Ct San Bernardino, Ca Walker Leland C 4,199 $555,000 $ /28/ , N/A San Bernardino, Ca Cochee Melonese 1,730 $389,500 $ /27/ , N/A San Bernardino, Ca Ducharme Jason T/ducharme Denise G 2,292 $376,500 $ /27/ , N/A San Bernardino, Ca Maher Steven T/maher Shelly M 1,730 $393,500 $ /27/ , N/A San Bernardino, Ca Tuner Mary 2,111 $430,500 $ /27/ , N/A San Bernardino, Ca Farrer Kari 4,199 $528,500 $ /24/ , N/A San Bernardino, Ca Giron Taide D/giron Victor H 1,821 $370,000 $ /24/ , N/A San Bernardino, Ca Kimball Jonathan/apodaca Cassandra 1,821 $367,500 $ /24/ , N/A San Bernardino, Ca Moore Shauna D 1,730 $401,500 $ /24/ , N/A San Bernardino, Ca Orozco Alexander/soria Lorraine 2,292 $380,500 $ /24/ , N/A San Bernardino, Ca Cracraft Christian/cracraft Rebekah 2,690 $442,000 $ /23/ , Cloudberry Dr San Bernardino, Ca Duong Phi M 2,111 $431,500 $ /22/ , Chamomile Ct San Bernardino, Ca Hundal Sukhbir S 2,899 $436,000 $ /22/ , Cloudberry Dr San Bernardino, Ca Jacobo Ivan G/marshall-jacobo Staci J 1,894 $410,000 $ /22/ , N/A San Bernardino, Ca Trimmer Kevin M/trimmer Sophia R 2,690 $432,000 $ /15/ , N/A San Bernardino, Ca Maldonado Ramiro 4,199 $533,000 $ /10/ , N/A San Bernardino, Ca Barraza Loraine 2,111 $417,500 $ /3/ , N/A San Bernardino, Ca Coria Victor M 1,821 $369,000 $ /31/ , N/A San Bernardino, Ca Huerta Jose/kelly-huerta Lashelle 2,292 $368,500 $ /31/ , Rosena Ranch Rd San Bernardino, Ca Hunt Jeremy 1,597 $346,500 $ /31/ , N/A San Bernardino, Ca Woodard Robert 1,821 $382,000 $ /31/ , N/A San Bernardino, Ca Marks Danial W/marks Devin T 1,597 $357,500 $ /30/ , N/A San Bernardino, Ca Murray Cristina/murray Michael 2,292 $380,000 $ /27/ , N/A San Bernardino, Ca Taylor Curtis L 1,821 $367,500 $ /27/ , N/A San Bernardino, Ca Carrillo Gilberto/carrillo Wendy 2,292 $381,500 $ /26/ , N/A San Bernardino, Ca Wilson Kim D/wilson Victor L 1,821 $362,500 $ /26/ , N/A San Bernardino, Ca Wolfe Samuel 1,894 $393,000 $ /25/ , N/A San Bernardino, Ca Ponto Victor 3,489 $467,000 $ /20/ , N/A San Bernardino, Ca Bowman Alexis 1,597 $372,500 $ /19/ , N/A San Bernardino, Ca Jackson Stephanie 2,111 $414,500 $ /19/ , N/A San Bernardino, Ca Lee John E Iii/lee Camary R 1,597 $367,000 $ /19/ , N/A San Bernardino, Ca Shane Kathleen K 1,894 $399,000 $ /18/ , N/A San Bernardino, Ca Cruz Judith 3,152 $470,000 $ /18/ ,

176 County of San Bernardino CFD NO , IA-5 Lytle Creek North Sales by Year APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built N/A San Bernardino, Ca Lorenzo Carlos 4,199 $537,000 $ /13/ , Tansy Way San Bernardino, Ca Overson Andrew M/overson Ashley B 1,580 $380,500 $ /13/ , Flowering Plum San Bernardino, Ca Armstead Ondra/johnson Laneeshia 3,489 $472,000 $ /12/ , N/A San Bernardino, Ca Ricotta Jason 1,821 $363,500 $ /9/ , Average 2,279 $414,293 $ , Tansy Way San Bernardino, Ca Keller Robin E 1,580 $383,500 $ /29/ , N/A San Bernardino, Ca Sanchez Gerard Jr/dudka Rachel 1,730 $380,000 $ /20/ , Milkweed Ln San Bernardino, Ca Hernandez Jesse A & Claudine/castillo Alejandro & Heather A 1,580 $382,500 $ /16/ , Milkweed Ln San Bernardino, Ca Tarin Leah R/tarin Roberto C 1,730 $385,000 $ /30/ , Tansy Way San Bernardino, Ca Potter James B/potter Christina E Mason 2,111 $433,000 $ /23/ , Milkweed Ln San Bernardino, Ca Saldana Daniel Perez/saldana Yolanda Parrilla 1,730 $409,500 $ /22/ , Milkweed Ln San Bernardino, Ca Tucker Fred Jr 2,111 $404,500 $ /29/ , Tansy Way San Bernardino, Ca Wagner John Christian/wagner Sherrie Lynn 2,111 $421,000 $ /21/ , Bur Oak Rd San Bernardino, Ca Cantu Kyle Patrick/cantu Andrea Christine 2,292 $369,500 $ /18/ , Bur Oak Rd San Bernardino, Ca Rodriguez Rafael Jr 2,292 $367,500 $ /16/ , Bur Oak Rd San Bernardino, Ca Maher Jemma 2,292 $387,000 $ /8/ , Bur Oak Rd San Bernardino, Ca Devine Lydia Jean 2,292 $375,500 $ /7/ , Bur Oak Rd San Bernardino, Ca Aspa Ivanna 2,292 $360,000 $ /2/ , Bur Oak Rd San Bernardino, Ca Reyes Albert/reyes Amanda 2,292 $368,000 $ /1/ , Rosena Ranch Rd San Bernardino, Ca Franklin Mauchese Edward/allen-franklin Tiffany Monique 2,292 $386,000 $ /31/ , Milkweed Ln San Bernardino, Ca Henley Nannette S/henley Gregory A 2,111 $423,500 $ /31/ , Milkweed Ln San Bernardino, Ca Huntspon Andrew E 2,111 $380,500 $ /31/ , Milkweed Ln San Bernardino, Ca Nunez Herry Tan 1,580 $380,500 $ /31/ , Milkweed Ln San Bernardino, Ca Pompa Richard James 1,580 $388,000 $ /28/ , Rosena Ranch Rd San Bernardino, Ca Santacruz Raymond/santacruz Nita 1,821 $369,000 $ /28/ , Rosena Ranch Rd San Bernardino, Ca Cortez Wendy Michelle 1,821 $375,000 $ /26/ , Milkweed Ln San Bernardino, Ca Morquecho Paige/zemlock Michael Jr 1,730 $397,000 $ /26/ , Milkweed Ln San Bernardino, Ca Barajas Carlos F/barajas Diana S 1,894 $391,000 $ /25/ , Milkweed Ln San Bernardino, Ca De La Piedra Andrea A/thomason Steven M 2,111 $391,000 $ /25/ , Milkweed Ln San Bernardino, Ca Manansala Gary J/manansala Darlene 2,111 $437,500 $ /25/ , Milkweed Ln San Bernardino, Ca Reyes Jesus/silva Irma 1,894 $389,000 $ /25/ , Rosena Ranch Rd San Bernardino, Ca Sanchez Joseph A/sanchez Angela 2,292 $381,000 $ /25/ , Milkweed Ln San Bernardino, Ca Armendariz Peter/harris Carla 2,111 $424,000 $ /24/ , Rosena Ranch Rd San Bernardino, Ca Mier Manuel Castillo/pineda Katherine 1,821 $368,000 $ /24/ , Milkweed Ln San Bernardino, Ca Handy Dean S/handy Keishia L 2,111 $415,000 $ /30/ , Milkweed Ln San Bernardino, Ca Reuland Leslie M 1,894 $395,500 $ /30/ , Bur Oak Rd San Bernardino, Ca Tung Hui Ping 2,292 $378,000 $ /29/ , Milkweed Ln San Bernardino, Ca Bailey Jeanne L 1,894 $390,500 $ /16/ , Milkweed Ln San Bernardino, Ca Figueroa Alek P/figueroa Felicia M 1,730 $382,000 $ /14/ , Milkweed Ln San Bernardino, Ca Romero Peter Norman/romero Susan Ann 1,730 $390,500 $ /14/ , Milkweed Ln San Bernardino, Ca Carter Lonnie Carl Iii/carter Tanoah Rekesha 2,111 $406,500 $ /13/ , Milkweed Ln San Bernardino, Ca Duarte Lorena A/ramirez Sergio D 1,894 $389,500 $ /12/ , Milkweed Ln San Bernardino, Ca Hawkins Rosalind 2,111 $415,500 $ /31/ , Milkweed Ln San Bernardino, Ca Roach Wade/harp Betty Lou 1,894 $391,000 $ /31/ , Milkweed Ln San Bernardino, Ca Duarte Salvador Jr 1,730 $379,000 $ /30/ , Milkweed Ln San Bernardino, Ca Martinez Richard Gilbert/martinez Deborah 1,894 $380,000 $ /30/ , Milkweed Ln San Bernardino, Ca Sardina Deborah 1,894 $388,500 $ /25/ , Milkweed Ln San Bernardino, Ca Bonifaz Elena 1,730 $397,000 $ /24/ ,

177 County of San Bernardino CFD NO , IA-5 Lytle Creek North Sales by Year APN Tract Lot Address City/State/ZIP Owner Names Bldg. Area Sale Price S/SF Recording Date Doc. No. Lot SF Yr. Built Bur Oak Rd San Bernardino, Ca Zebarth Ronald G Jr/auldridge Lauren R 1,821 $368,000 $ /11/ , Rosena Ranch Rd San Bernardino, Ca Romero Edgar Ramirez/hernandez Nora Esmeralda 1,821 $375,500 $ /5/ , Milkweed Ln San Bernardino, Ca Anton Robert B Sr/anton Angela M 1,894 $379,500 $ /29/ , Milkweed Ln San Bernardino, Ca Campos George Jr/crockett Angela 1,730 $385,500 $ /29/ , Milkweed Ln San Bernardino, Ca Escalante Ivonne E 1,894 $383,500 $ /29/ , Milkweed Ln San Bernardino, Ca Webster Joseph/webster Lucy 2,111 $404,000 $ /29/ , Milkweed Ln San Bernardino, Ca Narciso Antonio Jr/narciso Jill 2,111 $418,500 $ /26/ , Milkweed Ln San Bernardino, Ca Tolley Kenneth Lee 1,730 $381,500 $ /22/ , Milkweed Ln San Bernardino, Ca Rockn Tarick/rockn Stella Rose 2,111 $423,000 $ /21/ , Rosena Ranch Rd San Bernardino, Ca Frazer Stephen/frazer Damesha 2,292 $382,000 $ /14/ , Bur Oak Rd San Bernardino, Ca Dees Lydia Michelle 2,292 $379,500 $ /11/ , Rosena Ranch Rd San Bernardino, Ca Bell John R/bell Maria Teresa 2,292 $379,500 $ /30/ , Bur Oak Rd San Bernardino, Ca Dominguez Tyler B 1,597 $350,500 $ /22/ , Bur Oak Rd San Bernardino, Ca Jacquez Stephanie A 1,821 $354,500 $ /21/ , Bur Oak Rd San Bernardino, Ca Caires Joseph Robert 1,597 $345,500 $ /3/ , Rosena Ranch Rd San Bernardino, Ca Colbert Avis D 1,597 $353,500 $ /31/ , Rosena Ranch Rd San Bernardino, Ca Higham Jonathan/freire Victoria 1,597 $352,500 $ /31/ , Rosena Ranch Rd San Bernardino, Ca Salcido Christian Riboto/de Santis Marcella Francesca 1,821 $377,000 $ /27/ , Average 1,947 $386,877 $ ,

178 APPRAISAL REPORT COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO IMPROVEMENT AREA NO.5 LYTLE CREEK NORTH Prepared for: County of San Bernardino Special Districts Department 157 West 5th Street. Second Floor San Bernardino, CA James B. Harris, MAl Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA October 2017

179 Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, California FAX October 20, 2017 Mr. Jeffrey Rigney Director COUNTY OF SAN BERNARDINO Special Districts Department 157 West 5th Street, Sceond Floor San Bernardino, CA Re : Community Facilities District No Improvement Area No.5 Dear Mr. Rigney: In response to your authorization, I have prepared an appraisal report, in summary format, that must be read in conjunction with the prior self-contained appraisal report which had an August 1, 2017 date of value. This report has an October 1, 2017 date of value, and will provide sufficient information to state that if the property were to be appraised as of that date, the value would Not Be Less Than that reported as of August 1, This appraisal report, in summary format, and the original appraisal report address all of the property within the boundaries of Community Facilities District No , Improvement Area NO.5 (CFD , IA-5). The purpose of the original appraisal was to estimate the "As Is" Minimum Market Value of the 218 completed and sold production dwellings and 52 lots/dwellings, owned by the developer/builder, Lennar Homes of California, Inc. In total, there are 270 parcels in CFD No , IA-5. The original appraisal report included a Mass Appraisal analysis for the 218 completed and sold dwelling units, and 52 lots/dwellings, owned by the developer/builder, Lennar Homes of California, Inc., which resulted in a Minimum Market Value for the 270 development parcels, subject to the special tax of CFD No , IA-5. Please review the definitions of Minimum Market Value and Mass Appraisal in the definitions section of this report. In the case of this specific assignment, this appraisal report is intended to be used in conjunction with the original appraisal report. In lieu of revaluing the property with a full appraisal report, this appraisal report is intended to provide a Not Less Than Value as of October 1, I have advised the client and the finance team by that a summary appraisal report will be prepared to provide a Not Less Than Value. Our client, the County of San Bernardino, its financial advisor and underwriter have agreed that a brief appraisal report is sufficient. This summary appraisal report will briefly address significant conditions that have occurred since the original date of value, August 1, This report is intended to include sufficient information to conclude that if the property were to be revalued as of

180 Mr. Jeffrey Rigney October 20, 2017 Page 2 October 1, 2017, the value would Not Be Less Than the value estimate as of August 1, Client and Intended Users of the Report This report was prepared for my client, the County of San Bernardino. The intended users of the report include the County, its counsel, underwriter, financial advisor, consultants and potential bond purchasers. Purpose of the Report The purpose of this appraisal report is to re-analyze the market, subject property and site construction within the subject CFD that has occurred since the original report dated August 22, 2017, with an August 1, 2017 date of value. This report is intended to determine if the property were to be re-appraised as of October 1, 2017, the value estimate for CFD No , IA-5 would have a Not Less Than Value of the Minimum Market Value estimate included in the original appraisal report as of August 1,2017. The opinions set forth are subject to the assumptions and limiting conditions set forth in the original appraisal report and the specific appraisal guidelines as set forth by the District. Function of the Report and Intended Use It is my understanding that this appraisal report is to be used for Community Facilities District bond financing purposes only. The subject property is described more particularly within the original report. The bonds are issued pursuant to the Mello-Roos Community Facilities District Act of 1982, as amended. The maximum authorized bonded indebtedness for CFD No , IA-5, is $9,000,000. Scope of the Assignment The scope of this assignment encompasses the necessary research and analysis required for the intended use. This Not Less Than Value appraisal report analyzes conditions that have changed since the date of value of the original appraisal report. Generally, this appraisal report involved a review of current economic conditions, a review of sales activity in the subject's market area, site construction, building construction and home sales activity since last reported, and arriving at a Not Less Than Value conclusion. Date of Not Less than Value The opinion of Not Less Than Value expressed in this report is stated as of October 1,2017. Date of Report The date of this appraisal report is October 20,2017. Date of Inspection The subject property was inspected on several occasions, with the most recent on October 4,2017.

181 Mr. Jeffrey Rigney October 20, 2017 Page 3 Property Rights Appraised The property rights appraised are those of the fee simple estate subject to special tax and special assessment liens of the real estate described herein. Property Identification, Legal Description and General Condition of the Lotsl Dwellings As of August 1,2017, the subject property consisted of 232 built dwelling units, of which 218 dwelling units wee sold to individual homeowners, and 38 dwellings were under unit construction. The District is located east ot the 1-15 Freeway, south of Glen Helen Parkway and north of Lytle Creek, in unincorporated San Bernardino County. The City of Fontana is to the south. The taxable property is further identified as Final Tract Map No , Lots 239 through 320; Final Tract Map No , Lots 321 through 381; and Final Tract Map No , Lots 109 through 235. It is also identified as APN's to 61, to 82, to 42 and to 85. The current condition for CFD No , IA-5, as of October 1, 2017, includes 270 improved residential lots ranging from homes under construction to homes completed and closed. Of the 270 lots subject to the Special Tax, 255 dwellings have been completed. Of the completed dwellings, 250 have been sold and occupied by individual homeowners. Lennar Homes, the current builder of Sage, Chaparral and Rosewood owns five completed, but not closed dwellings and 15 dwellings under construction. Of the 20 builder owned dwellings, 19 are in escrow. Definitions Market Value 1 The most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (a) (b) (c) (d) Buyer and seller are typically motivated. Both parties are well informed or well advised, and each acting in what he considers his own best interest. A reasonable time is allowed for exposure in the open market. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. 1 Part 563, subsection a(b)(2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations.

182 Mr. Jeffrey Rigney October 20, 2017 Page 4 (e) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Minimum Market Value It may be appropriate for projects that have built-out and occupied product to use mass appraisal techniques. When conforming groups of property types within the same CFD are built and have achieved a stabilized occupancy, appraisers may use a limited valuation analysis to value a sampling of similar properties. In this analysis, the overall average sales price per square foot is compared for each year. A conservative estimate of value per square foot is used in estimating Minimum Market Value for the 270 dwellings within CFD No , IA-5. Mass Appraisal When a tract or project is built-out and absorbed, the appraiser may use an aggregate value estimate based upon conservative per dwelling unit estimates. It is implicit in mass appraisal that some individual value conclusions will not meet standards of reasonableness, consistency and accuracy. However, appraisers engaged in mass appraisal have a professional responsibility to ensure that, on an overall basis, the value conclusions meet attainable standards of accuracy. The appraisers have used an average conservative value for the average size unit within the District. By utilizing average value estimates, individual home values could be higher or lower, depending on unit size. However, on an overall basis, the value conclusions are reasonable and meet attainable standards of accuracy. Fee Simple Estate 2 Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government. Fee Simple Estate Subject to Special Tax and Special Assessment Liens Empirical evidence (and common sense) suggests that the selling prices of properties encumbered by such liens are discounted compared to properties free and clear of such liens. In new development projects, annual special tax and/or special assessment payments can be substantial, and prospective buyers take this added tax burden into account when formulating their bid prices. Taxes, including special taxes, are legally distinct from assessments. 2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page 140

183 Mr. Jeffrey Rigney October 20, 2017 Page 5 The Minimum Market Value included herein, reflects the value potential buyers would consider given the special tax lien of Community Facilities District No , IA-5. Retail Value Retail value should be estimated for all fully improved and sold properties. Retail value is an estimate of what an end user would pay for a finished property under the conditions requisite to a fair sale. Blue-Top Graded Parcel Blue-top graded parcel includes streets cut and padded lots with utilities stubbed to the parcel and perimeter streets completed. Finished Site 3 Land that is improved so that it is ready to be used for a specific purpose. (Improvements include padded lot, streets and utilities to the lot, and all fees required to issue a building permit paid.) Extraordinary Assumptions, Assumptions and Limiting Conditions The analyses and opinions set forth in this report are subject to the same contingencies, assumptions and limiting conditions set forth in the original appraisal report on pages 8 through 12. Standards Rule ("S.R.") 2-1 (c) of the "Standards of Professional Appraisal Practice" of the Appraisal Foundation requires the appraiser to "clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects an appraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1 (c) and to assist the reader in interpreting the report, the following contingencies, assumptions and limiting conditions are set forth as follows: Extraordinary Assumptions of the Appraisal, August, The site improvements for the subject property are complete. No infrastructure cost remains. The opinions of values expressed in this report do not apply to any specific dwelling unit. The opinions of value rely on the information provided by the District's Special Tax Consultant, which we have assumed to accurately describe the properties within CFD No , IA-5. It is a specific assumption of this appraisal that the appraisers have been provided with a summary of all the parcels subject to special tax within the CFD. 3 Ibid, Page 334

184 Mr. Jeffrey Rigney October 20, 2017 Page 6 Assumptions and Limiting Conditions of the Appraisal - October 1, 2017 This is an appraisal report, in summary format, intended to be used in conjunction with the original appraisal report dated August 22, 2017, with a date of value of August 1, Please refer to pages 8 through 12 of the original report for the Assumptions and Limiting Conditions. Consent is hereby given for this report, in its entirety, to be published in the Preliminary Official Statement and Official Statement along with the original appraisal report in conjunction with the funding of bonds for CFD No , IA-5, for the County of San Bernardino. Highest and Best Use The term highest and best use is an appraisal concept which has been defined as follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility and maximum productivity.4 Please refer to pages 46 through 53 in the original appraisal report, which describe, in detail, the process of determining the highest and best use of the property. There have not been any significant changes to the conclusions reached in the Highest and Best Use section of the original appraisal report. Since the original date of value, August 1, 2017, the San Bernardino County residential market has shown consistent sales with stable to slightly increasing prices. According to CoreLogic, San Bernardino County's August 2017 existing home sales increased 9.8% compared to August San Bernardino County's median home price, for existing homes, in August 2017 rose 12.5% to $315,000 from August Most economists are forecasting that sales rates and sales prices will moderate. According to Metrostudy, the median price of a new single-family home in the San Bernardino County market increased 0.5 % between Q and Q The Q median price of a new detached home in San Bernardino County is reported to be $455,500. The number of total new home sales in San Bernardino County for the 12-month period ending Q was 2,275 sales, up 5.1% from the 12 month period ending Q according to Metrostudy. We are of the opinion that the housing market will begin moderating in San Bernardino County in 2017 and into The Dictionary of Real Estate Appraisal, 4th Edition, Pub. by the Appraisal Institute, Chicago, IL., p. 135.

185 Mr. Jeffrey Rigney October 20, 2017 Page 7 In San Bernardino County, sales increased significantly along with increases in sales prices between mid-2012 and late From 2014 through 2017, sales remained stable. During this timeframe, sales prices have remained strong with increases in price, albeit at a more moderate and sustainable rate. Based on our current interviews with sales personnel in the subject's market, sales have continued at an acceptable rate over the past two months since the original August 1, 2017, date of value. Most economists are predicting a continued return to a more balanced and normal market during According to local brokers and sales agents in the area, there is demand for new homes in the $380,000 to $555,000 price range in the subject's market. I am of the opinion that the current highest and best use of CFD No , IA- 5 remains the same as reported in the August 22, 2017 appraisal report. Not Less Than Value As of August 1, 2017, the subject was in various stages of construction from dwellings under construction to completed dwellings. As indicated, there were 232 built dwelling units, of which 218 dwellings had closed escrow. The remaining 52 dwellings were under the ownership of Lennar Homes of California, Inc. As of October 1, 2017, 32 additional dwellings have closed escrow to individual homeowners. The 32 closings indicate an average absorption of 5.3 dwellings per month per product. In total, 257 dwellings are completed. Fifteen dwellings are under construction. All dwellings are nearing completion. As of the August 1, 2017 date of value, all three of the projects were nearly sold out. As of October 2017, only one dwelling in the Sage product remains unsold. Rosewood and Chaparral are completely sold out. Lennar Homes has opened new phases of Sage and Rosewood, with most floor plans at slightly higher prices. Some floor plans are at basically the same prices as the August 1, 2017 prices. Value Conclusion The total estimated Minimum Market Value for CFD No , IA-5 was $103,400,000 as of August 1, Based on the current sales activity in the subject's market place, along with local and national economic forecasts, if the District were to be reappraised as of October 1, 2017, the District would have a value that was Not Less Than the August 1, 2017 value of $103,400,000. Based on the investigation and analyses undertaken, my experience as a real estate appraiser and subject to all the premises, assumptions and limiting conditions set forth in this report and the original Appraisal Report dated August 22, 2017, the subject property has a Not Less Than Value of $103,400,000 as of October 1,2017.

186 Mr. Jeffrey Rigney October 20, 2017 Page 8 Certification I hereby certify that during the completion of this assignment, I personally inspected the property that is the subject of this appraisal and that, except as specifically noted: I have no present or contemplated future interest in the real estate or personal interest or bias with respect to the subject matter or the parties involved in this appraisal. I have not provided appraisal services regarding the subject property within the last three years to my client, the County of San Bernardino, other than the original appraisal report with an August 1, 2017 date of value. To the best of my knowledge and belief, the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct. My engagement in this assignment was not contingent upon developing or reporting predetermined results. The compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. As of the date of this report, James B. Harris has completed the requirements of the continuing education program of the Appraisal Institute. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions. No one provided significant real property appraisal assistance to the person signing this certificate. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In furtherance of the aims of the Appraisal Institute to develop higher standards of professional performance by its

187 Mr. Jeffrey Rigney October 20, 2017 Page 9 Members; I may be required to submit to ~uthorized committees of the Appraisal Institute copies of this appraisal and any subsequent changes or modifications thereof. Respectfully submitted, mes B. Harris, MAl rincip~1 AG001846