CITY OF PAIMDALE REPORT TO THE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM THE CITY MANAGER. DATE: January 9, 2013

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1 CITY OF PAIMDALE REPORT TO THE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM THE CITY MANAGER DATE: January 9, 2013 SUBJECT: Consideration of Alterations to CFD 93-1 Rifler Ranch ISSUING DEPARTMENT: Finance Department SUMMARY Issues: Should the City Council adopt Resolution No. CC , a resolution of consideration to alter the facilities authorized to be financed by, and the rate and method of apportionment of special taxes for, the City of Palmdale Community Facilities District No (Ritter Ranch)? Recommendation: Adopt Resolution No. CC , a resolution of consideration to alter the facilities authorized to be financed by, and the rate and method of apportionment of special taxes for, the City of Palmdale Community Facilities District No (Ritter Ranch). Fiscal Impact: None. BACKGROUND In February of 1994, the City of Palmdale formed Community Facilities District No (Ritter Ranch) in order to finance certain public improvements and authorized the levy of a special tax on real property within the district to be used to pay debt service on bonds issued and administrative expenses for the district. The calculation of the special tax levy is detailed in the Rate and Method of Apportionment document.

2 Report to City Council Consideration of Alterations to CFD 93-1 Ritter Ranch January 9, 2013 Page 2 In April 1995, the City of Palmdale issued $50,000,000 of Community Facilities District No (Ritter Ranch) Special Tax Bonds, Series 1995-A, of which $33,500,000 remains currently outstanding and is payable from proceeds of the special taxes levies on property within the district. The current bondowner of the Ritter Ranch CFD 93-1 bonds is Lehman Brothers Holdings, Inc., and the landowner of all of the property in the district subject to the special tax levy is LV Ritter Ranch LLC, an entity related to the bondowner. At this time, the landowner in concurrence with the bondowner has requested that the City of Palmdale authorize additional facilities to be finance eligible and to alter the original Rate and Method of Apportionment. Resolution No. CC is being presented for the City Council to consider, find, and determine that there is a public convenience and necessity requirement for the description of facilities eligible to be financed by the district to be altered, as well as the original Rate and Method of Apportionment to be altered. Exhibit A of the resolution includes a description of the additional facilities to be included in the altered description of eligible facilities to be financed within or in the vicinity of the district and of the resolution includes an Amended and Restated Rate and Method of Apportionment for City of Palmdale Community Facilities District No (Ritter Ranch). The additional facilities being proposed to be finance eligible within or in the vicinity of the district are roadway improvements consisting of Ranch Center Drive, Westland Drive, and Ritter Ranch Road. The completion of these roadway improvements will allow for a secondary access road for the Anaverde and Ritter Ranch areas, and provide for the safety of the existing residents in the Anaverde community as well as the orderly development of the surrounding areas. These proposed additional facilities will be financed by existing funds in an Acquisition Account held by a trustee in the City's name. Upon approval of Resolution No. CC , the City Council will hold a public hearing on Wednesday, February 13th 2013, at 6:00 p.m. in order to consider and make the final determination on the alteration of the facilities eligible to be financed by the district and the alteration of the original Rate and Method of Apportionment. Submitted by: Betsy St Jhn Director Ô1 Finance

3 CITY OF PALMDALE, CALIFORNIA COUNTY OF LOS ANGELES RESOLUTION NO. CC A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALMDALE OF CONSIDERATION TO ALTER THE FACILITIES AUTHORIZED TO BE FINANCED BY, AND THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR, THE CITY OF PALMDALE COMMUNITY FACILITIES DISTRICT NO (RITTER RANCH) WHEREAS, on February 24, 1994, this City Council adopted Resolution No (the "Resolution of Formation") forming City of Palmdale Community Facilities District No (Ritter Ranch) (the "District") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing with Section 53311, of the California Government Code (the "Act"), for the purpose of financing certain public improvements (the "Facilities"), as further provided in the Resolution of Formation; and he Resolution of Formation and the I special tax (the "Special Tax") on real te and Method of Apportionment for City of Palmdaie (Ritter Ranch) (the of the Special Tax to be used to pay administrative expenses related to the WHEREAS, on April 6, 1995, the City of Palmdale (the "City") issued, for and on behalf of the District, $50,000,000 initial principal amount of City of Palmdale Community Facilities District No (Ritter Ranch) Special Tax Bonds, Series 1995-A (the "Bonds"), of which $33,500,000 principal amount is now outstanding, and the Bonds are payable from the proceeds of the Special Tax levied on property in the District; and WHEREAS, all of the Bonds are currently owned by Lehman Brothers Holdings, Inc. (the "Bondowner"), and all of the property In the District that is subject to the levy of the Special Tax is currently owned by LV Riffer Ranch LLC (the "Landowner"); and WHEREAS, the Landowner has requested that the City Council take the actions necessary to authorize the District to finance certain facilities (the "Additional Facilities"), in addition to the Facilities, and to alter the Original Rate and Method, and the Bondowner has concurred with such request; and WHEREAS, the City Council now desires to undertake the proceedings required by the Act to authorize the District to finance the Additional Facilities and to alter the Original Rate and Method.

4 Resolution No. CC January 9, 2013 Page 2 NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the City Council of the City of Palmdale as follows: SECTION 1. The City Council hereby finds and determines that public convenience and necessity require that the description of the facilities eligible to be financed by the District be altered, and that the Original Rate and Method be altered. SECTION 2. The name of the District is "City of Palmdale Community Facilities District No (Ritter Ranch)," and the territory included in the District is as shown on the map of the District recorded in Book 179 of Maps of Assessment and Community Facilities Districts at Page 79, in the Office of the County Recorder for the County of Los Angeles, State of California. SECTION 3. It is proposed that the description of the facilities eligible to be financed by the District be altered to include, in addition to the Facilities, the Additional Facilities described in Exhibit A attached hereto and by this reference included herein. SECTION 4. It is further proposed that thtjginai Rate and Method be amended and restated as set forth in atbtd hereto and by this reference incorporated herein. The City Council hereby finf'11'd determines that the alteration of the special tax as described in this Resff will not interfere with the timely retirement of the Bonds. SECTION 5. Wednesday Feb?ary 13, 2013, at 6:00 p.m., in the regular meeting place of this City Council, Council Chambers, City HaIl, Sierra Highway, Suite B, Palmdale, California, are hereby designated as the time and place when and where this City Council, as legislative body for the District, will conduct a public hearing on the proposed alteration of the description of the Facilities to include the Additional Facilities, and on the proposed alteration to the rate and method of apportionment of the special tax to be as set forth in hereto, and consider and finally determine whether the public interest, convenience and necessity require the alteration of the facilities eligible to be financed by the District, and of the Original Rate and Method, as described above. SECTION 6. The City Clerk is hereby directed to cause notice of the public hearing to be given by publication one time in a newspaper of general circulation circulated within the District. The publication of the notice shall be completed at least seven (7) days before the date herein set for the public hearing. The notice shall be substantially in the form of Exhibit C hereto.

5 Resolution No. CC January 9, 2013 Page 3 SECTION 7. The City Clerk shall certify to the passage and adoption of this Resolution, which shall take effect immediately upon its adoption. PASSED, APPROVED and ADOPTED this gtpy of January, 2013 by the following vote: i41 AYES: NOES: dc, ABSTAIN: ABSENT: ATTEST: James C. Ledford, Jr. Mayor Rebecca J. Smith, City Clerk Approved as to form: Wm. Matthew Ditzhazy City Attorney :J /13/12

6 EXHIBIT A DESCRIPTION OF THE ADDITIONAL FACILITIES Roadway improvements consisting of Ranch Center Drive, Westland Drive and Ritter Ranch Road within or in the vicinity of the City of Palmdale Community Facilities District No (Ritter Ranch); including, but not limited to, costs of acquisition of rightof-way (for Ritter Ranch Road), site preparation, grading, erosion and dust control, street lights, storm drain and channel system, undergrounding of power lines, dry utilities, curb and gutter, paving and signage/striping; and including civil engineering, soils engineering, archaeological/paleontoiogical studies, environmental processing and mitigation, fees, deposits and permits, and other costs and appurtenances related to any of the foregoing. Exhibit A Page 1

7 EXHIBIT B AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR CITY OF PALMDALE COMMUNITY FACILITIES DISTRICT NO (RITTER RANCH) A Special Tax (the "Special Tax") shall be levied on and collected in Community Facilities District No of the City of Palmdale (Ritter Ranch) each Fiscal Year in an amount determined by the Finance Director of the City of Palmdale, or a designee of the Finance Director, through the application of the appropriate Special Tax as described herein. All of the property in CFD No. 93-1, 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 a Parcel as shown on the 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 Meflo-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 costs directly related to the administration of CFD No. 93-1: the actual costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the Finance Director or designee thereof or both); the actual costs of collecting the Special Taxes (whether by the County or otherwise); the actual costs of remitting the Special Taxes to the Fiscal Agent; the actual costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties required of it under the Fiscal Agent Agreement; the actual costs of the City or its designee of complying with disclosure requirements of the Act, including public inquires regarding the Special Taxes; the actual costs of the City or its designee related to an appeal of the Special Tax; and an allocable share of the salaries of the City staff directly related to the foregoing and the proportionate amount of City general administrative overhead related thereto. Administrative Expenses shall also include amounts advanced by the City for any other administrative purposes of the CFD No. 93-1, including the costs of prepayment of Special Taxes, recordings related to such prepayment and satisfaction of Special Taxes, and the costs of commencing foreclosure of delinquent Special Taxes, in an amount not to exceed $10,000 per Fiscal Year, if the amounts advanced are subject to reimbursement from other sources, including proceeds of foreclosure. Page 1

8 "Apartment" means Residential Property that consists of a building or buildings comprised of attached residential units available for rental, but not purchase, by the general public and under common management. "Assigned Special Tax" means the Special Tax for each Land Use Class, as determined by reference to Tables A, B, C, and D. "Backup Special Tax" means that Special Tax described in Section C that may apply to Parcels of Developed Property. "Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by the City for CFD No under the Act. 'Building Square Footage" for any parcel of Developed Property means the square footage of living area listed on a Parcel's building permit(s). "CFD No. 93-1" means Community Facilities District No (Ritter Ranch) established by the City under the Act, including any annexations thereto. "City" means the City of Palmdale. "Commercial Property" means all Developed Property other than Residential Property. "Completion of Construction" means the first to occur of the following: (i) issuance of all of the Bonds authorized by CFD No. 93-1, not including refunding bond issues, or (ii) completion of all of the facilities authorized to be financed by CFD No as evidenced by a certificate of completion (as provided for in the Fiscal Agent Agreement). "Condominium" means a unit meeting the statutory definition of a condominium contained in the California Civil Code, Section "County" means the County of Los Angeles. "Custom Home" means detached Residential Property where the average lot size within a Final Subdivision Unit is greater than 10,000 square feet. "Developed Property" means for any Fiscal Year, all Parcels of Taxable Property for which a building permit was issued, as of March 1 of the prior Fiscal Year, exclusive of Taxable Public Property, Owner Association Property, Golf Course Property, and Recreational Property. "Equestrian Estate Property" means the area adjacent to Bouquet Canyon Road designated Planning Unit lb in the Ritter Ranch Specific Plan, which has a specific plan or land use category of Single Family Estate. Page 2

9 "Final Map" means (i) a final map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section et seq.) that creates individual lots for which building permits may be issued, or (ii) for Condominiums, a final map approved by the City and a condominium plan recorded pursuant to California Civil Code Section 1352 creating such individual lots. The term "Final Map" shall not include any parcel map or subdivision map or portion thereof, that does not create individual lots for which a building permit may be issued, including parcels that are designated as a remainder parcel. The term "Final Map" shall not include an Interim Final Map. "Final Subdivision Unit" means the Parcels within a Final Map, or a group of Parcels included in a Final Map which are designated as a separate "unit" thereof or which, as determined by the Finance Director, constitute a group of individual lots with common characteristics taking into account such factors as similarity of housing product type and the timing of construction and new home sales, and, wherein, as of March 1 of the previous Fiscal Year, a building permit has been issued for any Parcel within such 'Final Subdivision Unit." All Parcels of Developed Property shall be considered to be within a "Final Subdivision Unit." "Finance Director" means the official of the City who is the chief financial officer or other comparable officer of the City or designee thereof responsible for determining the Special Tax Requirement and providing for the levy and collection of the Special Taxes. "Fiscal Agent" means the fiscal agent under the Fiscal Agent Agreement. "Fiscal Agent Agreement" means the agreement of that name between the City and the Fiscal Agent approved by the Resolution of Issuance that provides for the terms and conditions of the Bonds, as such agreement may be supplemented and amended from time to time. "Fiscal Year" means the period starting July 1 and ending on the following June 30. "Golf Course Property" means, for any Fiscal Year, a Parcel for which the City has issued, and there remains valid, as of March 1 of the previous Fiscal Year, a conditional use permit for the operation thereon of a golf course, including a clubhouse, driving range, and storage areas. "Inflation Index" means the Engineering News Record Building Cost Index for the Los Angeles area, measured as of the calendar year ending in the previous Fiscal Year. In the event this index ceases to be published, the Inflation Index shall be another index as determined by the Finance Director that is reasonably comparable to the Engineering News Record Building Cost index for the Los Angeles area. "Interim Fina' Map" means (i) an approved fina' map or parcel map that allows the sale, lease or financing of the parcels created thereby but which Page 3

10 requires further subdivisions or other actions before a building permit may be issued for such parcels or (ii) those portions of a final map or parcel map approved pursuant to other provisions of the Palmdale Municipal Code, that are excluded from the definition of "Final Map" above. "Land Use Class" means any of the classes listed in Tables A-D. "Landscape Maintenance Cost" means the cost of providing services, including an allocable share of the salaries of the City staff directly related to and a proportionate amount of City general administrative overhead related thereto, for the operation, maintenance, and repair of parks, slopes, parkways, and open space, in an amount not to exceed nine percent (9%) of the regularly scheduled gross debt service on all Bonds due in the calendar year beginning in such Fiscal Year; provided that such nine percent limitation shall apply only to amounts raised by CFD No "Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C, that can be levied by the Finance Director in any Fiscal Year for Undeveloped Property, each Land Use Class of Developed Property, Owner Association Property, Golf Course Property, Recreational Property and Taxable Public Property, as applicable. "Owner Association Property" means, for any Fiscal Year, any real property within the boundaries of CFD No that is owned by or irrevocably offered for dedication to a property owner's association on or before March 1 of the previous Fiscal Year. "Other Residential" Custom Homes. means detached Residential Property other than "Parcel" means a lot or parcel with a parcel number assigned by the assessor of the County. "Proportionately" means, for Developed Property, that the ratio of the actual Special Tax levy to the Assigned Special Tax is equal for all Parcels of Developed Property. For Undeveloped Property, proportionately shall mean that the ratio of the actual Special Tax levy per Acre to the Assigned Special Tax per Acre is equal for all Parcels within a particular class of Undeveloped Property. For Owner Association Property, Golf Course Property, Recreational Property and Taxable Public Property, proportionately shall mean that the Special Tax per Acre actually levied is the same for each Parcel of such property that is not otherwise exempt from Special Taxes pursuant to Section J. "Public Property" means property within the boundaries of CFD No owned by or irrevocably offered for dedication to the federal government, State of California, or other public agency or easements for the exclusive use of a public utility provider. Page 4

11 "Recreational Property" means, designated by a valid conditional use equestrian center, or (iii) a swim center. for any Fiscal Year, a Parcel that is permit for (i) an amphitheater, (ii) an "Residential Property" means all parcels of Developed Property for which a building permit was issued for purposes of constructing a residential dwelling unit(s). "Resolution of Issuance" means any resolution of the City authorizing the issuance of any Bonds for CFD No under the Act. "Special Tax" means the Special Tax provided for in Section C that may be levied in each Fiscal Year on each Parcel of Developed Property, Undeveloped Property, Owner Association Property, Golf Course Property, Recreational Property and Taxable Public Property, pursuant to Section D. "Special Tax Requirement" means that amount required in any Fiscal Year for CFD No. 93-1, net of any credit applied under the Fiscal Agent Agreement, for the following: (1) pay regularly scheduled debt service on all Bonds due in the calendar year beginning in such Fiscal Year and other periodic costs associated with such Bonds, including but not limited to, credit enhancement on the Bonds, (2) Administrative Expenses associated with CFD No. 93-1, (3) costs related to the release of funds from an escrow account, if any, associated with CFD No. 93-1, and (4) if determined by the City, any amounts required to establish or replenish any reserve funds associated with the Bonds issued by CFD No "Stacked Flat" means attached Residential Property, other than Apartments, that consists of a building or buildings in which most or all of the individual units are stacked above or below other units in the structure. "Taxable Property" means all Parcels within or annexed into the boundaries of CFD No which are not exempted from Special Taxes by Section J. "Taxable Public Property" means all Public Property which has not been exempted from Special Taxes pursuant to Section J. "Town Home" means attached Residential Property, other than Apartments, that consists of a building or buildings in which most or all of the individual units are side by side and not stacked above or below other units in the structure. "Undeveloped Property" means, for any Fiscal Year, all Taxable Property that is not classified as Developed Property, exclusive of Owner Association Property, Golf Course Property, Recreational Property and Taxable Public Property, as of March 1 of the previous Fiscal Year. Page 5

12 "Undeveloped Property, Class 1" means, for any Fiscal Year, Undeveloped Property that has been subdivided by a Final Map recorded as of March 1 of the previous Fiscal Year. "Undeveloped Property, Class 2" means, for any Fiscal Year, Undeveloped Property exclusive of Undeveloped Property Class 1, with an approved tentative map, as of March 1 of the previous Fiscal Year, that, upon recordation of a conforming Final Map will allow the sale, lease, or financing of, or construction upon, the individual lots therein without further subdivision. "Undeveloped Property, Class 3" means, for any Fiscal Year, Undeveloped Property exclusive of Undeveloped Property, Classes I and 2, that has been subdivided by an Interim Final Map, as of March 1 of the previous Fiscal Year. "Undeveloped Property, Class 4" means, for any Fiscal Year, any Undeveloped Property exclusive of Undeveloped Property Classes 1, 2, and 3. "Zone A" means that geographical area shown as Zone A on the map included herein as Appendix A. "Zone B" means that geographical area shown as Zone B on the map included herein as Appendix A. "Zone C" means that geographical area shown as Zone C on the map included herein as Appendix A. B. Assignment to Land Use Categories For each Fiscal Year, all Taxable Property shall be classified as Developed Property, Undeveloped Property, Owner Association Property, Golf Course Property, Recreational Property, or Taxable Public Property. Each Parcel of Developed Property shall be assigned to one of the Land Use Classes shown in Tables A-D and assigned to Zone A, B, or C. Each Parcel of Undeveloped Property shall be assigned to Class 1, 2, 3, or 4 of Undeveloped Property. The assignment of Parcels into land use categories shall be made according to the appropriate category for each Parcel as of March 1 of the previous Fiscal Year. Each Parcel shall be subject to Special Taxes according to the assignment of land use categories as described in this section and the application of the provisions in Sections C and D. C. Maximum Special Tax 1. Developed Property The Maximum Special Tax for each Parcel classified as Developed Property shall be the greater of (i) the Assigned Special Tax or (ii) the amount derived by application of the Backup Special Tax, if applicable. Page 6

13 a. Assigned Special Tax The Assigned Special Tax for each Land Use Class of Developed Property shall be as shown in Tables A, B, and C and shall be equal to the product of the Assigned Special Tax per square foot and the Building Square Footage of any Parcel. b. Increase in the Assigned Special Tax The Assigned Special Tax in Tables A, B, or C shall be applicable for Fiscal Year , and shall increase thereafter, commencing on July 1, 1995, and on July 1 of each Fiscal Year thereafter, according to the Inflation Index, with a maximum annual increase of four percent and a minimum annual increase of two percent, except that the increase in the Assigned Special Tax for Parcels within a Final Subdivision Unit shall be two percent (2 %) per year. c. Backup Special Tax The Backup Special Tax shall be the lesser of (i) $.23 per square foot or (ii) the amount calculated with each issuance of Bonds pursuant to the following formula: [(DSx 1.1)+AE-AT}^(TAx.85) Where the terms used in the formula have the following meaning: DS = The highest discounted annual debt service on outstanding Bonds, using a discount rate of two percent and discounting to the Fiscal Year in which any series of Bonds are issued AE = Administrative Expenses AT The total of Assigned Special Taxes that can be collected from Parcels of Developed Property as of the date any series of Bonds are actually issued TA = The anticipated Acreage of Developed Property (in square feet) at full build-out of CFD No. 93-1, excluding the taxable Acreage of Parcels that are Developed Property as of the date any series of Bonds are actually issued, determined as described in Appendix B, by the Finance Director or its designee (the Finance Director may request a certification as to the acreage for purposes of this calculation from engineers involved in any projects proposed for or under development within CFD No. 93-1) The Backup Special Tax shall be applied to the Acreage of each Parcel measured in square feet. The land area applicable to a Condominium unit shall be computed from the Acreage of the Parcel on which the Condominium unit is Page 7

14 located, with the Acreage for such Parcel allocated equally among all of the Condominiums located on such Parcel. d. Increase in the Backup Special Tax The Backup Special Tax determined pursuant to Section C(i) above shall be applicable for the Fiscal Year and shall increase by two percent annually each Fiscal Year thereafter. The Backup Special Tax determined pursuant to Section C(ii) above shall be applicable in the Fiscal Year in which any series of Bonds are actually issued and shall increase by two percent annually thereafter. The Backup Special Tax on a Parcel of Developed Property shall increase by two percent each Fiscal Year and shall not increase as a result of Bonds issued subsequent to the date a building permit is issued with respect to such Parcel. 2. Undeveloped Property a. Assigned Special Tax The Assigned Special Tax for each Land Use Class of Undeveloped Property for the Fiscal Year shall be as shown in Table D. b. Maximum Special Tax The Maximum Special Tax for Undeveloped Property for the Fiscal Year shall be $12,000 per Acre. c. Increase in the Assigned and Maximum Special Tax The Assigned and Maximum Undeveloped Property Special Tax described above shall be applicable for Fiscal Year The Undeveloped Property Assigned and Maximum Special Tax for each Fiscal Year thereafter shall increase according to the Inflation Index, with a maximum annual increase of four percent and a minimum annual increase of two percent. 3. Owner Association Property, Golf Course Property, Recreational Property and Taxable Public Property The Maximum Special Tax for Owner Association Property, Golf Property, Recreational Property and Taxable Public Property shall be $12,000 per Acre for Fiscal Year and shall increase by two percent per year thereafter. D. Method of Apportionment of Special Tax Commencing with Fiscal Year and for each Fiscal Year thereafter, the Finance Director, or its designee, shall determine the Special Tax Requirement and Landscape Maintenance Costs for such Fiscal Year. The Finance Director shall levy the Special Tax according to the following steps. Page 8

15 First: The Special Tax shall be levied on each Parcel of Developed Property at 100 percent of the Assigned Special Tax for each Land Use Class of Developed Property, determined by reference to Tables A, B, and C. Prior to the Completion of Construction, if the levy of Special Taxes pursuant to this step produces funds in excess of that required for the Special Tax Requirement, the remaining funds shall be applied in the following manner: first, to pay Landscape Maintenance Costs; second, to pay directly for the acquisition or construction of authorized facilities; third, if all costs of such acquisition or construction have been paid or provided for, to retire Bonds. Subsequent to Completion of Construction, the Special Tax shall be levied Proportionately on each Parc& of Developed Property up to 100 percent (100%) of the Assigned Special Tax for each Land Use Class of Developed Property in an amount necessary to fund the Special Tax Requirement and Landscape Maintenance Costs. Special Taxes collected pursuant to this step shall be applied first to the Special Tax Requirement and any excess funds shall then be applied to Landscape Maintenance Costs. Second: If additional monies are needed after the first step has been completed, the Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property Classes 1, 2, 3, and 4 up to 100 percent of the Assigned Special Tax for the Land Use Class of each such Parcel, to the extent necessary to fund the Special Tax Requirement and Landscape Maintenance Costs. Special Taxes collected pursuant to this step shall be applied first to the Special Tax Requirement and any excess funds shall then be applied to Landscape Maintenance Costs. Third: If additional monies are needed after the second step has been completed, then the levy of the Special Tax on each Parcel of Undeveloped Property shall be increased by equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Parcel, to the extent necessary to fund the Special Tax Requirement and Landscape Maintenance Costs. Equal percentage means that the increase from the Assigned Special Tax shall be the same, as a percentage of the Assigned Special Tax, up to the Maximum Special Tax for any Parcel. When a higher class of Undeveloped Property reaches its Maximum Tax, the equal percentage increases on the remaining classes of Undeveloped Property will continue until each lower class of Undeveloped Property successively reaches its respective Maximum Special Tax. Special Taxes collected pursuant to this step shall be apølied first to the Special Tax Requirement and any excess funds shall then be applied to Landscape Maintenance Costs. Fourth: If additional monies are needed after the third step has been completed, then the levy of the Special Tax on each Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased by equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Parcel, to the extent necessary to fund the Special Tax Requirement. Equal percentage Page 9

16 means that the increase from the Assigned Special Tax shall be the same, as a percentage of the Assigned Special Tax, up to the Maximum Special Tax for any Parcel. Pursuant to Section of the Act, under no circumstances shall the Special Tax levied against any Parcel be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Parcel. An increase of ten percent or more shall be determined by comparison to what the levy of Special Tax would be for any Parcel if there were no delinquencies or defaults. Fifth: If additional monies are needed after the fourth step has been completed, then the Special Tax shall be levied Proportionately on each Parcel of Owner Association Property, Golf Course Property, Recreation Property, and Taxable Public Property which are not otherwise exempt from Special Taxes pursuant to Section J, up to the Maximum Special Tax for these Parcels; however, Special Taxes shall not be levied on this property, if the Special Taxes levied pursuant to steps 1-4 of this section are equal to or exceeds the sum of (i) 110 percent of regularly scheduled debt service on any Bonds due in the calendar year beginning in such Fiscal Year and other periodic costs associated with such Bonds, including but not limited to credit enhancement on the Bonds, (ii) Administrative Expenses associated with CFD No allocable to Special Tax, and (iii) costs related to the release of funds from an escrow account, if any, associated with CFD No E. Full Preiayment of Special Tax Special Tax on any Parcel of Developed Property may be fully prepaid and the obligation to pay Special Tax permanently satisfied by payment of the sum of the following: 1. A sum equal to (a) delinquent Special Taxes on such Parcel, including any applicable penalties and related costs, and (b) Special Taxes due on such Parcel but not yet paid for the Fiscal Year in which such prepayment is made. 2. A sum equal to the principal portion of the amount of prepayment determined as follows: (a) For each Parcel of Developed Property for which the Assigned Special Tax is the Maximum Special Tax for such Parcel, the principal portion of the prepayment as listed in Tables A, B, and C for each Land Use Class. The principal portions of the prepayment listed in Tables A, B, or C shall be applicable for Fiscal Year , and shall increase thereafter according to the Inflation Index, with a maximum annual increase of four percent and a minimum annual increase of two percent, except for Parcels within a Final Subdivision Unit; the principal portion of the prepayment shall not increase further for Parcels in a Final Subdivision Unit. Page 10

17 (b) For each Parcel of Developed Property for which the Backup Special Tax is the Maximum Special Tax for the Parcel, the principal portion of the amount of the prepayment shall be 14.4 times the Backup Special Tax for the Parcel in the first Fiscal Year that the Parcel becomes Developed Property. 3. The principal portion of the prepayment shall be decreased by an adjustment for a reserve fund credit. The adjustment shall be equal to a percent of the principal portion of the prepayment equal to the lesser of the following: (i) the amount required to be in the reserve fund, as a percent of the Bonds outstanding, or (ii) the amount actually in the reserve fund, as a percent of the Bonds outstanding. 4. The principal portion of the prepayment calculated in step 2 shall be decreased by an adjustment for the years such Parcel has been subject to Special Tax prior to the year of the prepayment. The adjustment shall be equal to the principal portion of the prepayment calculated in step 2 multiplied by the cumulative adjustment from Table B that corresponds to the number of years Special Tax has been paid for the Parcel of Developed Property. 5. The amount calculated in steps 2-4, if used to redeem Bonds, shall be rounded up to the nearest $5,000, less the interest expected to be earned on the prepayment until such Bonds are redeemed; however, if prepayment is made for two or more Parcels together, the aggregate principal of all of the prepayments may be rounded up to the nearest $5,000, with the addition due to the rounding apportioned to each prepayment based on the proportion of each of the prepayments to the total prepayment. 6. A sum equal to applicable redemption premiums, if any, on the Bonds to be redeemed. 7. A sum equal to administrative fees and expenses of the City associated with the prepayment. The amounts calculated in the preceding steps shall be paid to the City and shall be distributed by the City according to the Fiscal Agent Agreement. Upon the payment of such prepayment amount to the City, the obligation to pay Special Tax shall be deemed to be permanently satisfied, the Special Tax shall not be levied thereafter, and the City shall cause a notice of cessation of the Special Tax to be recorded within 30 working days of receipt of such prepayment amount. F. Partial Prepayment of Special Tax The Special Tax on Developed Property may be partially prepaid on the Parcels within a Final Subdivision Unit and that portion of the Special Tax obligations permanently satisfied. The amount of the prepayment shall be calculated as in Section Page 11

18 E; except, however, the principal portion shall be calculated according to the following formula: PP = PE X P Where the terms have the followinq meaninq: PP = the principal portion of the partial prepayment PE = the principal portion of the prepayment calculated according to Section E.2 P the percent by which the owner of the Parcels within the Final Subdivision Unit is to partially prepay Special Tax The partial prepayment of Special Taxes shall be collected at the close of escrow of each Parcel in the Final Subdivision Unit. An owner of the Parcels within a Final Subdivision Unit shall notify the Finance Director of (i) such owner's intent to partially prepay Special Tax on all of the Parcels within a Final Subdivision Unit or all of those Parcels within a Final Subdivision Unit that are owned by such owner, (ii) the percentage by which the Special Tax shall be prepaid, and (iii) the company or agency that will be acting as the escrow agent. The owner shall provide instructions to the escrow agent and the Finance Director, which instructions shall direct the escrow agent to collect the partial prepayment of the Special Taxes as calculated pursuant to this Section F and to remit this amount to the City. The Finance Director shall provide the owner and the escrow agent with a statement of the amount required for the partial prepayment of the Special Tax for a Parcel within five (5) working days of notice of the pending close of an escrow. The Finance Director may charge a reasonable fee for providing this figure. With respect to any Parcel so partially prepaid, the City shall (i) distribute the funds remitted to it by the escrow agent according to the Fiscal Agent Agreement, (ii) cause a suitable notice to be recorded in compliance with the Act within 30 days of receipt of such prepayment of Special Taxes, to indicate the partial prepayment of Special Taxes and the release of the Special Tax lien in such amount. (iii) indicate in the records of CFD No that there has been a partial prepayment of the Special Tax and that this portion of the Special Tax shall not be levied thereafter. Foflowing a partial prepayment of the Special Tax with respect to any Parcel, the outstanding percentage ( F) of the Special Tax shall continue to be levied on such Parcel, G. Termination of Special Tax Except for any delinquent Special Taxes and related penalties and interest, Special Taxes used to pay for either or both the acquisition and construction of any public facilities for CFD No (through the issuance of Bonds or otherwise) and levied on any Parcel shall not be levied after the fortieth (40th) Fiscal Year in which such Parcel was taxed as Developed Property. After such fortieth (40th) Fiscal Year, and the collection of any delinquent Special Taxes, penalties and interest, the Finance Page 12

19 Director shall cause a document substantially in the form required by the Act evidencing such termination of the levy and collection to be recorded in the office of the Recorder of the County. H. Appealing the Levy of Special Taxes Any property owner claiming that the amount or application of the Special Tax is not correct and requesting a refund may file a written notice of appeal and refund to that effect with the Finance Director not later than one calendar year after having paid the Special Tax that is disputed. The Finance Director shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and decide the appeal. If the Finance Director's decision requires the Special Tax be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the next Special Tax levy. Any dispute over the decision of the Finance Director shall be referred to the City Council of the City and the decision of the City Council shall be final. This procedure shall be exclusive and its exhaustion by any property owner shall be a condition precedent to any legal action by such owner. Manner or Collection The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties and procedures, sale and lien priorities in case of delinquencies as are provided for ad valorem taxes; provided, however, that the City may provide in a Fiscal Agent Agreement or other instrument authorizing issuance of the Bonds for (I) other means of collecting the special taxes, including direct billings thereof to property owners and (ii) the judicia foreclosure of delinquent Special Taxes. J. Exemptions From Special Taxes 1. The Finance Director shall not levy a Special Tax on up to 8,800 acres of Public Property and Owner Association Property. Exemptions shall be granted for Public Property and Owner Association Property in the following order of priority: First: Public Property owned by entities of the federal government, State of California, or any local government agency and easements for the exclusive use of public utility providers, as of the date of formation of CFD No. 93-1; Second: Public Property acquired by the public agency through a gift, dedication, negotiated transaction, eminent domain, or any other form of conveyance, including granting of an easement, subsequent to the date of formation of CFD No. 93-1, with priority in order of the acquisition of the property; Third: Owner Association Property, with priority in order of the conveyance or recorded irrevocable offer of dedication of the property. Page 13

20 2. The Finance Director shall not levy a Special Tax on up to 180 Acres of Golf Course Property. To the extent Golf Course Property exceeds 180 Acres, it shall be taxed as Taxable Property at the appropriate Special Tax rate for Golf Course Property and the 180 Acres of exempt Golf Course Property shall be allocated equally among all Acres of Golf Course Property (i.e., if there are 190 Acres of Golf Course Property, each of those Acres will be taxed 10/l9Oths of the Golf Course Property tax rate per Acre). 3. The Finance Director shall not levy a Special Tax on up to 190 Acres of Recreational Property. To the extent Recreational Property exceeds 190 Acres, it shall be taxed as Taxable Property at the appropriate Special Tax rate for Recreational Property and the 190 Acres of exempt Recreational Property shall be allocated equally among all Acres of Recreational Property (i.e., if there are 200 Acres of Recreational Property, each of those Acres will be taxed 1 0/200ths of the Recreational Property tax rate per Acre). 4. The Finance Director shall not levy the Backup Special Tax on up to 212 acres of Equestrian Estate Property. Parcels shall be exempt in order of priority determined by the date a building permit is issued for residential use. Equestrian Property shall be subject to the appropriate Assigned Special Tax for such property. K. No Conferment of Development Rights The authorization, application, levy, or collection of the Special Tax under this Amended and Restated Rate and Method of Apportionment shall in no way imply, confer, or otherwise authorize any vested rights of development, or any specific land use, upon any Parcels or Parcels within CFD No. 93-1, provided, however, that this Section K shall not affect any development agreement between the City and any developer. Page 14

21 TABLE A Community Facilities District No ( Fiscal Year) Zone A Assigned Special Tax and Principal Prepayment Developed Property Land Use Class Apartments Stacked Flat Town Home Other Custom Corn mercial Assigned Special Tax Per SF of Building Square Footage Principal Prepayment Per SF of Building Square Footage Page 15

22 TABLE B Community Facilities District No ( Fiscal Year) Zone B Assigned Special Tax and Principal Prepayment Developed Property Assigned Special Tax Principal Prepayment Per SF of Building Per SF or Building Land Use Class Square Footage Square Footage Apartments Stacked Flat Town Home Other Custom Commercial Page 16

23 TABLE C Community Facilities District No ( Fiscal Year) Zone C Assigned Special Tax and Principal Prepayment Developed Property Land Use Class Apartments Stacked Flat Town Home Other Custom Commercial Assigned Special Tax Per SF of Building Square Footage Principal Prepayment Per SF of Building Square Footage Page 17

24 TABLE D Community Facilities District No ( Fiscal Year) Assigned Special Tax Undeveloped Property Undeveloped Property Assigned Special Tax Class. (Per Acre) 1 7, , , ,300 Page 18

25 TABLE E Community Facilities District No ( Fiscal Year) Prepayment of Special Taxes Annual Adjustment to ncipai as a esuit 01 vayment 01 ueot erv Year Cumulative Adjustment % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % 34 53,33% % % % % % % Page 19

26 APPENDIX A Community Facilities District No Zone Map Page 20

27 APPENDIX B Community Facilities District No Work Sheet for Calculating Anticipated Acreage of Developed Property at Full Build-out A. Gross acreage in project (excluding Equestrian Estate Property): B. Acreage in all public streets (including in-tract streets): C. Acreage in other publicly-owned properties: 1. Parks 2. Schools 3. Open space 4. Other publicly-owned properties Total 0. Acreage in Property Owners Association properties: 1. Private streets 2. Open space 3. Other Property Owners Association properties E. Acreage in utility easement properties which cannot be utilized for purposes other than those set forth in their easements: F. Taxable Acreage of Developed Property: NET TAXABLE ACREAGE Total * Net Taxable Acreage should be equivalent to all acreage in taxable lots and parcels. Page 21

28 CITY OF PALMDALE Community Facilities District No (Ritter Ranch) ASSESSOR'S PARCEL NUMBERS AND OWNERS OF LAND WITHIN COMMUNITY FACILITIES DISTRICT Assessor's Parcel Nos. Name of Property Owner Ritter Park Corporation do Sanford B. Schuihofer, Jr Topanga Canyon Blvd., Suite Woodland Hills, California Page 22

29 EXHIBIT C NOTICE OF PUBLIC HEARING City of Palmdale Community Facilities District No (Ritter Ranch) Notice is hereby given that on January 9, 2013, the City Council of the City of Palmdale adopted a Resolution entitled "A Resolution of the City Council of the City of Palmdale of Consideration to Alter the Facilities Authorized to be Financed by, and the Rate and Method of Apportionment of Special Taxes for, the City of Palmdale Community Facilities District No (Rifter Ranch)." Pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), the City Council of the City of Palmdale hereby gives notice as follows: A. The text of said Resolution is as follows: WHEREAS, on February 24, 1994, this City Council adopted Resolution No (the "Resolution of Formation") forming City of Palmdale Community Facilities District No (Ritter Ranch) (the "District") pursuant to the Mello- Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing with Section 53311, of the California Government Code (the "Act"), for the purpose of financing certain public improvements (the "Facilities"), as further provided in the Reso'ution of Formation; and WHEREAS, under proceedings pursuant to the Reso'ution of Formation and the Act, the City Council has authorized the levy of a special tax (the "Special Tax") on real property in the District, as specified in the Rate and Method of Apportionment for Community Facilities District No of the City of Palmdale (Ritter Ranch) (the "Original Rate and Method"), with the proceeds of the Special Tax to be used to pay debt service on bonds issued for the District and administrative expenses related to the District; and WHEREAS, on April 6, 1995, the City of Palmdale (the "City") issued, for and on behalf of the District, $50,000,000 initial principal amount of City of Palmdale Community Facilities District No (Ritter Ranch) Special Tax Bonds, Series 1995-A (the "Bonds"), of which $33,500,000 principal amount is now outstanding, and the Bonds are payable from the proceeds of the Specia' Tax levied on property in the District; and WHEREAS, all of the Bonds are currently owned by Lehman Brothers Holdings, Inc. (the "Bondowner"), and all of the property In the District that is subject to the levy of the Special Tax is currently owned by LV Ritter Ranch LLC (the "Landowner"); and Exhibit C Page 1