$16,135,000 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) SPECIAL TAX BONDS, SERIES 2016

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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 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 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 Bonds. See TAX MATTERS herein. $16,135,000 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) SPECIAL TAX BONDS, SERIES 2016 Dated: Date of Delivery Due: September 1, as shown on the inside cover page The City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 (the Bonds ) are being issued and delivered by the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) (the District ) to (i) provide financing for certain public facilities and costs with respect thereto related to the development within the District, (ii) fund a reserve fund with respect to the Bonds, (iii) provide financing for certain administrative expenses of the District, and (iv) pay the costs of issuance with respect to the Bonds. See ESTIMATED SOURCES AND USES OF FUNDS herein. The District has been formed by and is located in the City of Ontario, California (the City ). The Bonds are authorized to be issued pursuant to the Mello Roos Community Facilities Act of 1982, as amended (Sections et seq. of the Government Code of the State of California), and pursuant to an Indenture, dated as of September 1, 2016, by and between the District and The Bank of New York Mellon Trust Company, N.A., as Trustee. The Bonds are special obligations of the District and are payable solely from Net Special Tax Revenues (as defined herein), and the 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 City Council of the City of Ontario and the qualified electors within the District. The City Council is the legislative body of the District. The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases of Bonds may be made in principal amounts of $5,000 and integral multiples thereof. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds will be payable on each September 1 and March 1, commencing March 1, Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are expected to remit such payments to the beneficial owners of the Bonds. See THE BONDS General Provisions and APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM herein. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OF ONTARIO OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The purchase of the Bonds involves certain risks. See the section of this Official Statement entitled 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 Bonds. This cover page contains certain information for general reference only. It is not a summary of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. The 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, as Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Ontario, California, in its capacity as City Attorney, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Nossaman LLP, Irvine, California. It is anticipated that the Bonds will be available for delivery to DTC or its agent in book-entry form on or about September 8, Dated: August 23, 2016

2 MATURITY SCHEDULE BASE CUSIP : 68303E Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP No $265, % 0.760% % 68303EAA , EAB , EAC , EAD , EAE , EAF , EAG , EAH , EAJ , EAK , C 68303EAL , EAM , EAN , EAP , EAQ , EAR , EAS , C 68303EAT , EAU , C 68303EAV2 $3,365, % Term Bonds due September 1, 2041 Yield: 3.010% Price: C CUSIP No EAW0 $4,300, % Term Bonds due September 1, 2046 Yield: 3.060% Price: C CUSIP No EAX8 C Priced to first optional call date of September 1, 2026 at par. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright 2016 CUSIP Global Services. All rights reserved. CUSIP data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers.

3 CITY OF ONTARIO CITY COUNCIL Paul S. Leon, Mayor Debra Dorst-Porada, Mayor Pro Tem Alan D. Wapner, Council Member Jim W. Bowman, Council Member Paul Vincent Avila, Council Member STAFF Al C. Boling, City Manager Grant Yee, Administrative Services Director Bob Chandler, Management Services Director James R. Milhiser, City Treasurer Sheila Mautz, Interim City Clerk Best Best & Krieger LLP, City Attorney BOND COUNSEL Orrick Herrington & Sutcliffe LLP Los Angeles, California FINANCIAL ADVISOR CSG Advisors Incorporated San Francisco, California DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California TRUSTEE The Bank of New York Mellon Trust Company, N.A. Los Angeles, California SPECIAL TAX CONSULTANT Goodwin Consulting Group Sacramento, California APPRAISER Harris Realty Appraisal Newport Beach, California PRICE POINT CONSULTANT / MARKET ABSORPTION ANALYST Empire Economics, Inc. Capistrano Beach, California

4 Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, 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 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 City, 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 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 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. 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 a 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 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 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 District for further information in connection therewith. 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 a plan, expect, estimate, project, budget or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the captions THE COMMUNITY FACILITIES DISTRICT and PROPERTY OWNERSHIP AND THE DEVELOPMENT. The achievement of certain results or other expectations contained in such forward-looking statements involve 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. Except as set forth in the District s Continuing Disclosure Agreement, a form of which is attached hereto as APPENDIX G, neither the District nor the City plans to issue any updates or revisions to the forwardlooking statements set forth in this Official Statement. Each of the Disclosing Developers have also agreed to provide certain continuing disclosure information concerning themselves and their property within the District in the form attached hereto as APPENDIX H. A wide variety of other information, including financial information concerning the City, is available from publications and websites of the City and others. No such information is a part of or incorporated into this Official Statement. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 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 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

5 TABLE OF CONTENTS INTRODUCTION... 1 The District... 1 Security and Sources of Payment for the Bonds... 3 Description of the Bonds... 3 Appraisal Report... 4 Price Point Study... 4 Professionals Involved in the Offering... 4 Continuing Disclosure... 5 Bond Owners Risks... 5 Other Information... 5 ESTIMATED SOURCES AND USES OF FUNDS... 6 THE BONDS... 6 General Provisions... 6 Redemption... 7 Debt Service Schedule... 9 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General Special Taxes Rate and Method of Apportionment Collection and Application of Special Taxes Covenant for Superior Court Foreclosure Special Tax Fund Reserve Fund Investment of Moneys No Additional Bonds Except for Refunding Bonds THE COMMUNITY FACILITIES DISTRICT General Information Regarding the District The Facilities Direct and Overlapping Debt Property Values Value-to-Lien Ratios Delinquency History PROPERTY OWNERSHIP AND THE DEVELOPMENT Master Developer The Developers Summary of Development The Development Plans KB Home Financing Plan CalAtlantic Financing Plan Woodside Financing Plan TRI Pointe Financing Plan History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy SPECIAL RISK FACTORS Risks of Real Estate Secured Investments Generally Declines in Value Levy of the Special Tax Collection of the Special Tax Failure to Develop Properties Concentration of Property Ownership Exempt Properties Constitutional Limitations on Taxation and Appropriations i- Page

6 TABLE OF CONTENTS (continued) Page Maximum Special Tax Payment of the Special Tax is Not a Personal Obligation of the Owners Disclosures to Future Purchasers Parity Taxes and Special Assessments Depletion of Reserve Fund Bankruptcy and Legal Delays FDIC/Federal Government Interests In Properties Geologic, Topographic and Climatic Conditions Methane Gas Hazardous Substances No Acceleration Provision Bonds Are Limited Obligations Loss of Tax Exemption No Teeter Plan CONTINUING DISCLOSURE District Continuing Disclosure Agreement Developer Continuing Disclosure Agreements TAX MATTERS ABSENCE OF LITIGATION ABSENCE OF RATINGS CERTAIN LEGAL MATTERS UNDERWRITING FINANCIAL INTERESTS FINANCIAL ADVISOR ADDITIONAL INFORMATION APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX... A-1 APPENDIX B APPRAISAL REPORT... B-1 APPENDIX C UPDATED PRICE POINT STUDY... C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL... D-1 APPENDIX E GENERAL INFORMATION CONCERNING THE CITY OF ONTARIO... E-1 APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE... F-1 APPENDIX G FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT... G-1 APPENDIX H FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT... H-1 APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM... I-1 -ii-

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9 $16,135,000 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) SPECIAL TAX BONDS, SERIES 2016 INTRODUCTION 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, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices, is to provide certain information concerning the issuance of the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 in the aggregate principal amount set forth on the front cover page (the Bonds ). The proceeds of the Bonds will be used to finance certain public facilities and costs with respect thereto related to the development within the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) (the District ), to fund a reserve fund for the Bonds (the Reserve Fund ), provide financing for certain administrative expenses of the District and pay costs of issuance of the Bonds. The Bonds are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections et seq. of the Government Code of the State of California) (the Act ), and pursuant to the Indenture, dated as of September 1, 2016 (the Indenture ), by and between the District and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee ). The Bonds are secured under the Indenture by a pledge of, constituting a lien on and security interest in, the Net Special Tax Revenues (as defined herein) and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund established pursuant to the Indenture. 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 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 shall have the meaning set forth in APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Definitions herein. The District The District is located in the southern portion of the City, and is generally bounded by Archibald Avenue to the west, vacant land to the north and east, and dwellings and vacant land to the south. The vacant land to the east is a Southern California Edison high voltage right-of-way. Merrill Avenue forms the northerly line of the District. The District consists of approximately 70.0 gross acres and approximately 50.4 net acres consisting of 432 lots all within Final Tract Map Nos through and There are four developers within the District: (i) KB HOME Coastal, Inc., a California corporation ( KB Home ), (ii) CalAtlantic Group, Inc., a Delaware corporation ( CalAtlantic ), (iii) Woodside 05S, LP, a California limited partnership ( Woodside ), and (iv) TRI Pointe Homes, Inc., a Delaware corporation ( TRI Pointe, and with KB Home, CalAtlantic and Woodside, the Developers ). The Developers are developing the property within the District into seven neighborhoods within a master planned community known as Park Place. 1

10 As of May 16, 2016, the date of value of the Appraisal (defined herein), within the District, 106 single family detached units had been completed and conveyed to individual homeowners, an additional 31 production units and 23 model homes had been completed and were owned by the Developers, 41 production units were in various stages of construction and the remaining 231 lots were in a finished lot condition. Since the date of value of the Appraisal, as of July 15, 2016, an additional 25 units had been conveyed to individual homeowners within the District. See PROPERTY OWNERSHIP AND THE DEVELOPMENT. The District was formed to finance certain public facilities and costs with respect thereto related to the development within the District. The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State of California (the State ). Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. 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 legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. Pursuant to the Act, the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of special taxes on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness. Following public hearings conducted pursuant to the provisions of the Act, the City Council adopted resolutions establishing the District and calling a special election to submit the levy of the special taxes and the incurring of bonded indebtedness to the qualified voters of the District. On November 18, 2014, at an election held pursuant to the Act, SL Ontario Development Company, LLC, a Delaware limited liability company (the Master Developer ), the single qualified voter within the District, authorized the District to incur bonded indebtedness in the aggregate principal amount of not to exceed $57,000,000 and approved the rate and method of apportionment of the special taxes for the District to pay the principal of and interest on the bonds of the District (the Rate and Method ). The Rate and Method provides for a special tax (the Special Tax ) to be levied for the Special Tax Requirement. Under the Rate and Method, Special Tax Requirement is defined to mean for any Fiscal Year that amount required, after taking into account available amounts held in the funds and accounts established under the Indenture, for the District to: (i) pay debt service on all Outstanding Bonds which is due in the calendar year that commences in such Fiscal Year; (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) provide any amounts required to establish or replenish any reserve fund for the Bonds; (v) pay directly for acquisition or construction of Facilities, or the cost of Services, to the extent that the inclusion of such amounts does not increase the Special Tax levy on Final Mapped Property or Undeveloped Property; (vi) provide an amount equal to Special Tax delinquencies based on the historical delinquency rate for the Special Tax as determined by the CFD Administrator. The Special Tax will be levied against certain property within the District pursuant to the Act, the Ordinance approving the levy of Special Taxes and the Indenture and in accordance with the Rate and Method. Under the Indenture, the portion of the Special Tax levied under the Rate and Method to pay for Services (as defined in the Rate and Method) is not pledged to the payment of the Bonds. Accordingly, as used herein, the term Special Tax is defined to mean the Special Tax levied under the Rate and Method less amounts required to pay for Services. Upon the issuance of the Bonds, a principal amount of $40,865,000 will remain authorized but unissued. However, the City has covenanted not to issue additional indebtedness secured by the Special Taxes on a parity with the Bonds except to refund the Bonds in whole or in part, and only in circumstances where the issuance of such Additional Bonds results in a reduction in the amount of Annual Debt Service on the outstanding Bonds (including such Additional Bonds) in each Bond Year. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may be levied on the property within the District. See SPECIAL RISK FACTORS Parity Taxes and Special Assessments. 2

11 Security and Sources of Payment for the Bonds Under the Indenture, the City has pledged to repay the Bonds from Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. The Indenture defines Net Special Tax Revenues to mean Special Tax Revenues less amounts required to pay Administrative Expenses. The term Special Tax Revenues is defined in the Indenture to mean the proceeds of the Special Taxes received by or on behalf of the District, 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. Administrative Expenses is defined in the Indenture to mean any reasonably necessary or appropriate expenses incurred in the administration of the District and the Bonds, including, but not limited to (a) the administrative and legal costs of levying and collecting the Special Tax (including costs incurred in connection with any appeals relating thereto and litigation expenses incurred in connection with the collection of such Special Tax), (b) the fees, costs and indemnification due the Trustee, (c) the costs incurred with on-going disclosure in connection with the Bonds, (d) the costs incurred in connection with the disclosure of the Special Tax to property owners and potential purchasers of property, (e) the amounts required to calculate and pay arbitrage rebate payments to the federal government, and (f) an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and an allocable share of City general administrative overhead related thereto. Net Special Tax Revenues are the primary security for the repayment of the Bonds. In the event that Net Special Tax Revenues are not paid when due, the only sources of funds available to pay the debt service on the Bonds are the amounts held by the Trustee for such purpose in the Special Tax Fund, the Bond Fund and the Reserve Fund. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS herein. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Description of the Bonds The Bonds will be issued and delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ), and will be available to actual purchasers of the Bonds (the Beneficial Owners ) in the denominations of integral multiples of $5,000 under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM herein. Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Trustee, all as described herein. See APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM herein. 3

12 The Bonds are subject to optional redemption, mandatory redemption from Special Tax prepayments and mandatory sinking fund redemption as described herein. For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see THE BONDS and APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE herein. Appraisal Report The District has obtained an appraisal of the Taxable Property (as defined herein) included in the District dated May 18, 2016 with a date of value as of May 16, 2016 (the Appraisal ). The Appraisal was prepared for the District by Harris Realty Appraisal, Newport Beach, California (the Appraiser ). Subject to the limitations set forth in the Appraisal, the Appraiser is of the opinion that, as of May 16, 2016, the minimum market value of the property within the District was not less than $128,500,000 (the Appraised Value ). See THE COMMUNITY FACILITIES DISTRICT Property Values and Value-to-Lien Ratios. A copy of the Appraisal is included as APPENDIX B to this Official Statement. It is a condition precedent to the issuance of the Bonds that the Appraiser deliver a certificate stating that nothing has come to the attention of the Appraiser subsequent to the date of the Appraisal that would lead the Appraiser to believe that the value of the Taxable Property in the District is less than the minimum market value of such property reported in the Appraisal. Price Point Study In connection with the formation of the District, the City hired Empire Economics, Inc., Capistrano Beach, California (the Price Point Consultant ) to prepare a price point study of the prices of the homes planned within the District, dated April 18, 2013 (the Original Price Point Study ). The Special Tax rates set forth in the Rate and Method were based in part on the prices set forth in the Original Price Point Study. In connection with and in preparation for the issuance of the Bonds, the City hired the Price Point Consultant to conduct an update to the Original Price Point Study within the District, dated May 5, 2016 (the Updated Price Point Study ). Pursuant to Section C of the Rate and Method, upon the issuance of Bonds, the City will amend the Assigned Special Tax (as defined in the Rate and Method) (referred to as the Special Tax in this Official Statement) to the extent necessary to cause the total effective tax burden for residential property in the District to not exceed 1.95% of the minimum sales prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as APPENDIX C to this Official Statement. The Special Tax rates set forth in this Official Statement assume the Special Taxes are reduced pursuant to Section C of the Rate and Method and the Updated Price Point Study. See SECURITY AND SOURCES FOR THE BONDS Rate and Method of Apportionment. Professionals Involved in the Offering The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, will act as Trustee under the Indenture. Stern Brothers & Co. is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Orrick Herrington & Sutcliffe LLP, Bond Counsel to the District. CSG Advisors Incorporated, San Francisco, California, is acting as Financial Advisor for the City in connection with the Bonds. Harris Realty Appraisal, Newport Beach, California, is acting as the Appraiser to the District. Goodwin Consulting Group, Inc. is acting as the Special Tax Consultant to the District. Empire Economics, Inc. is acting as the Price Point Consultant to the District. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Ontario, California, in its capacity as City Attorney, and Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Nossaman LLP, Irvine, California. For information concerning respects in which certain of the above-mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see FINANCIAL INTERESTS herein. 4

13 Continuing Disclosure The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board s Electronic Municipal Market Access system available on the Internet at ( EMMA ) certain annual financial information and operating data. The District will further agree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the Rule ). See CONTINUING DISCLOSURE herein. See the form of District Continuing Disclosure Agreement attached as APPENDIX G hereto (the District Continuing Disclosure Agreement ) for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District. In addition, each of Woodside, TRI Pointe and KB Home (the Disclosing Developers ) will agree to provide or cause to be provided to EMMA certain information on a semi-annual basis with respect to such entity and its property ownership and development within the District and notice of certain listed events until such time as they are responsible for less than 10% of the Special Taxes levied in the District on an individual basis. See the form of Developer Continuing Disclosure Agreement attached as APPENDIX H hereto (the Developer Continuing Disclosure Agreement ) for a description of the specific nature of the semi-annual reports to be filed by each of the Disclosing Developers and notices of listed events to be provided by each of the Disclosing Developers. CalAtlantic is below the 10% threshold and will not enter into a Developer Continuing Disclosure Agreement. Bond Owners Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled SPECIAL RISK FACTORS for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the 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 Bonds and the constitution and laws of the State as well as the proceedings of the City Council, 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 Bonds, by reference to the Indenture. Copies of the Indenture, the District Continuing Disclosure Agreement and other documents and information referred to herein are available for inspection and (upon request and payment to the City of a charge for copying, mailing and handling) for delivery from the City at 303 East B Street, Ontario, California 91764, Attention: City Manager. 5

14 ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of Bond proceeds. Sources: Principal Amount of the Bonds $ 16,135, Plus: Net Original Issue Premium 1,975, Less: Underwriter s Discount (201,695.48) Total $ 17,908, Uses: SL Ontario Acquisition Account of the Improvement Fund (1) $ 16,531, Reserve Fund (2) 995, Administrative Expense Fund 15, Cost of Issuance Fund 367, Total $ 17,908, (1) Reflects amounts owed or to be owed to SL Ontario Development Company, LLC for the construction of eligible facilities under the Act. (2) Equal to the Reserve Requirement. General Provisions THE BONDS The Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof ( Authorized Denominations ). The Bonds will be dated the date of issuance thereof. The Bonds are scheduled to mature on September 1, in the years and in the principal amounts, and will bear interest at the rates per annum, shown on the inside front cover page of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months and will be payable on March 1 and September 1 of each year, commencing March 1, 2017 (each an Interest Payment Date ). Interest on each Bond will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) such Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day (the Record Date ) in which event interest thereon will be payable from such Interest Payment Date, (ii) such 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 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 Bonds are payable in lawful money of the United States of America. Interest is payable by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date (except that interest on any 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 payable on a payment date established by the Trustee to the Person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee pursuant to the Indenture). Payment of principal of any Bond will be made only upon presentation and surrender thereof at maturity or upon earlier redemption at the Office of the Trustee. The Bonds will initially be issued in book-entry form, and The Depository Trust Company of New York, New York ( DTC ) will act as securities depository. So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds will be paid by the Trustee directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with procedures adopted by DTC. See 6

15 APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM. The Bonds are not general obligations of the District but are special obligations of the District payable solely from Net Special Tax Revenues and the other amounts held under the Indenture in the Special Tax Fund, the Bond Fund and the Reserve Fund. Neither the faith and credit nor the taxing power of the City, 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 Bonds. See SPECIAL RISK FACTORS Bonds Are Limited Obligations. Redemption Optional Redemption. The Bonds are subject to optional redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date commencing on and after September 1, 2026, from any source of available funds, at a Redemption Price equal to the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Mandatory Sinking Fund Redemption. The Bonds maturing September 1, 2041 and September 1, 2046 (the Term Bonds ) shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 2037 and September 1, 2042, at a Redemption Price equal to the principal amount of the 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: Sinking Fund Redemption Date (September 1) Principal Amount to be Redeemed 2037 $610, , , , (Maturity) 740,000 Sinking Fund Redemption Date (September 1) Principal Amount to be Redeemed 2042 $780, , , , (Maturity) 945,000 If some but not all of the Term Bonds of a maturity are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of such Term Bonds to be redeemed described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District filed with the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of Term Bonds so optionally redeemed. If some but not all of the Term Bonds of a maturity are redeemed pursuant to the mandatory redemption from Special Tax Prepayments provisions of the Indenture, the principal amount of such Term Bonds to be redeemed described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Term Bonds so redeemed, 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 shall be given by the Trustee to the District. 7

16 Mandatory Redemption from Special Tax Prepayments. The Bonds are 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 and any related proportional amounts in the Reserve Fund required to be applied thereto pursuant to the Indenture (see SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Reserve Fund ) at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price Any Interest Payment Date through March 1, % September 1, 2024 and March 1, September 1, 2025 and March 1, September 1, 2026 and any Interest Payment Date thereafter 100 Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for redemption (i) with respect to any optional redemption of Bonds, among maturities of the Bonds as directed in a Written Request of the District, and (ii) with respect to any redemption of Bonds from prepayments of Special Taxes, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable. The Trustee shall select for redemption the Bonds of the same Series with the same maturity by lot in any manner in which the Trustee, in its sole discretion, shall deem appropriate. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations, and such separate denominations shall be treated as separate Bonds which may be separately redeemed. Notice of Redemption. If the Bonds are held in book-entry form, notice of redemption will be mailed to DTC and not to the Beneficial Owners of the 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 APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM herein. The Indenture provides that the Trustee on behalf and at the expense of the District will give notice of any redemption by first class mail to the respective Owners of any 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 of redemption will state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, if any, the Bond numbers and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole). The notice of redemption will require that the Bonds to be redeemed be surrendered at the Office of the Trustee for redemption at the Redemption Price, and give notice that further interest on such 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 Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, is held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon. With respect to any notice of any optional redemption of Bonds, unless at the time such notice is given the Bonds to be redeemed shall 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 8

17 on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District will not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of 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 shall be no redemption of Bonds pursuant to such notice of redemption. Debt Service Schedule (1) Year Ending September 1 Principal (1) Interest Total 2017 $ 265, $ 684, $ 949, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Total $ 16,135, $ 13,606, $ 29,741, Includes mandatory sinking fund redemptions. Source: Stern Brothers & Co. 9

18 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General The Bonds are special obligations of the District, and, except as otherwise provided in the Indenture, they are payable solely from Net Special Tax Revenues. The Indenture defines Net Special Tax Revenues to mean Special Tax Revenues less amounts required to pay Administrative Expenses. The term Special Tax Revenues is defined in the Indenture to mean the proceeds of the Special Taxes received by or on behalf of the District, 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 shall be limited to the amount of said lien and interest and penalties thereon). The Indenture defines the term Special Taxes as the special taxes levied within the District pursuant to the Act, the Ordinance Levying Special Taxes, the Rate and Method and the Indenture less amounts required to pay the costs of Services (as defined in the Rate and Method). Administrative Expenses is defined in the Indenture to mean any reasonably necessary or appropriate expenses incurred in the administration of the District and the Bonds, including, but not limited to (a) the administrative and legal costs of levying and collecting the Special Tax (including costs incurred in connection with any appeals relating thereto and litigation expenses incurred in connection with the collection of such Special Tax), (b) the fees, costs and indemnification due the Trustee, (c) the costs incurred with ongoing disclosure in connection with the Bonds, (d) the costs incurred in connection with the disclosure of the Special Tax to property owners and potential purchasers of property, (e) the amounts required to calculate and pay arbitrage rebate payments to the federal government, and (f) an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and an allocable share of City general administrative overhead related thereto. Under the Rate and Method, parcels of Taxable Property are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the fiscal year preceding the Special Tax levy. For the Fiscal Year Special Tax levy, based on the development status within the District as of May 1, 2016, 276 parcels of Taxable Property will be classified as Developed Property, including 106 completed homes which as of May 16, 2016 had been conveyed to individual homeowners, and 156 parcels of Taxable Property totaling approximately acres will be classified as Final Mapped Property under the Rate and Method. Based on the development status within the District as of May 16, 2016, the District estimates that approximately 66.25% of the projected Fiscal Year Special Taxes will be levied on Developed Property and approximately 33.75% of the projected Fiscal Year Special Taxes will be levied on Final Mapped Property. Since May 16, 2016, as of July 15, 2016, an additional 25 units had been conveyed to individual homeowners within the District. See PROPERTY OWNERSHIP AND THE DEVELOPMENT. In Fiscal Year , Special Taxes in the amount of $393,704 were levied on 128 units located on 114 parcels classified as Developed Property in the District for Fiscal Year , and approximately $285,000 of collected Special Taxes will be used to acquire Facilities. See ESTIMATED SOURCES AND USES OF FUNDS and THE COMMUNITY FACILITIES DISTRICT Delinquency History. Under no circumstances may the amount of Special Taxes levied by the District in any year exceed the maximum rates approved by the qualified electors within the District, as set forth in the Rate and Method. A copy of the Rate and Method is attached to this Official Statement as APPENDIX A. In addition to the Net Special Tax Revenues, any other amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund are pledged pursuant to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Bonds and any Additional Bonds in accordance with their respective terms, the Indenture and the Act. However, those amounts are pledged subject to the provisions of the Indenture permitting the application thereof for the purposes set forth in the Indenture. Amounts on deposit in the Costs of Issuance Fund, the Administrative Expense Fund and the Rebate Fund are not pledged to the payment of any of the Bonds or any Additional Bonds. 10

19 NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Special Taxes Pursuant to the Act, the City Council adopted a resolution on September 2, 2014 stating its intention to establish the District and to levy a special tax within the District. In accordance with the provisions of the Act, the City Council established the District on November 18, 2014 for the purpose of financing certain public infrastructure improvements necessary for the proposed development within the District. At a special election held on November 18, 2014, the Master Developer, as the single qualified voter within the District, authorized the District to incur indebtedness in an amount not to exceed $57,000,000 and approved the rate and method of apportionment of the Special Taxes to pay the principal of and interest on the bonds of the District. The rate and method of apportionment of the Special Tax approved by the City Council and the qualified electors on November 18, 2014 is set forth in APPENDIX A hereto. Pursuant to Section C of the Rate and Method, upon the issuance of the Bonds, the City will amend the Assigned Special Tax (as defined in the Rate and Method) to the extent necessary to cause the total effective tax burden for residential property in the District to not exceed 1.95% of the minimum sales prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as APPENDIX C to this Official Statement. The Special Tax rates set forth in this Official Statement assume the Special Taxes are reduced pursuant to Section C of the Rate and Method and the Updated Price Point Study. See Rate and Method of Apportionment below. Pursuant to the Indenture, the District has covenanted that it will fix and levy the amount of Special Taxes in each Fiscal Year in accordance with the Rate and Method in an amount sufficient (subject to the limitations contained in the Rate and Method as to the maximum Special Tax that may be levied) 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. See APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Certain Covenants Under the Indenture. Notwithstanding this covenant, the amount of Special Taxes actually collected each year may be less than the amount described for a variety of different reasons. See SPECIAL RISK FACTORS Levy of the Special Tax. The Bonds have been structured so that Assigned Special Tax rates set forth in the Rate and Method that may be levied within the District, based on the expected buildout of the District, are at least 110% of debt service on the Bonds in each Bond Year. The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method. See APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX. There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. Pursuant to the Act, the Special Taxes levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or default. See SPECIAL RISK FACTORS Levy of the Special Tax and Exempt Properties. 11

20 Rate and Method of Apportionment General. The Rate and Method is to be applied by the District each year for the purpose of determining the amount of the Special Tax to be levied against each Assessor s Parcel of Taxable Property within the District. For purposes of the discussion of the Rate and Method only, terms with initial capital letters that are not otherwise defined in this Official Statement shall have the respective meanings assigned to them in the Rate and Method, a copy of which appears in APPENDIX A. Under the terms of the Indenture, prior to August 1 of each year, the District will ascertain from the County of San Bernardino Assessor the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District will levy the Special Taxes by August 10 of each Fiscal Year that the Bonds are Outstanding, or otherwise such that the computation of the levy is complete before the final date on which the auditor of the County (the Auditor ) will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the District will prepare, or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll. The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX hereto. There is no assurance that the proceeds of the Special Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See SPECIAL RISK FACTORS Levy of the Special Tax herein. Rate and Method of Apportionment of Special Tax. The District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to a methodology, i.e., the Rate and Method, which the City Council and the qualified elector within the District have approved. The Rate and Method apportions the total amount of the Special Tax to be collected among the Taxable Property in the District as more particularly described below. As used herein, Special Tax means the Special Tax less amounts required to pay for Services (as defined in the Rate and Method). The portion of the Special Tax levied to pay for Services is not pledged to the repayment of the Bonds and is not available to pay debt service on the Bonds. The following is a synopsis of the provisions of the Rate and Method, which should be read in conjunction with the complete text of the Rate and Method which is attached as APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX. The meaning of the defined terms used in this section are as set forth in APPENDIX A. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the Rate and Method attached as APPENDIX A. Special Tax means the special tax authorized by the qualified electors of the District to be levied within the boundaries of the District. CFD Administrator means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, providing for the levy and collection of the Special Taxes, and performing other duties as set forth in the Rate and Method of Apportionment of Special Tax. Developed Property means, for each Fiscal Year, all Taxable Property, exclusive of Final Mapped Property, Taxable Property Owner Association Property, and Taxable Public Property, for which a building permit or other applicable permit for new construction was issued after January 1, 2014, and before May 1 of the prior Fiscal Year. 12

21 Final Mapped Property means, for each Fiscal Year, all Taxable Property, exclusive of Developed Property, Taxable Property Owner Association Property, and Taxable Public Property, which as of January 1 of the previous Fiscal Year was located within a Final Subdivision Map. The term Final Mapped Property shall include any parcel map or Final Subdivision Map, or portion thereof, that creates individual lots for which a building permit may be issued, including Parcels that are designated as a remainder Parcel (i.e., one where the size, location, etc., precludes any further subdivision or taxable use). Residential Floor Area means all of the Square Footage of living area within the perimeter of a residential Unit, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area shall be as set forth in the building permit(s) issued for such Assessor s Parcel, or as set forth in other official records maintained by the City s Building Department or other appropriate means selected by the District. The actual Square Footage shall be rounded up to the next whole square foot. Once such determination has been made for an Assessor s Parcel, it shall remain fixed in all future Fiscal Years unless an appeal pursuant to Section F of the Rate and Method is approved that results in a change in the actual Square Footage. Special Tax Requirement means, for any Fiscal Year that amount required, after taking into account available amounts held in the funds and accounts established under the Indenture, for the District to: (i) pay debt service on all Outstanding Bonds which is due in the calendar year that commences in such Fiscal Year; (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) provide any amounts required to establish or replenish any reserve fund for the Bonds; (v) pay directly for acquisition or construction of Facilities, or the cost of Services, to the extent that the inclusion of such amounts does not increase the Special Tax levy on Final Mapped Property or Undeveloped Property; (vi) provide an amount equal to Special Tax delinquencies based on the historical delinquency rate for the Special Tax as determined by the CFD Administrator. Taxable Property means, for each Fiscal Year, all of the Assessor s Parcels within the boundaries of the District which are not exempt from the Special Tax pursuant to law or described below under the subheading Exempt Property. Taxable Property Owner Association Property means, for each Fiscal Year, all Assessor s Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to Section E of the Rate and Method. Taxable Public Property means, for each Fiscal Year, all Assessor s Parcels of Public Property that are not exempt from the Special Tax described below under the subheading Exempt Property, and further described in Section E of the Rate and Method attached hereto as APPENDIX A. Undeveloped Property means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Final Mapped Property, Taxable Property Owner Association Property or Taxable Public Property. Exempt Property. No Special Tax shall be levied on up to Acres of Public Property and up to 6.13 Acres of Property Owner Association Property, not including Assessor s Parcel Numbers and , as described further in this paragraph. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Public Property or Property Owner Association Property. However, should an Assessor s Parcel no longer be classified as Public Property or Property Owner Association Property it will, from that point forward, be subject to the Special Tax. In addition, Assessor s Parcel Number and Assessor s Parcel Number shall be exempt from the Special Tax unless and until the site becomes Developed Property. Property Owner Association Property or Public Property that is not exempt from the Special Tax under the Rate and Method shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part of the fifth or sixth step, respectively, in Section D of the Rate and Method, up to 100% of the applicable Maximum Special Tax for 13

22 Taxable Property Owner Association Property and Taxable Public Property. No Special Tax shall be levied in any Fiscal Year on Assessor s Parcels that have fully prepaid the Special Tax obligation pursuant to the formula set forth in Section H of the Rate and Method. Maximum Special Tax, Assigned Special Tax and Backup Special Tax. The Maximum Special Tax, Assigned Annual Special Tax and Backup Special Tax for the Special Tax provided for in the Rate and Method is as follows: Special Tax. 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. Residential Property will be assigned to Land Use Classes 1 through 34 as listed in Table 1 in Section C of the Rate and Method. Based on the Updated Price Point Study provided by the Price Point Consultant, the Assigned Special Tax rates set forth in Section C of the Rate and Method will be reduced so that the total effective tax burden applicable to each land use class of residential property to be constructed within the District will not exceed 1.95% of the minimum sale prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as APPENDIX C to this Official Statement. Based on the Updated Price Point Study, the Assigned Special Tax applicable to an Assessor s Parcel classified as Residential Property ranges from $1,713 per unit for units with a Residential Floor Area of less than 1,601 square feet to $3,795 per unit for units with a Residential Floor Area greater than 4,000 square feet. The Assigned Special Tax applicable to an Assessor s Parcel classified as Non-Residential Property ranges from $32,771 per acre to $36,156 per acre. Backup Special Tax. The Backup Special Tax for an Assessor s Parcel of Developed Property ranges from $2,087 to $3,716 per Unit for Residential Property, although subject to adjustment as set forth in Section C.1.a.(3) of the Rate and Method. Final Mapped Property, Taxable Property Owner Association Property, Undeveloped Property and Taxable Public Property. The Maximum Special Tax for Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property, and Undeveloped Property ranges from $32,771 to $36,156 per acre and shall not be subject to increase or reduction and, therefore, shall remain the same in every Fiscal Year. Method of Apportionment of Special Tax. Commencing with Fiscal Year and for each following Fiscal Year, the CFD Administrator will determine the Special Tax Requirement and, subject to the Maximum Special Tax rates described above, will provide for the levy the Special Tax as follows: Each Fiscal Year, beginning with Fiscal Year , the CFD Administrator shall determine the Special Tax Requirement for such Fiscal Year. The Special Tax shall then be levied as follows: First: If needed to satisfy the Special Tax Requirement, the Special Tax shall be levied Proportionately on each Assessor s Parcel of Developed Property up to 100% of the applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Final Mapped Property up to 100% of the Maximum Special Tax for Final Mapped Property; 14

23 Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Undeveloped Property; Fourth: If additional monies are needed to satisfy the Special Tax Requirement after the first three 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 Proportionately from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor s Parcel; Fifth: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Taxable Property Owner Association Property up to the Maximum Special Tax for Taxable Property Owner Association Property; Sixth: If additional monies are needed to satisfy the Special Tax Requirement after the first five steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Taxable Public Property up to the Maximum Special Tax for Taxable Public Property. Notwithstanding the above, under no circumstances shall the Special Tax levied in any Fiscal Year on any Assessor s Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased as a result of delinquency or default by the owner or owners of any other Assessor s Parcel or Assessor s Parcels within the District by more than ten percent above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. Prepayment of Special Taxes. The Special Tax obligation for an Assessor s Parcel of Taxable Property for which a building permit has been issued, may be prepaid in full, or in part, 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 H 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 the Defeasance Amount plus the 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 RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX Section H. Estimated Debt Service Coverage. The principal amount of the Bonds has been established to produce debt service coverage on the Bonds from Special Taxes of at least 110%, net of estimated Administrative Expenses. The District may levy up to the Maximum Special Tax rates on Taxable Property within the District. See Rate and Method of Apportionment Maximum Special Tax, Assigned Special Tax and Backup Special Tax and Rate and Method of Apportionment Exempt Property. Pursuant to the Rate and Method, the status of Developed Property is based on building permits issued as of May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax is levied. As of May 1, 2016, 276 building permits had been issued for detached residential units within the District. Such parcels will be classified as Developed Property for Fiscal Year , and the remaining 156 parcels constituting approximately acres for which no building permit had been issued as of May 1, 2016 will be classified as Final Mapped Property. PROPERTY OWNERSHIP AND THE DEVELOPMENT and SPECIAL RISK FACTORS Failure to Develop Properties. In Fiscal Year , Special Taxes in the amount of $393,704 were levied on 128 units located on 114 parcels classified as Developed Property in the District for Fiscal Year , and approximately $285,000 of collected Special Taxes will used to acquire Facilities. See ESTIMATED SOURCES AND USES OF FUNDS and THE COMMUNITY FACILITIES DISTRICT Delinquency History. 15

24 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 Expenses when due. First, the District has covenanted that, to the extent 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 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 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 Bonds. See SPECIAL RISK FACTORS Proceedings to Reduce or Terminate the Special Tax. Second, the District has covenanted not to authorize owners of taxable parcels within the District to satisfy Special Tax obligations by the tender of Bonds unless the District shall have 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. Although the Special Taxes constitute liens on Taxable Property within the District, they do not constitute a personal indebtedness of the owners of such property within the District. Moreover, other overlapping general obligation debt already exists on the property located within the District and other future special tax and assessment liens and overlapping general obligation debt could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners therein. See SPECIAL RISK FACTORS Parity Taxes and Special Assessments herein. 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 the section of this Official Statement entitled SPECIAL RISK FACTORS. Under the terms of the Indenture, the Trustee shall establish and maintain a separate fund designated the Special Tax Fund. As soon as practicable after the receipt by the District of any Special Tax Revenues, but in any event no later than the date ten Business Days prior to the Interest Payment Date after such receipt, the District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that any portion of any such Special Tax Revenues that represents prepaid Special Taxes that are to be applied to the payment of the redemption price of Bonds in accordance with the provisions hereof shall be identified to the Trustee as such by the District and shall be deposited in the Redemption Fund. See Special Tax Fund below, THE BONDS Redemption Mandatory Redemption from Special Tax Prepayments and APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE. Covenant for Superior Court Foreclosure Pursuant to Section of the Act, the District has covenanted in the Indenture that it will determine or cause to be determined, no later than August 15 of each year, whether or not any owners of property within the District are delinquent in the payment of Special Taxes and that, if such delinquencies exist, the District will order and cause to be commenced no later than October 1, and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due. Notwithstanding the foregoing, the District is not required under the Indenture to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the District for such Fiscal Year is less than 5% of the total Special Tax levied in such Fiscal Year, and (b) the amount then on 16

25 deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the District determines that any single property owner is delinquent in excess of $7,500 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 SPECIAL RISK FACTORS Bankruptcy and Legal Delays and 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 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 not less than 75% by value of the Bonds Outstanding. Special Tax Fund The Indenture provides that the Trustee will establish and maintain a separate fund designated the Special Tax Fund. The Indenture requires that the District transfer Special Tax Revenues (other than prepaid Special Taxes) to the Trustee for deposit into the Special Tax Fund as soon as practicable after the District s receipt thereof, but in any event no later than ten Business Days prior to the Interest Payment Date after such receipt. On the Business Day immediately preceding each Interest Payment Date, after having made any requested transfers to the Administrative Expense Fund, as requested by the District, to have sufficient amounts available therein to pay Administrative Expenses, the Trustee is required by the Indenture to make transfers from the Special Tax Fund to the Interest Account in the Bond Fund, the Principal Account in the Bond Fund and the Reserve Fund in the amounts and in the priority specified in the Indenture. See APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE. As soon as practicable after the District s receipt of prepaid Special Taxes, but in any event no later than ten Business Days prior to the Interest Payment Date after such receipt, the District is required to transfer any prepaid Special Taxes to the Trustee and, in connection therewith, deliver to the Trustee a Written Certificate identifying such amounts as prepaid Special Taxes, identifying the portion of such prepaid Special Taxes so transferred that is to be applied to the Redemption Price of the Bonds and identifying the portion of such prepaid Special Taxes that is to be applied to the payment of interest on the Bonds to be so redeemed. The portion of such prepaid Special Taxes that is to be applied to the Redemption Price will be deposited by the Trustee in the Redemption Fund and will be applied to the redemption of the Bonds pursuant to the Indenture. The portion of such prepaid Special Taxes that is to be applied to the payment of interest on the Bonds to be so redeemed will be deposited by the Trustee in the Interest Account and will be applied to the payment of such interest. 17

26 Reserve Fund The Indenture provides that the Trustee will establish and maintain a special fund designated the Reserve Fund. On the Closing Date, the Trustee will deposit in the Reserve Fund the amount specified under the caption ESTIMATED SOURCES AND USES OF FUNDS. The Trustee is also required, on the Business Day immediately preceding each Interest Payment Date, to transfer from the Special Tax Fund (after the requisite transfers to the Administrative Expense Fund, the Interest Account and the Principal Account) the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement. The Indenture defines Reserve Requirement to mean, as of the date of any calculation, the least of (i) 10% of the original aggregate principal amount of the Bonds, (ii) Maximum Annual Debt Service and (iii) 125% of Average Annual Debt Service. Except as otherwise provided in the Indenture, all amounts deposited in the Reserve Fund are to be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with 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, (ii) making transfers to the Principal Account in accordance with the Indenture 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, and (iii) redeeming Bonds in accordance with the Indenture as described in the following paragraph. Whenever Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, 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, 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 said Bonds; provided 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 the minimum Authorized Denomination for said Bonds that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date of such transfer, times (ii) 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 Community Facilities District, transfer the amount in the Reserve Fund to the Interest Account, Principal Account and/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 the Bonds, the Reserve Requirement is reduced, the Trustee will transfer an amount equal to the amount of such reduction to the Interest Account. Investment of Moneys All moneys held by the Trustee in any of the funds or accounts established pursuant to the Indenture are required to be invested by the Trustee solely in Permitted Investments, as directed in writing by the District. As used in the Indenture, the phrase Permitted Investments includes a variety of investments, some of which may not be rated by a national rating service. See APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Definitions. 18

27 No Additional Bonds Except for Refunding Bonds So long as any of the Bonds remain Outstanding, the District will not issue any Additional Bonds or obligations payable from Net Special Tax Revenues senior to the Bonds. The District may issue Additional Bonds or obligations payable on a parity with the Bonds, if, among other things: (i) upon the issuance of such Additional Bonds, no Event of Default will occur or be continuing under the Indenture; (ii) the proceeds of the Additional Bonds will be applied to refund the Bonds or Additional Bonds previously issued under the Indenture, pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and/or make any requisite deposit to the Reserve Fund; and (iii) the 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. 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. The District may issue obligations payable from Net Special Tax Revenues on a basis subordinate to the Bonds. General Information Regarding the District THE COMMUNITY FACILITIES DISTRICT The District was organized by the City Council under the Act to provide for the financing of public improvements to meet the needs of new development. The qualified electors within the boundaries of the District, being the then owners of property in the District, authorized the District to incur bonded indebtedness to finance certain public facilities to meet the needs of new development within the District and approved the Rate and Method for and authorized the levy of the Special Tax. The District is located in the southern portion of the City, and is generally bounded by Archibald Avenue to the west, vacant land to the north and east, and dwellings and vacant land to the south. The vacant land to the east is a Southern California Edison high voltage right-of-way. Merrill Avenue forms the northerly line of the District. The District consists of approximately 70.0 gross acres and 50.4 net acres consisting of 432 lots all within Final Tract Map Nos through and There are four Developers within the District: (i) KB Home, (ii) CalAtlantic, (iii) Woodside and (iv) TRI Pointe. The Developers are developing their property within the District into seven neighborhoods of single family detached homes within a master planned community known as Park Place : the Margate, Camden, Waterford, Kensington, Hadleigh, St. James and Canopy Creek neighborhoods. As of May 16, 2016, within the District, 106 single family detached units had been completed and conveyed to individual homeowners, an additional 31 production units and 23 model homes had been completed and were owned by the Developers, 41 production units were in various stages of construction and the remaining 231 lots were in a finished lot condition. Since May 16, 2016, as of July 15, 2016, an additional 25 units had been conveyed to individual homeowners within the District. See PROPERTY OWNERSHIP AND THE DEVELOPMENT. A detailed description of the status of the construction as of the date of the appraisal is included in APPENDIX B APPRAISAL REPORT. The District is zoned S-P (Specific Plan-Subarea 29) by the City (the Specific Plan ), allowing for detached single-family residential uses with a density between 2.1 and 5.0 dwellings per acre. The property has a General Plan Designation of low density residential. As built and proposed, development within the District legally conforms with these requirements. The lot sizes within the District range from approximately 2,108 square feet to approximately 6,300 square feet. 19

28 The District is the first phase ( Phase 1 ) of a multiple phase master planned community in the City known as Park Place. Park Place is bound by Eucalyptus Avenue to the north, Riverside County Flood Control Channel to the south, Haven Avenue to the east, and the Cucamonga Creek Channel to the west. Park Place is planned to include 26 residential neighborhoods totaling 2,392 dwelling units over gross acres. Park Place is expected to include three elementary schools and one middle school, as well as an 11.2 acre neighborhood center and 12 acres of public parks. The neighborhood center is an approximately 14,500 square foot community clubhouse known as The Parkhouse at Park Place which has been completed and is available to Park Place residents. Amenities at Parkhouse at Park Place include a movie theater, a business center, a multi-purpose room with a catering kitchen, a reading room, a conference room, a fitness center, tennis court, pool, spa and dog park. Park Place is part of a multiple phase, multiple master-planned community development known as Ontario Ranch. Ontario Ranch includes over 8,000 acres and 13 square miles. At full buildout, Ontario Ranch is expected to include over 46,000 new homes. Water and sewer service to the property within the District will be supplied by the City. Electricity will be supplied by Southern California Edison, gas by Southern California Gas Company, telephone services by AT&T, and police and fire services by the City. Like all of Southern California, the land within the District is subject to seismic activity. Most of the District is not located in a designated Earthquake Study Zone. However, the Chino-Central Avenue fault is located approximately five miles from the District and the San Andreas Fault System is located approximately 20 miles from the District. The Federal Emergency Management Agency has determined that the District is located in a Zone X flood area (an area of minimal flooding, outside the 500-year flood plain), and flood insurance will not be required. An aerial photo showing the taxable property within the District and a map showing the general location of the District and the surrounding area appears on the pages before Page 1. More detailed information about the property therein is contained in APPENDIX B APPRAISAL REPORT, and information about the ownership of such property is set forth under the caption PROPERTY OWNERSHIP AND THE DEVELOPMENT. General information about the City is set forth in APPENDIX E. The Facilities The City and SL Ontario Development Company, LLC, the Master Developer, entered into an Acquisition and Funding Agreement, dated as of November 1, 2014 (the Acquisition Agreement ), which provides, among other things, the means by which certain public facilities will be financed in connection with the development within the District, including master interceptor drains and major drainage facilities, arterial street and interchange improvements, fire protection facilities, public facilities, median landscaping, library facilities, park and recreational facilities, police facilities, sewers and land, rights-of-way and easements necessary for any of such facilities (the Facilities ). Pursuant to the Acquisition Agreement, the Master Developer agreed to construct, and the City agreed to accept, certain Facilities to be acquired with the proceeds of the Bonds and available Special Taxes deposited into the Acquisition Account of the Improvement Fund under the Indenture pursuant to certain requirements contained in the Acquisition Agreement and the Indenture. The Acquisition Agreement also provides guidelines pursuant to which the City may acquire completed segments of the Facilities with the proceeds of the Bonds and available Special Taxes deposited into the Acquisition Account of the Improvement Fund. 20

29 Pursuant to the Acquisition Agreement, the Master Developer has agreed to pay all costs of the Facilities that it constructs pursuant to the Acquisition Agreement in excess of the moneys available therefor in the Acquisition Account of the Improvement Fund. Further, any lack of availability of amounts in the Acquisition Account of the Improvement Fund to pay the acquisition costs of the Facilities shall in no way diminish any obligation of the Master Developer with respect to the construction of or contributions for public facilities and mitigation measures required by the conditions of approval or any subdivision, development, or other agreement to which the Master Developer is a party, or any governmental approval to which the Master Developer or any land within the District is subject, except to the extent expressly set forth in such agreement or approval. As of May 16, 2016, all of the Facilities to be constructed by the Master Developer have been substantially completed within Phase I, pending final approval and acceptance by the City. In addition to the Facilities constructed by the Master Developer, under the Acquisition Agreement, Bond proceeds may be deposited into a Construction Account of the Improvement Fund under the Indenture to finance the costs of certain Facilities to be constructed by the City, for which the Master Developer will receive a credit for permit fees, or be reimbursed for permit fees previously paid, pursuant to the terms of the Acquisition Agreement. Direct and Overlapping Debt The District is included within the boundaries of numerous overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within the District is shown in Table 1 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments. 21

30 Assessed Valuation: $78,584,601 TABLE 1 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) DIRECT AND OVERLAPPING DEBT DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 5/1/16 Metropolitan Water District General Obligation Bonds 0.003% $ 2,977 Chaffey Community College District General Obligation Bonds ,322 Chaffey Union High School District General Obligation Bonds ,752 Mountain View School District General Obligation Bonds Mountain View School District SFID No. 1 General Obligation Bonds ,202 City of Ontario Community Facilities District No ,135,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $16,987,733 OVERLAPPING GENERAL FUND DEBT: San Bernardino County General Fund Obligations 0.042% $182,375 San Bernardino County Pension Obligation Bonds ,605 San Bernardino County Flood Control District General Fund Obligations ,730 Chaffey Community College District Certificates of Participation ,274 City of Ontario General Fund Obligations ,854 West Valley Vector Control District Certificates of Participation ,503 TOTAL OVERLAPPING GENERAL FUND DEBT $663,341 COMBINED TOTAL DEBT $17,651,074 (1) Ratios to Local Secured Assessed Valuation: Direct Debt % Total Direct and Overlapping Tax and Assessment Debt % Combined Total Debt % (1) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc. As shown in Table 2, the average total effective tax rate for completed single family detached homes conveyed to individual homeowners as of April 1, 2016 in the District range from approximately 1.88% to approximately 1.95% of the sales prices identified in the Appraisal. Such estimate assumes that the Rate and Method is amended as the District expects in accordance with Section C thereof concurrently with the issuance of the Bonds. 22

31 The following table sets forth projected sample tax bills for selected completed homes owned by individual homeowners within the Canopy Creek, Margate and Waterford neighborhoods for Fiscal Year TABLE 2 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) SAMPLE TAX BILLS Residential Floor Area (Sq. Ft.): 1,656 2,910 3,984 Community Name: Canopy Creek Margate Waterford Net Taxable Value Sales Price (1) $ 386, $ 494, $ 656, Less: Homeowner's Exemption (7,000.00) (7,000.00) (7,000.00) Net Taxable Value $ 379, $ 487, $ 649, Ad Valorem Property Taxes Rate Base Property Tax % $ 3, $ 4, $ 6, Chaffey College Bond Chaffey High Bond Mountain View Elementary Mountain View Elementary SFID # Metro Water Mid-Valley Debt Total Ad Valorem Property Taxes % $ 4, $ 5, $ 7, Parcel Charges, Assessments, and Special Taxes Vector Control Assessment #1 $ $ $ Metro Water - Water Standby City of Ontario CFD No. 23 (Park Place Services) (2) 1, , , City of Ontario CFD No. 24 (Park Place Facilities Phase 1) (3) 1, , , Total Parcel Charges, Assessments, and Special Taxes $ 3, $ 4, $ 5, Total Taxes $ 7, $ 9, $ 12, Total Effective Tax Rate 1.92% 1.95% 1.88% (1) (2) (3) Represents recent sales prices for sample lots as reported in the Appraisal. Equal to the maximum special tax for CFD No. 23. The maximum special tax for CFD No. 23 increases by 4% per year. Equal to the applicable Assigned Special Tax rate for the District. Sources: San Bernardino County Tax Collector s Office; Lewis Management Corp.; Harris Realty Appraisal; Goodwin Consulting Group, Inc. Property Values Appraisal. In order to provide information with respect to the value of the land within the District, the District engaged Harris Realty Appraisal to prepare the Appraisal. The principal 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 District and has no material relationships with the City, the District or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal and other similar engagements for the City. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the commission now known as California Debt and Investment Advisory Commission. A copy of the Appraisal is included as APPENDIX B to this Official Statement. 23

32 The purpose of the Appraisal was to estimate the as is market value of the fee simple estate, subject to special tax and special assessment liens, of the property within the District. Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal, the Appraiser concluded that, as of May 16, 2016, the minimum market value of the property within the District was not less than $128,500,000, including $53,100,000 for the 106 completed units conveyed to individual homeowners, and $75,400,000 for the homes and lots owned by the Developers. See APPENDIX B APPRAISAL REPORT. Reference is made to APPENDIX B for a complete list and full discussion of the applicable contingencies, assumptions and limiting conditions and the methodology employed by the Appraiser. In the event that any of the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within the District 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 the District would actually sell for the amount indicated by the Appraisal. The Appraisal merely indicates the Appraiser s opinion as to the minimum market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser s opinion reflects conditions prevailing in the applicable market as of the date of value. 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 further adversely change in the future. The Appraiser has specifically consented to the inclusion of the Appraisal in this Official Statement. Nevertheless, the Appraisal contains the following statement: 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 the Appraisal and the appraisers prevail, the party initiating such legal action shall reimburse Harris Realty Appraisal and/or the appraisers for any and all costs of any nature, including attorneys fees, incurred in their defense. It is a condition precedent to the issuance of the Bonds that the Appraiser deliver to the District a certification to the effect that nothing has come to the attention of the Appraiser subsequent to the date of the Appraisal that would cause the Appraiser to believe that the value of property in the District is less than the minimum value reported in the Appraisal. Value-to-Lien Ratios The value of the property within the District is significant because, in the event of a delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. Likewise, the ratio of the value of a parcel to its share of the Bonds is important because it provides an indication of the extent of the relative burden imposed on each parcel by the applicable Special Tax. As indicated above, the minimum appraised value of the property within the District is not less than $128,500,000. The ratio of that value to the $16,135,000 total principal amount of the Bonds is approximately 7.96-to-1. This ratio does not include other overlapping general obligation debt within the District. There is no other overlapping land secured special tax 24

33 or assessment bonded debt within the District. See Direct and Overlapping Debt. Taking other overlapping general obligation debt within the District into account, the ratio of the minimum appraised value to the total amount of existing bonded debt for the District of $16,987,733 is approximately 7.56-to-1. Table 3 sets forth the appraised value-to-lien ratios of all the taxable property within the District by development status as of May 16, Additionally, Table 4 below sets forth the stratification of value-to-liens of the parcels within the District, based on the appraised value of such parcels set forth in the Appraisal and such parcels respective shares of the principal amount of the Bonds (allocated to each parcel based upon its respective share of the total projected Fiscal Year Special Tax levy) and the ratio of the appraised value to its share of the Bonds and other direct and overlapping debt. 25

34 TABLE 3 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) APPRAISED VALUE-TO-LIEN RATIOS BY OWNERSHIP AND STATUS OF DEVELOPMENT Owner Status of Development (1) Parcels No. of Fiscal Year Special Tax Levy Percent of Fiscal Year Special Tax Levy Appraised Value (2) Bonds (3) Average Appraised Value-to-Lien Individual Homeowners Completed and Sold 106 $ 286, % $ 53,100,000 $ 4,117, KB Home Model Homes 6 $ 15, % $ 2,820,000 $ 223, Substantially Completed 4 10, ,540, , Under Construction 6 14, ,600, , Finished Lot , ,840,000 2,776, Subtotal - KB Home 98 $ 233, % $ 20,800,000 $ 3,356, CalAtlantic Model Homes 2 $ 5, % $ 1,000,000 $ 84, Substantially Completed 5 13, ,900, , Under Construction 6 16, ,700, , Finished Lot 20 54, ,200, , Subtotal - CalAtlantic 33 $ 91, % $ 7,800,000 $ 1,311, TRI Pointe Model Homes 6 $ 17, % $ 2,900,000 $ 244, Substantially Completed 13 37, ,900, , Under Construction 19 53, ,500, , Finished Lot , ,600,000 1,849, Subtotal - TRI Pointe 83 $ 236, % $ 19,900,000 $ 3,395, Woodside Model Homes 9 $ 23, % $ 4,400,000 $ 336, Substantially Completed 9 26, ,800, , Under Construction 10 27, ,500, , Finished Lot , ,200,000 2,841, Subtotal - Woodside 112 $ 275, % $ 26,900,000 $ 3,954, Grand Total 432 $ 1,124, % $ 128,500,000 $ 16,135, (1) Construction status as provided in the Appraisal. May not reflect classification of properties for purposes of the Special Tax levy. Since the date of value of the Appraisal which was May 16, 2016, as of July 15, 2016, an additional 25 units had been conveyed to individual homeowners within the District. See PROPERTY OWNERSHIP AND THE DEVELOPMENT The Development Plans. (2) Represents an allocation of the bulk market values reported in the Appraisal. The allocated values are not indicative of the market values of the groupings or the individual lots. (3) Equal to the principal amount of the Bonds. Does not include overlapping debt secured by ad valorem taxes on the property. Allocated based on the proportionate share of the projected Fiscal Year Special Tax levy. Other than the Bonds, there is no other overlapping land secured debt within the District. Sources: Harris Realty Appraisal; Stern Brothers & Co.; Goodwin Consulting Group, Inc. 26

35 Appraised Value-to-Lien Category No. of Parcels TABLE 4 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) APPRAISED VALUE-TO-LIEN RATIOS Fiscal Year Special Tax Levy Percent of Fiscal Year Special Tax Levy 27 Appraised Value (1) CFD Debt (2) Average Appraised Value-to-Lien 15:1 to 20:1 21 $ 46, % $ 9,609,007 $ 104, :1 to 15: , ,938,613 5,159, :1 to 10: , ,079,113 6,422, :1 to 5: , ,529,346 4,303, :1 to 3:1 2 10, , , Total 432 $ 1,124, % $ 128,500,000 $ 16,135, (1) Represents an allocation of the bulk market values reported in the Appraisal. The allocated values are not indicative of the market values of the groupings or the individual lots. (2) Equal to the principal amount of the Bonds. Does not include overlapping debt secured by ad valorem taxes on the property. Allocated based on the proportionate share of the Fiscal Year Special Tax levy. Other than the Bonds, there is no other overlapping land secured debt within the District. Source: Harris Realty Appraisal; Stern Brothers & Co.; Goodwin Consulting Group, Inc. Delinquency History The following table is a summary of Special Tax levies, collections and delinquency rates in the District for Fiscal Year , the first year of the Special Tax levy. Fiscal Year TABLE 5 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) SPECIAL TAX LEVIES, DELINQUENCIES AND DELINQUENCY RATES FISCAL YEAR Amount Levied Parcels Levied Parcels Delinquent Delinquencies as of June 30 of Fiscal Year Amount Delinquent Percent Delinquent $393, $4, % Source: Goodwin Consulting Group, Inc. PROPERTY OWNERSHIP AND THE DEVELOPMENT The information provided in this section has been included because it may be considered relevant to an informed evaluation and analysis of the Bonds and the District. No assurance can be given, however, that the proposed development of the property within the District will occur in a timely manner or in the configuration or to the density described herein, or that the Developers, any owners or affiliates thereof, or any other property owner described herein will or will not retain ownership of its respective property within the District. Neither the Bonds nor any of the Special Taxes are personal obligations of any property owner within the District. The Bonds are secured solely by the Net Special Tax Revenues and amounts on deposit

36 in certain of the funds and accounts maintained by the Trustee under the Indenture. See SPECIAL RISK FACTORS for a discussion of certain of the risk factors that should be considered in evaluating the investment quality of the Bonds. The following information regarding ownership and planned development of the District has been provided by the Master Developer and the respective Developers. No representation is made by the District as to the accuracy or adequacy of such information so provided. Master Developer The master developer within the District was SL Ontario Development Company, LLC, which is controlled by Lewis Management Corp. and Stratham Homes, Inc. The Master Developer sold the seven tracts to the Developers in December The Developers KB Home. KB Home is developing property within the District into two neighborhoods of single family detached residential homes known as Margate and Hadleigh. At completion, Margate and Hadleigh are expected to contain 53 dwelling units and 69 dwelling units, respectively. As of May 16, 2016, 10 units within Margate and 14 units within Hadleigh had been transferred to individual owners. Since May 16, 2016, as of July 15, 2016, an additional 1 unit had been conveyed to individual homeowners within the Margate neighborhood and an additional 5 units had been conveyed to individual homeowners within the Hadleigh neighborhood. As previously defined in this Official Statement, KB Home refers to KB HOME Coastal, 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 KB Home is a wholly owned subsidiary of KB Home, a Delaware corporation ( KB Home Parent Company ), which is an entity engaged primarily in the construction and development of residential communities. KB Home Parent Company is a publicly traded company listed on the New York Stock Exchange (the NYSE ) under the ticker symbol KBH. KB Home Parent Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of KB Home Parent Company and its subsidiaries (e.g. See KB Home Parent Company s Annual Report on Form 10-K for the fiscal year ended November 30, 2015, as filed with the SEC on January 25, 2016 and Quarterly Report on Form 10-Q for the quarter ended May 31, 2016 as filed with the SEC on July 8, 2016) as of the dates described therein. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including KB Home Parent Company. The address of such Internet web site is All documents subsequently filed by KB Home Parent Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of KB Home Parent Company s annual report, quarterly reports and current reports, including any amendments, will be available from KB Home Parent Company s website at The above Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. CalAtlantic. CalAtlantic is developing property within the District into one neighborhood of single family detached homes known as Camden. At completion, Camden is expected to contain 46 dwelling units. As of 28

37 May 16, 2016, 13 units within Camden had been transferred to individual owners. Since May 16, 2016, as of July 15, 2016, no additional units had been conveyed to individual homeowners within the Camden neighborhood. As previously defined in this Official Statement, CalAtlantic refers to CalAtlantic Group, Inc., a Delaware corporation, which is a homebuilder incorporated in Delaware in 1991 with principal executive offices located in Irvine, California. CalAtlantic is a publicly traded company with its stock listed on NYSE under the symbol CAA. CalAtlantic is subject to the informational requirements of the Exchange Act, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of CalAtlantic and its subsidiaries (e.g. See CalAtlantic s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on February 29, 2016 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 as filed with the SEC on July 29, 2016) as of the dates described therein. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including CalAtlantic. The address of such Internet web site is All documents subsequently filed by CalAtlantic pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of CalAtlantic s annual report, quarterly reports and current reports, including any amendments, will be available from CalAtlantic s website at The above Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. Woodside. Woodside is developing property within the District into two neighborhoods of single family detached residential homes known as Waterford and Canopy Creek. At completion, Waterford and Canopy Creek are expected to contain 65 dwelling units and 75 dwelling units, respectively. As of May 16, 2016, 12 units within Waterford and 16 units within Canopy Creek had been transferred to individual owners. Since May 16, 2016, as of July 15, 2016, an additional 5 units had been conveyed to individual homeowners within the Waterford neighborhood and an additional 7 units had been conveyed to individual homeowners within the Canopy Creek neighborhood. As previously defined in this Official Statement, Woodside refers to Woodside 05S, LP, a California limited partnership, which is wholly owned by Woodside Group, LLC, a Nevada limited liability company ( Woodside Group ), directly or through its wholly owned subsidiaries. Woodside is owned 99% directly by Woodside Group, as a limited partner. The remaining 1% interest is owned by WDS GP, Inc., a California corporation, as its general partner, which is wholly owned by Woodside Homes of California, Inc., a California corporation, which in turn is wholly owned by Woodside Group. The parent of Woodside Group is Woodside Homes Company, LLC, a Delaware limited liability company. Woodside Group and its subsidiaries were reorganized effective December 31, 2009, under Chapter 11 of the U.S. Bankruptcy Code, following the bankruptcy petitions that were filed on or about August 20, 2008, in the United States Bankruptcy Court for the Central District of California (Riverside Division). The bankruptcy cases for the reorganized Woodside Group entities were closed in August As of that date, pre-bankruptcy liability related to these entities had all been resolved, settled, or discharged in the bankruptcy process. Woodside Group s subsidiaries engage in the design, construction and sale of single-family homes in Arizona, California, Nevada, Texas and Utah under the brand name of Woodside Homes. Upon emergence 29

38 from bankruptcy on December 31, 2009, the parent of Woodside Group became PH Holding, LLC, a Delaware limited liability company, which later changed its name to Woodside Homes Company, LLC. TRI Pointe TRI Pointe is developing property within the District into two neighborhoods of single family detached residential homes known as Kensington and St. James. At completion, Kensington and St. James are expected to contain 67 dwelling units and 57 dwelling units, respectively. As of May 16, 2016, 14 units within Kensington and 27 units within St. James had been transferred to individual owners. Since May 16, 2016, as of July 15, 2016, an additional 2 units within the Kensington neighborhood and an additional 5 units within the St. James neighborhood had been conveyed to individual owners. As previously defined in this Official Statement, TRI Pointe refers to TRI Pointe Homes, Inc., a Delaware corporation. TRI Pointe is engaged in the design, construction and sale of single-family homes in master planned communities in major metropolitan areas located throughout Southern and Northern California and in Colorado. TRI Pointe is a wholly owned subsidiary of TRI Pointe Group, Inc., a Delaware corporation ( TRI Pointe Group ), which is an entity engaged primarily in the construction and development of residential communities. TRI Pointe Group is a publicly traded company listed on the NYSE under the ticker symbol TPH. TRI Pointe Group is subject to the informational requirements of the Exchange Act, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of TRI Pointe Group and its subsidiaries (e.g. See TRI Pointe Group s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on February 26, 2016 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 as filed with the SEC on July 27, 2016) as of the dates described therein. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including TRI Pointe Group. The address of such Internet web site is All documents subsequently filed by TRI Pointe Group pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of TRI Pointe Group s annual report, quarterly reports and current reports, including any amendments, will be available from TRI Pointe Group s website at The above Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. 30

39 Summary of Development The following table sets forth a summary of the development status within the District as of May 16, TABLE 6 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 Merchant Builder KB Home CalAtlantic Woodside TriPointe KB Home TriPointe Woodside Product Name Margate Camden Waterford Kensington Hadleigh St. James Canopy Creek Tract No (1) (2) (3) (4) (1) (4) (3) Total Completed Dwellings Models (Merchant Builder Owned) Production Dwellings Completed Production - Closed to Individual Homeowners Completed Production - Merchant Builder Owned Dwellings Under Construction Stucco Framing Finished Lots Totals Per Product (1) Since May 16, 2016, as of July 15, 2016, an additional five units had been conveyed to individual homeowners within the Margate neighborhood and an additional one unit had been conveyed to individual homeowners within the Hadleigh neighborhood. (2) Since May 16, 2016, as of July 15, 2016, no additional units had been conveyed to individual homeowners within the Camden neighborhood. (3) Since May 16, 2016, as of July 15, 2016, an additional five units had been conveyed to individual homeowners within the Waterford neighborhood and an additional seven units had been conveyed to individual homeowners within the Canopy Creek neighborhood. (4) Since May 16, 2016, as of July 15, 2016, an additional two units within the Kensington neighborhood and an additional five units within the St. James neighborhood had been conveyed to individual homeowners. Source: Developers. 31

40 The Development Plans General Description of the District. The District, which includes approximately 70.0 gross acres and approximately 50.4 net acres, is located in the master planned community known as Park Place. Park Place is located in the southern portion of the City, and is generally bounded by Archibald Avenue to the west, vacant land to the north and east, and dwellings and vacant land to the south. The vacant land to the east is a Southern California Edison high voltage right-of-way. Merrill Avenue forms the northerly line of the District. The District consists of seven neighborhoods which are projected to include a total of 432 single family dwellings at build-out. Acquisition Agreement and Status of Required Infrastructure. Pursuant to that certain Acquisition and Funding Agreement, dated as of November 1, 2014, by and between the City and the Master Developer, the Master Developer has constructed all of the public infrastructure improvements required under the Acquisition Agreement to support the planned development within the District and has sold all of its property within the District planned for the construction of residential units to the Developers. As of the date of this Official Statement, the Master Developer does not own any property within the District. A subdivision map has been recorded and all backbone infrastructure has been completed for the property in the District. KB Home Development Plan. KB Home plans to construct a total of 122 single-family detached homes on its property in the District within two neighborhood development projects known as Margate, planned to contain 53 units at completion, and Hadleigh, planned to contain 69 homes at completion. The Margate neighborhood is within Final Tract Map No and the Hadleigh neighborhood is within Final Tract Map No The Margate neighborhood development project includes three floor plans ranging in size from approximately 2,801 square feet to approximately 2,961 square feet on lots of approximately 3,825 square feet. As of May 16, 2016, base sales prices within the Margate neighborhood ranged from approximately $484,880 to approximately $505,880. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. The Hadleigh neighborhood development project includes three floor plans ranging in size from approximately 2,121 square feet to approximately 2,467 square feet on lots of approximately 3,150 square feet. As of May 16, 2016, base sales prices within the Hadleigh neighborhood ranged from approximately $434,880 to approximately $448,880. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. As of May 16, 2016, KB Home had completed the construction of 34 of the 122 homes planned to be constructed by KB Home within the District, including 24 homes which had been conveyed to individual homeowners, and 10 completed homes (including 6 model homes) which were owned by KB Home as of such date. As of May 16, 2016, KB Home had obtained building permits required to construct an additional 6 planned homes, which were under construction, and the remaining 82 lots owned by KB Home were in finished lot condition with building permits yet to be obtained. As of May 16, 2016, 55 homes within KB Home s Margate and Hadleigh neighborhoods in the District were in escrow. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. Since May 16, 2016, as of July 15, 2016, an additional 1 unit had been conveyed to individual homeowners within the Margate neighborhood and an additional 5 units had been conveyed to individual homeowners within the Hadleigh neighborhood, and KB Home had obtained an additional 6 building permits within the District. All of the backbone infrastructure required to serve KB Home s development projects within the District has been completed and no discretionary approvals or remediation is necessary in order for KB Home to obtain the remaining 82 building permits within the District. KB Home anticipates completing construction 32

41 and closing escrow to individual homebuyers on all of the remaining homes planned within the Margate and Hadleigh neighborhoods by December Summary of KB Home Development Plans. The table below details the planned and completed development by KB Home of its property within the District. Landowner Neighborhood/ Product Type TABLE 7 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT STATUS KB HOME (AS OF MAY 16, 2016) Estimated Number of Units Completed Units (Not Closed) (5) Units Under Construction (5) Finished Lots (1)(5) Units Under Contract to be Sold (2)(5) Units With Closed Escrows to Individual Homeowners KB Home Margate 53 6 (3) KB Home Hadleigh 69 4 (4) Total (1) (2) Includes finished lots for which no building permits have been issued. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. (3) Includes three homes currently used as model homes. (4) Includes three homes currently used as model homes. (5) Since May 16, 2016, as of July 15, 2016, an additional one unit had been conveyed to individual homeowners within the Margate neighborhood and an additional five units had been conveyed to individual homeowners within the Hadleigh neighborhood, and KB Home had obtained an additional six building permits within the District. Source: KB Home. 33

42 The table below details the plans and base sales prices of the remaining development to be completed by KB Home within the District. TABLE 8 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT PLANS BY NEIGHBORHOOD AND FLOOR PLAN KB HOME (AS OF MAY 16, 2016) Neighborhood Plan Square Feet No. of Lots Closed to Individual Homeowners (1) Base Sales Price (2) Margate 1 2, $484,880 Margate 2 2, ,880 Margate 3 2, ,880 Subtotal Hadleigh 1 2, $434,880 Hadleigh 2 2, ,880 Hadleigh 3 2, ,880 Subtotal Total (1) Since May 16, 2016, as of July 15, 2016, an additional one unit had been conveyed to individual homeowners within the Margate neighborhood and an additional five units had been conveyed to individual homeowners within the Hadleigh neighborhood. (2) As of May 16, Base sales prices are subject to change and are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. Source: KB Home. CalAtlantic Development Plan. CalAtlantic plans to construct a total of 46 single-family detached homes on its property in the District within one neighborhood development project known as Camden. The Camden neighborhood is within Final Tract Map No The Camden neighborhood development project includes three floor plans ranging in size from approximately 2,732 square feet to approximately 3,062 square feet on lots of approximately 4,250 square feet. As of May 16, 2016, base sales prices within the Camden neighborhood ranged from approximately $454,800 to approximately $499,510. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. As of May 16, 2016, CalAtlantic had completed the construction of 20 of the 46 homes planned to be constructed by CalAtlantic within the District, including 13 homes which had been conveyed to individual homeowners, and 7 completed homes (including 2 model homes) which were owned by CalAtlantic as of such date. As of May 16, 2016, CalAtlantic had obtained building permits required to construct an additional 14 planned homes, which were under construction, and the remaining 12 lots owned by CalAtlantic were in finished lot condition with building permits yet to be obtained. As of May 16, 2016, 5 homes were in escrow. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. Since May 16, 2016, as of July 15, 2016, no additional units had been conveyed to individual homeowners within the Camden neighborhood and no additional building permits had been obtained. 34

43 All of the backbone infrastructure required to serve CalAtlantic s development projects within the District has been completed and no discretionary approvals or remediation is necessary in order for CalAtlantic to obtain the remaining 20 building permits within the District. CalAtlantic anticipates completing construction and closing escrow to individual homebuyers on all of the remaining homes planned within the Camden neighborhood by February Summary of CalAtlantic Development Plans. The table below details the planned and completed development by CalAtlantic of its property within the District. Landowner Neighborhood/ Product Type TABLE 9 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT STATUS CALATLANTIC (AS OF MAY 16, 2016) Estimated Number of Units Completed Units (Not Closed) Units Under Construction (4) Finished Lots (1)(4) Units Under Contract to be Sold (2) Units With Closed Escrows to Individual Homeowners (4) CalAtlantic Camden 46 7 (3)(4) Total (1) (2) Includes finished lots for which no building permits have been issued. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. (3) Includes two homes currently used as model homes. (4) Since May 16, 2016, as of July 15, 2016, no additional units had been conveyed to individual homeowners within the Camden neighborhood and no additional building permits had been obtained. Source: CalAtlantic. The table below details the plans and base sales prices of the remaining development to be completed by CalAtlantic within the District. TABLE 10 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT PLANS BY NEIGHBORHOOD AND FLOOR PLAN CALATLANTIC (AS OF MAY 16, 2016) Neighborhood Plan Square Feet No. of Lots Closed to Individual Homeowners (1) Base Sales Price (2) Camden 1 2, $454,800 Camden 2 2, ,030 Camden 3 3, ,510 Total (1) Since May 16, 2016, as of July 15, 2016, no additional units had been conveyed to individual homeowners within the Camden neighborhood. (2) As of May 16, Base sales prices are subject to change and are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. Source: CalAtlantic. 35

44 Woodside Development Plan. Woodside plans to construct a total of 140 single-family detached homes on its properties in the District within two neighborhood development projects known as Waterford, planned to contain 65 units at completion, and Canopy Creek, planned to contain 75 homes at completion. The Waterford neighborhood is within Final Tract Map No and the Canopy Creek neighborhood is within Final Tract Map No The Waterford neighborhood development project includes four floor plans ranging in size from approximately 3,191 square feet to approximately 3,984 square feet on lots of approximately 6,300 square feet. As of May 16, 2016, base sales prices within the Waterford neighborhood ranged from approximately $567,880 to approximately $622,880. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. The Canopy Creek neighborhood development project includes five floor plans ranging in size from approximately 1,656 square feet to approximately 2,179 square feet on lots of approximately 2,108 square feet. As of May 16, 2016, base sales prices within the Canopy Creek neighborhood ranged from approximately $389,880 to approximately $429,880. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. As of May 16, 2016, Woodside had completed the construction of 46 of the 140 homes planned to be constructed by Woodside within the District, including 28 homes which had been conveyed to individual homeowners, and 18 completed homes (including 9 model homes) which were owned by Woodside as of such date. As of May 16, 2016, Woodside had obtained building permits required to construct an additional 10 planned homes, which were under construction, and the remaining 84 lots owned by Woodside were in finished lot condition with building permits yet to be obtained. As of June 29, 2016, 14 homes within Woodside s Waterford and Canopy Creek neighborhoods in the District were in escrow. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. Since May 16, 2016, as of July 15, 2016, an additional 5 units had been conveyed to individual homeowners within the Waterford neighborhood and an additional 7 units had been conveyed to individual homeowners within the Canopy Creek neighborhood. No additional building permits had been obtained. All of the backbone infrastructure required to serve Woodside s development projects within the District has been completed and no discretionary approvals or remediation is necessary in order for Woodside to obtain the remaining 84 building permits within the District. Woodside anticipates completing construction and closing escrow to individual homebuyers on all of the remaining homes planned within the Waterford neighborhood by April 2018 and the Canopy Creek neighborhood by December

45 Summary of Woodside Development Plans. The table below details the planned and completed development by Woodside of its property within the District. Landowner Neighborhood/ Product Type TABLE 11 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT STATUS WOODSIDE (AS OF MAY 16, 2016) (2) Estimated Number of Units Completed Units (Not Closed) (5) Units Under Construction Finished Lots (1) Units Under Contract to be Sold (2)(5) Units With Closed Escrows to Individual Homeowners (5) Woodside Waterford (3) Woodside Canopy Creek 75 8 (4) Total (1) Includes finished lots for which no building permits have been issued. (2) Homes under contract are as of June 29, Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. (3) Includes four homes currently used as model homes. (4) Includes five homes currently used as model homes. (5) Since May 16, 2016, as of July 15, 2016, an additional five units had been conveyed to individual homeowners within the Waterford neighborhood and an additional seven units had been conveyed to individual homeowners within the Canopy Creek neighborhood. Source: Woodside. 37

46 The table below details the plans and base sales prices of the remaining development to be completed by Woodside within the District. TABLE 12 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT PLANS BY NEIGHBORHOOD AND FLOOR PLAN WOODSIDE Neighborhood Plan Square Feet No. of Lots Closed to Individual Homeowners (1) Base Sales Price (2) Waterford 1 3, $567,880 Waterford 2 3, ,880 Waterford 3 3, ,880 Waterford 4 3, ,880 Subtotal Canopy Creek 1 1, $389,880 Canopy Creek 2 1, ,880 Canopy Creek 3 1, ,880 Canopy Creek 4 1, ,880 Canopy Creek 5 2, ,880 Subtotal Total (1) (2) Closings are as of July 15, As of May 16, Base sales prices are subject to change and are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. Source: Woodside. TRI Pointe Development Plan. TRI Pointe plans to construct a total of 124 single-family detached homes on its property in the District within two neighborhood development projects known as Kensington, planned to contain 67 units at completion, and St. James, planned to contain 57 homes at completion. The Kensington neighborhood is within Final Tract Map No and the St. James neighborhood is within Final Tract Map No The Kensington neighborhood development project includes three floor plans ranging in size from approximately 3,078 square feet to approximately 3,415 square feet on lots of approximately 5,000 square feet. As of May 16, 2016, base sales prices within the Kensington neighborhood ranged from approximately $485,900 to approximately $512,900. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. The St. James neighborhood development project includes three floor plans ranging in size from approximately 2,418 square feet to approximately 2,681 square feet on lots of approximately 3,811 square feet. As of May 16, 2016, base sales prices within the St. James neighborhood ranged from approximately $463,900 to approximately $470,900. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. As of May 16, 2016, TRI Pointe had completed the construction of 60 of the 124 homes planned to be constructed by TRI Pointe within the District, including 41 homes which had been conveyed to individual homeowners, and 19 completed homes (including 6 model homes) which were owned by TRI Pointe as of 38

47 such date. As of May 16, 2016, TRI Pointe had obtained building permits required to construct an additional 19 planned homes, which were under construction, and the remaining 45 lots owned by TRI Pointe were in finished lot condition with building permits yet to be obtained. Since May 16, 2016, as of July 15, 2016, TRI Pointe had conveyed to individual homeowners an additional 7 completed production units and had obtained an additional 16 building permits. As of July 15, 2016, 40 homes within TRI Pointe s Kensington and St. James neighborhoods in the District were in escrow. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. All of the backbone infrastructure required to serve TRI Pointe s development projects within the District has been completed and no discretionary approvals or remediation is necessary in order for TRI Pointe to obtain the remaining 24 building permits within the District. TRI Pointe anticipates completing construction and closing escrow to individual homebuyers on all of the remaining homes planned within the Kensington neighborhood by December 2017 and the St. James neighborhood by December Summary of TRI Pointe Development Plans. The table below details the planned and completed development by TRI Pointe of its property within the District. Landowner Neighborhood/ Product Type TABLE 13 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT STATUS TRI POINTE (AS OF JULY 15, 2016) Estimated Number of Units Completed Units (Not Closed) Units Under Construction Finished Lots (1) Units Under Contract to be Sold (2) Units With Closed Escrows to Individual Homeowners TRI Pointe Kensington 67 7 (3) TRI Pointe St. James 57 5 (4) Total (1) (2) Includes finished lots for which no building permits have been issued. Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. (3) Includes three homes currently used as model homes. (4) Includes three homes currently used as model homes. Source: TRI Pointe. 39

48 The table below details the plans and base sales prices of the remaining development to be completed by TRI Pointe within the District. TABLE 14 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 DEVELOPMENT PLANS BY NEIGHBORHOOD AND FLOOR PLAN TRI POINTE (AS OF JULY 15, 2016) Neighborhood Plan Square Feet No. of Lots Closed to Individual Homeowners Base Sales Price (1) Kensington 1 3, $485,900 Kensington 2 3, ,900 Kensington 3 3, ,900 Subtotal St. James 1 2, $463,900 St. James 2 2, ,900 St. James 3 2, ,900 Subtotal Total (1) As of July 15, Base sales prices are subject to change and are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. Source: TRI Pointe. KB Home Financing Plan To date, KB Home has financed its land acquisition and various site development and home construction costs related to its property in the District through home sales and internally generated funds. KB Home expects to use home sales and internal funding to complete its development in the District. However, home sales revenues for KB Home s project in the District are not segregated and set aside for the payment of costs required to complete its project in the District. Homes sales revenue is accumulated by KB Home and used to pay costs of KB Home operations, to pay debt service on outstanding debt, and for other corporate purposes, and may be diverted to pay costs other than the costs of completing the project in the District at the discretion of KB Home management. Notwithstanding the foregoing, KB Home believes that it will have sufficient funds available to complete its planned development in the District in accordance with the development schedule described in this Official Statement. Although KB Home expects to have sufficient funds available to complete its development in the District in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from KB Home or any other source when needed. For example, home sales revenue, which is accumulated daily for use in operations, to pay debt service on outstanding debt, and for other corporate purposes, may be diverted to pay costs other than the costs of completing the project in the District at the discretion of KB Home management. Neither KB Home nor any of its related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in the District. Any contributions by KB Home to fund the costs of such development and home construction are entirely voluntary. 40

49 If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by KB Home within the District and other financing by KB Home is not put into place, there could be a shortfall in the funds required to complete the planned development by KB Home in the District. The table below details KB Home s estimated construction budget for its development within the District. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, public facilities financing, and other matters. There can be no assurance that the actual development costs will not be greater than projected or occur sooner than projected, nor that the revenues will not be less than anticipated or be realized later than anticipated. TABLE 15 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 KB HOME CONSTRUCTION BUDGET (as of June 1, 2016) Incurred through June 1, 2016 June 2, 2016 Buildout Total Sources of Funds: Home Sales Revenue $ 13,765,900 $ 23,478,250 $ 37,244,150 Cash from Internal Sources 1,870, ,870,882 Total Sources of Funds $ 15,636,782 $ 23,478,250 $ 39,115,032 Uses of Funds: Site Development $ 2,372,300 $ 1,453,990 $ 3,826,290 Home Construction 10,056,400 6,163,655 16,220,055 Fees/Permits 2,525,984 1,548,184 4,074,168 Field Expense Selling & Marketing 103,497 92, ,068 Financial Other (Property Taxes) 578, , ,501 Internal Cash Repayment 0 1,870,882 1,870,882 Total Uses of Funds (1) $ 15,636,782 $ 11,287,182 $ 26,923,964 Net Cash Flow $ -- $ 12,191,068 $ 12,191,068 (1) Excludes land acquisition costs and non-cash items, such as capitalized costs and accruals. Source: KB Home. CalAtlantic Financing Plan As of June 1, 2016, CalAtlantic had expended approximately $8,608,431 million in land acquisition, site improvements, home construction costs, and other development, marketing and sales costs (exclusive of internal financing repayment and corporate overhead allocation) related to its property in the District. CalAtlantic expects the remaining site improvements, home construction costs and other development, marketing and sales costs (exclusive of internal financing repayment and corporate overhead allocation) related to its property in the District to be approximately $1,415,806 million as of June 1, To date, CalAtlantic has financed its land acquisition and various site development and home construction costs related to its property in the District through internally generated funds. CalAtlantic expects to use home sales, internal funding and funding under CalAtlantic s revolving credit facility (described below) to complete its development activities in the District. However, home sales revenue for CalAtlantic s projects in the District are not segregated and set aside for the payment of costs required to complete its activities in the 41

50 District. Home sales revenue is accumulated and used to pay costs of operations for CalAtlantic and its subsidiaries, to pay debt service on outstanding debt and for other corporate purposes, and may be diverted to pay costs other than the costs of completing CalAtlantic s activities in the District at the discretion of CalAtlantic s management. Notwithstanding the foregoing, CalAtlantic believes that it will have sufficient funds available to complete its proposed development activities in the District in accordance with the development schedule described in this Official Statement. As of June 30, 2016, CalAtlantic was party to a $750 million unsecured revolving credit facility (the CalAtlantic Revolving Facility ), which matures in October The CalAtlantic Revolving Facility has an accordion feature under which the aggregate commitment may be increased up to $1.2 billion, subject to the availability of additional bank commitments and certain other conditions. The CalAtlantic Revolving Facility contains certain covenants and conditions which may limit the amount that CalAtlantic may borrow or have outstanding at any time. As of June 30, 2016, CalAtlantic had no amounts outstanding under the CalAtlantic Revolving Facility and had outstanding letters of credit issued under the CalAtlantic Revolving Facility totaling $113.4 million, leaving $636.6 million available under the CalAtlantic Revolving Facility to be drawn as of such date. CalAtlantic s ability to renew the CalAtlantic Revolving Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and CalAtlantic s financial condition and strength. Although CalAtlantic expects to have sufficient funds available to complete its development activities in the District in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from CalAtlantic or any other source when needed. For example, borrowings under the CalAtlantic Revolving Facility may not be available, and home sales revenue, which is accumulated daily for use in operations by CalAtlantic, including to fund costs of other direct and indirect subsidiaries, to pay debt service on outstanding debt and for other corporate purposes, may be diverted to pay costs other than the costs of completing CalAtlantic s activities in the District at the discretion of CalAtlantic s management. Neither CalAtlantic, nor its lenders, nor any of their related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on CalAtlantic s property in the District. Any contributions by CalAtlantic to fund the costs of such development and home construction are entirely voluntary. If and to the extent that internal funding, including but not limited to home sales revenues, and borrowings under the Revolving Facility are inadequate to pay the costs to complete the planned development by CalAtlantic within the District and other financing by CalAtlantic is not put into place, there could be a shortfall in the funds required to complete the proposed development by CalAtlantic in the District and the remaining portions of the development may not be developed. Woodside Financing Plan To date, Woodside has financed its development activities in the District with internal funding, including advances from affiliates of its ultimate parent, Woodside Homes Company, LLC. Woodside Homes Company, LLC has a $305,000,000 unsecured debt indenture of which Wells Fargo Bank, National Association, is Trustee (the Woodside Indenture ). Woodside Homes Company, LLC also has an unsecured revolving credit facility with current borrowing capacity as of June 1, 2016 of $120 million, subject to a borrowing base, of which JP Morgan Chase Bank N.A. is administrative agent (the Woodside Credit Facility ). Woodside is one of the guarantors under the Woodside Indenture and the Woodside Credit Facility. Woodside intends to use these same sources to finance the home construction costs and carrying costs for its development in the District (including property taxes and the Special Taxes) until full sell-out of its planned single-family detached homes in the District. 42

51 Notwithstanding Woodside s belief that it will have sufficient funds to complete its planned development in the District, no assurance can be given that sources of financing available to Woodside will be sufficient to complete the property development and home construction as currently anticipated. While affiliates of Woodside have made such internal financing available in the past, there can be no assurance whatsoever of their willingness or ability to do so in the future. Neither Woodside nor any of its affiliates have any legal obligation of any kind to make any such funds available or to obtain loans. If and to the extent that internal financing and sales revenues are inadequate to pay the costs to complete Woodside s planned development within the District and other financing by Woodside or its affiliates is not put into place, there could be a shortfall in the funds required to complete the proposed development by Woodside and portions of the project may not be developed. The table below details Woodside s estimated construction budget for its development within the District. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, public facilities financing, and other matters. There can be no assurance that the actual development costs will not be greater than projected or occur sooner than projected, nor that the revenues will not be less than anticipated or be realized later than anticipated. TABLE 16 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 WOODSIDE CONSTRUCTION BUDGET (as of July 1, 2016) Incurred through June 30, 2016 July 1, 2016 Buildout Total Sources of Funds: Home Sales Revenue $ 19,427,617 $ 55,159,797 $ 74,587,414 Total Sources of Funds $ 19,427,617 $ 55,159,797 $ 74,587,414 Uses of Funds: Land Costs $ 8,328,372 $ 22,104,701 $ 30,433,073 Direct Construction Costs 9,567,146 26,355,353 35,922,499 Selling & Marketing 988,797 2,434,370 3,423,167 Total Uses of Funds (1) $ 18,884,315 $ 50,894,424 $ 69,778,739 Net Cash Flow $ 543,302 $ 4,265,373 $ 4,808,675 (1) Excludes non-cash items, such as capitalized costs and accruals. Source: Woodside. TRI Pointe Financing Plan To date, TRI Pointe has financed its land acquisition and home construction costs related to its activities in the District through internal sources, including funding from its parent, TRI Pointe Group. TRI Pointe intends to use this source of funds, together with proceeds of future home sales, to finance its remaining home construction costs and carrying costs for its activities in the District (including the payment of property taxes and the Special Taxes) until full sell-out of all of its planned homes in the District. However, home sales revenues from TRI Pointe s activities in the District are not segregated and set aside for completing the homes in the District. Home sales revenue is swept daily from TRI Pointe for use in corporate operations, to pay down debt and for other corporate purposes and might get diverted to other TRI Pointe and TRI Pointe Group needs at the discretion of management. Notwithstanding the foregoing, TRI Pointe believes that it will have sufficient funds to complete its construction of homes in the District. 43

52 As of June 30, 2016, TRI Pointe Group was a party to a $625 million unsecured revolving credit facility (the TRI Pointe Group Credit Facility ), which matures on May 18, 2019, and contains a sublimit of $75 million for letters of credit. TRI Pointe Group may borrow under the TRI Pointe Group Credit Facility in the ordinary course of business to fund its operations, including its land development and homebuilding activities. The TRI Pointe Group Credit Facility contains a borrowing base and certain covenants which may limit the amount TRI Pointe Group may borrow or have outstanding at any time. As of June 30, 2016, the outstanding balance under the TRI Pointe Group Credit Facility was $100 million with $520 million of availability after considering the borrowing base provisions and outstanding letters of credit. As of June 30, 2016, TRI Pointe Group had outstanding letters of credit of $5 million. TRI Pointe Group s ability to renew the TRI Pointe Group Credit Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and TRI Pointe Group s financial condition and strength. Although TRI Pointe expects to have sufficient funds available to complete its planned construction of homes in the District, no assurance can be given that the sources of financing available to TRI Pointe will be sufficient to complete the home construction as currently anticipated. While TRI Pointe Group 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 TRI Pointe nor any affiliate thereof has any legal obligation of any kind to make any such funds available or to obtain loans. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete TRI Pointe s planned home construction within the District and other financing by TRI Pointe is not put into place, there could be a shortfall in the funds required to complete the proposed home construction by TRI Pointe. The table below details TRI Pointe s estimated construction budget for its development within the District. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, public facilities financing, and other matters. There can be no assurance that the actual development costs will not be greater than projected or occur sooner than projected, nor that the revenues will not be less than anticipated or be realized later than anticipated. 44

53 TABLE 17 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 TRI POINTE CONSTRUCTION BUDGET (as of June 1, 2016) Incurred through June 1, 2016 June 2, 2016 Buildout Total Sources of Funds: Home Sales Revenue $ 20,265,536 $ 39,989,905 $ 60,255,441 Cash from Internal Sources 7,484, ,484,409 Total Sources of Funds $ 27,749,945 $ 39,989,905 $ 67,739,850 Uses of Funds: Site Development $ 3,786,657 $ 1,930,868 $ 5,715,525 Home Construction 10,857,090 9,750,322 20,607,412 Fees/Permits 3,818, ,744 4,260,387 Field Expense 1,205, ,621 1,818,796 Selling & Marketing 4,714,827 1,146,697 5,861,524 Financial Other (Property Taxes) 3,367,553 1,635,301 5,002,854 Internal Cash Repayment -- 7,484,409 7,484,907 Total Uses of Funds (1) $ 27,749,945 $ 23,002,962 $ 50,752,907 Net Cash Flow $ -- $ 16,986,943 $ 16,986,943 (1) Excludes land acquisition costs and non-cash items, such as capitalized costs and accruals. Source: TRI Pointe. History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy KB Home. KB Home has represented to the District in a Letter of Representations (the KB Home Letter of Representations ) as follows: 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of KB Home or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither KB Home nor, to the Actual Knowledge of KB Home (defined below), any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect KB Home s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of KB Home) prior to delinquency. 2. Except as set forth in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against KB Home (with proper service of process to KB Home having been accomplished) or, to the Actual Knowledge of KB Home, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of KB Home is threatened in writing against KB Home or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Fund established under the Indenture), (b) to restrain or enjoin the development of the Property as proposed in this Official Statement, (c) in any way contesting or affecting the validity of the Special Taxes, or (d) which is reasonably likely to 45

54 materially and adversely affect KB Home s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of KB Home) prior to delinquency. 3. KB Home has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that KB Home and its Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of KB Home, during the last five years, neither KB Home nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed against the delinquent KB Home or its Affiliate. 4. To the Actual Knowledge of KB Home, KB Home is able to pay its bills as they become due and no legal proceedings are pending against KB Home (with proper service of process having been accomplished) or, to the Actual Knowledge of KB Home, threatened in writing in which KB Home may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of KB Home, Affiliates of KB Home are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of KB Home (with proper service of process having been accomplished) or to the Actual Knowledge of KB Home, threatened in writing in which the Affiliates of KB Home may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of KB Home, the following defined terms and phrases have the following meanings: Affiliate means, with respect to KB Home, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with KB Home, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the District and investment decision regarding the Bonds (i.e., information relevant to (a) KB Home s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of KB Home) prior to delinquency, or (b) such Person s assets or funds that would materially affect KB Home s ability to develop the Property as proposed in this Official Statement or to pay its Special Taxes on the Property (to the extent the responsibility of KB Home) prior to delinquency or (c) such Person s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect KB Home s ability to comply with its obligations under the Developer Continuing Disclosure Agreement). Person means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term control (including the terms controlling, controlled by or under common control with ) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 46

55 Actual Knowledge of KB Home means the knowledge that the authorized officer or representative of KB Home (the Authorized Officer ) signing the KB Home Letter of Representations has as of the date of the KB Home Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of KB Home and its Affiliates as the Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the KB Home Letter of Representations, and/or (ii) review of documents that were reasonably available to the Authorized Officer and which such Authorized Officer has reasonably deemed necessary for the Authorized Officer to obtain knowledge of the matters set forth in the KB Home Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of KB Home s current business and operations. The Authorized Officer has not contacted employees who are no longer with KB Home or its Affiliates. Property means taxable property within the District held in the name of KB Home. CalAtlantic. 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of CalAtlantic or its Affiliates, that are secured by an interest in the Property. Neither CalAtlantic nor, to the Actual Knowledge of CalAtlantic, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect CalAtlantic s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of CalAtlantic) prior to delinquency. 2. Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against CalAtlantic (with proper service of process to CalAtlantic having been accomplished) or, to the Actual Knowledge of CalAtlantic, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of CalAtlantic is threatened in writing against CalAtlantic or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Fund established under the Indenture), (b) to restrain or enjoin the development of the Property as described in this Official Statement, (c) in any way contesting or affecting the validity of the Special Taxes, or (d) which is reasonably likely to materially and adversely affect CalAtlantic s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of CalAtlantic) prior to delinquency. 3. As a large, nation-wide developer of residential projects, CalAtlantic cannot represent with assurance that neither it nor any Affiliate has never been delinquent in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of CalAtlantic, during the last five years, neither CalAtlantic nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent CalAtlantic or its Affiliate. 4. To the Actual Knowledge of CalAtlantic, CalAtlantic is able to pay its bills as they become due and no legal proceedings are pending against CalAtlantic (with proper service of process having been accomplished) or, to the Actual Knowledge of CalAtlantic, threatened in writing in which CalAtlantic may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of 47

56 time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of CalAtlantic, Affiliates of CalAtlantic are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of CalAtlantic (with proper service of process having been accomplished) or to the Actual Knowledge of CalAtlantic, threatened in writing in which the Affiliates of CalAtlantic may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of CalAtlantic, the following defined terms and phrases have the following meanings: Actual Knowledge of CalAtlantic shall mean the knowledge that the authorized officer or representative of CalAtlantic (the Authorized Officer ) signing the CalAtlantic Letter of Representations has as of the date of the CalAtlantic Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of CalAtlantic and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the CalAtlantic Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such representative to obtain knowledge of the matters set forth in the CalAtlantic Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of CalAtlantic s current business and operations. CalAtlantic notes that it underwent a restructuring in 2011, which included new personnel, office closures and employee layoffs at all levels of management and staff. Individuals who are no longer employees of CalAtlantic have not been contacted. CalAtlantic further notes that it recently completed a merger with The Ryland Group, Inc., a Maryland corporation ( Ryland Group ), pursuant to which Ryland Group merged with and into CalAtlantic, with CalAtlantic being the surviving entity. Individuals who were employees and officers of Ryland Group and its subsidiaries prior to the merger have not been consulted or contacted and documents entered into by Ryland and its subsidiaries or related to their properties and projects have not been reviewed. Affiliate means, with respect to CalAtlantic, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with CalAtlantic, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the District and investment decision regarding the Bonds (i.e., information relevant to (a) CalAtlantic s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of CalAtlantic) prior to delinquency, or (b) such Person s assets or funds that would materially affect CalAtlantic s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property (to the extent the responsibility of CalAtlantic) prior to delinquency). For purposes hereof, Affiliates shall exclude MP CA Homes, LLC and its Affiliates (other than CalAtlantic and its direct or indirect subsidiaries). Person means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. Control (including the terms controlling, controlled by or under common control with ) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Property means the property within the District held in the name of CalAtlantic. 48

57 Woodside. Woodside has represented to the District in a Letter of Representations (the Woodside Letter of Representations ) as follows: 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of Woodside or its Affiliates, that are secured by an interest in the Property. Neither Woodside nor, to the Actual Knowledge of Woodside, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect Woodside s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of Woodside) prior to delinquency. 2. Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against Woodside (with proper service of process to Woodside having been accomplished) or, to the Actual Knowledge of Woodside, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of Woodside is threatened in writing against Woodside or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Fund established under the Indenture), (b) to restrain or enjoin the execution by Woodside of the Developer Continuing Disclosure Agreement and performance by Woodside of its obligations thereunder, (c) to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is reasonably likely to materially and adversely affect Woodside s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of Woodside) prior to delinquency. 3. Woodside has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that Woodside and its Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of Woodside, during the last five years, neither Woodside nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent Woodside or its Affiliate. 4. To the Actual Knowledge of Woodside, Woodside is able to pay its bills as they become due and no legal proceedings are pending against Woodside (with proper service of process having been accomplished) or, to the Actual Knowledge of Woodside, threatened in writing in which Woodside may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of Woodside, Affiliates of Woodside are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of Woodside (with proper service of process having been accomplished) or to the Actual Knowledge of Woodside, threatened in writing in which the Affiliates of Woodside may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 49

58 As used in the above representations of Woodside, the following defined terms and phrases have the following meanings: Affiliate means, with respect to Woodside, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Woodside, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the District and investment decision regarding the Bonds (i.e., information relevant to (a) Woodside s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of Woodside) prior to delinquency, or (b) such Person s assets or funds that would materially affect Woodside s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property (to the extent the responsibility of Woodside) prior to delinquency, or (c) such Person s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect Woodside s ability to comply with its obligations under the Developer Continuing Disclosure Agreement). Person means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term control (including the terms controlling, controlled by or under common control with ) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Actual Knowledge of Woodside means the knowledge that the authorized officer or representative of Woodside (the Authorized Officer ) signing the Woodside Letter of Representations has as of the date of the Woodside Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Woodside and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Woodside Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such representative to obtain knowledge of the matters set forth in the Woodside Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Woodside s current business and operations. Individuals who are no longer employees of Woodside and its Affiliates have not been contacted. Property means taxable property within the District held in the name of Woodside. TRI Pointe. TRI Pointe has represented to the District in a Letter of Representations (the TRI Pointe Letter of Representations ) as follows: 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of TRI Pointe or its Affiliates, that are secured by an interest in the Property. Neither TRI Pointe nor, to the Actual Knowledge of TRI Pointe, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect TRI Pointe s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of TRI Pointe) prior to delinquency. 2. Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against TRI Pointe (with proper service of process to TRI Pointe having been accomplished) or, to the Actual 50

59 Knowledge of TRI Pointe, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of TRI Pointe is threatened in writing against TRI Pointe or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Fund established under the Indenture), (b) to restrain or enjoin the execution by TRI Pointe of the Developer Continuing Disclosure Agreement and performance by TRI Pointe of its obligations thereunder, (c) to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is reasonably likely to materially and adversely affect TRI Pointe s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property (to the extent the responsibility of TRI Pointe) prior to delinquency. 3. TRI Pointe and its Affiliates have been developing or have been involved in the development of numerous projects over an extended period of time. It is likely that the Developer and some of its Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes on property in California owned by TRI Pointe and any such Affiliates. However, to the Actual Knowledge of TRI Pointe, during the last five years, neither TRI Pointe nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent TRI Pointe or its Affiliate. 4. To the Actual Knowledge of TRI Pointe, TRI Pointe is able to pay its bills as they become due and no legal proceedings are pending against TRI Pointe (with proper service of process having been accomplished) or, to the Actual Knowledge of TRI Pointe, threatened in writing in which TRI Pointe may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of TRI Pointe, Affiliates of TRI Pointe are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of TRI Pointe (with proper service of process having been accomplished) or to the Actual Knowledge of TRI Pointe, threatened in writing in which the Affiliates of TRI Pointe may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of TRI Pointe, the following defined terms and phrases have the following meanings: Affiliate means, with respect to TRI Pointe, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with TRI Pointe, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the District and investment decision regarding the Bonds (i.e., information relevant to (a) TRI Pointe s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of TRI Pointe) prior to delinquency, or (b) such Person s assets or funds that would materially affect TRI Pointe s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property (to the extent the responsibility of TRI Pointe) prior to delinquency, or (c) such Person s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect TRI Pointe s ability to comply with its obligations under the Developer Continuing Disclosure Agreement). Based on the foregoing definition, it is TRI Pointe s belief that 51

60 its parent company, TRI Pointe Group, Inc., a Delaware corporation ( TRI Pointe Group ) is TRI Pointe s only Affiliate. Person means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term control (including the terms controlling, controlled by or under common control with ) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Actual Knowledge of TRI Pointe means the knowledge that the authorized officer or representative of TRI Pointe (the Authorized Officer ) signing the TRI Pointe Letter of Representations has as of the date of the TRI Pointe Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of TRI Pointe and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the TRI Pointe Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such representative to obtain knowledge of the matters set forth in the TRI Pointe Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of TRI Pointe s current business and operations. Individuals who are no longer employees of TRI Pointe and its Affiliates have not been contacted. Property means taxable property within the District held in the name of TRI Pointe. SPECIAL RISK FACTORS The principal source of payment of debt service on the Bonds will be payments of the Special Tax made with respect to the Taxable Property. As discussed under SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Special Taxes, the Special Tax is to be levied annually against all such Taxable Property either at the maximum rate authorized by the Rate and Method or at such lower rates as are determined by the District Administrator to raise sufficient funds to comply with the agreements, conditions, covenants and terms contained in the Indenture, and in accordance with the Act. The Special Tax is to be collected on the tax roll of the District at the same time and in the same manner as general ad valorem real property taxes are collected. The Special Tax cannot be levied at a tax rate higher than the maximum tax rate even if the maximum tax rate will not produce sufficient Net Special Tax Revenues to pay the principal and interest then payable with respect to the Bonds. See discussions below under Levy of the Special Tax and Collection of the Special Tax. Payment of the Special Tax levied on a parcel is secured by a continuing lien against such parcel. In the event an installment of the Special Tax included in the tax bill for a parcel of Taxable Property is not paid when due, the District has covenanted to institute foreclosure proceedings in court to cause the parcel to be sold in order to attempt to recover the delinquent amount from the sale proceeds. Foreclosure and sale may not always result in the recovery of the full amount of delinquent installments of the Special Tax. See Collection of the Special Tax. The sufficiency of the foreclosure sale proceeds to cover the delinquent amount depends in part upon the market for and the value of the parcel at the time of the sale. Sufficiency of the foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. Further, other governmental claims, such as hazardous substance claims, may affect the realizable value even though such claims may not rise to the status of liens. See Hazardous Substances. 52

61 Timely foreclosure and sale proceedings with respect to a parcel of Taxable Property may be forestalled or delayed by a stay in the event the owner of the parcel becomes the subject of bankruptcy proceedings. Not only may foreclosure and sale proceedings be forestalled or delayed, but the sale of a parcel may also be similarly affected by a bankruptcy stay. Further, should the stay not be lifted, payment of the Special Tax may be subordinated to bankruptcy law priorities. See Bankruptcy and Legal Delays. Although bankruptcy proceedings may forestall or delay a foreclosure and sale or a tax sale of a delinquent parcel of Taxable Property, the Special Tax is secured by a lien which, assuming proper procedures are followed, may be enforced against the parcel. There may not be any recourse against a bankrupt property owner since the owner is not personally obligated to pay the Special Tax. Further, if proper disclosure of the authorization of the Special Tax is not made to the owner, the willingness or ability of an owner to pay the Special Tax may be adversely affected. See Payment of the Special Tax is Not a Personal Obligation of the Owners. The District is not obligated to advance funds to pay such debt service except from moneys on deposit in the Reserve Fund. See Bonds Are Limited Obligations. Even if debt service is timely paid, interest on the Bonds may have to be included in the gross income of the owner of the Bonds by reason of some circumstance occurring subsequent to issuance of the Bonds, thereby reducing the after-tax yield. See Loss of Tax Exemption. Risks of Real Estate Secured Investments Generally Declines in Value Purchasers of the Bonds 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 property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses. Levy of the Special Tax The principal source of money with which to pay debt service on the Bonds is the proceeds derived from the annual levy and collection of the Special Tax applicable to the Taxable Property in the District. The amount of the Special Tax that can be levied is limited to the maximum tax rates authorized pursuant to the Rate and Method. Additionally, pursuant to Section 53321(d) of the Government Code, the Special Tax levied against any Assessor s parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other Assessor s parcel within the District by more than ten percent above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax on residential parcels in all years. The levies cannot be made at higher rates even if the failure to do so would result in insufficient Net Special Tax Revenues to pay the principal of and interest on the Bonds as the same become due and payable. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of a particular parcel and the amount of the levy of the Special Tax against such parcel. Thus, there will rarely, if ever, be a uniform relationship between the value of a parcel and its proportionate share of the debt service on the Bonds. The Special Tax levied in any particular Fiscal Year on a parcel is based upon the revenue needs of the District and the application of the Rate and Method. The application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel by comparison with similar development factors with respect to the other parcels in the District. Thus, in addition to annual variations in the revenue needs of the District that must be met from the Special Tax, the following are some of the factors 53

62 which might cause the levy of the Special Tax on any particular parcel to vary from the Special Tax that might otherwise be expected: Reduction in the number of parcels of Taxable Property, for reasons such as acquisition of such parcels by a governmental entity and failure of the governmental entity 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, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property; and Failure of the owners of certain parcels of Taxable Property to pay the applicable Special Tax and delays in the collection of or inability to collect such Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. Collection of the Special Tax The timely payment of the principal of and interest on the Bonds is ultimately dependent upon the timely payment of all Special Taxes. Any money on deposit in the Reserve Fund can be used to make such payment in the event of delinquencies, but the replenishment of the Reserve Fund will be dependent on the recovery of such delinquencies. The Indenture provides that the Special Tax is to be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable (or in such other manner as the City Council shall determine, including direct billing of the affected property owners) and, except as provided in the special covenant for foreclosure described under the caption SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Covenant for Superior Court Foreclosure and in the Act, is to be subject to the same proportionate penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes on real property. Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the District may order the institution of a superior court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. However, the District has covenanted for the benefit of the owners of the Bonds that it will institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installments of the Special Tax under certain circumstances. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Covenant for Superior Court Foreclosure. In the event that foreclosure proceedings are commenced, such foreclosure proceedings could be stayed by the commencement of bankruptcy proceedings by or against the owner of the property being foreclosed. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the 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. The District may be unable to make full or timely payment of debt service on the Bonds if property owners in the District fail to pay installments of the Special Tax when due, if the Reserve Fund is depleted, or if the District is unable to sell foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax. Failure to Develop Properties Development of property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the Developers, or any other property owner to pay the Special Taxes prior to delinquency. 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. There is always the possibility that such approvals 54

63 will not be obtained or, if obtained, will not be obtained on a timely basis. Failure to obtain any such agency approval or satisfy such governmental requirements would adversely affect planned land development. Development of land in the District is also subject to the availability of water. Finally, development of land is subject to economic considerations. As of May 16, 2016, 106 single family detached units had been completed and conveyed to individual homeowners, an additional 31 completed production units and 23 model homes had been completed and were owned by the Developers, 41 production units were in various stages of construction and the remaining 231 lots were in a finished lot condition. The 326 parcels not conveyed to individual homeowners were owned by the Developers as of May 16, Since May 16, 2016, as of July 15, 2016, an additional 25 units had been conveyed to individual homeowners within the District. As of May 16, 2016, all of the property within the District had been mass-graded and all sewer, water, storm drains, streets, curbs and gutters were complete for all 432 lots within the District. See THE COMMUNITY FACILITIES DISTRICT and PROPERTY OWNERSHIP AND THE DEVELOPMENT. However, no assurance can be given that the remaining planned residential development will be partially or fully completed; and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and unimproved. Undeveloped or partially developed land is inherently less valuable than developed land and provides less security to the 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 in the District as planned, or substantial delays in the completion of the development may reduce the value of the property within the District and increase the length of time during which Special Taxes will be payable from undeveloped property, and may affect the willingness and ability of the owners of property within the District to pay the Special Taxes prior to delinquency. There can be no assurance that land development operations within the District 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. A slowdown of the development process and the absorption rate could adversely affect land values and reduce the ability or desire of the property owners to pay the annual Special Taxes. In that event, there could be a default in the payment of principal of, and interest on, the Bonds when due. Bond Owners should assume that any event that significantly impacts the ability to develop land in the District would cause the property values within the District to decrease substantially from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the Special Taxes prior to delinquency. The payment of principal of and interest on the Bonds is dependent upon the receipt of Special Taxes levied on Developed Property and Undeveloped Property. Undeveloped Property is less valuable per unit of area than Developed Property, especially if there are no plans to develop such land or if there are severe restrictions on the development of such land. The Undeveloped Property also provides less security to the Bond Owners should it be necessary for the District to foreclose on Undeveloped Property due to the nonpayment of the Special Taxes. Furthermore, an inability to develop the land within the District as currently planned will make the Bond Owners dependent upon timely payment of the Special Taxes levied on Undeveloped Property. A slowdown or stoppage in the continued development of the District could reduce the willingness and ability of the Developers to make Special Tax payments on Undeveloped Property and could greatly reduce the value of such property in the event it has to be foreclosed upon. 55

64 Concentration of Property Ownership Based on the ownership as of May 16, 2016, KB Home, CalAtlantic, Woodside and TRI Pointe are projected to be responsible for approximately 20.80%, 8.13%, 21.04% and 24.51%, respectively, of the total Fiscal Year Special Tax to be levied within the District. Since May 16, 2016, as of July 15, 2016, an additional 25 units had been conveyed to individual homeowners within the District. While the District includes 131 parcels of completed single family detached homes owned by individual homeowners as of July 15, 2016, the inability or refusal of the Developers to pay the Special Tax applicable to its property when due could result in the depletion of the Reserve Fund prior to replenishment thereof from sale or foreclosure proceedings, and/or insufficient money with which to pay the principal of and interest on the Bonds as the same became due. Additionally, pursuant to the Act, the Special Taxes levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or default. As a result, while the Maximum Special Taxes pursuant to the Rate and Method may be higher, Maximum Special Taxes on parcels of residential parcels cannot be greater than 110% of the projected actual Special Tax levy on such parcels. Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that properties or entities of the State, federal or local government are exempt from the Special Tax; provided, however, that property in the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. 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. The constitutionality and operation of these provisions of the Act have not been tested. In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property in the District, it may be unconstitutional. If for any reason property in the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Properties in the District. 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 timely payment of the Special Tax. Moreover, if a substantial portion of property in the District becomes exempt from the Special Tax because of public ownership, or otherwise, the Maximum Annual Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default would occur with respect to the payment of such principal and interest. Constitutional Limitations on Taxation and Appropriations Articles XIIIA and XIIIB of the California Constitution. On June 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative), which added Article XIIIA to the California Constitution. The effect of Article XIIIA is to significantly limit the imposition of new ad valorem taxes, special taxes, transaction taxes, and sales taxes. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA. Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1% of full cash value as determined by the county assessor. Article XIIIA defines full cash value to mean the county assessor s valuation of real property as shown on the tax bill under full cash value or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. The full cash value is subject to annual adjustment to reflect 56

65 increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and allows local governments to raise their property tax rates above the constitutionally mandated 1% ceiling for the purpose of paying off certain new general obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem taxes, special taxes, transaction taxes, and sales taxes. In addition, Article XIIIA requires the approval of two-thirds of all members of the California Legislature to change any State laws resulting in increased tax revenues. Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that the City or the District will have surplus funds, other than the Reserve Account for the Bonds, with which to advance funds to make any payments or to cure any deficiency in the Interest Account or Principal Account of the Special Tax Fund, should the City or the District, as applicable, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Reserve Account for the Bonds, none of the City or the District has any obligation to transfer into the Interest Account or Principal Account of the Special Tax Fund the amount of any such delinquencies out of any surplus moneys of the City. On July 2, 1979, the Fifth District Court of Appeal rendered a 3-0 decision in the case of County of Fresno v. Malmstrom (94 Cal.App.3d 974), that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within the definition of special taxes in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court s decision. At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution. Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority, or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The base year for establishing such appropriation limit is the fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance, and disability insurance funds. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity s revenues in any year exceed the amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years. On December 17, 1980, the Third District Court of Appeal rendered a 3-0 decision in the case County of Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the 57

66 limitation of Article XIIIB (Proposition 4). The Court held that the definition of proceeds of taxes imposed by California Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed. The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any one year) if other funds are not available to cover delinquencies. In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be assessed up to 2%, per year, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article XIIIA. Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of Article XIIIA s assessment rules and concluded that the West Virginia case did not apply to California s laws. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial property, but the plaintiff subsequently decided to drop the case. On October 7, 1991, the U.S. Supreme Court granted the plaintiff s petition for a writ of certiorari and agreed to hear the Nordlinger v. Lynch case. On June 18, 1992, the U.S. Supreme Court affirmed the Nordlinger decision (112 U.S. 2326) of the California Court of Appeal, Second Appellate District, which previously held that Article XIIIA does not violate the U.S. Constitution. The City cannot predict whether any other pending or future challenges to the State s present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State s present system of property tax assessment will have on the City s revenues or on the State s financial obligations to local governments. Articles XIIIC and XIIID of the California Constitution. Proposition 218, a state ballot initiative known as the Right to Vote on Taxes Act, was approved by California voters on November 6, Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, Among other things, Proposition 218 imposed certain voting requirements and other limitations on the imposition of new or increased taxes, assessments, and property-related fees and charges. Under Proposition 218 (i) all taxes imposed by local governments are deemed to be either general taxes, or special taxes, (ii) no local government may impose, extend, or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote, and (iii) no local government may impose, extend, or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote. Special purpose districts, including community facilities districts and assessment districts, have no power to levy general taxes. The City believes that the issuance of the Bonds does not require the conduct of further proceedings under the Refunding Act, the 1915 Act, the 1913 Act, the Mello-Roos Act, or Proposition 218, as applicable, other than as described herein. Proposition 218 provides that the initiative power shall not be prohibited or otherwise limited in matters reducing or repealing any local tax, assessment, fee or charge... Thus, Proposition 218 removes limitations on the initiative power in matters of, among other things, the Special Taxes. Consequently, it is 58

67 conceivable that the voters of the City or the District could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any Special Tax, subject to overriding federal constitutional principles relating to impairment of contracts. Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid Special Taxes that are pledged as security for payment of the Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid Special Taxes that are pledged as security for payment of the Bonds. The Appellate District, Division One, issued its opinion in 2014 in City of San Diego v. Melvin Shapiro, et al. (228 Cal. App. 4th 756) (the San Diego Decision ). The case involved a Convention Center Facilities District (the CCFD ) established by the City of San Diego (the City ). 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 the entire City. 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 hundreds of thousands of registered voters within the CCFD (viz., all of the registered voters in the City). There were no registered voters in the District at the time of formation. 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 elections in the District. 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. The Master Developer, as the single landowner voter in the District, approved Special Tax and the issuance of bonds on November 18, Based on Sections and of the Act and analysis of existing laws, regulations, rulings and court decisions, the City believes the Special Tax is being levied in accordance with the Rate and Method. The interpretation and application of Proposition 218 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. Maximum Special Tax Within the limits of the Special Tax, the District may adjust the Special Tax levied on all property in the District to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to cure delinquencies and replenish the Reserve Fund to an amount equal to the Reserve Requirement for the respective Bonds and to pay Administrative Expenses. However, the amount of the Special Tax that may be levied against any property in the District is subject to the Maximum Special Tax applicable to it. There is no assurance that the Maximum Special Tax on the property in the District will be 59

68 sufficient to pay the amounts required to be paid by the Indenture at all times. Additionally, pursuant to the Act, the Special Taxes levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District 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. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Special Taxes. Payment of the Special Tax is Not a Personal Obligation of the Owners An owner of a parcel of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcel of Taxable Property. If the value of a parcel is not sufficient, taking into account other obligations also payable thereby, to fully secure the Special Tax, the District has no recourse against the owner. Disclosures to Future Purchasers The District has recorded a notice of the Special Tax Lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a parcel of land, a home or a commercial or industrial facility in the District or the lending of 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 Section 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. Parity Taxes and Special Assessments The ability or willingness of a property owner in the District to pay the Special Tax could be affected by the existence of other taxes and assessments imposed upon the property. The Special Tax and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special tax and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, other special taxes, and certain special assessments regardless of when they are imposed upon the same property. The Special Tax has priority over all existing and future private liens imposed on the property. In addition, other public agencies whose boundaries overlap those of the District could, with or in some circumstances without the consent of the owners of the land in the District, impose additional taxes or assessment liens on the property in the District in order to finance public improvements to be located inside or outside of the District. The District has no control over the ability of other entities and districts to issue indebtedness secured by special tax or assessments payable from all or a portion of the property in the District. In addition, the City is not prohibited itself from establishing assessment districts, community facilities districts or other districts which might impose assessments or taxes against property in the District. In the event any additional improvements are financed pursuant to the establishment of an assessment district, community facilities district or other district, any taxes or assessments levied to finance such improvements will have a lien on a parity with the lien of the Special Tax. The imposition of additional liens on a parity with the Special Tax could reduce the ability or willingness of the property owners to pay the Special Tax and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Tax or the principal of and interest on the Bonds when due. 60

69 Depletion of Reserve Fund The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. Money in said fund may be used to pay debt service on the Bonds in the event the proceeds of the levy and collection of the Special Tax against property in the District are insufficient. If funds in the Reserve Fund are used to pay debt service on the Bonds, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid pursuant to the Indenture. However, no replenishment from the proceeds of a levy of the Special Tax can occur as long as the proceeds that are collected from the levy of the Special Tax at the maximum tax rates, together with other available funds, remain insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted by its use to pay such amounts and will not be replenished by the levy of the Special Tax. There is no assurance that the amount in the Reserve Fund will, at any particular time, be sufficient to pay all such amounts or that any amounts of the Reserve Requirement used for debt service on the Bonds will be fully replenished from the proceeds of the levy and collection of the Special Tax. Bankruptcy and Legal Delays The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in SECURITY AND SOURCES OF PAYMENT FOR THE BONDS, may be limited by bankruptcy, insolvency or other laws generally affecting creditors rights or by the laws of the State of California relating to judicial foreclosure. In addition, the prosecution of a foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, the bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings because federal bankruptcy laws may provide for an automatic stay of foreclosure and sale of tax sale proceedings. Any such delays could increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent tax installments not being paid in full. Moreover, if the value of the subject property is less than the lien of the Special Tax, such excess could be treated as an unsecured claim by the bankruptcy court. Further, should remedies be exercised under the federal bankruptcy laws against Taxable Property, payment of the Special Tax may be subordinated to bankruptcy law priorities. Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding. FDIC/Federal Government Interests In Properties 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 Federal Deposit Insurance Corporation (the FDIC ), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest. In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC s policy statement regarding the payment of state and local real property taxes (the Policy Statement ) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the 61

70 Resolution Trust Corporation had an interest in property on or prior to December 31, Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes. The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County, California, in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax. 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 FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale. In the case of Fannie Mae and Freddie Mac, in the event a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or in the event a private deed of trust secured by a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property 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 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. The District s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest. Geologic, Topographic and Climatic Conditions The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The District is not located within an identified earthquake study zone. No known active earthquake faults cross the District and the nearest active earthquake fault to the District is the Chino-Central Avenue fault, located approximately five miles to the west of the District. Other known regional active faults that could affect the site include the Whittier, Elsinore-Glen Ivy, San Jose, Cucamonga, Sierra Madre, San Jacinto-San Bernardino segment and Puente Hills faults. The largest fault in southern California, the San Andreas Fault System, is located approximately 20.5 miles northeast of the District. 62

71 The Federal Emergency Management Agency has determined that the District is located in a Zone X flood area (an area of minimal flooding, outside the 500-year flood plain), and flood insurance will not be required. However, the basin of the Santa Ana River is located near the southern border of the District. In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District 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. Methane Gas Like much of the property within the City and surrounding areas, the property within the District has previously been utilized as dairy pastures in the northwestern portion of the District and agricultural fields in the southern portion of the District. A study undertaken by the Master Developer in 2013 determined that methane levels within the District were below levels considered hazardous and did not pose a risk of accumulating to hazardous levels in the future. Accordingly, the study indicated that no remediation was required. While no methane gas remediation was required within the District, future phases within the Park Place development will be required to undergo further methane level tests, and as a result of such tests, future development within Park Place outside of the District may require methane remediation. Hazardous Substances While governmental taxes, assessments, and charges are a common claim against the value of a parcel of Taxable Property, other less common claims may be relevant. One example is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel of Taxable Property 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 California 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 Taxable Property 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. Further, 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 the property that is realizable upon a delinquency and foreclosure. While the District is not aware that the owner (or operator) of any of Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the District is not aware of them. The Developers have also represented to the District that they are not aware of any federally or State classified hazardous substances located on their respective properties within the District. Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property 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. Further, such liabilities may arise not simply from the existence of a hazardous 63

72 substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel of Taxable Property that is realizable upon a delinquency. No Acceleration Provision The Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture. Bonds Are Limited Obligations Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State or any political subdivision thereof is pledged to the payment of the Bonds. The Bonds are limited obligations of the District; and, except as provided in the Indenture, they are payable solely from Net Special Tax Revenues. Net Special Tax Revenues could be insufficient to pay debt service on the Bonds as a result of delinquencies in the payment of Special Taxes or the insufficiency of proceeds derived from the sale of land within the District following a delinquency in the payment of the applicable Special Tax. The District has no obligation to pay debt service on the Bonds in the event of insufficient Net Special Tax Revenues, except to the extent that money is available for such purpose in the Reserve Fund. The District s only obligation with respect to delinquent Special Taxes is to pursue judicial foreclosure proceedings under the circumstances described in the Indenture. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Covenant for Superior Court Foreclosure. Loss of Tax Exemption As discussed under TAX MATTERS, interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the District subsequent to the issuance of the Bonds in violation of the District s covenants with respect to the Bonds. Should interest become includable in gross income, the Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Tax. No Teeter Plan Although the San Bernardino County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments. District Continuing Disclosure Agreement CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement (the District Continuing Disclosure Agreement ), the District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at ( EMMA ) on an annual basis certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events. The District s covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission. 64

73 The District has not previously entered into any undertaking with respect to Rule 15c2-12. However, the City and its related governmental entities specifically those entities (such as the former Redevelopment Agency of the City) (the City Entities ) for whom City staff is responsible for undertaking compliance with continuing disclosure undertakings have previously entered into numerous disclosure undertakings under the Rule in connection with the issuance of long-term obligations. The City and its affiliated entities have failed, on a handful of occasions during the past five years, to comply, in all material respects, with these undertakings. More specifically, during the last five years: (i) For some outstanding bonds, the City and the former Redevelopment Agency failed to file financial and operating data in some years, and in some years, the City failed to file the financial and operating data on a timely basis. (ii) For some outstanding bonds, the City and the former Redevelopment Agency failed to file audited financial statements in some years, and in some years, they failed to file the audited financial statements on a timely basis. (iii) The City and the former Redevelopment Agency did not file material event notices regarding changes to the ratings of certain of their obligations as a result of the downgrades and upgrades of bond insurance companies that insured their bonds. (iv) The City and the former Redevelopment Agency did not file material event notices regarding certain other rating changes. In order to ensure ongoing compliance with its continuing disclosure undertakings, the City has designated a single staff member within the Administrative Services Department with the responsibility of ensuring timely and complete filings. In addition, the City has retained an outside consultant to conduct periodic reviews of City compliance. Except as disclosed in this Official Statement, within the last five years, the City Entities have not failed to timely comply with their respective prior continuing disclosure obligations under Rule 15c2-12 in all material respects. The full text of the form of the District Continuing Disclosure Agreement is set forth in APPENDIX G. Developer Continuing Disclosure Agreements Although the Underwriter has concluded that the Developers are not obligated persons under Rule 15c2-12, pursuant to the Developer Continuing Disclosure Agreements, each of Woodside, TRI Pointe and KB Home (previously defined in this Official Statement as the Disclosing Developers ) have agreed to provide, or cause to be provided, to EMMA, on a semi-annual basis certain information concerning such entity and its property ownership and development within the District. Each Disclosing Developer has further agreed to provide notice to EMMA of certain listed events. Each Disclosing Developer s obligation to provide semi-annual reports and notices of certain listed events will terminate upon the earlier to occur of certain events, including at such time as such Developer is no longer responsible for more than 10% of the Special Tax levy. A default under a Developer Continuing Disclosure Agreement will not, in itself, constitute an Event of Default under the Indenture, and the sole remedy under the Developer Continuing Disclosure Agreements in the event of any failure of the Disclosing Developer or the dissemination agent, as applicable, to comply with the Developer Continuing Disclosure Agreements will be an action to compel performance. See APPENDIX H FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT for a description of the specific nature of the semi-annual reports to be filed by each Disclosing Developer and notices of listed events to be provided by each Disclosing Developer. 65

74 Neither the District nor the City has participated in the preparation, negotiation or implementation of the Developer Continuing Disclosure Agreements or in discussions regarding the form or content thereof. The District and the City take no responsibility for such form or content or for the adequacy of the Developer Continuing Disclosure Agreements for their intended purpose. None of the District, the City or the Trustee is a party to any of the Developer Continuing Disclosure Agreements, none of the District, the City or the Trustee has any obligation or responsibility to monitor, nor any right or obligation to enforce, compliance by the Disclosing Developers with their respective undertakings pursuant to the Developer Continuing Disclosure Agreements, and none of the District, the City or the Trustee will be so monitoring or enforcing such compliance. KB Home Prior Disclosure Compliance. Except as disclosed in the next paragraph, to the Actual Knowledge of KB Home (as defined in PROPERTY OWNERSHIP AND THE DEVELOPMENT History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy KB Home ), KB Home has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. KB Home s Inland Empire division is the division which will be responsible for complying with KB Home s obligations under its Developer Continuing Disclosure Agreement. A review of compliance with disclosure undertakings by KB Home for filings since July 1, 2011, indicates that (a) continuing disclosure undertakings entered into prior to July 1, 2011, had terminated prior to July 1, 2011 and (b) KB Home entered into one continuing disclosure undertaking subsequent to July 1, 2011 relating to the issuance of $4,235,000 Community Facilities District No of the Menifee Union School District 2015 Special Tax Bonds on December 9, Identification of the below described event does not constitute a representation by KB Home that any such events were material. The review indicates that in September 2007, KB Home entered into a continuing disclosure agreement in connection with the issuance of bonds by the Victor Elementary School District Community Facilities District No and that KB Home s reporting obligation under the foregoing continuing disclosure agreement terminated prior to November 1, 2010, however, KB Home cannot confirm whether a termination notice was ever filed providing notice of such termination. KB Home further notes that KB Home has undergone several restructurings, including office closures and division consolidations. Although KB Home has conducted an internal inquiry in connection with the representations, employees previously responsible for certain continuing disclosure compliance who are no longer employees of KB Home have not been contacted. TRI Pointe Prior Disclosure Compliance. Except as disclosed in the next paragraph, to the Actual Knowledge of TRI Pointe (as defined in PROPERTY OWNERSHIP AND THE DEVELOPMENT History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy TRI Pointe ), TRI Pointe has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. TRI Pointe has advised that it currently has three operating divisions, including Northern California, Southern California and Colorado. The Southern California division is the division which will be responsible for complying with TRI Pointe s obligations under its Developer Continuing Disclosure Agreement. A review of compliance with continuing disclosure undertakings by TRI Pointe with respect to its developments in California since July 1, 2011 has indicated that it has had two continuing disclosure obligations. TRI Pointe s Southern California division was responsible for a continuing disclosure undertaking in respect to special tax bonds issued in 2013 for a City of Riverside community facilities district, and TRI Pointe has advised that it complied in all material respects with such obligation, including the timely filing in July of 2014 of a notice of termination of its obligations thereunder. TRI Pointe s Northern California division is responsible for a continuing disclosure undertaking in respect of special tax bonds issued in March 2016 for a City of Alameda 66

75 (Alameda Landing) community facilities district, and TRI Pointe has advised that, as of the date of this Official Statement, it has complied in all material respects with such obligation, including the timely filing of its first report on June 15, Woodside Prior Disclosure Compliance. Except as disclosed in the next paragraph, to the Actual Knowledge of Woodside (as defined in PROPERTY OWNERSHIP AND THE DEVELOPMENT History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy Woodside ), Woodside has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. In the last five years, Woodside (i) failed to include annual financial statements with certain annual reports dating back to 2010; although such financial statement were subsequently filed in 2014, (ii) failed to file reports for 2012 with respect to a continuing disclosure obligation, although subsequent reports and a notice of termination of obligation were filed in 2013, and (iii) filed an annual report under another continuing disclosure obligation nineteen days past the due date. Identification of the above-described events does not constitute a representation by Woodside that any such events were material. 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 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 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. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX D hereto. To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such 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 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 Bonds is the first price at which a substantial amount of such maturity of the 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 Bonds accrues daily over the term to maturity of such 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 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of beneficial owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. 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 67

76 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 Bonds. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the 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 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the 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 Bonds may adversely affect the value of, or the tax status of interest on, the 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 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 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. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 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. For example, the Obama Administration s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest on the Bonds to some extent for high-income individuals. 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 Bonds. Prospective purchasers of the 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 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 Bonds ends with the issuance of the 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 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 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 Bonds, and may cause the District or the beneficial owners to incur significant expense. 68

77 ABSENCE OF LITIGATION In connection with the issuance of the Bonds, the City Attorney of the City will deliver a certificate to the effect that, to the City Attorney s actual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the City or the District, which would adversely impact the ability of the City or the District to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Taxes, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Taxes, or the transactions described herein. ABSENCE OF RATINGS The District has not made, and does not contemplate making, application to any rating organization for a rating on the Bonds. CERTAIN LEGAL MATTERS Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, will render an opinion with respect to the validity and enforceability of the Indenture and as to the validity of the Bonds. A copy of the form of such approving opinion is attached hereto as APPENDIX D. Copies of such approving opinion will accompany each Bond. Bond Counsel has not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the Bonds and expresses no opinion relating thereto. Certain legal matters will be passed upon for the City by the City Attorney and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Nossaman LLP, Irvine, California. Although it is serving as Bond Counsel to the District in connection with the issuance and sale of the Bonds, Bond Counsel represents the Underwriter in connection with other financings and matters unrelated to the Bonds. Disclosure Counsel and the City Attorney also represent the Underwriter in connection with other financings and matters unrelated to the Bonds. UNDERWRITING The Bonds are being purchased by Stern Brothers & Co. (the Underwriter ). The Underwriter has agreed to purchase the Bonds at a price of $17,908, (being $16,135,000 aggregate principal amount thereof, plus net original issue premium of $1,975, and less Underwriter s discount of $201,695.48). The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the 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 Bonds to certain dealers and others at prices lower than the offering price stated on the cover page thereof. The offering price may be changed from time to time by the Underwriter. FINANCIAL INTERESTS The fees being paid to the Financial Advisor, Bond Counsel, Disclosure Counsel, Underwriter, and Underwriter s Counsel are contingent upon the issuance and delivery of the Bonds. 69

78 FINANCIAL ADVISOR The District has retained CSG Advisors Incorporated, San Francisco, California, as financial advisor (the Financial Advisor ) for the sale of the 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. ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations and summaries and explanations of the 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. The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City of Ontario acting in its capacity as the legislative body of the District. CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) By: /s/ Al C. Boling City Manager 70

79 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE 1) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX A Special Tax shall be levied on all Assessor s Parcels in the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase 1) ( CFD No. 24 ) and collected each Fiscal Year, commencing in Fiscal Year , in an amount determined by the City Council of the City of Ontario through the application of the Rate and Method of Apportionment, as described below. All of the real property in CFD No. 24, 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 Subdivision Map, parcel map, condominium plan, or other recorded County map. Act means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Division 2 of Title 5 of the California Government Code. Administrative Expenses means the following actual or reasonably estimated costs directly related to the administration of CFD No. 24: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or CFD No. 24 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 City or CFD No. 24 of complying with arbitrage rebate requirements; the costs to the City or CFD No. 24 of complying with City, CFD No. 24, 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 City or CFD No. 24 related to the analysis and reduction, if any, of the Special Tax on Residential Property in accordance with Section C.1 herein; the costs of the City or CFD No. 24 related to an appeal of the Special Tax; the costs associated with the release of funds from any escrow account; the City s administration fees and third party expenses; the costs of City staff time and reasonable overhead relating to CFD No. 24; and amounts estimated or advanced by the City or CFD No. 24 for any other administrative purposes of the CFD, including attorney s fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. Assessor s Parcel means a lot or parcel shown in an Assessor s Parcel Map with an assigned Assessor s Parcel Number. Assessor s Parcel Map means an official map of the Assessor of the County designating parcels by Assessor s Parcel Number. A-1

80 Assessor s Parcel Number means, with respect to an Assessor s Parcel, that number assigned to such Assessor s Parcel by the County for purposes of identification. Assigned Special Tax means the Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C.1.a.2 below. Backup Special Tax means the Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C.1.a.3 below. Bonds means any bonds or other debt (as defined in Section 53317(d) of the Act) issued by CFD No. 24 under the Act and payable from Special Taxes. Buildable Lot means an individual lot, within a Final Subdivision Map or an area expected by CFD No. 24 to become Final Mapped Property, such as the area within a Tentative Tract Map, for which a building permit may be issued without further subdivision of such lot. CFD Administrator means an official of the City responsible for determining the Special Tax Requirement, providing for the levy and collection of the Special Taxes, and performing the other duties provided for herein. CFD No. 24 means City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase 1). City means the City of Ontario, California. City Council means the City Council of the City, acting as the legislative body of CFD No. 24. County means the County of San Bernardino. Designated Buildable Lot means a Buildable Lot for which a building permit has not been issued by the City as of the date of calculation of the Backup Special Tax. Developed Property means for each Fiscal Year, all Taxable Property, exclusive of Final Mapped Property, Taxable Property Owner Association Property, and Taxable Public Property, for which a building permit or other applicable permit for new construction was issued after January 1, 2014, and before May 1 of the prior Fiscal Year. Expected Residential Lot Count means 432 Buildable Lots of Residential Property or, as determined by the CFD Administrator, the number of Buildable Lots of Residential Property based on the most recent Tentative Tract Map(s) or most recently recorded Final Subdivision Map(s) or modified Final Subdivision Map(s). Facilities means the public facilities authorized to be financed, in whole or in part, by CFD No. 24. Final Mapped Property means, for each Fiscal Year, all Taxable Property, exclusive of Developed Property, Taxable Property Owner Association Property, and Taxable Public Property, which as of January 1 of the previous Fiscal Year was located within a Final Subdivision Map. The term Final Mapped Property shall include any parcel map or Final Subdivision Map, or portion thereof, that creates individual lots for which a building permit may be issued, including Parcels that are designated as a remainder Parcel (i.e., one where the size, location, etc., precludes any further subdivision or taxable use). A-2

81 Final Subdivision Map means a final tract map, parcel map, or lot line adjustment approved by the City pursuant to the Subdivision Map Act (California Government Code Section et seq.) or a condominium plan recorded pursuant to California Civil Code 1352 that, in either case, creates individual lots for which building permits may be issued without further subdivision. Fiscal Year means the period starting July 1 and ending on the following June 30. Indenture means the indenture, fiscal agent agreement, resolution, or other instrument pursuant to which Bonds are issued, as modified, amended, and/or supplemented from time to time. Land Use Class means any of the classes listed in Table 1 below. Maximum Special Tax means, with respect to an Assessor s Parcel of Taxable Property, the Maximum Special Tax determined in accordance with Section C.1 below that can be levied in any Fiscal Year on such Assessor s Parcel of Taxable Property. Minimum Sale Price means the minimum price at which Units of a given Land Use Class have sold or are expected to be sold in a normal marketing environment and shall not include prices for such Units that are sold at a discount to expected sales prices for the purpose of stimulating the initial sales activity with respect to such Land Use Class. Non-Residential Property means all Assessor s Parcels of Developed Property for which a building permit was issued by the City permitting the construction of one or more non-residential structures or facilities. Outstanding Bonds means all Bonds which are outstanding under and in accordance with the provisions of the Indenture. Price Point Consultant means any consultant or firm of such consultants selected by CFD No. 24 that (a) has substantial experience in performing price point studies for residential units within community facilities districts established under the Act or otherwise estimating or confirming pricing for residential units in such community facilities districts, (b) has recognized expertise in analyzing economic and real estate data that relates to the pricing of residential units in such community facilities districts, (c) is in fact independent and not under the control of CFD No. 24 or the City, (d) does not have any substantial interest, direct or indirect, with or in (i) CFD No. 24, (ii) the City, (iii) any owner of real property in CFD No. 24, or (iv) any real property in CFD No. 24, and (e) is not connected with CFD No. 24 or the City as an officer or employee thereof, but who may be regularly retained to make reports to CFD No. 24 or the City. Price Point Study means a price point study or a letter updating a previous price point study prepared by the Price Point Consultant pursuant to Section C herein. Property Owner Association Property means, for each Fiscal Year, any property within the boundaries of CFD No. 24 that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year. Proportionately means (a) for Developed Property in the first step of Section D below, that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Assessor s Parcels of Developed Property; however, for Developed Property in the fourth step of Section D below, Proportionately means that the amount of the increase above the Assigned Special Tax, if necessary, is equal for all Assessor s Parcels of Developed Property, except that if the Backup Special Tax limits the increase on any Assessor s Parcel(s), then the amount of the increase shall be equal for the remaining Assessor s Parcels; (b) for Final Mapped Property, that the ratio of the actual Special Tax A-3

82 levy to the Maximum Special Tax is equal for all Assessor s Parcels of Final Mapped Property; (c) for Undeveloped Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Assessor s Parcels of Undeveloped Property; (d) for Taxable Property Owner Association Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Assessor s Parcels of Taxable Property Owner Association Property; and (e) for Taxable Public Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Assessor s Parcels of Taxable Public Property. Public Property means, for each Fiscal Year, property within the boundaries of CFD No. 24 that is (a) owned by, irrevocably offered to, or dedicated to the federal government, the State, the County, the City, or any local government or other public agency or (b) encumbered by an easement for purposes of public right of way that makes impractical its use for any purpose other than that set forth in such easement, provided 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 according to its use. Rate and Method of Apportionment means this Rate and Method of Apportionment of Special Tax. Residential Floor Area means all of the Square Footage of living area within the perimeter of a residential Unit, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area shall be as set forth in the building permit(s) issued for such Assessor s Parcel, or as set forth in other official records maintained by the City s Building Department or other appropriate means selected by CFD No. 24. The actual Square Footage shall be rounded up to the next whole square foot. Once such determination has been made for an Assessor s Parcel, it shall remain fixed in all future Fiscal Years unless an appeal pursuant to Section F below is approved that results in a change in the actual Square Footage. Residential Property means all Assessor s Parcels of Taxable Property for which a building permit may be issued for purposes of constructing one or more Units. Services means the services authorized to be financed, in whole or in part, by CFD No. 24. Special Tax means the special tax authorized by the qualified electors of CFD No. 24 to be levied within the boundaries of CFD No. 24. Special Tax Requirement means for any Fiscal Year that amount required, after taking into account available amounts held in the funds and accounts established under the Indenture, for CFD No. 24 to: (i) pay debt service on all Outstanding Bonds which is due in the calendar year that commences in such Fiscal Year; (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) provide any amounts required to establish or replenish any reserve fund for the Bonds; (v) pay directly for acquisition or construction of Facilities, or the cost of Services, to the extent that the inclusion of such amounts does not increase the Special Tax levy on Final Mapped Property or Undeveloped Property; (vi) provide an amount equal to Special Tax delinquencies based on the historical delinquency rate for the Special Tax as determined by the CFD Administrator. Square Footage or Sq. Ft. means the floor area square footage reflected on the original construction building permit, or as set forth in other official records maintained by the City s Building Department or other appropriate means selected by CFD No. 24, issued for construction of Residential Property or Non Residential Property, plus any square footage subsequently added to a building of Non Residential Property after issuance of a building permit for expansion or renovation of such building. A-4

83 State means the State of California. Taxable Property means, for each Fiscal Year, all of the Assessor s Parcels within the boundaries of CFD No. 24 that are not exempt from the Special Tax pursuant to law or Section E below. Taxable Property Owner Association Property means, for each Fiscal Year, all Assessor s Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to Section E below. Taxable Public Property means, for each Fiscal Year, all Assessor s Parcels of Public Property that are not exempt from the Special Tax pursuant to law or Section E below. Tentative Tract Map means a map: (i) showing a proposed subdivision of an Assessor s Parcel(s) and the conditions pertaining thereto; (ii) that may or may not be based on a detailed survey; and (iii) that is not recorded by the County to create legal lots. Total Tax Burden means for any Unit, the annual Special Tax, together with ad valorem property taxes, special assessments, special taxes for any overlapping community facilities district, and any other taxes, fees, and charges which are levied and imposed on such Unit and the real property on which it is located and collected by the County on ad valorem tax bills and which are secured by such Unit and the real property on which it is located, assuming such Unit had been completed, sold, and subject to such levies and impositions, excluding service charges such as those related to sewer and trash. Trustee means the trustee or fiscal agent under the Indenture. TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 12 (or PA 12). TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 8 (or PA 8). TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 7 (or PA 7). TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 6 (or PA 6). TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 9 (or PA 9). TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 10 (or PA 10). TTM means Tentative Tract Map No , the area of which is located within CFD No. 24, is commonly referred to as planning area 15 (or PA 15), and is the proposed location of the recreation center. TTM means Tentative Tract Map No , the area of which is located within CFD No. 24 and is commonly referred to as planning area 13 (or PA 13). A-5

84 Undeveloped Property means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Final Mapped Property, Taxable Public Property, or Taxable Property Owner Association Property. Unit means an individual single-family detached home, townhome, condominium, apartment, or other residential dwelling unit, including each separate living area within a half-plex, duplex, triplex, fourplex, or other residential structure. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, beginning with Fiscal Year , all Taxable Property within CFD No. 24 shall be classified as Developed Property, Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property and shall be subject to Special Taxes in accordance with the Rate and Method of Apportionment as determined pursuant to Sections C and D below. Assessor s Parcels of Residential Property shall be assigned to Land Use Classes 1 through 26 as listed in Table 1 below based on the Residential Floor Area of the Units on such Assessor s Parcels. Non-Residential Property shall be assigned to Land Use Classes 27 through 34. C. MAXIMUM SPECIAL TAX 1. Special Tax At least 30 days prior to the issuance of Bonds, the Assigned Special Tax on Developed Property (set forth in Table 1 below) shall be analyzed in accordance with and subject to the conditions set forth in this Section C. At such time, CFD No. 24 shall select and engage a Price Point Consultant and the CFD Administrator shall request the Price Point Consultant to prepare a Price Point Study setting forth the Minimum Sale Price of Units within each Land Use Class. If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden applicable to Units within one or more Land Use Classes of Residential Property to be constructed within CFD No. 24 shall exceed 1.95% of the Minimum Sale Price of such Units, the Assigned Special Tax shall be reduced to the extent necessary to cause the Total Tax Burden that shall apply to Units within such Land Use Class(es) not to exceed 1.95% of the Minimum Sale Price of such Units. Each Assigned Special Tax reduction for a Land Use Class shall be calculated by the CFD Administrator separately, and it shall not be required that such reduction be proportionate among Land Use Classes. In connection with any reduction in the Assigned Special Tax, the Backup Special Tax shall also be reduced by the CFD Administrator based on the percentage reduction in Maximum Special Tax revenues within the Tentative Tract Map area(s) where the Assigned Special Tax reductions occurred. The Special Tax reductions required pursuant to this paragraph shall be reflected in an amended notice of Special Tax lien which CFD No. 24 shall cause to be recorded by executing a certificate in substantially the form attached herein as Exhibit A. a. Developed Property 1) Maximum Special Tax The Maximum Special Tax that may be levied in any Fiscal Year 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 shall not increase in future years, other than as calculated pursuant to Section C.1.a.3 below. A-6

85 Land Use Class 2) Assigned Special Tax The Assigned Special Tax that may be levied in any Fiscal Year for each Land Use Class is shown below in Table 1. TABLE 1 ASSIGNED SPECIAL TAX DEVELOPED PROPERTY Residential Floor Area Description (Square Footage) Assigned Special Tax 1 Residential Property < 1,601 $1,752 per Unit 2 Residential Property 1,601 1,700 $1,868 per Unit 3 Residential Property 1,701 1,800 $1,975 per Unit 4 Residential Property 1,801 1,900 $2,070 per Unit 5 Residential Property 1,901 2,000 $2,182 per Unit 6 Residential Property 2,001 2,100 $2,199 per Unit 7 Residential Property 2,101 2,200 $2,349 per Unit 8 Residential Property 2,201 2,300 $2,491 per Unit 9 Residential Property 2,301 2,400 $2,576 per Unit 10 Residential Property 2,401 2,500 $2,688 per Unit 11 Residential Property 2,501 2,600 $2,791 per Unit 12 Residential Property 2,601 2,700 $2,898 per Unit 13 Residential Property 2,701 2,800 $2,950 per Unit 14 Residential Property 2,801 2,900 $3,010 per Unit 15 Residential Property 2,901 3,000 $3,117 per Unit 16 Residential Property 3,001 3,100 $3,272 per Unit 17 Residential Property 3,101 3,200 $3,435 per Unit 18 Residential Property 3,201 3,300 $3,499 per Unit 19 Residential Property 3,301 3,400 $3,547 per Unit 20 Residential Property 3,401 3,500 $3,603 per Unit 21 Residential Property 3,501 3,600 $3,710 per Unit 22 Residential Property 3,601 3,700 $3,795 per Unit 23 Residential Property 3,701 3,800 $3,880 per Unit 24 Residential Property 3,801 3,900 $3,965 per Unit 25 Residential Property 3,901 4,000 $4,050 per Unit 26 Residential Property > 4,000 $4,135 per Unit Non-Residential Property 27 TTM $32,771 per Acre 28 TTM $31,193 per Acre 29 TTM $24,756 per Acre 30 TTM $28,780 per Acre 31 TTM $32,255 per Acre 32 TTM $33,625 per Acre 33 TTM $36,156 per Acre 34 TTM $36,156 per Acre A-7

86 3) Backup Special Tax The Backup Special Tax shall be $3,083 per Unit for Residential Property in TTM 18075, $3,131 per Unit for Residential Property in TTM 18076, $3,716 per Unit for Residential Property in TTM 18077, $3,483 per Unit for Residential Property in TTM 18078, $2,541 per Unit for Residential Property in TTM 18079, $2,777 per Unit for Residential Property in TTM 18080, $3,716 per Unit for Residential Property in TTM , and $2,087 per Unit for Residential Property in TTM However, if the Expected Residential Lot Count does not equal 53 for TTM 18075, 46 for TTM 18076, 65 for TTM 18077, 67 for TTM 18078, 69 for TTM 18079, 57 for TTM 18080, or 75 for TTM 18945, and the City has not issued Bonds, then the Backup Special Tax for Designated Buildable Lots of Residential Property shall be calculated separately for each Tentative Tract Map area according to the following formula: Backup Special Tax = $32,771 for TTM or $31,193 for TTM or $24,756 for TTM or $28,780 for TTM or $32,255 for TTM or $33,625 for TTM or $36,156 for TTM Acreage of Designated Buildable Lots of Residential Property within the applicable Tentative Tract Map number of Designated Buildable Lots of Residential Property within the applicable Tentative Tract Map If any portion of a Final Subdivision Map, or any area expected by CFD No. 24 to become Final Mapped Property, such as the area within a Tentative Tract Map, changes any time after the City has issued Bonds, causing an adjustment to the number of Designated Buildable Lots, then the Backup Special Tax for all Designated Buildable Lots in the specific area where the change occurred shall be calculated according to the following steps: Step 1: Step 2: Determine the total Backup Special Taxes that could have been collected from Designated Buildable Lots prior to the Final Subdivision Map or expected Final Mapped Property area change. Divide the amount determined in Step 1 by the number of Designated Buildable Lots that exists after the Final Subdivision Map or expected Final Mapped Property area change. A-8

87 Step 3: Apply the amount determined in Step 2 as the Backup Special Tax per Unit for each Assessor s Parcel of Designated Buildable Lots in the area where the Final Subdivision Map or expected Final Mapped Property area change occurred. The Backup Special Tax for an Assessor s Parcel shall not change once an Assessor s Parcel is classified as Developed Property. b. Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property, and Undeveloped Property The Maximum Special Tax for Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property, and Undeveloped Property shall be $32,771 per Acre for such property in TTM 18075, $31,193 per Acre for such property in TTM 18076, $24,756 per Acre for such property in TTM 18077, $28,780 per Acre for such property in TTM 18078, $32,255 per Acre for such property in TTM 18079, $33,625 per Acre for such property in TTM 18080, and $36,156 per Acre for such property in TTM 18945, and shall not be subject to increase or reduction and, therefore, shall remain the same in every Fiscal Year. 2. Multiple Land Use Classes on an Assessor s Parcel In some instances an Assessor s Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax levied on such Assessor s Parcel shall be the sum of the Maximum Special Tax for all Units of Residential Property and Acres of Non- Residential Property (based on the applicable Final Subdivision Map, parcel map, condominium plan, or other recorded County map) located on that Assessor s Parcel. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Each Fiscal Year, beginning with Fiscal Year , the CFD Administrator shall determine the Special Tax Requirement for such Fiscal Year. The Special Tax shall then be levied as follows: First: If needed to satisfy the Special Tax Requirement, the Special Tax shall be levied Proportionately on each Assessor s Parcel of Developed Property up to 100% of the applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Final Mapped Property up to 100% of the Maximum Special Tax for Final Mapped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Undeveloped Property; Fourth: If additional monies are needed to satisfy the Special Tax Requirement after the first three 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 Proportionately from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor s Parcel; A-9

88 Fifth: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Taxable Property Owner Association Property up to the Maximum Special Tax for Taxable Property Owner Association Property; Sixth: If additional monies are needed to satisfy the Special Tax Requirement after the first five steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor s Parcel of Taxable Public Property up to the Maximum Special Tax for Taxable Public Property. Notwithstanding the above, under no circumstances shall the Special Tax levied in any Fiscal Year on any Assessor s Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased as a result of delinquency or default by the owner or owners of any other Assessor s Parcel or Assessor s Parcels within CFD No. 24 by more than ten percent above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. E. EXEMPTIONS No Special Tax shall be levied on up to Acres of Public Property and up to 6.13 Acres of Property Owner Association Property, not including Assessor s Parcel Numbers and , as described further in this paragraph. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Public Property or Property Owner Association Property. In addition, the sites designated as PA 15 within TTM (Assessor s Parcel Number ) and Lot A within TTM (Assessor s Parcel Number ) shall be exempt from the Special Tax unless and until the site becomes Developed Property. Property Owner Association Property or Public Property that is not exempt from the Special Tax under this section shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part of the fifth or sixth step, respectively, in Section D above, up to 100% of the applicable Maximum Special Tax for Taxable Property Owner Association Property and Taxable Public Property. No Special Tax shall be levied in any Fiscal Year on Assessor s Parcels that have fully prepaid the Special Tax obligation pursuant to the formula set forth in Section H. F. APPEALS Any property owner may file a written appeal of the Special Tax with CFD No. 24 claiming that the amount or application of the Special Tax is not correct. The appeal must be filed not later than one calendar year after having paid the Special Tax that is disputed, and the appellant must be current in all payments of Special Taxes. In addition, during the term of the appeal process, all Special Taxes 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 property owner disagrees with the CFD Administrator s decision relative to the appeal, the owner may then file a written appeal with the City Council whose subsequent decision shall be final and binding on all interested parties. If the decision of the CFD Administrator or subsequent decision by the City Council requires the Special Tax to be modified or changed in favor of the property owner, then the CFD Administrator shall determine if sufficient Special Tax revenue is available to make a cash refund. If a cash refund cannot be made, then an adjustment shall be made to credit future Special Tax levy(ies). A-10

89 This procedure shall be exclusive and its exhaustion by any property owner shall be a condition precedent to filing any legal action by such owner. G. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the Special Taxes may be collected in such other manner as the City Council shall determine, including direct billing of affected property owners. H. PREPAYMENT OF SPECIAL TAX The following definitions apply to this Section H: CFD Public Facilities means $15,900,000 for each Prepayment Period, or such lower number as determined by the City Council to be sufficient to fund the Facilities and Services to be provided by CFD No. 24. Expenditures Fund means funds or accounts, regardless of their names, that are established to hold moneys that are available to acquire or construct Facilities and to fund Services. Future Facilities Costs means the CFD Public Facilities minus (i) Facilities and Services costs previously paid from the Expenditures Fund during the Prepayment Period in which the prepayment is being made, (ii) moneys currently on deposit in the Expenditures Fund from deposits made during the Prepayment Period in which the prepayment is being made, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance Facilities costs. In no event shall the amount of Future Facilities Costs be less than zero. Prepayment Period means one of three periods of time during which a Special Tax prepayment may be made. Prepayment Period 1 means July 1, 2014, through June 30, Prepayment Period 2 means July 1, 2048, through June 30, Prepayment Period 3 means July 1, 2081, through June 30, Prepayment in Full The obligation of an Assessor s Parcel to pay the Special Tax may be prepaid as described herein, provided that a prepayment may be made only for Assessor s Parcels for which a building permit for new construction was issued after January 1, 2014, 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 for such Assessor s Parcel. The CFD Administrator may charge a fee for providing this service. Prepayment in any six month period 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. A-11

90 Paragraph No. 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 Prepayment Amount As of the proposed date of prepayment, the Special Tax Prepayment Amount (defined below) shall be calculated by the CFD Administrator as follows: 1. Confirm that no Special Tax delinquencies apply to such Assessor s Parcel, and determine the Prepayment Period for the proposed prepayment. 2. Compute the Assigned Special Tax and Backup Special Tax for the Assessor s Parcel to be prepaid based on the Developed Property Special Tax which is, or could be, charged in the current Fiscal Year. For Assessor s Parcels of Final Mapped Property (for which a building permit has been issued but which is not yet classified as Developed Property) 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. 3. (a) Divide the Assigned Special Tax computed pursuant to Paragraph 2 by the total estimated Assigned Special Tax for CFD No. 24 based on the Developed Property Special Tax which could be charged in the current Fiscal Year on all expected development through buildout of CFD No. 24, 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 CFD No. 24, 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 (e.g., the redemption price minus 100%), 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. A-12

91 9. Determine the Special Tax levied on the Assessor s Parcel in the current Fiscal Year which has not yet been paid. 10. Add the amounts computed pursuant to Paragraphs 8 and 9 to determine the Defeasance Amount. 11. Verify the administrative fees and expenses of CFD No. 24, including the costs to compute the prepayment, the costs to invest the prepayment proceeds, the costs to redeem Bonds, and the costs to record any notices to evidence the prepayment and the redemption (the Administrative Fees and Expenses ). 12. If reserve funds for the Outstanding Bonds, if any, are at or above 100% of the reserve requirement (as defined in the Indenture) on the prepayment date, a reserve fund credit shall be calculated as a reduction in the applicable reserve fund for the Outstanding Bonds to be redeemed pursuant to the prepayment (the Reserve Fund Credit ). No Reserve Fund Credit shall be granted if reserve funds are below 100% of the reserve requirement on the prepayment date or the redemption date. 13. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 4, 5, 7, 10, and 11, less the amount computed pursuant to Paragraph 12 (the Prepayment Amount ). 14. From the Prepayment Amount, the amounts computed pursuant to Paragraphs 4, 5, 10, and 12 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 Expenditures Fund. The amount computed pursuant to Paragraph 11 shall be retained by CFD No. 24. 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 during Prepayment Period 3, the CFD Administrator shall cause a suitable notice to be recorded in compliance with the Act to indicate that the Special Tax has been prepaid and that the obligation of such Assessor s Parcel to pay the Special Tax shall cease. With respect to the Special Tax for any Assessor s Parcel that is prepaid during Prepayment Period 1 or Prepayment Period 2, the obligation of such Assessor s Parcel to pay the Special Tax shall be tolled, or suspended, through the end of such Prepayment Period, but shall resume in the first Fiscal Year of the subsequent Prepayment Period. The CFD Administrator shall cause a suitable notice to be recorded in compliance with the Act to indicate that the Special Tax has been satisfied for the remainder of the applicable Prepayment Period but has not been permanently satisfied and the obligation to pay the Special Tax will resume in the first Fiscal Year of the Prepayment Period following the Prepayment Period in which the prepayment was made. Once the obligation of an Assessor s Parcel to pay the Special Tax resumes, the Special Tax for the then applicable Prepayment Period may be prepaid. A-13

92 Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of Maximum Special Tax that may be levied on Taxable Property within CFD No. 24 (after excluding Acres of Public Property and 6.13 acres of Property Owner Association Property, not including Assessor s Parcel Numbers and , as set forth in Section E) both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 2. Prepayment in Part The Special Tax on an Assessor s Parcel for which a building permit for new construction was issued after January 1, 2014, may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1, except that a partial prepayment shall be calculated by the CFD Administrator according to the following formula: The terms above have the following meaning: PP = PF x %. PP = the partial prepayment PF = the Prepayment Amount (full prepayment) for the Special Tax calculated according to Section H.1 % = the percentage by which the owner of the Assessor s Parcel(s) is partially prepaying the Special Tax The Special Tax partial prepayment amount must be sufficient to redeem at least a $5,000 increment of Bonds. 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 fee for providing this service. With respect to any Assessor s Parcel that is partially prepaid, the CFD Administrator shall (i) distribute the remitted prepayment funds according to Section H.1, and (ii) indicate in the records of CFD No. 24 that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such Assessor s Parcel, equal to the outstanding percentage (100% - %, as defined above) of the Maximum Special Tax, shall continue to be levied on such Assessor s Parcel pursuant to Section D during the Prepayment Period in which the partial prepayment is made. For partial prepayments made during Prepayment Period 1 or Prepayment Period 2, the full amount of the Special Tax shall resume in the first Fiscal Year of the Prepayment Period following the Prepayment Period in which the partial prepayment was made. Once the obligation of an Assessor s Parcel to pay the Special Tax resumes, the Special Tax for the then applicable Prepayment Period may be prepaid. I. TERM OF SPECIAL TAX The Fiscal Year after which no further Special Tax shall be levied or collected is Fiscal Year , except that the Special Tax that was lawfully levied in or before such Fiscal Year and that remains delinquent may be collected in subsequent years. A-14

93 CITY OF ONTARIO AND CFD NO. 24 CERTIFICATE 1. Pursuant to Section C.1 of the Rate and Method of Apportionment of Special Tax for City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase 1) ( CFD No. 24 ), the Assigned Special Tax and the Backup Special Tax for Developed Property within CFD No. 24 has been modified. a. The information in Table 1 relating to the Assigned Special Tax for Developed Property within CFD No. 24, as stated in Section C.1.a.2 of the Rate and Method of Apportionment, has been modified as follows: Land Use Class TABLE 1 ASSIGNED SPECIAL TAX DEVELOPED PROPERTY Description Residential Floor Area (Square Footage) Assigned Special Tax 1 Residential Property < 1,601 $1,713 per Unit 2 Residential Property 1,601 1,700 $1,817 per Unit 3 Residential Property 1,701 1,800 $1,904 per Unit 4 Residential Property 1,801 1,900 $1,986 per Unit 5 Residential Property 1,901 2,000 $2,099 per Unit 6 Residential Property 2,001 2,100 $2,107 per Unit 7 Residential Property 2,101 2,200 $2,209 per Unit 8 Residential Property 2,201 2,300 $2,277 per Unit 9 Residential Property 2,301 2,400 $2,386 per Unit 10 Residential Property 2,401 2,500 $2,460 per Unit 11 Residential Property 2,501 2,600 $2,571 per Unit 12 Residential Property 2,601 2,700 $2,681 per Unit 13 Residential Property 2,701 2,800 $2,729 per Unit 14 Residential Property 2,801 2,900 $2,783 per Unit 15 Residential Property 2,901 3,000 $2,875 per Unit 16 Residential Property 3,001 3,100 $3,003 per Unit 17 Residential Property 3,101 3,200 $3,112 per Unit 18 Residential Property 3,201 3,300 $3,124 per Unit 19 Residential Property 3,301 3,400 $3,205 per Unit 20 Residential Property 3,401 3,500 $3,301 per Unit 21 Residential Property 3,501 3,600 $3,425 per Unit 22 Residential Property 3,601 3,700 $3,458 per Unit 23 Residential Property 3,701 3,800 $3,542 per Unit 24 Residential Property 3,801 3,900 $3,627 per Unit 25 Residential Property 3,901 4,000 $3,781 per Unit 26 Residential Property > 4,000 $3,795 per Unit Non-Residential Property 27 TTM $30,244 per Acre 28 TTM $28,397 per Acre 29 TTM $22,874 per Acre 30 TTM $26,147 per Acre 31 TTM $29,831 per Acre 32 TTM $30,820 per Acre 33 TTM $34,640 per Acre 34 TTM $34,640 per Acre A-15

94 b. The Backup Special Tax for Developed Property, as stated in Section C.1.a.3, shall be modified as follows: The Backup Special Tax shall be $2,845 per Unit for Residential Property in TTM 18075, $2,850 per Unit for Residential Property in TTM 18076, $3,433 per Unit for Residential Property in TTM 18077, $3,165 per Unit for Residential Property in TTM 18078, $2,350 per Unit for Residential Property in TTM 18079, $2,545 per Unit for Residential Property in TTM 18080, and $1,999 per Unit for Residential Property in TTM However, if the Expected Residential Lot Count does not equal 53 for TTM 18075, 46 for TTM 18076, 65 for TTM 18077, 67 for TTM 18078, 69 for TTM 18079, 57 for TTM 18080, or 75 for TTM 18945, and the City has not issued Bonds, then the Backup Special Tax for Designated Buildable Lots of Residential Property shall be calculated according to the formula on the follow page: Backup Special Tax = $30,244 for TTM or $28,397 for TTM or $22,874 for TTM or $26,147 for TTM or $29,831 for TTM or $30,820 for TTM or $34,640 for TTM Acreage of Designated Buildable Lots of Residential Property within the applicable Tentative Tract Map number of Designated Buildable Lots of Residential Property within the applicable Tentative Tract Map 2. The Special Tax for Developed Property may only be modified prior to the first issuance of CFD No. 24 Bonds. 3. Upon execution of this certificate by CFD No. 24, CFD No. 24 shall cause an amended notice of Special Tax lien for CFD No. 24 to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledge, on behalf of the City and CFD No. 24, receipt of this certificate and modification of the Rate and Method of Apportionment as set forth in this certificate. CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE 1) A-16

95 APPENDIX B APPRAISAL REPORT B-1

96 [THIS PAGE INTENTIONALLY LEFT BLANK]

97 APPRAISAL REPORT CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 PARK PLACE FACILITIES, PHASE 1 ONTARIO,CA Prepared for: CITY OF ONTARIO 303 East B Street Ontario, CA James B. Harris, MAl Berri Cannon Harris Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA May 2016

98 Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, California FAX www. h arris ~ appraisal.com May 18, Mr. Grant Yee Finance Director CITY OF ONTARIO 303 East B Street Ontario, CA Re: City of Ontario - Community Facilities District No. 24 Park Place Facilities, Phase 1 Dear Mr. Yee: In response to your authorization, we have prepared a self-contained appraisal report that addresses all of the property within the boundaries of Community Facilities District (CFD) No. 24, Park Place Facilities, Phase 1. According to the specific guidelines of the City of Ontario, and its Underwriter, this report includes an estimate of Minimum Market Value of all the property subject to the Special Tax within the District. The property is under the ownership of four merchant builders, and 106 individual homeowners. The District is proposed to include 432 dwellings, of which 201 are built or under construction and 231 lots are in a physically finished condition. The appraisal includes a Mass Appraisal analysis for the completed and occupied dwelling units, which results in a Minimum Market Value for the 106 sold dwellings. Please review the definitions of Minimum Market Value and Mass Appraisal listed in the definitions section of this report. The dwellings under construction are valued with consideration to their construction completion and current market conditions. The physically finished lots are valued with consideration to both the Direct Comparison Approach to value and the Static Residual Analysis. 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 each ownership as of the date of value. The aggregate value of the sold dwellings and the land and dwellings in various stages of construction under the ownership of four merchant builders are considered Minimum Market Value for CFD No. 24, as of the date of value.

99 Mr. Grant Yee May 18, 2016 Page Two 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 have been formed as of May 16, Community Facilities District No. 24 ONE HUNDRED TWENTY- EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS $128,500,000 Individual Homeowners -106 Completed Dwellings FIFTY-THREE MILLION ONE HUNDRED THOUSAND DOLLARS $53,100,000 Merchant Builder Ownership Dwellings/Lots SEVENTY- FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS $75,400,000 KB Home Coastal, Inc. CalAtlantic Homes Tri Pointe Homes Woodside 055, LP $20,800,000 $7,800,000 $19,900,000 $26,900,000 The self-contained report which follows sets forth the data and analyses upon which our opinions of value are, in part, predicated. This report has been prepared for the City of Ontario for use in the sale of Community Facilities District No. 24 bonds. The intended users of this report are the City of Ontario, 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 Appraisa/ Standards for Land Secured Financing as published by the California Debt and Investment Advisory Commission; the Uniform Standards of Professional Appraisal Practice (U8PAP) of the Appraisal Foundation; and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

100 Mr. Grant Vee May 18, 2016 Page Three We meet the requirements of the Competency Provision of the Uniform Standards of Professional Appraisal Practice. A statement of our qualifications appears in the Addenda. Respectfully submitted,.~~~ Berri Cannon Harris Principal AG ames B. Harris, MAl rincipal AG001846

101

102 SUMMARY OF FACTS AND CONCLUSIONS EFFECTIVE DATE OF May 16, 2016 APPRAISAL DATE OF REPORT INTEREST APPRAISED May 18, 2016 Fee Simple Estate, subject to special tax liens LEGAL DESCRIPTION OWNERSHIPS CFD No lots/dwellings Lots 1-53, Tract No (53 lots) Lots 1-46, Tract No (46 lots) Lots 1-65, Tract No (65 lots) Lots 1-67, Tract No (67 lots) Lots 1-69, Tract No (69 lots) Lots 1-57, Tract No (57 lots) Lots 1-75, Tract No (75 lots) Individual Homeowners Margate Tract No , Lots 12,14,15,41-46,48 Total 10 Dwellings Camden Tract No , Lots 1-4, 6-8,10-11,14-15,22,38 Total 13 Dwellings Waterford Tract No , Lots 6, 8-9, 12, 14,43-48,50 Total 12 Dwellings Kensington Tract No , Lots 32-34,36,38-39,41,44-49,51 Total 14 Dwellings Hadleigh Tract No , Lots 1,18-19,21-26,65-69 Total 14 Dwellings v

103 OWNERSHIPS Cont. Sf. James Tract No , Lots 18-34, 38-39,41,43-48,50 Total 27 Dwellings Canopy Creek Tract No , Lots 1-2, 4-5,52-55,66-70,72-73,75 Total 16 Dwellings Total Sold Dwellings - CFD No. 24: 106 Merchant Builders Margate - KB Home Coastal, Inc. Tract No , Lots 1-11,13,16-40, 47,49-53 Total 43 Dwellings/lots Camden - CalAtlantic Homes Tract No , Lots 5,9,12-13,16-21,23-46 Total 33 Dwellings/Lots Waterford - Woodside 05S LP Tract No , Lots 1-5, 7,10-11,13,15-42,49,51-65 Total 53 Dwellings/Lots Kensington - Tri Pointe Homes, Inc. Tract No , Lots 1-31, 35, 37,40,42-43,50,52-67 Total 53 Dwellings/Lots Hadleigh - KB Home Coastal, Inc. Tract No , Lots 2-17,20,27-64 Total 55 Dwellings/Lots St. James - Tri Point Homes, Inc. Tract No , Lots 1-17, 35-37, 40, 42, 49,51-57 Total 30 Dwellings/Lots Canopy Creek - Woodside 05S LP Tract No , Lots 3,6-51,56-65,71,74 Total 59 Dwellings Total Merchant Builder Dwellings CFD No. 24: 326 vi

104 SITE CONDITION 23 model homes completed, 106 production homes sold, 31 dwellings built but not sold, 41 production homes under construction, and 231 physically finished lots HIGHEST AND BEST USE Continued residential development within the Park Place master planned community VALUATION CONCLUSIONS MINIMUM MARKET VALUE Individual Homeowners (106 DUs) Merchant Builder Ownerships KB Home Coastal, Inc. CalAtlantic Homes Tri Pointe Homes Woodside 05S, LP $128,500,000 $53,100,000 $75,400,000 $20,800,000 $ 7,800,000 $19,900,000 $26,900,000 vii

105 TABLE OF CONTENTS Section Transmittal Letter.... Summary of Facts and Conclusions iv Aerial... v Table of Contents... vi Introduction Area Description Site Analysis Improvement Description Highest and Best Use Valuation Methodology Valuation of Dwelling Units Valuation of Dwellings Under-Construction Valuation of Finished Lots Valuation Conclusion Certification Addenda Qualifications Assessed Values & Taxes Ownerships Summary of Sales by Tract viii

106 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 taxable property within the City of Ontario Community Facilities District No. 24, (CFD No. 24) ("District"). The purpose of this appraisal is to estimate the "As Is" Minimum Market Value of the land and improvements within the District under the ownerships of four merchant builders and 106 individual homeowners. CFD No. 24 generally conforms to Tract Nos , 18076, 18077, 18078, 18079, and 18945, in Ontario. The master planned community is known as Park Place. The opinions of value set forth are subject to the assumptions and limiting conditions set forth in this appraisal and the appraisal guidelines as set forth by the City of Ontario for CFD financing. Function of the Report and Intended Use It is our understanding that this appraisal report is to be used for Community Facilities District bond purposes only. The subject properties are 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 bond indebtedness for CFD No. 24 is $57,000,000. Client and Intended Users of the Report This report was prepared for our client, the City of Ontario. The intended users of the report include the City, its legal counsel, financial advisor, 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 the property under the ownerships of the developer/merchant builders, and 106 individual ownerships within the boundaries of CONSULTING REAL ESTATE APPRAISERS 1

107 HRA the District. This is a fully documented self-contained appraisal report. Any lands designated for school, park, open space or civic uses within CFD No. 24 not subject to special tax are not included in this assignment. The residential property is valued in its "as is" condition as of the date of value. Site development for the subject property ranges from physically finished lots to completed and sold dwelling units. The residential land is valued in its "as is" condition as of the date of value. Site development for the subject property is to a near finished lot condition, plus completed model homes and production homes. The exhibit on the following page illustrates the condition and construction in each of the proposed developments within the District. 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 fin ished lots. 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 California Department of Finance (population data), Ernployment Development Department of the State of California (employment data), City of Ontario (zoning information, building permit trends), Ontario 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 obtained from the builders and their consultant. 2. Inspected the subject's neighborhood and reviewed proposed product and similar products for consideration of Highest and Best Use of the proposed lots. 3. Gathered and analyzed comparable merchant builder land sales within the Ontario market areas, and residential detached unit 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 Southern California area. Where feasible, data were confirmed with both the CONSULTING REAL ESTATE APPRAISERS 2

108 City of Ontario CFD No. 24 :IJ Lot Condition/Status» 5/27/2016 Homeowners Lots Merchant Builder Ownerships lots ::r: w KB CalAtlantic Woodside Tri Pointe KB Tri Pointe Woodside Merchant Builder Home Homes Homes Homes Home Homes Homes Product Name Margate Camden Waterford Kensington Hadleigh St. James Canopy Creek Tract No Total 0 z (j) Completed Dwellings c r:::; Models Z Gl Production Dwellings Xl m }> r Closed Sales - Production m (j) Completed Unsold - Production >! '-< m }> -u -u Xl }> ii5 m Xl (j) Merchant Builder Owned Dwellings (includes models and unsold completed dwelling units) Dwellings Under Construction Stucco Framing Physically Finished lots Totals Per Product

109 HRA buyer and seller. The data gathered are presented on a summary page within this report. Date of Value and Report The opinion of Minimum Market Value expressed in this report is stated as of May 16,2016. The date of the appraisal report is May 18, Date of Inspection The subject property was inspected on several occasions, with the most recent on May 15, 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 The subject property, CFD No. 24, includes approximately 70 gross acres and approximately 50 net acres in the master planned community known as Park Place. Park Place is located within the City limits of Ontario, in San Bernardino County, California. Park Place is located in the southern portion of Ontario. The community is generally bounded by Archibald Avenue to the west, vacant land to the north and east, and dwellings and vacant land to the south. The vacant land to the east is a Southern California Edison high voltage right-of-way. Merrill Avenue forms the northerly line of CFD No. 24. The subject property consists of 23 model homes, 137 completed dwelling units, 41 dwellings under unit construction, and 231 physically finished lots. The District in its entirety consists of 50.4 taxable acres according to Tract Nos , 18076, 18077, 18078, 18079, and 18945, dated January 2007, February 20007, and January 2014, prepared by LD. King, Inc. and MDS Consulting. Please refer to the following page for a copy of the boundary map for CFD No. 24. CONSULTING REAL ESTATE APPRAISERS 4

110 H~~ ~ PROPOSED BOUNDARIES OF CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE 1) COUNTY OF SAN BERNARDINO STATE OF CALIFORNIA COOIN'fS IoU, or!ri.cr '&l1j~' mo A I'OIIOI)N 01' lfw.:f SHOWII {)/I WJ'S (luo tl BOOK J311 or fra(;t WPS, AI r~(s, 1)1/101)(;n 7 ANIl!i(),')~ J..H OF nw:r WS'$,?}{.,s 6t nlllo'... ~1 71. R(Sl'tcnvUY, IN!H[ Cine;( Cf Iff( OOUlIlY IIIxon(!f)l: Of r~! COVIITY or "M (IfmWlOlM~. STAT< or ()iifornioi. NT5 ii 'V I \ PROPOSF.O!l(lt}ti[W~les or mt elf! or Ohl~RtO CO\lMI)~11TY I'lICltlli'.$ nlsllnct /,0. 24 (PARK I~'\C( fiictljll(s PlV.S( I) CFD NO. 24 APNs Q11~.. 0!l1"OI llyu ~9 Cl11t-C/Il--OI TlYv 18 Q111} OOl-OI II",?~ Oll/Hm OJ,"'" {/ IY.!la-J:l~-OI tm. 1~ OlI6~J\'H)],"'" ~I 0218~Jli2-01 Ttw ~~ 011~-0l1 1J 0211}-051 1l. I~ nu:o I~ llie OHlCE Of!!1t ~lu!\( rjf 1He ell'( Of OIIiNlIO n~s.l;:':'~ l)i.y Of Ss,\lI~f.t:.. 20H CUltK Of IIIE CII'( Of O«lAAiO I I1.R fj( (;tf(1lfy HIIII I}lE li1!ll 'i low' SlK1MIIC fll( f'hof'o<j.o UOUNrAR:(S or cny Of OOfNUO COWVI11IY r,l(;lunt~ IIlSII!<CI liq. l' (PAAK 1'l}.C( fj,(lljli(s f1\o\.s[ I), (;1)liNIY (f SOil ((R!W«lIHO. ~fal( 01" C!iIFORliLl, WAS m'r(nw!ii THE em COU~Cll. if 1I1( CIT'( ()f 001,11110 AI ~ fl(r,tol,lll ~[[11N(; II(R Of, JI!:LO ON Il!l;" ~~_.. {),\y OF,J._~.~J.~~H trl ITS R SOI.UfiOll O'J_~L.:. l~tq,.. _._,.. _. SAN BEHNARDINO COUNTY RECORDER'S CERTIFICATE r:~ry 'fills ~. DAY or.yfkl!1th- 201~. AT IfIt.1OIm Of ~'~'{lp'b c,oi." _ ~I (;ook,,'6.12_ Of WPS or ASsr~lItnr NlO COOlAl,llllN f,oclllllts ~1~IS AI I'Mit ';;J,.g. II.II(! }..~ INS1Rij~Hll ~O J...7.f2!L1._. in mr OIn;r. Of Ol( f,(mity m:cl)f;()er Cf me COlJlllY Of 5.m f)(!lw.'l'oitlo. SI_I, Cf CIlIFOOM.'.. p.xm"t-~i!:ciii(o"ilwjfs1m"l'!1r- ~.cooc...'i03-- ll!.~jii'; ~W(,1I< MSf.SS()R-R-rCOll!lfR-COVNI~ COVNW O( SIll (lfjl!w!ookl m~~ CONSULTING REAL ESTATE APPRAISERS 5

111 HRA Legal Description and Ownership The land within the District is under the ownerships of four merchant builders and 106 individual homeowners. KB Home Coastal, Inc. owns 43 lots/dwellings in Tract No , Margate and 55 lots/dwellings in Tract No , Hadleigh. CalAtlantic Homes owns 33 lots/dwellings in Tract No , Camden. Woodside 05S, LP owns 53 lots/dwellings in Tract No , Waterford and 59 lots/dwellings in Tract No , Canopy Creek. Tri Pointe Homes, Inc. owns 53 lots/dwellings in Tract No , Kensington and 30 lots/dwellings in Tract No , St. James. One hundred-six homes have sold to individual homeowners as of the date of value. Please refer to the Addenda of this report for a lot by lot summary of ownerships. Property History Based on our research through public records, and information provided by Lewis Management Corp., The seven tracts were sold by the developer, SL Ontario Development Company, LLC in December The developer is a partnership of Lewis Management Corp. and Stratham Homes, Inc. Please review the following table for information on each of the seven sales. CFD No. 24 Merchant Builder Lot Sales Tract No. Gross Acres No. of Lots Sales Price $/SF Sale Date $9,258,497 $174,689 12/ $8,608,531 $187,142 12/ $15,021,513 $231,100 12/ $13,243,054 $197,658 12/ $10,224,338 $148,179 12/ $10,506,505 $184,325 12/ $10,193,018 $135,907 12/ Reportedly, all of the tracts, except Tract No , sold in a blue-top condition. Tract No sold in a mass graded condition. CONSULTING REAL ESTATE APPRAISERS 6

112 HRA To the best of the appraiser's knowledge, other than the 106 dwelling sales to individual homeowners, there have not been any other transfers of the subject property over the previous three years. 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 per square foot is used in estimating Minimum Market Value for the 106 built and sold dwellings within CFD No. 24. 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 1 Part 563, subsection a(b)(2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations. CONSULTING REAL ESTATE APPRAISERS 7

113 HRA 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 govemment. 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. 24 for the City of Ontario. 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 installed. 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. 2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page Ibid, Page 334 CONSULTING REAL ESTATE APPRAISERS 8

114 HRA Extraordinary Assumptions, 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: Extraordinary Assumptions of the Appraisal The on-site infrastructure costs and fees were provided for our review by the developer. It is assumed that all conditions for site development as indicated in the Conditions of Approval were included in the infrastructure costs. It is a specific contingency and assumption of this appraisal report that the costs reported are accurate. Any variance in costs could impact the value conclusions reported in this appraisal report. 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. 24. 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. Assumptions and Limiting Conditions No responsibility is assumed by your appraisers 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 appraisers. All areas and dimensions furnished to your appraisers are presumed to be correct. The date of value for which the opinions of Minimum Market Value are expressed in this report is May 16, 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. CONSULTING REAL ESTATE APPRAISERS 9

115 HRA 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 appraisers have requested copies of geotechnical/soils reports and site assessment reports. As of the date of the appraisal report the appraisers have been provided with one soils report for review. The report was prepared by Leighton and Associates, dated July 14, 2006, for the tracts within the District. In addition, a review of the rough grading plans was completed in June In August 2013, a methane gas investigation was completed in October A foundation design and seismic design report was completed in November The acceptance of the rough grading was provided for each of the seven tracts. The reports were prepared for the site grading in Based on this report, the subject lots were reported to be geologically and geotechnically acceptable. For purposes of this appraisal, the soil is assumed to be of adequate loadbearing capacity to support all the proposed uses. Although requested for all seven tracts, the appraisers were provided with one preliminary title report for Tract No The preliminary report was prepared by Orange Coast Title Company, dated December 19, 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. The lien for CFD 24 was not recorded prior to the title policy. The Notice of Special Tax was recorded on November 20,2014. The appraisers have not been provided with plans or specifications for the existing or proposed dwellings within the District. For purposes of this appraisal, we have assumed that the quality of construction, functional utility, amenities and features will meet market demand for new product in the market area in which the subject is located. This is a specific assumption of the value estimate included in the 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 affect on individual properties, unless detailed geologic reports are made available. The appraisers have 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. CONSULTING REAL ESTATE APPRAISERS 10

116 HRA The appraisers assume no responsibility for economic or physical factors that may occur after the date of this appraisal. The appraisers, in rendering these opinions, assume 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 furnished 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 appraisers become aware of such during the appraisers' inspection. The appraisers have no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraisers, however, are 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. The forecasts of future events that influence the valuation process are predicated on the continuation of historic and current trends in the market. CONSULTING REAL ESTATE APPRAISERS 11

117 HRA 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. We 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 appraisers relative to such additional employment. In the event the appraisers are subpoenaed for a deposition, judicial, or administrative proceeding, and are ordered to produce their appraisal report and files, the appraisers will immediately notify the client. The appraisers will appear at the deposition, judicial, or administrative hearing with their appraisal report and files and will answer all questions unless the client provides the appraisers with legal counsel who then instructs them not to appear, instructs them not to produce certain documents, or instructs them not to answer certain questions. These instructions will be overridden by a court order which the appraisers will follow if legally required to do so. It shall be the responsibility of the client to obtain a protective order. The appraisers have 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 appraisers assume 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 and Associates to control the uses and distribution of each appraisal report signed by such Member or Associates. Except as hereinafter provided, possession of this report, or a copy of it, does not carry 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 CONSULTING REAL ESTATE APPRAISERS 12

118 HRA without the written consent of the appraisers and in any event only with properly written qualification and only in its entirety. The City of Ontario, its underwriter, financial advisor and legal counsel may publish this report in the Official Statement for this CFD. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers or the firm with which they are 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 appraisers prevail, the party initiating such legal action shall reimburse Harris Realty Appraisal and/or the appraisers for any and all costs of any nature, including attorneys' fees, incurred in their defense. CONSULTING REAL ESTATE APPRAISERS 13

119 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 Bernardino County, City of Ontario and the subject market areas. 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 2016, the countywide population stood at 2,139,600 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 five years, the average annual increase was only 17,240 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 six years represent annual changes of a negative 1.1 % to 0.9%. The decline in 2010 was due to the different methodologies between the U.S. Census count and the State of California projections. CONSULTING REAL ESTATE APPRAISERS 14

120 ll ~ Regional Map 1; " G apeland L. I 1 ~ -.lli!j Lm '" " " )~c'bl II Ai,port " "- i1" v./ Fl ~ 0 0 ~cla-, ""''' ~~!I e " {co!ij>larut "'""'- It<L Ra cho Cucam e'g \nga "/ ~ Roctkstet North Cuca on930 Ir ocu on9a Kaiser t ~ NGEl JL LSi ~ -<Ill I" ~ h! ~ ontc laira -.l Onta'ieu. ~ Ontario V,II ~'d " f7 " ~ " 50tP- Miis~ ~ Fontana omo a ~ <n IF, W F " s R D NO! Fontana Declezville ~Q i' " --"-El' d~llliill.>l """ ~ Ch ~_ne jjj -- ",,- ~ ~ I... '., lill g' -LBiversi e Dr ~ ~ Chino A' ~', "- ~, ~v,./" ~ :\. F c:::r --- c L I F 0 N I A &' -EOis.on..& Subject ProP.!:ID: BOK s I ~ ~ Mira La a SIY ' Il-. I~ ~eprs ~ Chino.Y :~~ ~ 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..i,,a' /i A,e ~ "ile-"'>, Padle ---- Area go ~ '" ) Los Serranos o r\ J;<&. ~ ~ ~ Hidden Valley Chino Hills l 0, Chino Hills State Park r---- r k. Wildlife A' " \zq 0 Norco RIV R S IDE / Corona ~ - rrb M""~ r-. ~., ~ ~,port ~ ~ ~ I~ ';... " ":-~ \~.ns --!}.:/ L ~ h'~ Anr eim '" wel'c,"~~ Regional '" o A N G E ~ Peppej Corner.. Sierra Peak a Cleveland National Forest ~~ "ilo \ ~~9, I

121 HRA Year1 San Bernardino County Population Trends Average Annual Change Population Number Percent , ,418,380 52, % ,709,434 29, % ,741,400 31, % ,788,500 47, % ,833,000 44, % ,886,500 53, % ,946,200 59, % ,991,800 45, % ,028,000 36, % ,055,800 27, % ,057,300 1, % ,035,210 (22,090) (1.1 %) ,052,400 17, % ,063,900 10, % ,076,300 12, % ,085,700 9, % ,104,300 18, % ,139,600 35, % 'ApriI1, 1980, 1990, 2000, 2010; all other years January 1 Source: California Department of Finance, SAN BAG, U.S. Census 5/16 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 Bemardino and Riverside Counties. These counties have a diverse 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 CONSULTING REAL ESTATE APPRAISERS 16

122 HRA unemployment rate is significantly above the Southern California average and higher than the State. The higher unemployment rate is due to the seasonal nature of agricultural employment in the area and the sharp decline in construction, manufacturing and logistics jobs. The following exhibit illustrates the area's unemployment compared to California as of March Unemployment rates have increased 16% from the record low of 5%± in The unemployment rate peaked in July 2010 at 15.1%. California Inland Empire Labor Force 19,058,000 1,974,800 Unemployment 5.4% 5.8% 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 1,145,600 jobs in This represents an increase of over 702,000 new jobs created in San Bernardino and Riverside Counties during the past 30 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. Over the last five years, job growth has ranged from 0.3% to 4.8%. The following table illustrates the annual employment trends from 1983 through In March 2016, the nonagricultural employment was 1,377,700, a 3.4% increase from March CONSULTING REAL ESTATE APPRAISERS 17

123 HRA 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 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, Benchmark Source: Employment Development Department 2/16 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% 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 33.2% to 85,200 jobs in The 2015 employment is up 44.2% from the low mark of 59,100 construction jobs in The number of manufacturing jobs in the Inland Empire has increased over 45% 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 CONSULTING REAL ESTATE APPRAISERS 18

124 HRA 2006, but declined to 85,100 in Small increases occurred over the last four years, up to 95,600 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 Bernardino 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. 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 employment is a major employment sector in the Inland Empire due to the rapid population growth; however, government CONSULTING REAL ESTATE APPRAISERS 19

125 HRA employment declined from 235,200 jobs in 2009 to 224,600 jobs in In 2015, employment had increased to 233,400, but is still 0.9% below the 2009 peak. 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 was 160% above the current rate. Income The average household income in San Bernardino County in 2015 is estimated to be $65,551. The median household income stands at $50,644. These figures are moderately below the Southern California region average. Almost 50% 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. Income Range 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 County of San Bernardino Household Income Distribution 2015 Households 82,606 71,381 66,363 90, ,959 79,481 77,615 25,646 16, ,053 Percent % 11.38% 10.58% 14.38% 18.65% 12.68% 12.37% 4.09% 2.68% % $50,644 $65,551 1 Percent of total distribution Source: Claritas 3/16 CONSULTING REAL ESTATE APPRAISERS 20

126 HRA 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 2013 total of $ billion is near the peak 2006 retail sales level. During the past five years, retail sales growth has ranged from a low of a negative $2.735 billion in 2009 to $1.427 billion in During the first three quarters of 2014, retail sales totaled $ billion, or 4.6% greater than the first three quarters of Year Taxable Retail Sales 1000'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 San Bernardino County Retail Sales Trends Average Annual Change Number (000'5) 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, % 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% Retail Stores, Taxable Retail Sales Total Source: State Board of Equalization 3116 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 CONSULTING REAL ESTATE APPRAISERS 21

127 HRA sales level. During retail sales were up 8.2% over In 2012 retail sales increased 6.6%. In 2013 retail sales increased 6.0%. to $ This is nearly back to the peak highs of the 2006 sales level. In the future. retail sales growth should reflect the population growth in the County. 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 San Bernardino County. The major north-south arterial is the Mojave/Ontario Freeway (1-15) and the Riverside Freeway (S-91). The Pomona Freeway (SH-60) and San Bernardino Freeway (1-10) provide east-west access to the Los Angeles area. The Foothill Freeway (1-210). now completed. parallels the San Bernardino Freeway in an east-west direction. The subject property is about 3 miles south of the SH-60 Freeway. Archibald Avenue has a full interchange at the SH-60 Freeway. The subject is about 2% miles west of the 1-15 Freeway via Limonite Avenue. Limonite Avenue has a full interchange at the 1-15 Freeway. 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. County Los Angeles Orange County Riverside San Bernardino San Diego Ventura Southern California Southern California Home Sales No. Sold - All Homes Median Price - All Homes Mar. Mar. Pct. Mar. Mar. Pct Chg Chg % $ $ % , % $585,000 $625, % 3,418 3, % $305,000 $330, % 2,347 2, % $260,000 $272, % 3,477 3, % $455,000 $478, % % $461,750 $497, % 19,987 20, % $425,000 $449, % Source: DQNews.com 4/16 CONSULTING REAL ESTATE APPRAISERS 22

128 HRA During the period from 1988 through 1989, housing values appreciated at rates approaching an average of 15% per annum throughout much of San Bemardino 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 appreciation. Over the subsequent 6:±: years, sales, prices significantly decreased. However, over the last 4:±: years, sales prices have increased on a year-over-year basis. The March 2016 sales were the highest March sales since 2013, but the March 2016 sales were 14.6% lower than the average sales rate for March over the last 28 years. The change in sales was up 34.5% from February 2016 and up 1.9% since March However, sales have not been above the 28 year average for any particular month in over seven years. There were also more signs of home prices flattening out. The region's median sale price has changed little over the last five months, following 44 months of increases. The March average price is about 1.0% less than September Southern California's March median sale price was 11.1 % below the peak median price of $505,000 reached from March through July The median price has had single-digit increases for 22 straight months after 22 consecutive months of double-digit increases. In March 2016, Ontario had a median existing home sale price of $355,000. In San Bernardino County, 2,528 homes were reportedly sold in March 2016, which is an increase of 7.7% from March Prices are reportedly back to their level. At this time, builders appear to be testing the market again with increases in sales and pricing. Over the past 12 months, the median existing home sales price has increased 4.6% to $272,000, 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 CONSULTING REAL ESTATE APPRAISERS 23

129 HRA 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 3% 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. City of Ontario The City of Ontario is located in the central west valley area of San Bernardino County. Please refer to the following page for a neighborhood map. Ontario is located approximately 35 miles east of Los Angeles and 23 miles west of San Bernardino. The City was incorporated in The Ontario area was primarily an agricultural area, from the early part of the century, until urban development began in the 1950's. The City has over 10,000 acres zoned for industrial use around the Ontario International Airport. This development has spurred the growth of the City for the last 40 years. The City of Ontario is bounded by the following local cities and counties. CitvlArea Rancho Cucamonga and Upland Chino and Montclair Fontana and Riverside County Riverside Count and Chino Dir. From Ontario North West East South CONSULTING REAL ESTATE APPRAISERS 24

130 Neighborhood Map OntariO II S~~~ ~ CFDNo.24 Chino 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.

131 HRA The City land area is developed with primarily industrial uses. The City limits of Ontario contain approximately 32,000 acres of land. Of this amount, there are 10,000± acres of industrial land. The major commercial area is adjacent to the Ontario Mills at the 1-15 and the 1-10 Freeways. Population The City of Ontario has had moderate population growth since the 1970's. Although the growth has been steady, there is still significant area for future residential development. The following table illustrates the City's growth and population since The January 2016 population, according to the California State Department of Finance, was 169,900 residents. Population Trends Ontario Percent Year Population Change , , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % Source: California Department of Finance. 5/16 Employment and Income Levels The City of Ontario is within a labor market area that includes the nearby communities of Rancho Cucamonga and Fontana. As of March 2016, within the immediate Ontario area there is an estimated 82,600 person labor force with a 5.6% CONSULTING REAL ESTATE APPRAISERS 26

132 HRA unemployment rate, as reported by the State of California. Within the Fontana, Ontario, Rancho Cucamonga area, there is a 271,400-person labor force with a 5.3% unemployment rate. The largest employers in Ontario are: Major Emplovers Employer Ontario International Airport North American Medical Mgmt. City of Ontario Mag Instruments Citizens Bank Waymart Fullmer Construction Classic Containers Kindred Hospital Merv n's Source: San Bernardino Chamber of Commerce No. of Employees 7,500 1,304 1, According to Claritas, Inc. the Ontario area has a similar income level as the entire San Bernardino County. The median household income for 2015 is $51,368 compared to the County median of $50,644. The City's average household income is $61,825. Retail Sales Retail sales in the City of Ontario have increased significantly as the overall economy has improved. The following table shows the growth of retail store sales since The annual increases are significantly higher than the County increases. The retail sales in 2013 finally exceeded the previous high retail sales of $3,800,293,000, which occurred in CONSULTING REAL ESTATE APPRAISERS 27

133 HRA City of Ontario Retail Sales Trends Taxable Average Annual Change Retail Sales Number Year (OOO's) (OOO's) Percent 2000 $2,058, $2,464,136 $ 405, % 2002 $2,495,899 $ 31, % 2003 $2,789,875 $ 293, % 2004 $3,205,034 $ 415, % 2005 $3,639,448 $ 434, % 2006 $3,785,626 $ 146, % 2007 $3.800,293 $ 14,667 O.?% 2008 $3,473,717 ($ 326,576) (8.6%) 2009 $2,881,884 ($ 591,833) (17.0%) 2010 $3,098,722 $ 216, % 2011 $3,363,827 $ 265, % 2012 $3,628,744 $ 264, % 2013 $3,933,584 $ 304, % Retail Stores, Taxable Retail Sales Total Source: State Board of Equalization 3116 Transportation Major highways and railroads cross Ontario, making shipping and transportation throughout Southern California and the Western States convenient and reliable. Ontario has access to seven major highways. Interstate 10 traverses the northern section of the City and Interstate 15 borders the City to the east. State Route 60 travels an east/west path through the southern section of the City, State Highways 91 and 57, and Interstates 210 and 215 are within 10 to 20 minutes driving distance of Ontario. Burlington Northern Santa Fe and Union Pacific provide rail service to Ontario. 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 Ontario and are easily accessible by truck. The LA-Ontario International Airport is CONSULTING REAL ESTATE APPRAISERS 28

134 HRA located four miles to the north of the subject property, and is used by the United Parcel Service as its main Southern California regional cargo distribution point. Immediate Surroundings The subject property is located in the most southerly portion of the City of Ontario. It is located at the southeast corner of Archibald Avenue and Merrill Avenue. The subject property is the first phase of a new master planned community known as Park Place. Park Place, in total, is proposed to be built-out with 2,293 dwelling units with density ranging from 3.5 dwellings per acre to 10.2 dwellings per acre. Phase 1 will contain 432 dwellings upon build-out. The average density for the 432 dwellings is 6.2 dwellings per acre. Park Place is a portion of a much larger master planned community known as Ontario Ranch. Previously this planned community was known as the New Model Colony. This community will contain over 3,500 acres of land proposed for almost 18,000 dwelling units; over 2,900,000 square feet of industrial space; over 1,500,000 square feet of commercial - retail space; and over 500,000 square feet of business park uses. Currently most of Ontario Ranch is raw vacant land. North of the subject property is mostly raw vacant land, within the future Park Place development. To the north of the future Park Place land is raw land and on-going dairy operations. To the west (across Archibald Avenue) is raw vacant land and ongoing dairy operations. To the east is raw vacant land. The general area, north and west of the subject property has several other on-going dairy operations. To the south is the City of Eastvale, within Riverside County. Basically the south line of the subject property is adjacent to the border of San Bernardino County and Riverside County. Eastvale is a newer city, incorporated on October 1, Eastvale contains 13.1 square miles and currently has over 16,400 dwelling units which supports a population of over 63,200 residents as of January 1, CONSULTING REAL ESTATE APPRAISERS 29

135 HRA Most of the nearby retail uses are located in Eastvale. Eastvale Gateway North and South contain over 1,000,000 square feet of retail space on both sides of Limonite Avenue at the 1-15 Freeway. This center extends westerly to Hamner Avenue. The Marketplace at the Enclave contains about 90,000 square feet and is located at Archibald Avenue at Schlesman Road. The future Eastvale Crossings, located at the southeast corner of Archibald Avenue and Limonite Avenue, is proposed for 200,000 square feet of retail space including a Super Walmart. An older retail center known as the Cloverdale Marketplace is located at the southwest corner of Limonite Avenue and Hamner Avenue. The center contains about 130,000 square feet of retail space anchored by a Ralph's Market. The subject property and most of the surrounding land are located within the Chino Airport Influence Area. Conclusions of Area Analysis 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 May 13, 2016, the Dow Jones Industrial Average (DJIA) and S&P 500 are near historical highs of over 17,500 and 2,000 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 10% in the median home price from a year ago. The median home price in San Bernardino County was $272,000 in March Riverside's median home price was $330,000. 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 improving demand CONSULTING REAL ESTATE APPRAISERS 30

136 HRA 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 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 Ontario and the nearby communities are anticipated to continue to experience moderate growth. CONSULTING REAL ESTATE APPRAISERS 31

137 HRA SITE ANALYSIS General The subject property of this appraisal is identified as City Ontario CFD No. 24. The subject consists of seven tract maps proposed for seven residential projects totaling 432 dwelling units. CFD No. 24 is the first phase of the 2,293 unit Park Place master planned community. As of the date of value, 160 dwelling units were completed within the District. Of the 160 dwelling units, 23 are model homes and 137 are production homes. One hundred-six production homes have sold to individual homeowners. Thirtyseven nearly complete dwellings have not closed escrow to individual homeowners. Forty-one production homes are under construction. The remaining 231 lots are in a physically finished lot condition. Please refer to page 4 for boundary map of the District. Location The subject property is located west of Interstate 15, at the southeast corner of Archibald and Merrill Avenues, in the city of Ontario. The subject is 2% miles west of the Limonite Avenue interchange with Interstate 15. This is a full interchange, with onramps and off-ramps in both direction. Current Site Condition As of the date of value of this appraisal, the land in CFD No. 24 is in a physically finished lot condition with all streets and utilities installed. There are 160 completed units, with 41 production dwellings under construction. The remaining 231 lots are in a physically finished condition. Size and Shape The overall shape of CFD No. 24 is generally triangular and contains 69.9:t gross acres and 50.2:t net acres, according to the recorded tract maps. CFD No. 24 has been subdivided into seven final tract maps, proposed for seven projects with 432 dwellings. Please refer to the table on the next page which summarizes the final tracts. CONSULTING REAL ESTATE APPRAISERS 32

138 Ontario Gross Number CFD No. 24 Tract No. Acres of Lots Density lIac /ac /ac /ac /ac /ac /ac /ac Soils and Geology A soils report prepared in 2006 by Leighton & Associates was submitted for our review. In addition, a review of grading plans, dated June 2013, a methane investigation dated August 2013 and updated foundation recommendations, dated October 2013 were submitted for our review. Also submitted were individual acceptances of rough grading for the seven tract maps. The proposed 280.± acre Park Place development is located within the Chino Basin in the northern portion of the Peninsular Range geomorphic province of California. Major structural features surround the region, including the Cucamonga fault and the San Gabriel Mountains to the north, the Chino fault and Puente and Chino Hills to the southwest, and the San Jacinto fault to the east. In addition, this is an area of large-scale crustal disturbance as the relatively northwestward-moving Peninsular Range Province collides with the Transverse Range Province (San Gabriel Mountains) to the north. Several active or potentially active faults have been mapped in the region and are believed to accommodate compression associated with this collision. The site is located approximately 9 kilometers east of Chino-Central Avenue Fault Zone. The site is generally located approximately 12 miles south of the Cucamonga Fault Zone. This is a major active fault zone forming the steep escarpment between the San Gabriel Mountains to the north and the basin floor on the south. The site is underlain by younger alluvial soil deposits eroded from the San Gabriel Mountains to the north and deposited in the site vicinity. This younger alluvium is underlain by older alluvium. 33

139 HRA The entire Park Place site is underlain by alluvial soils and in various areas by organic-rich soil and manure. Manure was mainly observed in the former corral areas within the north portion of the site. Manure was also observed to overlie alluvium in some of the pastures and detention ponds, within the northern portion. Uncontrolled artificial fill was observed onsite as uncompacted fill berms surrounding the detention ponds within the northern portion of the Park Place site. No signs of manure were observed covering the surface of the agricultural farms within the southern portion of the Park Place site, the former Hettinga property (CFD No. 24). Groundwater was not encountered in any of the borings excavated onsite to a maximum depth of 51.5 feet below the existing ground surface. Based on a review of regional maps and groundwater data, groundwater is expected to be on the order of 70 feet or deeper below the existing ground surface in the site vicinity. The closest mapped active fault that could affect the site is the Chino-Central Avenue fault, located approximately 5 miles west of the subject site. The Chino-Central Avenue fault is capable of producing a maximum moment magnitude of 6.7 (Mw) with an average slip rate of 1.0± millimeter per year. Other known regional active faults that could affect the site include the Whittier, Elsinore-Glen Ivy, San Jose, Cucamonga, Sierra Madre, San Jacinto-San Bernardino segment, and Puente Hills faults. The largest fault in southern California, the San Andreas Fault System, is located approximately 33 kilometers northeast of the site. No active or potentially active faults have been previously mapped across the project site and the site is not located within a current Alquist-Priolo Earthquake Fault Zone. The potential for fault ground rupture at the site is considered very low. The project site is not located in an area mapped as potentially liquefiable within the San Bernardino County Land Use Plan for the Corona North quadrangle (San Bernardino County Planning Department 1994). In addition, regional groundwater maps CONSULTING REAL ESTATE APPRAISERS 34

140 HRA and groundwater data indicate that shallow groundwater conditions do not exist locally, nor are groundwater levels expected to rise significantly. Based on these findings, the potential for liquefaction within the Park Place site is considered very low. The appraisers assume that the soil conditions allow all of the existing and proposed development as discussed in the Highest and Best Use section of this report and as proposed by the builder. All 432 lots in CFD No. 24 are in a physically finished lot condition, with 201 dwellings completed or under construction. Topography and Drainage Elevations range from 650 feet to 670 feet. 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 development process. During our inspection of the site, we did not observe any drainage problems. Zoning The subject property is zoned S-P, Specific Plan-Subarea 29, by the City of Ontario. This zone allows for detached single-family residential uses with a density between 2.1 and 5.0 dwellings per acre. The property has a General Plan Designation of low density residential. The seven tract maps range from cluster homes (7-14 DUlac) to conventional large lot (3-6 DUlAc). As built and proposed, the subject project appears to be a legally conforming use. The subject property is in conformance with all zoning requirements, and is assumed to be in conformance with all governmental regulations. Access and Circulation Regional access to the area is provided by the Ontario Freeway (1-15). Interstate 15 runs in an northeasterly direction from San Diego and Riverside Counties through San Bernardino County, bisecting the West San Bernardino Valley. Access to the subject's immediate area is Limonite Avenue which connects with 1-15, east of subject. This is a full interchange about 2% miles east of CFD No. 24. CONSULTING REAL ESTATE APPRAISERS 35

141 HRA Archibald Avenue, to the west, is paved with three traffic lanes in each direction. Merrill Avenue is paved with two lanes in each direction adjacent to CFD 24. Public interior streets within CFD No. 24 have dedicated widths of 60 feet allowing for one traffic lanes in each direction, concrete curbs, gutters and sidewalks. Within Tract No , there are also private streets which are dedicated 24 feet wide, allowing for one traffic lane in each direction. Easements The appraisers have been provided with one title report, for Tract No , in CFD No. 24. The report was dated December 19, 2013 and prepared by Orange Coast Title Company. There are numerous easements for water and water pipelines, electrical pole lines, roadway and public utilities over the subject property. CC&Rs were recorded December 5, In addition, a Deed of Trust to secure the performance of an agreement between Ryland Homes and SL Ontario Development Company was recorded December 11, 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. The special tax for CFD No. 24 was not listed on the title report. Subsequent to the title report, a notice of lien for the special tax for CFD No. 24 was recorded on November 20, Utilities As of the date of this appraisal, all utilities with capacity to serve are available to the property. All utilities required to support the subject property to its highest and best use are provided by the following companies/agencies. Electricity Natural Gas Cable Telephone Fire Police Solid Waste Water Sewer Southern California Edison Southern California Gas Company Time Warner Cable AT&TNerizon City of Ontario City of Ontario City of Ontario City of Ontario City of Ontario CONSULTING REAL ESTATE APPRAISERS 36

142 HRA The subject property is located in a Zone "X" flood designated area according to Federal Emergency Management Agency Community Panel No H, dated August 28, This designation references an area of minimal flooding, which is within the 500-year flood plain. This area is protected by a levee. Flood insurance is not required. Hazardous Material/Toxic Waste Physical inspection of the subject property did not indicate evidence of hazardous materials and/or toxic waste. However, your appraisers are not considered experts in the field and are not qualified to detect such materials. A specific assumption of the report and value is that the soil is suitable for development as proposed and no evidence of hazardous materials or toxic waste exists. Environmental Issues The subject parcel was previously farmed for many years. The property is reportedly not impacted by any negative environmental issues. Transportation Vital to an area's growth and economic expansion are its transportation facilities for both business and residents. The existing transportation facilities available in the area are as follows. Rail: Truck: Air: Water: Highways: Metrolink stops in Ontario and Fontana All major trucking lines serve Ontario Ontario International Airport (4 miles), Los Angeles International Airport (50 miles) Long Beach Harbor/Port of Los Angeles (50 miles) San Bernardino Freeway (Interstate 10) - EM! Ontario Freeway (Interstate 15) - N/S Taxes and Special Taxes 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 CONSULTING REAL ESTATE APPRAISERS 37

143 HRA tax increases are limited according to Proposition 13 to a maximum of 2% per year plus bonds, if any. If the property is sold, real estate taxes are normally subject to modification to the then current Market Value. The basic levy for the properties is 1 %. In addition, there are taxes for the Metropolitan Water District, Chaffey College District, Chaffey High School District, Chino Basin Water, lighting and landscape districts and the Mountain View Elementary School District. In addition, there will be special taxes for the City of Ontario CFD No. 24, Park Place. The total tax rate is estimated not to exceed 1.95%. CFD No. 24 will have special taxes ranging from $1,713 to $3,795 per unit depending on house size, plus an additional $1,471 per unit for a Services Special Tax. For , none of the parcels had improvement values. The assessed values are of land only. The office of Goodwin Consulting Group estimates the Special Taxes on the undeveloped residential land within CFD No. 24. The Special Taxes for the individual homes are also estimated. The estimated property values are based, in part, on the Special Taxes estimated for the ultimate homeowner. The subject property falls within the taxing jurisdiction of the San Bernardino County Assessor's office. The applicable tax rate area is The published annual, tax rate in this area is %. The subject tax rate includes bond indebtedness related to school district debt service and flood control district debt service. For the tax years, CFD No. 24 has a total assessed value of $78,584,600. The total property tax is $1,447, Please refer to the Addenda of this report for individual assessed values and taxes for each of the 432 properties in CFD No. 24. The 75 parcels in Tract No did not have individual assessed values and taxes for We have included the two parent parcels of Tract No Reportedly, no properties are delinquent in their tax payments. CONSULTING REAL ESTATE APPRAISERS 38

144 HRA The overall effective tax rate for the proposed homes will be approximately 1.95% of base prices. This tax burden is common for newer dwellings in Westem San Bernardino County where tax rates in new horne comrnunities typically range from 1.50% to 2.00%. A survey of the subject's market area revealed that special Assessrnent Districts or CFDs encumber most of the competing residential subdivisions. There does not appear to be a great deal of resistance to the special assessments that do not increase the overall tax rate significantly above 2.0% of value. CONSULTING REAL ESTATE APPRAISERS 39

145 HRA IMPROVEMENT DESCRIPTION General There are seven active single-family subdivisions currently being developed in CFD No. 24. The currently active developments contain 178 detached production residential units, completed or under construction, 23 model homes completed and 231 physically finished lots. The 432 units in seven products are being built on lots that have a minimum size that range from 2,108 square feet to 6,300 square feet. The community has three pocket parks and a large homeowner association recreation center north of Merrill Avenue. The following table summarizes the floor plans of the active developments within CFD No. 24, as of appraisal date. The base sales prices are those actually being achieved, as of the date of value. Park Place Planned Community CFD No. 24 May 16,2016 NQ. Project/Builder Margate KB Home TR Total Lot Size Units Size Base Price Sg.Ft. $/Sg.Ft. 53 3,825 $484,880 2,801 $ $494,880 2,883 $ $505,880 2,961 $ Bdrm/ Stories/ No. Sold Bath Garage AbsorQtign 4/2.5 2/2 13 4/2.5 2/2 0.7 Du/mo. 5/3.0 2/2 2 Camden CalAtiantic Homes TR ,250 $454,800 2,732 $ $495,030 2,901 $ $499,510 3,062 $ /2.5 2/2 18 4/3,5 2/2 1.0 Du/mo. 4/3.5 2/2 3 Waterford Woodside Homes TR KenSington Tri Pointe Homes TR Hadleigh KB Home TR &,300 $567,880 3,191 $ $569,880 3,205 $ $592,880 3,562 $ $622,880 3,984 $ ,000 $485,900 3,078 $ $498,900 3,269 $ $512,900 3,415 $ ,150 $434,880 2,121 $ $444,880 2,331 $ $448,880 2,467 $ /3,0 1/3 19 4/3.5 2/3 1.1 DU/mo. 5/3.5 2/3 5/4.5 2/3 4/3.0 2/2 24 4/3.0 2/2 1.3 DU/mo. 5/4.0 2/2 3/2.5 2/2 26 4/3.0 2/2 1.4 Du/mo. 5/3.0 2/2 6 St. James Tri Pointe Homes TR ,811 $463,900 2,418 $ $465,900 2,496 $ $470,900 2,681 $ /3.0 2/2 36 4/3.0 2/2 2.0 DU/mo. 4/3.0 2/2 7 Canopy Creek Woodside Homes TR ,108 $389,880 1,656 $ $395,880 1,758 $ $406,880 1,856 $ $429,880 1,990 $ $426,880 2,179 $ /2.5 2/2 19 3/2.5 2/2 1,6 Du/mo. 3/2.5 2/2 3/2.5 2/2 4/2.5 2/2 CONSULTING REAL ESTATE APPRAISERS 40

146 HRA As indicated in the preceding table, Margate is being built by KB Home. There are 53 homes proposed. The project opened for sales in November 2014 and as of the date of value, 13 homes were reported to be sold; which indicates an overall absorption of 0.7 units per month. As of the date of value, ten homes have closed escrow. As of our date of inspection, three model homes were built, three homes were built, but not occupied, and no homes were under construction. There are 37 physically finished lots. CalAtlantic Homes is building Camden which opened for sales in November There are 46 dwellings proposed. As of the date of value, 18 homes were reported as sold which indicates an overall absorption of 1.0 unit per month. As of the date of value, there were two model homes, 13 homes had closed escrow, five homes were built but have not closed escrow and six dwellings were in the stucco stage of construction. There are 20 finished lots. Waterford is being built by Woodside Homes. There are 65 homes proposed. The project opened for sales in November 2014 and as of the date of value, 19 homes were reported to be sold; which indicates an overall absorption of 1.1 units per month. As of the date of value, 12 homes have closed escrow. As of our date of inspection, four model homes were built, six homes were built but not closed, and five homes were under construction in the framing stages. There are 38 finished lots. Tri Pointe Homes is building Kensington which opened for sales in November There are 67 dwellings proposed. As of the date of value, 24 homes were reported as sold which indicates an overall absorption of 1.3 units per month. As of the date of value, there were three model homes, 14 homes had closed escrow, six homes were built but have not closed escrow and nine dwellings were in the framing stage of construction. There are 35 finished lots. Hadleigh is being built by KB Home. There are 69 homes proposed. The project opened for sales in November 2014 and as of the date of value, 26 homes were reported to be sold; which indicates an overall absorption of 1.4 units per month. As of the date of value, 14 homes have closed escrow. As of our date of inspection, three CONSULTING REAL ESTATE APPRAISERS 41

147 HRA model homes were built, one home were built but not closed, and six homes were under construction in the stucco stages, There are 45 finished lots, Tri Pointe Homes is building Sl. James which opened for sales in November 2014, There are 57 dwellings proposed, As of the date of value, 36 homes were reported as sold which indicates an overall absorption of 2,0 units per month, As of the date of value, there were three model homes, 27 homes had closed escrow, seven homes were built but have not closed escrow and ten dwellings were in the stucco stage of construction, There are ten finished lots, Canopy Creek is being built by Woodside Homes, There are 75 homes proposed, The project opened for sales in May 2015 and as of the date of value, 19 homes were reported to be sold; which indicates an overall absorption of 1,6 units per month, As of the date of value, 16 homes have closed escrow, As of our date of inspection, five model homes were built, three homes were built but not closed, and five homes were under construction in the framing stages, There are 46 finished lots, We have been provided with brochures of the actively selling projects and they have been reviewed, The following is a list of some of the assumed general construction specifications for the detached single-family homes. Construction Units are of Class "0" 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. CONSULTING REAL ESTATE APPRAISERS 42

148 HRA Floor Covering Floor coverings are wall-to-wall carpet in all living areas. Entries are of ceramic tile and kitchen, bathrooms and laundry room are of vinyl or ceramic tile flooring. Interior Finish Custom trowelled ceiling and wall treatments. Heating/HVAC Energy efficient central air conditioning and gas forced air heating. Kitchens Kitchens will be equipped with stain grade or white Thermofil cabinets and ceramic tile or granite counter tops. Each kitchen will include stainless steel appliances including a 30 or 36 inch gas range or cooktop, fan hood, microwave, single or double oven, dishwasher and disposal. Bathrooms Master bathrooms will have double sinks with E-stone countertops and stain grade cabinets, and a separate fiberglass shower/tub. Secondary bathrooms will have E stone countertops, fiberglass combination tub/shower and stain grade cabinets. Doors Solid core 8 foot entry door. Garage doors are sectional steel roll-up. Site Improvements The production homes include concrete driveways and walkways to the front entry. Front yard landscaping with side and rear yard fencing are included. Options Numerous options and upgrades will be available including flooring, cabinet, and countertop upgrades. Most options and upgrades, provided at competing similar quality developments, will be offered. Conclusion of the Improvements Based on the review of the product information and physical inspection of current models and similar products, we are of the opinion that the quality of the projects are average for the market area and will generally meet buyer expectations for the subject's marketplace. CONSULTING REAL ESTATE APPRAISERS 43

149 HRA Functional Utility It is an assumption of this appraisal that all of the floor plans are functional, and competitive with current design standards. Remaining Economic Life The total/remaining economic life, according to the Marshall Valuation Service, is considered to be 50 years from date of completion. Homeowners Association The currently selling projects have a Homeowner's Association. At build out, the monthly fee is expected to be $ CONSULTING REAL ESTATE APPRAISERS 44

150 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."s 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. The subject property is located in the City of Ontario in San Bernardino County. CFD No. 24 is located at southeast corner of Archibald Avenue and Merrill Avenue. The seven tract maps were recorded in January 2007, February 2007 and January These tracts allow for development of 432 dwellings on lots that range from 2,108 square feet to 6,300 square feet in minimum size. Park Place has 137 completed 4 The Dictionary of Real Estate Appraisal, 4th Edition, Pub. by the Appraisal Institute, Chicago, IL., P The Appraisal of Real Estate, 10 th Edition, Pub. By the Appraisal Institute, Chicago, IL., P CONSULTING REAL ESTATE APPRAISERS 45

151 HRA production dwellings, 23 model homes and 41 dwellings under construction. The remaining 231 lots are in a physically finished condition. Physically Possible Use CFD No. 24 is roughly triangular in shape and contains 50.2 net acres according to the recorded tract maps. The individual lots have a flat topography. The development is a natural extension of existing nearby residential developments, in Eastvale, located in Riverside County and the City of Ontario. All normal utilities are available to serve the subject site. All utility and street improvements have been completed as of the date of value. The property is generally bounded by vacant land on all sides. Access is considered adequate, but will improve as more specific plan communities begin construction closer to CFD No. 24. 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 residential use. Additionally, the future surrounding uses of residential development appear to make the subject property more suitable for residential use. 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 CFD No. 24. CONSULTING REAL ESTATE APPRAISERS 46

152 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± 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 horne sales showed annual double-digit appreciation from 1996/1997 through The recent 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 48± months, 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 horne price increased by over 11 %, to $477,700± during During 2014, new home sales decreased by over 13%, however the sales price remained strong, with an increase of 5%±. However, sales are about 15% below the average March sales over the last 28 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/DataQuick, San Bernardino County's March 2016 existing home sales increased 7.7% to 2,528 dwellings compared to March San Bernardino County median home price in March 2016 rose 4.6% to $272,000 from March During 2015, new home sales increased 39.9% compared to 2014, in San Bernardino County new horne sales totaled 1,869 detached dwellings compared to 1,336 detached dwellings in The median new home sales price during the fourth quarter of 2015 was $477,700, 11.2% more than the median price for the fourth quarter of One of the reasons for the Inland Empire's current weakness in housing demand is due to a shortage of dwellings currently listed for sale. Both short CONSULTING REAL ESTATE APPRAISERS 47

153 HRA sales and foreclosures are at their lowest levels in over seven 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 1,869 new single-family detached homes and 202 attached new homes during This was up 39.9% for detached homes and down 22.0% for attached homes compared to Most of the detached homes sold in San Bernardino County during 2015 are priced under $500,000, and comprise 62%:1:. of the total sales. Sales of homes priced between $400,000 and $499,999 have the most activity, comprising 36%:1:. of the detached market. The number of active detached projects in San Bernardino County was up 13 projects to 157 projects from the end of According to Metrostudy, there are 831 detached dwellings under construction in San Bernardino County as of In addition, there are a reported 4,498 lots that are improved to a finished lot condition in San Bernardino County. At the end of 2014 there were 562 detached dwellings under construction and 7,256 lots were in a finished lot condition. Based on the current closing rate per project per quarter, the 831 detached homes under construction, assuming a similar number of active projects, would have an approximate 5.3 month absorption time. The estimated absorption time for the 4,498 finished lots is 22.8 months. Total inventory, which includes units under construction, units built but not occupied and model homes; indicates 10.0 months of absorption for the detached dwellings. The current total inventory absorption of 10.0 months is up from the reported 9.5 months one year ago. San Bernardino - Southwest Submarket CFD No. 24 is situated in the Central submarket region, which includes the cities and communities of Ontario, Montclair, Chino Hills, and Chino, The Southwest submarket region accounted for 121 detached sales during , or a 23.4% market share of the San Bernardino County market. This sales rate is up 5.2% from the sales rate. The Southwest submarket had average quarterly sales per project of 3.5:1:. units which is 33.9% less than the sales rate and is in the mid-range CONSULTING REAL ESTATE APPRAISERS 48

154 HRA sales rate of all county sub-markets. The Q median sales price in the Southwest submarket is $577,600, up from $542,300 in Q4 of 2014, a 6.5% increase and it is up 51.3% from the Q median price of $381,670. The Southwest submarket is in the high-range of the median sales price as of the end of Q4 2015, in San Bernardino County. It is a moderately expensive submarket in San Bernardino County with an average price per square foot of $ This price per square foot is down 11% from the Q price per square foot. The average size of a detached home in the subject's submarket decreased by 2.7% during 2015 to 2,630 square feet. During Q4 of 2015, the subject's submarket sold 0 detached homes priced under $350,000, five detached homes priced between $350,000 and $399,999 were sold; 29 detached homes priced between $400,000 and $499,000 were sold; and 87 homes priced over $500,000 were sold. There were 24 attached units sold in the subject's submarket in Q4 of Within the Southwest submarket there are 35 active projects, which are 13 more than the number of projects as of last year at this time. The subject's market area reports 178 units under construction. This is a 5.3 month absorption time for the units under construction. This is the same as the average absorption time of San Bernardino County, in total. Total lot inventory, which includes finished lots without home construction, totals 1,162 lots which equates to an 18.7 month supply at the current sales rate. One year ago finished lot inventory was at 778 lots, and the absorption time based on last year's sales rate was 21.9 months. Feasibility It is not in the scope of this appraisal assignment for the appraisers to conduct an extensive independent market study/absorption analysis, but it is the appraisers' responsibility to address the reasonableness of the conclusions of any market study which has been prepared by outside firms for the subject property. Unforeseen national and regional economic and/or social changes will affect the time-frame of real estate development. CONSULTING REAL ESTATE APPRAISERS 49

155 HRA In an attempt to arrive at reasonable and supportable absorption schedules for the proposed dwellings within CFD No. 24, the appraisers reviewed an independently prepared absorption analysis that relates to the entire build-out of CFD No. 24. This independent study is titled Community Facilities District No. 24 (Park Place Facilities - Phase One) Market Absorption Study, prepared for the City of Ontario and prepared by Empire Economics, Inc., dated April 25, The study analyzes the seven existing products within Park Place. The report reflects 91 closed sales as of April The report forecasts future closings of 96 dwellings during the remainder of During 2017, additional closings are estimated at 116 dwellings. During 2018,110 dwellings are expected to close, with 19 closings in early Based on the absorption analysis prepared by Empire Economics, the estimated average monthly absorption per project is 0.7 to 2.0 units, with an overall absorption of 1.9 units per month per project. It is our opinion, after surveying the competitive projects and analyzing the pricing, design, location and other pertinent factors, that the subject properties should experience average absorption, similar to those estimated by Empire Economics, Inc., assuming market conditions continue as currently predicted. Currently, the market appears to have entered a phase of stabilization. Please refer to the table on page 51 that summarizes the actively selling projects in Park Place. The overall absorption for the seven projects within Park Place is 0.7:!:: to 2.0:!:: 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 Bemardino are the most productive uses that will be allowed at the present time. Current zoning and approved uses indicate that other alternative uses are not feasible at this time. CONSULTING REAL ESTATE APPRAISERS 50

156 HRA Given the improving demand for residential product in San Bernardino County and the Southwest 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. After reviewing the alternatives available and considering this and other information, it is the opinion of the appraisers 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 altematives available, it is these appraisers' 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 remaining physically finished 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 our opinion that the existing improvements constitute the highest and best use of the subject property. CONSULTING REAL ESTATE APPRAISERS 51

157 HRA No. ProjeetlBuilder Margate KB Home Ontario Subject Prpoerty 2 Camden CalAtlattie Homes Ontario Subject Prpoerty 3 Waterford Woodside Homes Ontario Subject Prpoerty 4 Kensington Tri Pointe Homes Ontario Subject Prpoerty 5 Hadleigh KB Home Ontario Subject Prpoerty Competitive Market Area Comparable Residential Project Summary Detached Single Family Homes May 16, 2016 Total Size Units Lot Size Base Price g,!. 53 3,825 $ $494,880 2,883 $505,880 2, ,250 $454,800 2,732 $495,030 2,901 $499,510 3, ,300 $567,880 3,191 $569,880 3,205 $592,880 3,562 $622,880 3, ,000 $485,900 3,078 $498,900 3,269 $512,900 3, ,150 $434,880 2,121 $444,880 2,331 $448,880 2,467 No. Sold Overall ~/Sg. Flo Start 01. Mo. Abs. $ $ Nov-14 $ $ $ Nov-14 $ $ $ Nov-14 $ $ $ $ Nov-14 $ $ $ Nov-14 $ James Tri Pointe Homes Subject Prpoerty 57 3,811 $463,900 2,418 $465,900 2,496 $470,900 2,681 $ $ Nov-14 $ Canopy Creek Woodside Homes Ontario Subject Prpoerty 75 2,018 $389,880 1,656 $395,880 1,758 $406,880 1,856 $429,880 1,990 $426,880 2,179 $ $ May-15 $ $ $ CONSULTING REAL ESTATE APPRAISERS 52

158 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 53

159 HRA Static Residual Analysis is used to estimate the merchant builder finished lot value. From the estimated base retail home price, all costs associated with the home construction including direct construction costs, indirect construction costs, financing and profit are deducted. Following the deduction of costs, the residual figure is an estimate of the merchant builder finished lot value or blue-top lot value. The purpose of this appraisal assignment is to estimate Minimum Market Value for the taxable property within CFD No. 24. As summarized in the Site Analysis and Improvement Description sections of this report, there are seven products in an active sales program. Within CFD No. 24, 432 dwelling units, subject to the special tax, are built, under construction or planned. Of those, 106 have closed escrow to individual homeowners. The sold dwelling units closed between May 2015, and the date of value. The dwellings that have sold within Park Place over the past 12± months have been valued utilizing the actual sales price, due to the stabilizing market over the time frame of sales. The 23 completed model units are valued based on the average base sales price for that floor plan, as of the date of value. In addition, there are 41 dwelling units in various stages of unit construction as of the date of value. The units under construction are valued based on our inspection of the property. An estimate of completion (stated as a percent) for each unit is estimated as of the date of value. As illustrated in the Highest and Best Use section of this report, demand and acceptance for the subject products has been fair to average since opening in May Given current market conditions and demand for the subject products, additional value is considered warranted for the units under construction. The estimated completion is applied to the average size dwelling unit for the specific product. The Direct Comparison Approach is used for the valuation of land when sufficient comparable sales are available. Their sales prices would be considered the best indicators of value, assuming the sales are current and in a similar land condition. The Income Approach is typically used when appraising income producing properties. This approach is CONSULTING REAL ESTATE APPRAISERS 54

160 HRA not applicable in the valuation of land as land is not typically held to generate monthly income, but rather purchased to construct an end product that mayor may not generate income. The Cost Approach is not an appropriate tool in the valuation of land. The balance of CFD No. 24 consists of 231 physically finished lots. All of the lots are within tracts of currently developing subdivisions. The seven products have been in an active sales program since November The merchant builder land within CFD No. 24 is valued by the Direct Comparison Approach with similar recent merchant builder land sales and the Static Residual Analysis. The Static Residual Analysis more closely reflects current market conditions. The Static Residual Analysis is considered a reliable method for estimating finished lot value for actively selling products. CONSULTING REAL ESTATE APPRAISERS 55

161 HRA VALUATION OF DWELLING UNITS Valuation of Completed and Sold Dwelling Units As previously discussed, within seven products, 201 dwelling units are built or under construction, and of those 106 have closed escrow to individual homeowners. Included in the 201 dwelling units that are built or under construction are 23 completed model homes. The sold dwelling units closed escrow between May 2015 and the date of value, May 16, 2016, according to information provided by the developer, merchant builders, public records and recorded grant deeds. A unit by unit summary of sales is included in the Addenda of this report. The data includes product, buyer's name, date of sale, legal description and sales price. The dates of sale for the 106 dwelling units have occurred within 12± months of the date of value. Market conditions have been generally stable for the subject products over this timeframe. Sales have continued to be fair to average. The appraisers have relied on the 2015 and 2016 closed sales in the valuation of the sold dwelling units. As discussed within this report, the residential market significantly improved between 2012 and While sales have moderated over the past 12:!: months, sales prices remain good. The reported County median price as of March 2016 by CoreLogic is $272,000, 28.4% below the August 2006 peak of $380,000. Sales rates reflect the typical month over month sales increases and continuing slight year-over-year gains. March sales were 37.4% greater than February 2016 sales. Year-over-year, sales gained less than 1 %. The following table summarizes the 106 closed sales included in the analysis. The sales are categorized by product along with the number of sales and average sales price. The estimated Market Value for the 106 dwelling units is $53,100,000, rounded. CONSULTING REAL ESTATE APPRAISERS 56

162 HRA Summary of Subject Sales May May 15, 2016 Product No. of Sales Avg. S/F Avg. SIP Margate 10 2,877 $511,350 Camden 13 2,987 $518,923 Waterford 12 3,653 $627,667 Kensington 14 3,349 $550,750 Hadleigh 14 2,344 $454,643 St. James 27 2,535 $485,648 Canopy Creek 16 1,874 $405,563 Avg.~/SF $ $ $ $ $ $ $ Market Value 106 Individual Ownerships Product/Builder Dwellings Sold Margate 10 Dwellings KB Home Camden 13 Dwellings CalAtiantic Homes Waterford 12 Dwellings Woodside Homes Kensington 14 Dwellings Tri Pointe Homes Hadleigh 14 Dwellings KB Home St. James 27 Dwellings Tri Pointe Homes Canopy Creek 16 Dwellings Woodside Homes 106 Sold Dwellings Rd. Value Estimate $5,113,500 $6,733,000 $7,532,000 $7,710,500 $6,365,000 $13,112,500 $6,489,000 $53,055,500 $53,100,000 CONSULTING REAL ESTATE APPRAISERS 57

163 HRA Valuation of Model Homes and Dwelling Units Under Construction In addition to the 106 completed and sold dwelling units, there are 23 completed model homes within CFD No. 24. The model homes are valued based on 100% completion of the average size unit for each product. In addition to the 23 model homes, there are 31 dwellings that have been completed, but have not closed escrow to homeowners by the date of value. These dwellings are valued at 80% of the average base sales price for each of the seven products. There are a total of 41 dwelling units in various stages of unit construction within the seven products of CFD No.4. The table on page 3 summarizes the number of dwelling units per product in the various stages of unit construction. In total, there are 12 dwelling units in the stucco stage with roofs under construction and 29 dwelling units in a framed stage. For purposes of this appraisal, the appraisers have estimated the percent complete at 60% for the dwellings in the stucco stage, and 50% for the dwellings in the framed stage. The table on the following pages summarizes the estimated Market Value for the 23 model homes, 31 completed dwellings that have not closed escrow and 41 dwelling units under construction for the merchant builder ownerships. As indicated the total estimated Market Value for the 95 dwellings is $33,600,000, rounded. CONSULTING REAL ESTATE APPRAISERS 58

164 HRA, " MODEL HOMES; COMPLETED DWELLINGS, NOT CLOSED; DWELLINGS UNDER CONSTRUCTION, Merchant Builder Ownerships Product Ownership ~of Units ", of Units, - KB Home voas'a' 3 Models 3 I Not Closed 0IUnder In Estimated Avg. Base SIP % " ' ' PerM, -" 1'10%, 13 0%, 13 N/A $0 Estimated Value $1, $1,188,5 $2,674,1,,-,Homes 2 Models 5 I Not Closed 6 Stucco Stage, roofs under 100% 80% 60%,4l3,113 ;4l3,113 ;4l3,113 $966, ;1,739, ;4,637, 1-, Homes Models 1 Framing Stage I Not Closed 1,- -ri POinte Homes IModels (, Not Closed Framing Stage , )9, 18 19, - KB Home Coastal 31Models 1 ::01 I Not Closed 6!Stucco Stage, roofs under C' JlI $44,,8 $44,8 $44,8 $ $' $3,277,31: Sf. James - Tri Pointe I-inmp, 3'Models 7 I, Not Closed 10 II- ramlng stage JlI,31, )71,5,, ;79,2',285 ":Mnn" Creek -, Homes 51Models 3 ::ompleted r I, Not Closed 51Framing Stage p4c,7 $',7' $~ )57,81:, ""if,, Units i But i& U/e, to: $33, CONSULTING REAL ESTATE APPRAISERS 59

165 HRA V ALUATION OF FINISHED LOTS The previous section of this report valued the completed and sold dwelling units owned by 106 individual homeowners and the 96 dwellings under the ownerships of the merchant builders. This section of the report will value the 231 physically finished lots owned by the four merchant builders, KB Home Coastal, Inc, CalAtlantic Homes, Tri Pointe Homes, Inc., and Woodside 05S, L.P. The actual sales price of a particular parcel is always considered the best indication of value, assuming the transaction is arm's length, current and meets the definition of Market Value. Due to the downturn in the residential market from 2005 to 2012 and lack of demand for merchant builder land, there had been limited comparable land sales within the subject market place. However, over the last 2 to 3 years the market has improved, with increasing home sales and increasing prices. This has spurred a resurgence of merchant builder lot sales. We have included the subject's seven comparable transactions within CFD No. 24 which closed in December Direct Comparison Approach The Direct Comparison Approach is based upon the premise that, when a property is replaceable in the market, its value tends to be set by the purchase price necessary to acquire an equally desirable substitute property, assuming no costly delay is encountered in making the decision and the market is reasonably informed. In appraisal practice, this is known as the Principle of Substitution. This approach is a method of analyzing the subject property by comparison of actual sales of similar properties, when available. These sales are evaluated by weighing both overall comparability and the relative importance of such variables as time, terms of sale, location of sale property, and lot characteristics. For the purpose of this report, the unit of comparison utilized is the price per lot for the residential land. Please refer to the following page that summarizes the sales of the subject merchant builder parcels. CONSULTING REAL ESTATE APPRAISERS 60

166 HRA City of Ontario CFD No. 24 Land Sales Summary Data No.1 Project NO.1 SEC McClave Way & Discovery Lane Ontario Subject Property NO.2 SEC McCleve Way & Salisbury Way Ontario Subject Property No.3 SEC SAlisbury Way & Devonshire Lane Ontario Subject Property No.4 NEG Kensington & Rose Petal Way Ontario Subject Property Buyerl Sale Lot No. Sales Seller Date Size of Lots Price KB Hone Coastal 12/13 4, $9,258,500 SL Ontario Development Tr P. A 12 Ryland Homes 12/13 4, $8,60a,500 SL Ontario Development P.A.8 Woodside 05$, LP 12f13 6, $15,021,500 Sl Ontario Development Tr P.A.7 Tri Pointe Homes , $13,243,000 SL Ontario Development Tr P.A.6 Sale Price Finished At time of Sale Per Lot Price/Lot Land Condition $174,700 $224,500 Blue*Top Lots Margate Park Place $187,100 $248,800 Blue-Top Lots Camden Park Place $231,100 $284,000 Blue-Top Lots Waterford Park Place $197,700 $265,000 Blue.Top Lots Kensington Park Place No,5 SWC Merrill Ave. & McVleve Way Ontario Subject Property No.6 NEC & NWC Victory Ln. & McClave Way Ontario Subject Property NO,7 SEC Merrill Ave, & McCleve Way Ontario Subject Property K,B Hone Coastal 12/13 3, $10,224,300 SL Ontario Development Tr P.A.9 Tri Pointe Homes , $10,506,500 SL Ontario Development Tf P. A. 10 Woodside 05S, LP 12/13 2, $10,193,000 SL Ontario Development Tr P. A. 12 $148,200 $197,600 Blue Top Lots Hadleigh Park Place $184,300 $230,600 Blue T op Lots SI. James Park Place $135,900 $183,600 Mass Graded Canopy Creek Park Place CONSULTING REAL ESTATE APPRAISERS 61

167 HRA We have searched for merchant builder land sales in the subject area. The seven sales within Park Place are the comparables considered most helpful in valuing the subject property. The actual sales to the merchant builders in December 2013 are considered the most relevant sales. We have reviewed and inspected all of the data items. The data includes the finished lot prices for merchant builder parcels. The land sales sold in a blue-top and mass graded lot condition. Costs to bring the land from the condition at the time of sale to finished lot condition were made available by the builders to analyze the data. Therefore, the analysis will conclude at an indication of the finished lot value for the subject lots. The residential land market had been declining from 2006 to mid Between mid-2012 and the end of 2013, prices increased rapidly. From 2014 to the current time, prices stabilized with some increases and some decreases, depending on location. The residential market is now improving. The number of home sales has increased significantly and sales prices are increasing for most products. Please refer to the next page for the land sales adjustment summary. Analysis Financing All of the comparable sales were all cash transactions or financing considered to be cash, therefore, no adjustments for financing were warranted. Property Rights Conveyed All of the comparables involved the transfer of the fee simple interest. The subject fee simple interest is appraised in this report, and therefore, no adjustment is warranted. Time ofsaie The seven merchant builder lot sales included in this analysis occurred in December Prices have been stable to declining during this time frame. Just the fact that there have been merchant builder lot sales is a significant change from the prior market between 2006± to mid The price reductions for homes equated to a 60% to 70% decrease in lot prices between 2006± and CONSULTING REAL ESTATE APPRAISERS 62

168 HRA Data No.1 Location No.1 SEC McCleve Way & Discovery Lane Ontario Subject Property Date of Sale 12/13 RESIDENTIAL LAND SALES ADJUSTMENT GRID No. Finished Adjusted Units Lot Size Lot Price Time Price 53 4,000 $224,500 ~14% $193,070 Appeal & Location 0% Lot Adjusted Size Price/Unit 0% $193,070 No.2 SEC McCleve Way & Salisbury Way Ontario Subject Property 12/ ,250 $248,800 ~14% $213,968 0 /0 0% $213,968 No.3 SEC SAlisbury Way & Devonshire Lane Ontario Subject Property 12/ ,300 $284,000-14% $244,240 0%) 0% $244,240 No.4 NEG Kensington & Rose Petal Way Ontario Subject Property 12/ ,000 $265, /0 $227,900 0% 0% $227,900 No.5 SWC Merrill Ave. & McVleve Way Ontario Subject Property 12/ ,150 $197, /0 $169,936 0% 0% $169,936 NO.6 NEC & NWC Victory Ln. & McCleve Way Ontario Subject Property 12/ ,850 $230,600-14% $198,316 0% 0% $198,316 No. 7 SEC Merrill Ave. & McCleve Way Ontario Subject Property 12/ ,150 $183,600-14% $157,896 0% 0% $157,896 CONSULTING REAL ESTATE APPRAISERS 63

169 HRA The Hoffman Company, a land brokerage firm, tracks merchant builder lot sales in Southern California. Based on their research, they are reporting that merchant builder lot prices have increased 55% to 185%, depending on location, in San Bernardino County between the beginning of 2009 through the first quarter of Ontario is near the low end of the range. They also report that in Ontario, between Q and Q merchant builder lot prices decreased approximately 14%. A downward adjustment has been made to all seven data items due to their 2013 sale dates. Conditions of Sale Typically, adjustments for conditions of sale reflect the motivations of the buyer and the seller in the transfer of real property. The conditions of sale adjustment reflects the difference between the actual sales price of the comparable and its probable sales price if it were sold in an arms-length transaction with typical motivations. Some circumstances of comparable sales that will need adjustment include sales made under duress, eminent domain transactions and sales that were not arm's length. All of the transactions were reported to be arm's length in nature. Accordingly, no adjustment is indicated. Location/Appeal The Location/Appeal adjustment is based on the strength of new home sales proximity to existing infrastructure and employment and the surrounding developments. All of the sales occurred in CFD No. 24. No adjustments are required for the data. Entitlement/Map Status All of the sales are entitled. No adjustment is required. Tax Rate The subject property is expected to have an average overall tax rate of around 1.95% of the current base sales price. Because the comparable sales are located in CFD No.. 24, no adjustment is required. CONSULTING REAL ESTATE APPRAISERS 64

170 HRA Lot Size The comparables have minimum lot sizes that range from 2,108 square feet to 6,300 square feet. The minimum lot size for the subject parcels is 2,108 to 6,300 square feet. No adjustment was necessary. Condition of Lots All of the data included information to estimate a finished lot price for each comparable. According to the builders, there are fees and site cost associated with the near finished lots within CFD No. 24. SL Ontario Development reports that most of the site improvements have been completed. Out of over $39,000,000 in site cost, approximately $900,000 remain or $4,000± per lot. SL Ontario Development reports there are approximately $15,000 per lot of remaining impact fees for Park Place. About $3,400,000 remain to be paid, in total. The total remaining site cost is $19,000 per lot. This amount will be deducted from the finished lot value of the 231 remaining lots. Finished Lot Values by Direct Comparison The adjusted finished lot values range from $157,896 to $244,240 per lot. We have concluded at these adjusted prices per unit for each of the seven residential products in CFD No. 24, Park Place. As previously discussed, the residential market started to stabilize during 2012, after the lengthy down turn in the residential market over the previous six years. By mid- 2012, the positive impact on the residential market started and has continued to the present time. The impact of the sales activity and minimal supply to meet demand resulted in increased sales prices from 2012 to While the residential market continues to be positive, sales activity has decreased during 2014 and 2015 compared to 2013 and price levels have begun to moderate. In a rapidly changing market the better indication of land value can be estimated by the Static Residual Analysis which reflects current dwelling sales prices and market conditions. The following paragraphs begin the discussion of the Static Residual Analysis for the seven actively selling products within CFD No. 24. CONSULTING REAL ESTATE APPRAISERS 65

171 HRA Static Residual Analysis to Finished Lot Value The merchant builder land is valued by the Direct Comparison Approach and by the Static Residual Analysis. The purpose of this analysis is to estimate a value for the land assuming no direct construction has taken place. This method is particularly helpful when development for a subdivision represents the highest and best use and when competitive house sales are available. Reportedly, this analysis is by far the most commonly used by merchant builders when determining price for land. This analysis is useful for projects that will have a typical holding period of one to two years which represents the typical holding period sought by merchant builders. The Static Residual Analysis best replicates the investor's analysis when determining what can be paid for the land based on proposed product. Purchase of the land is simply treated as one of the components necessary to build the houses to sell to the homeowner. When all the components of the end-product can be identified and reasonable estimates of costs and profit can be allocated, the Static Residual Analysis becomes the best indicator of value to a merchant builder for a specific product. Specific product information is available, which makes this analysis particularly meaningful. The analysis uses an estimated average base sales price for a specific product, then deducts the various costs including direct and indirect costs of construction, marketing, taxes and overhead, as well as the required profit margin to attract an investor in light of the risks and uncertainties of the project and residential market. This analysis is most helpful when significant lot and or view premiums are not present. When negotiating land price, builders typically will consider the value of lot premiums when they are significant, but typically do not give the premiums full consideration. When a downturn in the market occurs or a slight stall in a sales program, premiums are typically the first to be negotiated away. End-product Sales Prices The analysis uses the average base sales price as provided by the builders without lot premiurns. The seven products have met with fair market acceptance. Based on interviews with sales personnel in the subject's rnarket area, it appears that the rnarket is moderating, or at least not increasing in price as it had during 2012 and CONSULTING REAL ESTATE APPRAISERS 66

172 HRA Direct Development Costs The builders have provided direct construction costs to build the seven Park Place products. The appraisers have also been provided with direct construction costs for recent projects in the Inland Empire and are aware that direct construction costs have decreased over the past several years. The appraisers have given consideration to the builder's estimates of direct construction costs as well as costs from other builders in the Inland Empire in the analyses. Based on our understanding of the proposed quality of construction, home size and functional utility, we have estimated direct construction costs of $48.00 per square for the Margate product, $51.00 per square foot for the Camden product, $45.00 per square foot for the Waterford product, $48.00 per square foot for the Kensington product, $47.00 for the Hadleigh product, $54.00 per square foot for the St. James product, and $57.00 per square foot for the Canopy Creek product. Indirect construction costs have been estimated at 4% of sales price. The 4% deduction is generally similar to the indirect cost estimate provided by the builder/developer. General and Administrative General and administrative costs are estimated at 4% of retail value. This category covers such expenses as administrative, professional fees, real estate taxes, HOA dues, and miscellaneous costs. This estimate is typical and consistent with the market. Marketing and Warranty Marketing and sales expenses plus warranty costs are estimated at 6% of retail value. This category covers such expenses as advertising and sales commissions and home warranties. This estimate is typical and consistent with the market. Developer Profit The line item for profit reflects the required margin to attract an investor in light of the risk and uncertainties of the specific project. This analysis assumes a finished lot and no onsite construction. Therefore, additional risk of development is minimal. CONSULTING REAL ESTATE APPRAISERS 67

173 HRA Based on surveys of builders, current profit requirements are typically between 8% and 12% of revenues, with occasional responses as high as 15%. These profit estimates are for projects that can be constructed and sold out in a two-year period. Higher profits can be required for longer construction/sellout periods and riskier projects. Lower profits can be accepted in inexpensive land cost areas where homes sell quickly. Given the continued strength of the market over the past 24.± months, the market demand for products similar to the subject is average. Based on a review of the absorption of the subject product and competing subdivisions, a sales rate of 1.0 to 2.0 dwellings per month for the products appears reasonable. The line item for profit is based on a typical holding period sought by merchant builders; that of one to two years. Based on current market conditions and the outlook for the next 12 to 24 months, and 10% line item for profit, would seem appropriate for the additional risk of a two to three year holding period. Interest During Holding Period A typical allowance for financing during the holding period has been between 5% and 7%. Based on recent interviews with builders in the subject market area, we have chosen a 5% deduction for financing during the holding period. Site Costs Because this analysis residuals to a finished lot condition, deductions for costs to bring to a finished lot condition are not required. The following seven pages illustrate the Static Residual Analysis for the seven currently selling products within the District. This analysis indicates a finished lot value of $176,000 for lots with a minimum lot size of 2,108 square feet, to $254,000 for lots with a minimum size of 6,300 square feet. Please review the table which follows on page 76. CONSULTING REAL ESTATE APPRAISERS 68

174 HRA Park Place Margate CFD No. 24 Finished Lot Value Floor Plan Average Size 2,801 2,883 2,961 2,882 Base Price $484,880 $494,880 $505,880 $495,213 Incentives $10,000 Land Ratio 3,825 Square Foot Lot Average Retail Value of Improvements $485,213 $ (Per sq. ft.) Average Dwelling Size (Sq. Feet) 2,882 Direct Building Cost Per Sq. Ft. $48.00 $138,320 Indirect Construction Costs 4.00% $19,409 General & Administrative Costs 4.00% $19,409 Marketing and Warranty Costs 6.00% $29,113 Builder's Profit 10.00% $48,521 Interest During Holding Period 5.00% $24,261 Costs to bring to Finished Lot None $206,181 Finished Lot Estimate of Value $206,000 Finished Lot 42% CONSULTING REAL ESTATE APPRAISERS 69

175 HRA Park Place Camden CFD No. 24 Finished Lot Value Floor Plan Average Size 2,732 2,901 3,602 3,078 Base Price $454,800 $495,030 $499,510 $483,113 Incentives $10,000 Land Ratio 4,250 Square Foot Lot Average Retail Value of Improvements $473,113 $ (Per sq. ft.) Average Dwelling Size (Sq. Feet) 3,078 Direct Building Cost Per Sq. Ft. $51.00 $156,995 Indirect Construction Costs 4.00% $18,925 General & Administrative Costs 4.00% $18,925 Marketing and Warranty Costs 6.00% $28,387 Builder's Profit 10.00% $47,311 Interest During Holding Period 5.00% $23,656 Costs to bring to Finished Lot None $178,915 Finished Lot Estimate of Value $ Finished Lot 38% CONSULTING REAL ESTATE APPRAISERS 70

176 HRA Park Place Waterford CFD No. 24 Finished Lot Value Floor Plan Size 1 3, , , ,984 Average 3,486 Base Price $567,880 $569,880 $592,880 $622,880 $588,380 Incentives $10,000 Land Ratio 6,300 Square Foot Lot Average Retail Value of Improvements $578,380 $ (Per sq. ft.) Average Dwelling Size (Sq. Feet) 3,486 Direct Building Cost Per Sq. Ft. $45.00 $156,848 Indirect Construction Costs 4.00% $23,135 General & Administrative Costs 4.00% $23,135 Marketing and Warranty Costs 6.00% $34,703 Builder's Profit 10.00% $57,838 Interest During Holding Period 5.00% $28,919 Costs to bring to Finished Lot None $253,802 Finished Lot Estimate of Value $254,000 Finished Lot 44% CONSULTING REAL ESTATE APPRAISERS 71

177 HRA Park Place Kensington CFD No. 24 Finished Lot Value Floor Plan Size 1 3, , ,415 Average 3,254 Incentives Base Price $485,900 $498,900 $512,900 $499,233 $10,000 Land Ratio 5,000 Square Foot Lot Average Retail Value of Improvements $489,233 $150,35 (Persq, ft,) Average Dwelling Size (Sq, Feet) 3,254 Direct Building Cost Per Sq, Ft. $48,00 $156,192 Indirect Construction Costs 4,00% $19,569 General & Administrative Costs 4,00% $19,569 Marketing and Warranty Costs 6,00% $29,354 Builder's Profit 10.00% $48,923 Interest During Holding Period 5,00% $24,462 Costs to bring to Finished Lot None $191,164 Finished Lot Estimate of Value $ Finished Lot 39% CONSULTING REAL ESTATE APPRAISERS 72

178 HRA Park Place Hadleigh CFD No. 24 Finished Lot Value Floor Plan Average Size 2,121 2,331 2,467 2,306 Base Price $434,880 $444,880 $448,880 $442,880 Incentives $10,000 Land Ratio 3,150 Square Foot Lot Average Retail Value of Improvements $432,880 $ (Per sq. ft.) Average Dwelling Size (Sq. Feet) 2,306 Direct Building Cost Per Sq. Ft. $47.00 $108,398 Indirect Construction Costs 4.00% $17,315 General & Administrative Costs 4.00% $17,315 Marketing and Warranty Costs 6.00% $25,973 Builder's Profit 10.00% $43,288 Interest During Holding Period 5.00% $21,644 Costs to bring to Finished Lot None $198,947 Finished Lot Estimate of Value $ Finished Lot 46% CONSULTING REAL ESTATE APPRAISERS 73

179 HRA Park Place St. James CFD No. 24 Finished Lot Value Floor Plan Size 1 2, , ,681 Average 2,532 Incentives Base Price $437,990 $455,990 $472,990 $455,657 $10,000 Land Ratio 3,811 Square Foot Lot Average Retail Value of Improvements $445,657 $ (Per sq. ft.) Average Dwelling Size (Sq. Feet) 2,532 Direct Building Cost Per Sq. Ft. $54.00 $136,710 Indirect Construction Costs 4.00% $17,826 General & Administrative Costs 4.00% $17,826 Marketing and Warranty Costs 6.00% $26,739 Builder's Profit 10.00% $44,566 Interest During Holding Period 5.00% $22,283 Costs to bring to Finished Lot None $179,706 Finished Lot Estimate of Value $ Finished Lot 40% CONSULTING REAL ESTATE APPRAISERS 74

180 HRA Park Place Canopy Creek CFD No. 24 Finished Lot Value Floor Plan Average Size 1,656 1,758 1,856 1,990 2,179 1,888 Base Price $389,880 $395,880 $406,880 $429,880 $426,880 $409,880 Incentives $10,000 Land Ratio 2,108 Square Foot Lot Average Retail Value of Improvements $399,880 $ (Per sq. ft.) Average Dwelling Size (Sq. Feet) 1,888 Direct Building Cost Per Sq. Ft. $57.00 $107,605 Indirect Construction Costs 4.00% $15,995 General & Administrative Costs 4.00% $15,995 Marketing and Warranty Costs 6.00% $23,993 Builder's Profit 10.00% $39,988 Interest During Holding Period 5.00% $19,994 Costs to bring to Finished Lot None $176,310 Finished Lot Estimate of Value $ Finished Lot 44% CONSULTING REAL ESTATE APPRAISERS 75

181 HRA Conclusion of Finished Lot Values The following table summarizes the conclusions of the finished lot values by the Direct Comparison Approach, the Static Residual Analysis and the concluded lot value. Due to the continued changes in the residential market and limited land sales, we have given equal consideration to the results of the Direct Comparison Approach and the Static Residual Analysis. Finished Lot Value Conclusions No. Direct Comparison Minimum Static Residual Finished Concluded Product Lots Approach Lot Size Analysis Lot Ratio Lot Value Margate 37 $193,070 3,825 SF $206,000 42% $205,000 Camden 20 $213,968 4,250 SF $179,000 38% $179,000 Waterford 38 $244,240 6,300 SF $254,000 44% $254,000 Kensington 35 $227,900 5,000 SF $191,000 39% $191,000 Hadleigh 45 $169,936 3,150 SF $199,000 46% $195,000 St. James 10 $198,316 3,811 SF $180,000 40% $180,000 Canopy Creek 46 $157,896 2,108 SF $176,000 44% $176,000 According to the builder, the remaining development fees are $19,000± for each remaining finished lot for the remaining 231 finished lots. The total cost to get to a finished lot condition is: $4,389,000. Please review the summary of values shown on the next page. The total estimated value for the 231 physically finished lots is $41,784,000. CONSULTING REAL ESTATE APPRAISERS 76

182 HRA SUMMARY OF VALUATION CONCLUSIONS Product Ownership Finished Costs To No. of Units Condition of Units/Lots Lot Values Finished Lots Ma!J]J}te - KB Home Coastal 3 Models 3 Completed Dwellings, Not Closed o Under Construction N/A $0 37 Phvsicallv Finished Lots $205,000 $19,000 I Say Camden - CalAtlantic Homes 2 Models 5 Completed Owe!lin S, Not Closed 6 Stucco Stage, roofs under construction 20 Physically Finished Lots $179,000 $19,000 Sa Waterford" Woodside Homes 4 Models 6 Com leted DwelliDg.s, Not Closed 5 Framing Stage 38 Physically Finished Lots $254,000 $19,000 Sa Kensington" Tti Pointe Homes 3 Models 6 Completed Dwellinqs, Not Closed 9 FramiQg Stage 35 Physically Finished Lots $191,000 $19,000 Say Had/eJILh - KB Home Coastal 3 Models 1 Completed Dwellings, Not Closed 6 Stucco Staae, roofs under construction 45 Physically Finished Lots $195,000 $19,000 Sa St. James - rri Pointe Homes 3 Models 7 Completed Dwellings, Not Closed 10 FraminQ Staqe 10 Phvsicallv Finished Lots $180,000 $19,000 Sa Canopv Creek - Woodside Homes 5 Models 3 Completed Dwellings, Not Closed 5 Framing Staqe 46 Phvsicallv Finished Lots $176,000 $19,000 Sa Estimated Value $1,485,639 $1,188,511 $0 $ $9,556,150 $ $966,226 $1,932,452 $1,739,207 $ $7,837,885 $ $2,353,520 $2,824,224 $1,470,950 'i $15,578,694 $15,600,000 $1,497,699 $2,396,318 $2,246, $12,160,566 $ $1,328,640 $354,304 $1,594, $11,197,312 $ $1,366,971 $2,551,679 $2,278,285 $ $7,806,935 $ $2, $983,712 $1,024,700 $ $11,279,812 $11 300, Total Models Homes, Dwellfng Units Under Construction & Physically Finished Lots - 4 Merchant Builders 106 Individual Ownershlps - See Addenda Sold Dwellings 432 Total Value CFD No 24 Say $ $75400,000 $53100,000 $ CONSULTING REAL ESTATE APPRAISERS 77

183 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 May 16, Community Facilities District No. 24 ONE HUNDRED TWENTY EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS $128,500,000 Individual Homeowners -106 Completed Dwellings FIFTY-THREE MILLION ONE HUNDRED THOUSAND DOLLARS $53,100,000 Merchant Builder Ownership Dwellings/Lots SEVENTY- FIVE MILLION EIGHT HUNDRED THOUSAND DOLLARS $75,400,000 KB Home Coastal, Inc. CalAtlantic Homes Tri Pointe Homes Woodside 05S, LP $20,800,000 $7,800,000 $19,900,000 $26,900,000 CONSULTING REAL ESTATE APPRAISERS 78

184 HRA CERTIFICATION We hereby certify that during the completion of this assignment, we personally inspected the property that is the subject of this appraisal and that, except as specifically noted: We 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. We have not provided appraisal services regarding the subject property within the last three years to our client, The City of Ontario, To the best of our 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 Our 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, No one provided significant real property appraisal assistance to the persons signing this certificate, CONSULTING REAL ESTATE APPRAISERS 79

185 HRA 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 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, Berri Cannon Harris Principal AG A:=! U~~~~~ AG rr::::: CONSULTING REAL ESTATE APPRAISERS 80

186 HRA ADDENDA CONSULTING REAL ESTATE APPRAISERS

187 @ Il!J #J flo ff U r[;;;jij 1M [f) HARRIS REALTY APPRAISAL 5100 Birch Street, Suite 200 Newport Beach, CA (949)

188 QUALIFICATIONS OF JAMES B. HARRIS, MAl PROFESSIONAL BACKGROUND Actively engaged as a real estate analyst and consulting appraiser since 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 TlONS Member of the Appraisal Institute, with MAl designation No 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 TlONAL 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 I nvestment 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.

189 TEACHING AND LECTURING ACTIVITIES 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 175 Land Secured Municipal Bond Financing appraisals over the last five 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.

190 QUALIFICATIONS OF BERRI CANNON HARRIS PROFESSIONAL BACKGROUND Actively engaged as a real estate appraiser since Principal of Harris Realty Appraisal, with offices at: 5100 Birch Street, Suite 200 Newport Beach, California Before joining Harris Realty Appraisal was employed with Interstate Appraisal Corporation as Assistant Vice President. Prior to employment with Interstate Appraisal was employed with Real Estate Analysts of Newport Beach as a Research Assistant. PROFESSIONAL ORGANIZATIONS Appraisal Institute Co-Chair, Southern California Chapter Hospitality Committee Chair, Southern California Chapter Research Committee , 1993 Commercial Real Estate Women (CREW) Chair, Special Events Second Vice-President , 1997 Treasurer , 1994, 1995 Chair, Network Luncheon Committee , 1992 California State Certified Appraiser, Number AG EDUCA T10NAL ACTIVITIES B.S., University of Redlands, Redlands, California Successfully completed the following courses sponsored by the Appraisal Institute: Principles of Real Estate Appraisal Basic Valuation Procedures Capitalization Theory and Techniques - A Capitalization Theory and Techniques - B Report Writing and Valuation Analyses Standards of Professional Practice Case Studies in Real Estate Valuation Has attended numerous seminars sponsored by the Appraisal Institute. Has also attended real estate related courses through University of California-Irvine.

191 LECTURING ACTIVITIES Seminars and lectures presented to UCLA, California Debt and Investment Advisory Commission, and Stone & Youngberg, 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) Appraisal Projects SCOPE OF EXPERIENCE Has completed all types of appraisal assignments from San Diego to San Francisco, California, Also has completed out-of-state appraisal assignments in Arizona and Hawaii. Residential Residential subdivisions, condominiums, planned unit developments, mobile home parks, apartment houses, and single-family residences, Commercial Office buildings, retail store buildings, restaurants, neighborhood-shopping centers, strip retail centers, Industrial Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilities, Vacant Land Residential sites, commercial sites, industrial sites, large multi-unit housing, master planned unit developments, and agricultural acreage, Specializing in Community Facilities District and Assessment District appraisal assignments,

192 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 of Tustin 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

193 ASSESSED VALUATION AND TAXES

194 City of Ontario CFD No. 24 Park Place Assessed Value & Taxes APN Land Value 1m!!. Value Total Value Pro!!. Tax Tax Area $4,678,502 $0 $4,678,502 $50, $5,718,171 $0 $5,718,171 $115, $196,677 $0 $196,677 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $6, $186,489 $0 $186,489 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $6, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $6,

195 $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $6, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $6, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $6, $196,689 $0 $196,689 $7, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $196,689 $0 $196,689 $2, $235,731 $0 $235,731 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2,

196 $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $8, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $7, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2, $235,717 $0 $235,717 $2,

197 $190,870 $0 $190,870 $6, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $6, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $190,879 $0 $190,879 $2, $193,244 $0 $193,244 $6,

198 $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $6, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2,

199 $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $193,796 $0 $193,796 $2, $152,827 $0 $152,827 $5, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1,

200 $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $1, $152,852 $0 $152,852 $5, $152,852 $0 $152,852 $5, $175,949 $0 $175,949 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1,

201 $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $6, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 $0 $175,950 $1, $175,950 SQ $175,950 $1, Total $78,584,600 $0 $78,584,600 $1,447,917.75

202 OWNERSHIP

203 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership KB Home Coastal APN Tract Tract No Hadleigh Lot Owner Names Lot SF 2 Kb Home Coastal Inc 3,150 3 Kb Home Coastal Inc 3,150 4 Kb Home Coastal Inc 3,182 5 Kb Home Coasta Iinc 3,265 6 Kb Home Coasta Iinc 3,289 7 Kb Home Coastal Inc 3,643 8 Kb Home Coasta Iinc 3,750 9 Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coasta I Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3,366

204 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coasta Iinc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4,095 Total 55 KB Home Coastal APN Tract Lot Owner Names Lot SF Tract No Margate Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4,028

205 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership Kb Home Coastal Inc 3, Kb Home Coastal Inc 5, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 5, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 3, Kb Home Coastal Inc 3, Kb Home Coastal Inc 5, Kb Home Coastal Inc 5, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 4, Kb Home Coastal Inc 5, Kb Home Coastal Inc 5, Kb Home Coastal Inc 5,226 Total 43 Ryland Homes Of California Inc APN Tract Lot Owner Names Lot SF Tract No Camden Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 7, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4,652

206 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership Ryland Homes Of California Inc 5, Ryland Homes Of California Inc 6, Ryland Homes Of California Inc 6, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 5, Ryland Homes Of California Inc 5, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 6, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 6, Ryland Homes Of California Inc 5, Ryland Homes Of California Inc 4, Ryland Homes Of California Inc 5, Ryland Homes Of California Inc 5, Ryland Homes Of California Inc 5,230 Total 33 Tri Pointe Homes Inc APN Tract Lot Owner Names Lot SF Tract No Kensington Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4,998

207 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership Tri Pointe Homes Inc 7, Tri Pointe Homes Inc 10, Tri Pointe Homes Inc 7, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 7, Tri Pointe Homes Inc 10, Tri Pointe Homes Inc 7, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 6, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5, Tri Pointe Homes Inc 5,157

208 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership Total Tri Pointe Homes Inc 6,227 Tri Pointe Homes Inc APN Tract Tract No St. James D Total 30 Lot Owner Names Lot SF 1 Tri Pointe Homes Inc 4,295 2 Tri Pointe Homes Inc 3,811 3 Tri Pointe Homes Inc 3,811 4 Tri Pointe Homes Inc 3,812 5 Tri Pointe Homes Inc 3,813 6 Tri Pointe Homes Inc 3,815 7 Tri Pointe Homes Inc 3,812 8 Tri Pointe Homes Inc 3,811 9 Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 4, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 3, Tri Pointe Homes Inc 4,581 Woodside 055 LP

209 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership APN Tract Lot Owner Names Lot SF Tract No Waterford Woodside 05s Ps 7, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 7, Woodside 05s Ps 10, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 7, Woodside 05s Ps 7, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 7, Woodside 05s Ps 7, Woodside 05s Ps 8, Woodside 05s Ps 6, Woodside 05s Ps 7, Woodside 05s Ps 11, Woodside 05s Ps 10, Woodside 05s Ps 7, Woodside 05s Ps 8, Woodside 05s Ps 8, Woodside 05s Ps 7, Woodside 05s Ps 8, Woodside 05s Ps 7, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6,300

210 City of Ontario CFD No. 24 Park Place Merchant Builder Ownership Woodside 05s Ps 6, Woodside 05s Ps 8, Woodside 05s Ps 7, Woodside 05s Ps 9, Woodside 05s Ps 7, Woodside 05s Ps 9, Woodside 05s Ps 7, Woodside 05s Ps 8, Woodside 05s Ps 7, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6, Woodside 05s Ps 6,562 Total 53 APN Tract Lot Owner Names Lot SF Tract No Can0I111 Creek Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Q Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp

211 City of Ontario efd No. 24 Park Place Merchant Builder Ownership Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Woodside 05s Lp Total 59 Overall Merchant Builder Total 326

212 DWELLING SALES BY TRACT

213 City of Ontario CFD No. 24 Park Place Sales by Tract Margate APN Sold Tract lot Address 3008 Arbor In 3020 Arbor In N/A N/A 3015 Arbor In N/A N/A 2985 Arbor In 2979 Arbor In N/A Owner Names Fangonil Efren S & Editha F Kim Ruby Quinn Cecilia E/craig Steven Ramirez Jaime & Graceli Hoggard Christopher Shirley Ryan E & Paula A Yap Gloria & AI Codesal Miriam S & Jesus Agosto Roberto & Nancy Mallari Roselle 0 Average Bldg. Area 2,801 2,801 2,910 2,961 2,910 2,801 2,961 2,910 2,801 2,910 Sale Price $476,000 $516,500 $510,000 $552,000 $509,000 $511,000 $518,000 $510,500 $516,000 $494,500 ~ $ $ $ $ $ $ $ $ $ $ ,877 $511,350 $ Recording Date Doc. No. 11/16/ /23/ /19/ /20/ /2/ /4/ /8/ /13/ /22/ /20/ lot SF 3,825 3,825 3,825 8,141 7,229 6,451 5,793 5,303 4,905 4,492 Yr. Bit Camden ~ oo Sold Arbor In 2820 Arbor In 2826 Arbor In 2832 Arbor In 2844 Arbor In 2850 Arbor In 2856 Arbor In 2868 Arbor In 2874 Arbor In 2908 Arbor In 2914 Arbor In 2907 Arbor In 2811 Arbor In Reyes Alejandro Cordura Aldo Wu Zheng M &Jue Gonzales Patrica Silva Carlos E & Myriam Tran Joey/xu Helen Yeh James W & Sara Pon Ervin & Sharon Fu Wamming Magbulos Gerald & Gemma C Nagy Michael Cousineau Stephan Canson Roland 3,062 2,900 3,062 2,900 2,900 3,062 2,900 3,062 2,900 2,900 3,062 3,062 ~ 2,987 $517,500 $517,500 $500,000 $504,000 $506,000 $551,000 $573,500 $517,500 $480,500 $499,500 $534,500 $533,500 $ $518,923 $ $ $ $ $ $ $ $ $ $ $ $ $ $ /6/2015 6/16/2015 7/24/ /29/2015 1/21/2016 1/14/2016 2/29/2016 1/14/2016 4/28/2016 3/31/2016 4/28/2016 5/5/2016 9/3/ ,123 4,693 4,324 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,917 6, Waterford ~ ~072~27~ ~31~OOOO N/A 2777 Devonshire In 2767 Devonshire In 2751 Devonshire In 2741 Devonshire In 2782 Devonshire In N/A N/A 2758 Devonshire In 2752 Devonshire In Gonzalez Victor M Cunningham Timothy M & Beth Soria Alejandro & Martha lachica Susan I Dixon Glynn M & Elaine M Guo Yun Ejo Multifoods Inc Jackson Melvin & Beverly J Patel Bhavesh K & Digna K Waddy Roland S Jr & Erika C 3,984 3,984 3,205 3,191 3,984 3,984 3,562 3,984 3,562 3,205 $656,500 $640,000 $583,500 $567,000 $664,000 $683,500 $617,500 $676,000 $600,000 $615,500 $ $ $ $ $ $ $ $ $ $ /29/ /1/2015 7/22/2015 9/18/ /29/2015 6/30/2015 8/13/2015 8/27/2015 3/30/2016 9/17/ ,739 7,422 7,182 6,300 6,300 9,284 8,758 6,423 6,423 6,

214 City of Ontario CFO No. 24 Park Place Sales by Tract <\ E Devonshire Ln 2732 Devonshire Ln Wang Uzhu Champan Cordine C 3,984 $618,000 3,205 $610,500 $ $ /8/ /29/ ,423 7, Sold 3,623 $625,045 $17253 Kensington Centennial Cir 2782 Rose Petal Way N/A N/A N/A N/A N/A N/A 5061 Primrose PI N/A 5021 Primrose PI 5020 Primrose PI 5030 Primrose PI 5050 Primrose PI Zhang Ying/yin Qiqiang Mao Hua/nasraoui Samir K Sun lanyuan Lin Jennifer Zhang Jinsong/mei li Soodjinda Victor Hu Weixin Montero Steve Diaz Eduardo J & Xochitl D Zhao Jingye/li Na Jackson Keith & Tanya Dai Jingwei Winek Errick J & Cortney R Williams Leon Iii & Ladeisha S 3,269 3,415 3,415 3,415 3,078 3,415 3,415 3,269 3,415 3,415 3,269 3,415 3,269 3,415 $477,500 $570,500 $562,000 $522,000 $503,000 $564,500 $570,000 $538,000 $537,000 $579,000 $581,500 $608,500 $558,500 $538,500 $146_07 $167_06 $ $ $ $ $ $ $ $ $ $ $ $ /7/ /5/2015 6/12/2015 2/12/2016 3/2/2016 7/17/2015 6/29/2015 3/28/2016 2/25/2016 3/25/2016 2/18/ /3/2015 2/11/2016 4/19/ ,315 6,486 5,895 4,999 4,999 4,999 5,776 6,439 5,073 10,387 7,803 10,466 8,538 5, Sold 3,355 $556,385 $ Hadleigh S Mccleve Way E 5043 $ Centennial Cir 5033 S Centennial Cir $013 S Centennial Cir N/A 5006 Centennial Cir 5016 $ Centennial Cir 5026 $ Centennial Cir N/A 5043 Heritage Paseo 5033 S Heritage Paseo SO~3 Heritage Paseo 5011 Heritage Paseo 5003 Heritage Paseo Bachicha Shannon K Yang Elva G Yang Elva G Tantoco Reynaldo D & Encarnacion I Sun Dongmu Peluffo Kimberly Alvarenga Karen V & Alejandro E Acosta Bryan Sun Dongmu Vargas Carlos Chang Chin ping P & Miri P/eun Ellen Kapp Kristen Barrios Saul Yang Fan 2,467 2,331 2,467 2,331 2,467 2,331 2,121 2,467 2,331 2,467 2,121 2,331 2,467 2,121 $461,000 $440,500 $447,000 $458,500 $443,000 $447,000 $452,000 $460,000 $444,500 $503,500 $452,000 $457,000 $461,500 $437,500 $ $ $ $ $ $ $ $ $ $ $ $ $ /20/ /17/ /17/ /24/ /20/2015 8/7/2015 3/1/2016 4/21/ /30/ /5/ /29/2015 9/24/2015 8/11/2015 8/13/ ,827 4,223 3,870 3,692 3,840 4,448 3,652 3,804 4,564 4,086 3,899 3,599 3,700 4, Sold 2,344 $454,643 $ Sf. James McCleve Way E 5096 McCleve Way E 5huktz Timothy Duncan David 2,681 $531,500 2,418 $463,500 $ $ /30/2015 6/24/ ,469 3,

215 City of Ontario CFD No. 24 Park Place Sa les by Tract Sold S Mcleve Way E 5088 McCleve Way E 5086 McCleve Way E 5084 McCleve Way E 5078 McCleve Way E 2076 McCleve Way E 5074 S Mdeve Way E 5068 McCleve Way E Mcleve Way E Mdeve Way E Mdeve Way E 5056 McCleve Way E 5047 McCieve Way E Centennial Or Centennial Cir 5077 Centennial Cir 5079 S Centennial Cir 5087 S Centennial Cir 5097 S Centennial Cir 5088 Centennial Cir 5082 S Centennial Cir 5078 Centennial Cir 5072 S Centennial Cir 5068 S Centennial Cir 5058 Centennial Cir Dodson Alethia Syun Yoon Vazquez Alejandra loh Johnathan Arthur James leavenworth Kristen Srunswig TImothy J & Angelica 0 Eramya Farris Mina Emily Sanchez Jonathan/lopez Julia R Tsao Szu C/wen Xu AI-khatib Ahmed & Noor Zang Ying & Yin Digiang Beattie Scott A & Florence C Obrien Michael J & Valerie 5 Kehyeng Eric Ma Yuqin Pu Zhaojun Jen Oliver & Yuki! Abad Stephen Harmonson Timothy Colon Angel Bernor Walter Mocarski Marcin Terrranova Michael , , ,496 2,418 2,681 2,496 2,681 2,496 2,496 2,681 2,418 2,418 2,496 2,418 2,496 2,496 2,681 2,418 2,681 2,496 2,496 $491,500 $479,500 $485,500 $499,500 $467,000 $476,000 $492,500 $468,500 $476,000 $475,000 $497,500 $466,500 $477,500 $489,500 $458,000 $455,000 $468,000 $464,000 $490,000 $467,000 $515,500 $470,000 $566,500 $496,000 $525,500 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ ,535 $485,648 $ /5/2015 6/17/2015 6/22/2015 6/30/2015 6/26/2015 5/6/2016 9/9/2015 9/11/2015 3/23/2016 9/17/ /7/ /18/ /7/2015 3/22/ /9/2015 5/16/ /28/ /22/ /18/2015 4/28/2016 4/27/2016 5/10/2016 5/3/2016 5/5/2016 5/11/ ,988 3,987 3,988 3,989 3,990 3,973 3,989 3,988 3,987 3,988 3,988 4,484 4,570 3,954 3,954 3,955 3,954 3,954 4,583 4,439 3,911 3,911 3,982 3,984 3, Canopy Creek ~35-0oo N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Huver James Bruder Timothy Cornejo Ricardo Acevedo Mariano Morris Bryan Velaquez Ricardo Tran Cathy Ganaway Anthony ChoiDanny Marks Braden Quirk Jesse Salcedo Dennis Studer David 2,179 1,856 1,758 1,990 1,990 1,856 1,656 1,758 2,179 1,856 1,656 1,758 1,990 $424,000 $417,500 $395,500 $415,000 $425,500 $416,500 $386,000 $409,000 $415,000 $402,000 $376,000 $387,500 $400,000 $ $ $ $ $ $ $ $ $ $ $ $ $ /31/ /28/2015 1/4/ /28/ /30/ /28/ /30/2015 4/28/2016 9/25/2015 9/25/2015 9/29/2015 9/30/2015 9/29/ ,442 3,012 2,394 2,504 2,890 3,259 2,393 3,591 2,791 2,430 2,156 2,430 2,

216 City of Ontario CFD No. 24 Park Place Sales by Tract N/A N/A N/A Haywood Dana Afre CoUeen Magnaye Derek 1,856 $429,500 1,656 $389,500 1,990 $400,500 $ $ $ /25/2016 4/27/2016 2/24/ ,430 2,455 2, Sold 1,874 $405,563 $ Total 106 Sold

217 APPENDIX C UPDATED PRICE POINT STUDY C-1

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228 The methodology utilized herein has been purposefully formulated to be as transparent and straightforward as possible, so that the study and its results can be readily understood by interested parties, including the homeowners that will be paying the Special Taxes. Accordingly, the methodology focuses upon using the net adjusted housing prices and tax burdens of the market comparables for homes with various sizes of living area, and then utilizes these to estimate the prices for the projects/plans in CFD No. 24.

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233 APPENDIX D FORM OF OPINION OF BOND COUNSEL Upon the delivery of the Bonds, Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, proposes to render its final approving opinion with respect to the Bonds in substantially the following form: [Delivery Date] City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Ontario, California City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) (the Community Facilities District ) in connection with the issuance by the Community Facilities District of its City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 (the Series 2016 Bonds ), in the aggregate principal amount of $16,135,000, pursuant to the Indenture, dated as of September 1, 2016 (the Indenture ), by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee ). Capitalized undefined terms used herein have the meanings ascribed thereto in the Indenture. In such connection, we have reviewed the Indenture, the Tax Certificate, opinions of counsel to the Community Facilities District and the Trustee, certificates of the Community Facilities District, the Trustee and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Series 2016 Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Community Facilities District. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and the Tax Certificate, including, without limitation, covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause the interest on the Series 2016 Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Series 2016 Bonds, the Indenture and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in D-1

234 appropriate cases, and to the limitations on legal remedies against governmental entities such as the Community Facilities District in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, nonexclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the plans, specifications, maps, reports or other engineering or financial details of the proceedings, or upon the Rate and Method or the validity of the Special Taxes levied upon any individual parcel. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Series 2016 Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Series 2016 Bonds constitute valid and binding special obligations of the Community Facilities District, payable, as provided in the Indenture, solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. 2. The Indenture has been duly executed and delivered by, and constitutes a valid and binding obligation of, the Community Facilities District. 3. Interest on the Series 2016 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. Interest on the Series 2016 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2016 Bonds. Faithfully yours, D-2

235 APPENDIX E GENERAL INFORMATION CONCERNING THE CITY OF ONTARIO This appendix sets forth general information about the City of Ontario ( Ontario ) including information with respect to its finances. The following information concerning Ontario, the County of San Bernardino (the County ) and the State of California (the State ) are included only for general background purposes. The Bonds are not obligations of the City, County or State or any political subdivision thereof and neither the faith and credit nor the taxing power of the City, County or the State, or any political subdivision thereof, is pledged to the payment of the Bonds. General The City of Ontario is located in western San Bernardino County, 35 miles inland from downtown Los Angeles and encompasses 50 square miles. Located in the western part of the Inland Empire region, it lies just east of the Los Angeles county line and is part of the Greater Los Angeles Area. The city is home to the LA/Ontario International Airport which is the 15th busiest cargo airport in the United States. Ontario handles the mass of freight traffic between the ports of Los Angeles and Long Beach and the rest of the country. Government The City was incorporated as a general law city in 1891, and is governed by a Mayor and four council members elected at large to serve four-year terms. The City operates under the Council - Manager form of government. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. Population (1) The population growth in the City, County and State is shown on the following chart. POPULATION ESTIMATES FOR THE CITY, COUNTY AND STATE County of San Year (1) City of Ontario Bernardino State of California ,175 1,989,690 36,399, ,951 2,009,594 36,704, ,309 2,019,432 36,966, ,924 2,035,210 37,253, ,396 2,054,735 37,536, ,974 2,070,374 37,881, ,114 2,086,559 38,239, ,820 2,100,700 38,567, ,177 2,121,088 38,907, ,869 2,139,570 39,255,883 January 1 estimate. Source: State of California, Department of Finance. E-1

236 Employment The following table summarizes the labor force, employment and unemployment figures for the years 2011 through 2015 for the City, the County, the State and the United States. CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT RATE City of Ontario, San Bernardino County, State of California and United States 2011 through 2015 (1) Year and Area Labor Force Employment (2) Unemployment (3) Rate (%) Unemployment 2011 City of Ontario 79,000 68,800 10, % San Bernardino County 888, , , State of California 18,415,100 16,258,100 2,157, United States 153,617, ,869,000 13,747, City of Ontario 79,400 70,300 9, % San Bernardino County 893, , , State of California 18,551,400 16,627,800 1,923, United States 154,975, ,469,000 12,506, City of Ontario 79,700 71,900 7, % San Bernardino County 898, ,100 87, State of California 18,670,100 17,001,000 1,669, United States 155,389, ,929,000 11,460, City of Ontario 80,600 74,100 6, % San Bernardino County 910, ,900 72, State of California 18,827,900 17,418,000 1,409, United States 155,922, ,305,000 9,617, City of Ontario 82,000 76,700 5, % San Bernardino County 926, ,800 59, State of California 18,981,800 17,798,600 1,183, United States 157,130, ,834,000 8,296, Note: Data is not seasonally adjusted. (1) Annual averages, unless otherwise specified. (2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table. Source: U.S. Department of Labor Bureau of Labor Statistics, California Employment Development Department. March 2015 Benchmark. E-2

237 Listed below are the major employers in the City and County for fiscal year Employer PRINCIPAL EMPLOYERS City of Ontario 2015 Number of Employees Ontario International Airport 5,000 to 9,999 Safariland LLC 500 to 999 Sam's Club Distribution Center 500 to 999 Securitas Security Services USA 500 to 999 Target Distribution Center 500 to 999 UPS Regional Air Hub 500 to 999 Argosy University-Inland Empire Autozone Distribution Center Barrett Business Service Inc BMW of Ontario Source: City of Ontario Fiscal Year Ending June 30, 2015 CAFR. Rank Name of Business PRINCIPAL EMPLOYERS San Bernardino County 2015 No. of San Bernardino County Employees Type of Business 1 County of San Bernardino 19,000 Public Service 2 Stater Bros. Market 18,221 Supermarket Retailer 3 US Army, Fort Irwin & National Training Center 13,805 Military Training Base 4 Loma Linda University 13,805 Education 5 U.S. Marine Corps Air Ground Combat Center 12,486 Military 6 United Parcel Service 8,600 Shippers 7 San Bernardino City Unified School District 8,574 School District 8 Ontario International Airport 7,695 Airport 9 Loma Linda University Medical Center 6,147 Hospital, Health care 10 Kaiser Permanente Fontana Medical Center 6,000 Medical Center Source: San Bernardino County Comprehensive Annual Report for the year ending June 30, E-3

238 Industries Residents of the City find employment throughout the Riverside-San Bernardino-Ontario Labor Market Area. This labor market area, as defined for reporting purposes by the California Employment Development Department, has boundaries coterminous with those of Riverside and San Bernardino Counties. The following table represents the Annual Average Labor Force and Industry Employment for the Riverside- San Bernardino-Ontario Metro Statistical Area for the period from 2011 through RIVERSIDE-SAN BERNARDINO-ONTARIO MSA INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE Civilian Labor Force 1,866,200 1,882,900 1,897,000 1,919,900 1,961,800 Civilian Employment 1,623,100 1,665,600 1,710,500 1,763,300 1,832,300 Civilian Unemployment 243, , , , ,500 Civilian Unemployment Rate 13.0% 11.5% 9.8% 8.2% 6.6% Total Farm 14,900 15,000 14,500 14,300 15,100 Total Nonfarm 1,154,500 1,185,200 1,233,300 1,289,300 1,347,400 Total Private 927, ,600 1,008,100 1,060,500 1,114,000 Goods Producing 145, , , , ,100 Mining and Logging 1,000 1,200 1,200 1,300 1,300 Construction 59,100 62,600 70,000 77,600 85,200 Manufacturing 85,100 86,700 87,300 91,300 95,600 Service Providing 1,009,300 1,034,700 1,074,700 1,119,100 1,165,200 Trade, Transportation and Utilities 275, , , , ,500 Wholesale Trade 49,200 52,200 56,400 58,900 61,700 Retail Trade 158, , , , ,500 Transportation, Warehousing and Utilities 67,900 73,000 78,400 86,600 97,300 Information 12,200 11,700 11,500 11,300 11,300 Financial Activities 39,500 40,200 41,300 42,300 43,200 Professional and Business Services 126, , , , ,400 Educational and Health Services 165, , , , ,000 Leisure and Hospitality 124, , , , ,500 Other Services 39,100 40,100 41,100 43,000 44,000 Government 227, , , , ,400 Total, All Industries 1,169,400 1,200,200 1,247,800 1,303,700 1,362,400 Note: Source: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The Total, All Industries data is not directly comparable to the employment data found in this Appendix E. State of California, Employment Development Department, March 2015 Benchmark. E-4

239 Personal Income The following tables show the personal income and per capita personal income for the City, County, State of California and United States from 2010 through Year PERSONAL INCOME City of Ontario, County of San Bernardino, State of California, and United States (1) City of Ontario County of San Bernardino California United States 2010 $2,400,178 $59,850,108 $1,583,446,730 $12,459,613, ,403,359 62,952,683 1,691,002,503 13,233,436, ,315,184 64,633,723 1,812,314,643 13,904,485, ,047,233 66,321,591 1,849,505,496 14,064,468, ,100,249 69,487,877 1,939,527,656 14,683,147, ,224, (1) 2,061,337,141 15,324,108,725 Note: Dollars in Thousands. (1) 2015 figures not yet available for County of San Bernardino. Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Ontario Fiscal Year Ending June 30, 2015 CAFR. (1) PER CAPITA PERSONAL INCOME (1) City of Ontario, County of San Bernardino, State of California, and United States (2) Year Ontario County of San Bernardino State of California United States 2010 $16,255 $29,314 $42,411 $40, ,947 30,491 44,852 42, ,229 31,064 47,614 44, ,552 31,683 48,125 44, ,774 32,892 49,985 46, , (2) 52,651 47,669 Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation). (2) 2015 figures not yet available for County of San Bernardino. Source: City CAFR for City, Bureau of Economic Analysis for County, State and U.S. E-5

240 Assessed Valuation The table below sets forth the City s assessed valuation of property for Fiscal Years 2010 through Fiscal Year Ended June 30 ASSESSED VALUATION OF TAXABLE PROPERTY City of Ontario Fiscal Years 2010 to 2015 (Dollars in Thousands) Secured Value Unsecured Value Less Exemptions Total Assessed and Estimated Full Value 2010 $12,224,682 $1,914,746 $(114,806) $14,024, ,851,209 1,854,606 (114,659) 13,591, ,997,380 1,792,402 (113,832) 13,675, ,065,269 1,788,106 (112,198) 13,741, ,465,751 1,758,596 (110,182) 14,114, ,413,859 2,552,384 (108,252) 14,857,991 Source: City of Ontario Comprehensive Annual Financial Report for the year ending June 30, Tax Levy and Tax Collection Below is a chart which indicates the tax levy and collection records for the City from the 2006 through 2015 fiscal years. (1) PROPERTY TAX LEVIES AND COLLECTIONS City of Ontario Fiscal Years 2006 to 2015 Fiscal Year Percent of Levy Collected Total Tax Collections to Tax Levy to Date % $18,663, ,496, ,533, ,056, ,720, ,801, ,383, ,273, ,110, ,576,407 Due to the dissolution of the former redevelopment agency, the property taxes collected in the former project areas is no longer remitted to the agencies. Assembly Bill 1X26 provides that revenues will only be allocated to make payments on the indebtedness; all remaining collections will be distributed to the other taxing entities based on the tax sharing formula. Source: City of Ontario Fiscal Year Ending June 30, 2015 CAFR. E-6

241 Largest Taxpayers The principal property taxpayers in the City for 2015 are as follows: Taxpayer PRINCIPAL PROPERTY TAXPAYERS City of Ontario Fiscal Year 2015 Assessed Valuation % of Total Assessed Valuation Ontario Mills Limited Partnership $ 370,956, % Pro Logis California I LLC 231,404, Catellus Operating LP/Catellus Finance LLC 216,766, Comref So Ca Industrial Sub A&F LLC 132,830, Majestic CCC IV, Partners 127,104, UPS Worldwide Forwarding Inc. 122,806, Vogel Properties Inc. 94,464, Camden Landmark LLC 90,296, ML Casa III LP 88,770, Teachers Insurance & Annuity Assoc. 80,214, TOTAL: $ 1,555,614, % Source: City of Ontario Fiscal Year Ending June 30, 2015 CAFR. Building Activity In addition to annual building permit valuations, the numbers of permits for new dwelling units issued each year from 2011 through 2015 are shown in the following tables for both the County and the City. BUILDING PERMIT VALUATIONS San Bernardino County Valuation ($000 s) Residential $341,317 $ 480,704 $ 666,166 $ 708,471 $1,056,572 Non-Residential 361, , , ,267 1,146,721 Total $702,979 $1,043,320 $1,410,357 $1,666,738 $2,203,293 Units Single Family 1,075 1,214 1,874 1,937 2,753 Multiple Family ,439 1,266 1,159 Total 1,484 1,810 3,313 3,203 3,912 Note: Totals may not add to sum because of rounding. Source: Construction Industry Research Board. E-7

242 BUILDING PERMIT VALUATIONS City of Ontario Valuation ($000 s) Residential $11,027 $ 9,550 $ 31,397 $ 52,924 $ 83,313 Non-Residential 67,891 55, ,943 88, ,268 Total $78,918 $65,467 $189,340 $140,947 $284,581 Units Single Family Multiple Family Total Note: Totals may not add to sum because of rounding. Source: Construction Industry Research Board. Taxable Sales The table below presents taxable sales for the years 2009 through 2014 for the City. Year Retail and Food Permits TAXABLE SALES City of Ontario 2009 through 2014 (Dollars in Thousands) Retail and Food Taxable Transactions Total Permits Total Outlets Taxable Transactions ,708 $2,881,884 5,711 $4,616, ,247 3,098,722 6,308 4,846, ,344 2,448,618 6,399 3,940, ,520 3,628,744 6,644 5,797, ,241 3,933,584 6,386 6,127, ,422 4,166,601 6,647 6,595,978 Note: In 2009, retail permits expanded to include permits for food services. Source: Taxable Sales in California (Sales & Use Tax) - California State Board of Equalization. E-8

243 The table below presents taxable sales for the years 2009 through 2014 for the County. Year Retail and Food Permits TAXABLE SALES San Bernardino County 2009 through 2014 (Dollars in Thousands) Retail and Food Taxable Transactions Total Permits Total Outlets Taxable Transactions ,676 $16,330,138 45,062 $23,652, ,068 17,308,880 47,562 24,687, ,140 18,736,053 47,791 27,322, ,095 19,980,937 48,936 29,531, ,986 21,173,875 46,632 31,177, ,555 22,240,376 48,349 33,055,967 Note: In 2009, retail permits expanded to include permits for food services. Source: Taxable Sales in California (Sales & Use Tax) - California State Board of Equalization. Transportation Because Ontario is a major hub for passengers and freight, the City is also served by several major freeways. Interstate 10 and the Pomona Freeway (State Route 60) run east-west through the City. Interstate 10 is north of the Ontario airport while the Pomona freeway is south of the airport. Interstate 15 runs in the northsouth directions at the eastern side of the City. State Route 83, also known as Euclid Avenue, also runs in the north-south direction at the western side of the City. The City maintains an Amtrak station which is served by the Sunset Limited and Texas Eagle lines. Ontario also has a Metrolink station off of Haven Avenue. It connects Ontario with much of the Greater Los Angeles area, Orange County and the San Fernando Valley. Public bus transportation is provided by Omnitrans. The LA/Ontario International Airport is a medium-hub, full-service airport, which offers more than 64 daily flights to cities in the U.S. and Mexico and is served by AeroMexico, Alaska Airlines, American Airlines, Delta Air Lines, Southwest Airlines, United Airlines/United Express, US Airways and Volaris. The airport s service area includes a population of approximately six million in San Bernardino and Riverside counties, and portions of Orange and Los Angeles counties. It currently is operated by Los Angeles World Airports, a City of Los Angeles agency also operating Los Angeles International and Van Nuys airports. Expected to begin in October, 2016, subject to FAA approval, the airport will be owned and operated by the Ontario International Airport Authority under a Joint Powers Agreement enacted by the City of Ontario and the County of San Bernardino. With the completion of its twin terminals, it is able to handle approximately 10 million passengers annually. When passenger traffic reaches 10 million in two consecutive years, a third terminal will be constructed. LA/Ontario International Airport is the Western States Regional Terminal for United Parcel Service. In 2015, 4.2 million passengers used the airport and 509,809 tons of air freight were shipped. E-9

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245 APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a summary of certain provisions of the Indenture which are not described elsewhere in the Official Statement. This summary does not purport to be comprehensive, and reference should be made to the Indenture for a full and complete statement of their provisions. Definitions Act means the Mello-Roos Community Facilities Act of 1982, constituting Sections et seq. of the California Government Code. Additional Bonds means Bonds other than Series 2016 Bonds issued under the Indenture in accordance with the provisions thereof. Administrative Expense Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Administrative Expenses means any reasonably necessary or appropriate expenses incurred in the administration of the Community Facilities District and the Bonds, including, but not limited to (a) the administrative and legal costs of levying and collecting the Special Tax (including costs incurred in connection with any appeals relating thereto and litigation expenses incurred in connection with the collection of such Special Tax), (b) the fees, costs and indemnifications due the Trustee, (c) the costs incurred with on-going disclosure in connection with the Bonds, (d) the costs incurred in connection with the disclosure of the Special Tax to property owners and potential purchasers of property, (e) the amounts required to calculate and pay arbitrage rebate payments to the federal government, and (f) an allocable share of the salaries of the City staff providing services on behalf of the Community Facilities District directly related to the foregoing and an allocable share of City general administrative overhead related thereto. Annual Debt Service means, for each Bond Year, the sum of (a) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of mandatory sinking fund redemptions), and (b) the principal of the Outstanding Bonds due in such Bond Year (including by reason of mandatory sinking fund redemptions). Authorized Denominations means (a) with respect to the Series 2016 Bonds, $5,000 and any integral multiple thereof, and (b) with respect to each Series of Additional Bonds, the authorized denominations for such Series of Additional Bonds specified in the Supplemental Indenture pursuant to which such Additional Bonds are issued. Authorized Representative means, with respect to the Community Facilities District, the Mayor of the City, the City Manager of the City, the Administrative Services/Finance Director of the City, and any other Person designated as an Authorized Representative of the Community Facilities District in a Written Certificate of the Community Facilities District filed with the Trustee. Average Annual Debt Service means the average of the Annual Debt Service for all Bond Years, including the Bond Year in which the calculation is made. Beneficial Owners means those Persons for which the Participants have caused the Depository to hold Book-Entry Bonds. F-1

246 Bond Counsel means a firm of nationally recognized bond counsel selected by the Community Facilities District. Bond Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Bond Year means each twelve-month period beginning on September 2 in each year and extending to the next succeeding September 1, both dates inclusive, except that the first Bond Year shall begin on the Closing Date and end on September 1, Bonds means the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds issued under the Indenture, and includes the Series 2016 Bonds and any Additional Bonds. Book-Entry Bonds means the Bonds of a Series registered in the name of the Depository, or the Nominee thereof, as the registered owner thereof pursuant to the terms and provisions of the Indenture. Business Day means a day which is not (a) a Saturday, Sunday or legal holiday in the State, (b) a day on which banking institutions in the State, or in any state in which the Office of the Trustee is located, are required or authorized by law (including executive order) to close, or (c) a day on which the New York Stock Exchange is closed. Cede & Co. means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to a Series of Book-Entry Bonds. City means the City of Ontario, a general law city organized and existing under and by virtue of the laws of the State of California, and any successor thereto. City Council means the City Council of the City. City Facilities Account means the account by that name within the Improvement Fund established and held by the Trustee pursuant to the Indenture. Closing Date means the date upon which the Series 2016 Bonds are delivered to the Original Purchaser. Code means the Internal Revenue Code of Community Facilities District means City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I), a community facilities district organized and existing under the laws of the State, and any successor thereto. Continuing Disclosure Agreement means the Continuing Disclosure Agreement, dated as of the date of the Indenture, by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., as Trustee, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Corresponding Bond Year means, with respect to any Fiscal Year, the Bond Year that commences in such Fiscal Year. Costs of Issuance means all items of expense directly or indirectly payable by or reimbursable to the Community Facilities District relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to printing expenses, rating agency fees, filing and recording fees, initial fees, F-2

247 expenses and charges of the Trustee and its counsel, including the Trustee s first annual administrative fee, fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the Bonds, any premium for a bond insurance policy securing payment of the Bonds, any premium for a reserve facility and any other cost, charge or fee in connection with the original issuance of the Bonds. Costs of Issuance Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. County means the County of San Bernardino, a county and political subdivision of the State organized and existing under the laws of the State, and any successor thereto. County Assessor means the assessor of the County. County Auditor means the auditor of the County. Defeasance Securities means (a) non-callable direct obligations of the United States of America ( United States Treasury Obligations ), and (b) evidences of ownership of proportionate interests in future interest and principal payments on United States Treasury Obligations held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying United States Treasury Obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. Depository means DTC, and its successors as securities depository for any Series of Book-Entry Bonds, including any such successor appointed pursuant to the Indenture. DTC means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York. Event of Default means any event or circumstance specified in the Indenture. Facilities means the facilities authorized to be financed by the Community Facilities District, as more particularly described in the Resolution of Formation. Fiscal Year means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period hereafter selected and designated as the official fiscal year period of the Community Facilities District. Improvement Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Indenture means the Indenture, dated as of September 1, 2016, by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., as originally executed and as it may be amended or supplemented from time to time by any Supplemental Indenture. Independent Consultant means any consultant or firm of such consultants selected by the Community Facilities District and who, or each of whom (a) is generally recognized to be qualified in the financial consulting field, (b) is in fact independent and not under the control of the Community Facilities District or the City, (c) does not have any substantial interest, direct or indirect, with or in the Community Facilities District or the City, or any owner of real property in the Community Facilities District, or any real property in the Community Facilities District, and (d) is not connected with the Community Facilities District or the City as an officer or employee thereof, but who may be regularly retained to make reports to the Community Facilities District or the City. F-3

248 Interest Account means the account by that name within the Bond Fund established and held by the Trustee pursuant to the Indenture Interest Payment Dates means March 1 and September 1 of each year, commencing March 1, Letter of Representations means the Letter of Representations from the Community Facilities District to the Depository, in which the Community Facilities District makes certain representations with respect to issues of its securities for deposit by the Depository. Maximum Annual Debt Service means the largest Annual Debt Service for any Bond Year, including the Bond Year the calculation is made. Moody s means Moody s Investors Service, Inc., a corporation duly organized and existing under the laws of the State of Delaware, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Moody s shall be deemed to refer to any other nationally recognized securities rating agency selected by the Community Facilities District. Net Special Tax Revenues means Special Tax Revenues, less amounts required to pay Administrative Expenses. NMC Acquisition Account means the account by that name within the Improvement Fund established and held by the Trustee pursuant to the Indenture. NMC Acquisition Agreement means the Acquisition and Funding Agreement, dated as of July 21, 2015, by and between the City and NMC Builders, as originally executed and as it may be amended from time to time in accordance with the terms thereof. NMC Builders means NMC Builders, LLC, a limited liability company organized and existing under the laws of the State of California, and any successor thereto. NMC Facilities has the meaning ascribed to the term Facilities in the NMC Acquisition Agreement. NMC Payment Request has the meaning ascribed to the term Payment Request in the NMC Acquisition Agreement. Nominee means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Indenture. Office of the Trustee means the principal corporate trust office of the Trustee in Los Angeles, California, or such other office as may be specified to the Community Facilities District by the Trustee in writing; provided, however, that with respect to presentation of Bonds for payment or for registration of transfer and exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted, which other office or agency shall be specified to the Community Facilities District by the Trustee in writing. Ordinance means any ordinance adopted by the City Council levying the Special Taxes. Original Purchaser means the original purchaser of the Series 2016 Bonds from the Community Facilities District. F-4

249 Outstanding means, when used as of any particular time with reference to Bonds, subject to the provisions of the Indenture relating to disqualified Bonds, all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation, (b) Bonds with respect to which all liability of the Community Facilities District shall have been discharged in accordance with the Indenture, and (c) Bonds in lieu of which other Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture. Owner means, with respect to a Bond, the Person in whose name such Bond is registered on the Registration Books. Participant means any entity which is recognized as a participant by DTC in the book-entry system of maintaining records with respect to Book-Entry Bonds. Participating Underwriter has the meaning ascribed to such term in the Continuing Disclosure Agreement. Permitted Investments means the following: (1) (a) Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America ( United States Treasury Obligations ), (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. (2) Federal Housing Administration debentures. (3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America: - Federal Home Loan Mortgage Corporation (FHLMC) Senior debt obligations and participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) - Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) Consolidated system wide bonds and notes - Federal Home Loan Banks (FHL Banks) Consolidated debt obligations - Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) (4) Unsecured certificates of deposit, time deposits or other bank deposit products, and bankers acceptances (having maturities of not more than 365 days) of any bank, the short-term obligations of which are rated A-1+ or better by S&P and Prime-1 by Moody s. F-5

250 (5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation, in banks which have capital and surplus of at least $15 million. (6) Commercial paper (having original maturities of not more than 270 days) rated at the time of purchase A-1+ by S&P and Prime-1 by Moody s. (7) Money market mutual funds rated AAm or AAm-G by S&P, or better and, if rated by Moody s, rated Aa2 or better, including a fund for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee provide transfer agency, custodial, investment advisory or other management services, and, subject to the prior written consent of S&P and Moody s, the investment pool maintained by the county in which the Community Facilities District is located or other investment pools, in either case so long as such pool is rated in one of the two highest rating categories by S&P and Moody s. (8) State Obligations, which means (a) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated at least A3 by Moody s and at least A- by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (b) Direct, general short-term obligations of any state agency or subdivision or agency thereof described in (a) above and rated A-1+ by S&P and MIG-1 by Moody s. (c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state or state agency in (a) above and rated AA- or better by S&P and Aa3 or better by Moody s. (9) Pre-refunded municipal obligations rated AAA by S&P and Aaa by Moody s meeting the following requirements: (a) the municipal obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (b) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; (c) the principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ( Verification Report ); (d) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; F-6

251 (e) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification Report; and (f) the cash or the United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. (10) Repurchase agreements: A. With (i) any domestic bank, or domestic branch of a foreign bank, the long term debt of which is rated at least A- by S&P and Aa3 by Moody s; (ii) any brokerdealer with retail customers or a related affiliate thereof which broker-dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least A- by S&P and Aa3 Moody s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (iii) any other entity rated at least A- by S&P and A3 by Moody s (each, an Eligible Provider ), provided that: a. The (i) permitted collateral shall include U.S. Treasury Obligations, or senior debt obligations of GNMA, FNMA or FHLMC (no collateralized mortgage obligations shall be permitted for these providers), and (ii) collateral levels must be at least 102% of the total principal when the collateral type is U.S. Treasury Obligations, 103% of the total principal when the collateral type is GNMA s and 104% of the total principal when the collateral type is FNMA and FHLMC ( Eligible Collateral ); b. The Trustee or a third party acting solely as agent therefor or for the Community Facilities District (the Custodian ) has possession of the collateral or the collateral has been transferred to the Custodian in accordance with applicable state and federal laws (other than by means of entries on the transferor s books); c. The collateral shall be marked to market on a daily basis and the provider or Custodian shall send monthly reports to the Trustee and the Community Facilities District setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; d. The repurchase agreement shall state, and an opinion of counsel shall be rendered at the time such collateral is delivered that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; and e. The repurchase agreement shall provide that if during its term the provider s rating by either Moody s or S&P is withdrawn or suspended or falls below A- by S&P or A3 by Moody s, as appropriate, the provider must, notify the Trustee and the Community Facilities District within five days of receipt of such notice. Within ten days of receipt of such notice, the provider shall either (i) post Eligible Collateral, or (ii) assign the agreement to an Eligible Provider. If the provider does not perform a remedy within ten business days, the provider shall, at the direction of the Trustee or the Community Facilities District repurchase all collateral and terminate the repurchase agreement, with no penalty or premium to the Trustee or the Community Facilities District. F-7

252 (11) Investment agreements with a domestic or foreign bank or corporation the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least AA by S&P and Aa3 by Moody s (each, an Eligible Provider ); provided, that, by the terms of the investment agreement: (a) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service on the Bonds; (b) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days prior notice; the Trustee and the Community Facilities District will give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; (c) the provider shall send monthly reports to the Trustee and the Community Facilities District setting forth the balance the Community Facilities District or the Trustee has invested with the provider and the amounts and dates of interest accrued and paid by the provider; (d) the investment agreement shall state that it is an unconditional and general obligation of the provider, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; (e) the Trustee and the Community Facilities District shall receive an opinion of domestic counsel to the provider that such investment agreement is legal, valid and binding and enforceable against the provider in accordance with its terms; (f) the Trustee and the Community Facilities District shall receive an opinion of foreign counsel to the provider (if applicable) that (i) the investment agreement has been duly authorized, executed and delivered by the provider and constitutes the legal, valid and binding obligation of the provider, enforceable against the provider in accordance with its terms, (ii) the choice of law of the state set forth in the investment agreement is valid under that country s laws and a court in such country would uphold such choice of law, and (iii) any judgment rendered by a court in the United States would be recognized and enforceable in such country; (g) the investment agreement shall provide that if during its term (i) the provider s rating by either S&P or Moody s falls below AA- or Aa3, respectively, the provider shall, at its option, within ten days of receipt of publication of such downgrade, either (A) post Eligible Collateral with the Trustee, the Community Facilities District or a third party acting solely as agent therefor (the Custodian ) free and clear of any third party liens or claims, (B) assign the agreement to an Eligible Provider, or (C) repay the principal of and accrued but unpaid interest on the investment, and (ii) the provider s rating by either S&P or Moody s falls below A- or A3, respectively, the provider must, at the direction of the Trustee or the Community Facilities District, within ten days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Trustee or the Community Facilities District; (h) in the event the provider is required to collateralize, permitted collateral shall include U.S. Treasury Obligations, or senior debt obligations of GNMA, FNMA or F-8

253 FHLMC (no collateralized mortgage obligations shall be permitted for these providers) and collateral levels must be 102% of the total principal when the collateral type is U.S. Treasury Obligations, 103% of the total principal when the collateral type is GNMA s and 104% of the total principal when the collateral type is FNMA and FHLMC ( Eligible Collateral ). In addition, the collateral shall be marked to market on a daily basis and the provider or Custodian shall send monthly reports to the Trustee and the Community Facilities District setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; (i) the investment agreement shall state, and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; and (j) the investment agreement must provide that if during its term (i) the provider shall default in its payment obligations, the provider s obligations under the investment agreement shall, at the direction of the Trustee or the Community Facilities District, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Trustee or the Community Facilities District, as appropriate, and (ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. ( event of insolvency ), the provider s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Trustee or the Community Facilities District, as appropriate. Person means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. Principal Account means the account by that name within the Bond Fund established and held by the Trustee pursuant to the Indenture. Rate and Method means the rate and method of apportionment of the Special Taxes approved by the qualified electors of the Community Facilities District. Rebate Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Rebate Requirement has the meaning ascribed to such term in the Tax Certificate. Record Date means, with respect to interest payable on any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day. Redemption Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Redemption Price means the aggregate amount of principal of and premium, if any, on the Bonds upon the redemption thereof pursuant to the Indenture. Registration Books means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to the Indenture. F-9

254 Reserve Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Reserve Requirement means, as of the date of any calculation, the least of (a) 10% of the original aggregate principal amount of the Bonds (excluding Bonds refunded with the proceeds of subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c) 125% of Average Annual Debt Service. Resolution of Formation means Resolution No , adopted by the City Council on November 18, 2014, as originally adopted and as it may be amended or supplemented from time to time. S&P means Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation duly organized and existing under the laws of the State of New York, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term S&P shall be deemed to refer to any other nationally recognized securities rating agency selected by the Community Facilities District. Series means the initial series of Bonds executed, authenticated and delivered on the date of initial issuance of the Bonds and identified pursuant to the Indenture as the Series 2016 Bonds, and any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of Bonds. Series 2016 Bonds means the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016, issued under the Indenture. Services has the meaning ascribed to such term in the Rate and Method. SL Ontario means SL Ontario Development Company, LLC, a limited liability company organized and existing under the laws of the State of Delaware, and any successor thereto. SL Ontario Acquisition Account means the account by that name within the Improvement Fund established and held by the Trustee pursuant to the Indenture. SL Ontario Acquisition Agreement means the Acquisition and Funding Agreement, dated as of November 1, 2014, by and between the City and SL Ontario, as originally executed and as it may be amended from time to time in accordance with the terms thereof. SL Ontario Facilities has the meaning ascribed to the term First Community Facilities District Facilities in the SL Ontario Acquisition Agreement. SL Ontario Payment Request has the meaning ascribed to the term Payment Request in the SL Ontario Acquisition Agreement. Special Tax Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Special Tax Revenues means the proceeds of the Special Taxes received by or on behalf of the Community Facilities District, 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 shall be limited to the amount of said lien and interest and penalties thereon. Special Taxes means the special taxes approved by the qualified electors to be levied within the Community Facilities District pursuant to the Act and the Rate and Method, excluding such special taxes levied thereunder to pay for the cost of Services. F-10

255 State means the State of California. Supplemental Indenture means any supplemental indenture amendatory of or supplemental to the Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture. Tax Certificate means the Tax Certificate executed by the Community Facilities District at the time of issuance of the Series 2016 Bonds relating to the requirements of Section 148 of the Code, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Trustee means The Bank of New York Mellon Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, or any successor thereto as Trustee under the Indenture substituted in its place as provided in the Indenture. Verification Report means, with respect to the deemed payment of Bonds pursuant to the Indenture, a report of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Defeasance Securities and cash, if any, deposited in connection with such deemed payment satisfy the requirements thereof. Written Certificate and Written Request of the Community Facilities District mean, respectively, a written certificate or written request signed in the name of the Community Facilities District by an Authorized Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. The Bonds. Transfer and Exchange of Bonds. Any Bond may be transferred upon the Registration Books by the Person in whose name it is registered, in person or by such Person s duly authorized attorney, upon surrender of such Bond to the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds shall be so surrendered for transfer, the Community Facilities District shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series and maturity in a like aggregate principal amount, in any Authorized Denomination. The Trustee shall require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of the same Series and maturity of other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series pursuant to the provisions of the Indenture summarized under this caption ( Transfer and Exchange of Bonds ) during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption. Book-Entry System. (a) Prior to the issuance of a Series of Bonds, the Community Facilities District may provide that such Series of Bonds shall initially be issued as Book-Entry Bonds, and in such event, the Bonds of such Series for each maturity date shall be in the form of a separate single fully registered Bond (which may be typewritten). Upon initial issuance, the ownership of each such Bond of such Series shall be registered in the Registration Books in the name of the Nominee, as nominee of the Depository. The Series 2016 Bonds shall initially be issued as Book-Entry Bonds. F-11

256 Payment of principal of, and interest and premium, if any, on, any Book-Entry Bond registered in the name of the Nominee shall be made on the applicable payment date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of the Nominee. Such payments shall be made to the Nominee at the address which is, on the Record Date, shown for the Nominee in the Registration Books. (b) With respect to Book-Entry Bonds, the Community Facilities District and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in such Book-Entry Bonds. Without limiting the immediately preceding sentence, the Community Facilities District and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in Book-Entry Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the Registration Books, of any notice with respect to Book-Entry Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in Book-Entry Bonds of a maturity to be redeemed in the event such Book-Entry Bonds are redeemed in part, (iv) the payment to any Participant or any other Person, other than an Owner as shown in the Registration Books, of any amount with respect to principal of, or premium, if any, or interest on Book-Entry Bonds, or (v) any consent given or other action taken by the Depository as Owner. (c) The Community Facilities District and the Trustee may treat and consider the Person in whose name each Book-Entry Bond is registered in the Registration Books as the absolute Owner of such Book-Entry Bond for the purpose of payment of principal of, and premium, if any, and interest on such Bond, for the purpose of selecting any Bonds, or portions thereof, to be redeemed, for the purpose of giving notices of redemption and other matters with respect to such Book-Entry Bond, for the purpose of registering transfers with respect to such Book-Entry Bond, for the purpose of obtaining any consent or other action to be taken by Owners and for all other purposes whatsoever, and the Community Facilities District and the Trustee shall not be affected by any notice to the contrary. (d) In the event of a redemption of all or a portion of a Book-Entry Bond, the Depository, in its discretion (i) may request the Trustee to authenticate and deliver a new Book-Entry Bond, or (ii) if the Depository is the sole Owner of such Book-Entry Bond, shall make an appropriate notation on the Book-Entry Bond indicating the date and amounts of the reduction in principal thereof resulting from such redemption, except in the case of final payment, in which case such Book-Entry Bond must be presented to the Trustee prior to payment. (e) The Trustee shall pay all principal of, and premium, if any, and interest on the Book-Entry Bonds only to or upon the order of (as that term is used in the Uniform Commercial Code as adopted in the State) the respective Owner, as shown in the Registration Books, or such Owner s respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the obligations with respect to payment of principal of, and premium, if any, and interest on the Book-Entry Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the Registration Books, shall receive an authenticated Book-Entry Bond. Upon delivery by the Depository to the Owners, the Community Facilities District and the Trustee of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions in the Indenture with respect to Record Dates, the word Nominee in the Indenture shall refer to such nominee of the Depository. (f) In order to qualify the Book-Entry Bonds for the Depository s book-entry system, the Community Facilities District shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Community Facilities District or the Trustee any obligation whatsoever with respect to Persons having interests in such Book-Entry Bonds other than the Owners, as shown on the Registration Books. Such Letter of Representations may provide the time, form, content and manner of transmission, of notices to the Depository. In addition to the execution and delivery of a Letter of Representations by the Community Facilities District, F-12

257 the Community Facilities District and the Trustee shall take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify Book-Entry Bonds for the Depository s book-entry program. (g) In the event the Community Facilities District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated Bonds and that such Bonds should therefore be made available and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Bonds. In such event, the Trustee shall transfer and exchange certificated Bonds as requested by the Depository and any other Owners in appropriate amounts. In the event (i) the Depository determines not to continue to act as securities depository for Book- Entry Bonds, or (ii) the Depository shall no longer so act and gives notice to the Trustee of such determination, then the Community Facilities District shall discontinue the Book-Entry system with the Depository. If the Community Facilities District determines to replace the Depository with another qualified securities depository, the Community Facilities District shall prepare or direct the preparation of a new single, separate, fully registered Bond of the appropriate Series for each maturity date of such Book-Entry Bonds, registered in the name of such successor or substitute qualified securities depository or its nominee. If the Community Facilities District fails to identify another qualified securities depository to replace the Depository, then the Book-Entry Bonds shall no longer be restricted to being registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Bonds shall designate, in accordance with the provisions of the Indenture. Whenever the Depository requests the Community Facilities District to do so, the Community Facilities District shall cooperate with the Depository in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Book-Entry Bonds to any Participant having Book-Entry Bonds credited to its account with the Depository, and (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Book-Entry Bonds. (h) Notwithstanding any other provision of the Indenture to the contrary, if the Depository is the sole Owner of the Bonds of a Series, so long as any Book-Entry Bond of such Series is registered in the name of the Nominee, all payments of principal of, and premium, if any, and interest on such Book-Entry Bond and all notices with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository. (i) In connection with any notice or other communication to be provided to Owners pursuant to the Indenture by the Community Facilities District or the Trustee, with respect to any consent or other action to be taken by Owners of Book-Entry Bonds, the Trustee shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Community Facilities District, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of the same Series and maturity in a like principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or upon the order of, the Community Facilities District. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence and indemnity satisfactory to the Trustee shall be given, the Community Facilities District, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of the same Series and maturity in a like aggregate principal amount in lieu of and in replacement for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the same without surrender thereof). The Community Facilities District may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond issued under the provisions summarized in this paragraph and of the expenses which may be incurred by the Community Facilities District and the Trustee. Any Bond of a Series issued under the provisions summarized in this paragraph in lieu of any Bond of such Series alleged to be lost, destroyed or stolen shall constitute an F-13

258 original additional contractual obligation on the part of the Community Facilities District whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of the Indenture with all other Bonds of such Series secured by the Indenture. Temporary Bonds. The Bonds of a Series may be issued in temporary form exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such Authorized Denominations as may be determined by the Community Facilities District, shall be in fully registered form without coupons and may contain such reference to any of the provisions of the Indenture as may be appropriate. Every temporary Bond shall be executed by the Community Facilities District and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Community Facilities District issues temporary Bonds of a Series it shall execute and deliver definitive Bonds of such Series as promptly thereafter as practicable, and thereupon the temporary Bonds of such Series may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of such Series and maturities in Authorized Denominations. Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under the Indenture as definitive Bonds of such Series authenticated and delivered under the Indenture. Additional Bonds Conditions for the Issuance of Additional Bonds. The Community Facilities District may at any time issue one or more Series of Additional Bonds (in addition to the Series 2016 Bonds) payable from Net Special Tax Revenues as provided in the Indenture on a parity with all other Bonds theretofore issued under the Indenture, but only subject to the following conditions, which are conditions precedent to the issuance of such Additional Bonds: (a) upon the issuance of such Additional Bonds, no Event of Default shall have occurred and be continuing under the Indenture; (b) the issuance of such Additional Bonds shall have been authorized under and pursuant to the Indenture and the Act and shall have been provided for by a Supplemental Indenture which shall specify the following: (i) the purposes for which the proceeds of such Additional Bonds are to be applied, which purposes may only include one or more of (A) providing funds to refund any Bonds previously issued under the Indenture, (B) providing funds to pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and (C) providing funds to make any deposit to the Reserve Fund required pursuant to paragraph (vii) below; (ii) the principal amount and designation of such Series of Additional Bonds and the interest rate to be borne by each maturity of such Additional Bonds; (iii) that such Additional Bonds shall be payable as to interest on the Interest Payment Dates, except that the first installment of interest may be payable on either March 1 or September 1 and shall be for a period of not longer than twelve months; (iv) the date, the maturity date or dates and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional Bonds; provided, however, that each such maturity date and date on which a mandatory sinking fund redemption is to be made shall be a September 1 and, provided, further, that serial maturities of serial Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be established to provide for the redemption or payment of such Additional Bonds on or before their respective maturity dates; F-14

259 (v) (vi) the redemption premiums and terms, if any, for such Additional Bonds; the form of such Additional Bonds; (vii) the amount, if any, to be deposited from the proceeds of sale of such Additional Bonds in the Reserve Fund; provided, however, that the amount on deposit in the Reserve Fund at the time that such Additional Bonds become Outstanding shall be at least equal to the Reserve Requirement; and (viii) such other provisions that are appropriate or necessary and are not inconsistent with the provisions of the Indenture; (c) The Community Facilities District shall have received a certificate from an Independent Consultant certifying 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. Nothing contained in the Indenture shall limit 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. Procedure for the Issuance of Additional Bonds. At any time after the sale of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the Community Facilities District for issuance under the Indenture and shall be delivered to the Trustee and thereupon shall be authenticated and delivered by the Trustee, but only upon receipt by the Trustee of the following: (a) a certified copy of the Supplemental Indenture authorizing the issuance of such Additional Bonds; (b) a Written Request of the Community Facilities District as to the delivery of such Additional Bonds; (c) a Written Certificate of the Community Facilities District stating that the conditions precedent to the issuance of such Additional Bonds specified in the provisions of the Indenture summarized under the caption Additional Bonds Conditions for the Issuance of Additional Bonds have been satisfied; (d) an opinion of Bond Counsel substantially to the effect that (i) the Indenture and all Supplemental Indentures have been duly authorized, executed and delivered by, and constitute the valid and binding obligations of, the Community Facilities District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State), (ii) such Additional Bonds constitute valid and binding special obligations of the Community Facilities District and are enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State), and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect the exclusion of interest on the Bonds Outstanding prior to the issuance of such Additional Bonds from gross income for federal income tax purposes; F-15

260 (e) the proceeds of the sale of such Additional Bonds; and (f) such further documents or money as are required by the provisions of the Indenture or by the provisions of the Supplemental Indenture authorizing the issuance of such Additional Bonds. Additional Bonds. The Community Facilities District shall not incur any obligations payable from Net Special Tax Revenues on a parity with the Bonds, except pursuant to the provisions of the Indenture. Security for Bonds; Funds and Accounts Established Under the Indenture Pledge. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act, the Community Facilities District pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. Said pledge shall constitute a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the Community Facilities 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. Special Tax Fund. (a) The Trustee shall establish and maintain a separate fund designated the Special Tax Fund. As soon as practicable after the receipt by the Community Facilities District of any Special Tax Revenues, but in any event no later than the date ten Business Days after such receipt, the Community Facilities District shall 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 shall be identified as such in a Written Certificate of the Community Facilities District delivered to the Trustee at the time such prepaid Special Taxes are transferred to the Trustee, (ii) the portion of such prepaid Special Taxes that is to be applied to the Redemption Price of the Bonds shall be identified in such Written Certificate of the Community Facilities District, shall be deposited by the Trustee in the Redemption Fund and shall be applied to the redemption of Bonds pursuant to the provisions of the Indenture relating to mandatory redemption from Special Tax prepayments 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 is to be applied to the payment of interest on the Bonds to be so redeemed shall be identified in such Written Certificate of the Community Facilities District, shall be deposited by the Trustee in the Interest Account and shall be applied to the payment of such interest. (b) Upon receipt of a Written Request of the Community Facilities District, the Trustee shall withdraw from the Special Tax Fund and transfer to the Administrative Expense Fund the amount specified in such Written Request of the Community Facilities District as the amount necessary to be transferred thereto in order to have sufficient amounts available therein to pay Administrative Expenses. (c) No later than the Business Day immediately preceding each Interest Payment Date, after having made any requested transfer to the Administrative Expense Fund, the Trustee shall withdraw from the Special Tax Fund Net Special Tax Revenues in an amount sufficient to enable the Trustee to make the following transfers in the following order of priority: (i) Interest Account. To the Interest Account, the amount, if any, necessary to cause the amount on deposit in the Interest Account to be equal to the interest due on the Bonds on such Interest Payment Date; F-16

261 (ii) Principal Account. To the Principal Account, 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 (iii) Reserve Fund. To the Reserve Fund, the amount, if any, necessary to cause the amount in the Reserve Fund to be equal to the Reserve Requirement. (d) So long as the City Facilities Account has not been closed pursuant to the Indenture, on each September 2, after having made any requested transfer to the Administrative Expense Fund, the Trustee shall transfer from the Special Tax Fund to the City Facilities Account any amount remaining in the Special Tax Fund; provided, however, that the Community Facilities District may, in a Written Request of the Community Facilities District submitted to the Trustee prior to such September 2, direct the Trustee to retain in the Special Tax Fund all or a portion of such remaining amount. Bond Fund. (a) The Trustee shall establish and maintain a separate fund designated the Bond Fund. Within the Bond Fund, the Trustee shall establish and maintain a separate account designated the Principal Account and a separate account designated the Interest Account. The Trustee shall deposit in the Interest Account and the Principal Account from time to time the amounts required to be deposited therein pursuant to the Indenture. There shall additionally be deposited in the Interest Account the portion, if any, of the proceeds of the sale of Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued. (b) 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 shall withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall transfer any amounts so withdrawn to the Interest Account. (c) On each Interest Payment Date, the Trustee shall withdraw from the Interest Account for payment to the Owners of the Bonds the interest on the Bonds then due and payable. (d) 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 provisions summarized in paragraph (b) above, the Trustee shall withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall transfer any amounts so withdrawn to the Principal Account. (e) On each 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 shall withdraw from the Principal Account for payment to the Owners of the Bonds such principal then due and payable. Reserve Fund. (a) The Trustee shall establish and maintain a special fund designated the Reserve Fund. On the Closing Date, the Trustee shall deposit in the Reserve Fund the amount specified in the Indenture. The Trustee shall deposit in the Reserve Fund from time to time the amounts required to be deposited therein pursuant to the Indenture. There shall 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. (b) Except as otherwise provided in this section described under the caption Reserve Fund, amounts in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with the Indenture in the event of any deficiency at any time in F-17

262 the Interest Account of the amount then required for payment of the interest on the Bonds, (ii) making transfers to the Principal Account in accordance with the Indenture in the event of any deficiency at any time in the Principal Account of the amount then required for payment of the principal of the Bonds, and (iii) redeeming Bonds in accordance with the provisions of the Indenture described under this section under the caption Reserve Fund. (c) Whenever Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, a proportionate share, determined as provided below, of the amount on deposit in the Reserve Fund shall, 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 shall be applied to the redemption of said Bonds; provided, however, that such amount shall 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 shall be equal to the largest integral multiple of the minimum Authorized Denomination for said Bonds that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date of such transfer, times (ii) 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. (d) 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 shall, upon receipt of a Written Request of the Community Facilities District, transfer the amount in the Reserve Fund to the Interest Account, Principal Account and/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. (e) If, as a result of the scheduled payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, the Trustee shall transfer an amount equal to the amount of such reduction to the Interest Account. Redemption Fund. (a) The Trustee shall establish and maintain a special fund designated the Redemption Fund. The Trustee shall deposit in the Redemption Fund (i) amounts received from the Community Facilities District in connection with the Community Facilities District s exercise of its rights to optionally redeem Bonds, (ii) the portion of prepaid Special Taxes required to be deposited therein pursuant to the Indenture, (iii) amounts required to be transferred to the Redemption Fund from the Reserve Fund pursuant to the provisions of the Indenture, and (iv) amounts required to be deposited therein pursuant to any Supplemental Indenture. (b) Amounts in the Redemption Fund shall be disbursed therefrom for the payment of the Redemption Price of Series 2016 Bonds redeemed pursuant to the provisions of the Indenture relating to optional redemption and mandatory redemption from Special Tax prepayments and for the payment of the Redemption Price of Additional Bonds redeemed under the Supplemental Indenture pursuant to which such Additional Bonds are issued (other than mandatory sinking fund redemptions thereof). Rebate Fund. (a) The Trustee shall establish and maintain a special fund designated the Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate, as specified in a Written Request of the Community Facilities District. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding defeasance of the Bonds pursuant to the defeasance provisions of the Indenture or anything to the contrary contained in the Indenture, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by the provisions summarized under this caption ( Rebate Fund ) and by the Tax Certificate F-18

263 (which is incorporated in the Indenture by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Community Facilities District, and shall have no liability or responsibility to enforce compliance by the Community Facilities District with the terms of the Tax Certificate. The Trustee may conclusively rely upon the Community Facilities District s determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have no responsibility to independently make any calculation or determination or to review the Community Facilities District s calculations. (b) Any funds remaining in the Rebate Fund after payment in full of all of the Bonds and after payment of any amounts described under this caption ( Rebate Fund ), shall, upon receipt by the Trustee of a Written Request of the Community Facilities District, be withdrawn by the Trustee and remitted to the Community Facilities District. Administrative Expense Fund. (a) The Trustee shall establish and maintain a special fund designated the Administrative Expense Fund. The Trustee shall deposit in the Administrative Expense Fund the amounts transferred from the Special Tax Fund and required to be deposited therein pursuant to the provisions of the Indenture summarized under the caption Special Tax Fund above. (b) The moneys in the Administrative Expense Fund shall be used and withdrawn by the Trustee from time to time to pay the Administrative Expenses upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid and instructions for such payment, (iii) the purpose for which the obligation was incurred and that such purpose constitutes an Administrative Expense, (iv) that such payment is a proper charge against the Administrative Expense Fund, and (v) that such amounts have not been the subject of a prior disbursement from the Administrative Expense Fund; in each case together with a statement or invoice for each amount requested thereunder. Costs of Issuance Fund. (a) The Trustee shall establish and maintain a separate fund designated the Costs of Issuance Fund. On the Closing Date, the Trustee shall deposit in the Costs of Issuance Fund the amount required to be deposited therein pursuant to the Indenture. There shall additionally be deposited in the Cost of Issuance Fund the portion, if any, of the proceeds of the sale of any Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued. (b) The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid and instructions for such payment, (iii) the purpose for which the obligation was incurred, (iv) that such payment is a proper charge against the Costs of Issuance Fund, and (v) that such amounts have not been the subject of a prior disbursement from the Costs of Issuance Fund, in each case together with a statement or invoice for each amount requested thereunder. On the last Business Day that is no later than six months after the Closing Date, the Trustee shall transfer any amount remaining in the Costs of Issuance Fund to the NMC Acquisition Account and, upon making such transfer, the Costs of Issuance Fund shall be closed. (c) If the Costs of Issuance Fund has been closed in accordance with the provisions of the Indenture, the Costs of Issuance Fund shall be reopened and reestablished by the Trustee in connection with the issuance of any Additional Bonds, if so provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued. Improvement Fund. (a) The Trustee shall establish and maintain a separate fund designated the Improvement Fund. Within the Improvement Fund, the Trustee shall establish and maintain a separate account designated the SL Ontario Acquisition Account, a separate account designated the NMC Acquisition Account and a separate account designated the City Facilities Account. On the Closing Date, F-19

264 the Trustee shall deposit in the SL Ontario Acquisition Account and the NMC Acquisition Account the respective amounts required to be deposited therein pursuant to the Indenture. The moneys in the SL Ontario Acquisition Account shall be used and withdrawn by the Trustee from time to time to pay the costs of the SL Ontario Facilities upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid and instructions for such payment, (iii) the purpose for which the obligation was incurred, (iv) that such payment constitutes a cost of the SL Ontario Facilities and is a proper charge against the SL Ontario Acquisition Account, (v) that such amounts have not been the subject of a prior disbursement from the SL Ontario Acquisition Account, and (vi) whether or not such costs of the SL Ontario Facilities are to be paid pursuant to a SL Ontario Payment Request submitted in accordance with the SL Ontario Acquisition Agreement, in each case together with a statement or invoice for each amount requested thereunder. If costs of the SL Ontario Facilities are to be paid pursuant to a SL Ontario Payment Request submitted in accordance with the SL Ontario Acquisition Agreement, a duplicate original of the signed and approved SL Ontario Payment Request relating to such costs of the SL Ontario Facilities, together with all exhibits and attachments thereto, must accompany such Written Request of the Community Facilities District. Upon the filing of a Written Certificate of the Community Facilities District stating (i) that the portion of the SL Ontario Facilities to be financed from the SL Ontario Acquisition Account has been completed and that all costs of such SL Ontario Facilities have been paid, or (ii) that such portion of the SL Ontario Facilities has been substantially completed and that all remaining costs of such portion of the SL Ontario Facilities have been determined and specifying the amount to be retained therefor, the Trustee shall transfer all of the amount remaining in the SL Ontario Acquisition Account (less any such retention) to the NMC Acquisition Account. (b) The moneys in the NMC Acquisition Account shall be used and withdrawn by the Trustee from time to time to pay the costs of the NMC Facilities upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid and instructions for such payment, (iii) the purpose for which the obligation was incurred, (iv) that such payment constitutes a cost of the NMC Facilities and is a proper charge against the NMC Acquisition Account, (v) that such amounts have not been the subject of a prior disbursement from the NMC Acquisition Account, and (vi) whether or not such costs of the NMC Facilities are to be paid pursuant to a NMC Payment Request submitted in accordance with the NMC Acquisition Agreement, in each case together with a statement or invoice for each amount requested thereunder. If costs of the NMC Facilities are to be paid pursuant to a NMC Payment Request submitted in accordance with the NMC Acquisition Agreement, a duplicate original of the signed and approved NMC Payment Request relating to such costs of the NMC Facilities, together with all exhibits and attachments thereto, must accompany such Written Request of the Community Facilities District. Upon the filing of a Written Certificate of the Community Facilities District stating (i) that the portion of the NMC Facilities to be financed from the NMC Acquisition Account has been completed and that all costs of such NMC Facilities have been paid, or (ii) that such portion of the NMC Facilities has been substantially completed and that all remaining costs of such portion of the NMC Facilities have been determined and specifying the amount to be retained therefor, the Trustee shall (A) if the amount remaining in the NMC Acquisition Account (less any such retention) is equal to or greater than $25,000, transfer the portion of such amount equal to the largest integral multiple of $5,000 that is not greater than such amount to the Redemption Fund, to be applied to the redemption of Bonds, and (B) after making the transfer, if any, required to be made pursuant to the preceding clause (A), transfer all of the amount remaining in the NMC Acquisition Account (less any such retention) to the Interest Account, to be applied to the payment of interest on the Bonds. (c) The moneys in the City Facilities Account shall be used and withdrawn by the Trustee from time to time to pay the costs of the Facilities upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid and instructions for such payment, (iii) the purpose for which the obligation was incurred, (iv) that such payment constitutes a cost of the Facilities and is a proper charge against the City Facilities Account, and (v) that such F-20

265 amounts have not been the subject of a prior disbursement from the City Facilities Account, in each case together with a statement or invoice for each amount requested thereunder. Upon the filing of a Written Certificate of the Community Facilities District stating (i) that the portion of the Facilities to be financed from the City Facilities Account has been completed and that all costs of such Facilities have been paid, or (ii) that such portion of the Facilities has been substantially completed and that all remaining costs of such portion of the Facilities have been determined and specifying the amount to be retained therefor, the Trustee shall (A) if the amount remaining in the City Facilities Account (less any such retention) is equal to or greater than $25,000, transfer the portion of such amount equal to the largest integral multiple of $5,000 that is not greater than such amount to the Redemption Fund, to be applied to the redemption of Bonds, and (B) after making the transfer, if any, required to be made pursuant to the preceding clause (A), transfer all of the amount remaining in the City Facilities Account (less any such retention) to the Interest Account, to be applied to the payment of interest on the Bonds. Investment of Moneys. (a) Except as otherwise provided in the Indenture, all moneys in any of the funds or accounts established pursuant to the Indenture held by the Trustee shall be invested by the Trustee solely in Permitted Investments, as directed in a Written Request of the Community Facilities District received by the Trustee no later than two Business Days prior to the making of such investment. Moneys in all such funds and accounts shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in the Indenture; provided, however, that Permitted Investments in which moneys in the Reserve Fund are so invested shall mature no later than the earlier of five years from the date of investment or the final maturity date of the Bonds and, provided, further, that if such Permitted Investments may be redeemed at par so as to be available on each Interest Payment Date, any amount in the Reserve Fund may be invested in such redeemable Permitted Investments maturing on any date on or prior to the final maturity date of the Bonds. Absent a timely Written Request of the Community Facilities District with respect to the investment of moneys in any of the funds or accounts established pursuant to the Indenture held by the Trustee, the Trustee shall invest such moneys in Permitted Investments described in paragraph (7) of the definition thereof; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a Written Request of the Community Facilities District specifying a specific money market fund that satisfies the requirements of said paragraph in which such investment is to be made and, if no such Written Request of the Community Facilities District is so received, the Trustee shall hold such moneys uninvested. (b) Subject to the provisions of the Indenture relating to the Rebate Fund, all interest, profits and other income received from the investment of moneys in any fund or account established pursuant to the Indenture (other than the Reserve Fund) shall be retained therein. Subject to the provisions of the Indenture relating to the Rebate Fund, all interest, profits or other income received from the investment of moneys in the Reserve Fund shall, prior to the date on which a Written Certificate of the Community Facilities District is delivered to the Trustee pursuant to the provisions of the Indenture relating to the Improvement Fund, be transferred to the NMC Acquisition Account and, thereafter, shall be transferred to the Interest Account; provided, however, that, notwithstanding the foregoing, any such transfer shall be made from the Reserve Fund only if and to the extent that, after such transfer, the amount on deposit in the Reserve Fund is at least equal to the Reserve Requirement. (c) Permitted Investments acquired as an investment of moneys in any fund or account established under the Indenture shall be credited to such fund or account. For the purpose of determining the amount in any fund or account, all Permitted Investments credited to such fund or account shall be valued by the Trustee at the market value thereof, such valuation to be performed not less frequently than semiannually on or before each February 15 and August 15. In determining the market value of Permitted Investments, the Trustee may use and rely upon generally recognized pricing information services, including brokers and dealers in securities, available to it. F-21

266 (d) The Trustee may act as principal or agent in the making or disposing of any investment. Upon the Written Request of the Community Facilities District, the Trustee shall sell or present for redemption any Permitted Investments so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investments are credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to the provisions summarized under this caption ( Investment of Moneys ). For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established under the Indenture. (e) The Community Facilities District acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Community Facilities District the right to receive brokerage confirmations of security transactions as they occur, at no additional cost, the Community Facilities District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee shall furnish the Community Facilities District periodic cash transaction statements, which shall include detail for all investment transactions made by the Trustee under the Indenture. Certain Covenants under the Indenture Collection of Special Tax Revenues. (a) The Community Facilities District shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes. (b) Prior to August 1 of each year, the Community Facilities District shall ascertain from the County Assessor the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The Community Facilities District shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August 10, or otherwise such that the computation of the levy is complete before the final date on which the County Auditor will accept the transmission of the Special Tax amounts for the parcels within the Community Facilities District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the Community Facilities District shall prepare or cause to be prepared, and shall transmit to the County Auditor, such data as the County Auditor requires in order to include the levy of the Special Taxes on the next real property tax roll. (c) The Community Facilities District shall fix and levy the amount of Special Taxes within the Community Facilities District 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. (d) The Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable (or in such other manner as the City Council shall determine, including direct billing of the affected property owners), and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. Foreclosure. Pursuant to Section of the Act, the Community Facilities District will covenant with and for the benefit of the Owners that it will determine or cause to be determined, no later than August 15 of each year, whether or not any owners of property within the Community Facilities District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the Community Facilities District will order and cause to be commenced no later than October 1, and thereafter diligently prosecute, an action in the superior F-22

267 court to foreclose the lien of any Special Taxes or installment thereof not paid when due; provided, however, that the Community Facilities District shall not be required to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the Community Facilities District 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 Community Facilities District determines that any single parcel in the Community Facilities District is delinquent in excess of $7,500 in the payment of the Special Tax, then the Community Facilities District shall diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Compliance with Act. The Community Facilities District shall comply with all applicable provisions of the Act. Punctual Payment. The Community Facilities District shall punctually pay or cause to be paid the principal, premium, if any, and interest to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Net Special Tax Revenues and other assets pledged for such payment as provided in the Indenture and received by the Community Facilities District or the Trustee. Extension of Payment of Bonds. The Community Facilities District shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this paragraph shall be deemed to limit the right of the Community Facilities District to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. Against Encumbrances; Defense of Pledge. The Community Facilities District shall not create, or permit the creation of, any pledge of, lien on, security interest in or charge or other encumbrance upon the assets pledged under the Indenture, except as permitted by the Indenture. The Community Facilities District shall at all times, to the extent permitted by law, defend, preserve and protect said pledge of such assets, and the lien thereon and security interest therein created by the Indenture, against all claims and demands of all Persons whomsoever. Tax Covenants. (a) The Community Facilities District shall not 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 2016 Bonds under Section 103 of the Code. Without limiting the generality of the foregoing, the Community Facilities District shall comply with the requirements of the Tax Certificate, which is incorporated in the Indenture as if fully set forth in the Indenture. This covenant shall survive payment in full or defeasance of the Series 2016 Bonds. (b) In the event that at any time the Community Facilities District is of the opinion that for purposes of the provisions of the Indenture summarized under this caption ( Tax Covenants ) it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trustee in any of the funds or accounts established under the Indenture, the Community Facilities District shall so instruct the Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions. (c) Notwithstanding any provisions of the Indenture summarized under this caption ( Tax Covenants ), if the Community Facilities District shall provide to the Trustee an opinion of Bond Counsel to the effect that any specified action required under the provisions of the Indenture summarized under this caption is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Series 2016 Bonds, the Trustee may conclusively rely on such opinion in F-23

268 complying with the requirements of the provisions of the Indenture summarized under this caption and of the Tax Certificate, and the covenants under the Indenture shall be deemed to be modified to that extent. Non-Cash Payments of Special Taxes. The Community Facilities District shall not authorize owners of taxable parcels within the Community Facilities District to satisfy Special Tax obligations by the tender of Bonds unless the Community Facilities District shall have first obtained a report of an Independent Consultant certifying that doing so would not result in the Community Facilities District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due. Reduction in Special Taxes. The Community Facilities District shall not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the 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 Bonds, the Community Facilities 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 Bonds. Continuing Disclosure. Each of the Community Facilities District and the Trustee shall comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to it. Notwithstanding any other provision of the Indenture, failure of the Community Facilities District or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Series 2016 Bonds, and upon receipt of indemnification reasonably satisfactory to the Trustee, shall) or any Owner or Beneficial Owner of the Series 2016 Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. Accounting Records. The Community Facilities District shall keep or cause to be kept appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Special Taxes, which records shall be available for inspection by the Trustee at reasonable hours and under reasonable conditions. State Reporting. If at any time principal or interest due on any scheduled payment date for the Bonds is not paid, or if funds are withdrawn from the Reserve Fund to pay principal of or interest on the Bonds, the Trustee shall notify the Community Facilities District in writing of such failure or withdrawal, and the Community Facilities District shall notify the California Debt and Investment Advisory Commission of such failure or withdrawal within ten days of the failure to make such payment or the date of such withdrawal. Annual Reports to the California Debt and Investment Advisory Commission. Not later than October 30 of each year, commencing October 30, 2017 and continuing until the October 30 following the final maturity of the Bonds, the Community Facilities District shall supply to the California Debt and Investment Advisory Commission the information required to be provided thereto pursuant to Section (b) of the Act. Such information shall be made available to any Owner upon written request to the Community Facilities District accompanied by a fee determined by the Community Facilities District to pay the costs of the Community Facilities District in connection therewith. The Community Facilities District shall in no event be liable to any Owner or any other person or entity in connection with any error in any such information. Further Assurances. The Community Facilities District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the rights and benefits provided in the Indenture. F-24

269 Events of Default and Remedies under the Indenture Events of Default. The following events shall be Events of Default: (a) failure to pay any installment of principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption or otherwise; (b) failure to pay any installment of interest on any Bonds when and as the same shall become due and payable; (c) failure by the Community Facilities District to observe and perform any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, if such failure shall have continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, shall have been given to the Community Facilities District by the Trustee, or to the Community Facilities District and the Trustee by the Owners of not less than 5% in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that, if in the reasonable opinion of the Community Facilities District the failure stated in the notice can be corrected, but not within such 30 day period, such failure shall not constitute an Event of Default if corrective action is instituted by the Community Facilities District within such 30 day period and the Community Facilities District shall thereafter diligently and in good faith cure such failure in a reasonable period of time, provided, further, that, unless otherwise consented to by the Trustee, such period of time shall not exceed 180 days; or (d) the commencement by the Community Facilities District of a voluntary case under Title 11 of the United States Code or any substitute or successor statute. Foreclosure. If an Event of Default shall occur under the provisions of the Indenture summarized by paragraph (a) or paragraph (b) under the caption Events of Default and Remedies under the Indenture Events of Default then, and in each and every such case during the continuance of such Event of Default, the Trustee may, or at the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, and upon being indemnified to its satisfaction therefor, shall, commence foreclosure against any parcels of land in the Community Facilities District with delinquent Special Taxes, as provided in Section of the Act; provided, however, that the Trustee shall not be required to pursue a foreclosure action against any such parcel if the Trustee would be required to take title to, or an ownership interest in, such parcel in connection with or as a result of such foreclosure action. Other Remedies. If an Event of Default shall have occurred and be continuing, the Trustee shall have the right: (a) by mandamus, suit, action or proceeding, to compel the Community Facilities District and its officers, agents or employees to perform each and every term, provision and covenant contained in the Indenture and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the Community Facilities District and the fulfillment of all duties imposed upon it by the Indenture and the Act; (b) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the rights of the Trustee or the Owners; or (c) by suit, action or proceeding in any court of competent jurisdiction, to require the Community Facilities District and its officers and employees to account as if it and they were the trustees of an express trust. F-25

270 Remedies Not Exclusive. No remedy in the Indenture conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or otherwise. Application of Net Special Tax Revenues After Default. If an Event of Default shall occur and be continuing, all Net Special Tax Revenues and any other funds thereafter received by the Trustee under any of the provisions of the Indenture shall be applied by the Trustee as follows and in the following order: (a) to the payment of any expenses incurred by the Trustee necessary in the opinion of the Trustee to protect the interests of the Owners and payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture; (b) to the payment of the principal and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Indenture, as follows: First: to the payment to the Persons entitled thereto of all installments of interest then due in the order of the maturity of such installments and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference; and Second: to the payment to the Persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the Persons entitled thereto, without any discrimination or preference; (c) any remaining funds shall be transferred by the Trustee to the Special Tax Fund. Power of Trustee to Enforce. All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of the Owners of such Bonds, subject to the provisions of the Indenture. Nothing in the Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment, or composition affecting the Bonds or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding without the approval of the Owners so affected. Owners Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee under the Indenture; provided, however, that such direction shall not be otherwise than in accordance with the provisions of the Indenture, the Act and other applicable law and, provided, further, that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Owners not parties to such direction. F-26

271 Limitation on Owners Right to Sue. No Owner of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture, the Act or any other applicable law with respect to such Bond, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default, (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers granted in the Indenture or to institute such suit, action or proceeding in its own name, (c) such Owner or said Owners shall have tendered to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy under the Indenture or under law; it being understood and intended that no one or more Owners shall have any right in any manner whatever by such Owner s or Owners action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners, or to enforce any right under the Bonds, the Indenture, the Act or other applicable law with respect to the Bonds, except in the manner provided in the Indenture, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner provided in the Indenture and for the benefit and protection of all Owners, subject to the provisions of the Indenture. Absolute Obligation. Nothing in the Indenture or the Bonds contained shall affect or impair the obligation of the Community Facilities District, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners at their respective dates of maturity, or upon call for redemption, as provided in the Indenture, but only out of the Net Special Tax Revenues and other assets in the Indenture pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. Termination of Proceedings. In case any proceedings taken by the Trustee or any one or more Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, then in every such case the Community Facilities District, the Trustee and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights under the Indenture, severally and respectively, and all rights, remedies, powers and duties of the Community Facilities District, the Trustee and the Owners shall continue as though no such proceedings had been taken. No Waiver of Default. No delay or omission of the Trustee or of any Owner to exercise any right or power arising upon the occurrence of any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence therein, and every power and remedy given by the Indenture to the Trustee or to the Owners may be exercised from time to time and as often as may be deemed expedient. Trustee Duties and Liabilities of Trustee. The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Indenture. The Trustee shall, during the existence of any Event of Default which has not been cured or waived, exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person s own affairs. Qualifications; Removal and Resignation; Successors. (a) The Trustee initially a party to the Indenture and any successor thereto shall at all times be a trust company, national banking association or bank having trust powers in good standing in or incorporated under the laws of the United States or any state F-27

272 thereof, which is (or if such trust company, national banking association or bank is a member of a bank holding company system, its parent bank holding company is (i) a national banking association that is supervised by the Office of the Comptroller of the Currency and has at least $250 million of assets, or (ii) a state-chartered commercial bank that is a member of the Federal Reserve System and has at least $1 billion of assets. If such trust company, national banking association or bank publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining agency above referred to, then for the purpose of this paragraph the combined capital and surplus of such trust company, national banking association or bank shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) The Community Facilities District may, by an instrument in writing, upon at least 30 days notice to the Trustee, remove the Trustee initially a party to the Indenture and any successor thereto unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee initially a party to the Indenture and any successor thereto if (i) at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing), or (ii) the Trustee shall cease to be eligible in accordance with paragraph (a) above, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee. (c) The Trustee may at any time resign by giving written notice of such resignation by first-class mail, postage prepaid, to the Community Facilities District, and to the Owners at the respective addresses shown on the Registration Books. In case at any time the Trustee shall cease to be eligible in accordance with the provisions summarized in paragraph (a) above, the Trustee shall resign immediately in the manner and with the effect specified in the Indenture. (d) Upon removal or resignation of the Trustee, the Community Facilities District shall promptly appoint a successor Trustee by an instrument in writing. Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee; provided, however, that any successor Trustee shall be qualified as provided in the Indenture as described in paragraph (a) above. If no qualified successor Trustee shall have been appointed and have accepted appointment within 45 days following notice of removal or notice of resignation as aforesaid, the removed or resigning Trustee or any Owner (on behalf of such Owner and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice, if any, as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall signify its acceptance of such appointment by executing and delivering to the Community Facilities District and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee in the Indenture; but, nevertheless at the Written Request of the Community Facilities District or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions in the Indenture set forth. Upon acceptance of appointment by a successor Trustee as provided in this paragraph, the successor Trustee shall, within 15 days after such acceptance, mail, by first class mail postage prepaid, a notice of the succession of such Trustee to the trusts under the Indenture to the Owners at the addresses shown on the Registration Books. (e) Any trust company, national banking association or bank into which the Trustee may be merged or converted or with which it may be consolidated or any trust company, national banking association F-28

273 or bank resulting from any merger, conversion or consolidation to which it shall be a party or any trust company, national banking association or bank to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such trust company, national banking association or bank shall be eligible under paragraph (a) above, shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything in the Indenture to the contrary notwithstanding. Liability of Trustee. (a) The recitals of facts in the Indenture and in the Bonds contained shall be taken as statements of the Community Facilities District, and the Trustee shall not assume responsibility for the correctness of the same or incur any responsibility in respect thereof, other than as expressly stated in the Indenture in connection with the respective duties or obligations in the Indenture or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. (b) The Trustee makes no representations as to the validity or sufficiency of the Indenture or of any Bonds, or in respect of the security afforded by the Indenture and the Trustee shall incur no responsibility in respect thereof. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds for value, the application of the proceeds thereof except to the extent that such proceeds are received by it in its capacity as Trustee, or the application of any moneys paid to the Community Facilities District or others in accordance with the Indenture. (c) The Trustee shall not be liable in connection with the performance of its duties under the Indenture, except for its own negligence or willful misconduct. (d) No provision of the Indenture or any other document related to the Indenture shall require the Trustee to risk or advance its own funds. (e) The Trustee may execute any of its powers or duties under the Indenture through attorneys, agents or receivers and shall not be answerable for the actions of such attorneys, agents or receivers if selected by it with reasonable care. (f) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (g) The immunities and protections extended to the Trustee also extend to its directors, officers, employees and agents. (h) Before taking action under the provisions of the Indenture summarized under the captions Events of Default and Remedies and Trustee or upon the direction of the Owners, the Trustee may require indemnity satisfactory to the Trustee be furnished to it to protect it against all fees and expenses, including those of its attorneys and advisors, and protect it against all liability it may incur. (i) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture. (j) The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such committee shall represent the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. F-29

274 (k) The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. (l) The Trustee shall not be liable for the failure to take any action required to be taken by it under the Indenture if and to the extent that the Trustee s taking such action is prevented by reason of an act of God, terrorism, war, riot, strike, fire, flood, earthquake, epidemic or other, similar occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. (m) The Trustee shall not be deemed to have knowledge of an Event of Default under the Indenture unless it has actual knowledge thereof. (n) The permissive right of the Trustee to do things enumerated in the Indenture shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. (o) The Trustee shall not be responsible for or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions of the Indenture. Right to Rely on Documents and Opinions. (a) The Trustee shall be protected in acting upon any notice, resolution, request, requisition, facsimile, consent, order, certificate, report, opinion, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Each statement of facts contained in a Written Request of the Community Facilities District or a Written Certificate of the Community Facilities District shall be sufficient evidence to the Trustee of the facts so stated and the Trustee shall have no duty to confirm the accuracy of such facts. (b) Whenever in the administration of the duties imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter (unless other evidence in respect thereof be specifically prescribed in the Indenture) may be deemed to be conclusively proved and established by a Written Certificate of the Community Facilities District, and such Written Certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Written Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable. (c) The Trustee may consult with counsel, who may be counsel to the Community Facilities District, with regard to legal questions, including with respect to compliance with the Indenture of amendments to the Indenture, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under the Indenture in good faith and in accordance therewith. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of the Indenture shall be retained in its possession and shall be subject during business hours and upon reasonable notice to the inspection of the Community Facilities District, the Owners and their agents and representatives duly authorized in writing. Supplemental Indentures Supplemental Indentures. (a) The Indenture and the rights and obligations of the Community Facilities District, the Trustee and the Owners under the Indenture may be modified or amended from time to time and at any time by a Supplemental Indenture, which the Community Facilities District and the Trustee may enter into when there are filed with the Trustee the written consents of the Owners of a majority of the aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the F-30

275 Indenture. No such modification or amendment shall (i) extend the fixed maturity of any Bond, reduce the amount of principal thereof or the rate of interest thereon, extend the time of payment thereof or alter the redemption provisions thereof, without the consent of the Owner of each Bond so affected, (ii) permit any pledge of, or the creation of any lien on, security interest in or charge or other encumbrance upon the assets pledged under the Indenture prior to or on a parity with the pledge contained in, and the lien and security interest created by, the Indenture or deprive the Owners of the pledge contained in, and the lien and security interest created by, the Indenture, except as expressly provided in the Indenture, without the consent of the Owners of all of the Bonds then Outstanding, or (iii) modify or amend the provisions of the Indenture summarized under this caption ( Supplemental Indentures Supplemental Indentures ) without the prior written consents of the Owners of all Bonds then Outstanding. (b) The Indenture and the rights and obligations of the Community Facilities District, the Trustee and the Owners under the Indenture may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Community Facilities District and the Trustee may enter into without the consent of any Owners for any one or more of the following purposes: (i) to add to the covenants and agreements of the Community Facilities District in the Indenture contained, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power reserved to or conferred upon the Community Facilities District in the Indenture; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in the Indenture, provided that such modification or amendment does not materially adversely affect the rights or interests of the Owners under the Indenture; (iii) to provide for the issuance of one or more Series of Additional Bonds, and to provide the terms and conditions under which such Series of Additional Bonds may be issued, subject to and in accordance with the provisions of the Indenture; (iv) to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect; (v) to cause interest on the Bonds to be excludable from gross income for purposes of federal income taxation by the United States of America; and (vi) in any other respect whatsoever as the Community Facilities District may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the rights or interests of the Owners under the Indenture. (c) Promptly after the execution by the Community Facilities District and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the Trustee by the Community Facilities District), by first class mail postage prepaid, setting forth in general terms the substance of such Supplemental Indenture, to the Owners at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to the provisions of the Indenture as described under the caption Supplemental Indentures, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the Community Facilities District, the Trustee and the Owners shall thereafter be determined, exercised and enforced under the Indenture subject in all respects to such modification and F-31

276 amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the effective date of any Supplemental Indenture pursuant to the Indenture may and, if the Community Facilities District so determines, shall bear a notation by endorsement or otherwise in form approved by the Community Facilities District and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Owner of any Bond Outstanding at the time of such effective date and presentation of such Bond for such purpose at the Office of the Trustee a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Community Facilities District and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Community Facilities District and authenticated by the Trustee and, in that case, upon demand of the Owner of any Bond Outstanding at the time of such effective date, and presentation of such Bond for such purpose at the Office of the Trustee, such a new Bond in equal principal amount of the same Series, interest rate and maturity shall be exchanged for such Owner s Bond so surrendered. Amendment of Particular Bonds. The provisions of the Indenture as described under the caption Supplemental Indentures shall not prevent any Owner from accepting any amendment or modification as to any particular Bond owned by it, provided that due notation thereof is made on such Bond. Defeasance Discharge of Indenture. (a) If the Community Facilities District shall pay or cause to be paid or there shall otherwise be paid to the Owners of all Outstanding Bonds the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated therein, then the Owners shall cease to be entitled to the pledge of the Net Special Tax Revenues and the other assets as provided in the Indenture, and all agreements, covenants and other obligations of the Community Facilities District under the Indenture shall thereupon cease, terminate and become void and the Indenture shall be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Community Facilities District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the Community Facilities District all money or securities held by it pursuant to the Indenture which are not required for the payment of the principal of and interest and premium, if any, on the Bonds. (b) Subject to the provisions of paragraph (a) above, when any Bond shall have been paid and if, at the time of such payment, the Community Facilities District shall have kept, performed and observed all of the covenants and promises in such Bonds and in the Indenture required or contemplated to be kept, performed and observed by it or on its part on or prior to that time, then the Indenture shall be considered to have been discharged in respect of such Bond and such Bond shall cease to be entitled to the pledge of the Net Special Tax Revenues and other assets as provided in the Indenture, and all agreements, covenants and other obligations of the Community Facilities District under the Indenture shall cease, terminate, become void and be completely discharged and satisfied as to such Bond. (c) Notwithstanding the discharge and satisfaction of the Indenture or the discharge and satisfaction of the Indenture in respect of any Bond, those provisions of the Indenture relating to the maturity of the Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, non-presentment of Bonds, and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon the Trustee and the Owners of such Bond, and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of and interest and premium, if any, on such Bond, and to pay to the Owner of such Bond the funds so held by the Trustee as and when such payment becomes due. Notwithstanding the discharge and satisfaction of the Indenture, the obligation of the F-32

277 Community Facilities District to indemnify the Trustee pursuant to the provisions of the Indenture relating to indemnification of the Trustee shall remain in effect and be binding upon the Community Facilities District. Bonds Deemed To Have Been Paid. (a) If moneys shall have been set aside and held by the Trustee for the payment or redemption of any Bond and the payment of the interest thereon to the maturity or redemption date thereof, such Bond shall be deemed to have been paid within the meaning and with the effect provided in the provisions of the Indenture as described under the caption Defeasance Discharge of Indenture. Any Outstanding Bond shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in the provisions of the Indenture as described under the caption Defeasance Discharge of Indenture if (i) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Community Facilities District shall have given to the Trustee in form satisfactory to it irrevocable instructions to mail, on a date in accordance with the provisions of the Indenture, notice of redemption of such Bond on said redemption date, said notice to be given in accordance with such provisions of the Indenture, (ii) there shall have been deposited with the Trustee either (A) money in an amount which shall be sufficient, or (B) Defeasance Securities, the principal of and the interest on which when due, and without any reinvestment thereof, together with the money, if any, deposited therewith, will provide moneys which shall be sufficient to pay when due the interest to become due on such Bond on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and premium, if any, on such Bond, and (iii) in the event such Bond is not by its terms subject to redemption within the next succeeding 60 days, the Community Facilities District shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the Owner of such Bond that the deposit required by clause (ii) above has been made with the Trustee and that such Bond is deemed to have been paid in accordance with the provisions of the Indenture summarized under this caption ( Bonds Deemed To Have Been Paid ) and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and premium, if any, on such Bond. (b) No Bond shall be deemed to have been paid pursuant to clause (ii) of paragraph (a) above unless the Community Facilities District shall have caused to be delivered to the Community Facilities District and the Trustee (i) an executed copy of a Verification Report with respect to such deemed payment, addressed to the Community Facilities District and the Trustee, in form and in substance acceptable to the Community Facilities District, (ii) a copy of the escrow agreement entered into in connection with the deposit pursuant to clause (ii)(b) of paragraph (a) above resulting in such deemed payment, which escrow agreement shall be in form and in substance acceptable to the Community Facilities District and which escrow agreement shall provide that no substitution of Defeasance Securities shall be permitted except with other Defeasance Securities and upon delivery of a new Verification Report, and no reinvestment of Defeasance Securities shall be permitted except as contemplated by the original Verification Report or upon delivery of a new Verification Report, and (iii) a copy of an opinion of Bond Counsel, dated the date of such deemed payment and addressed to the Community Facilities District and the Trustee, in form and in substance acceptable to the Community Facilities District, to the effect that such Bond has been paid within the meaning and with the effect expressed in the Indenture, the Indenture has been discharged in respect of such Bond and all agreements, covenants and other obligations of the Community Facilities District under the Indenture as to such Bond have ceased, terminated, become void and been completely discharged and satisfied. Unclaimed Moneys. Any moneys held by the Trustee in trust for the payment and discharge of the principal of, or premium or interest on, any Bond that remain unclaimed for two years after the date when such principal, premium or interest has become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when such principal, premium or interest become payable, shall be repaid by the Trustee to the Community Facilities District as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owner of such Bond shall look only to the Community Facilities District for the payment of such principal, premium or interest. The Trustee shall hold any such moneys uninvested. F-33

278 Miscellaneous Limitation of Rights. Nothing in the Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any Person other than the Trustee, the Community Facilities District and the Owners, any legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant, condition or provision therein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Trustee, the Community Facilities District and the Owners. Destruction of Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the Community Facilities District of any Bonds, the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds. Evidence of Rights of Owners. Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Owners in Person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any Person of Bonds transferable by delivery, shall be sufficient for any purpose of the Indenture and shall be conclusive in favor of the Trustee and the Community Facilities District if made in the manner provided in this paragraph. The fact and date of the execution by any Person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the Person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Community Facilities District in accordance therewith or reliance thereon. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds which are actually known by the Trustee to be owned or held by or for the account of the Community Facilities District, or by any other obligor on the Bonds, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Community Facilities District or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided, however, that if 100% of the Bonds are so owned or held, such Bonds shall be deemed to be Outstanding. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this paragraph if the pledgee shall establish to the satisfaction of the Trustee the pledgee s right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Community Facilities District or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Community Facilities District shall specify in a Written Certificate of the Community Facilities District delivered to the Trustee which Bonds, if any, are, as of the date of such Written Certificate, owned or held by or for the account of the Community Facilities District. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books F-34

279 and held in trust by it for the Owners entitled thereto, subject, however, to the provisions of the unclaimed moneys provisions of the Indenture but without any liability for interest thereon. Funds and Accounts. Any fund or account required by the Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with prudent corporate trust industry standards to the extent practicable, and with due regard for the requirements of the Indenture and for the protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may establish any such additional funds or accounts as it deems necessary to perform its obligations under the Indenture. Business Days. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in the Indenture shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day, with the same force and effect as if done on the nominal date provided in the Indenture and, unless otherwise specifically provided in the Indenture, no interest shall accrue for the period from and after such nominal date. Waiver of Personal Liability. No member, officer, agent or employee of the Community Facilities District or the City shall be individually or personally liable for the payment of the principal of or premium or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing in the Indenture contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by any applicable provision of law or by the Indenture. Conflict with Act. In the event of any conflict between any provision of the Indenture and any provision of the Act, the provision of the Act shall prevail over the provision of the Indenture. Conclusive Evidence of Regularity. Bonds issued pursuant to the Indenture shall constitute evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes. Governing Laws. The Indenture shall be governed by and construed in accordance with the laws of the State. F-35

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281 APPENDIX G FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT CONTINUING DISCLOSURE AGREEMENT by and between CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE Dated as of September 1, 2016 City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 G-1

282 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (this Disclosure Agreement ), dated as of September 1, 2016, is by and between CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I), a community facilities district organized and existing under the laws of the State of California (the Community Facilities District ), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, as Trustee (the Trustee ). W I T N E S S E T H : WHEREAS, the Community Facilities District has issued the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 (the Series 2016 Bonds ), in the aggregate principal amount of $16,135,000, pursuant to the Indenture, dated as of September 1, 2016 (the Indenture ), by and between the Community Facilities District and the Trustee; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Community Facilities District and the Trustee for the benefit of the owners and beneficial owners of the Series 2016 Bonds and in order to assist the underwriters of the Series 2016 Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Disclosure Agreement have the meanings herein specified. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. Annual Report means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 2 and 3 hereof. Annual Report Date means the date in each year that is the first day of the month following the ninth month after the end of the Community Facilities District s fiscal year, which date, as of the date of this Disclosure Agreement, is April 1. Community Facilities District means the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I), a community facilities district organized and existing under the laws of the State, and its successors. Disclosure Representative means the Administrative Services/Finance Director of the City, or his or her designee, or such other person as the Community Facilities District shall designate in writing to the Trustee from time to time. Dissemination Agent means the Trustee, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Community Facilities District and which has filed with the Trustee a written acceptance of such designation. Indenture means the Indenture, dated as of September 1, 2016, by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., as originally executed and as it may be amended or supplemented from time to time in accordance with its terms. Listed Events means any of the events listed in subsection (a) or subsection (b) of Section 4 hereof. G-2

283 MSRB means the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at Participating Underwriter means any of the original underwriters of the Series 2016 Bonds required to comply with the Rule in connection with the offering of the Series 2016 Bonds. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Trustee means The Bank of New York Mellon Trust Company, N.A., as Trustee under the Indenture, or any successor thereto as Trustee thereunder, substituted in its place as provided therein. Section 2. Provision of Annual Reports. (a) The Community Facilities District shall, or shall cause the Dissemination Agent to, provide to the MSRB an Annual Report that is consistent with the requirements of Section 3 hereof, not later than the Annual Report Date, commencing with the report for the Fiscal Year. The Annual Report may include by reference other information as provided in Section 3 hereof; provided, however, that the audited financial statements of the Community Facilities District, if any, may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Community Facilities District s fiscal year changes, it shall, or it shall instruct the Dissemination Agent to, give notice of such change in a filing with the MSRB. (b) Not later than 15 business days prior to the date specified in subsection (a) of this Section for the providing of the Annual Report to the MSRB, the Community Facilities District shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the Community Facilities District and the Dissemination Agent to determine if the Community Facilities District is in compliance with the first sentence of this subsection (b). (c) If the Trustee is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a) of this Section, the Trustee shall, in a timely manner, send a notice to the MSRB in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) provide each Annual Report received by it to the MSRB, as provided herein; and (ii) file a report with the Community Facilities District and (if the Dissemination Agent is not the Trustee) the Trustee certifying that such Annual Report has been provided pursuant to this Disclosure Agreement and stating the date it was provided to the MSRB. Section 3. Content of Annual Reports. The Community Facilities District s Annual Report shall contain or incorporate by reference the following: (a) The Community Facilities District s audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Community Facilities District s audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to subsection (a) of Section 2 hereof, the Annual Report shall contain unaudited financial statements, in a format similar to that used for the Community Facilities G-3

284 District s audited financial statements, and the audited financial statements, if any, shall be filed in the same manner as the Annual Report when they become available. (b) The following information: (i) The principal amount of Series 2016 Bonds Outstanding as of the December 31 next preceding the Annual Report Date; (ii) The principal amount of Additional Bonds Outstanding as of the December 31 next preceding the Annual Report Date; (iii) The balance in (A) the SL Ontario Acquisition Account, and (B) the NMC Acquisition Account, as of the December 31 next preceding the Annual Report Date; (iv) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the December 31 next preceding the Annual Report Date; (v) The total assessed value of all parcels within the Community Facilities District on which the Special Taxes are levied, as shown on the assessment roll of the San Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date, and a statement of assessed value-to-bonded debt ratios therefor, either by individual parcel or by categories (e.g., below 3:1, 3:1 to 4:1, etc.); (vi) The Special Tax delinquency rate for all parcels within the Community Facilities District, as shown on the assessment roll of the San Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date, the number of parcels within the Community Facilities District delinquent in payment of Special Taxes as of the December 31 next preceding the Annual Report Date, the amount of each delinquency, the length of time delinquent and the date on which foreclosure was commenced, or similar information pertaining to delinquencies deemed appropriate by the Community Facilities District; provided, however, that parcels with aggregate delinquencies of $2,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category; (vii) The status of foreclosure proceedings and a summary of the results of any foreclosure sales as of the December 31 next preceding the Annual Report Date; (viii) The identity of any property owner representing more than 5% of the Special Tax levy delinquent in payment of Special Taxes as of the December 31 next preceding the Annual Report Date; (ix) A land ownership summary listing property owners responsible for more than 5% of the annual Special Tax, as shown on the assessment roll of the San Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date; and (x) A description of any changes to the Rate and Method approved by, or submitted for approval to, the qualified electors of the Community Facilities District during the period from the date of filing the prior year s Annual Report to the date of filing such Annual Report. (c) In addition to any of the information expressly required to be provided under the preceding paragraphs (a) and (b), the Community Facilities District shall provide such further G-4

285 information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Community Facilities District or related public entities that have been made available to the public on the MSRB s website. The Community Facilities District shall clearly identify each such other document so included by reference. Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2016 Bonds in a timely manner not later than ten business days after the occurrence of the event: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Principal and interest payment delinquencies. Unscheduled draws on debt service reserves reflecting financial difficulties. Unscheduled draws on credit enhancements reflecting financial difficulties. Substitution of credit or liquidity providers, or their failure to perform. Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB). Tender offers. Defeasances. Rating changes. Bankruptcy, insolvency, receivership or similar event of the Community Facilities District. For purposes of the event identified in paragraph (ix), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Community Facilities District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Community Facilities District. (b) Pursuant to the provisions of this Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2016 Bonds, if material, in a timely manner not later than ten business days after the occurrence of the event: (i) Unless described in paragraph (v) of subsection (a) of this Section, material notices or determinations by the Internal Revenue Service with respect to the tax status of the Series 2016 Bonds or other material events affecting the tax status of the Series 2016 Bonds. G-5

286 (ii) (iii) Modifications to rights of holders of the Series 2016 Bonds. Optional, unscheduled or contingent Series 2016 Bond calls. (iv) Release, substitution, or sale of property securing repayment of the Series 2016 Bonds. (v) (vi) (vii) Non-payment related defaults. The consummation of a merger, consolidation, or acquisition involving an Community Facilities District or the sale of all or substantially all of the assets of the Community Facilities District other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. Appointment of a successor or additional Trustee or the change of name of a Trustee. (c) The Trustee shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative and inform such person of the event. The Trustee shall have no responsibility for determining the materiality of any such Listed Event. (d) Whenever the Community Facilities District obtains knowledge of the occurrence of a Listed Event described in subsection (b) of this Section, the Community Facilities District shall determine if such event would be material under applicable Federal securities law. (e) Whenever the Community Facilities District obtains knowledge of the occurrence of a Listed Event described in subsection (a) of this Section, or determines that knowledge of a Listed Event described in subsection (b) of this Section would be material under applicable Federal securities law, the Community Facilities District shall, or shall cause the Dissemination Agent to, file a notice of the occurrence of such Listed Event with the MSRB, within ten business days of such occurrence. (f) Notwithstanding the foregoing, notice of Listed Events described in paragraph (vii) of subsection (a) of this Section and (iii) of subsection (a) of this Section need not be given any earlier than the notice (if any) of the underlying event is given to holders of affected Series 2016 Bonds pursuant to the Indenture. Section 5. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB. Section 6. Termination of Reporting Obligation. The Community Facilities District s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2016 Bonds. If such termination occurs prior to the final maturity of the Series 2016 Bonds, the Community Facilities District shall give, or cause to be given, notice of such termination in a filing with the MSRB. Section 7. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days written notice to the Community Facilities District. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent. G-6

287 Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Community Facilities District and the Trustee may amend this Disclosure Agreement (and the Trustee shall agree to any amendment so requested by the Community Facilities District, so long as such amendment does not adversely affect the rights or materially increase the obligations of the Trustee), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of subsection (a) of Section 2 hereof, Section 3 hereof or subsection (a) or (b) of Section 4 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Series 2016 Bonds, or the type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Series 2016 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver (i) is approved by Owners of the Series 2016 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of Owners or Beneficial Owners of the Series 2016 Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Community Facilities District shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Community Facilities District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements (i) notice of such change shall be given in a filing with the MSRB, and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice required to be filed pursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the Community Facilities District chooses to include any information in any Annual Report or notice in addition to that which is specifically required by this Disclosure Agreement, the Community Facilities District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported. Section 10. Default. In the event of a failure of the Community Facilities District, the Trustee or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% of the aggregate principal amount of Outstanding Series 2016 Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee), or any Owner or Beneficial Owner of the Series 2016 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of G-7

288 any failure of the Community Facilities District, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Trustee thereunder. Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement and shall be reimbursed for its reasonable expenses (including attorneys fees and expenses) incurred by it in the exercise or performance of its powers and duties hereunder. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement To the extent permitted by law, the Community Facilities District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities incurred by it in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, and which are not due to its negligence or its willful misconduct. The obligations of the Community Facilities District under this Section shall survive resignation or removal of the Dissemination Agent and the termination of this Disclosure Agreement. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Community Facilities District, the Trustee, the Dissemination Agent, the Participating Underwriter and the Owners and Beneficial Owners from time to time of the Series 2016 Bonds, and shall create no rights in any other person or entity. Section 13. Governing Laws. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) By: Authorized Signatory THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE By: Authorized Signatory G-8

289 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Name of Issue: City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 Date of Issuance: September 8, 2016 NOTICE IS HEREBY GIVEN that the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) (the Community Facilities District ) has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of September 1, 2016, by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., as Trustee. [The Community Facilities District anticipates that such Annual Report will be filed by.] Dated: The Bank of New York Mellon Trust Company, N.A., as Trustee, on behalf of the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) cc: City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) G-9

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291 APPENDIX H FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT CONTINUING DISCLOSURE AGREEMENT by and between [DEVELOPER] and GOODWIN CONSULTING GROUP, AS DISSEMINATION AGENT Dated as of September 1, 2016 City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 H-1

292 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (this Disclosure Agreement ), dated as of September 1, 2016, is by and between [DEVELOPER], a organized and existing under the laws of the State of (the Developer ), and Goodwin Consulting Group, as dissemination agent (the Dissemination Agent ). W I T N E S S E T H : WHEREAS, City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) (the Community Facilities District ) has issued the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 (the Series 2016 Bonds ), in the aggregate principal amount of $16,135,000, pursuant to the Indenture, dated as of September 1, 2016 (the Indenture ), by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee (the Trustee ); WHEREAS, the Series 2016 Bonds are payable from and secured by special taxes levied on certain of the property within the Community Facilities District; WHEREAS, the Developer is developing a portion of the property within the Community Facilities District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Developer and the Dissemination Agent for the benefit of the owners and beneficial owners of the Series 2016 Bonds; NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Disclosure Agreement have the meanings herein specified. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. Affiliate of another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person; for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. Assumption Agreement means an agreement between a Major Developer, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Agreement, whereby such Major Developer or Affiliate agrees to provide Semi-Annual Reports and notices of significant events with respect to the portion of the Property owned by such Major Developer and its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major Developer, or an Affiliate thereof, intends or is obligated (contractually or otherwise) to make or cause to be made. Community Facilities District means the City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I), a community facilities district organized and existing under the laws of the State, and its successors. H-2

293 Developer means [DEVELOPER], a organized and existing under the laws of the State of, and its successors and assigns. Development Plan means, with respect to a Major Developer, the specific improvements such Major Developer intends to make, or cause to be made, in order for the Planned Development Stage to be reached, the time frame in which such improvements are intended to be made and the estimated costs of such improvements; the Developer s Development Plan, as of the date hereof, is described in the Official Statement under the caption PROPERTY OWNERSHIP AND THE DEVELOPMENT The Development Plans [ ] Development Plan. Disclosure Representative means the of the Developer, or such other person as the Developer shall designate in writing to the Community Facilities District from time to time. Dissemination Agent means Goodwin Consulting Group, or any successor Dissemination Agent designated in writing by the Developer and which has filed with the Developer and the Community Facilities District a written acceptance of such designation. Financing Plan means, with respect to a Major Developer, the method by which such Major Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan; the Developer s Financing Plan, as of the date hereof, is described in the Official Statement under the caption PROPERTY OWNERSHIP AND THE DEVELOPMENT [ ] Financing Plan. First Report Date means April 30 of each year. Indenture means the Indenture, dated as of September 1, 2016, by and between the Community Facilities District and The Bank of New York Mellon Trust Company, N.A., as originally executed and as it may be amended or supplemented from time to time in accordance with its terms. Listed Events means any of the events listed in subsection (a) of Section 4 hereof. Major Developer means, as of any date, any Property Owner, including the Developer, that owns Property that has not reached the Planned Development Stage that, together with Property that has not reached the Planned Development Stage owned by Affiliates of such Property Owner, is subject to 10% or more of the Special Tax levy on all of the Property for the then current Fiscal Year. MSRB means the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at Official Statement means the Official Statement, dated August 23, 2016, relating to the Series 2016 Bonds. Participating Underwriter means any of the original underwriters of the Series 2016 Bonds. Person means an individual, a corporation, a partnership, an association, a limited liability company, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. Planned Development Stage means, with respect to any portion of the Property, the stage of development to which the Developer intends to develop such property, as described in the Official Statement, H-3

294 which is the stage at which such portion of the Property is ready to be presented to the marketplace as a finished residential unit. Property means (i) the real property within the boundaries of the Community Facilities District owned by the Property Owner as of the Report Date, and (ii) the real property within the boundaries of the Community Facilities District that was formerly owned by the Property Owner but is still subject to the undertakings of this Disclosure Agreement. Property Owner means any Person that owns a fee interest in any Property. Report Dates means, collectively, the First Report Dates and the Second Report Dates. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Second Report Date means October 31 in each year. Semi-Annual Report means any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 2 and 3 hereof. Trustee means The Bank of New York Mellon Trust Company, N.A., as Trustee under the Indenture, or any successor thereto as Trustee thereunder, substituted in its place as provided therein. Section 2. Provision of Semi-Annual Reports. (a) The Developer shall, or shall cause the Dissemination Agent to, provide to the MSRB a Semi-Annual Report that is consistent with the requirements of Section 3 hereof, not later than each Report Date, commencing with April 30, (b) Not later than 15 business days prior to the date specified in subsection (a) of this Section for the providing of the Semi-Annual Report to the MSRB, the Developer shall provide the Semi-Annual Report to the Dissemination Agent or shall provide notification to the Dissemination Agent that the Developer is preparing, or causing to be prepared, the Semi-Annual Report and the date which the Semi-Annual Report is expected to be available. If by such date, the Dissemination Agent has not received a copy of the Semi-Annual Report, the Dissemination Agent shall contact the Developer Representative to determine if the Developer is in compliance with the first sentence of this subsection (b). (c) If the Dissemination Agent is unable to verify that a Semi-Annual Report has been provided to the MSRB by the date required in subsection (a) of this Section, the Dissemination Agent shall, in a timely manner, send a notice to the MSRB in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: and (i) provide each Semi-Annual Report received by it to the MSRB, as provided herein; (ii) file a report with the Developer and the Community Facilities District certifying that such Semi-Annual Report has been provided pursuant to this Disclosure Agreement and stating the date it was provided to the MSRB. Section 3. Content of Semi-Annual Reports. The Developer s Semi-Annual Report shall contain or incorporate by reference the following: (a) With respect only to the Semi-Annual Report that is required to be provided no later than the First Report Date, an updated construction budget for the development being undertaken by the Developer H-4

295 within the Community Facilities District, presented in a format similar to that contained in Table [ ] included in the Official Statement. (b) The following information with respect to each Major Developer: (i) If information regarding such Major Developer has not previously been included in a Semi-Annual Report or in the Official Statement, the Development Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semi-Annual Report or in the Official Statement, a description of the progress made in the Development Plan of such Major Developer since the date of such information and a description of any significant changes in such Development Plan and the causes or rationale for such changes. (ii) If information regarding such Major Developer has not previously been included in a Semi-Annual Report or in the Official Statement, the Financing Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semi-Annual Report or in the Official Statement, a description of any significant changes in the Financing Plan of such Major Developer and the causes or rationale for such changes. (iii) A description of any sales of portions of such Major Developer s Property that has not reached the Planned Development Stage during the six-month period ending on (A) February 28 or February 29, as applicable, for the First Report Date, and (B) August 31 for the Second Report Date, including the identification of each buyer and the number of lots or acres sold. (iv) A description of the number of building permits issued with respect to such Major Developer s Property during the six-month period ending on (A) February 28 or February 29, as applicable, for the First Report Date, and (B) August 31 for the Second Report Date. (v) The number of single family residences on such Major Developer s Property conveyed to buyers by such Major Developer during the six-month period ending on (A) February 28 or February 29, as applicable, for the First Report Date, and (B) August 31 for the Second Report Date. (vi) A description of how many lots or acres of Property were owned by such Major Developer as of (A) February 28 or February 29, as applicable, for the First Report Date, and (B) August 31 for the Second Report Date, how many lots or acres of, and how many units on, such Major Developer s Property reached the Planned Development Stage during the six-month period ending on (A) February 28 or February 29, as applicable, for the First Report Date, and (B) August 31 for the Second Report Date and how many lots or acres of such Major Developer s Property had not reached the Planned Development Stage as of (A) February 28 or February 29, as applicable, for the First Report Date, and (B) August 31 for the Second Report Date. (vii) An update of the status of any previously reported Listed Event described in Section 4 hereof. (c) In addition to any of the information expressly required to be provided under the preceding paragraphs (a) and (b), the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Major Developers that are Affiliates of each other may file a single Semi-Annual Report covering all such entities. Any or all of the items listed above may be included by specific reference to other documents that have been made available to the public on the MSRB s website or through the Securities and Exchange H-5

296 Commission s EDGAR database. The Developer shall clearly identify each such other document so included by reference. Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Developer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to each Major Developer, if material under clauses (b) and (c), in a timely manner not later than ten business days after the occurrence of the event: (i) Any conveyance by such Major Developer of Property owned by such Major Developer to an entity that is not an Affiliate of such Major Developer, the result of which conveyance is to cause the transferee to become a Major Developer. (ii) Any failure of such Major Developer, or any Affiliate of such Major Developer owning any Property, to pay when due general property taxes or assessments with respect to the Property (to the extent the responsibility of such Major Developer or any such Affiliate). (iii) Any denial or termination of credit, any denial or termination of, or default under, any line of credit or loan or any other loss of a source of funds that could have a material adverse effect on such Major Developer s most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer owning any Property, to pay the Special Taxes with respect to the Property when due. (iv) Bankruptcy, insolvency, receivership or similar event of such Major Developer. For purposes of this paragraph, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for such Major Developer in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of such Major Developer, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of such Major Developer. (v) The sale of all or substantially all of the assets of such Major Developer or an Affiliate of such Major Developer owning any Property, to an entity that is not an Affiliate of such Major Developer. (vi) Any significant amendments to land use entitlements for such Major Developer s Property, if material. (vii) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on such Major Developer s Property, if material. (viii) Any previously undisclosed legislative, administrative or judicial challenges to development on such Major Developer s Property, if material. (ix) Any changes, if material, in the alignment, design or likelihood of completion of significant public improvements affecting such Major Developer s Property, including major thoroughfares, sewers, water conveyance systems and similar facilities. hereof. (x) The assumption of any obligations by a Major Developer pursuant to Section 6 (b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall as soon as possible determine if such event would be material under applicable federal H-6

297 securities laws. The Dissemination Agent shall have no responsibility to determine the materiality of any of the Listed Events. (c) If the Developer determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Developer shall, or shall cause the Dissemination Agent to, file a notice of the occurrence of such Listed Event with the MSRB and the Community Facilities District, within ten business days of such occurrence. Section 5. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB. Section 6. Assumption of Obligations. If a portion of the Property owned by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be a Major Developer, the obligations of the Developer hereunder with respect to the Property owned by such Major Developer and its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major Developer, or an Affiliate thereof, intends or is obligated (contractually or otherwise) to make or cause to be made, may be assumed by such Major Developer or by an Affiliate thereof. In order to effect such assumption, such Major Developer or Affiliate shall enter into an Assumption Agreement. Section 7. Termination of Reporting Obligation. The Developer s obligations under this Disclosure Agreement shall terminate upon the earliest to occur of (a) the date on which the Planned Development Stage has been reached, (b) the date on which (i) the Developer is no longer a Major Developer, and (ii) the Developer no longer has any obligations under this Disclosure Agreement with respect to any Major Developer as a result of such obligations having been assumed under one or more Assumption Agreements entered into pursuant to Section 6 hereof, or (c) the date on which all of the Series 2016 Bonds have been legally defeased, redeemed, or paid in full. The Developer s obligations under this Disclosure Agreement with respect to a Major Developer shall terminate upon the earliest to occur of (x) the date on which such Major Developer is no longer a Major Developer, as defined herein, or (y) the date on which the Developer s obligation with respect to such Major Developer are assumed under an Assumption Agreement entered into pursuant to Section 6 hereof; provided, however, that upon the occurrence of any of the events described in clauses (x) or (y), the Developer s obligations hereunder with respect to each other Major Developer, if any, shall remain in full force and effect. If such termination occurs prior to the final maturity of the Series 2016 Bonds, the Developer shall give, or cause to be given, notice of such termination in a filing with the MSRB. Section 8. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days written notice to the Developer. The Developer shall be responsible for paying the fees and expenses of the Dissemination Agent. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Developer may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of subsection (a) of Section 2 hereof, Section 3 hereof or subsection (a) of Section 4 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the Developer, or the type of business conducted; and H-7

298 (b) the proposed amendment or waiver (i) is approved by Owners of the Series 2016 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of Owners or Beneficial Owners of the Series 2016 Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Developer shall describe such amendment or waiver in the next Semi-Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type of financial information or operating data being presented by the Developer. Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Semi-Annual Report or notice required to be filed pursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the Developer chooses to include any information in any Semi-Annual Report or notice in addition to that which is specifically required by this Disclosure Agreement, the Developer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event or any other event required to be reported. Section 11. Default. In the event of a failure of the Developer or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Owners of at least 25% of the aggregate principal amount of Outstanding Series 2016 Bonds, may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Developer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. The Dissemination Agent shall not be responsible for the form or content of any Semi-Annual Report or notice of Listed Event. The Developer agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, and which are not due to its negligence or its willful misconduct. The obligations of the Developer under this Section shall survive the resignation or removal of the Dissemination Agent and the termination of this Disclosure Agreement. Section 13. Notices. Notices should be sent in writing to the following addresses. The following information may be conclusively relied upon until changed in writing. Disclosure Representative: Dissemination Agent: Attn: Goodwin Consulting Group 555 University Avenue, Suite 280 Sacramento, CA Attn: Dave Freudenberger H-8

299 Community Facilities District: City of Ontario 303 East B Street Ontario, CA Attn: City Manager Section 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Developer, the Dissemination Agent, the Trustee, the Community Facilities District, the Participating Underwriter and the Owners and Beneficial Owners from time to time of the Series 2016 Bonds, and shall create no rights in any other person or entity. Section 15. Governing Laws. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 16. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. [DEVELOPER] By: GOODWIN CONSULTING GROUP By: Authorized Signatory H-9

300 EXHIBIT A NOTICE OF FAILURE TO FILE SEMI-ANNUAL REPORT Name of Issuer: City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Name of Issue: City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) Special Tax Bonds, Series 2016 Date of Issuance: September 8, 2016 NOTICE IS HEREBY GIVEN that [DEVELOPER] (the Developer ) has not provided a Semi- Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of September 1, 2016, by and between the Developer and Goodwin Consulting Group, as Dissemination Agent. [The Developer anticipates that such Semi-Annual Report will be filed by.] Dated:, a, as Dissemination Agent, on behalf of [DEVELOPER] cc: [DEVELOPER] City of Ontario Community Facilities District No. 24 (Park Place Facilities Phase I) H-10

301 APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM The information in this section concerning DTC and DTC s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fullyregistered Bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized bookentry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such I-1

302 other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant s interest in the Bonds, on DTC s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Bonds to the Trustee s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. I-2

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304 CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 24 (PARK PLACE FACILITIES PHASE I) SPECIAL TAX BONDS, SERIES 2016