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Home My WebLink About071012 CC AgendaIn compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the office of the City Clerk (951) 694-6444. Notification 48 hours prior to a meeting will enable the City to make reasonable arrangements to ensure accessibility to that meeting [28 CFR 35.102.35.104 ADA Title II] AGENDA TEMECULA CITY COUNCIL A REGULAR MEETING CITY COUNCIL CHAMBERS 41000 MAIN STREET JULY 10, 2012 – 7:00 PM At approximately 9:45 P.M., the City Council will determine which of the remaining agenda items can be considered and acted upon prior to 10:00 P.M. and may continue all other items on which additional time is required until a future meeting. All meetings are scheduled to end at 10:00 P.M. 5:30 P.M. – The City Council will convene in Closed Session in the Canyons Conference Room on the third floor of the Temecula City Hall concerning the following matters: 1) Public Employee performance evaluation for the incumbent position of City Manager pursuant to Government Code Section 54957. 2) Conference with real property negotiators pursuant to Government Code Section 54956.8 regarding two parcel of real property on the Temecula Escarpment. The first parcel is owned by John and Maria B. Barth, Samuel and Theresa G. Barragan, R. Anthony and Kathleen L. Henrich, Thomas M. and Christine C. Horan, Thomas M and Judy R. Henrich in various undivided interests and capacities as described in the title report for the property, and consists of approximately 19.91 acres (APN 940-030-003) located near Rancho California Road on the escarpment west of the City limits in unincorporated Riverside County. The second parcel is owned by Anthony T. Carr and consists of approximately 4.46 acres (APN 940-140-011) located on Via Horca on the escarpment west of the City limits in unincorporated Riverside County. The parties to the negotiations for the purchase of the property are the Barth/Barragan, Anthony T. Carr, Riverside County Regional Conservation Authority and the City of Temecula. Negotiators for the City of Temecula are: Bob Johnson, Patrick Richardson, and Luke Watson. Under negotiation are price and the terms of the City and Authority's purchase of the property. 3) Conference with real property negotiators pursuant to Government Code Section 54956.8 regarding the acquisition of the City of the YMCA building located at 29119 Margarita Road, Temecula 92591 on a portion of Margarita Park. The parties to the negotiations for the acquisition of this building are: YMCA of Riverside City and County and the City of Temecula. Negotiators for the City of Temecula are: Bob Johnson, Aaron Adams, and Tamra Irwin. Under negotiation are the price and terms for the acquisition of the building. 4) Conference with legal counsel—Potential litigation. The City Council will meet in closed session with the City Attorney pursuant to Government Code Section 54956.9(c) with respect to one matter of pending potential litigation and will 1 discuss whether to initiate litigation against the County of Riverside relating to its certification of the Final Environmental Impact Report for the Liberty Quarry Project. Public Information concerning existing litigation between the City and various parties may be acquired by reviewing the public documents held by the City Clerk. Next in Order: Ordinance: 12-06 Resolution: 12-54 CALL TO ORDER: Mayor Chuck Washington Prelude Music: Jamie Rector Invocation: Reverend Robert A. Nagy, Oblatte OSB of Saint Thomas of Canterbury Episcopal Church Council Member Comerchero Comerchero, Edwards, Naggar, Roberts, Washington Flag Salute: ROLL CALL: PUBLIC COMMENTS A total of 30 minutes is provided so members of the public may address the City Council on items that appear within the Consent Calendar or a matter not listed on the agenda. Each speaker is limited to three minutes. If the speaker chooses to address the City Council on an item listed on the Consent Calendar or a matter not listed on the agenda, a Request to Speak form must be filled out and filed with the City Clerk prior to the City Council addressing Public Comments and the Consent Calendar. Once the speaker is called to speak, please come forward and state your name for the record. For all Public Hearing or Council Business items on the agenda, a Request to Speak form must be filed with the City Clerk prior to the City Council addressing that item. Each speaker is limited to five minutes. CITY COUNCIL REPORTS Reports by the members of the City Council on matters not on the agenda will be made at this time. A total, not to exceed, 10 minutes will be devoted to these reports. CONSENT CALENDAR NOTICE TO THE PUBLIC All matters listed under Consent Calendar are considered to be routine and all will be enacted by one roll call vote. There will be no discussion of these items unless Members of the City Council request specific items be removed from the Consent Calendar for separate action. 2 1 Standard Ordinance and Resolution Adoption Procedure RECOMMENDATION: 1.1 Motion to waive the reading of the text of all ordinances and resolutions included in the agenda. 2 Action Minutes RECOMMENDATION: 2.1 Approve the action minutes of June 26, 2012. 3 List of Demands RECOMMENDATION: 3.1 Adopt a resolution entitled: RESOLUTION NO. 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS SET FORTH IN EXHIBIT A 4 City Treasurer's Report as of May 31, 2012 RECOMMENDATION: 4.1 Approve and file the City Treasurer's Report as of May 31, 2012. 5 Agreement with Temecula Sunrise Rotary for Placement and Maintenance of Bus Benches RECOMMENDATION: 5.1 Approve a three-year agreement with the Temecula Sunrise Rotary Club, a non- profit corporation, for the placement and maintenance of 36 bus benches located throughout the City, in an annual amount of $10,050. 6 Acceptance of Certain Public Streets within Tract Map No. 35181 into the City - Maintained System (located at the northwest corner of Winchester Road and Dendy Parkway) RECOMMENDATION: 6.1 Adopt a resolution entitled: RESOLUTION NO. 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ACCEPTING CERTAIN PUBLIC STREETS INTO THE CITY -MAINTAINED SYSTEM (WITHIN TRACT MAP NO. 35181) 3 7 First Amendment to the License Agreement with the Friends of the Temecula Public Library RECOMMENDATION: 7.1 Approve the First Amendment with the Friends of the Temecula Library for the support of the Temecula Public Library and operation of the Friends of the Temecula Library Bookstore. 8 Purchase Agreement for the Traffic Safety and Bridge Light Retrofit, PW12-08 RECOMMENDATION: 8.1 Approve the agreement with Tanko Lighting to purchase 470 Induction Luminaire Cobra Head Lights for a total cost of $141,799 for the Traffic Safety and Bridge Light Retrofit Program, PW12-08. ******************** RECESS CITY COUNCIL MEETING TO SCHEDULED MEETINGS OF THE TEMECULA COMMUNITY SERVICES DISTRICT, THE SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY, THE TEMECULA HOUSING AUTHORITY, AND THE TEMECULA PUBLIC FINANCING AUTHORITY ******************** 4 TEMECULA COMMUNITY SERVICES DISTRICT MEETING Next in Order: Ordinance: No. CSD 12-01 Resolution: No. CSD 12-07 CALL TO ORDER: President Jeff Comerchero ROLL CALL: DIRECTORS: Edwards, Naggar, Roberts, Washington, Comerchero CSD PUBLIC COMMENTS A total of 30 minutes is provided so members of the public may address the Board of Directors on items that appear within the Consent Calendar or a matter not listed on the agenda. Each speaker is limited to three minutes. If the speaker chooses to address the Board of Directors on an item listed on the Consent Calendar or a matter not listed on the agenda, a Request to Speak form must be filled out and filed with the City Clerk prior to the Board of Directors addressing Public Comments and the Consent Calendar. Once the speaker is called to speak, please come forward and state your name for the record. For all Public Hearing or District Business items on the agenda, a Request to Speak form must be filed with the City Clerk prior to the Board of Directors addressing that item. Each speaker is limited to five minutes. CSD CONSENT CALENDAR NOTICE TO THE PUBLIC All matters listed under Consent Calendar are considered to be routine and all will be enacted by one roll call vote. There will be no discussion of these items unless Members of the Temecula Community Services District request specific items be removed from the Consent Calendar for separate action. 9 Action Minutes RECOMMENDATION: 9.1 Approve the action minutes of June 26, 2012. 10 Agreement with The Shortstop for Concession Services at the Patricia H. Birdsall Sports Park RECOMMENDATION: 10.1 Approve an Agreement with The Shortstop for concession services at the Patricia H. Birdsall Sports Park. CSD DIRECTOR OF COMMUNITY SERVICES REPORT CSD GENERAL MANAGER REPORT 5 CSD BOARD OF DIRECTORS REPORTS CSD ADJOURNMENT Next regular meeting: Tuesday, July 24, 2012, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM., City Council Chambers, 41000 Main Street, Temecula, California. 6 TEMECULA PUBLIC FINANCING AUTHORITY MEETING Next in Order: Ordinance: No. TPFA 12-01 Resolution: No. TPFA 12-01 CALL TO ORDER: Chairperson Chuck Washington ROLL CALL: DIRECTORS: Comerchero, Edwards, Naggar, Roberts, Washington TPFA PUBLIC COMMENTS A total of 15 minutes is provided so members of the public may address the Board of Directors on items that appear within the Consent Calendar or a matter not listed on the agenda. Each speaker is limited to three minutes. If the speaker chooses to address the Board of Directors on an item listed on the Consent Calendar or a matter not listed on the agenda, a Request to Speak form must be filled out and filed with the City Clerk prior to the Board of Directors addressing Public Comments and the Consent Calendar. Once the speaker is called to speak, please come forward and state your name for the record. For all Public Hearing or Authority Business items on the agenda, a Request to Speak form must be filed with the City Clerk prior to the Board of Directors addressing that item. Each speaker is limited to five minutes. TPFA CONSENT CALENDAR NOTICE TO THE PUBLIC All matters listed under Consent Calendar are considered to be routine and all will be enacted by one roll call vote. There will be no discussion of these items unless Members of the Temecula Public Financing Authority request specific items be removed from the Consent Calendar for separate action. 11 Action Minutes RECOMMENDATION: 11.1 Approve the action minutes of November 22, 2011. TPFA BUSINESS 12 Approval of Issuance of Special Tax Refunding Bonds for Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill), Community Facilities District No. 03-03 (Wolf Creek), and Community Facilities District No. 03-06 (Harveston in RECOMMENDATION: 12.1 Adopt a resolution entitled: RESOLUTION NO. TPFA 12- 7 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS 12.2 Adopt a resolution entitled: RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS 12.3 Adopt a resolution entitled: RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS TPFA EXECUTIVE DIRECTOR REPORT TPFA BOARD OF DIRECTORS REPORTS TPFA ADJOURNMENT Next regular meeting: Tuesday, July 24, 2012, at 5:30 P.M., for a Closed Session, with regular session commencing at 7:00 PM., City Council Chambers, 41000 Main Street, Temecula, California. 8 SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY — no meeting TEMECULA HOUSING AUTHORITY — no meeting 9 RECONVENE TEMECULA CITY COUNCIL CITY MANAGER REPORT CITY ATTORNEY REPORT ADJOURNMENT Next regular meeting: Tuesday, July 24, 2012, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. NOTICE TO THE PUBLIC The agenda packet (including staff reports) will be available for viewing in the Main Reception area at the Temecula Civic Center (41000 Main Street, Temecula) after 4:00 PM the Friday before the City Council meeting. At that time, the packet may also be accessed on the City's website — www.cityoftemecula.org Supplemental material received after the posting of the Agenda Any supplemental material distributed to a majority of the City Council regarding any item on the Agenda, after the posting of the Agenda, will be available for public review in the Main Reception area at the Temecula Civic Center (41000 Main Street, Temecula, 8:00 AM — 5:00 PM). In addition, such material will be made available on the City's website — www.cityoftemecula.org — and will be available for public review at the respective meeting. If you have any questions regarding any item of business on the Agenda for this meeting, please contact the City Clerk's Department, (951) 694-6444. 10 CONSENT CALENDAR Item No. 1 Item No. 2 ACTION MINUTES TEMECULA CITY COUNCIL A REGULAR MEETING CITY COUNCIL CHAMBERS 41000 MAIN STREET JUNE 26, 2012 – 7:00 PM 6:00 P.M. – The City Council will convene in Closed Session in the Canyons Conference Room on the third floor of the Temecula City Hall concerning the following matters: 1) Conference with real property negotiators pursuant to Government Code Section 54956.8 regarding the acquisition of the City of the YMCA building located at 29119 Margarita Road, Temecula 92591 on a portion of Margarita Park. The parties to the negotiations for the acquisition of this building are: YMCA of Riverside City and County and the City of Temecula. Negotiators for the City of Temecula are: Bob Johnson, Aaron Adams, and Tamra Irwin. Under negotiation are the price and terms for the acquisition of the building. 2) Conference with legal counsel—Potential litigation. The City Council will meet in closed session with the City Attorney pursuant to Government Code Section 54956.9(c) with respect to one matter of pending potential litigation and will discuss whether to initiate litigation against the County of Riverside relating to its certification of the Final Environmental Impact Report for the Liberty Quarry Project. 3) Conference with real property negotiators pursuant to Government Code Section 54956.8 regarding one parcel of real property owned by the City of Temecula consisting of approximately 30.2 acres (APN 909-370-002) located northwesterly of Diaz Road and Dendy Parkway. The parties to the negotiations for an amendment to the terms of sale of this property are: Wild Rivers Temecula LLC and the City of Temecula. Negotiators for the City of Temecula are: Bob Johnson, Patrick Richardson, and Luke Watson. Under negotiation are the price and terms of the sale of the property to Wild Rivers Temecula LLC. Public Information concerning existing litigation between the City and various parties may be acquired by reviewing the public documents held by the City Clerk. At 6:00 P.M. the City Council called the Closed Session meeting to order. The City Council meeting convened at 7:01 P.M. CALL TO ORDER: Mayor Chuck Washington Prelude Music: To Be Announced Invocation: Reverend Al of Unity Church of Temecula Valley Flag Salute: Council Member Roberts 1 ROLL CALL: Comerchero, Edwards, Naggar, Roberts, Washington PRESENTATIONS/PROCLAMATIONS Certificates of Achievement to Jacob Adams, William Baker, Jason Geminert, Spencer Golledge, Troy Golledge, Austin Larsen, and Taylor May for attaining the rank of Eagle Scout PUBLIC COMMENTS The following individuals addressed the City Council: • Elaine Castillo • Ann Crutchley • Kimberly Sheehy • Carol Monroe • Adrian McGregor • Carlos (Chai) Notarte • Richard Kencht • Ann Pica • Stephen Eldred • Garry Grant • Dustin Lundle • Bret Kelley • Paul Jacobs • Patrice Lynes • Fred Bartz • Haley Seino • Tom Vining • Kathy Vining CITY COUNCIL REPORTS CONSENT CALENDAR 1 Standard Ordinance and Resolution Adoption Procedure - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 1.1 Motion to waive the reading of the text of all ordinances and resolutions included in the agenda. 2 Action Minutes - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. 2 RECOMMENDATION: 2.1 Approve the action minutes of June 12, 2012. 3 List of Demands - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 3.1 Adopt a resolution entitled: RESOLUTION NO. 12-50 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS SET FORTH IN EXHIBIT A 4 Agreement for Phlebotomy Services - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 4.1 Approve the Agreement with American Forensic Nurses, DBA: AFN for phlebotomy services in Fiscal Year 2012-13 for an annual contract amount of $45,000. 5 California Department of Justice — Fingerprinting Agreement - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 5.1 Approve a five-year Agreement with the California Department of Justice in the amount of $75,000 annually for a total term of $375,000 for fingerprinting services. 6 Trustee/Fiscal Agent Services for Fiscal Year 2012-13 - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 6.1 Approve the expenditure of $32,160 for Fiscal Year 2012-13 trustee/fiscal agent services, provided by U.S. Bank, for the City's Community Facilities Districts (CFD), Assessment District (AD), and Tax Allocation Bonds (TABs). 3 7 Fourth Amendment to the Agreement with Proactive Fire Design, Inc. - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 7.1 Approve the Fourth Amendment with Proactive Fire Design, Inc. in the amount of $60,000 for Fiscal Year 2012-13 Fire Department plan review service. 8 Fiscal Year 2012-13 Solid Waste and Recycling Fees - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 8.1 Adopt a resolution entitled: RESOLUTION NO. 12-51 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA APPROVING SOLID WASTE AND RECYCLING FEES FOR FISCALYEAR 2012-13 9 Purchase & Sale Agreement with the Gurrola Family Trust for Murrieta Creek Bridge and Overland Drive Extension to Diaz Road, PVV00-26 - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 9.1 Adopt a resolution entitled: RESOLUTION NO. 12-52 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA APPROVING THAT CERTAIN AGREEMENT ENTITLED PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS BETWEEN THE CITY OF TEMECULA AND RICHARD B. GURROLA AND VALERIE GURROLA, TRUSTEES OF THE GURROLA FAMILY TRUST UNDER DECLARATION DATED DEC. 27, 2001, ROBERT A. GURROLA, GARY S. GURROLA, AND RICHARD B. GURROLA IN CONNECTION WITH THE MURRIETA CREEK BRIDGE AND OVERLAND DRIVE EXTENSION TO DIAZ ROAD — PW00-26 9.2 Authorize the City Manager to approve and execute any necessary documents and to take all necessary actions to complete this acquisition, including without limitation, the approval and execution of all documents referenced in the Purchase and Sale Agreement and all escrow instructions; 4 9.3 Authorize the Finance Director to issue a warrant for the sum of $1,242,000 plus escrow fees for deposit with the Escrow Holder, First American Title Insurance Company, to complete the transaction. Escrow fees are estimated not to exceed $15,000. 10 Plans and Specifications, and Authorization to Solicit Construction Bids for Environmental Mitigation for the French Valley Parkway Interchange Project - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 10.1 Approve the plans and specifications, and authorize the Department of Public Works to solicit construction bids for the Environmental Mitigation for the French Valley Parkway/Interstate 15 Overcrossing and Interchange Improvements. 11 Notice of Completion for the Citywide Storm Drain Improvements — Calle Fiesta, PW10-07 - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 11.1 Accept the construction of the Citywide Storm Drain Improvements — Calle Fiesta, PW10-07, as complete; 11.2 Direct the City Clerk to file and record the Notice of Completion, release the Performance Bond, and accept a one-year Maintenance Bond in the amount of 10% of the contract amount; 11.3 Release the Labor and Materials Bond seven months after filing of the Notice of Completion if no liens have been filed. 12 Construction Contract for the Pavement Rehabilitation Program — Ynez Road, PW10-14 - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 12.1 Approve a Mutual Rescission and Compensation Agreement of the Construction Contract with EBS General Engineering, Inc. for the Pavement Rehabilitation Program — Ynez Road, PW10-14, and accept a payment of $95,067 from EBS General Engineering, Inc.; 12.2 Award a construction contract for the Pavement Rehabilitation Program — Ynez Road, PW10-14, to All American Asphalt in the amount of $2,177,177; 5 12.3 Authorize the City Manager to approve change orders up to 10% of the contract amount, $217,717.70. 13 Specifications and Authorization to Solicit Bids for the Traffic Safety and Bridge Light Retrofit, PW12-08 - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 13.1 Approve the specifications and authorize the Department of Public Works to solicit bids for the Traffic Safety and Bridge Light Retrofit, PW12-08. 14 Approval of Parcel Map 36358 (located at the southwest corner of Landings Road and Village Road) - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 14.1 Approve Parcel Map 36358 in conformance with the Conditions of Approval. 15 Approval of a Subdivision Improvement Agreement and its securities for Tract Map 23992 (located south of Rancho California Road and west of Ynez Road at Tierra Vista Road) - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 15.1 Approve the Subdivision Improvement Agreement and accept the Faithful Performance Bond and the Labor and Material Bond as security for the Agreement. 16 Agreement with TWM Roofing, Inc. for Preventive Roof Maintenance Services at various City locations - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATIONS: 16.1 Approve an Agreement for minor maintenance services for preventive roof maintenance services at various City locations with TWM Roofing, Inc., in the amount of $62,740 for Fiscal Year 2012-13. 6 17 Second Reading of Ordinance No. 12-05 - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 17.1 Adopt an ordinance entitled: ORDINANCE NO. 12-05 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TEMECULA AMENDING CHAPTER 8.28 OF THE TEMECULA MUNICIPAL CODE RELATING TO STORM WATER AND URBAN RUNOFF MANAGEMENT AND DISCHARGE CONTROL, AND AUTHORIZING THE DIRECTOR OF PUBLIC WORKS/CITY ENGINEER TO PREPARE A MANUAL SETTING FORTH THE ADMINISTRATIVE RULES, PROCEDURES, AND REQUIREMENTS NECESSARY TO IMPLEMENT THIS ORDINANCE Mayor Washington recessed the City Council Meeting to the scheduled meeting of the Temecula Community Services District meeting at 8:20 P.M. Mayor Washington adjourned the Temecula Community Services District meeting and reconvened the regular City Council Meeting at 8:35 P.M. PUBLIC HEARING 25 Amendment to the Citywide User Fee Schedule - Approved Staff Recommendation (4-0-1, Council Member Edwards absent) Council Member Comerchero made the motion; it was seconded by Council Member Naggar; and electronic vote reflected approval, with Council Member Edwards absent. RECOMMENDATION: 25.1 Adopt a resolution entitled: RESOLUTION NO. 12-53 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ADDING CURRENT HOURLY RATE CHARGES TO THE CONSOLIDATED SCHEDULE OF FEES FOR LAND USE AND RELATED FUNCTIONS USER FEE SCHEDULE FOR THOSE SERVICES PROVIDED THAT ARE NOT SUBJECT TO A SPECIFIC FEE CITY COUNCIL BUSINESS 26 Planning Commission Appointments — Reappointed Commissioners Guerriero and Kight for a full three-year term. (4-0-1, Council Member Edwards absent) Council Member Roberts made the motion; it was seconded by Council Member Comerchero; electronic vote showed approval, with Council Member Edwards absent. 7 RECOMMENDATION: 26.1 Appoint two applicants to serve full three-year terms on the Planning Commission through June 15, 2015. DEPARTMENTAL REPORTS 27 Public Works Department Monthly Report 28 Planning Department Monthly Report 29 Economic Development Department Monthly Report 30 Police Department Monthly Report CITY MANAGER REPORT CITY ATTORNEY REPORT With respect to the Closed Session items, City Attorney Thorson advised that there was no action to report. ADJOURNMENT At 8:49 P.M., the City Council meeting was formally adjourned to Tuesday, July 10, 2012, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. ATTEST: Susan W. Jones, MMC City Clerk [SEAL] 8 Chuck Washington, Mayor Item No. 3 Approvals City Attorney Chief Financial Officer City Manager M -r - CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Genie Wilson, Chief Financial Officer DATE: July 10, 2012 SUBJECT: List of Demands PREPARED BY: Pascale Brown, Accounting Manager Jada Shafe, Accounting Specialist RECOMMENDATION: Adopt a resolution entitled: RESOLUTION NO. 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS SET FORTH IN EXHIBIT A BACKGROUND: All claims and demands are reported and summarized for review and approval by the City Council on a routine basis at each City Council meeting. The attached claims represent the paid claims and demands since the last City Council meeting. FISCAL IMPACT: All claims and demands were paid from appropriated funds or authorized resources of the City and have been recorded in accordance with the City's policies and procedures. ATTACHMENTS: 1. Resolution 2. List of Demands RESOLUTION NO. 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS SET FORTH IN EXHIBIT A THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: Section 1. That the following claims and demands as set forth in Exhibit A, on file in the office of the City Clerk, has been reviewed by the City Manager's Office and that the same are hereby allowed in the amount of $7,284,338.89. Section 2. The City Clerk shall certify the adoption of this resolution. PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula this 10th day of July 2012. Chuck Washington, Mayor ATTEST: Susan W. Jones, MMC City Clerk [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Susan W. Jones, MMC, City Clerk of the City of Temecula, do hereby certify that the foregoing Resolution No. 12- was duly and regularly adopted by the City Council of the City of Temecula at a meeting thereof held on the 10th day of July 2012, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: Susan W. Jones, MMC City Clerk CITY OF TEMECULA LIST OF DEMANDS 06/14/2012 TOTAL CHECK RUN $ 5,590,003.65 06/21/2012 TOTAL CHECK RUN 926,170.64 06/14/2012 TOTAL PAYROLL RUN: 333,491.62 06/21/2012 TOTAL PAYROLL RUN: 434,672.98 TOTAL LIST OF DEMANDS FOR 07/10/2012 COUNCIL MEETING: $ 7,284,338.89 DISBURSEMENTS BY FUND: CHECKS: CITY OF TEMECULA LIST OF DEMANDS 001 GENERAL FUND $ 797,377.64 130 RECOVERY ACT JAG FUNDING 200.89 165 SARDA AFFORDABLE HOUSING 18,303.23 170 MEASURE A FUND 2,785.17 190 TEMECULA COMMUNITY SERVICES DISTRICT 324,759.97 192 TCSD SERVICE LEVEL B 76,763.42 194 TCSD SERVICE LEVEL D 1,002.88 195 TCSD SERVICE LEVEL R 316.98 196 TCSD SERVICE LEVEL "L" LAKE PARK MAINT. 9,607.26 197 TEMECULA LIBRARY FUND 11,447.69 210 CAPITAL IMPROVEMENT PROJECTS FUND 584,316.23 300 INSURANCE FUND 3,382.46 320 INFORMATION TECHNOLOGY 43,037.86 330 SUPPORT SERVICES 7,260.52 340 FACILITIES 16,356.63 380 SARDA DEBT SERVICE FUND 475,429.74 472 CFD 01-2 HARVESTON A&B DEBT SERVICE 564,078.05 473 CFD 03-1 CROWNE HILL DEBT SERVICE FUND 596,334.04 474 AD03-4 JOHN WARNER ROAD DEBT SERVICE 48,209.53 475 CFD03-3 WOLF CREEK DEBT SERVICE FUND 1,068,900.59 476 CFD 03-6 HARVESTON 2 DEBT SERVICE FUND 313,554.87 477 CFD- RORIPAUGH 1,524,300.66 501 SERVICE LEVEL"C"ZONE 1 SADDLEWOOD 971.47 502 SERVICE LEVEL"C"ZONE 2 WINCHESTER CREEK 326.77 503 SERVICE LEVEL"C"ZONE 3 RANCHO HIGHLANDS 969.90 504 SERVICE LEVEL"C"ZONE 4 THE VINEYARDS 232.19 505 SERVICE LEVEL"C"ZONE 5 SIGNET SERIES 2,326.60 506 SERVICE LEVEL"C"ZONE 6 WOODCREST COUNTRY 520.76 507 SERVICE LEVEL"C"ZONE 7 RIDGEVIEW 533.88 508 SERVICE LEVEL"C"ZONE 8 VILLAGE GROVE 239.81 509 SERVICE LEVEL"C"ZONE 9 RANCHO SOLANA 68.49 510 SERVICE LEVEL"C"ZONE 10 MARTINIQUE 110.66 511 SERVICE LEVEL"C"ZONE 11 MEADOWVIEW 83.91 512 SERVICE LEVEL"C"ZONE 12 VINTAGE HILLS 160.00 513 SERVICE LEVEL"C"ZONE 13 PRESLEY DEVELOP. 1,668.24 514 SERVICE LEVEL"C"ZONE 14 MORRISON HOMES 625.05 515 SERVICE LEVEL"C"ZONE 15 BARCLAY ESTATES 17.23 516 SERVICE LEVEL"C"ZONE 16 TRADEWINDS 39.91 517 SERVICE LEVEL"C"ZONE 17 MONTE VISTA 46.32 518 SERVICE LEVEL"C"ZONE 18 TEMEKU HILLS 3,444.10 519 SERVICE LEVEL"C"ZONE 19 CHANTEMAR 620.13 520 SERVICE LEVEL"C"ZONE 20 CROWNE HILL 214.70 521 SERVICE LEVEL"C"ZONE 21 VAIL RANCH 7,044.30 522 SERVICE LEVEL"C"ZONE 22 SUTTON PLACE 96.81 523 SERVICE LEVEL"C"ZONE 23 PHEASENT RUN 153.87 524 SERVICE LEVEL"C"ZONE 24 HARVESTON 2,217.33 525 SERVICE LEVEL"C"ZONE 25 SERENA HILLS 619.42 526 SERVICE LEVEL"C"ZONE 26 GALLERYTRADITION 2.89 527 SERVICE LEVEL"C"ZONE 27 AVONDALE 9.53 528 SERVICE LEVEL"C"ZONE 28 WOLF CREEK 5,053.46 529 SERVICE LEVEL"C"ZONE 29 GALLERY PORTRAIT 30.25 $ 6,516,174.29 CITY OF TEMECULA LIST OF DEMANDS 001 GENERAL FUND $ 468,556.15 165 SARDA AFFORDABLE HOUSING 19,692.18 190 TEMECULA COMMUNITY SERVICES DISTRICT 198,914.27 192 TCSD SERVICE LEVEL B 903.65 194 TCSD SERVICE LEVEL D 1,637.62 196 TCSD SERVICE LEVEL "L" LAKE PARK MAINT. 1,757.17 197 TEMECULA LIBRARY FUND 1,717.86 300 INSURANCE FUND 3,761.22 320 INFORMATION TECHNOLOGY 34,775.62 330 SUPPORT SERVICES 7,430.87 340 FACILITIES 24,838.90 501 SERVICE LEVEL"C"ZONE 1 SADDLEWOOD 153.61 502 SERVICE LEVEL"C"ZONE 2 WINCHESTER CREEK 103.15 503 SERVICE LEVEL"C"ZONE 3 RANCHO HIGHLANDS 122.35 504 SERVICE LEVEL"C"ZONE 4 THE VINEYARDS 22.15 505 SERVICE LEVEL"C"ZONE 5 SIGNET SERIES 247.83 506 SERVICE LEVEL"C"ZONE 6 WOODCREST COUNTRY 44.95 507 SERVICE LEVEL"C"ZONE 7 RIDGEVIEW 63.72 508 SERVICE LEVEL"C"ZONE 8 VILLAGE GROVE 420.96 509 SERVICE LEVEL"C"ZONE 9 RANCHO SOLANA 3.13 510 SERVICE LEVEL"C"ZONE 10 MARTINIQUE 19.01 511 SERVICE LEVEL"C"ZONE 11 MEADOWVIEW 11.50 512 SERVICE LEVEL"C"ZONE 12 VINTAGE HILLS 280.99 513 SERVICE LEVEL"C"ZONE 13 PRESLEY DEVELOP. 59.68 514 SERVICE LEVEL"C"ZONE 14 MORRISON HOMES 34.28 515 SERVICE LEVEL"C"ZONE 15 BARCLAY ESTATES 30.32 516 SERVICE LEVEL"C"ZONE 16 TRADEWINDS 70.02 517 SERVICE LEVEL"C"ZONE 17 MONTE VISTA 5.54 518 SERVICE LEVEL"C"ZONE 18 TEMEKU HILLS 260.37 519 SERVICE LEVEL"C"ZONE 19 CHANTEMAR 139.09 520 SERVICE LEVEL"C"ZONE 20 CROWNE HILL 377.28 521 SERVICE LEVEL"C"ZONE 21 VAIL RANCH 639.23 522 SERVICE LEVEL"C"ZONE 22 SUTTON PLACE 15.84 523 SERVICE LEVEL"C"ZONE 23 PHEASENT RUN 16.71 524 SERVICE LEVEL"C"ZONE 24 HARVESTON 359.40 525 SERVICE LEVEL"C"ZONE 25 SERENA HILLS 116.17 526 SERVICE LEVEL"C"ZONE 26 GALLERYTRADITION 5.26 527 SERVICE LEVEL"C"ZONE 27 AVONDALE 16.71 528 SERVICE LEVEL"C"ZONE 28 WOLF CREEK 529.61 529 SERVICE LEVEL"C"ZONE 29 GALLERY PORTRAIT 10.23 768,164.60 TOTAL BY FUND: $ 7,284,338.89 apChkLst Final Check List Page: 1 06/14/2012 3:01:16PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor Description Amount Paid Check Total 1940 06/14/2012 005460 U S BANK Secured Settlement #2 CFD/AD pmt 3,957,560.12 3,957,560.12 1941 06/12/2012 005460 U S BANK Secured Prior Year Tax #1 payment 157,817.62 157,817.62 1942 06/14/2012 000444 INSTATAX (EDD) State Income Taxes Payment 28,321.20 28,321.20 1943 06/14/2012 000283 INSTATAX (IRS) Federal Income Taxes Payment 89,121.23 89,121.23 1944 06/14/2012 005460 U S BANK RDA '07 tax bonds debt srvcs pmt 403,682.82 403,682.82 1945 06/14/2012 005460 U S BANK RDA '06 B tax bonds debt srvc pmt 71,746.92 71,746.92 99939 06/08/2012 014919 ARBINI, MAGDALINE refund:TVFEE Health 9600.207 155.00 155.00 99940 06/08/2012 014920 BAILEY, BRIDGOT refund:Lost library materials 32.99 32.99 99941 06/08/2012 014921 BEDOLLA, MARCIA refund:The bodies left behind book 133.75 133.75 99942 06/08/2012 014922 BOVEE, KEIKO refund:sec dep:rm rental:Harveston 200.00 200.00 99943 06/08/2012 014923 BROCK, NOAH refund:picnic rental:Meadows Park 48.00 48.00 99944 06/08/2012 014924 CLARK, CAROLE refund:TVFEE Geometry 9600.205 311.00 311.00 99945 06/08/2012 014925 DAVILA, GEMAINE refund:Tiny tots basketball 2300.106 20.00 20.00 99946 06/08/2012 014926 ELLIS, WENDY refund:bal on acct:CPR/AED 8250.201 40.00 40.00 99947 06/08/2012 014927 GILL, GREGORY refund:credit:rm rental:Library 105.00 105.00 99948 06/08/2012 014928 LI, WEI refund:Please try to rernember...bk 8.99 8.99 99949 06/08/2012 014929 LOWE, ROBIN refund:TVFEE Pre AP Chemistry 165.00 165.00 9600.208 99950 06/08/2012 014930 MCGAUGH, SARAH refund:Soccer skills 2202.201 84.00 84.00 Page:1 apChkLst Final Check List Page: 2 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CAUFORNIA (Continued) Check # Date Vendor Description Amount Paid Check Total 99951 06/08/2012 014931 SALGADO, SANDY refund:TVFEE Geography 9600.204 155.00 155.00 99952 06/08/2012 014932 TRANG, MAVICTORIA refund:Bear cub univ 4005.201 442.00 442.00 99953 06/08/2012 014933 WALSH, JEANNE refund:TVFee Health 9600.207 310.00 310.00 99954 06/08/2012 014934 WIGGINS, JOSHUA refund:TVFEE Health 9600.207 155.00 155.00 99955 06/08/2012 014935 YZERNANS, BRAD refund:picnic rental:Meadows Park 48.00 48.00 99956 06/08/2012 014936 ZIMMERMANN, DAWNA refund:TVFEE Spanish 19600.211 311.00 311.00 152440 06/14/2012 014939 1ST FORSS REALTY refund:sec dep:rm rental:Conf Ctr 150.00 150.00 152441 06/14/2012 004973 ABACHERLI, LINDI TCSD instructor eamings 630.00 630.00 152442 06/14/2012 014937 ACOSTA, MANUEL refund:sec dep:kitchen rental:TCC 400.00 400.00 152443 06/14/2012 008552 ADKINS DESIGN CONSULTING MAY GRAPHIC DESIGN 6,112.51 6,112.51 SVCS:THEATER 152444 06/14/2012 014531 ALLEN EMBROIDERY SERVICE uniforms: B&S 52.80 52.80 152445 06/14/2012 011961 AT&T MOBILITY May Trip wire:Graffitti:Police 130.40 130.40 152446 06/14/2012 014946 BECERRA, STEPHANIE refund:picnic rental:Meadows Park 43.00 43.00 152447 06/14/2012 011028 BENTLEY, DOUG OR AMY refund:Basketball skills interm 2500.201 30.00 30.00 152448 06/14/2012 004040 BIG FOOT GRAPHICS TCSD instructor earnings 420.00 420.00 152449 06/14/2012 014825 BREWER, ELSA performance:Mayor's event 6/9 500.00 500.00 152450 06/14/2012 012214 BROSCHE, STEPHEN relmb:SC gang cf SD 5/29-31 193.68 193.68 152451 06/14/2012 014947 BUTTERICK, JANET refund:overpmt:prkg cite #82554 45.00 45.00 Page2 apChkLst Final Check List Page: 3 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor Description Amount Paid Check Total 152452 06/14/2012 004073 CALIF DEPT OF HIGHWAY COZEEP June '12:F Vlly Pkwy 11 6,580.56 6,580.56 PATROL 152453 06/14/2012 014941 CARDENAS, JOSE refund:sec dep:kitchen rental:TCC 400.00 400.00 152454 06/14/2012 014726 CHAPTER 13 STANDING Support Pmt Case # 6:10-bk51657-MJ 182.77 182.77 TRUSTEE 152455 06/14/2012 000137 CHEVRON AND TEXACO City vehicles fuel: Police 240.83 240.83 152456 06/14/2012 014943 CLARK, MEREDITH refund:sec dep:rm rental:Harveston 200.00 200.00 152457 06/14/2012 014917 CLARKE, ROBERT A refund: service level R 316.98 316.98 152458 06/14/2012 014824 CLINE, MICHELLE LORRAINE petting zoo:western days 5/19-20 920.00 920.00 BYLER 152459 06/14/2012 000442 COMPUTER ALERT SYSTEMS emerg alarm repair svcs:harveston 75.00 alarm repair: children's museum 75.00 fire alarm emerg repair: civic ctr 75.00 emerg alarm repair svcs: crc 75.00 emerg alarm repair svc: TV Chapel 75.00 emerg alarm repair svcs: TV Chapel 155.81 emerg alarm repair svcs: city hall 161.09 691.90 152460 06/14/2012 013286 CONNEXON TELECOM INC May Enterprise 911 Svc:IT 250.00 250.00 152461 06/14/2012 012353 CONSTRUCTION TESTING May soil insp/testing: crc rehab 1,020.00 1,020.00 152462 06/14/2012 001264 COSTCO WHOLESALE misc supplies: tcc classes/pgrms 355.93 355.93 152463 06/14/2012 010650 CRAFTSMEN PLUMBING & countertop install: Civic Center 13,990.15 13,990,15 HVAC INC 152464 06/14/2012 014364 CUNNINGHAM, GRISEI DA TCSD Instructor Eamings 315.00 CLEMENTINA TCSD Instructor Earnings 273.00 588.00 152465 06/14/2012 001233 DANS FEED & SEED INC propane gas: patio heaters civic ctr 62.82 62.82 152466 06/14/2012 012600 DAVID EVANS & ASSOCIATES APR CNSLT SVCS: BUTTERFIELD RD INC EXT 1,398.50 1,398.50 Page3 apChkLst Final Check List Page: 4 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor Description 152467 06/14/2012 014940 DOGS FOR THE DEAF, INC refund:sec dep:picnic rental:RRSP 152468 06/14/2012 004192 DOWNS COMMERCIAL FUELING INC Amount Paid Check Total 150.00 150.00 Fuel for City vehicles: BSS 476.87 Fuel for City vehicles' Code EnF Fuel for City vehicles: Police Fuel for City vehicles: PW Maint Fuel for City vehicles: PW Traffic Fuel for City vehicles: PW Id/cip/npdes Fuel for City vehicles: PW Id/npdes Fuel for City vehicles: TCSD 152469 06/14/2012 002528 EAGLE GRAPHIC CREATIONS Plaques: Youth Court Police pgrm INC 152470 06/14/2012 014419 ELLIOTT, MICHAEL G. May Idscp inspection: roripaugh 152471 06/14/2012 003665 EXCEL COMMERCIAL May long distance phone svcs 152472 06/14/2012 000478 FAST SIGNS vehicle vinyl lettering: code enf 152473 06/14/2012 014865 FEIZE UHLER. KIMBERLY PROMO ITEMS: ECO DEV promo items: eco dev marketing supplies: Econ Dev PROMO ITEMS:ECO DEV PERSONALIZED RIBBONS: ECO DE\ PROMO ITEMS:ECO DEV 497.79 115.61 1,605.19 577.91 479.72 173.16 2,561.83 6,488.08 430.89 430.89 1,050.00 1,050.00 55.04 163.26 564.61 611.30 1,767.77 539.70 287.35 624.94 55.04 163.26 4,395.67 Page:4 apChkLst 06/14/2012 3:01:15PM Final Check List CITY OF TEMECULA Page: 5 Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor 152474 06/14/2012 003347 FIRST BANKCARD CENTER 004462 C D W GOVERNMENT INC 007282 AMAZON.COM, INC 007028 AMERICAN AIRLINES 014949 WESTERN CITY MAGAZINE 006937 SOUTHWEST AIRLINES 006937 SOUTHWEST AIRLINES 008326 AVIS RENT -A -CAR (Continued) Description Amount Paid Check Total AA 10 keyboards: info tech AA DVDS: LIBRARY COLLECTION JC airfare: NLC steering mtg July '12 GY recruitment ad: HR GY airfare:refund Scanlon, Terry GY airfare:JAG grant tm Woods, A GY car rental refund:JAG grant tm TS/CB 014950 CALIFORNIA CITY NEWS.ORG GY recruitment ad: FIR 003698 RIVERSIDE CO ECONOMIC GY refund: 3rd district meeting 014583 PAI_UMBO'S RISTORANTE, LLC GW lunch:budget review mtg 4/25 014821 CPE STORE INC, THE 006952 PAYPAL 011368 MCGRAW-HILL COMPANIES, THE 013338 APPLE STORE 006952 PAYPAL 006952 PAYPAL 014750 INFOGROUP 013338 APPLE STORE 152475 06/14/2012 014851 FOREMAN PRODUCTS, LLC GW books/tests: acctg best practices GW Verisign Payflow Pro Transaction GW subscr: enr.com Graciano, Rudy GW iPad: serial # dmphn906dgr AA Verisign Payflow Pro Transaction AA paypal transacation set up:tcsd AA online subscr: Econ Dev AA iPad: serial # dmphn94ydngr install lockers & benches: crc 152476 06/14/2012 008016 G & M CUSTOM UPHOLSTERY upholstery repair: pd motors 152477 06/14/2012 014942 GARZA, PATRICIA 152478 06/14/2012 013076 GAUDET, YVONNE M. 152479 06/14/2012 012066 GEOCON WEST, INC 152480 06/14/2012 005405 011 LILAND, ROBIN refund:sec dep:rm rental:Harveston TCSD instructor earnings 4/16-5/13 geotech svc:roripaugh employee computer loan program 1,062.48 2,089.86 473.70 250.00 -1,031.20 1,061.20 -260.00 150.00 -35.00 76.62 197.00 59.95 9.95 782.75 179.40 25.00 183.34 782.75 2,400.00 100.00 200.00 423.50 7,987.00 2,000.00 6,057.80 2,400.00 100.00 200.00 423.50 7,987.00 2,000.00 Page:5 apChkLst Final Check List Page: 6 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check* Date Vendor (Continued) Description Amount Paid Check Total 152481 06/14/2012 014436 GOLDEN ARROW May const: crc energy retrofit 206,797.50 206,797.50 ENGINEERING, INC 152482 06/14/2012 014945 GONZALEZ, SALVADOR reimb:sc gang cf SD 5/29-31 203/2 203.72 152483 06/14/2012 013942 GRAY, JODIE reimb: repair parts dishwasher Stn 84 104.32 104.32 152484 06/14/2012 014402 GROEPPER, BROOKE TCSD instructor earnings 1,164.80 TCSD instructor earnings 1,164.80 TCSD instructor earnings 1,747.20 TCSD instructor earnings 1,747.20 5,824.00 152485 06/14/2012 004188 HARRIS & ASSOCIATES Apr const mgmt: french vly intrchg 51,238.41 51,238.41 152486 06/14/2012 010032 HILGARD HOUSE htl:sust cf LA 6/25-29 Weaver, Dana 702.20 702.20 152487 06/14/2012 014948 HOFFMAN, BRIAN refund:overpmt:prkg cite #82295 73.00 73.00 152488 06/14/2012 002701 HUB INT'L INSURANCE May special events premiums 1,358.22 1,358.22 SERVCS INC 152489 06/14/2012 005201 HUDSON, MICHAEL employee computer loan program 1,457.43 1,457.43 152490 06/14/2012 000194 I C M A RETIREMENT -PLAN ICMA Retirement Health Saving Payment 4,134.62 4,134.62 303355 152491 06/14/2012 003046 K F R 0 G 95.1 FM RADIO advertising: Westem Days 850.00 850.00 152492 06/14/2012 012462 KIMCO PALM PLAZA CFD 88-12 Reimbursement FY 09/10 16,238.12 16,238.12 152493 06/14/2012 012065 LANCE, SOLL & LUNGHARD city/rda audit svcs:FY 11/12 19,572.00 19,572.00 LLC 152494 06/14/2012 004412 LEANDER, KERRY D. TCSD instructor earnings TCSD instructor earnings TCSD instructor earnings TCSD instructor earnings 152495 06/14/2012 009260 LEONHARDI, RYAN A. cfd 88-12 reimb 09/10 152496 06/14/2012 014228 LSK, LLC Jun '12 rent: Harveston Center 189.00 1,050.00 315.00 728.00 2,282.00 252.54 252.54 4,714.00 4,714.00 Pages apChkLst Final Check List Page: 7 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor (Continued) Description Amount Pald Check Total 152497 06/14/2012 004813 M & J PAUL ENTERPRISES INC Inflatable party jumps:Expo 700.00 700.00 152498 06/14/2012 014014 MAGICAL ADVENTURE National League of Cities event 6/8 2,345.00 2,345.00 BALLOON RIDE (Sponsored by Lennar) 152499 06/14/2012 003782 MAIN STREET SIGNS MISC SIGNS:PW MAINT 7,789.03 7,789.03 152500 06/14/2012 014536 MARKEN, KERI E. May cataloging srvcs: History Museum 2,520.00 2,520.00 152501 06/14/2012 014918 MARTINEZ, CHELSEA refund:ins prem pd:spec event 6/9 187.16 187.16 152502 06/14/2012 014756 MEDIMEDIA USA, INC. Training manuals:aquatics pgrm 232.73 232.73 152503 06/14/2012 012962 MILLER, MISTY TCSD Instructor Earnings 710.50 TCSD Instructor Earnings 73.50 TCSD Instructor Earnings 112.00 896.00 152504 06/14/2012 014582 MIRAMONTES, SHEILA Reimb:theatersupplies 141.97 141.97 152505 06/14/2012 012264 MIRANDA, JULIO C. TCSD Instructor Earnings 1,225.00 TCSD Instructor Earnings 833.00 TCSD Instructor Earnings 392.00 2,450.00 152506 06/14/2012 013985 MONOPRICE, INC. MISC HARDWARE SUPPLIES:INFO 300.32 300.32 TECH 152507 06/14/2012 002925 NAPA AUTO PARTS Auto parts & supplies: Citizen Corps 527.96 527.96 152508 06/14/2012 000727 NATIONAL FIRE PROTECTION renew mbrshp:S.Gallegos 1075752 ASSN 152509 06/14/2012 008820 NEIGHBORS NEWSPAPER Jun advertising: Street Painting 152510 06/14/2012 002139 NORTH COUNTY TIMES May advertising:western days May ads:NIB concrete repairs/Planning May advertising:city clerk May advertising:theater 165.00 165.00 250.00 250.00 712.52 268.56 236.25 1,075.76 2,293.09 Page:7 apChkLst Final Check List Page: 8 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor (Continued) Description Amount Paid Check Total 152511 06/14/2012 003964 OFFICE DEPOT BUSINESS SVS Misc office supplies:pd old town office 181.61 DIV MISC OFFICE SUPPLIES:FINANCE Credit:office supplies -Finance Credit:office supplies -Finance MISC OFFICE SUPPLIES:FINANCE MISC OFFICE SUPPLIES:FINANCE MISC OFFICE SUPPLIES:FINANCE Misc office supplies:sister cities pgrm MISC OFFICE SUPPLIES:CENTRAL 152512 06/14/2012 014894 OLD TOWN SWEET SI IOP Promo item:natl league of cities conf 152513 06/14/2012 002105 OLD TOWN TIRE & SERVICE City Vehicle Maint Svcs: Parks City Vehicle Maint Svcs: Parks City Vehicle Maint Svcs: Parks 152514 06/14/2012 002105 OLD TOWN TIRE & SERVICE CITY VEHICLE MAINT SVCS: PW . MAINT CITY VEHICLE MAINT SVCS: PW MA CITY VEHICLE MAINT SVCS: PW MA City Vehicle Maint Svcs: PW L.D. City Vehicle Maint Svcs: PW CIP City Vehicle Maint Svcs: PW CIP 704.79 -20.39 -6.24 14.13 122.16 148.12 104.40 83.25 1,331.83 313.13 313.13 208.07 220.67 931.46 308.67 75.00 208.34 90.20 36.27 38.00 1,360.20 756.48 152515 06/14/2012 002105 OLD TOWN TIRE & SERVICE City Vehicle Maint Svcs: Fire Prev 19.34 City Vehicle Maint Svcs: Fire Prev 5.33 24.67 152516 06/14/2012 014051 PACE, ALTON N. & WANDA J. refund:eng grad dep:LD04-093GR 995.00 995.00 152517 06/14/2012 014938 PATTERSON, SHARON refund:sec dep:rm rental:Conf Ctr 150.00 150.00 152518 06/14/2012 002331 PEP BOYS INC Vehicle repair & maint:pw maint 614.98 614.98 152519 06/14/2012 013381 PERE/, AARON TROY TCSD Instructor Earnings 189.00 TCSD Instructor Earnings 472.50 661.50 152520 06/14/2012 000249 PETTY CASH Petty Cash Reimbursement 254.69 254.69 152521 06/14/2012 002579 POTAMUS PRESS Misc supplies:natl league of cities conf 64.33 64.33 152522 06/14/2012 011549 POWER SPORTS UNLIMITED Veh repair & maint:police 1,730.73 1,730.73 152523 06/14/2012 012904 PRO ACTIVE FIRE DESIGN May fire plancheck srvcs: Prev 6,329.66 6,329.66 Page:8 apChkLst Final Check List Page: 9 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor 152524 06/14/2012 005075 PRUDENTIAL OVERALL SUPPLY 152525 06/14/2012 000262 RANCHO CALIF WATER DISTRICT Description Amount Paid Check Total May uniform supply srvcs:csd maint 594.68 May uniform/fir mat/twl rentals:city 881.48 May var water meters:TCSD & PW 1,676.89 May Floating meter- comm:PW May Reclaimed-Lscp:Wolf Crk Dr N May var water meters:TCSD May var water meters:TCSD svc lev C May water meter-comm:28640 Pujol Si May var water meters: Fire Stns 165.66 354.22 3,148.73 35,862.30 7.93 603.66 1,476.16 41,819.39 152526 06/14/2012 000271 RBF CONSULTING Feb EIR: temecula creek inn 23,400.66 Mar EIR: temecula creek inn 15,970.93 Apr EIR: temecula creek inn 3,469.71 APR ENG SRVCS: 115/79S ULT. INTR 4,100.68 46,941.98 152527 06/14/2012 013632 RELIANCE CHURCH refund:sec dep:kitchen rental:Conf Ctr 150.00 150.00 152528 06/14/2012 003591 RENES COMMERCIAL Weed abatement:city right of way 9,500.00 9,500.00 MANAGEMENT 152529 06/14/2012 002110 RENTAL SERVICE EQUIP RENTAL & MAINT:PW MAINT 27.83 27.83 CORPORATION 152530 06/14/2012 014944 RIDGE VIEW BUSINESS refund:eng grad dep:LD05-006GR 995.00 995.00 152531 06/14/2012 014693 RILEY, MARY ELIZABETH TCSD Instructor Earnings 189.00 189.00 152532 06/14/2012 000411 RIVERSIDE CO FLOOD Apr encroachment permit:Ped Bridge 2,452.56 2,452.56 CONTROL 152533 06/14/2012 000406 RIVERSIDE CO SHERIFFS FY 11/12 RMS Services:Police 158,208.00 158,208.00 DEPT 152534 06/14/2012 001365 RIVERSIDE COUNTY OF health permit:4th of July vendor fair 505.00 505.00 152535 06/14/2012 008818 ROTARY CLUB OF TEMECULA Event proceeds:Rotary Club military prjt 1,606.00 1,606.00 152536 06/14/2012 013582 SAN DIEGUITO PUBLISHERS PRINTING SRVCS: CSD RECREATION 1,230.77 INC GUIDE PRINTING SRVCS: CSD RECREATIO 16,697.55 17,928.32 Page:9 apChkLst Final Check List Page: 10 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check* Date Vendor 152537 06/14/2012 000537 SO CALIF EDISON (Continued) Description June 2-33-777-1950:40135 Village Rd May 2-31-031-2616:27991 Diaz Rd PE May 2-02-351-5281: CRC May 2-10-331-2153:28816 Pujol St May 2-20-798-3248:42081 Main St May 2-30-066-2889:30051 Rancho vlst May 2-26-887-0789:40233 Village rd PI May 2-33-237-4818:30499 Rancho Cal May 2-30-608-9384:28582 Harveston June 2-01-202-7330:var LS -1 Allntie May 2-01-202-7603:Arterial STLT May 2-31-419-2659:26706 Ynez TC1 May 2-05-791-8807:31587 Tem pkwy L May 2-28-171-2620:40820 Winchester 152538 06/14/2012 012652 SOUTHERN CALIFORNIA June gen usage:0141,0839,2593,9306 152539 06/14/2012 003840 STRONGS PAINTING exterior painting srvcs: crc rehab 152540 06/14/2012 007696 SWANK MOTIONS PICTURES, Rental: Movies in the Park prgrm 6/8 INC. Amount Paid Check Total 457.90 22.54 3,630.74 783.00 998.99 24.55 1,687.89 89.69 510.85 76,279.15 26,925.14 59.94 9,320.14 854.54 121,645.06 478.84 478.84 18,000.00 18,000.00 446.00 446.00 152541 06/14/2012 011090 TEMECULA VALLEY Transportation srvcs:NLC Conf 6/7-10 3,823.20 3,82120 TRANSPORTATION 152542 06/14/2012 008379 THEATRE FOUNDATION, THE Gala Dinners & Auctions 5/27-28/12 1,023.70 1,023.70 152543 06/14/2012 010276 TIME WARNER CABLE June high speed internet:32364 Overland 44.95 44.95 152544 06/14/2012 007766 UNDERGROUND SERVICE May undrgmd svcs alert tickets:PW 201.00 201.00 ALERT 152545 06/14/2012 004789 VERIZON June SW DSL:PD:Jones, C. June Internet svcs: Theater 152546 06/14/2012 004848 VERIZON SEI ECT SERVICES May long distance phone svcs INC 152547 06/14/2012 009101 VISION ONE INC 152548 06/14/2012 006248 WALKER, JESSICA 39.95 134.99 10.19 174.94 May long distance phone svcs 5.54 15.73 FACEBOOK SOCIAL MEDIA 1,000.00 1,000.00 CONNECT:THTR TCSD Instructor Earnings 385.00 385.00 152549 06/14/2012 001881 WATER SAFETY PRODUCTS Misc pool supplies:aquatics pgrm INC Mlsc pool supplies:aquatics pgrm 1,141.80 327.42 1,469.22 Page.10 apChklst Final Check List Page: 11 06/14/2012 3:01:15PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor (Continued) Description Amount Paid Check Total 152550 06/14/2012 001342 WAXIE SANITARY SUPPLY INC custodial supplies:TCSD park sites 36.89 CLEANING SUPPLIES:CITYWIDE 1,407.57 custodial supplies:TCSD park sites 230.59 custodial supplies:TCSD park sites 73.79 custodial supplies:TCSD park sites 18.45 custodial supplies:TCSD park sites 43,64 1,810.93 152551 06/14/2012 006612 WEATHERPROOFING TECH, roof inspection srvcs: ymca 560.00 560.00 INC 152552 06/14/2012 003730 WEST COAST ARBORISTS INC 5/1-15/12 TREE TRIMMING SRVCS:PW 1,372.00 1,372.00 MAINT 152553 06/14/2012 000339 WEST PUBLISHING CORP 4/5-5/4 judicial updates: City Clerk 176.72 176.72 152554 06/14/2012 014687 WESTBROOK FENCE, INC. Release retention:Duck Pond fence 5,009.10 5,009.10 152555 06/14/2012 000621 WESTERN RIVERSIDE Jan -Mar srvcs:Corridor pin/Jefferson 16,342.07 16,342.07 COUNCIL OF 152556 06/14/2012 000341 WILLDAN ASSOCIATES INC Apr feasibility study: GOHS ped access 720.00 720.00 152557 06/14/2012 001624 WILSON, GENIE Reimb:renew CPA license 120.00 120.00 152558 06/14/2012 006290 WOODCREST VEHICLE install radio switch:Police 90.00 90.00 CENTER 152559 06/14/2012 000348 ZIGLER, GAIL Reimb:heater parts/conf. center 86.96 Reimb:NLC Conf/Artists Gallery 801.15 Reimb:NLC Conference 6/8 & 6/9 460.52 1,348.63 (Reimbursed by NLC) 152560 06/14/2012 003776 ZOLL MEDICAL CORPORATION Medical supplles: Medics 1,978.07 1,978.07 Grand total for UNION BANK OF CALIFORNIA: 5,590,003.65 Page:11 apChkLst Final Chock List Page: 12 06/14/2012 3:01:15PM CITY OF TEMECULA 145 checks In thin report. Grand Total All Checks. 5,590,003.85 Page.i2 apChkLst Final Check List Page: 1 06/21/2012 3:20:32PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor Description Amount Paid Check Total 1946 06/21/2012 010349 CALIF DEPT OF CHILD Support Payment 1,176.34 1,176.34 SUPPORT 1947 06/21/2012 000444 INSTATAX (EDD) State Disability Ins Payment 22,450.40 22,450.40 1948 06/21/2012 000283 INSTATAX (IRS) Federal Income Taxes Payment 80,191.14 80,191.14 1949 06/21/2012 000389 NATIONWIDE RETIREMENT OBRA - Project Retirement Payment 5,341.90 5,341.90 SOLUTION 1950 06/21/2012 001065 NATIONWIDE RETIREMENT Nationwide Retirement Payment 11,341.28 11,341.28 SOLUTION 1951 06/21/2012 000246 PERS (EMPLOYEES' PERS ER Paid Member Contr Payment 131,471.63 131,471.63 RETIREMENT) 99957 06/14/2012 014919 ARBINI, MAGDALINE refund:TVFEE Geography 9600.203 155.00 155.00 99958 06/14/2012 014964 BODDEN, ANJIE refund:bal on acct:Doghouse prgrm 15,00 15.00 99959 06/14/2012 014965 BUDD, KATHRYN refund:TVFEE Pre AP Chemistry 165.00 165.00 99960 06/14/2012 014966 CRAIG, LINDA refund:sec dep:rm rental:Harveston 200.00 200.00 99961 06/14/2012 008577 GUZMAN, BALBINA refund:sec dep:rm rental:Harveston 200.00 200.00 99962 06/14/2012 014967 HARTMAN, SARAH refund:TVFEE Pre AP Chemistry 165.00 165.00 99963 06/14/2012 014968 HODGKINSON, ODETTE refund:bal on acct:contracted classes 75.00 75.00 99964 06/14/2012 014969 MCWILLIAMS, TRISTA refund:Kids cooking mini camp 160.00 160.00 99965 06/14/2012 014970 MIRANDA, BEATRIZ refund:Exploring the world of bks 40.00 40.00 99966 06/14/2012 014971 NICHOLS, KAELA refund:TVFEE Health 9600.207 155.00 155.00 99967 06/14/2012 014972 NUSSBAUM, JULIANNE refund:TVFEE Health 9600.206 155.00 155.00 Pagel apChkLst Final Check List 06/21/2012 3:20:32PM CITY OF TEMECULA Page: 2 Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor 99968 06/14/2012 014973 RODRIGUEZ, LINDA 99969 06/14/2012 014974 ROTHERMUND, ALECIA 99970 06/14/2012 014975 T.V.G.A. 99971 06/14/2012 014976 WINDLER, MIKE 99972 06/14/2012 014977 WILSON, DENISE 99973 06/14/2012 014978 YAM, HEI 152561 06/21/2012 014695 ALL AMERICAN MOTORSPORTS, INC 152562 06/21/2012 006915 ALLIE'S PARTY EQUIPMENT (Continued) 152563 06/21/2012 012943 ALPHA MECHANICAL SERVICE INC 152564 06/21/2012 004240 AMERICAN FORENSIC NURSES (AFN) 152565 06/21/2012 000936 AMERICAN RED CROSS 152566 06/21/2012 014235 AND ALL THAT JAZZ 152567 06/21/2012 004623 AQUA SOURCE INC 152568 06/21/2012 013671 ATHENS TECHNICAL SPECIALISTS 152569 06/21/2012 005709 BAMM PROMOTIONAL PRODUCTS 152570 06/21/2012 014782 BARRY, GEORGE Description refund:TVFEE Health 9600.207 refund:Bear club univ 4015.202 refund:sec dep:rm rental:Harveston refund:bal an acct:contracted classes refund:sec dep:rm rental:TCC refund:Music for Toddlers 1125.201 bicycle repair/malnt: Police bicycle repair/malnt: Police bicycle repair/maint: Police equip rental: Mayor's event 6/9 HVAC repair: harveston park hvac repair: mpsc HVAC repair: Harveston DUI & drug screenings: Police DUI & drug screenings: Police misc lifeguard supplies:aquatics misc lifeguard supplies: aquatics mist supplies: aquatics lifeguard re -cert cards:aquatics TCSD Instructor Earnings TCSD Instructor Earnings TCSD Instructor Earnings chlorine tablets: tes pool equip repair/maint: pw traffic adult softball awards:sports pgrm staff & camper shirts: day camp performance:summer concert 6/21 Amount Paid Check Total 155.00 280.80 200.00 20.00 150.00 54.00 383.00 130.36 374.75 1,801.23 338.19 260.81 221.57 241.90 199.52 171.00 70.00 247.00 756.00 273.00 227.50 136.50 3,376.78 585.00 5,387.50 2,133.45 1,500.00 155.00 280.80 200.00 20.00 150.00 54.00 888.11 1,801.23 820.57 441.42 1,244.00 637.00 3,376.78 585.00 7,520.95 1.500.00 Page2 apChkLst 06/21/2012 3:20:32PM Final Check List CITY OF TEMECULA Page: 3 Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor 152571 06/21/2012 013356 BATES INDUSTRIES INC 152572 06/21/2012 004040 BIG FOOT GRAPHICS 152573 06/21/2012 014284 BLAKELY'S TRUCK SERVICE 152574 06/21/2012 014329 BOOK WHOLESALERS, INC 152575 06/21/2012 014299 BOOKS ON TAPE 152576 06/21/2012 014433 BOWCON COMPANY, INC 152577 06/21/2012 006437 BRANDEL MASONRY SUPPLIES 152578 06/21/2012 004126 BROOKS, JIM (Continued) Description uniforms: police TCSD instructor earnings VEHICLE REPAIR/MAINT: PW MAINT VEHICLE REPAIR/MAINT: PW MAINT VEHICLE REPAIR/MAINT: PW MAI NT VEHICI E REPAIR/MAINT: PW MAINT VEHICLE REPAIR/MAINT: PW MAINT credit: shipping charge inv 124106E credit: shipping charge inv 121953E (22) BOOKS: LIBRARY (5) BOOKS: LIBRARY (4) BOOKS: LIBRARY (11) BOOKS: LIBRARY (9) BOOKS: LIBRARY (4) BOOKS: LIBRARY (6) BOOKS: LIBRARY (7) BOOKS: LIBRARY (7) BOOKS: LIBRARY (1) BOOK: LIBRARY credit: shipping charge inv 121067E credit: shipping charge inv 120918E (8) BOOKS: LIBRARY (14) BOOKS: LIBRARY (7) BOOKS: LIBRARY (56) BOOKS: LIBRARY (3) BOOKS: LIBRARY (72) BOOKS: LIBRARY (2) BOOKS: LIBRARY (4) BOOKS: LIBRARY (2) BOOKS ON TAPE: LIBRARY (2) BOOKS ON TAPE: LIBRARY release retention: PW05-11 refund:overpmt prkg cite:83240 Entertainment: Western Days 5/19-20 152579 06/21/2012 000128 BROWN & BROWN INSURANCE ins 6304168X28A prop:harveston Amount Pald Check Total 947.65 1,137.50 88.00 417.67 128.00 694.33 563.55 -4.95 -4.95 328,44 69.01 69.59 135.88 92.22 63.41 63.24 74.18 87.20 17.47 -4.95 -4.95 120.06 221,72 126.08 952.38 60.92 807.96 23.90 64.38 60.61 56.57 63,237.96 30.00 650.00 947.65 1,137.50 1,691.55 3,358.24 117.18 63,237.96 30.00 650.00 470.00 470.00 Page:3 apChkLst Final Check List 06/21/2012 3:20:32PM CITY OF TEMECULA Page: 4 Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor 152580 06/21/2012 014961 BRYANT, ODISE 152581 06/21/2012 006908 C C & COMPANY INC 152582 06/21/2012 004462 C D W GOVERNMENT INC 152583 06/21/2012 003138 CAL MAT 152584 06/21/2012 004248 CALIF DEPT OF JUSTICE-ACCTING 152585 06/21/2012 004566 CALIF DEPT -TOXIC SUB CONTROL (Continued) 152586 06/21/2012 004566 CALIF DEPT -TOXIC SUB CONTROL 152587 06/21/2012 007146 CALIFORNIA SENSOR CORP 152588 06/21/2012 004228 CAMERON WELDING SUPPLY 152589 06/21/2012 004971 CANON FINANCIAL SERVICES, INC 152590 06/21/2012 009640 CERTIFION CORPORATION 152591 06/21/2012 014726 CHAPTER 13 STANDING TRUSTEE 152592 06/21/2012 000137 CHEVRON AND TEXACO 152593 06/21/2012 005417 CINTAS FIRST AID & SAFETY Description , refund:sec dep:rm rental:TCC performance:Mayor's event 6/9 COMPUTER EQUIP: INFO TECH credit: (2) fortinet fortlgate misc supplies: info tech misc supplies: info tech misc supplies: info tech misc supplies: info tech PW PATCH TRUCK MATERIALS PW PATCH TRUCK MATERIALS PW PATCH TRUCK MATERIALS PW PATCH TRUCK MATERIALS PW PATCH TRUCK MATERIALS PW PATCH TRUCK MATERIALS DUI & drug screenings: Police DUI & drug screenings: Police mb: REA 1-06495 Licitra, Aldo epa verification id: CAL000212813 retrofit kits: calsense local radios helium tank refills: recreation events Jun copier lease: civic center May copier lease: Fire Dept May database subscr: police Amount Paid Check Total 150.00 700.00 2,755.13 -2,201.88 248.99 634.85 620.26 104.27 1,174.44 151.18 453.04 41.10 74.35 120.44 2,275.00 70.00 100.00 22.50 10,667.25 58.15 3,004.54 182.55 150.00 150.00 700.00 2,161.62 2,014.55 2,345.00 100.00 22.50 10,667.25 58.15 3,187.09 150.00 SUPPORT PMT 182.77 182.77 City vehicles fuel: Police 2,419.60 2,419.60 first aid supplies: Fld Op Ctr/PW 330.40 330.40 Page;4 apChkLst Final Check List Page: 5 06/21/2012 3:20:32PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor Description 152594 06/21/2012 003997 COAST RECREATION INC playground equip parts: tcsd parks 152595 06/21/2012 004405 COMMUNITY HEALTH Community Health Charities Payment CHARITIES 152596 06/21/2012 000442 COMPUTER ALERT SYSTEMS Alarm Repair: Stn 95 Amount Paid Check Total 1,530.48 1,530.48 51.00 51.00 75.00 75.00 152597 06/21/2012 002945 CONSOLIDATED ELECTRICAL misc electrical supplies: clvic ctr 162.97 DIST. misc electrical supplies: old town 48.49 misc electrical supplies: clvic ctr 109.91 misc electrical supplies: Theater 243.78 misc electrical supplies: parking str 291.46 856.61 152598 06/21/2012 014521 COSTAR GROUP JUNE WEBSITE SUBSCR: ECO DEV 348.00 348.00 INFORMATION, INC 152599 06/21/2012 001264 COSTCO WHOLESALE misc supplies: human services shelving: Library 152600 06/21/2012 013379 COUSSOU, CELINE TCSD Instructor Earnings TCSD Instructor Earnings 152601 06/21/2012 013560 CROWN BUILDING MAINT CO MAY JANITORIAL SVCS: HARVESTON INC 291.05 888.72 1,179.77 560.00 518.00 1,078.00 233.96 MAY JANITORIAL SVCS: FLD OP CTI 763,80 MAY JANITORIAL SVCS: HARVESTC 131.84 MAY JANITORIAL SVCS: CITY FACIL 4,077.02 5,206.62 152602 06/21/2012 003272 DAISY WHEEL RIBBON plotter ink/paper supplies: info tech 773.27 773.27 COMPANY INC 152603 06/21/2012 011027 DEL RIO ENTERPRISE INC. hardscape improvements:duck pond 29,695.98 29,695.98 152604 06/21/2012 010461 DEMCO INC misc holder/display stands: Library 1,338.64 1,338.64 152605 06/21/2012 007057 DERNBACH, ESTHER MARIE TCSD instructor earnings 731.50 731.50 152606 06/21/2012 003945 DIAMOND ENVIRONMENTAL Jun portable restrooms: veterans pk 52.78 SRVCS 152607 06/21/2012 004222 DIAMONDBACK FIRE & RESCUE, INC Jun portable restrooms: Ing cyn pk 52.78 portable restrooms: st painting 6/21 356.99 Jun portable restrooms: vail ranch 52.78 Jun portable restrooms: riverton pk 52.78 Jun portable restrooms: GOHS 52.78 620.89 Fire equip maint: Stn 84 440.00 440.00 Page:5 apChkLst Final Check List Page: 8 06/21/2012 3:20:32PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor Description 152608 06/21/2012 014301 DUNAMIX DANCE PROJECT sttlmnt: Praise Him w/Dancing 6/9-10 152609 06/21/2012 001669 DUNN EDWARDS graffiti removal supplies: pw maint CORPORATION Amount Paid Check Total 1,049.52 1,049.52 399.27 399.27 152610 06/21/2012 007319 EAGLE ROAD SERVICE & TIRE VEHICLE REPAIR/MAINT: PW MAINT 228.41 INC VEHICLE REPAIR/MAINT: PW MAINT 243.44 VEHICLE REPAIR/MAINT: PW MAINT 1,984.33 VEHICLE REPAIR/MAINT: PW MAINT 456.82 2,913.00 152611 06/21/2012 005880 EDGE DEVELOPMENT INC.- C/0 release stop notice: AAA Roofing 75,527.06 75,527.06 152612 06/21/2012 004829 ELLISON WILSON ADVOCACY Jun legislative cnslt svcs: CM 3,500.00 3,500.00 LLC 152613 06/21/2012 009618 ENNIS PAINT INC Traffic Paint: PW Maint 5 656.88 traffic paint: tcsd parks 1,899.09 7,555.97 152614 06/21/2012 011203 ENVIRONMENTAL CLEANING May restroom svc: tcsd parks 5,265.00 5,265.00 152615 06/21/2012 010804 FEHR & PEERS ASSOCIATES FEB CNSLT SVC: JEFFERSON 14,904.97 CORRIDOR MAR CNSLT SVC: JEFFERSON COR 38,148.47 53,053.44 152616 06/21/2012 003747 FINE ARTS NETWORK rent/foh: les sylphide ballet 175.00 175.00 Page apChkLst 06/21/2012 3:20:32PM Final Check List CITY OF TEMECULA Page: 7 Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor (Continued) 152617 06/21/2012 003347 FIRST BANKCARD CENTER 013338 APPLE STORE 013338 APPLE STORE 008956 PANERA BREAD 014583 PALUMBO'S RISTORANTE, LLC 004822 RIVERSIDE TRANSIT AGENCY 003395 TEMECULA, CITY OF 013338 APPLE STORE 014979 PALOMAR VILLAGE CLEANERS 013338 APPLE STORE 012820 ROCK OLA 014980 UNIVERSITY OF CALIFORNIA 014564 NATIONAL BUSINESS INCUBATION 014564 NATIONAL BUSINESS INCUBATION 004200 VERIZON WIRELESS LLC 014564 NATIONAL BUSINESS INCUBATION 000747 AMERICAN PLANNING ASSOCIATION 013338 APPLE STORE 013338 APPLE STORE 013338 APPLE STORE 012915 LUCILLE'S BBQ 014981 SQUARETRADE.COM 014981 SQUARETRADE.COM 004910 GLOBAL EQUIPMENT COMPANY INC 004811 HEWLETT PACKARD 010865 CONSTANT CONTACT INC 012915 LUCILLE'S BBQ Description MH iPad: serial # dmphlfjpdfhw MH applecare for iPads:info tech RJ lunch: cm mtg 5/16 RJ lunch:csusm/uhs/tvhs mtg 5/31 RJ rta tickets: NLC mtgs RJ tickets:NLC Jazz alt Merc 6/7 (Sponsored by Lennar) MH apps for autism: info tech GB drapery cleaning:Harveston GB iPad: serial # dmphn869dnqr GB parts: juke box Ch Museum PR regist:enviro hlth/sfty Weaver,Dana PR mb: CK/LW/CD PR refund: mb CK/LW/CD PR verizon iPad: comm dev PR nbia manual: econ dev PR APA publication: Planning PR iPad: serial # dmphn5cddngr PR applecare for iPad: planning PR sync cable iPad: planning PR meal:pin comm/council 6/6 MH warranty: 2 yr ADH phone/pda MH warranty: 2 yr ADH phone/pda MH 36" mat: info tech MH 10 power cords: Info Tech MH domain name: temeculagov MH Apr bank transaction fees SJ meal: closed council mtg 5/22 Amount Paid Check Total 1,281.97 267.30 88.28 96.71 345.60 720.00 300.00 150.00 782.75 85.39 245.00 525.00 -525.00 792.56 73.00 68.00 782.75 99.00 32.27 122.00 99.99 94.99 48.63 235.16 200.00 77.31 291.38 7,380.04 Page:7 apChkLst Final Check List Page: 8 06/21/2012 3:20:32PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor Description Amount Paid Check Total 152618 06/21/2012 002982 FRANCHISE TAX BOARD SUPPORT PAYMENT 50.00 50.00 152619 06/21/2012 003946 G T ENTERTAINMENT dj/mc svcs: FAM pool party 6/11 250.00 emcee svc:street painting 6/24 300.00 550.00 152620 06/21/2012 013552 GANDS PRODUCTIONS LLC sttlmnt: Country at the Merc 6/16 785.25 785.25 152621 06/21/2012 013076 GAUDET, YVONNE M. TCSD instructor earnings 864.50 864.50 152622 06/21/2012 000177 GLENNIES OFFICE PRODUCTS Office Supplies: Finance 248.04 248.04 INC 152623 06/21/2012 003299 HAYES, BARNEY entertalnment:Western Days 5/19 400,00 400.00 152624 06/21/2012 000194 ICMA RETIREMENT -PLAN ICMA Retirement Trust 457 Payment 6,494.51 6,494.51 303355 152625 06/21/2012 006750 KB HOME COASTAL, INC. refund:eng grad dep:LD03-065GR 995.00 995.00 152626 06/21/2012 003975 LAWRENCE, JEFF employee computer loan program 582.84 582.84 152627 06/21/2012 010427 LILLI, LYDIA A sttlmnt: Comedy at the Merc 6/9 804.30 804.30 152628 06/21/2012 013188 LINFIELD CHRISTIAN SCHOOL refund:sec dep:picnic rental:RRSP 150.00 150.00 152629 06/21/2012 004141 MAINTEX INC Misc cleaning supplies:citywide 2,542.79 2,542.79 152630 06/21/2012 014184 MALCOLM SMITH Veh repair & maint:police 678.04 MOTORCYCLES, INC Veh repair & maint:pollce 1,433.31 Veh repair & maint:police 425.78 Veh repair & maint:police 544.72 Veh repair & malnt:police 516.89 Veh repair & maint:police 344.44 3,943.18 152631 06/21/2012 011179 MC MILLIN REDHAWK LLC TCSD Instructor Earnings 630.00 630.00 152632 06/21/2012 009835 MIRACLE PLAYGROUND playground equip:winchester crk park 1,481.91 1,481,91 SALES INC 152633 06/21/2012 014719 MK PRESTIGE BUILDERS, INC. May prgs pmt:crc roof replace 10,134.84 10,134.84 Page:8 apChkLst 06/21/2012 3:20:32PM Final Check List CITY OF TEMECULA Page: 9 Bank : union UNION BANK OF CALIFORNIA Check # Date Vendor 152634 06/21/2012 010168 MYERS & SONS HI -WAY SAFETY INC (Continued) 152635 06/21/2012 003964 OFFICE DEPOT BUSINESS SVS DIV 152636 06/21/2012 001171 ORIENTAL TRADING COMPANY INC 152637 06/21/2012 002800 PACIFIC STRIPING INC 152638 06/21/2012 012833 PC MALL GOV, INC. 152639 06/21/2012 014048 PERREAULT, MIKE P. 152640 06/21/2012 010338 POOL & ELECTRICAL PRODUCTS INC 152641 06/21/2012 000254 PRESS ENTERPRISE COMPANY INC 152642 06/21/2012 003155 PRICE CHOPPER INC Description TRAFFIC CONTROL SUPPLIES:PW MAINT Misc office supplies:public works MISC OFFICE SUPPLIES:CENTRAL MISC OFFICE SUPPLIES:PD MALL 0 MISC OFFICE SUPPLIES:PD MALL 0 Misc office supplies:public works Printing srvcs: csd Misc supplies:crc Misc supplies:recreation pgrm Street striping: Roripaugh Rd Amount Paid Check Total (6) Printers:info tech Performance:summer concert series 6/28 pool supplies & chemicals: citywide credit:pool supplies & chemicals/ctywic pool supplies & chemicals: citywide Advertising:Mayor's Block Party Wristbands:aquatics pgrm 152643 06/21/2012 010491 PRIORITY MAILING SYSTEMS Postage meter ink cartridges:Cntrl Srvcs INC. 152644 06/21/2012 004457 R J NOBLE COMPANY 152645 06/21/2012 000262 RANCHO CALIF WATER DISTRICT 152646 06/21/2012 003591 RENES COMMERCIAL MANAGEMENT credit:billing adj/pvmnt rehab-wnchstr Apr prgs pmt:pvmnt rehab-wnchstr rd no ret. prjt complete:pvmnt Jun var water meters:TCSD svc lev C May Lndscp water meter:40135 Village May D.C. meter:Landings Rd May Lndscp water meter:41951 Morag; May water meter:Calle Elenita Mow 33 city owned acres 152647 06/21/2012 005807 RESOURCE STRATEGIES INC Digital aerial imagery:info tech GIS 1,978.29 360.46 34.58 29.37 133.38 31.38 363.04 59.00 808.50 16,711.00 1,803.74 1,500.00 236.41 -236.41 188.57 795.00 319.40 732.80 -6,522.20 83,865.07 4,413.97 19,868.29 348.79 18.59 1,331.24 75.33 2,800.00 8,404.50 1,978.29 952.21 867.50 16,711.00 1,803.74 1,500.00 188.57 795.00 319.40 732.80 81,756.84 21,642.24 2,800.00 8,404.50 Page apChkLst Final Check List Page: 10 06/21/2012 3:20:32PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor Description Amount Paid Check Total 152648 06/21/2012 000353 RIVERSIDE CO AUDITOR May '12 prkg citation assessments 4,533.50 4,533.50 152649 06/21/2012 000815 ROWLEY, CATHY TCSD Instructor Earnings 966.00 966.00 152650 06/21/2012 000277 S & S ARTS & CRAFTS INC Misc supplies:recreation pgrm 779.01 779.01 152651 06/21/2012 009196 SACRAMENTO THEATRICAL MISC LIGHTING SUPPLIES: THEATER 1,046.56 1,046.56 LIGHTING 152652 06/21/2012 011511 SCUBA CENTER TEMECULA TCSD Instructor Earnings 28.00 TCSD Instructor Earnings 504.00 532.00 152653 06/21/2012 014962 SEEDSOWERS MONTESSORI refund:picnic rental:Harveston Comm 60.00 60.00 152654 06/21/2012 006554 SHAFFER, FRED Performance:street painting festival 500.00 500.00 152655 06/21/2012 008529 SHERIFF'S CIVIL DIV - SUPPORT PAYMENT 100.00 100.00 CENTRAL 152656 06/21/2012 009213 SHERRY BERRY MUSIC Jazz @ the Merc 06/07/12 521.00 Jazz @, the Merc 06/14/12 325.50 846.50 152657 06/21/2012 009746 SIGNS BY TOMORROW PUBLIC NOTICE POSTING XX -0059: 296.20 PLANNING PUBLIC NOTICE POSTING XX -0032: 54.65 350.85 152658 06/21/2012 000645 SMART & FINAL INC Misc supplies:day camp pgrm 812.85 MISC SUPPLIES:HIGH HOPES PGR 263.61 MISC SUPPLIES:SUMMER MOVIES/( 703.06 misc supplies:NLC Conf 6/8 293.24 2,072.76 152659 06/21/2012 000537 SO CALIF EDISON May 2-27-560-0625:32380 Deerhollow 2,328.14 May 2-30-296-9522:31035 Rancho vist 235.71 May 2-00-397-5059:Comm Svc UTL 7,673.75 May 2-31-693-9784:26036 Ynez TC1 364.74 May 2-29-974-7568:26953 Ynez TC1 119.34 10,721.68 152660 06/21/2012 000519 SOUTH COUNTY PEST Pest control srvcs:crc 94.00 CONTROL INC Pest control srvcs:citywide fac's Pest control srvcs:flre station 73 Pest control srvcs:fire stn 73 PEST CONTROL SRVCS:PBSP Pest control srvcs:la serena park 152661 06/21/2012 005786 SPRINT Apr 26 -May 25 cellular usage/equip 816.00 48.00 90.00 70.00 94.00 1,212.00 5,453.10 5,453.10 Page:10 apChkLst Final Check List Page: 11 06/21/2012 3:20:32PM CITY OF TEMECULA Bank : union UNION BANK OF CALIFORNIA (Continued) Check # Date Vendor 152662 06/21/2012 000293 STADIUM PIZZA INC Description Refreshments:csd expo 5/30 REFRESHMENTS:CSD EXPO 5/12 Refreshments:staff trng 6/12 Rfrshmnts:mayors beach ball blck part Amount Paid Check Total 150.56 91.47 34.86 250.51 152663 06/21/2012 002015 STAR WAY PRODUCTIONS sound system:mayor's beach ball party 2,700.00 audio services:light parade 12/2 915.00 audio services:santa's arrival 11/25 240.00 152664 06/21/2012 000305 TARGET BANK BUS CARD Mlsc.rec supplies:sports pgrm 86.45 SRVCS 527.40 Misc supplies:crc 4.27 Misc suppiies:recreation pgrm 67.66 Misc suppiies:recreation pgrm 137.51 Misc supplies:aquatics pgrm 486.42 Misc suppiies:recreation pgrm 86.29 Misc supplles:recreation pgrm 445.47 Misc suppiies:chiidrens museum 183.80 MISC SUPPLIES:CHILDRENS MUSEI 21.47 MISC SUPPLIES:MPSC 78.53 1,597.87 152665 06/21/2012 012265 TEMECULA ACE HARDWARE MISC HARDWARE SUPPLIES:CSD 5.95 C/O MAINT 152666 06/21/2012 010679 TEMECULA AUTO Vehicle maint: Prevention 894.09 894.09 REPAIR/RADIATOR 152667 06/21/2012 000168 TEMECULA FLOWER CORRAL Sunshine Fund 203.45 203.45 152668 06/21/2012 000515 TEMECULA VALLEY CHAMBER Apr -Jun Sponsorship FY 11/12 34,065.00 34,065.00 OF 152669 06/21/2012 010046 TEMECULA VALLEY Apr'12 Bus. Impry DistrictAsmnts 90,755.08 CONVENTION & promo items:NLC Conf 6/8 174.75 90,929.83 152670 06/21/2012 009194 TEMECULA VALLEY NEWS MAY ADVERTISING:THEATER 143.20 143.20 152671 06/21/2012 005970 TEMECULA VALLEY PLAYERS Ticket sales advance:Oliver Jun '12 4,189.82 4,189.82 152672 06/21/2012 004274 TEMECULA VALLEY SECURITY Locksmith srvcs: Aquatics 70.04 70.04 CENTR 152673 06/21/2012 014963 TEMECULA VALLEY UNIFIED refund:sec dep:picnic rental:RRSP 200.00 200.00 152674 06/21/2012 010276 TIME WARNER CABLE Jun high speed Internet:32211 Wolf vly 102.17 102.17 Page:11 apChkLst Final Check List Page: 12 06/21/2012 3:20:32PM CITY OF TEMECULA Bank • union UNION BANK OF CALIFORNIA Check # Date Vendor (Continued) 152675 06/21/2012 000668 TIMMY D PRODUCTIONS INC 152676 06/21/2012 013084 TRI STATE PUMP INC 152677 06/21/2012 000325 UNITED WAY 152678 06/21/2012 014265 VAN GONKA, JEFF 152679 06/21/2012 004261 VERIZON 152680 06/21/2012 004789 VERIZON 152681 06/21/2012 009101 VISION ONE INC 152682 06/21/2012 014480 WARREN, DALE 152683 06/21/2012 014960 WENDT ENTERPRISES INC. 152684 06/21/2012 003730 WEST COAST ARBORISTS INC Description Equip rental:Mayor's Beach Ball Party lake pump: harveston lake park United Way Charities Payment exhibits & display maint:child museum Jun xxx-0073 general usage Jun Internet svcs:Civic Center Jun Internet svcs:Library MAY SHOWARE TICKETING SRVCS:THEATER Amount Paid Check Total REFUND:OVERPMT OF EVENT:PICNIC SHELTER refund:permit not needed:F12-0374 5/1-15 tree maint srvcs: parks & medians emerg tree trim & removal:vintage hills EMERG TREE TRIM & REMOVAL:LA 725.00 725.00 3,549.97 3,549.97 5 C 51.00 8,400.00 8,400.00 91.95 91.95 269.99 0.08 270.07 1,452.00 1,452.00 10.00 10.00 846.00 846.00 478.00 1,176.00 1,848.00 3,502.00 926,170.64 Grand total for UNION BANK OF CALIFORNIA: Page:12 ajChkLst Final Check List Page: 13 O6/2112012 3:20:32PM CITY OF TEMECULA 147 checks in this report. Grand Total All Checks: :�%'i i7? Item No. 4 Approvals City Attorney Chief Financial Officer City Manager Mr - go CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Genie Wilson, Chief Financial Officer DATE: July 10, 2012 SUBJECT: City Treasurer's Report as of May 31, 2012 PREPARED BY: Rudy Graciano, Revenue Manager RECOMMENDATION: Approve and file the City Treasurer's Report as of May 31, 2012. BACKGROUND: Government Code Sections 53646 and 41004 require reports to the City Council regarding the City's investment portfolio, receipts, and disbursements respectively. Adequate funds will be available to meet budgeted and actual expenditures of the City for the next six months. Current market values are derived from the Local Agency Investment Fund (LAIF) reports, Union Bank of California trust and custody statements, and from US Bank trust statements. Attached is the City Treasurer's Report that provides this information. The City's investment portfolio is in compliance with the statement of investment policy and Government Code Sections 53601 and 53635 as of May 31, 2012. FISCAL IMPACT: None. ATTACHMENTS: City Treasurer's Report as of May 31, 2012 Investments City of Temecula, California Portfolio Management Portfolio Summary May 31, 2012 City of Temecula 41000 Main Street P.O. Box 9033 Temecula, CA, 92590 (951)694-6430 Par Market Book %of Days to YTM YTM Value Value Value Portfolio Term Maturity 360 Equiv. 365 Equiv. Managed Pool Accounts 57,754,456.55 57,754,456.55 57,754,456.55 41.26 1 1 0.233 0.236 Retention Escrow Account 6,976,298.44 6,976,298.44 6,976,208.44 4.34 1 1 9.909 0.000 Letter of Credit 1.00 1.09 1.00 0.00 1 1 9.999 9.999 Local Agency Investment Funds 41,158,853.79 41,202,449.53 41,158,853.79 29.49 1 1 9.358 9.363 Federal Agency Callable Securities 15,999,999.99 15,150,530.00 15,999,999.99 10.72 1,516 983 1.784 1.808 Federal Agency Bullet Securities 20,999,999.99 20,168,749.99 19,988,759.99 14.28 1,234 774 1.198 1.215 Investments 139,989,519.69 140,352,385.52 139,978,269.69 100.00% 339 217 0.564 0.571 Cash Passbook/Checking (not included in yield calculations) Total Cash and Investments 6,930,554.55 146,920,074.24 6,930,554.55 h,931E,554.55 1 1 9.999 9.999 147,282,940.07 146,908,824.24 339 217 0.564 0.571 Total Earnings May31 Month Ending Fiscal Year To Date Current Year 63,050.95 871,982.92 Average Daily Balance 132,075,802.27 140,111,248.10 Effective Rate of Return 0.56% 0.68% Reporting period 05/01/2012-05/31/2012 Run Date: 08/20/2012 -10:44 Portfolio TEME CP PM (PRF_PM1) SymRept8.42 Report Ver. 5.00 CUSIP City of Temecula, California Portfolio Management Portfolio Details - Investments May 31, 2012 Page 2 Average Purchase Stated YTM YTM Days to Maturity Investment# Issuer Balance Date Par Value Market Value Book Value Rate 360 365 Maturity Date Managed Pool Accounts 1 2221 6003-2 CITY COP RE2 ASSURED GUARANTY 0.00 0.00 0.00 1.000 0.986 1.000 1 104348008-1 01-2 IMP 2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 104348006-4 01-2 RESA2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 104348016-3 01-2 RESB2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 104348000-4 01-2 SPTAX2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94669911-2 03-1 ACQA2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94669921-3 03-1 ACQB3 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94669902-3 03-1 BON D3 First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 94669906-3 03-1 RES A3 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94669916-2 03-1 RES B2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94669900-4 03-1 SPTAX1 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593011-2 03-2 ACQ 2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593009-2 03-2 EMW D 2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593007-2 03-2 IMP 2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593016-4 03-2 LOC 2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593010-2 03-2 PWADM2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593006-2 03-2 RES 2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 793593000-3 03-2 SPTX2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 744727011-2 03-3 ACQ2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 744727002-2 03-3 BOND 2 First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 744727007-2 03-3 CITY2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 744727009 03-3 EMW D 1 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 744727006-3 03-3 RES3 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 744727000-4 03-3 SP TX 4 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94686001-2 03-4 ADMIN2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94686005-1 03-4 PREP1 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94686000-1 03-4 RED1 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94686006-2 03-4 RES2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 786776002-2 03-6 BON D2 First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 786776007-2 03-6 IMP2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 786776006-2 03-6 RES2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 786776000-3 03-6 SP TX3 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 95453510-2 88-12 BON D2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 95453518-4 88-12 GI4 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 1 2221 6003-4 CITY COP RE4 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 122216008-3 CITY COPCIP2 First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 1 2221 600 0-2 CITY COPLPF2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94434160-1 RDA 02 INTI First American Treasury 0.00 0.00 0.00 0.000 0.000 1 94 43 41 61-2 RDA 02 PRIN2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 Run Date: 06120!2012 - 10:44 Portfolio TEME CP PM (PRF_PM2) SymRept 6.42 Report Ver. 5.00 CUSIP City of Temecula, California Portfolio Management Portfolio Details - Investments May 31, 2012 Page 3 Average Purchase Stated YTM YTM Days to Maturity Investment # Issuer Balance Date Par Value Market Value Book Value Rate 360 365 Maturity Date Managed Pool Accounts 107886008-2 RDA 06 CIPA2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 107886001 RDA 06 PRIN First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 107886000-2 RDA O6A INT2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 107886018-3 RDA 06B CIP3 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 107886010-2 RDA O6B INT2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 107886016-2 RDA 06B RES2 First American Treasury 202,121.21 202,121.21 202,121.21 0.020 0.020 0.020 1 107886030-2 RDA 07 CAPI2 First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 107886027-2 RDA 07 ESC2 First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 107886020-2 RDA 07 INT2 First American Treasury 0.00 0.00 0.00 0.000 0.000 1 107886028-2 RDA 07 PROJ2 First American Treasury 209,286.04 209,286.04 209,286.04 0.020 0.020 0.020 1 107886026-2 RDA 07RES2 First American Treasury 1,111,066.56 1,111,066.56 1,111,066.56 0.020 0.020 0.020 1 136343006 RDA 10 DS 1 First American Treasury 1,269,739.20 1,269,739.20 1269,739.20 0.020 0.020 0.020 1 136343008 RDA 1 OA CIP2 First American Treasury 07/01/2011 19,945.89 19,945.89 19,945.89 0.020 0.020 0.020 1 136343001-2 RDA 10A -INTI First American Treasury 07/28/2011 0.00 0.00 0.00 0.000 0.000 1 136343018-2 RDA 10B CIP2 First American Treasury 07/01/2011 1,184,398.40 1,184,398.40 1,184,398.40 0.020 0.020 0.020 1 136343000-1 RDA 106 -INTI First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 94432360-2 TCSD COP INT First American Treasury 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 104348006-5 01-2 RESA11 Federated Tax Free Obligations 440,442.48 440,442.48 440,442.48 0.090 0.089 0.090 1 104348016-5 01-2 RESB11 Federated Tax Free Obligations 202,754.06 202,754.06 202,754.06 0.090 0.089 0.090 1 104348000-5 01-2 SPTAX11 Federated Tax Free Obligations 256,864.62 256,864.62 256,864.62 0.090 0.089 0.090 1 94669921-5 03-01 ACQ11 Federated Tax Free Obligations 15,126.31 15,126.31 15,126.31 0.090 0.089 0.090 1 94669911-5 03-01 ACQA11 Federated Tax Free Obligations 388.89 388.89 388.89 0.090 0.089 0.090 1 94669906-5 03-01 RESA11 Federated Tax Free Obligations 864,118.18 864,118.18 864,118.18 0.090 0.089 0.090 1 94669916-5 03-01 RESB11 Federated Tax Free Obligations 222,867.50 222,867.50 222,867.50 0.090 0.089 0.090 1 94669000-5 03-01SPTAX11 Federated Tax Free Obligations 221,401.24 221,401.24 221,401.24 0.090 0.089 0.090 1 786776006-5 03-06 RES11 Federated Tax Free Obligations 337,917.18 337,917.18 337,917.18 0.090 0.089 0.090 1 786776000-5 03-06SPTAX11 Federated Tax Free Obligations 214,438.90 214,438.90 214,438.90 0.090 0.089 0.090 1 793593011-5 03-2 ACQ11 Federated Tax Free Obligations 820,753.14 820,753.14 820,753.14 0.090 0.089 0.090 1 793593009-5 03-2 EMW D11 Federated Tax Free Obligations 5,191.09 5,191.09 5,191.09 0.090 0.089 0.090 1 793593016-5 03-2 LOC1 1 Federated Tax Free Obligations 141,940.41 141,940.41 141,940.41 0.090 0.089 0.090 1 793593010-5 03-2 PWADM11 Federated Tax Free Obligations 397.95 397.95 397.95 0.080 0.079 0.080 1 793593006-5 03-2 RES11 Federated Tax Free Obligations 368.12 368.12 368.12 0.090 0.089 0.090 1 793593000-5 03-2 SPTX Federated Tax Free Obligations 724,876.12 724,876.12 724,876.12 0.090 0.089 0.090 1 793593007-5 03-2-IMPR11 Federated Tax Free Obligations 1,143.91 1,143.91 1,143.91 0.090 0.089 0.090 1 744727006-5 03-3 RES11 Federated Tax Free Obligations 2,171,391.01 2,171,391.01 2,171,391.01 0.090 0.089 0.090 1 744727011-5 03-3ACQ11 Federated Tax Free Obligations 1,397.11 1,397.11 1,397.11 0.090 0.089 0.090 1 94686001-5 03-4 ADMIN11 Federated Tax Free Obligations 5,517.07 5,517.07 5,517.07 0.090 0.089 0.090 1 94686005-5 03-4 PREP11 Federated Tax Free Obligations 0.02 0.02 0.02 0.001 0.001 0.001 1 94686000-5 03-4 RED11 Federated Tax Free Obligations 47,211.55 47,211.55 47,211.55 0.090 0.089 0.090 1 Run Date: 06/20/2012 - 1 0:44 Portfolio TEME CP PM (PRF_PM2) SymRept 6.42 CUSIP City of Temecula, California Portfolio Management Portfolio Details - Investments May 31, 2012 Page 4 Average Purchase Stated YTM YTM Days to Maturity Investment# Issuer Balance Date Par Value Market Value Book Value Rate 360 365 Maturity Date Managed Pool Accounts 94686006-5 03-4 RES11 Federated Tax Free Obligations 744727000-5 03-SSPTAX11 Federated Tax Free Obligations 146161000-5 146161000-5 Federated Tax Free Obligations 1 461 61 006-5 RDA 11 DS11 Federated Tax Free Obligations 146161008-5 RDA 11ACIP11 Federated Tax Free Obligations 1 461 61 009-5 RDA 11ACO111 Federated Tax Free Obligations 94432363 02001 Financial Security Assurance 793593011-1 03-2-1 ACQUI CA Local Agency Investment Fun 793593009-1 03-2-1 EMWD CA Local Agency Investment Fun 793593007-1 03-2-1 IMPRO CA Local Agency Investment Fun 793593010-1 03-2-1 PW AD CA Local Agency Investment Fun 793593006-3 03-2-3 RESER CA Local Agency Investment Fun 1 2221 600 8 CITY COP CIP CA Local Agency Investment Fun 122216003-1 CITY COP RE1 CA Local Agency Investment Fun 107886008-1 RDA 06 CIP-1 CA Local Agency Investment Fun 107886018-2 RDA 06 CIP-2 CA Local Agency Investment Fun 107886030-1 RDA 07 CAP -1 CA Local Agency Investment Fun 107886027-1 RDA 07 ESC -1 CA Local Agency Investment Fun 107886028-1 RDA 07 PRO -1 CA Local Agency Investment Fun 107886026-1 RDA 07 RES -1 CA Local Agency Investment Fun 107886006 RDA 06 RES A MBIA Surety Bond 94434166 RDA TABS RES MBIA Surety Bond SYS95453516-1 95453516-1 USBANK Subtotal and Average 58,110,055.00 73,009.12 73,009.12 73,009.12 0.090 0.089 0.090 1 589,235.71 589,235.71 589,235.71 0.090 0.089 0.090 1 07/27/2011 0.65 0.65 0.65 0.001 0.001 0.001 1 1,308,637.61 1,308,637.61 1,308,637.61 0.090 0.089 0.090 1 13,125,234.92 13,125,234.92 13,125,234.92 0.090 0.089 0.090 1 0.00 0.00 0.00 0.020 0.020 0.020 1 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 26,469,638.45 26,469,638.45 26,469,638.45 0.363 0.358 0.363 1 1,572,526.02 1,572,526.02 1,572,526.02 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 290,438.02 290,438.02 290,438.02 0.363 0.358 0.363 1 3,632,327.32 3,632,327.32 3,632,327.32 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 342.57 342.57 342.57 0.363 0.358 0.363 1 0.00 0.00 0.00 0.363 0.358 0.363 1 1.00 1.00 1.00 0.000 0.000 1 1.00 1.00 1.00 0.000 0.000 1 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 57,754,456.55 57,754,456.55 57,754,456.55 0.233 0.236 1 Retention Escrow Account 194012308-16 RJ NOBLE Bank of Sacramento 12/01/2011 216,508.16 216,508.16 216,508.16 0.000 0.000 1 SYSPI aza Pitnr PI aza Pitnr Wells Fargo Bank 01/01/2012 4,000,032.88 4,000,032.88 4,000,032.88 0.000 0.000 1 PORTOLA TRRC Portola Trrc Wells Fargo Bank 01/01/2012 1,859,667.40 1,859,667.40 1,859,667.40 0.000 0.000 1 Subtotal and Average 6,038,611.30 6,076,208.44 6,076,208.44 6,076,208.44 0.000 0.000 1 Letter of Credit 104348006-1 02008 ASSURANCE CO BOND INSURANCE 07/01/2011 Subtotal and Average 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.000 0.000 1 0.000 0.000 1 Local Agency Investment Funds 94669911-1 03-1 ACQ A2 94669921-1 03-1 ACQ B2 Run Date: 06/20/2012 - 10:44 CA Local Agency Investment Fun CA Local Agency Investment Fun 315,746.98 315,746.98 315,746.96 0.363 0.358 0.363 1 3,910,890.03 3,910,890.03 3,910,890.03 0.363 0.358 0.363 1 Portfolio TEME CP PM (PRF_PM2) SymRept 6.42 CUSIP City of Temecula, California Portfolio Management Portfolio Details - Investments May 31, 2012 Page 5 Average Purchase Stated YTM YTM Days to Maturity Investment # Issuer Balance Date Par Value Market Value Book Value Rate 360 365 Maturity Date Local Agency Investment Funds 744727011-1 03-3 ACQ 2 CA Local Agency Investment Fun 933,823.23 933,823.23 933,823.23 0.363 0.358 0.363 1 744727007-1 03-3 CITY 2 CA Local Agency Investment Fun 0.00 0.00 0.00 0.363 0.358 0.363 1 786776007-1 03-6 IMP 1 CA Local Agency Investment Fun 0.00 0.00 0.00 0.363 0.358 0.363 1 SYSCITY CITY CA Local Agency Investment Fun 15,192,456.54 15,210,856.32 15,192,456.54 0.363 0.358 0.363 1 SYSRDA RDA CA Local Agency Investment Fun 1,737.22 1,739.32 1,737.22 0.363 0.358 0.363 1 SYSRDA 10 DS 2 RDA 10 DS 2 CA Local Agency Investment Fun 0.00 0.00 0.00 0.363 0.358 0.363 1 SYSRDA 10A CIP1 RDA 10A CIP1 CA Local Agency Investment Fun 0.00 0.00 0.00 0.363 0.358 0.363 1 136343018-1 RDA 10B CIP1 CA Local Agency Investment Fun 1,891.90 1,891.90 1,891.90 0.363 0.358 0.363 1 SYSTCSD TCSD CA Local Agency Investment Fun 20,802,307.80 20,827,501.75 20,802,307.80 0.363 0.358 0.363 1 Subtotal and Average 31,510,466.60 41,158,853.70 41,202,449.53 41,158,853.70 0.358 0.363 1 Federal Agency Callable Securities 31331KPN4 01169 Federal Farm Credit Bank 06/27/2011 1,000,000.00 1,000,400.00 1,000,000.00 1.050 1.036 1.050 756 06/27/2014 3134G1Y65 01162 Federal Home Loan Mtg Corp 01/25/2011 1,000,000.00 1,001,970.00 1,000,000.00 1.500 1.479 1.500 784 07/25/2014 3134G2NK4 01170 Federal Horne Loan Mtg Corp 07/11/2011 1,000,000.00 1,000,820.00 1,000,000.00 1.125 1.110 1.125 770 07/11/2014 3134G2RX2 01173 Federal Home Loan Mtg Corp 07/25/2011 1,000,000.00 1,001,090.00 1,000,000.00 1.200 1.184 1.200 784 07/25/2014 3134G3BV1 01179 Federal Horne Loan Mtg Corp 12/09/2011 1,000,000.00 1,011,960.00 1,000,000.00 1.400 1.381 1.400 1,652 12/09/2016 3134G3CL2 01181 Federal Home Loan Mtg Corp 12/16/2011 1,000,000.00 1,004,940.00 1,000,000.00 1.000 0.986 1.000 1,110 06/16/2015 3134G3PH7 01186 Federal Horne Loan Mtg Corp 02/24/2012 1,000,000.00 999,950.00 1,000,000.00 1.000 0.986 1.000 1545 08/24/2016 3136F9CB7 01088 Federal National Mtg Assn 03/11/2008 2,000,000.00 2,058,240.00 2,000,000.00 4.000 3.945 4.000 283 03/11/2013 3136F9DP5 01090 Federal National Mtg Assn 03/27/2008 1,000,000.00 1,030,780.00 1,000,000.00 4.000 3.945 4.000 299 03/27/2013 3136FPZD2 01157 Federal National Mtg Assn 12/03/2010 1,000,000.00 1,003,910.00 1,000,000.00 1.125 1.110 1.125 915 12/03/2014 3136FRZQ9 01171 Federal National Mtg Assn 07/20/2011 1,000,000.00 1,001,240.00 1,000,000.00 1.250 1.233 1.250 871 10/20/2014 3136FRB44 01172 Federal National Mtg Assn 07/22/2011 1,000,000.00 1,017,960.00 1,000,000.00 2.125 2.096 2.125 1,512 07/22/2016 3136FTBQ1 01176 Federal National Mtg Assn 10/24/2011 1,000,000.00 1,011,680.00 1,000,000.00 1.350 1.332 1.350 1,606 10/24/2016 3136FT4R7 01188 Federal National Mtg Assn 03/27/2012 1,000,000.00 1,005,590.00 1,000,000.00 1.000 0.986 1.000 1,579 09/27/2016 Subtotal and Average 15,000,000.00 15,000,000.00 15,150,530.00 15,000,000.00 1.784 1.808 983 Federal Agency Bullet Securities 31331GE47 01135 Federal Farm Credit Bank 07/29/2009 1,000,000.00 1,022,840.00 997,500.00 2.250 2.284 2.316 423 07/29/2013 31331GG37 01137 Federal Farm Credit Bank 08/04/2009 1,000,000.00 1,013,010.00 1,000,000.00 2.150 2.121 2.150 248 02/04/2013 31331GZ44 01144 Federal Farm Credit Bank 10/15/2009 1,000,000.00 1,005,210.00 1,000,000.00 1.550 1.529 1.550 136 10/15/2012 31331KCA6 01164 Federal Farm Credit Bank 02/10/2011 1,000,000.00 1,016,500.00 1,000,000.00 1.375 1.356 1.375 619 02/10/2014 31331KTK6 01174 Federal Farm Credit Bank 08/01/2011 1,000,000.00 1,008,350.00 1,000,000.00 0.875 0.863 0.875 791 08/01/2014 31331KE55 01175 Federal Farm Credit Bank 10/06/2011 1,000,000.00 1,020,000.00 1,000,000.00 1.300 1.282 1.300 1,588 10/06/2016 31331KK58 01177 Federal Farm Credit Bank 10/26/2011 1,000,000.00 1,011,930.00 1,000,000.00 1.050 1.036 1.050 1,242 10/26/2015 31331KV98 01178 Federal Farm Credit Bank 11/23/2011 1,000,000.00 1,009,030.00 1,000,000.00 0.970 0.957 0.970 1,270 11/23/2015 31331KY79 01180 Federal Farm Credit Bank 11/29/2011 1,000,000.00 999,860.00 1,000,000.00 0.500 0.493 0.500 546 11/29/2013 Run Date: 06/20/2012 - 10:44 Portfolio TEME CP PM (PRF_PM2) SymRept 6.42 CUSIP City of Temecula, California Portfolio Management Portfolio Details - Investments May 31, 2012 Page 6 Average Purchase Stated YTM YTM Days to Maturity Investment # Issuer Balance Date Par Value Market Value Book Value Rate 360 365 Maturity Date Federal Agency Bullet Securities 31331K2P4 01182 Federal Farm Credit Bank 12/09/2011 1,000,000.00 1,010,000.00 1,000,000.00 1.000 0.986 1.000 1,286 12/09/2015 31331K6P0 01183 Federal Farm Credit Bank 01/19/2012 1,000,000.00 1,004,620.00 1,000,000.00 0.850 0.838 0.850 1,327 01/19/2016 3133XTXC5 01130 Federal Horne Loan Bank 06/11/2009 1,000,000.00 1,000,580.00 1,000,000.00 2.250 2.219 2.250 10 06/11/2012 3133XVEM9 01150 Federal Home Loan Bank 11/04/2009 1,000,000.00 1,006,930.00 1,000,000.00 1.625 1.603 1.625 173 11/21/2012 313372UH5 01166 Federal Horne Loan Bank 03/15/2011 1,000,000.00 1,010,890.00 1,000,000.00 1.125 1.110 1.125 469 09/13/2013 313374CZ1 01168 Federal Home Loan Bank 06/22/2011 1,000,000.00 1,012,970.00 1,000,000.00 1.000 0.986 1.000 843 09/22/2014 313376V77 01184 Federal Horne Loan Bank 01/23/2012 1,000,000.00 1,000,510.00 1,000,000.00 0.520 0.513 0.520 966 01/23/2015 313376YQ2 01185 Federal Home Loan Bank 02/13/2012 1,000,000.00 997,090.00 1,000,000.00 0.400 0.395 0.400 987 02/13/2015 313378AC5 01187 Federal Horne Loan Bank 02/22/2012 1,000,000.00 998,640.00 1,000,000.00 0.500 0.493 0.500 1,085 05/22/2015 313378QH7 01189 Federal Home Loan Bank 03/28/2012 1,000,000.00 1,016,720.00 1,000,000.00 0.900 0.888 0.900 1,396 03/28/2016 31398AYM8 01139 Federal National Mtg Assn 08/10/2009 1,000,000.00 1,003,060.00 991,250.00 1.750 2.024 2.052 70 08/10/2012 Subtotal and Average 19,988,750.00 20,000,000.00 20,168,740.00 19,988,750.00 1.198 1.215 774 Total and Average 132,075,802.27 Run Date: 06/20/2012 - 1 0:44 139,989, 519.69 140, 352,385.52 139,978,269.69 0.564 0.571 217 Portfolio TEME CP PM (PRF_PM2) SymRept 6.42 CUSIP City of Temecula, California Portfolio Management Portfolio Details - Cash May 31, 2012 Average Purchase Stated YTM YTM Days to Investment # Issuer Balance Date Par Value Market Value Book Value Rate 360 365 Maturity Page 7 Retention Escrow Account SYSAAA#1202 AAA#1202 COMMUNITY BANK 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 4110170281 EDGEDEV TORRY PINES BANK 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 23303800 PCL CONST Wells Fargo Bank 07/01/2011 0.00 0.00 0.00 0.000 0.000 1 Passbook/Checking Accounts SYSPetty Cash Petty Cash City of Temecula 07/01/2011 2,910.00 2,910.00 2,910.00 0.000 0.000 1 SYSFIex Ck Acct Flex Ck Acct Union Bank of California 07/01/2011 23,018.57 23,018.57 23,018.57 0.000 0.000 1 SYSGen CkAcct Gen CkAcct Union Bank of California 6,890,905.98 6,890,905.98 6,890,905.98 0.000 0.000 1 SYSParking Ck PARKING CITA Union Bank of California 07/01/2011 13,720.00 13,720.00 13,720.00 0.000 0.000 1 Average Balance 0.00 1 Total Cash and Investments 132,075,802.27 Run Date: 06/20/2012 - 10:44 146, 920,074.24 147, 282, 940.07 146,908,824.24 0.564 0.571 217 Portfolio TEME CP PM (PRF_PM2) SymRept 6.42 Fund CITY OF TEMECULA CASH BALANCES THROUGH MAY 31, 2012 Fund Name Fund Total 001 GENERAL FUND $ 32,152,590.46 100 STATE GAS TAX FUND 1,530,177.94 120 DEVELOPMENT IMPACT FUND 5,503,652.03 150 AB 2766 FUND 246,316.90 165 SARDA AFFORDABLE HOUSING 24,224,306.65 170 MEASURE A FUND 5,231,042.13 190 TEMECULA COMMUNITY SERVICES DISTRICT 1,651,95941 192 TCSD SERVICE LEVEL "B" STREET LIGHTS 222,966.26 194 TCSD SERVICE LEVEL "D" REFUSE/RECYCLING 3,056,545.23 195 TCSD SERVICE LEVEL "R" STREET/ROAD MAINT 10,06241 196 TCSD SERVICE LEVEL "L" LAKE PARK MAINT. 299,935.90 197 TEMECULA LIBRARY FUND 221,535.36 210 CAPITAL IMPROVEMENT PROJECT FUND 16,496,503.63 273 CFD 03-1 CROWNE HILL IMPROVEMENT FUND 4,242,152.21 275 CFD 03-3 WOLF CREEK IMPROVEMENT FUND 935,220.34 277 CFD-RORIPAUGH 26,669,252.61 260 REDEVELOPMENT AGENCY -CIP PROJECT 166,135.94 300 INSURANCE FUND 377,749.11 310 VEHICLES AND EQUIPMENT FUND 1,152,627.79 320 INFORMATION TECHNOLOGY 415,926.53 330 CENTRAL SERVICES 346,423.62 340 FACILITIES 192,911.09 375 SUMMER YOUTH EMPLOYMENT PROGRAM 17,997.62 360 SARDA DEBT SERVICE FUND 1,593,767.10 460 CFD 66-12 DEBT SERVICE FUND 65,056.52 472 CFD 01-2 HARVESTON A&B DEBT SERVICE 1,510,074.61 473 CFD 03-1 CROWNE HILL DEBT SERVICE FUND 1,957,610.66 474 AD 03-4 JOHN WARNER ROAD DEBT SERVICE 176,927.66 475 CFD 03-3 WOLF CREEK DEBT SERVICE FUND 4,166,774.53 476 CFD 03-6 HARVESTON 2 DEBT SERVICE FUND 921,647.06 477 CFD 03-02 RORIPAUGH DEBT SERVICE FUND 7,660,066.02 501 SERVICE LEVEL"C"ZONE 1 SADDLEWOOD 29,942.01 502 SERVICE LEVEL"C"ZONE 2 WINCHESTER CREEK 57,657.37 503 SERVICE LEVEL"C"ZONE 3 RANCHO HIGHLANDS 37,696.01 504 SERVICE LEVEL"C"ZONE 4 THE VINEYARDS 5,07547 505 SERVICE LEVEL"C"ZONE 5 SIGNET SERIES 26,369.62 506 SERVICE LEVEL"C"ZONE 6 WOODCREST COUNTRY 17,226.60 507 SERVICE LEVEL"C"ZONE 7 RIDGEVIEW 9,056.62 506 SERVICE LEVEL"C"ZONE 6 VILLAGE GROVE 94,464.75 509 SERVICE LEVEL"C"ZONE 9 RANCHO SOLANA 15,393.60 510 SERVICE LEVEL"C"ZONE 10 MARTINIQUE 9,907.22 511 SERVICE LEVEL"C"ZONE 11 MEADOWVIEW 1,691.60 512 SERVICE LEVEL"C"ZONE 12 VINTAGE HILLS 61,016.57 513 SERVICE LEVEL"C"ZONE 13 PRESLEY DEVELOP 22,347.45 514 SERVICE LEVEL"C"ZONE 14 MORRISON HOMES 10,131.03 515 SERVICE LEVEL"C"ZONE 15 BARCLAY ESTATES 6,626.60 516 SERVICE LEVEL"C"ZONE 16 TRADEWINDS 74,701.60 517 SERVICE LEVEL"C"ZONE 17 MONTE VISTA 1,437.34 516 SERVICE LEVEL"C"ZONE 16 TEMEKU HILLS 65,995.29 519 SERVICE LEVEL"C"ZONE 19 CHANTEMAR 64,166.75 520 SERVICE LEVEL"C"ZONE 20 CROWNE HILL 169,024.52 521 SERVICE LEVEL"C"ZONE 21 VAIL RANCH 172,694.34 522 SERVICE LEVEL"C"ZONE 22 SUTTON PLACE 2,903.29 523 SERVICE LEVEL"C"ZONE 23 PHEASENT RUN 13,109.74 524 SERVICE LEVEL"C"ZONE 24 HARVESTON 194,551.52 525 SERVICE LEVEL"C"ZONE 25 SERENA HILLS 42,720.06 526 SERVICE LEVEL"C"ZONE 26 GALLERYTRADITION 995.97 527 SERVICE LEVEL"C"ZONE 27 AVONDALE 10,427.66 526 SERVICE LEVEL"C"ZONE 26 WOLF CREEK 299,660.35 529 SERVICE LEVEL"C"ZONE 29 GALLERY PORTRAIT 5,693.59 530 SERVICE LEVEL"C"ZONE 30 FUTURE ZONES 33,022.56 Grand Total: $ 147,282,940.07 Item No. 5 Approvals City Attorney Chief Financial Officer City Manager 07 -e -r - go CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Greg Butler, Director of Public Works/City Engineer DATE: July 10, 2012 SUBJECT: Agreement with Temecula Sunrise Rotary for Placement and Maintenance of Bus Benches PREPARED BY: Beryl Yasinosky, Management Analyst RECOMMENDATION: Approve a three-year agreement with the Temecula Sunrise Rotary Club, a non-profit corporation, for the placement and maintenance of 36 bus benches located throughout the City, in an annual amount of $10,050. BACKGROUND: The Temecula Sunrise Rotary Club (Rotary Club) has installed and maintained bus benches at various locations throughout the City since 1994. Beginning in June 2000, the City Council desired to lease 43 bus benches at various designated bus stop locations throughout the City and to have Rotary Club maintain the bus benches for an annual amount of $12,000. In return, the Rotary Club agreed to maintain, repair, clean, keep neat, safe and in sanitary condition, all benches placed pursuant to the agreement. The current agreement expires on June 30, 2012. The Rotary Club has faithfully performed all services identified in the Agreement and staff recommends that the City Council consider entering into an agreement for continued services for an additional three years. The terms and conditions are the same as the previous agreement, with the exception that the current number of benches maintained by the Rotary Club has been reduced from 43 to 36 as a result of route changes or conflicts with other improvements. Therefore, the original agreement amount has been prorated and adjusted accordingly to reflect the reduction in annual bench maintenance services provided. Pursuant to the terms and conditions of the agreement, the Rotary Club will maintain, repair and service 36 bus benches depicted on Exhibit B of the agreement. The City will pay $10,050 annually for the maintenance of the bus benches and $75.00 per quarter for each additional bus bench installed within the public right-of-way in accordance with the agreement. The agreement also includes provisions for the frequency and maintenance, placement and installation criteria, as well as general liability, automobile and workers' compensation insurance requirements. The agreement does not preclude the City from installing other bus benches or shelters within the public right-of-way or on private property. FISCAL IMPACT: The costs associated with the terms of the lease agreement with the Temecula Sunrise Rotary Club for Fiscal Year 2012-13 is $10,050. Adequate funds will be appropriated through the Public Works Department operating budget for Fiscal Year 2012-13. ATTACHMENTS: Agreement for Placement and Maintenance of Bus Benches AGREEMENT BETWEEN THE CITY OF TEMECULA AND TEMECULA SUNRISE ROTARY FOUNDATION FOR BUS BENCHES PLACEMENT AND MAINTENANCE THIS AGREEMENT is made and entered into as of July 1, 2012 by and between the City of Temecula, a municipal corporation ("City") and Temecula Sunrise Rotary Foundation, a California non-profit corporation ("Rotary"). In consideration of the respective covenants and promises herein contained and subject to all of the terms and conditions hereof, the parties hereby agree as follows: 1. Recitals. Rotary has installed and maintained bus benches within the City of Temecula since 1994. City desires to enter into this Agreement in order to lease bus benches at various designated bus stop locations throughout the City and to have Rotary maintain the bus benches. 2. Placement of Bus Benches within City. Rotary hereby agrees to provide and maintain thirty six (36) bus benches ("Bus Benches") within the City. The Bus Benches shall be of the style depicted on Exhibit "A" and shall be placed by Rotary at the locations within the public right-of-way designated on Exhibit "B". The Bus Benches shall contain no advertising or logos, other than City provided City Seals, and shall be painted in color designated by the Director of Public Works and finished with an anti -graffiti finish coat. City reserves the right to allow, install or place other bus benches or transit shelters on public or private property. No additional Bus Benches shall be placed in the public right-of-way without the approval of the Director of Public Works. a. Rotary must maintain an active City Encroachment Permit issued by the Public Works Department. 3. Rotary's Maintenance Services. Rotary agrees, at its own cost and expense to maintain, repair, clean, keep neat and safe and in a sanitary condition, all benches placed pursuant to this agreement. All such work shall be performed at the sole expense of Rotary. Each Bus Bench shall be cleaned not less than one time a month as required to provide safe and clean benches. In the event the Director of Public Works determines that a Bus Bench fails to comply with the requirements of this Agreement or is otherwise in a state of disrepair or deferred maintenance, the Rotary shall remove such Bus Bench within three (3) days of notice from the Director of Public Works and shall replace the Bus Bench in accordance with the requirements of this Agreement within the time set by the Director. As an exception to the foregoing removal requirement, the Director of Public Works may demand that the Bus Benches may be removed within one (1) day of notice if he determines that the problem constitutes a safety problem. 4. Lease Payments. City shall pay to Rotary the annual sum of Ten Thousand Fifty Dollars and No Cents ($10,050.00) for the initial thirty six (36) Bus Benches described in this agreement. Said annual payment shall be made in quarterly installments with the exception of the first payment identified in paragraph "a", below. The City shall pay an additional Seventy - Five Dollars and No Cents ($75.00) per quarter for each additional Bus Bench request that is placed and maintained by Rotary within the public right-of-way in accordance with this Agreement. City shall pay such fee to Rotary within 30 days of receipt of an invoice the first business day of each quarter, beginning July 1, 2012. 1 a \Program Files (x86)\Needia.Corn\Document Corwerter temp\1752.tloc a. All lease payments shall be invoiced on a quarterly basis by Rotary, as identified in Section 4. 5. Term. The term of this Agreement shall commence as of July 1, 2012, and shall continue for a term of three (3) years unless earlier terminated as hereafter provided. In no event shall this Agreement be extended beyond June 30, 2015. 6. Termination a. This Agreement may be terminated by City upon fifteen (15) days' notice to Rotary if: (1) Rotary fails to provide satisfactory evidence of renewal or replacement of comprehensive general liability insurance in accordance with this Agreement at least twenty (20) days before the expiration date of the previous policy; or (2) if Rotary is in breach of any material provision of this Agreement and fails to cure said breach within twenty (20) days of written notice to Rotary of the breach. b. City Manager may suspend this Agreement at any time upon finding that: (1) the Rotary is in breach of a material term of this Agreement: and (2) said breach could cause an immediate adverse affect upon the health or safety of members of the public. c. If Rotary fails to maintain the Bus Benches as required by this Agreement, City may take such action as is required to maintain the Bus Benches in the condition required by this Agreement. In such event City shall deduct all costs incurred by the City to provide such maintenance from the lease payment described in Section 3 of this Agreement. d. In addition to the above, the City may terminate this agreement without cause with one year's notice. In the event the City is not able to provide one year's notice, the City will pay Rotary the prorated portion of the remaining year. 7. Bus Bench Removal. Upon expiration or termination of this Agreement, Rotary shall immediately remove all Bus Benches. If Rotary does not remove all Bus Benches within thirty (30) days after notice to remove they shall be deemed abandoned and City shall have the right to remove the remaining Bus Benches and dispose of them, in which event Rotary shall pay all costs of removal and site restoration. 8. INDEMNIFICATION The Consultant agrees to defend, indemnify, protect and hold harmless the City of Temecula, Temecula Community Services District, and/or Successor Agency to the Temecula Redevelopment Agency, its officers, officials, employees and volunteers from and against any and all claims, demands, losses, defense costs or expenses, including attorney fees and expert witness fees, or liability of any kind or nature which the City of Temecula, Temecula Community Services District, and/or Successor Agency to the Temecula Redevelopment Agency, its officers, agents, employees or volunteers may sustain or incur or which may be imposed upon them for injury to or death of persons, or damage to property arising out of Consultant's negligent or wrongful acts or omissions arising out of or in any way related to the performance or non-performance of this Agreement, excepting only liability arising out of the negligence of the City of Temecula, Temecula Community Services District, and/or Successor Agency to the Temecula Redevelopment Agency. 2 a \Program Files (x86)\Needia.Corn\Document Corwerter temp\1752.tloc 9. INSURANCE REQUIREMENTS Consultant shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the work hereunder by the Consultant, its agents, representatives, or employees. a. Minimum Scope of Insurance. Coverage shall be at least as broad as: 1) Insurance Services Office Commercial General Liability form No. CG 00 01 11 85 or 88. 2) Insurance Services Office Business Auto Coverage form CA 00 01 06 92 covering Automobile Liability, code 1 (any auto). If the Consultant owns no automobiles, a non -owned auto endorsement to the General Liability policy described above is acceptable. 3) Worker's Compensation insurance as required by the State of California and Employer's Liability Insurance. If the Consultant has no employees while performing under this Agreement, worker's compensation insurance is not required, but Consultant shall execute a declaration that it has no employees. b. Minimum Limits of Insurance. Consultant shall maintain limits no less than: 1) General Liability: One million ($1,000,000) per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. 2) Automobile Liability: One million ($1,000,000) per accident for bodily injury and property damage. 3) Worker's Compensation as required by the State of California; Employer's Liability: One million dollars ($1,000,000) per accident for bodily injury or disease. Worker's Compensation insurance is required only if Consultant employs any employees. Consultant warrants and represents to the City of Temecula, Temecula Community Services District, and/or Successor Agency to the Temecula Redevelopment Agency that it has no employees and that it will obtain the required Worker's Compensation Insurance upon the hiring of any employees. c. Deductibles and Self -Insured Retentions. Any deductibles or self-insured retentions shall not exceed Twenty Five Thousand Dollars and No Cents ($25,000). d. Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions: 1) The City of Temecula, the Temecula Community Services District, the Successor Agency to the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees and volunteers are to be covered as insured's, as respects: liability arising out of activities performed by or on behalf of the Consultant; products and completed operations of the Consultant; premises owned, occupied or used by the Consultant; or automobiles owned, leased, hired or borrowed by the Consultant. The coverage shall contain no special limitations on the scope of protection afforded to the City of Temecula, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers. 2) For any claims related to this project, the Consultant's insurance coverage shall be primary insurance as respects the City of Temecula, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, 3 a \Program Files (x86)\Needia.Corn\Document Corwerter temp\1752.tloc their officers, officials, employees and volunteers. Any insurance or self-insured maintained by the City of Temecula, Temecula Community Services District, and/or Successor Agency to the Temecula Redevelopment Agency, its officers, officials, employees or volunteers shall be excess of the Consultant's insurance and shall not contribute with it. 3) Any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City of Temecula, the Temecula Community Services District, and the Successor Agency to the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers. 4) The Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 5) Each insurance policy required by this agreement shall be endorsed to state: should the policy be canceled before the expiration date the issuing insurer will endeavor to mail thirty (30) days' prior written notice to the City. 6) If insurance coverage is canceled or, reduced in coverage or in limits the Consultant shall within two (2) business days of notice from insurer phone, fax, and/or notify the City via certified mail, return receipt requested of the changes to or cancellation of the policy. e. Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best rating of A -:VII or better, unless otherwise acceptable to the City. Self- insurance shall not be considered to comply with these insurance requirements. f. Verification of Coverage. Consultant shall furnish the City with original endorsements effecting coverage required by this clause. The endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. The endorsements are to be on forms provided by the City. All endorsements are to be received and approved by the City before work commences. As an alternative to the City's forms, the Consultant's insurer may provide complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications. 10. Legal Responsibilities. Rotary shall keep fully informed of all Federal, State and local laws, regulations and ordinances that in any manner affect those employed by or in any way affect or govern the performance of services pursuant to this Agreement. Rotary shall at all times observe and comply with all such laws, regulations and ordinances. 11. Representatives and Notices. City's Director of Public Works shall be the representative of City for purposes of this Agreement and may issue all consents, approvals, directives, or agreements on behalf of the City called for by this Agreement except as otherwise expressly provided in this Agreement. The President of Rotary shall designate in writing the representative of Rotary for purposes of coordinating Rotary's work under this Agreement and to serve as Rotary's agent for obtaining compliance with the terms of this Agreement and to serve as Rotary's agent for obtaining compliance with the terms of this Agreement. Notices and written communications sent by one party to the other shall be personally delivered or sent by certified or registered U.S. Mail, return receipt requested, postage prepaid, or a reliable overnight delivery service, such as but not limited to Federal Express, to the following address (or such other addresses as may be designated by notice given in accordance with this paragraph): 4 a \Program Files (x86)\Needia.Corn\Document Corwerter temp\1752.tloc If to City, to: City of Temecula Post Office Box 9033 41000 Main Street Temecula, CA 92589-9033 Attn: Director of Public Works If to Rotary: Temecula Sunrise Rotary Foundation Attn: David Skinner P. O. Box 2203 Temecula, CA 92593 Phone: (951) 695-3877 Notice shall be deemed received upon actual receipt of the notice or three (3) business days following deposit in one of the approved transmission methods. 12. Independent Contractor. Rotary is an independent contractor and riot an employee of the City. 13. Assignability. Rotary shall riot assign or transfer any interest in this Agreement whether by assignment or novation, without prior written consent of the City Council. Any purported assignment without such consent shall be void and without effect. 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 15. Entire Agreement. This Agreement supersedes any and all other agreements, permits or City approvals, either oral or in writing, between the parties hereto with respect to the subject matter hereof and contains all of the covenants and agreements between the parties hereto with respect to the subject matter hereof and contains all of the covenants and agreements between the parties with respect to said matter, and each party this Agreement acknowledges that no representation, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that any other agreement shall be effective only if executed in writing and signed by both City and Rotary. 16. Third Party Rights. No third party shall be deemed to have any rights hereunder against any of the parties as a result of this Agreement. 17. Waiver of Breach. No breach of any provision of this Agreement can be waived unless the waiver is in writing. Waiver of any one breach of a provision shall not be deemed to be a waiver of any other breach of the same or any other provision of this Agreement. 18. Attorney's Fees. Should any dispute under this Agreement lead to litigation, the prevailing party in litigation shall be entitled to reasonable attorney's fees and litigation expenses incurred with respect to the dispute and prosecution of the action. a \Program Files (x86)\Needia.Corn\Document Corwerter temp\1752.tloc IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. TEMECULA SUNRISE ROTARY FOUNDATION, A California non-profit corporation (Two Signatures of corporate officers required unless corporate documents authorize only one person to sign the agreement on behalf of the corporation.) By: By: Chuck Washington, Mayor Leonard Bustin, President ATTEST: By: By: Susan W. Jones, MMC, City Clerk APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney CONSULTANT David H. Skinner, Treasurer Temecula Sunrise Rotary Foundation Attn: David Skinner PO Box 2203 Temecula, CA 92593 (951) 695-3877 C:\Program Files (x86)\Neevia.Com\Document Converter \temp\1759.doc PM Initials: D Q Date: !/ 6 EXHIBIT A APPROVED STYLE OF BUS BENCHES 7 C:'Program Files (x86)Weevia.Com\Document Converler\temp\1759.cloc EXHIBIT B LOCATION OF BUS BENCHES TEMECULA SUNRISE ROTARY - BUS BENCH LOCATIONS No. I Location Traffic Direction 1 Winchester West 2 Winchester West 3 Diaz South 4 Diaz South 5 Front South 6 Main West 7 Front North 8 I 6th East 9 6th East 10 Front North 11 Ynez South 12 Ynez South 13 Ynez South 14 Ynez South 15 Margarita South 16 Margarita South 17 Margarita North 18 j Rancho California West 19 Rancho California West 20 j Rancho California West 21 Rancho California West 22 Rancho California West 23 Ynez North 24 Ynez North 25 Ynez North 26 Winchester West 27 County Center East 28 Jefferson South 29 Jefferson South 30 Jefferson North 31 Jefferson South 32 i Rancho California East 33 Rancho California East 34 Rancho California East 35 Rancho California East 36 Rancho Vista Rd. East 6/12/2012 Cross St./ Reference_ Jefferson Medical Enterprise Circle North Avenida Alvarado Via Dos Picos Ahmed Medical Center Pujol 28860 Front Front Post Office Palm Plaza/Union Bank Palm Plaza/Union Bank PallmPlaza Restaurant Palm Plaza/Restaurant Solana Avenida Barca Just North of Rancho California Margarita -Jiffy Lube Margarita -Jiffy Lube Lyndie Lane Mobil Gas Station Mobil Gas Station Wells Fargo Solana Way Abbott MacDonalds Library Del Taco Adobe Plaza Via Montezuma Bianchi Intl. (former) Duck Pond Duck Pond Church Church Sports Park 8 C:'Program Files (x86)Weevia.Com\Document Converter \temp\1759.tloc VESM.PARPARKk 0.7. -COMA. TEMECULA SUNRISE ROTARY H 44.%yeti . �y� p¢RIEu7A M4 Re' to co \gyp 3J wVALIE \ -0-Ty , �m�E147 dPOa� � c fs N REEK •PARK N /y JAMES L DAY - ( T MIDDLEESCHOOLq 1 FN EtMNNg i� UL •_• OEL SDI. S 0 RR��0�4-. FIRE 44,44:1V so Z\P CORTh 4�..4..,0*A LAOERDAA -000NW27 .n° AVENIDA A OEL P CIM g IESP ` LG� 8 _oo'. --" PHA �1 �A a ,RATE roars OA pp50VUAL \YZ� VETE PAR MARGARITA )4 g M o i Co, YF',4Q MIDDLE SCHOOL Z x oee EMECULA0- HALL J% LL :ALIFORNIA o 14D0'S I CRYSTALA POST OFFICE T T MIA ,AwEcOUTIKT 4I ��F Id OR RO IN ICOMMUNITY AEC CENTER"- LI IRE. srLe Ro 0 /31J.S R.4 i ti, -1 C:\Program Files (x86)\Neevia.Com\Document Converter \temp\1759.doc LDGAT/DA/ J --401P LOLRA 9 i el- 4 4 /121201 Item No. 6 Approvals City Attorney Chief Financial Officer City Manager Mr - CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Greg Butler, Director of Public Works/City Engineer DATE: July 10, 2012 SUBJECT: Acceptance of Certain Public Streets within Tract Map No. 35181 into the City - Maintained System (located at the northwest corner of Winchester Road and Dendy Parkway) PREPARED BY: Mayra De La Torre, Senior Engineer Steve Charette, Associate Engineer RECOMMENDATION: Adopt a resolution entitled: RESOLUTION NO. 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ACCEPTING CERTAIN PUBLIC STREETS INTO THE CITY -MAINTAINED SYSTEM (WITHIN TRACT MAP NO. 35181) BACKGROUND: Tract Map No. 35181 was recorded by the County Recorder on April 9, 2002 The owner dedicated to public use for street and public utility purposes certain streets designated as lettered lots on the map. The City Clerk accepted the offers of dedication. Public Works staff has since reviewed and inspected the public improvements and determined that all required repairs and replacements were satisfactorily completed. The Performance Bond for the Tract has therefore been released; however, the one-year Warranty Bond has not been released. The Warranty Bond will be considered for release at the end of the one-year period in June 2013. The public streets now being accepted by this action are as follows: Portions of: Dendy Parkway, Winchester Road and Remington Avenue (Portions of the Western Bypass and Cherry Street will be constructed at a later date) The storm drain improvements within the public right-of-way shall remain privately owned and maintained facilities in accordance with the recorded Development Agreement for Tract Map No. 35181 and as indicated on the storm drain improvement plans LD07-017C0. FISCAL IMPACT: five to eight years. Periodic surface and/or structural maintenance will be required every ATTACHMENTS: Resolution No. 12- with Exhibits "A — B" inclusive. RESOLUTION NO. 12- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ACCEPTING CERTAIN PUBLIC STREETS INTO THE CITY -MAINTAINED SYSTEM (WITHIN TRACT MAP NO. 35181) THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: WHEREAS, Tract Map No. 35181 was recorded by the County Recorder on April 9th2002 in which offers of dedication for street and public utility purposes were accepted by the City of Temecula from Temecula Properties, LLC, a California Limited Liability Company; and, WHEREAS, City Public Works Staff reviewed and inspected the public improvements and all repairs and replacements were satisfactorily completed; and, WHEREAS, Only the Warranty Bond pertaining to this tract has not been released; and, NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Temecula hereby accepts into the City -Maintained Street System the streets and portions of streets offered to and accepted by the City of Temecula described in Exhibits "A" and "B" attached hereto. Storm drain improvements constructed within the public right-of-way shall remain privately owned and maintained facilities in accordance with the recorded Development Agreement for Tract Map No. 35181 and as indicated on the approved storm drain improvement plans. PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula this 10th day of July, 2012. Chuck Washington, Mayor ATTEST: Susan W. Jones, MMC City Clerk [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Susan W. Jones, MMC, City Clerk of the City of Temecula, do hereby certify that the foregoing Resolution No. 12- was duly and regularly adopted by the City Council of the City of Temecula at a meeting thereof held on the 10th day of July, 2012, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: Susan W. Jones, MMC City Clerk EXHIBIT "A" TO RESOLUTION NO. 2012 - Accepting certain public streets offered to and accepted by the City of Temecula as indicated on Tract Map 35181 into the City -Maintained Street System as described as follows: 1. Lot "A" (portion of Dendy Parkway) of said Tract Map No. 35181 2. Lot "B" (portion of Winchester Road) of said Tract Map No. 35181 3. Lot "C" (portion of Remington Avenue) of said Tract Map No. 35181 4. Lot "D" (portion of Winchester Road) of said Tract Map No. 35181 EXHIBIT "B" TO RESOLUTION NO. 2012 - TRACT MAP NO. 35181 -- CHERRY STREET LOT•? III h\A i,6 J 25' � l - -3 DENDY 50 50'l 1 NN / be - PS/4VA7' S ITE VICINITY MAP NTS Item No. 7 Approvals City Attorney Chief Financial Officer City Manager 07 -e -r- 74-0 CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Aaron Adams, Executive Director of Community Services DATE: July 10, 2012 SUBJECT: First Amendment to the License Agreement with the Friends of the Temecula Public Library PREPARED BY: Barbara Smith, Senior Management Analyst RECOMMENDATION: Approve the First Amendment with the Friends of the Temecula Library for the support of the Temecula Public Library and operation of the Friends of the Temecula Library Bookstore. BACKGROUND: On December 12, 2006 the City Council approved the License Agreement between the City of Temecula and the Friends of the Temecula Library (Friends) which outlined the operations of the bookstore and the support provided to the Temecula Public Library. The license agreement expired on June 30, 2012 with the ability to extend the term for two five-year terms. Grace Mellman, President of the Friends, has provided outstanding leadership to create an organization that has proven to be an exceptional partner to the Temecula Public Library. The Friends raised $500,000 toward the construction of Temecula Public Library. The Friends oversee all bookstore operations, scheduling of bookstore volunteers (about 400 hours per month) along with planning and implementing various fundraisers. In addition, the Friends continue to support current operations with proceeds from fundraisers and bookstore sales in the amount of $50,000 annually. Their funding provides programming as well as contributions for the purchase of new collection and resource materials. Recently, the Friends have raised funds for two new special needs programs called SNAPL and LEAP. SNAPL (Special Needs Access at your Public Library) offers free special needs resources and a Play and Learn Island for children. LEAP (Learning Enriched Autism Program) provides the opportunity for social interaction of special needs middle and high school aged youths. If approved, this amendment will extend the term of the agreement for an additional five years to June 30, 2017. Other changes include the updating of the Liability Insurance terminology and the Notice sections. Also, all references to the "Director of Community Services" and the "Director of Finance" will be deleted and replaced with "City Manager or his or her designee" in order to accommodate the City's organizational changes. FISCAL IMPACT: The Friends of the Library anticipate generating approximately $50,000 annually from the bookstore and other fundraising activities. ATTACHMENTS: First Amendment to License Agreement FIRST AMENDMENT TO LICENSE AGREEMENT BETWEEN CITY OF TEMECULA AND FRIENDS OF THE TEMECULA LIBRARY FOR THE SUPPORT OF THE TEMECULA PUBLIC LIBRARY AND OPERATION OF THE FRIENDS OF THE TEMECULA LIBRARY BOOKSTORE THIS FIRST AMENDMENT is made and entered into as of July 10, 2012 by and between the City of Temecula, a municipal corporation (hereinafter referred to as "City"), and Friends of the Temecula Library, a California Non -Profit Corporation (hereinafter referred to as "Association"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: 1. This Amendment is made with the respect to the following facts and purposes: A. On December 12, 2006, the City and Association entered into that certain Agreement entitled "License Agreement for between the City of Temecula and Friends of the Temecula Library for the Support of the Temecula Public Library and operation of the Friends of the Temecula Library Bookstore. b. The parties now desire to update City positions, insurance, notice and term sections and to amend the Agreement as set forth in this Amendment. follows: 2. Section 3 of the Agreement entitled "Term" is hereby amended to read as "Association may utilize the Premises from the date the City issues a certificate of occupancy for the Temecula Public Library until June 30, 2017 unless sooner terminated pursuant to this Agreement. City may extend the term for one (1) additional five (5) year term. Association shall not be entitled to continue use of the Premises until all insurance documents required by Section 16 of this License Agreement have been duly completed and are on file with the City Manager or his or her designee." 3. Section 16 of the Agreement entitled "Liability Insurance" is hereby amended to read as follows: a. Subsection c shall be amended to read as follows: "Deductibles and Self -Insured Retentions. Any deductibles or self-insured retentions shall not exceed Twenty Five Thousand Dollars and No Cents ($25,000)." b. Subsection d.(1) shall be amended to read as follows: "Other Insurance Provision. The general liability policy is to contain or be endorsed to contain the following provisions: (1) The City of Temecula, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials employees and volunteers are to be covered as insured's, as respects: liability arising out of activities performed by or on behalf of the Association; products and completed operations of the Association; premises owned, occupied or used by the Association; or automobiles owned, leased, hired or borrowed by the Association. The coverage shall contain no special limitations 1 follows: on the scope of protection afforded to the City of Temecula, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers." c. Subsection d shall be amended and subsection e shall be added and shall read as follows: "d. Each insurance policy required by this agreement shall be endorsed to state in substantial conformance to the following: If the policy will be canceled before the expiration date the insurer will notify in writing to the City of such cancellation not less than thirty (30) days' prior to the cancellation effective date." "e. If insurance coverage is canceled or, reduced in coverage or in limits the Association shall within two (2) business days of notice from insurer phone, fax and/or notify the City via certified mail, return receipt requested of the changes to or cancellation of the policy." 4. Section 24 of the Agreement entitled "Notice" is hereby amended to read as "Any notices which either party may desire to give to the other party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable document delivery service, such as but not limited to, Federal Express, that provides a receipt showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below or at any other address as that party may later designate by Notice. Notice shall be effective upon delivery to the addresses specified below or on the third business day following deposit with the document delivery service or United States Mail as provided above. Mailing Address: City of Temecula Attn: City Manager P.O. Box 9033 Temecula, CA 92589-9033 Use this Address for a Delivery Service: City of Temecula or Hand -Deliveries ONLY Attn: City Manager 41000 Main Street Temecula, CA 92590 5. Throughout the license agreement all references to the Director of Community Services and Director of Finance shall be deleted and replaced with the City Manager or his or her designee. 6. Except for the changes specifically set forth herein, all other terms and conditions of the Agreement shall remain in full force and effect. 2 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. CITY OF TEMECULA Friends of the Temecula Library, a California Non -Profit Corporation By: By: Chuck Washington, Mayor Grace Mel!man, President ATTEST: By: By: Susan W. Jones, MMC, City Clerk APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney Association Stanley Williams, Vice President Friends of the Temecula Library Attn: President P.O. Box 817 Temecula, CA 92593 3 PM Initials: Date: Item No. 8 Approvals City Attorney Chief Financial Officer City Manager Pif-e-r- r, CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Greg Butler, Director of Public Works/City Engineer DATE: July 10, 2012 SUBJECT: Purchase Agreement for the Traffic Safety and Bridge Light Retrofit, PW12-08 PREPARED BY: Amer Attar, Principal Engineer Chris White, Assistant Engineer - CIP RECOMMENDATION: Approve the agreement with Tanko Lighting to purchase 470 Induction Luminaire Cobra Head Lights for a total cost of $141,799 for the Traffic Safety and Bridge Light Retrofit Program, PW12-08. BACKGROUND: The Traffic Safety and Bridge Light Retrofit Project will replace lower efficiency high pressure sodium lighting technology with more energy efficient induction lighting technology at 113 traffic intersections and atop three bridges within the City of Temecula. The vast majority of the intersections have four high pressure sodium lamps that operate approximately 12 hours per day and 365 days a year. The annual electricity usage for the existing high pressure sodium street lights is estimated at 492,750 kWh. The proposed induction lamps use 85 watts compared to the existing high pressure sodium lamps, which use 200, 250 and 450 watt lamps. The City considered both LED and induction lighting technologies; however staff determined that the light dispersion quality, energy efficiencies, and reliability of the induction lamps are preferable over the LED lamps. The annual electricity usage with the induction lamps is estimated at 179,580 kWh. Replacing the high pressure sodium lights with higher efficient induction lighting technology would reduce energy use and save the City operational and maintenance costs. The Traffic Safety and Bridge Lighting Retrofit Program will use EECBG funds for the retrofit project. The annual savings as a result of the implementation of this project are estimated to be 313,170 kWh in electricity useage and $66,000 in costs. On Tuesday, July 3, 2012, six proposals were publicly opened and electronically posted on the City's on-line bidding service, PlanetBids. The results were as follows: 1. Tanko Lighting 2. Crystal Lighting Corp. 3. Mendocino $141,799 $171,550 $174,150 4. Control Tech West Inc. $190,665 5. PowerLux $212,667.95 6. Vining Wholesale Lighting Supply Inc. $296,258.63 Staff has reviewed the proposals and found Tanko Lighting to be the lowest proposal. The company has the ability to provide the necessary Luminair fixtures by the August 15, 2012 deadline. FISCAL IMPACT: The total cost to pourchase the lights is $141,799. All funding for the Traffic Safety and Bridge Lighting Retrofit Program will come from the Energy Efficiency and Conservation Block Grant funds. No General Fund revenues will be used for this project. ATTACHMENTS: Purchase Agreement AGREEMENT FOR PURCHASE OF EQUIPMENT BETWEEN CITY OF TEMECULA AND TANKO STREETLIGHTING, INC. (DBA TANKO LIGHTING) TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM — PW 12-08 THIS AGREEMENT is made and effective as of July 10, 2012, between the City of Temecula , a municipal corporation (hereinafter referred to as "City"), and Tanko Streetlighting, Inc. dba Tanko Lighting (hereinafter referred to as "Vendor"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: 1. TERM This Agreement shall commence on July 10, 2012, and shall remain and continue in effect until tasks described herein are completed, but in no event later than December 31, 2012, unless sooner terminated pursuant to the provisions of this Agreement. 2. PURCHASE AND SALE OF EQUIPMENT On and subject to the terms and conditions set forth in this Agreement and the Agreement Documents, Vendor agrees to sell and deliver to City a 285 — 120 VOLT/85 WATT INDUCTION LUMINAIRE (Cobra Head) and 185 — 240 VOLT/85 WATT INDUCTION LUMINAIRE (Cobra Head), as more particularly described in Exhibit A, Description of Equipment / Scope of Work (hereafter "Equipment"), attached hereto and incorporated herein as though set forth in full. 3. PURCHASE PRICE The Purchase Price which City agrees to pay to Vendor for the Equipment is One Hundred Forty One Thousand Seven Hundred Ninety Nine Dollars ($141,799). 4. REPRESENTATION AND WARRANTIES OF VENDOR Vendor makes the following representations and warranties to City: a. Authority and Consents. Vendor has the right, power, legal capacity and authority to enter into and perform its obligations under this Agreement. No approvals or consents of any persons are necessary in connection with Vendor's execution, delivery and performance of this Agreement, except for such as have been obtained on or prior to the date hereof. The execution, delivery and performance of this Agreement by Vendor have been duly authorized by all necessary action on the part of Vendor and constitute the legal, valid and binding obligations of Vendor, enforceable against Vendor in accordance with their respective terms. b. Title, License and Operating Condition. Vendor has good and marketable title to all of the Equipment. All of the Equipment is free and clear of any restrictions on or conditions to transfer or assignment, and City will acquire absolute title to all of the Equipment free and clear of mortgages, liens, pledges, charges, encumbrances, equities, claims, covenants, conditions and restrictions except for such as may be created or granted by City. All of the Equipment is in good operating condition, is free of any defects, and is in conformity with 1 the specifications, descriptions, representations and warranties set forth in the Agreement Documents. Vendor is aware that City is purchasing the Equipment for use as Traffic Safety and Bridge Lighting, and that City is relying on the warranties of the Vendor that the Equipment is fit for this purpose and the ordinary purposes for which the Equipment is normally used. c. Full Disclosure. None of the representations and warranties made by Vendor in this Agreement contains or will contain any untrue statements of a material fact, or omits to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, riot misleading. 5. TIME OF DELIVERY The date and time of delivery of the Equipment shall be on or before August 15, 2012. 6. PLACE OF DELIVERY The Equipment shall be delivered to the following location: City of Temecula Maintenance Facility, 43200 Business Park Drive, Temecula, CA. 7. TITLE AND RISK OF LOSS Title to and the risk of loss, damage and destruction of the Equipment shall remain with the Vendor until after inspection and acceptance of the Equipment by City. 8. INSPECTION AND ACCEPTANCE City shall inspect the Equipment at the time and place of delivery. Such inspection may include reasonable tests and use of the Equipment by City. If, in the determination of City, the Equipment fails to conform to the Agreement IN ANY MANNER OR RESPECT, City shall so notify Vendor within ten (10) days of delivery of the Equipment to City. Failing such notice, the Equipment shall be deemed accepted by City as of the date of receipt. 9. REJECTION In the event of such notice of non -conformity by City pursuant to the section entitled "Acceptance" above, City may, at its option, (1) reject the whole of the Equipment, (2) accept the whole of the Equipment, or (3) accept any commercial unit or units of the Equipment and reject the remainder. The exercise of any of the above options shall be "without prejudice" and with full reservation of any rights and remedies of City attendant upon a breach. In the event of such notice and election by City, City agrees to comply with all reasonable instructions of Vendor and, in the event that expenses are incurred by City in following such instructions, Vendor shall indemnify City in full for such expenses. 10. NO REPLACEMENTS OF CURE This Agreement calls for strict compliance. Vendor expressly agrees that both the Software tendered and the tender itself will conform fully to the terms and conditions of the Agreement on the original tender. In the event of rejection by City of the whole of the Software or any part thereof pursuant to the section entitled "Rejection" above, City may, but is riot required to, accept any substitute performance from Vendor or engage in subsequent efforts to affect a cure of the original tender by Vendor. 2 11. MAINTENANCE Vendor shall maintain the Equipment in accordance with the terms of the maintenance schedule attached hereto as Exhibit D, and incorporated herein by this reference as though set forth in full. In performing the maintenance of the Equipment, Vendor shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of Vendor hereunder in meeting its maintenance obligations under this Agreement. 12. INDEMNIFICATION Vendor agrees to defend, indemnify, protect, and hold harmless, the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency, and its officers, officials, employees, agents, and volunteers, from and against any and all claims, demands, losses, defense costs or expenses, actions, liability or damages of any kind and nature which the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency, its officers, agents, employees, and volunteers may sustain or incur or which may be imposed upon them for injury to or death of persons, or damage to property arising out of Vendor's negligent or wrongful acts or omissions arising out of or in any way related to the Work or the Vendor's performance or non-performance of this Agreement, excepting only liability out of the sole negligence of the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency. 13. AGREEMENT DOCUMENTS a. This Agreement includes the following documents, which are by this reference incorporated herein and made a part hereof: • Description of Equipment 1 Scope of Work (from the Request for Proposal (RFP)), attached hereto as Exhibit A • Response/Quotation to the Request for Proposal (RFP), attached hereto as Exhibit B • Copy of RFP, attached hereto as Exhibit C b. In the event any term or condition of the Agreement Documents conflicts with or is contradictory to any term or condition of the Agreement, the terms and conditions of this Agreement are controlling. c. In the event of a conflict in terms between this Agreement, the Request for Proposal (RFP) and/or the Vendor's response to the RFP, this Agreement shall prevail over the RFP and the Vendor's response to the RFP. 14. REMEDIES The remedies and rights conferred on the City by this Agreement are in addition to and cumulative with all other remedies and rights accorded the City under law or equity. 15. SURVIVAL OF RERESENTATIONS AND WARRANTIES All representations, warranties, covenants and agreements of the parties contained in this Agreement shall survive the execution, delivery and performance of this Agreement. 3 16. LEGAL RESPONSIBILITIES The Vendor shall keep itself informed of State and Federal laws and regulations which in any manner affect those employed by it or in any way affect the performance of its service pursuant to this Agreement. The Vendor shall at all times observe and comply with all such laws and regulations. The City, and its officers and employees, shall not be liable at law or in equity occasioned by failure of the Vendor to comply with this section. 17. ASSIGNMENT The Vendor shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City. This Agreement shall be binding on, and shall inure to the benefit of, the parties to it and their respective heirs, legal representatives, successors and assigns. Upon termination of the Agreement, Vendor's sole compensation shall be payment for actual equipment received. 18. SEVERABILITY If any provision of this Agreement is held invalid or unenforceable by any court of final jurisdiction, it is the intent of the parties that all other provisions of this Agreement be construed to remain fully valid, enforceable, and binding on the parties. 19. PROHIBITED INTEREST No officer, or employee of the City of Temecula that has participated in the development of this agreement or its approval shall have any financial interest, direct or indirect, in this Agreement, the proceeds thereof, the Vendor, or Vendor's sub -Contractors for this project, during his/her tenure or for one year thereafter. The Vendor hereby warrants and represents to the City that no officer or employee of the City of Temecula that has participated in the development of this agreement or its approval has any interest, whether contractual, non - contractual, financial or otherwise, in this transaction, the proceeds thereof or in the business of the Vendor or Vendor's sub -Contractors on this project. Vendor further agrees to notify the City in the event any such interest is discovered whether or not such interest is prohibited by law or this Agreement. 20. ENTIRE AGREEMENT; MODIFICATION; WAIVER This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and thereof and supersedes all prior and contemporaneous agreements, representations and understandings of the parties, whether oral or written. No supplement, modification or amendment of this Agreement or the Agreement Documents shall be binding unless executed in writing by all the parties. No waiver of any of the provisions of this Agreement or the Agreement Documents shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 21. NOTICES Any notices which either party may desire to give to the other party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable document delivery service, such as but not limited to, Federal Express, that provides 4 a receipt showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below or at any other address as that party may later designate by Notice. Notice shall be effective upon delivery to the addresses specified below or on the third business day following deposit with the document delivery service or United States Mail as provided above. Mailing Address: City of Temecula Attn: City Manager P.O. Box 9033 Temecula, CA 92589-9033 Use this Address for a Delivery Service: City of Temecula or Hand -Deliveries ONLY Attn: City Manager 41000 Main Street Temecula, CA 92590 To Consultant: 22. EFFECTS OF HEADINGS Tanko Lighting Jason Tanko 903 Palou Avenue San Francisco, CA 94124 The subject headings of the sections and subsections of this Agreement are included for convenience only and shall not affect or be considered in the construction or interpretation of any of its provisions. 23. GOVERNING LAW This Agreement shall be construed in accordance with, and governed by, the laws of the State of California as applied to contracts that are executed and performed entirely in California. The City and Vendor understand and agree that the laws of the State of California shall govern the rights, obligations, duties, and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in the municipal, superior, or federal district court with geographic jurisdiction over the City of Temecula. In the event such litigation is filed by one party against the other to enforce its rights under this Agreement, the prevailing party, as determined by the court's judgment, shall be entitled to reasonable attorney fees and litigation expenses for the relief granted. 24. AUTHORITY TO EXECUTE THIS AGREEMENT The person or persons executing this Agreement on behalf of the Vendor warrants and represents that he or she has the authority to execute this Agreement on behalf of the Vendor and has the authority to bind the Vendor to the performance of its obligation hereunder. The City Manager is authorized to enter into an amendment on behalf of the City to make the following non -substantive modifications to the agreement: (a) name changes; (b) extension of time; (c) non -monetary changes in scope of work; (d) agreement termination. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. 5 Jim Terry, National Sales Director CITY OF TEMECULA TANKO STREETLIGHTING, DBA TANKO LIGHTING (Two Signatures of corporate officers required unless corporate documents authorize only one person to sign the agreement on behalf of the corporation.) By: By: Chuck Washington, Mayor ATTEST: By: By: Susan W. Jones, MMC, City Clerk APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney VENDOR Jason Tanko, President Tanko Streetlighting Inc. dba Tanko Lighting Jason Tanko 903 Palou Avenue San Francisco, CA 94124 (415) 254-7966 (415) 822-3626 Jason@tankolighting.com PM Initials: Date: 6 EXHIBIT A DESCRIPTION OF EQUIPMENT and/or SCOPE OF WORK (from RFP) 7 EXHIBIT B RESPONSE/QUOTATION TO THE REQUEST FOR PROPOSAL (RFP) 8 EXHIBIT C COPY OF RFP 9 4000K Roadway Induction Luminaire With Cutoff Optics GUIDE SPECIFICATIONS Roadways and Parking Lots B A 1. The luminaire shall be PowerLux Model PP85/840/120/PEC/TEM and PP85 /840/277/PEC/TEM using QL 85W 4000K QL Induction System for 120V or 200-277V operation or a City approved equal. 2. The induction QL system shall have a proven 100,000 hours rated life and with a CRI>80 and being in the market since 1992. 3. The luminaire shall have IP65 quality and consist of a heavy duty corrosion resistant powder coated die-cast aluminum top part housing which can be open from the luminaire housing for easy maintenance. 4. The optical system shall include secured safety tempered lens. The optical assembly shall include an inner reflector which provides an IES full cut-off distribution. 5. The luminaire shall be pre -wired and shall contain a thermally shielded induction generator with plug-in connectors for easy replacement and sustainable operation. 6. The housing must include a safety power switch to shut off power automatically when the door is open. All latches exposed to exterior shall be stainless steel. 7. The luminaire shall have a Power Coupler mounted on the inner reflector with an independent thermal shield for sustainable operation. 8. The Luminaire shall be suitable for maximum 2.375 inch diameter pipe entry for horizontal luminaire mounting with angle adjustment and post top mount positions with stainless steel fixing accessories. 9. The luminaire shall have tapped holes available for installing photocell receptacle (photocell receptacle and control are optional). 10. The luminaire shall be made in the U.S. by a U.S. manufacturer with no less than 13 years of successful and proven installed induction lighting projects experience in the U.S. with successful records. The manufacturer is not in any legal law suits and using unlawful patent infringement components. 11. The luminaire shall be listed by UL. 12. The luminaire shall be certified by induction lighting system manufacturer, QL Company and qualified for a Ten Year Limited Warranty. 13. The above information must be presented at the same time as the price quotation: otherwise the quotation cannot be accepted. 14. Proposed substitutions of products will not be reviewed or approved prior to awarding of the contract. The contractor shall pay all costs incurred. r ;' TankoLighting 7/3/2012 Proposal In Response to RFP No. 182 Traffic Safety and Bridge Lighting Retrofit Program, Project No. PW12-08 Tanko Lighting Jason Tanko 903 Palou Ave., San Francisco, CA (415) 254-7579 Jason@tankolighting.com 1 Description Quantity Cost per unit Cost of Total 85W, 120V Tanko Lighting Induction Cobra Head Street Light Fixture with cut-off optics, flat glass lens, 4000K color Temp., and gray finish Part 14 EW-3870-250im-85-1-T3-FL1-1-4-BG * 285 $ 280.00 $ 79 800.00 85W, 240V Tanko Lighting Induction Cobra Head Street Light Fixture with cut-off optics, flat glass lens, 4000K color Temp., and gray finish Part# EW-3870-250im-85-3-T3-FL1-1-4-BG * 185 $ 280.00 $ 51,800.00 Subtotal $ 131,600.00 *Also available in Multi -tap (120V- 277VAC) for the same price, $280.00 per unit. Delivery Cost $ 0.00 Applicable Tax (7.75%) $ 10,199.00 Grand Total $ 141,799.00 Tanko Lighting will provide all equipment specified in this RFP # 182 by August 15, 2012. Also included in this bid (separate attachment): Page 2: Page 3 & 4: Page 5: Tanko Lighting's certificate of compliance to section 6-1.07 Tanko Lighting's Cut Sheet for submitted equal (EW -3870...). Tanko Lighting's response to Exhibit A, Guide Specifications r 747 TankoLighting • 'r TankoLighting Buy American Act Compliance * ' RECOVERY GOV Tanko Streetlighting Services' products are made in the USA and meet the guidelines established under the Buy American Act. Tanko Streetlighting Services currently operates a 12,000 square foot state-of-the-art facility in a designated economic enterprise zone in San Francisco, California. All fixtures are assembled using documented US labor, with technicians earning well above both federal and local minimum wage. As an Original Equipment Manufacturer (OEM), Tanko Streetlighting Services performs engineering, assembly, wiring, testing, and inspection of all fixtures in its San Francisco facility. Tanko Streetlighting Services is proud that its products are made in the USA and comply with the Buy American Act. For any questions, please contact: Jason Tanko, President; 415.254.7579; jason@tankolighting.com. Tanko Lighting 903 Palou Avenue, San Francisco, CA 94124 2 r 1 'r' TankoLighting TankoLighting Induction Fixtures Applications • Highways/Arterials • Docks/Piers • Residential Roadways • Remote I Rural Locations • Pedestrian Walkways • High Crime Areas • Parking Lots • Security Lighting Features • Wattage range: 35 - 200W • Extremely long life (100,000 hours) • 10 -year warranty • Die-cast aluminum housing with electrostatic powder -coated surface for minimum corrosion and extended life • Maximum strength, clear and tempered glass lens • Internal bulb -changing structure ensures good sealing and dust prevention • Specially -designed reflector for optimal light distribution • Universal two bolt slipfitter • Mounting: up to 2 inch arm • Fits up to 150W induction lamp • Induction lamp included • Rated for wet locations • Terminal block and NEMA photocell receptacle Fixtures are Made in USA 903 Palou Avenue, San Francisco, CA 94124 (888) 688-3999 (415) 254-7579 www. tankolighting.com ARRA Compliant 3 ,I " T' TankoLighting Cost Savings Save up to $80 per year per light; $1,200 over the product's lifetime.' Energy Savings Up to 560 kilo -watt hours/year; 8,400 kilo -watt hours over product's lifetime. Greenhouse Gas (CO2) Reduction Tanko Lighting Cobra Head Specifications Up to 868 lbs/yr; 13,020 lbs. over the product's lifetime - about as much CO2 as the average passenger car produces in 8 months of driving.2 'Savings based on replacement of 250W High Pressure Sodium Light or 250W Metal Halide with 135W Induction Lamp. 2Savings based on U.S. average 1.55 lbs CO2 per kwh, 11,560 lbs COs per passenger car per year. Model Radio Frequency 35W 2.68 mhz 40W 2.68mhz 50W 2.68 mhz 65W 2.68 mhz 7000 2.68 mhz 85W 2.68mhz 100W 2.66 mhz 120W 2.68 mhz 135W 2.68 mhz 15050 2,68 mhz 165W' 268 mnz 200W' 2.68 mhz Rated Power 35W 40W 50W 6598 7000 85W 100W 120W 135W 150W I65W 200W C87e71(22014 0.16A 0.18A a23A 0.308 0.323 0.393 0466 0.566 0.630 0.70A 0.770 0.915 Pinar Facmr 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 Starting Tme <0.5s <0.5s <0.5s <0,5s <0.5s <0.5s <0.5s <0.5s <0Ss <0.5s <05s < 05s Luminous Flus 245087 200087 35001m 4650 I 4900m 5950141 70001m 84051m 945000 1050000 115501m 140001m CCT 2.7006,5000 2,700.6,5006 2,700£,5006 2.70136,500 I( 2,700-6,000 I( 2,700-6.500 I( 2,700.6,5000 2,700.6,5000 2,700-6,500 I( 2,703,6,500 I( 2,700-6500 I( 27006,5000 CRI >80 080 >80 >80 >80 >80 '60 080 >80 >80 >80 >80 Rated Product Lie 100,000 hr 100,0001r 100,000 hr 100000 hr 100,001 hr 100,000 hr 100,000 hr 100,005 hr 100,000h, 100,0110 hr 100.000 hr 100,000 hr Note: This wattage is an "A" -sty e lamp' Ordering Information (Example: EW-3870-250pd- 50-2-T2-RI 2 -2 -4 -RG) EW 3870 Wattage 35: 35w 100: 100w 40: 40w 120: 120w 50: 50w 135: 135w 65:65w 150:150w 70: 70w 165:165, 85: 85w 200: 200w Series 250pd: Small Housing, Power Door Mounted Driver 2501m: Small Housing, Internal Mounted Driver 400pd: Large Housing, Power Door Mounted Driver 4001m: Large Housing, Infernal Mounted Driver Optics 01: IES Type I T2: IES Type II 03: IES Type III T4: IES Type IV 05: IES Type V Voltage 1: 120 5: Multi -Tap' 2:208 •Multi -Tap 3:240 available 4:277 upfo85w Options 1: None 2: PER Receptacle 3: PER Receptacle and Shortng Cap 4: PER Receptacle and Photocell PER and Cell are Twist Lock Style Lens BL: Bowl Lens. Semi Cut -o0 1 • Polycarbonate 2 - Acrylic 3 - Glass FL: Flat Lens, Full Gut -off 1 - Glass SL': Sag Lens required for small housing if full cut-off selected 1- Glass 'SL71ens meets cut -o7 requirements of Dark Skies Finish BG: Battleship Gray (standard) CF: Custom Finish (optional) Color Temperature 2: 2,700 - 2,9000 3: 3,200 - 3,500K 4: 4,000 - 4,500K 5: 5,000 - 5,500K 6: 6,000 - 6,500K 4 r 1 Tr' TankoLighting 7/3/2012 Tanko Lighting will meet all specifications from RFP # 182 below or exception is indicated. 5 1. The Luminaire shall be PowerLux Model PP85/840/120/PEC/TEM and PP85/840/277/PEC/TEM using QL 85W 4000K QL Induction System for 120V or 200-277V operation or a City approved equal. [Exception: Tanko Lighting is proposing equal using 85W 4000K QL Induction System]. 2. The Induction QL system shall have a proven 100,000 hours rated life and with a CRI >80 and being in the market since 1992. [We take exception to being on the market since 1992. Tanko lighting's induction system has been on the market for ten years. Our system operates at the same frequency and design as the Philips system. We have at least 25,000 Induction street light fixtures installed currently. We have had past installations at the following locations: 1) Ontario, CA (300 Fixtures); 2) Pasadena (2,000 Fixtures); 3) Pomona (4,400 Fixtures); 4) Inglewood (800 Fixtures); 5) Fairfield (8,000 Fixtures); these are just examples showing our reliability, coverage and solid design.] 3. The luminaire shall have IP65 quality and consist of a heavy duty corrosion resistant powder coated die-cast aluminum top part housing which can be open from the luminaire housing for easy maintenance. [Exception: Tanko Lighting housing is designed to open from the bottom. All other aspects of specification 3 are met by Tanko Lighting's proposed luminaire.] 4. The optical system shall include secured safety tempered lens. The optical assembly shall include an inner reflector which provides an IES full cut-off distribution. (Fixture illustrated does not comply with full cut-off specifications, due to sag lens shown in picture; Tanko Lighting's equal will provide flat lens and full cut-off optics). Tanko Lighting complies. 5. The luminaire shall be pre -wired and shall contain a thermally shielded induction generator with plug-in connectors for easy replacement and sustainable operation. Tanko Lighting complies. 6. The housing must include a safety power switch to shut off power automatically when the door is open. All latches exposed to exterior shall be stainless steel. [Exception: Since Tanko Lighting housing is designed to be opened from the bottom, a safety power switch is not necessary. All other aspects of specification 6 are met by Tanko Lighting's proposed luminaire.] 7. The luminaire shall have a power coupler mounted on the inner reflector with an independent thermal shield for sustainable operation. Tanko Lighting complies. 8. The luminaire shall be suitable for maximum 2.375 inch diameter pipe entry for horizontal luminaire mounting with angle adjustment and post top mount positions with stainless steel fixing accessories. Tanko Lighting complies. 9. The luminaire shall have tapped holes available for installing photocell receptacle (photocell receptacle and control are optional). [Exception: photo -cell receptacles come standard with our fixture unless omitted by request.] 10. The luminaire shall be made in the U.S. by a U.S. manufacturer with no less than 13 years of successful and proven installed induction lighting projects experience in the U.S. with successful records. The manufacturer is not in any legal law suits and using unlawful patent infringement components. [Exception: Tanko Lighting has been in business for 9 years.] 11. The luminaire shall be listed by UL. Tanko Lighting complies. 12. The luminaire shall be certified by induction lighting system manufacturer, QL Company and qualified for a Ten Year Limited warranty. Tanko Lighting complies. • ra144 1989 ' CITY OF TEMECULA CAI I FON'," IA REQUEST FOR PROPOSAL (RFP) NO.182 Traffic Safety and Bridge Lighting Retrofit Program Project No. PW12-08 Filing Deadline: 4:00 pm, July 3, 2012 R..\ADMINISTRATION\PROCUREMENT\RFP \RFP 182 TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM \RFP for Bridge Lighting gb AA. doc CITY OF TEMECULA DEPARTMENT OF PUBLIC WORKS REQUEST FOR PROPOSAL (RFP) NO.182 Traffic Safety and Bridge Lighting Retrofit Program Project No. PW12-08 INTRODUCTION & PROJECT DESCRIPTION The City of Temecula (City), Public Works Department, is requesting a cost proposal from to supply the City of Temecula with 285 - 120v/85w Induction Luminaires (Cobra Head), 185 - 240v/85w Induction Luminaires (Cobra Head), including delivery of the equipment to the City of Temecula Maintenance Facility. PROPOSAL REQUIREMENTS PROPOSAL (Upload to General Attachments) Upload a one sheet proposal that include the following: • Company information and Contact Person • Cost of 285 — 120v/85w Induction Luminaire • Cost of 185 — 240v/85w Induction Luminaire • Delivery Cost • Applicable Taxes • Total Cost, Clearly Shown GENERAL INFORMATION o Filing Deadline: Tuesday July 3, 2012 at 4:00 PM o Participation in this RFP requires that the company be a registered vendor with the City of Temecula. Information and registration is available through the City's website at http://www. citvoftemecula.orq/Temecula/Government/Finance/Purchasing.htm. Any addenda, questions/answers, or additional information will be distributed through this website. Only registered vendors can view and obtain (download) information. o PROPOSALS must be uploaded in PDF (Portable Document Format) prior to the filing deadline. It is the proposer's responsibility to ensure that their documents are properly uploaded onto the City's online bid management system. Proposals that are missing R:.ADMINISTRATION1PR000REMENT\RFP \RFP 182 TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM\RFP for Bridge Lighting gb AA.doc pages, cannot be opened, etc. may be considered unresponsive. Hard copies will not be accepted. It is the proposer's sole responsibility to contact the City's online bid management provider (PlanetBids at 818-992-1771) to resolve any technical issues. o The City reserves the right to accept or reject any or all proposals received in response to this bid, to waive minor irregularities, to negotiate with any qualified source, or cancel in whole or in part this bid if it is in the best interest of the City to do so, and to take all proposals under advisement for a period of 90 days. All equipment must be furnished by August 15, 2012. If a Vendor cannot supply the number of luminaires specified by August 15, 2012, the City may negotiate with other Vendor's to fulfill the number required. The City may at its sole discretion, award the purchase in whole, or in part, to one or more Vendors. • THIS PROJECT IS SUBJECT TO THE "BUY AMERICA" PROVISION OF THE AMERICAN RECIVERY AND REINVESTMENT ACT, SEE EXHIBIT "B". o Point of Contact: Chris White, City of Temecula, 951.308-6388 or chris.whiteAcityoftemecula.orq. All Requests for Information (RFI's) shall be submitted through PlanetBids. 1. CERTIFICATE OF COMPLIANCE A Certificate of Compliance, conforming to the provisions in Section 6-1.07, "Certificates of Compliance," of the Caltrans Standard Specifications, shall be furnished. The certificate(s), in addition to certifying that the materials comply with the specifications, shall also specifically certify that all manufacturing processes for the materials occurred in the United States, except for the exceptions allowed herein. 2. PURCHASING PROVISIONS AND DEADLINES The City reserves the right to accept or reject any or all proposals received in response to this bid, to waive minor irregularities, to negotiate with any qualified source, or cancel in whole or in part this bid if it is in the best interest of the City to do so, and to take all proposals under advisement for a period of 90 days. All equipment must be furnished by August 15, 2012. If a Vendor cannot supply the number of luminaires specified by August 15, 2012, the City may negotiate with other Vendor's to fulfill the number of luminaires required. The City may at its sole discretion, award the purchase in whole, or in part, to one or more Vendors. 3. DESCRIPTION OF ITEMS 285 -120 VOLT/85 WATT INDUCTION LUMINAIRE (Cobra Head) 185 - 240 VOLT/85 WATT INDUCTION LUMINAIRE (Cobra Head) The Vendor shall furnish 120 Volt /85 Watt Induction Luminaires and 240 Volt /85 Watt Induction Luminaires that conform to the Guide Specifications for 4000K Roadway Induction Luminaires with Cutoff Optics as shown on Exhibit "A." R:\ADMINISTRATION\PROCUREMENT\RFP\RFP 182 TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM RFP for Bridge Lighting gb AA.doc RFP SELECTION SCHEDULE (tentative) 1 Issuance of RFP JUNE 20, 2012 2. Deadline for filing RFP JULY 3, 2012 ATTACHMENTS: Exhibit A Guide Specifications Exhibit B Federal Specifications - American Recovery and Reinvestment Act Provisions R:\ADMINISTRATION\PROCUREMENT\RFP\RFP 182 TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM\RFP for Bridge Lighting gb AA.doc CITY OF TEMECULA, DEPARTMENT OF PUBLIC WORKS EXHIBIT "A" - GUIDE SPECIFICATIONS FOR TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM PROJECT NO. PW12-08 R:\ADMINISTRATION\PROCUREMENT\RFP\RFP 182 TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM\RFP for Bridge Lighting gb AA.doc 4000K Roadway Induction Luminaire With Cutoff Optics GUIDE SPECIFICATIONS Roadways and Parking Lots e A ` r_ D 1. The luminaire shall be PowerLux Model PP85/840/120/PEC/TEM and PP85 /840/277/PEC/TEM using QL 85W 4000K QL Induction System for 120V or 200-277V operation or a City approved equal. 2. The induction QL system shall have a proven 100,000 hours rated life and with a CRI>80 and being in the market since 1992. 3. The luminaire shall have IP65 quality and consist of a heavy duty corrosion resistant powder coated die-cast aluminum top part housing which can be open from the luminaire housing for easy maintenance. 4. The optical system shall include secured safety tempered lens. The optical assembly shall include an inner reflector which provides an IES full cut-off distribution. 5. The luminaire shall be pre -wired and shall contain a thermally shielded induction generator with plug-in connectors for easy replacement and sustainable operation. 6. The housing must include a safety power switch to shut off power automatically when the door is open. All latches exposed to exterior shall be stainless steel. 7. The luminaire shall have a Power Coupler mounted on the inner reflector with an independent thermal shield for sustainable operation. 8. The Luminaire shall be suitable for maximum 2.375 inch diameter pipe entry for horizontal luminaire mounting with angle adjustment and post top mount positions with stainless steel fixing accessories. 9. The luminaire shall have tapped holes available for installing photocell receptacle (photocell receptacle and control are optional). 10. The luminaire shall be made in the U.S. by a U.S. manufacturer with no less than 13 years of successful and proven installed induction lighting projects experience in the U.S. with successful records. The manufacturer is not in any legal law suits and using unlawful patent infringement components. 11. The luminaire shall be listed by UL. 12. The luminaire shall be certified by induction lighting system manufacturer, QL Company and qualified for a Ten Year Limited Warranty. 13. The above information must be presented at the same time as the price quotation: otherwise the quotation cannot be accepted. 14. Proposed substitutions of products will not be reviewed or approved prior to awarding of the contract. The contractor shall pay all costs incurred. CITY OF TEMECULA, DEPARTMENT OF PUBLIC WORKS EXHIBIT "B" - AMERICAN RECOVERY AND REINVESTMENT ACT PROVISIONS FOR TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM PROJECT NO. PW12-08 R:\ADMINISTRATION\PROCUREMENT\RFP\RFP 182 TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM\RFP for Bridge Lighting gb AA.doc RECOVERY. GOV American Recovery and Reinvestment Act (ARRA) ADDENDUM TO AGREEMENT FOR TRAFFIC SAFETY AND BRIDGE LIGHTING RETROFIT PROGRAM In the event of a conflict between the terms and conditions of this Agreement and the American Recovery and Reinvestment Act ("ARRA") provisions, the ARRA provisions shall govern. Failure to comply with the ARRA provisions shall constitute a material breach of this Agreement and may result in Contractor's/Consultant's termination for cause. Buy American The Contractor/Consultant and all subcontractors/subconsultants shall comply with Section 1605 of ARRA, which mandates that no ARRA funds shall be used for the purchase of iron, steel or manufactured goods which have been manufactured outside the United States for construction, maintenance, repair or alteration of any public building or public works, unless an exception set forth in Section 1605 allows such purchase and a determination approving a waiver of the requirement has been obtained and the excepted materials have been described in the Agreement. ARRA Exceptions to the Buy American requirement include: 1. Production in the United States of the iron or steel used in the project requires that all manufacturing processes must take place in the United States, except metallurgical processes involving refinement of steel additives. (2 CFR § 176.70(a)(2)(i).) 2. There is no requirement with regard to the origin of components or subcomponents in manufactured goods used in the Project, as long as the manufacturing occurs in the United States. (2 CFR § 176.70(a)(2)(ii).) Unless otherwise specifically noted in the Contract Documents, Contractor shall perform the work assuming the applicability of the Buy American Requirement. The Federal department or agency granting the ARRA funds for this Project may waive the Buy American Requirement only upon a finding that: 1. Applying subparagraph (a) would be inconsistent with the public interest (2 CFR -1- RECOVERY.Gov § 176.80(a)(1); 2. Iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality (2 CFR §176(a)(2)); or 3. Inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than twenty-five percent (25%) (2 CFR §176(a)(3)). Davis -Bacon Act (DBA) Requirement Contractor and all subcontractors shall comply with Section 1606 of ARRA, which requires that all laborers and mechanics employed by Contractors and subcontractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to ARRA shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code. Whistleblower Protection Contractor/Consultant and all subcontractors/subconsultants shall comply with Section 1553 of ARRA, which provides that employees of any non -Federal employer receiving ARRA funds may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing information that the employee reasonably believes is evidence of gross mismanagement, gross waste, a substantial and specific danger to public health or safety, abuse of authority, or violations of law related to contracts or grants using ARRA funds. Posting with the Local Employment Security Commission Contractor/Consultant is encouraged to post with the local Employment Security Commission Office, California Employment Development Department, 800 Capitol, Sacramento, California 94280, all trades/disciplines which Contractor/Consultant intends to employ as a result of this Agreement. Labor and semi -skilled trades should be posted for at least forty-eight (48) hours prior to a hiring decision. All other trades should be posted a minimum of -2- RECOVERY.GOV five (5) calendar days prior to a hiring decision. The Contractor/Consultant and any subcontractor/subconsultant should report all new hires in the manner prescribed by the Employment Security Commission and the Office of Economic Recovery & Reinvestment. Employment Eligibility Verification Contractor/Consultant and its subcontractors/subconsultants represent and warrant that all employees and laborers employed on the project are legally authorized under the laws of the United States of America and the State of California to perform work on the project. At the City's request, Contractor/Consultant and its subcontractors/subconsultants shall provide documentation verifying eligibility. Rebates, Kickbacks or Other Unlawful Consideration Contractor/Consultant warrants that this Agreement was not obtained or secured through rebates, kickbacks or other unlawful consideration, either promised or paid to any City employee. For breach or violation of this warranty, City shall have the right in its discretion, to terminate the Agreement without liability, to pay only for the value of the work actually performed, or to deduct from the contract price, or otherwise recover the full amount of such rebate, kickback or other unlawful consideration. Access to Information In accordance with Section 902 of ARRA, the U.S. Comptroller General and their representatives shall have the authority to do the following: 1. To examine any records of the contractor or any of its subcontractors, or any State or local agency administering such contract, that directly pertain to, and involve transactions relating to, the contract or subcontract; and 2. To interview any officer or employee of the Contractor/Consultant or any of its subcontractors/subconsultants, or of any State or local government agency administering the Agreement, regarding such transactions. Accordingly, the Comptroller General and their representatives shall have the authority and rights as provided under Section 902 of ARRA with respect to this Agreement, which is -3- RECOVERY. Gov funded with funds made available under ARRA. Section 902 further states that nothing in this section shall be interpreted to limit or restrict in any way any existing authority of the Comptroller General. In accordance with Section 1515(a) of the ARRA of 2009, the Inspector General and their representatives shall have the authority to examine any records or interview any employee or officers working under this Agreement. The Contractor/Consultant is advised that representatives of the Inspector General have the authority to examine any record and interview any employee or officer of the Contractor/Consultant, its subcontractors or other firms working under this Agreement. Section 1515(b) further provides that nothing in this section shall be interpreted to limit or restrict in any way any existing authority of an Inspector General. Debarment and Suspension Certification Contractor's/Consultant's signature affixed to this Agreement, shall constitute a certification under penalty of perjury under the laws of the State of California, that the Contractor/Consultant has complied with Title 49, Code of Federal Regulations, Part 29, Debarment and Suspension Certificate, which certifies that Contractor/Consultant or any person associated therewith in the capacity of owner, partner, director, officer, or manager, is not currently under suspension, debarment, voluntary exclusion, or determination of ineligibility by any federal agency, has not been suspended, debarred, voluntarily excluded, or determined ineligible by any federal agency within the past three (3) years, does not have a proposed debarment pending, and has not been indicted, convicted, or had a civil judgment rendered against it by a court of competent jurisdiction in any matter involving fraud or official misconduct within the past three (3) years. Any exception to this certification must be disclosed to the City. Exceptions will not necessarily result in denial of recommendation for award, but will be considered in determining Contractor/Consultant responsibility. Disclosure must include to whom exceptions apply, initiating agency, and dates of action. Nondiscrimination -4- RECOVERY. GOV During Contractor's/Consultant's performance of this Agreement, Contractor/Consultant shall not discriminate on the grounds of race, religious creed, color, national origin, ancestry, age, physical disability, mental disability, medical condition, including the medical condition of Acquired Immune Deficiency Syndrome (AIDS) or any condition related thereto, marital status, sex, or sexual orientation, in the selection and retention of employees and subcontractors and the procurement of materials and equipment, except as provided in Section 12940 of the California Government Code. Further, Contractor/Consultant agrees to conform to the requirements of the Americans with Disabilities Act in the performance of this Agreement. Prohibition of Expending City, State or Federal Funds for Lobbying Contractor/Consultant certifies by signing this Agreement to the best of his or her knowledge and belief that: 1. No federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting to influence an officer or employee of any federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement. 2. If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this federal contract, grant, loan, or cooperative agreement, the undersigned shall complete and submit Standard Form -LLL, "Disclosure of Lobbying Activities," in accordance with its instructions. This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by Section 1352, Title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less -5- RECOVERY. Gov than $10,000 and not more than $100,000 for each such failure. Contractor/Consultant also agrees by affixing its signature hereto that it shall require that the language of this certification be included in all lower -tier subcontracts, which exceed $100,000 and that all such sub -recipients shall certify and disclose accordingly. Publication Contractor/Consultant agrees that information concerning this Agreement will be published on the Internet, including the City's website, www.cityoftemecula.org, and the federal website, www.recovery.gov, which is maintained by the Federal Recovery Accountability and Transparency Board ("FRATB"). The FRATB may exclude posting contractual or other information on the website on a case-by-case basis when necessary to protect national security or to protect information that is not subject to disclosure under Sections 552 and 552a of Title 5, United States Code. Local Hiring City seeks to maximize the economic benefits of ARRA funded investments in its communities. In furtherance of the City's goal, Contractor/Consultant agrees to use its best efforts to employ laborers who reside in the local community to perform work on the project. Subcontractors/Subconsultants 1. Nothing contained in this Agreement or otherwise, shall create any contractual relation between the City and any subcontractors/subconsultants, and no subcontract shall relieve the Contractor/Consultant of its responsibilities and obligations hereunder. Contractor/Consultant agrees to be as fully responsible to the City for the acts and omissions of its subcontractors/subconsultants and of persons either directly or indirectly employed by any of them as it is for the acts and omissions of persons directly employed by Contractor/Consultant. The Contractor's/Consultant's obligation to pay its subcontractors/subconsultants is an independent obligation from the City's obligation to make payments to the Contractor/Consultant. -6- RECOVERY.Gov 2. Any subcontract entered into as a result of this Agreement shall contain all of the ARRA provisions stipulated in this Agreement, and shall require subcontractors/subconsultants to invoice work performed with ARRA funds separately from work performed with other funding sources, so as to avoid commingling of the funding sources. 3. Contractor/Consultant shall pay its subcontractors/subconsultants within ten (10) calendar days from receipt of each payment made to the Contractor/Consultant by the City. 4. Any substitution of subcontractors/subconsultants must be approved in writing by the City's Contract Manager in advance of assigning work to a substitute subcontractor/subconsultant. Disadvantaged Business Enterprise (DBE) Participation 1. This Agreement is subject to 49 CFR, Part 26 entitled "Participation by Disadvantaged Business Enterprises in Department of Transportation Financial Assistance Programs." Contractors/Consultants who obtain DBE participation on this Agreement will assist Caltrans in meeting its federally mandated statewide overall DBE goal. 2. If the contract has an under-utilized DBE (UDBE) goal, the Contractor/Consultant must meet the UDBE goal by using UDBEs as subcontractor/subconsultant or document a good faith effort to meet the goal. If a UDBE subcontractor/subconsultant is unable to perform, the Contractor/Consultant must make a good faith effort to replace it with another UDBE subcontractor/subconsultant if the goal is not otherwise met. A UDBE is a firm meeting the definition of a DBE as specified in 49 CFR and is one of the following groups: 1. Black American 2. Asian-Pacfic American 3. Native American 4. Women 3. DBE and other small businesses, as defined in 49 CFR, Part 26 are encouraged to participate in the performance of agreements financed in whole or in part with federal -7- RECOVERY. Gov funds. The Contractor/Consultant, subrecipient or subcontractor/subconsultant shall not discriminate on the basis of race, color, national origin, or sex in the performance of this Agreement. The Contractor/Consultant shall carry out applicable requirements of 49 CFR, Part 26 in the award and administration of US DOT- assisted agreements. Failure by the Contractor/Consultant to carry out these requirements is a material breach of this Agreement, which may result in the termination of this Agreement or such other remedy as the recipient deems appropriate. 4. Any subcontract entered into as a result of this Agreement shall contain all of the provisions of this section. Performance of DBE Contractors/Consultants and other DBE Subcontractors/Subconsultants and Suppliers A DBE performs a commercially useful function when it is responsible for execution of the work of the Agreement and is carrying out its responsibilities by actually performing, managing, and supervising the work involved. To perform a commercially useful function, the DBE must also be responsible with respect to materials and supplies used on the Agreement, for negotiating price, determining quality and quantity, ordering the material, and installing (where applicable) and paying for the material itself. To determine whether a DBE is performing a commercially useful function, evaluate the amount of work subcontracted, industry practices; whether the amount the firm is to be paid under the Agreement is commensurate with the work it is actually performing, and other relevant factors. A DBE does not perform a commercially useful function if its role is limited to that of an extra participant in a transaction, Agreement, or project through which funds are passed in order to obtain the appearance of DBE participation. In determining whether a DBE is such an extra participant, examine similar transactions, particularly those in which DBEs do not participate. If a DBE does not perform or exercise responsibility for at least thirty percent of the total cost of its Agreement with its own work force, or the DBE subcontracts a greater portion of the work of the Agreement than would be expected on the basis of normal industry practice for the type of work involved, it will be presumed that it is not performing a commercially useful function. -8- RECOVERY. GOV Prompt Payment of Funds Withheld to Subcontractors/Subconsultants No retainage will be withheld by the City from progress payments due the prime Contractor/Consultant. Retainage by the prime Contractor/Consultant or subcontractors/subconsultants is prohibited, and no retainage will be held by the prime Contractor/Consultant from progress due subcontractors/subconsultants. Any violation of this provision shall subject the violating prime consultant or subcontractor/subconsultant to the penalties, sanctions, and other remedies specified in Section 7108.5 of the California Business and Professions Code. This requirement shall not be construed to limit or impair any contractual, administrative, or judicial remedies otherwise available to the prime Contractor/Consultant or subcontractor/subconsultant in the event of a dispute involving late payment or nonpayment by the prime Contractor/Consultant or deficient subcontract performance, or noncompliance by a subcontractor/subconsultant. This provision applies to both DBE and non -DBE prime consultants and subcontractors/subconsultants. Any subcontract entered into as a result of this Agreement shall contain all of the provisions of this section. DBE Records 1. Contractor/Consultant shall maintain records of materials purchased and/or supplied from all subcontracts entered into with certified DBEs. The records shall show the name and business address of each DBE or vendor and the total dollar amount actually paid each DBE or vendor, regardless of tier. The records shall show the date of payment and the total dollar figure paid to all firms. DBE prime Contractors/Consultants shall also show the date of work performed by their own forces along with the corresponding dollar value of the work. 2. Upon completion of the Agreement, a summary of these records shall be prepared and submitted on the form entitled, "Final Report -Utilization of Disadvantaged Business Enterprises (DBE)," CEM -2402F (Exhibit 17-F in Chapter 17 of the LAPM), certified correct by the Contractor/Consultant or the Contractor's/Consultant's authorized representative and shall be furnished to the Contract Manager with the final invoice. Failure to provide the summary of DBE payments with the final -9- RECOVERY.Gov invoice will result in twenty-five percent (25%) of the dollar value of the invoice being withheld from payment until the form is submitted. The amount will be returned to the Contractor/Consultant when a satisfactory "Final Report Utilization of Disadvantaged Business Enterprises (DBE)"is submitted to the Contract Manager. (a) Prior to the fifteenth of each month, the Contractor/Consultant shall submit documentation to the City's Contract Manager showing the amount paid to DBE trucking companies. The Contractor/Consultant shall also obtain and submit documentation to the City's Contract Manager showing the amount paid by DBE trucking companies to all firms, including owner -operators, for the leasing of trucks. If the DBE leases trucks from a non -DBE, the Contractor/Consultant may count only the fee or commission the DBE receives as a result of the lease arrangement. (b) The Contractor/Consultant shall also submit to the City's Contract Manager, documentation showing the truck number, name of owner, California Highway Patrol CA number, and if applicable, the DBE certification number of the truck owner for all trucks used during that month. This documentation shall be submitted on the Caltrans Monthly DBE Trucking Verification, CEM -2404(F) form provided to the Contractor/Consultant by the City's Contract Manager. DBE Certification and De -certification Status If a DBE subcontractor/subconsultant is decertified during the life of the Agreement, the decertified subcontractor/subconsultant shall notify the Contractor/Consultant in writing with the date of de -certification. If a subcontractor/subconsultant becomes a certified DBE during the life of the Agreement, the subcontractor/subconsultant shall notify the Contractor/Consultant in writing with the date of certification. Any changes should be reported to the City's Contract Manager within thirty (30) days. Materials or supplies purchased from DBEs will count towards DBE credit, and if a DBE is also a UDBE, purchases will count towards the UDBE goal under the following conditions: - 10 - RECOVERY.Gov 1. If the materials or supplies are obtained from a DBE manufacturer, one hundred percent (100%) of the cost of the materials or supplies will count toward the DBE participation. A DBE manufacturer is a firm that operates or maintains a factory or establishment that produces on the premises, the materials, supplies, articles, or equipment required under the Agreement and of the general character described by the specifications. 2. If the materials or supplies purchased from a DBE regular dealer, count sixty percent (60%) of the cost of the materials or supplies toward DBE goals. A regular dealer is a firm that owns, operates or maintains a store, warehouse, or other establishment in which the materials, supplies, articles or equipment of the general character described by the specifications and required under the Agreement, are bought, kept in stock, and regularly sold or leased to the public in the usual course of business. To be a regular dealer, the firm must be an established, regular business that engages, as its principal business and under its own name, in the purchase and sale or lease of the products in question. A person may be a regular dealer in such bulk items as petroleum products, steel, cement, gravel, stone or asphalt without owning, operating or maintaining a place of business provided in this section. 3. If the person both owns and operates distribution equipment for the products, any supplementing of regular dealers' own distribution equipment, shall be by a long- term lease agreement and not an ad hoc or Agreement -by -Agreement basis. Packagers, brokers, manufacturers' representatives, or other persons who arrange or expedite transactions are not regular dealers within the meaning of this section. 4. Materials or supplies purchased from a DBE, which is neither a manufacturer nor a regular dealer, will be limited to the entire amount of fees or commissions charged for assistance in the procurement of the materials and supplies, or fees or transportation charges for the delivery of materials or supplies required on the job site, provided the fees are reasonable and not excessive as compared with fees charged for similar services. For DBE trucking companies: credit for DBEs will count towards DBE credit, and if a - 11 - RECOVERY.Gov DBE is also a UDBE, credit will count towards the UDBE goal under the following conditions: 1. The DBE must be responsible for the management and supervision of the entire trucking operation for which it is responsible. 2. The DBE must itself own and operate at least one fully licensed, insure, and operational truck used on the Agreement. 3. The DBE receives credit for the total value of the transportation services it provides on the Agreement using trucks it owns, insures, and operates using drivers it employs. 4. The DBE may lease trucks from another DBE firm including an owner -operator who is certified as a DBE. The DBE who leases trucks from another DBE receives credit for the total value of the transportation services the lessee DBE provides on the Agreement. 5. The DBE may also lease trucks from a non -DBE firm, including an owner - operator. The DBE who leases trucks from a non -DBE is entitled to credit only for the fee or commission it receives as a result of the lease arrangement. The DBE does not receive credit for the total value of the transportation services provided by the lessee, since these services are not provided by the DBE. 6. For the purposes of this section, a lease must indicate that the DBE has exclusive use and control over the truck. This does not preclude the leased truck from working for others during the term of the lease with the consent of the DBE, as long as the lease gives the DBE absolute priority for use of the leased truck. Leased trucks must display the name and identification number of the DBE. Reporting Requirements Contractor/Consultant is notified that this project/program will be funded with American Recovery and Reinvestment Act of 2009 (hereinafter, "ARRA") Funds. The Contractor/Consultant shall ensure that all subcontracts and other contracts for goods and services for an ARRA-funded project include the mandated provisions of this directive in their contracts. Title XV, Section 1512 of ARRA requires that the Contractor/Consultant provide - 12 - RECOVERY. GOV reports and other employment information as evidence to document the number of jobs created or jobs retained for this Agreement from the Contractor's/Consultant's own workforce and any sub-contractors/sub-consultants. No direct payment will be made for providing said reports, as the cost for same shall be included in the various bid items/cost proposals in the bid/proposal. Jobs Reporting Appendix Contractor/Consultant shall submit information about how many jobs were created or retained with each invoice. The format should be how many person -hours of work are included within the invoice for all work that can be counted or measured. This can be reported to the City on the frequency they desire, but no later than time of invoice submittal. City in turn will provide the information on job creation to the appropriate agency with each reimbursement request. Contractor's/Consultant's invoice shall include a statement about the person -hours of work reflected in the invoice. Contractor/Consultant should require of subcontractors similar estimates to be included in the reporting with the invoice such that the invoice includes a fair and reasonable estimate of the jobs created or retained by the services represented in the invoice. The following describes the general guidelines for jobs reporting: ■ Contractor/Consultant is required to report an estimate of jobs directly created or retained by project and activity or contract. City will report on the employment impact of sub -recipients of ARRA funds. Contractor/Consultant should not attempt to report on the employment impact on materials suppliers (so called "indirect" jobs) or on the local community ("Induced" jobs). • A job created is a new position created or filled; a job retained is an existing position that would not have been continued were it not for ARRA funding. Only compensated employment should be reported. • The number of jobs should be expressed as full-time equivalents (FTEs) which is calculated as total hours worked in jobs created or retained divided by the number of hours in a full-time schedule (40 hours per week). The default value for hours worked in a quarter is 520. - 13 - RECOVERY. GOV • A brief description of types of jobs created or retained should be provided. The narrative should include a brief description of the types of jobs created or retained. This description may rely on job titles, broader labor categories, or the Contractor's/Consultant's existing practice for describing jobs as long as the terms used are widely understood and describe the general nature of the work. - 14 - TEMECULA COMMUNITY SERVICES DISTRICT Item No. 9 ACTION MINUTES of June 26, 2012 City Council Chambers, 41000 Main Street, Temecula, California TEMECULA COMMUNITY SERVICES DISTRICT MEETING The Temecula Community Services District Meeting convened at 8:20 P.M. CALL TO ORDER: President Jeff Comerchero ROLL CALL: DIRECTORS: Edwards, Naggar, Roberts, Washington, Comerchero CSD PUBLIC COMMENTS None. CSD CONSENT CALENDAR 18 Action Minutes — Approved Staff Recommendation (4-0-1, Director Edwards absent) Director Naggar made the motion; it was seconded by Director Washington; and electronic vote reflected approval, with Director Edwards absent. RECOMMENDATION: 18.1 Approve the action minutes of June 12, 2012. 19 Agreement with Melody's Ad Works, Inc. for Promoting and Marketing Special Events in Old Town for Fiscal Year 2012-13 — Approved Staff Recommendation (4-0-1, Director Edwards absent) Director Naggar made the motion; it was seconded by Director Washington; and electronic vote reflected approval, with Director Edwards absent. RECOMMENDATION: 19.1 Approve the Agreement with Melody's Ad Works, Inc. in the amount of $43,000 for services provided in promoting and marketing Special Events in Old Town for Fiscal Year 2012-13. 20 Second Amendment to the Window Cleaning Services Agreement with Clear Image Window Cleaning for Fiscal Year 2012-13 — Approved Staff Recommendation (4-0-1, Director Edwards absent) Director Naggar made the motion; it was seconded by Director Washington; and electronic vote reflected approval, with Director Edwards absent. RECOMMENDATION: 20.1 Approve the Second Amendment with Clear Image Window Cleaning for routine window cleaning maintenance services in the amount of $20,000 for Fiscal Year 2012-13. 21 Fifth Amendment with Tremco/Weatherproofing Technologies, Inc. — Approved Staff Recommendation (4-0-1, Director Edwards absent) Director Naggar made the motion; it was seconded by Director Washington; and electronic vote reflected approval, with Director Edwards absent. RECOMMENDATION: 21.1 Approve the Fifth Amendment with Tremco/Weatherproofing Technologies, Inc. to extend the term of the agreement to September 30, 2012, and make minor changes to the agreement. 22 Amendment to various Community Service District Fees — Approved Staff Recommendation (3-0-1-1, Director Edwards absent, Director Comerchero abstaining on items relating to the Children's Museum) Director Naggar made the motion; it was seconded by Director Washington; and electronic vote reflected approval, with Director Edwards absent, and Director Comerchero abstaining on items relating to the Children's museum. RECOMMENDATION: 22.1 Adopt a resolution entitled: RESOLUTION NO. CSD 12-05 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA COMMUNITY SERVICES DISTRICT OF THE CITY OF TEMECULA AMENDING CERTAIN TCSD RESOLUTIONS ESTABLISHING VARIOUS COMMUNITY SERVICES DISTRICT FEES CSD PUBLIC HEARING 23 Adoption of the Fiscal Year 2012-13 Annual Operating Budget — Approve staff recommendation with the exception of anything dealing with the Children's Museum (4-0-1, Director Edwards absent) Director Naggar made the motion; it was seconded by Director Roberts; and electronic vote reflected approval, with Director Edwards absent. Approve staff recommendation only in regards to the Children's Museum. (3-0-2, Director Edwards and President Comerchero absent, as President Comerchero left the Chambers.) RECOMMENDATION: 23.1 Adopt a resolution entitled: CSD DEPARTMENTAL REPORT 24 Community Services Department Monthly Report CSD DIRECTOR OF COMMUNITY SERVICES REPORT CSD GENERAL MANAGER REPORT CSD BOARD OF DIRECTORS REPORTS CSD ADJOURNMENT At 8:35 P.M., the Temecula Community Services District meeting was formally adjourned to Tuesday, July 10, 2012, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM., City Council Chambers, 41000 Main Street, Temecula, California. Jeff Comerchero, President ATTEST: Susan W. Jones, MMC City Clerk/District Secretary [SEAL] Item No. 10 Approvals City Attorney Chief Financial Officer City Manager 07-e-r- iltd r -o TEMECULA COMMUNITY SERVICES DISTRICT AGENDA REPORT TO: General Manager/Board of Directors FROM: Aaron Adams, Executive Director of Community Services DATE: July 10, 2012 SUBJECT: Agreement with The Shortstop for Concession Services at the Patricia H. Birdsall Sports Park PREPARED BY: Barbara Smith, Senior Management Analyst RECOMMENDATION: Approve an Agreement with The Shortstop for concession services at the Patricia H. Birdsall Sports Park. BACKGROUND: On June 22, 2010 the Temecula Community Services District (TCSD) entered into an agreement with Stadium Pizza Redhawk, LLC to provide concession services at the Patricia H. Birdsall Sports Park (PHBSP). This was a two-year agreement with two one-year extensions. In May 2012 the TCSD was notified, by the vendor, that they would exercise their 90 - day termination clause and relinquish their agreement. In order to prepare and process a Request for Proposal (RFP) for a new concessionaire, Stadium Pizza Redhawk agreement's term was extended to July 31, 2012. The RFP was released on PlanetBids on June 8, 2012. Three businesses, all located in Temecula, submitted proposals. A panel of experts reviewed, evaluated and rated the proposals and it was unanimously determined that The Shortstop was the best qualified proponent to provide concession services at Patricia H. Birdsall Sports Park. The Shortstop owners Greg and Lauren Stiles have restaurant and concession service experience. Their proposed menu will include a daily special that provides a "healthy alternative" to the standard concession offerings. The Shortstop and TCSD have agreed upon a maintenance schedule for the concession equipment and eating area, both prior to their start of operations and during their term as concessionaire. Due to the Stiles' knowledge of the PHBSP facility and park activities, they will quickly and easily transition into providing concession services. This is an exclusive agreement to provide food and non-alcoholic beverages from the concession area at PHBSP seven days a week and extended hours during special events. The TCSD reserves the right to contract with other food vendors in areas outside of the concession section for special events. If approved, the agreement will be in effect July 10, 2012 and the concessionaire will begin service as soon as possible but no later than August 1, 2012. The TCSD will receive 10.25% of the gross revenues generated from sales at the PHBSP which was the highest percentage proposed by all three proponents. FISCAL IMPACT: Revenues generated will be 10.25% of gross sales. Staff estimates the TCSD revenues to be approximately $10,000 annually. ATTACHMENTS: Agreement FOOD AND BEVERAGE SALES AGREEMENT BETWEEN TEMECULA COMMUNITY SERVICES DISTRICT AND GREG AND LAUREN STILES D/B/A THE SHORTSTOP FOR THE PATRICIA H. BIRDSALL SPORTS PARK THIS AGREEMENT is made and effective as of July 10, 2012, between the Temecula Community Services District, a municipal corporation ("City") and Greg and Lauren Stiles d/b/a The Shortstop ("Concessionaire"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: 1. RECITALS. This Agreement is made with respect to the following facts and for the following purposes, which each of the parties acknowledge being true and correct: a. The City has constructed and operates the Patricia H. Birdsall Sports Park. The Sports Park includes sports fields, play equipment, picnic facilities and a food concession area. b. The Patricia H. Birdsall Sports Park's current contracted concessionaire will relinquish their contract with the City as of July 31, 2012. c. City circulated a request for proposal for the food concession services at the Patricia II. Birdsall Sports Park; following receipt and evaluation of the responses, a Concessionaire was selected to provide high quality food and beverage services in the Food Concession Area. d. City desires to have a Concessionaire, and Concessionaire desires, to provide for the sale of high quality food and beverages at the Patricia H. Birdsall Sports Park from the Food Concession Area. 2. Definitions. As used in this Agreement the following words and phrases shall be defined as follows: a. "City Supplied Equipment" shall mean the equipment provided by the City for the operation of the food and beverage sales operation as described in Exhibit A, City Supplied Equipment. b. "Concessionaire Supplied Equipment" shall mean such equipment as is necessary for the providing of food and beverage sales as required by this Agreement, except for the City Supplied Equipment. c. "City Manager" shall mean the City Manager of the City of Temecula or his or her designee. d. "Food Concession Area" shall mean that portion of the Sports Park designated as the food concession area which is described and depicted on Exhibit B, Food 1 Concession Area. e. "Gross Receipts" is hereby defined to mean receipt of all sales from all items sold by concessionaire at the Patricia H. Birdsall Sports Park and during sporting special events at Ronald Reagan Sports Park. Gross receipts shall include all cash and other things of value received by concessionaire for all items sold by the concessionaire. Gross receipts shall not include deductions from franchise, capital stock or other taxes based upon income or profits. No deduction shall be allowed for uncollected or uncollectible installment or credit accounts. However, sales taxes pursuant to Section 7200 et seq of the Revenue and Taxation Code shall not be included in Gross Receipts. f. "Sports Park" shall mean the Patricia H. Birdsall Sports Park located at 32380 Deer Hollow Way, Temecula, California. g. "City" shall mean the Temecula Community Services District. 3. EXCLUSIVE AGREEMENT FOR FOOD AND BEVERAGE SALES AT FOOD CONCESSION AREA. Concessionaire shall have an exclusive agreement to provide for the sale of high quality food and beverages from the Food Concession Area to patrons of the Sports Park and members of the public in accordance with the terms of this Agreement. If Concessionaire is unable to provide additional services for special events the City reserves the right to contract with other food vendors in areas of the Sports Park outside of the Food Concession Area. The City shall provide notice to the Concessionaire one (1) week prior to each Special Event. 4. MAINTENANCE OF EQUIPMENT AND PHYSICAL PLANT OF FOOD CONCESSION AREA a. The City shall provide equipment for the operation of the food and beverage sales operation as described in Exhibit A, City Supplied Equipment. The City shall review and approve the routine cleaning and maintenance schedule of the City Supplied Equipment, in accordance with applicable law and standard commercial food handling practices in Exhibit C. Concessionaire shall maintain the City Supplied Equipment in good working order. In the event of City Supplied Equipment needs repair concession staff shall contact PHBSP staff. The City shall replace items of the City Supplied Equipment when the equipment cannot be repaired; provided, however, Concessionaire shall be responsible for the repair or replacement of City Supplied Equipment damaged or destroyed by the negligent or willful acts of Concessionaire or its employees or agents, excepting normal wear and tear. Concessionaire shall use only licensed appliance repair companies as listed in Exhibit D, which are approved by the City, for any routine maintenance or repairs of the City Supplied Equipment. b. Concessionaire shall provide such equipment as is necessary for providing food and beverage sales as required by this Agreement, except for the City Supplied Equipment. At the termination or expiration of this Agreement, the City shall have the option, but not the obligation, to purchase the Concessionaire Supplied Equipment at its then fair market value. 2 c. City shall arrange for and be responsible for the timely payment of electricity, water, gas, security system and exterior pest control for the Food Concession Area. d. Concessionaire shall arrange for and be responsible for all other services within the Food Concession Area necessary and convenient for the sales of food and beverages as required by this Agreement, including, but not limited to, telephone and telecommunications facilities and lines, interior pest control and interior custodial services. During hours of concession operations, the concession staff shall provide periodic cleaning of the Food Concession Area, including but not limited to the picking up of trash and wiping of tables and seating. Concessionaire staff shall clean concession area prior to closing each day. e. All signage for the Concessionaire's food and beverage operation at the Food Concession Area, including sign content, shall be approved in writing by the City Manager prior to placement. The name of the facility shall be "The Shortstop." 5. FOOD AND BEVERAGE SALES OPERATIONAL REQUIREMENTS. In performing the services required by this Agreement, Concessionaire shall comply with the following operational requirements: a. Concessionaire shall provide quality food and beverages at the Food Concession Area during the following hours: (1) Monday through Friday from 3:00 p.m. to 9:00 p.m.; and (2) Saturday and Sundays from 8:00 a.m. to 8:00 p.m. Changes to these hours shall be provided upon the prior written approval of the Concessionaire and the City Manager. On Memorial Day Weekend concession services shall be provided at Ronald Reagan Sports Park and Concessionaire shall obtain all required health permits and licenses for that site. b. City Manager shall approve in writing the Menu and Price Lists, Exhibit E. Concessionaire's prices for food and beverages shall not exceed the prices on this approved list. Concessionaire shall not sell gum, seeds and peanuts, beer, wine or other alcoholic beverages as part of its concession service. Food and beverage price list can be adjusted with the mutual approval of the City Manager and Concessionaire. c. Concessionaire shall at all times faithfully, competently and to the best of its ability, experience and talent, perform all services described herein. Concessionaire shall provide staff to receive all deliveries and be available during all equipment service or maintenance calls that are requested by Concessionaire. Concessionaire shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar high quality food and beverage services as are required of Concessionaire in meeting its obligations under this Agreement. d. Concessionaire shall, at its own cost and expense, procure and keep in force during the term of this Agreement all necessary permits and licenses and shall require any subcontractors to have all necessary permits and licenses during the course of the term of the Agreement, including, without limitation: (1) City of Temecula business license; (2) County of Riverside Health Department food handler permits; and (3) California State Board of Equalization sellers permit. 3 e. Concessionaire shall be responsible for the payment of all applicable taxes for products or services under its control, including without limitation, any possessory interest tax which might be imposed, and for the maintenance of appropriate records showing payment of taxes. Concessionaire shall pay and discharge before delinquency all taxes and assessments, if any, which may be levied during the term of the Agreement as a result of Concessionaire's operations. Concessionaire shall not permit any liens to be asserted against City's property during the term of this Agreement. f. Employees of Concessionaire shall at all times be neatly and cleanly uniformed at no expense to City. The style and colors of uniforms for employees shall be approved by the City Manager. g. Concessionaire shall train and closely supervise all employees so that they are aware of and continually practice high standards of cleanliness, courtesy and service. Concessionaire's employees shall follow all applicable sanitary practices, rules and requirements governing restaurant employees. Concessionaire's employees shall at all times reflect personal cleanliness and neatness. Unkempt and unclean employees will not be tolerated by the City. The City shall provide written notice regarding any unkempt and unclean employees to the Concessionaire. h. Concessionaire's employees shall not, either by act or language, offend or disturb patrons of normal sensitivity during the course of providing services at the Sports Park. Concessionaire's employees shall not interfere with a program or special event presented at the Sports Park. The City Manager shall be the sole judge in the determination of such matters. i. To the extent required by law, Concessionaire's employees shall be fingerprinted and undergo the State required background check for working in a public park. j. Concessionaire shall provide an adequate number of personnel to properly service and attend to the patrons. k. Concessionaire shall respond promptly to all complaints from patrons and shall report to City on each complaint and the resolution thereof. If City believes a complaint to be of a serious nature, City shall notify Concessionaire in writing. Concessionaire shall respond to such notification within four (4) calendar days. 1. Not less than once each calendar quarter during the first year of the term of this Agreement, the City Manager and Concessionaire shall meet to discuss the operation of the food and beverage services and the financial viability of the operation. m. All promotions with other food vendors or any subcontracts shall be approved in advance and in writing by the City Manager. n. Concessionaire shall allow City Staff access to the Food Concession area as necessary or convenient to the City to insure compliance with the terms of this Agreement. 4 6. TERM. a. This Agreement shall commence by July 31, 2012 pursuant to the vacation of the current concessionaire and shall remain and continue in effect until June 30, 2014, unless sooner terminated or extended pursuant to the provisions of this Agreement. City shall have the right to extend this Agreement for three (3) one-year periods with the first beginning on July 1, 2014 and the second beginning on July 1, 2015 and the third beginning on July 1, 2016. City and Concessionaire shall exercise its option to extend the Agreement on or before April 1 of the year of expiration. 7. PAYMENT TO THE CITY. a. Concessionaire shall sell its food and beverages to patrons of the Sports Park and members of the public from the Food Concession Arca. City shall not be required to pay or otherwise compensate Concessionaire for providing food and beverage services at the Sports Park. b. For the privilege of operating the Food Concession Area pursuant to the terms of this Agreement, Concessionaire shall pay to the City 10.25% percent of the Gross receipts of the Concessionaire from its sales pursuant to this Agreement. Said sum shall be paid to the City within ten (10) calendar days following the end of each calendar quarter. c. Concessionaire shall maintain a system of books and records in accordance with generally accepted accounting principles showing all Concessionaires' revenues received in connection with the sales of food and beverages pursuant to this Agreement. The City Manager shall review and approve the system of books and records and shall be authorized to require the preparation and maintenance of additional accounting records and reports. Said records shall be kept for not less than three (3) years after the expiration of the term of this Agreement and any extensions thereof. City and its authorized agents may inspect or audit such books and records at any time during regular business hours upon one (1) business days' notice. If a City audit uncovers an underreporting of Gross Receipts in the amount of five percent (5%) or more during a one year period, Concessionaire shall pay the City's costs in performing the audit. d. Prior to the commencement of the term of this Agreement, Concessionaire shall provide the City with a check for one thousand dollars ($1,000.00) which will be deposited into a non-interest bearing account. If Concessionaire defaults in payments to the City or any of the terms, provisions, covenants and conditions of this Agreement, City may use, apply, or retain the whole or any part of this security for any payment due to the City of any expenses or payment in default or for any other sum which the City may spend or be required to spend by reason of Concessionaire's default. The security deposit or any balance remaining of the security deposit, less any deductions per this subsection, shall be returned to Concessionaire, without interest, within fourteen (14) days of the termination or expiration of this Agreement. In the event City uses part or all of the security deposit as provided herein, Concessionaire shall replenish the security deposit in the amount used within ten (10) days of notice from City. City may require, at any time that the security deposit be increased in proportion to the amount that 5 minimum monthly rent or payment has increased. 8. TERMINATION OF AGREEMENT WITHOUT CAUSE. a. The City may at any time, for any reason, with or without cause, terminate this Agreement, or any portion hereof, by serving upon the Concessionaire at least ninety (90) calendar days prior written notice. Upon receipt of said notice, the Concessionaire shall continue to provide the services required by this Agreement, unless the notice provides otherwise. b. Concessionaire may at any time, for any reason, with or without cause, suspend or terminate this Agreement, or any portion hereof, by serving upon the City at least ninety (90) calendar days prior written notice. Upon receipt of said notice, the Concessionaire shall continue to provide the services required by this Agreement, unless the City Manager otherwise agrees in writing. c. In the event this Agreement is terminated pursuant to this Section, the Concessionaire shall pay to the City the amounts which may be due to the City under this Agreement through the time of termination. 9. DEFAULT OF CONCESSIONAIRE. a. Concessionaire's failure to comply with the provisions of this Agreement shall constitute a default. b. If the City Manager determines that Concessionaire is in default in the performance of any of the terms or conditions of this Agreement, he or she shall serve the Concessionaire with written notice of the default. Concessionaire shall have (10) days after service upon it of said notice in which to cure the default by rendering a satisfactory performance. In the event that the Concessionaire fails to cure its default within such period of time, the City shall have the right, notwithstanding any other provision of this Agreement, to terminate or suspend this Agreement without further notice and without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement. c. In the event the City Manager determines that Concessionaire's default poses an immediate risk to the health or safety of patrons of the park, the Food Concession Facility or the public, he may suspend the Agreement without prior written notice to Concessionaire. Upon such immediate suspension, the City Manager shall initiate the default procedures set forth in this Section. d. The City and Concessionaire agree that waiver by the City or Concessionaire of any breach or violation of any term or condition of this Agreement shall not be deemed to be a waiver of any other term or condition contained herein or a waiver of any subsequent breach or violation of the same or any other term or condition. 10. INDEMNIFICATION. The Concessionaire agrees to defend, indemnify, protect and hold harmless the City of Temecula, Temecula Community Services District, and/or the 6 Successor Agency to the Temecula Redevelopment Agency, its officers, officials, employees and volunteers from and against any and all claims, demands, losses, defense costs or expenses, including attorney fees and expert witness fees, or liability of any kind or nature which the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency, its officers, agents, employees or volunteers may sustain or incur or which may be imposed upon them for injury to or death of persons, or damage to property arising out of Concessionaire's negligent or wrongful acts or omissions arising out of or in any way related to the performance or non-performance of this Agreement, excepting only liability arising out of the negligence of the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency. 11. INSURANCE REQUIREMENTS. Concessionaire shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the work hereunder by the Concessionaire, its agents, representatives, or employees. a. Minimum Scope of Insurance. Coverage shall be at least as broad as: 1) Insurance Services Office Commercial General Liability form No. CG 00 01 11 85 or 88. 2) Insurance Services Office Business Auto Coverage form CA 00 01 06 92 covering Automobile Liability, code 1 (any auto). If the Concessionaire owns no automobiles, a non -owned auto endorsement to the General Liability policy described above is acceptable. 3) Worker's Compensation insurance as required by the State of California and Employer's Liability Insurance. If the Concessionaire has no employees while performing under this Agreement, worker's compensation insurance is not required, but Concessionaire shall execute a declaration that it has no employees. b. Minimum Limits of Insurance. Concessionaire shall maintain limits no less . than: 1) General Liability: One million ($1,000,000) per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. 2) Automobile Liability: One million ($1,000,000) per accident for bodily injury and property damage. 3) Worker's Compensation as required by the State of California; Employer's Liability: One million dollars ($1,000,000) per accident for bodily injury or disease. c. Deductibles and Self -Insured Retentions. Any deductibles or self-insured retentions shall not exceed Twenty Five Thousand Dollars and No Cents ($25,000). d. Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions: 7 1) The City of Temecula, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees and volunteers are to be covered as insured's, as respects: liability arising out of activities performed by or on behalf of the Concessionaire; products and completed operations of the Concessionaire; premises owned, occupied or used by the Concessionaire; or automobiles owned, leased, hired or borrowed by the Concessionaire. The coverage shall contain no special limitations on the scope of protection afforded to the City of Temecula, the Temecula Community Services District, and the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers. 2) For any claims related to this project, the Concessionaire's insurance coverage shall be primary insurance as respects the City of Temecula, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees and volunteers. Any insurance or self-insured maintained by the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency, its officers, officials, employees or volunteers shall be excess of the Concessionaire's insurance and shall not contribute with it. 3) Any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City of Temecula, the Temecula Community Services District, and the Successor Agency to the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers. 4) The Concessionaire's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 5) Each insurance policy required by this agreement shall be endorsed to state in substantial conformance to the following: If the policy will be canceled before the expiration date the insurer will notify in writing to the City of such cancellation not less than thirty (30) days' prior to the cancellation effective date. 6) If insurance coverage is canceled or, reduced in coverage or in limits the Concessionaire shall within two (2) business days of notice from insurer phone, fax, and/or notify the City via certified mail, return receipt requested of the changes to or cancellation of the policy. e. Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best rating of A -:VII or better, unless otherwise acceptable to the City. Self- insurance shall not be considered to comply with these insurance requirements. f. Verification of Coverage. Concessionaire shall furnish the City with original endorsements effecting coverage required by this clause. The endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. The endorsements are to be on forms provided by the City. All endorsements are to be received and approved by the City before work commences. As an alternative to the City's forms, the Concessionaire's insurer may provide complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications. 8 12. INDEPENDENT CONTRACTOR. a. Concessionaire is and shall at all times remain as to the City a wholly independent Contractor. The personnel performing the services under this Agreement on behalf of Concessionaire shall at all times be under Concessionaire's exclusive direction and control. Neither City nor any of its officers, employees, agents, or volunteers shall have control over the conduct of Concessionaire or any of Concessionaire's officers, employees, or agents except as set forth in this Agreement. Concessionaire shall not at any time or in any manner represent that it or any of its officers, employees or agents are in any manner officers, employees or agents of the City. Concessionaire shall not incur or have the power to incur any debt, obligation or liability whatever against City, or bind City in any manner. b. No employee benefits shall be available to Concessionaire in connection with the performance of this Agreement. Except for the rights of Concessionaire as provided in the Agreement, City shall not pay salaries, wages, or other compensation to Concessionaire for performing services hereunder for City. City shall not be liable for compensation or indemnification to Concessionaire for injury or sickness arising out of performing services hereunder. 13. LEGAL RESPONSIBILITIES. Concessionaire shall keep itself informed of all applicable local, State and Federal laws, ordinances, and regulations which in any manner affect those employed by it or in any way affect the performance of its obligations pursuant to this Agreement. Concessionaire shall at all times observe and comply with all such ordinances, laws and regulations. The City, and its officers and employees, shall not be liable for any failure of the Concessionaire to comply with this section. 14. RELEASE OF INFORMATION. a. All information gained by Concessionaire in performance of this Agreement shall be considered confidential and shall not be released by Concessionaire without City's prior written authorization. Concessionaire, its officers, employees, agents or subcontractors, shall not without written authorization from the City Manager or unless requested by the City Attorney, voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories or other information concerning the work performed under this Agreement or relating to any project or property located within the City. Response to a subpoena or court order shall not be considered "voluntary" provided Concessionaire gives City notice of such court order or subpoena. b. Concessionaire shall promptly notify City should Concessionaire, its officers, employees, agents or subcontractors be served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admissions or other discovery request, court order or subpoena from any party regarding this Agreement and the work performed there under or with respect to any project or property located within the City. City retains the right be present at any deposition, hearing or similar proceeding. Concessionaire agrees to cooperate fully with City and to provide City with the opportunity to review any response to discovery requests provided by Concessionaire. However, City's right to review any 9 such response does not imply or mean the right or obligation by City to control, direct, or rewrite said response. 15. NOTICES. Any notices which either party may desire to give to the other party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable document delivery service, such as but not limited to, Federal Express, that provides a receipt showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below or at any other address as that party may later designate by Notice. Notice shall be effective upon delivery to the addresses specified below or on the third business day following deposit with the document delivery service or United States Mail as provided above. To CITY: Use this Address for a Delivery Service: or Hand -Deliveries ONLY City of Temecula Community Services District Mailing Address: P.O. Box 9033 Temecula, California 92589-9033 Attention: City Manager City of Temecula Community Services District 41000 Main Street Temecula, CA 92590 Attention: City Manager To CONCESSIONAIRE: The Shortstop 43523 Modena Drive Temecula, CA 92592 Attention: Greg and Lauren Stiles 16. ASSIGNMENT. Due to the special services being performed by Concessionaire pursuant to this Agreement, and the importance of providing quality food and beverage services, Concessionaire shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City Manager. 17. GOVERNING LAW; LITIGATION. The City and Concessionaire understand and agree that the laws of the State of California shall govern the rights, obligations, duties and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in the municipal, superior, or federal district court with geographic jurisdiction over the City of Temecula. In the event such litigation is filed by one party against the other to enforce its rights under this Agreement, the prevailing party, as determined by the Court's judgment, shall be entitled to reasonable attorney fees and litigation expenses for the relief granted. 18. PROHIBITED INTEREST. No officer, or employee of the City of Temecula shall have any financial interest, direct or indirect, in this Agreement, the proceeds 10 thereof, the Concessionaire, or Concessionaire's sub -contractors, during his/her tenure or for one year thereafter. The Concessionaire hereby warrants and represents to the City that no officer or employee of the City of Temecula has any interest, whether contractual, non -contractual, financial or otherwise, in this transaction, or in the business of the Concessionaire or Concessionaire's sub -contractors for the services to be provided under this Agreement. Concessionaire further agrees to notify the City in the event any such interest is discovered whether or not such interest is prohibited by law or this Agreement. 19. ENTIRE AGREEMENT. This Agreement contains the entire understanding between the parties relating to the obligations of the parties described in this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged into this Agreement and shall be of no further force or effect. Each party is entering into this Agreement based solely upon the representations set forth herein and upon each party's own independent investigation of any and all facts such party deems material. 20. AUTHORITY TO EXECUTE THIS AGREEMENT. The person or persons executing this Agreement on behalf of Concessionaire warrants and represents that he or she has the authority to execute this Agreement on behalf of Concessionaire and has the authority to bind Concessionaire to the performance of its obligations hereunder. 21. EXHIBITS. The following Exhibits are attached to this Agreement and incorporated herein as though set forth in full: a. Exhibit A City Supplied Equipment b. Exhibit B Food Concession Area c. Exhibit C Maintenance Schedule d. Exhibit D List of City Approved Contractors e. Exhibit E Food Menu and Prices 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. TEMECULA COMMUNITY SERVICES GREG AND LAUREN STILES DISTRICT D/B/A THE SHORTSTOP By: By: Robert C. Johnson, General Greg Stiles, Owner Manager ATTEST: By: By: Susan W. Jones, MMC, City Lauren Stiles, Owner Clerk/District Secretary APPROVED AS TO FORM: Bv: Peter M. Thorson, City Attorney CONCESSIONAIRE: The Shortstop Greg and Lauren Stiles 43523 Modena Drive Temecula, CA 92592 951314-6259 — Greg Stiles 951541-6750 — Lauren Stiles stileslauren@hotmail.com PM Initials: 0 /� . Date: 1/ 12 EX111131T A City Supplied Equipment Commercial Refrigerator (reach -in) Commercial Freezer (reach -in) Ice Machine Restaurant Range with Oven Commercial Fryer Three (3) Compartment Sink Preparation Sink Janitorial Floor Sink Commercial Hot Water Heater Hand Sink 13 Exhibit B Patricia H. Birdsall Sports Park March 2012 Aerial 100 150 200 Feet` EXHIBIT C Maintenance Schedule Prior to The Shortstop beginning operations: City: Service the ice maker, freezer, refrigerator, fryers and grill including inspect and clean coils. Inspect the concession building roof and remove where grease has collected. The Shortstop: Clean the interior of the concession building, wash the walls and ceiling where grease has collected; clean the interior vents above both the fryers and the grill. After The Shortstop operations has begun: City: Annually inspect the roof and remove any accumulated grease. Repair city supplied equipment as needed. Daily removal of trash, from the concession eating area, and taken to the dumpsters. The Shortstop: Daily — Wipe down counters, sweep floor, all trash will be taken to the dumpsters, clean concession eating arca periodically through the day and prior to end of day. Weekly — Clean mats, floors mopped, filters above fryers will be washed and the grease trap will be emptied. Freezer and refrigerator will be cleaned out and wiped down. Monthly — The steel cage above the fryer will be cleaned as will the ceiling and side walls. Semi -Annually — Routine maintenance service will be conducted on all equipment including coil cleaning and maintenance checks. Concession eating area patio will be power washed and freezer will be defrosted. This list can be administratively amended upon the mutual agreement between the City and The Shortstop. 14 EXHIBIT D List of City Approved Contractors Mr. Appliance — Kitchen equipment (refer, freezer, ice maker, fryer, oven, etc.) (951) 926-1353 Diamond Environmental — Grease trap pumping (888) 744-7191 Craftsman Plumbing and Heating — Plumbing repairs and drain line clearing (951) 676-6638 Computer Alert Systems — Alarm monitoring and repair (951) 676-6880 Alpha Mechanical — HVAC maintenance and repair (858) 279-1300 Wurm's Janitorial Services Inc. — Facility janitorial services (951) 582-0003 Environmental Cleaning Solutions — Park restroom janitorial services (714) 231-9645 This list can be administratively amended upon the mutual agreement between the City and The Shortstop. 15 EXHIBIT E Menu and Price List Breakfast Items: Breakfast Burritos (Hash browns, egg, bacon or sausage) French Toast Sticks Donuts or Muffin Bagel/Cream Cheese Oatmeal Lunch/Dinner Items: Burgers: 1/3 Pound Burger Turkey Burger With Cheese Add Side order of fries Chicken Strips With French fries Large Hot Dog Add chili Add cheese Mini Corn Dogs With French fries Pizza (Slice) Combo: 2 slice/drink Whole pizza French Fries (full order) Tater Tots (full order) Add chili Add cheese Additional Items: Fresh Fruit (apple. orange; banana) Granola Bar Bowl of Chili Churros Cup of Noodles Bag of Chips Ice Cream Bag of Popcorn Pickle Assorted Candy $1.00 $1.00 $2.50 $1.50 $1.50 $1.00 $1.00/$1.50 $1.50 $1.00 $1.00 Daily Specials varies This list can be administratively City and The Shortstop. amended $5.00 $2.50 $1.50 $2.50 $2.00 $5.00 $5.00 $5.50 $6.50 $4.00 $5.00 $3.00 $3.50 $4.00 $3.00 $4.00 $2.00 $5.00 $12.00 $3.00 $3.00 $ .50 $ .50 Drinks: Apple Juice $1.50 Orange Juice $1.50 Soda & Powerade (20oz) $2.00 Coffee $1.50/ $2.50 Hot Chocolate $1.501$2.50 Slush Puppies $2.00 Water (23.7oz) $2.00 upon the mutual agreement between the TEMECULA PUBLIC FINANCING AUTHORITY Item No. 11 ACTION MINUTES of November 22, 2011 City Council Chambers, 41000 Main Street, Temecula, California TEMECULA PUBLIC FINANCING AUTHORITY The Temecula Public Financing Authority convened at 8:08 P.M. CALL TO ORDER: Chair Person Ron Roberts ROLL CALL: DIRECTORS: Comerchero, Edwards, Naggar, Washington, Roberts TPFA PUBLIC COMMENTS There were no public comments. TPFA CONSENT CALENDAR 18 Action Minutes — Approved staff recommendation (5-0-0) — Agency Member Washington made the motion; it was seconded by Agency Member Comerchero; and electronic vote reflected unanimous approval. RECOMMENDATION: 18.1 Approve the action minutes of July 26, 2011. Item No. 19 was pulled from the Consent Calendar and was placed for discussion under Agency Business. AGENCY BUSINESS 19 Execution and Delivery of Lease Financing Documents relating to the Refinancing of the 2001 COPs and 2008 COPs — Approved staff recommendation (5-0-0) — Agency Member Edwards made the motion; it was seconded by Agency Member Washington; and electronic vote reflected unanimous approval. R:1Minutes.tpfa1112211 RECOMMENDATION: 19.1 Adopt a resolution entitled: RESOLUTION NO. TPFA 11-11 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY OF THE CITY OF TEMECULA APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF CERTAIN LEASE FINANCING DOCUMENTS IN CONNECTION WITH THE REFUNDING OF THE CITY OF TEMECULA CERTIFICATES OF PARTICIPATION (2001 CAPITAL IMPROVEMENT FINANCING PROJECT) AND THE CITY OF TEMECULA CERTIFICATES OF PARTICIPATION (2008 TEMECULA CIVIC CENTER FINANCING PROJECT), AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS WITH RESPECT THERETO TPFA BOARD OF DIRECTORS REPORTS TPFA ADJOURNMENT At 8:10 P.M., the Temecula Public Financing Authority meeting was formally adjourned to Tuesday, December 13, 2011, at 5:30 P.M., for a Closed Session, with regular session commencing at 7:00 PM., City Council Chambers, 41000 Main Street, Temecula, California. Ron Roberts, Chair Person ATTEST: Susan W. Jones, MMC City Clerk/Agency Secretary [SEAL] R:1Minutes.tpfa1112211 TEMECULA PUBLIC FINANCING AUTHORITY BUSINESS Item No. 12 Approvals City Attorney Chief Financial Officer City Manager M -r - 7‘1m) r, TEMECULA PUBLIC FINANCING AUTHORITY AGENDA REPORT TO: Executive Director/Authority Members FROM: Genie Wilson, Treasurer DATE: July 10, 2012 SUBJECT: Approval of Issuance of Special Tax Refunding Bonds for Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill), Community Facilities District No. 03-03 (Wolf Creek), and Community Facilities District No. 03-06 (Harveston II) RECOMMENDATION: 1. Adopt a resolution entitled: RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS 2. Adopt a resolution entitled: RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS 3. Adopt a resolution entitled: RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS BACKGROUND: In 2003, the Board of Directors of the Authority formed three community facilities districts pursuant to the provisions of the Mello -Roos Community Facilities Act of 1982, as amended, including the Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) ("CFD 03-1"), the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) ("CFD 03-03"), and the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II), in order to finance various public improvements incident to development in the Crowne Hill, Wolf Creek and Harveston developments in the City. On August 7, 2003, the Temecula Public Financing Authority (the "Authority") issued $12,155,000 initial principal amount of its Special Tax Bonds, Series 2003A for and on behalf of CFD 03-1 (the "CFD 03-1 Bonds"), on January 8, 2004, the Authority issued $30,990,000 initial principal amount of its 2003 Special Tax Bonds for and on behalf of CFD 03-03 (the "CFD 03-03 Bonds"), and on September 9, 2004, the Authority issued $4,845,000 initial principal amount of its Special Tax Bonds, Series 2004 for and on behalf of CFD 03-06 (the "CFD 03-06 Bonds," and, collectively with the CFD 03-1 Bonds and CFD 03-03 Bonds, the "Outstanding Bonds"), all in order to provide financing for the public improvements authorized to be funded by CFD 03-1, CFD 03-03 and CFD 03-06, respectively. Due to favorable interest rates in the financial markets, the Outstanding Bonds can now be refunded by means of the issuance of three series of refunding bonds, one series for each of the three CFDs (collectively, the "Refunding Bonds"), with the debt service to be payable on each series of the Refunding Bonds to be less than the debt service due on the related Outstanding Bonds to be refunded. Specifically, for Crowne Hill, the refunding of the CFD 03-1 (Crowne Hill) Bonds are anticipated to generate about $105,000 annually in debt service savings or about $2.2 million in total debt service over the remaining term of the bonds. In addition, the City anticipates releasing about $765,000 from unspent improvement fund bond proceeds, which will additionally lower the debt service and the tax on homeowners by about $70,000. On average, each homeowner will see his/her tax for the district drop by about 15%. For Wolf Creek, the refunding of the CFD 03-3 (Wolf Creek) Bonds are anticipated to generate about $235,000 annually in debt service savings or about $5.1 million in total debt service over the remaining term of the bonds. On average, each homeowner will see his/her tax for the district drop by about 8%. For Harveston II, the refunding of the CFD 03-6 (Harveston II) Bonds are anticipated to generate about $29,000 annually in debt service savings or about $630,000 in total debt service over the remaining term of the bonds. On average, each homeowner will see his/her tax for the district drop by about 8%. Actual savings is dependent upon market conditions at the time of sale of the respective Refunding Bonds, as well as the credit quality of the respective CFD and any rating from a national rating agency that may be obtained for the respective series of the Refunding Bonds. -2- The Refunding Bonds for CFD 03-1 are proposed to be issued pursuant to a Second Supplemental Fiscal Agent Agreement amending and supplementing the Fiscal Agent Agreement under which the CFD 03-1 Bonds were issued (the "CFD 03-1 Second Supplement"), and the Refunding Bonds for CFD 03-03 and for CFD 03-06 are proposed to be issued pursuant to two respective Fiscal Agent Agreements, one for CFD 03-03 (the "CFD 03-03 Fiscal Agent Agreement") and one for CFD 03-06 (the "CFD 03-06 Fiscal Agent Agreement"), which CFD 03-1 Second Supplement, CFD 03-03 Fiscal Agent Agreement and CFD 03-06 Fiscal Agent Agreement set forth the various terms and provisions for the respective series of the Refunding Bonds to which they pertain. The proceeds of the three series of Refunding Bonds are expected to be applied to the redemption of the related series of the Outstanding Bonds pursuant to three Escrow Agreements, one for each CFD. The three series of the Refunding Bonds are expected to be offered to investors for sale pursuant to three different Preliminary Official Statements, one for each CFD, and are expected to be sold to Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus, the underwriter for the Refunding Bonds, subject to parameters set forth in the respective resolutions for the Refunding Bonds the titles of which are set forth above. Those parameters allow for the issuance of up to $11,000,000 of Refunding Bonds for CFD 03-1, up to $28,000,000 of Refunding Bonds for CFD 03-03, and up to $5,000,000 of Refunding Bonds for CFD 03-06. The Authority will enter into a Continuing Disclosure Agreement for each series of the Refunding Bonds, which will require that the Authority provide certain ongoing information for each respective CFD on an annual basis until the Refunding Bonds for the applicable CFD have been paid in full. Finally, with respect to CFD 03-1, the Authority will enter into an indemnity agreement with Lennar Homes of California, Inc. ("Lennar"), pursuant to which Lennar will agree to indemnify the Authority, CFD 03-1 and the City against any claims related to California prevailing wage requirements that apply to public facilities to be acquired with proceeds of the CFD 03-1 Bonds that were constructed by Lennar. City Staff and consultants have reviewed the documents described above and they are now in form ready for approval by the Board of Directors so that the sale and issuance of the Refunding Bonds can occur. The three Resolutions also designate the professionals necessary to assist Staff with the issuance of the Refunding Bonds, including Fieldman, Rolapp & Associates as financial advisor, Quint & Thimmig LLP as bond counsel, McFarlin & Anderson LLP as disclosure counsel; and authorizes the Executive Director of the Authority to execute agreements with the professionals for their services related to the Refunding Bonds, provided that the compensation payable to the financial advisor, bond counsel and disclosure counsel relative to each series of the Refunding Bonds is payable solely from the proceeds, and is contingent upon the issuance of, the respective series of the Refunding Bonds. Each of the consultants has assisted the Authority in connection with prior issuances by the Authority of special tax bonds. If the Board of Directors adopts the Resolutions authorizing the issuance of the Refunding Bonds, it is expected that the three series of Refunding Bonds will go to the market within ten days hereof and be issued on or about August 7, 2012. FISCAL IMPACT: Each CFD is authorized to levy special taxes to repay its indebtedness, and to pay the annual costs of administration of the respective CFD. Each CFD is only authorized to levy special taxes on land included within the boundaries of the respective CFD. The Refunding Bonds will not be obligations of the City of Temecula, or general obligations of the Authority or of any CFD, but will be limited obligations of the Authority for the applicable CFD secured solely by the special taxes levied in the respective CFD and amounts held in certain funds and accounts established under the Fiscal Agent Agreement for the respective CFD. All costs of issuance of the Refunding Bonds will be paid from the proceeds of the Refunding Bonds. All administrative costs of the three CFDs and the Refunding Bonds will be paid from proceeds of the special taxes levied in the respective CFDs. -3- ATTACHMENTS: 1. Resolutions (3) 2. Second Supplemental Fiscal Agent Agreement (Crowne Hill) 3. Fiscal Agent Agreement (Wolf Creek) 4. Fiscal Agent Agreement (Harveston II) 5. Escrow Agreement (3) 6. Preliminary Official Statements (3) 7. Bond Purchase Agreements (3) 8. Continuing Disclosure Agreements (3) 9. Indemnity Agreement (Crowne Hill) -4- Attachment No. 1 Resolutions for Crowne Hill, Wolf Creek, and Harveston II RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: Section 1. The Board of Directors has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (the "Act"), to form the Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) (the "District"), to authorize the levy of special taxes on the real property within the District, and to issue bonds secured by the special taxes the proceeds of which are to be used to finance certain public improvements, all as described in Resolution No. TPFA 03-05, adopted by the Board of Directors on March 25, 2003. Section 2. On August 7, 2003, the Authority, for and on behalf of the District: (i) entered into a Fiscal Agent Agreement, dated as of July 1, 2003 (the "Original Fiscal Agent Agreement"), with U.S. Bank National Association, as fiscal agent thereunder (the "Fiscal Agent"); and (ii) issued $12,155,000 initial principal amount of Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Bonds, Series 2003-A (the "Series 2003-A Bonds"). Section 3. The Original Fiscal Agent Agreement allows for the issuance by the Authority for the District of Parity Bonds, as defined therein, secured on a parity with the Series 2003-A Bonds, in order to provide additional financing for the District and to refund outstanding bonds issued for the District. Section 4. On August 24, 2005, the Authority, for and on behalf of the District: (i) entered into a First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005 (the "First Supplement") with the Fiscal Agent; and (ii) issued $3,865,000 initial principal amount of Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Bonds, Series 2005-B (the "Series 2005-B Bonds"). Section 5. Due to favorable interest rates in the financial markets. the Board of Directors has determined that it is in the best interests of the Authority and the persons owning real property in the District that the Series 2003-A Bonds be refunded. Section 6. There have been submitted to the Board of Directors for its approval a Second Supplemental Fiscal Agent Agreement (the "Second Supplement") providing for the issuance of special tax refunding bonds of the Authority for the District (the "Bonds") and the use of the proceeds of the Bonds to refund, in whole, the Series 2003- A Bonds, as well as a Preliminary Official Statement (the "Preliminary Official Statement") describing the Bonds, a bond purchase agreement to be used in connection with the sale of the Bonds (the "Purchase Contract"), a Continuing Disclosure Agreement relating to the Bonds (the "Continuing Disclosure Agreement"), an Escrow Agreement (the "Escrow Agreement") relating to the redemption of the Series 2003-A Bonds and an Indemnity Agreement (the "Indemnity Agreement") relating to the use of proceeds of the Series 2003-A Bonds and of the Series 2005 Bonds to pay costs of public improvements, and the Board of Directors, with the aid of City of Temecula staff, has reviewed said documents and found them to be in proper order. Section 7. All conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds as contemplated by this Resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California. Section 8. Pursuant to the Act, Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), this Resolution and the Original Fiscal Agent Agreement, as amended and supplemented by the First Supplement and the Second Supplement, special tax bonds of the Authority for the District (described in Section 6 and elsewhere in this Resolution as the "Bonds"), in an aggregate principal amount not to exceed $11,000,000, are hereby authorized to be issued, with the Bonds to be designated the "Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Refunding Bonds, Series 2012." The Original Fiscal Agent Agreement, as amended and supplemented by the First Supplement and by the Second Supplement is referred to below as the "Fiscal Agent Agreement." The Bonds shall be executed in the form set forth in and otherwise as provided in the Fiscal Agent Agreement. In furtherance of the issuance of the Bonds, the Board of Directors hereby makes the following findings and determinations: (a) it is prudent in the management of the fiscal affairs of the Authority, the Board of Directors and the District to issue the Bonds for the purpose of refunding the Series 2003-A Bonds; (b) the total net interest cost to maturity on the Bonds plus the principal amount of the Bonds will not exceed the total net interest cost to maturity of the Series 2003-A Bonds plus the principal amount of the Series 2003-A Bonds (by reason of the requirement for sale of the Bonds in clause (d) of Section 10 below); (c) the Bonds satisfy the requirements of Section 53345.8(a) of the Act in that the assessed value of the real property in the District is more than three times the principal amount of the Bonds, based upon the assessed value of the real property in the District as determined by reference to the Riverside County Assessor's records; (d) the Bonds will constitute "Refunding Bonds" as defined in the Fiscal Agent -2- Agreement; (e) the Bonds satisfy the "Parity Bond" requirements of Section 2.14 of the Fiscal Agent Agreement and, when issued, will be secured under the Fiscal Agent Agreement on a parity with the Series 2005-B Bonds and any future Parity Bonds that may be issued under and as such term is defined in the Fiscal Agent Agreement; and (f) the Bonds, when issued pursuant to the Fiscal Agent Agreement, will be in accordance with the Revised Local Goals and Policies for Community Facilities Districts, adopted by the Board of Directors on July 10, 2012. For purposes of Section 53363.2 of the Act: (i) it is expected that the purchase of the Bonds will occur on or after July 11, 2012, (ii) the date, denomination, maturity dates, places of payment and form of the Bonds shall be as set forth in the Fiscal Agent Agreement, (iii) the minimum rate of interest to be paid on the Bonds shall be one-half of one percent (0.5%) with the actual rate or rates to be set forth in the Fiscal Agent Agreement as executed, (iv) the place of payment for the Series 2003-A Bonds shall be as set forth in the Fiscal Agent Agreement; and (v) the designated costs of issuing the Bonds shall be as described in Section 53363.8(a) of the Act, and as otherwise described in the Second Supplement hereafter approved, in the Official Statement for the Bonds and the closing certificates for the Bonds, including Bond Counsel and Disclosure Counsel fees and expenses. Underwriter's discount, financial advisor fees and expenses, printing costs for the Official Statement, initial fiscal agent fees, and costs of City staff incurred in connection with the sale and issuance of the Bonds. Section 9. The Second Supplement, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed to execute and deliver the Second Supplement in said form, with such additions thereto or changes therein as are approved by the Executive Director upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Second Supplement by the Executive Director. The date, manner of payment, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption and other terms of the Bonds shall be as provided in the Fiscal Agent Agreement. Section 10. The Purchase Contract between the Authority and Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus (the "Underwriter"), in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director and the Treasurer, each acting alone, are hereby authorized and directed to accept the offer of the Underwriter to purchase the Bonds contained in the Purchase Contract; provided that (a) the aggregate principal amount of the Bonds sold thereby is not in excess of $11,000,000, (b) the true interest cost of the Bonds is not in excess of 5.50%, (c) the underwriter's discount is not in excess of 1.00% of the aggregate principal amount of the Bonds, and (d) the requirements of clause (b) of the second paragraph of Section 8 above are satisfied. The Executive Director and the Treasurer, each acting alone, are hereby authorized and directed to execute and deliver the Purchase Contract in said form (if the requirements of the preceding sentence are satisfied), with such additions thereto or changes therein as are -3- recommended or approved by the officer executing such document upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Purchase Contract by the Authority. Section 11. The Preliminary Official Statement, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed, for and in the name and on behalf of the Authority, to make changes to the Preliminary Official Statement prior to its dissemination to prospective investors, and to bring the Preliminary Official Statement into the form of a final official statement (the "Official Statement") including such additions thereto or changes therein as are recommended or approved by such officer upon consultation with the Authority's General Counsel and Disclosure Counsel. The Executive Director is hereby authorized and directed to execute and deliver the Official Statement. The Underwriter is hereby authorized to distribute copies of the Preliminary Official Statement to persons who may be interested in the purchase of the Bonds and is directed to deliver copies of the Official Statement to all actual purchasers of the Bonds. The Executive Director is hereby authorized to execute a certificate or certificates to the effect that the Official Statement and the Preliminary Official Statement were deemed "final" as of their respective dates for purposes of Rule 15c2-12 of the Securities Exchange Act of 1934, and is authorized to so deem such statements final. Section 12. The Continuing Disclosure Agreement related to the Bonds and the Indemnity Agreement relating to the use of proceeds of the Series 2003-A Bonds and the Series 2005-B Bonds to pay costs of public improvements, in the respective forms presented to the Board of Directors at this meeting, are hereby approved. The Executive Director is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Continuing Disclosure Agreement and the Indemnity Agreement in said forms, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Executive Director upon consultation with the Authority's General Counsel and Disclosure Counsel, the approval of such changes to be conclusively evidenced by the execution and delivery by the Executive Director of the Continuing Disclosure Agreement and the Indemnity Agreement. Section 13. The Board of Directors hereby approves the refunding of the Series 2003-A Bonds with the proceeds of the Bonds, in accordance with the provisions of the Fiscal Agent Agreement and the Escrow Agreement between the Authority and U.S. Bank National Association, as Escrow Bank. The Board of Directors hereby approves the Escrow Agreement in the form presented to the Board of Directors at this meeting. The Executive Director is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Escrow Agreement in said form, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Executive Director upon consultation with the Authority's General -4- Counsel and Bond Counsel, the approval of such changes to be conclusively evidenced by the execution and delivery by the Executive Director of the Escrow Agreement. Section 14. The Authority hereby covenants, for the benefit of the Bondowners, to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Bonds, said foreclosure action to be commenced and pursued as more completely set forth in the Fiscal Agent Agreement. Section 15. The Bonds, when executed, shall be delivered to the Fiscal Agent (as defined in the Fiscal Agent Agreement) for authentication. The Fiscal Agent is hereby requested and directed to authenticate the Bonds by executing the Fiscal Agent's certificate of authentication and registration appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the Underwriter in accordance with written instructions executed on behalf of the Authority by the Executive Director, which instructions such officer is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver to the Fiscal Agent. Such instructions shall provide for the delivery of the Bonds to the Underwriter upon payment of the purchase price therefor. Section 16. The law firm of Quint & Thimmig LLP is hereby designated as Bond Counsel to the Authority for the Bonds, the law firm of McFarlin & Anderson LLP is hereby designated as Disclosure Counsel to the Authority for the Bonds, and the firm of Fieldman, Rolapp & Associates is hereby designated as Financial Advisor to the Authority for the Bonds. The Executive Director is hereby authorized to execute agreements with said firms for their services in connection with the Bonds, provided that the compensation payable to said firms is payable solely from the proceeds, and wholly contingent upon the issuance, of the Bonds. Section 17. All actions heretofore taken by the officers and agents of the Authority with respect to the sale and issuance of the Bonds and the refunding of the Series 2003-A Bonds are hereby approved, confirmed and ratified, and the proper officers of the Authority are hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents (including but not limited to those related to bond insurance and a reserve fund surety bond for the Bonds) which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds and the refunding of the Series 2003-A Bonds in accordance with this Resolution, and any certificate, agreement, and other document described in the documents herein approved. Section 18. This Resolution shall take effect upon its adoption. -5- PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula Public Financing Authority this 10th day of July, 2012 Chuck Washington, Chairperson ATTEST: Susan W. Jones, MMC City Clerk/Board Secretary [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Susan W. Jones, MMC, City Clerk/Board Secretary of the Temecula Public Financing Authority of the City of Temecula, do hereby certify that the foregoing Resolution No. TPFA 12- was duly and regularly adopted by the Board of Directors of the Temecula Public Financing Authority of the City of Temecula at a meeting thereof held on the 10th day of July, 2012, by the following vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSENT: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: -6- Susan W. Jones, MMC City Clerk/Board Secretary Resolution for Wolf Creek RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: Section 1. The Board of Directors has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (the "Act"), to form the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (the "District"), to authorize the levy of special taxes on the real property within the District, and to issue bonds secured by the special taxes the proceeds of which are to be used to finance certain public improvements, all as described in Resolution No. TPFA 03-22 adopted by the Board of Directors on October 28, 2003. Section 2. On January 8, 2004, the Temecula Public Financing Authority (the "Authority"), for and on behalf of the District, issued $30,990,000 principal amount of Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds (the "Prior Bonds"), with the Prior Bonds having been issued under a Fiscal Agent Agreement, dated as of December 1, 2003 (the "Prior Fiscal Agent Agreement") to finance facilities authorized to be funded by the District. Section 3. Due to favorable interest rates in the financial markets, the Board of Directors has determined that it is in the best interests of the Authority and the persons owning real property in the District that the Prior Bonds be refunded. Section 4. There have been submitted to the Board of Directors for its approval a Fiscal Agent Agreement (the "Fiscal Agent Agreement") providing for the issuance of special tax refunding bonds of the Authority for the District (the "Bonds") and the use of the proceeds of the Bonds to refund, in whole, the Prior Bonds, as well as a Preliminary Official Statement (the "Preliminary Official Statement") describing the Bonds, a bond purchase agreement to be used in connection with the sale of the Bonds (the "Purchase Contract"), a Continuing Disclosure Agreement relating to the Bonds (the "Continuing Disclosure Agreement"), and an Escrow Agreement (the "Escrow Agreement") relating to the redemption of the Prior Bonds, and the Board of Directors, with the aid of City of Temecula staff, has reviewed said documents and found them to be in proper order. Section 5. All conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds as contemplated by this Resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California. Section 6. Pursuant to the Act, Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), this Resolution and the Fiscal Agent Agreement, special tax bonds of the Authority for the District (described in Section 4 and elsewhere in this Resolution as the "Bonds"), in an aggregate principal amount not to exceed $28,000,000, are hereby authorized to be issued, with the Bonds to be designated the "Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds." The Bonds shall be executed in the form set forth in and otherwise as provided in the Fiscal Agent Agreement. In furtherance of the issuance of the Bonds, the Board of Directors hereby makes the following findings and determinations: (a) it is prudent in the management of the fiscal affairs of the Authority, the Board of Directors and the District to issue the Bonds for the purpose of refunding the Prior Bonds; (b) the total net interest cost to maturity on the Bonds plus the principal amount of the Bonds will not exceed the total net interest cost to maturity of the Prior Bonds plus the principal amount of the Prior Bonds (by reason of the requirement for sale of the Bonds in clause (d) of Section 8 below); (c) the Bonds satisfy the requirements of Section 53345.8(a) of the Act in that the assessed value of the real property in the District is more than three times the principal amount of the Bonds, based upon the assessed value of the real property in the District as determined by reference to the Riverside County Assessor's records; and (d) the Bonds, when issued pursuant to the Fiscal Agent Agreement, will be in accordance with the Local Goals and Policies for Community Facilities Districts, adopted by the Board of Directors on April 24, 2001. For purposes of Section 53363.2 of the Act: (i) it is expected that the purchase of the Bonds will occur on or after July 11, 2012, (ii) the date, denomination, maturity dates, places of payment and form of the Bonds shall be as set forth in the Fiscal Agent Agreement, (iii) the minimum rate of interest to be paid on the Bonds shall be one-half of one percent (0.5%) with the actual rate or rates to be set forth in the Fiscal Agent Agreement as executed, (iv) the place of payment for the Prior Bonds shall be as set forth in the Prior Fiscal Agent Agreement; and (v) the designated costs of issuing the Bonds shall be as described in Section 53363.8(a) of the Act, and as otherwise described in the Fiscal Agent Agreement hereafter approved, in the Official Statement for the Bonds and the closing certificates for the Bonds, including Bond Counsel and Disclosure Counsel fees and expenses, Underwriter's discount, financial advisor fees and expenses, printing costs for the Official Statement, initial fiscal agent fees, and costs of City staff incurred in connection with the sale and issuance of the Bonds. -2- Section 7. The Fiscal Agent Agreement with respect to the Bonds, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed to execute and deliver the Fiscal Agent Agreement in said form, with such additions thereto or changes therein as are approved by the Executive Director upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Fiscal Agent Agreement by the Executive Director. The date, manner of payment, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption and other terms of the Bonds shall be as provided in the Fiscal Agent Agreement as finally executed. Section 8. The Purchase Contract between the Authority and Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus (the "Underwriter"), in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director and the Treasurer, each acting alone, are hereby authorized and directed to accept the offer of the Underwriter to purchase the Bonds contained in the Purchase Contract; provided that (a) the aggregate principal amount of the Bonds sold thereby is not in excess of $28,000,000, (b) the true interest cost of the Bonds is not in excess of 5.50%, (c) the underwriter's discount is not in excess of 1.10% of the aggregate principal amount of the Bonds, and (d) the requirements of clause (b) of the second paragraph of Section 6 above are satisfied. The Executive Director and the Treasurer, each acting alone, are hereby authorized and directed to execute and deliver the Purchase Contract in said form (if the requirements of the preceding sentence are satisfied), with such additions thereto or changes therein as are recommended or approved by the officer executing such document upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Purchase Contract by the Authority. Section 9. The Preliminary Official Statement, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed, for and in the name and on behalf of the Authority, to make changes to the Preliminary Official Statement prior to its dissemination to prospective investors, and to bring the Preliminary Official Statement into the form of a final official statement (the "Official Statement") including such additions thereto or changes therein as are recommended or approved by such officer upon consultation with the Authority's General Counsel and Disclosure Counsel. The Executive Director is hereby authorized and directed to execute and deliver the Official Statement. The Underwriter is hereby authorized to distribute copies of the Preliminary Official Statement to persons who may be interested in the purchase of the Bonds and is directed to deliver copies of the Official Statement to all actual purchasers of the Bonds. The Executive Director is hereby authorized to execute a certificate or certificates to the effect that the Official Statement and the Preliminary Official Statement were -3- deemed "final" as of their respective dates for purposes of Rule 15c2-12 of the Securities Exchange Act of 1934, and is authorized to so deem such statements final. Section 10. The Continuing Disclosure Agreement related to the Bonds, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Continuing Disclosure Agreement in said form, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Executive Director upon consultation with the Authority's General Counsel and Disclosure Counsel, the approval of such changes to be conclusively evidenced by the execution and delivery by the Executive Director of the Continuing Disclosure Agreement. Section 11. The Board of Directors hereby approves the refunding of the Prior Bonds with the proceeds of the Bonds, in accordance with the provisions of the Prior Fiscal Agent Agreement and the Escrow Agreement between the Authority and U.S. Bank National Association, as Escrow Bank. The Board of Directors hereby approves the Escrow Agreement in the form presented to the Board of Directors at this meeting. The Executive Director is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Escrow Agreement in said form, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Executive Director upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such changes to be conclusively evidenced by the execution and delivery by the Executive Director of the Escrow Agreement. Section 12. The Authority hereby covenants, for the benefit of the Bondowners, to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Bonds, said foreclosure action to be commenced and pursued as more completely set forth in the Fiscal Agent Agreement. Section 13. The Bonds, when executed, shall be delivered to the Fiscal Agent (as defined in the Fiscal Agent Agreement) for authentication. The Fiscal Agent is hereby requested and directed to authenticate the Bonds by executing the Fiscal Agent's certificate of authentication and registration appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the Underwriter in accordance with written instructions executed on behalf of the Authority by the Executive Director, which instructions such officer is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver to the Fiscal Agent. Such instructions shall provide for the delivery of the Bonds to the Underwriter upon payment of the purchase price therefor. Section 14. The law firm of Quint & Thimmig LLP is hereby designated as Bond Counsel to the Authority for the Bonds, the law firm of McFarlin & Anderson LLP is hereby designated as Disclosure Counsel to the Authority for the Bonds, and the firm of Fieldman, Rolapp & Associates is hereby designated as Financial Advisor to the -4- Authority for the Bonds. The Executive Director is hereby authorized to execute agreements with said firms for their services in connection with the Bonds, provided that the compensation payable to said firms is payable solely from the proceeds, and wholly contingent upon the issuance, of the Bonds. Section 15. All actions heretofore taken by the officers and agents of the Authority with respect to the sale and issuance of the Bonds and the refunding of the Prior Bonds are hereby approved, confirmed and ratified, and the proper officers of the Authority are hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents (including but not limited to those related to bond insurance and a reserve fund surety bond for the Bonds) which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds and the refunding of the Prior Bonds in accordance with this Resolution, and any certificate, agreement, and other document described in the documents herein approved. Section 16. This Resolution shall take effect upon its adoption. -5- PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula Public Financing Authority this 10th day of July, 2012 ATTEST: Susan W. Jones, MMC City Clerk/Board Secretary [SEAL] STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF TEMECULA ) ss Chuck Washington, Chairperson I, Susan W. Jones, MMC, City Clerk/Board Secretary of the Temecula Public Financing Authority of the City of Temecula, do hereby certify that the foregoing Resolution No. TPFA 12- was duly and regularly adopted by the Board of Directors of the Temecula Public Financing Authority of the City of Temecula at a meeting thereof held on the 10th day of July, 2012, by the following vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSENT: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: -6- Susan W. Jones, MMC City Clerk/Board Secretary Resolution for Harveston II RESOLUTION NO. TPFA 12- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX REFUNDING BONDS RELATED TO THE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: Section 1. The Board of Directors has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (the "Act"), to form the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) (the "District"), to authorize the levy of special taxes on the real property within the District, and to issue bonds secured by the special taxes the proceeds of which are to be used to finance certain public improvements, all as described in Resolution No. TPFA 03-27 adopted by the Board of Directors on November 25, 2003. Section 2. On September 9, 2004, the Temecula Public Financing Authority (the "Authority"), for and on behalf of the District, issued $4,845,000 principal amount of Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004 (the "Prior Bonds"), with the Prior Bonds having been issued under a Fiscal Agent Agreement, dated as of August 1, 2004 (the "Prior Fiscal Agent Agreement") to finance facilities authorized to be funded by the District. Section 3. Due to favorable interest rates in the financial markets, the Board of Directors has determined that it is in the best interests of the Authority and the persons owning real property in the District that the Prior Bonds be refunded. Section 4. There have been submitted to the Board of Directors for its approval a Fiscal Agent Agreement (the "Fiscal Agent Agreement") providing for the issuance of special tax refunding bonds of the Authority for the District (the "Bonds") and the use of the proceeds of the Bonds to refund, in whole, the Prior Bonds, as well as a Preliminary Official Statement (the "Preliminary Official Statement") describing the Bonds, a bond purchase agreement to be used in connection with the sale of the Bonds (the "Purchase Contract"), a Continuing Disclosure Agreement relating to the Bonds (the "Continuing Disclosure Agreement"), and an Escrow Agreement (the "Escrow Agreement") relating to the redemption of the Prior Bonds, and the Board of Directors, with the aid of City of Temecula staff, has reviewed said documents and found them to be in proper order. Section 5. All conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds as contemplated by this Resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California. Section 6. Pursuant to the Act, Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), this Resolution and the Fiscal Agent Agreement, special tax bonds of the Authority for the District (described in Section 4 and elsewhere in this Resolution as the "Bonds"), in an aggregate principal amount not to exceed $5,000,000, are hereby authorized to be issued, with the Bonds to be designated the "Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012." The Bonds shall be executed in the form set forth in and otherwise as provided in the Fiscal Agent Agreement. In furtherance of the issuance of the Bonds, the Board of Directors hereby makes the following findings and determinations: (a) it is prudent in the management of the fiscal affairs of the Authority, the Board of Directors and the District to issue the Bonds for the purpose of refunding the Prior Bonds; (b) the total net interest cost to maturity on the Bonds plus the principal amount of the Bonds will not exceed the total net interest cost to maturity of the Prior Bonds plus the principal amount of the Prior Bonds (by reason of the requirement for sale of the Bonds in clause (d) of Section 8 below); (c) the Bonds satisfy the requirements of Section 53345.8(a) of the Act in that the assessed value of the real property in the District is more than three times the principal amount of the Bonds, based upon the assessed value of the real property in the District as determined by reference to the Riverside County Assessor's records; and (d) the Bonds, when issued pursuant to the Fiscal Agent Agreement, will be in accordance with the Local Goals and Policies for Community Facilities Districts, adopted by the Board of Directors on April 24, 2001. For purposes of Section 53363.2 of the Act: (i) it is expected that the purchase of the Bonds will occur on or after July 11, 2012, (ii) the date, denomination, maturity dates, places of payment and form of the Bonds shall be as set forth in the Fiscal Agent Agreement, (iii) the minimum rate of interest to be paid on the Bonds shall be one-half of one percent (0.5%) with the actual rate or rates to be set forth in the Fiscal Agent Agreement as executed, (iv) the place of payment for the Prior Bonds shall be as set forth in the Prior Fiscal Agent Agreement; and (v) the designated costs of issuing the Bonds shall be as described in Section 53363.8(a) of the Act, and as otherwise described in the Fiscal Agent Agreement hereafter approved, in the Official Statement for the Bonds and the closing certificates for the Bonds, including Bond Counsel and Disclosure Counsel fees and expenses, Underwriter's discount, financial advisor fees and expenses, printing costs for the Official Statement, initial fiscal agent fees, and costs of City staff incurred in connection with the sale and issuance of the Bonds. -2- Section 7. The Fiscal Agent Agreement with respect to the Bonds, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed to execute and deliver the Fiscal Agent Agreement in said form, with such additions thereto or changes therein as are approved by the Executive Director upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Fiscal Agent Agreement by the Executive Director. The date, manner of payment, interest rate or rates, interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of redemption and other terms of the Bonds shall be as provided in the Fiscal Agent Agreement as finally executed. Section 8. The Purchase Contract between the Authority and Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus (the "Underwriter"), in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director and the Treasurer, each acting alone, are hereby authorized and directed to accept the offer of the Underwriter to purchase the Bonds contained in the Purchase Contract; provided that (a) the aggregate principal amount of the Bonds sold thereby is not in excess of $5,000,000, (b) the true interest cost of the Bonds is not in excess of 5.50%, (c) the underwriter's discount is not in excess of 1.10% of the aggregate principal amount of the Bonds, and (d) the requirements of clause (b) of the second paragraph of Section 6 above are satisfied. The Executive Director and the Treasurer, each acting alone, are hereby authorized and directed to execute and deliver the Purchase Contract in said form (if the requirements of the preceding sentence are satisfied), with such additions thereto or changes therein as are recommended or approved by the officer executing such document upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such additions or changes to be conclusively evidenced by the execution and delivery of the Purchase Contract by the Authority. Section 9. The Preliminary Official Statement, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed, for and in the name and on behalf of the Authority, to make changes to the Preliminary Official Statement prior to its dissemination to prospective investors, and to bring the Preliminary Official Statement into the form of a final official statement (the "Official Statement") including such additions thereto or changes therein as are recommended or approved by such officer upon consultation with the Authority's General Counsel and Disclosure Counsel. The Executive Director is hereby authorized and directed to execute and deliver the Official Statement. The Underwriter is hereby authorized to distribute copies of the Preliminary Official Statement to persons who may be interested in the purchase of the Bonds and is directed to deliver copies of the Official Statement to all actual purchasers of the Bonds. The Executive Director is hereby authorized to execute a certificate or certificates to the effect that the Official Statement and the Preliminary Official Statement were -3- deemed "final" as of their respective dates for purposes of Rule 15c2-12 of the Securities Exchange Act of 1934, and is authorized to so deem such statements final. Section 10. The Continuing Disclosure Agreement related to the Bonds, in the form presented to the Board of Directors at this meeting, is hereby approved. The Executive Director is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Continuing Disclosure Agreement in said form, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Executive Director upon consultation with the Authority's General Counsel and Disclosure Counsel, the approval of such changes to be conclusively evidenced by the execution and delivery by the Executive Director of the Continuing Disclosure Agreement. Section 11. The Board of Directors hereby approves the refunding of the Prior Bonds with the proceeds of the Bonds, in accordance with the provisions of the Prior Fiscal Agent Agreement and the Escrow Agreement between the Authority and U.S. Bank National Association, as Escrow Bank. The Board of Directors hereby approves the Escrow Agreement in the form presented to the Board of Directors at this meeting. The Executive Director is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute and deliver the Escrow Agreement in said form, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Executive Director upon consultation with the Authority's General Counsel and Bond Counsel, the approval of such changes to be conclusively evidenced by the execution and delivery by the Executive Director of the Escrow Agreement. Section 12. The Authority hereby covenants, for the benefit of the Bondowners, to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Bonds, said foreclosure action to be commenced and pursued as more completely set forth in the Fiscal Agent Agreement. Section 13. The Bonds, when executed, shall be delivered to the Fiscal Agent (as defined in the Fiscal Agent Agreement) for authentication. The Fiscal Agent is hereby requested and directed to authenticate the Bonds by executing the Fiscal Agent's certificate of authentication and registration appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the Underwriter in accordance with written instructions executed on behalf of the Authority by the Executive Director, which instructions such officer is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver to the Fiscal Agent. Such instructions shall provide for the delivery of the Bonds to the Underwriter upon payment of the purchase price therefor. Section 14. The law firm of Quint & Thimmig LLP is hereby designated as Bond Counsel to the Authority for the Bonds, the law firm of McFarlin & Anderson LLP is hereby designated as Disclosure Counsel to the Authority for the Bonds, and the firm of Fieldman, Rolapp & Associates is hereby designated as Financial Advisor to the -4- Authority for the Bonds. The Executive Director is hereby authorized to execute agreements with said firms for their services in connection with the Bonds, provided that the compensation payable to said firms is payable solely from the proceeds, and wholly contingent upon the issuance, of the Bonds. Section 15. All actions heretofore taken by the officers and agents of the Authority with respect to the sale and issuance of the Bonds and the refunding of the Prior Bonds are hereby approved, confirmed and ratified, and the proper officers of the Authority are hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents (including but not limited to those related to bond insurance and a reserve fund surety bond for the Bonds) which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds and the refunding of the Prior Bonds in accordance with this Resolution, and any certificate, agreement, and other document described in the documents herein approved. Section 16. This Resolution shall take effect upon its adoption. -5- PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula Public Financing Authority this 10th day of July, 2012 ATTEST: Susan W. Jones, MMC City Clerk/Board Secretary [SEAL] STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF TEMECULA ss Chuck Washington, Chairperson I, Susan W. Jones, MMC, City Clerk/Board Secretary of the Temecula Public Financing Authority of the City of Temecula, do hereby certify that the foregoing Resolution No. TPFA 12- was duly and regularly adopted by the Board of Directors of the Temecula Public Financing Authority of the City of Temecula at a meeting thereof held on the 10th day of July, 2012, by the following vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSENT: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: -6- Susan W. Jones, MMC City Clerk/Board Secretary Attachment No. 2 Second Supplemental Fiscal Agent Agreement for Crowne Hill Quint & Thimmig 1.IP 5/29/12 6/6/12 6/20/12 SECOND SUPPLEMENTAL FISCAL AGENT AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent dated as of August 1, 2012 relating to: Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Refunding Bonds, Series 2012 20009.10:J11753 TABLE OF CONTENTS SECTION 1. Supplement to Fiscal Agent Agreement 2 ARTICLE XI SERIES 2012 BONDS Section 11.01. Definitions 2 Section 11.02. Authorization of Series 2012 Bonds 3 Section 11.03. Terms of Series 2012 Bonds 3 Section 11.04. Redemption of Series 2012 Bonds 4 Section 11.05. Form of Series 2012 Bonds; Authentication and Delivery 6 Section 11.06. Application of Proceeds of Sale of Series 2012 Bonds 7 Section 11.07. 2012 Costs of Issuance Fund 7 Section 11.08. Security for Series 2012 Bonds 7 Section 11.09. Private Activity Bond Limitations 8 Section 11.10. Federal Guarantee Prohibition 8 Section 11.11. Rebate Requirement 8 Section 11.12. No Arbitrage 8 Section 11.13. Yield of the Bonds 8 Section 11.14. Maintenance of Tax -Exemption 8 Section 11.15. Effect of this Artide XI 8 SECTION 2. Attachment of Exhibit C 8 SECTION 3. Additional Amendments to Original Fiscal Agent Agreement 9 SECTION 4. Partial Invalidity 11 SECTION 5. Execution in Counterparts 11 SECTION 6. Governing Law 11 EXHIBIT A — FORM OF SERIES 2012 BONDS -i- SECOND SUPPLEMENTAL FISCAL AGENT AGREEMENT THIS SECOND SUPPLEMENTAL FISCAL AGENT AGREEMENT (this "Second Supplement"), dated as of August 1, 2012, is by and between the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) (the "District"), and U.S. BANK NATIONAL ASSOCIATION, as fiscal agent (the "Fiscal Agent") under a Fiscal Agent Agreement, dated as of July 1, 2003 (the "Original Fiscal Agent Agreement") by and between the Fiscal Agent and the Authority. RECITALS: WHEREAS, the Board of Directors of the Authority (the "Board") has formed the District under the provisions of the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311, et seq. of the California Government Code) (the "Act") and Resolution No. TPFA 03-05 of the Board adopted on March 25, 2003; WHEREAS, the Board, as the legislative body with respect to the District, is authorized under the Act to levy special taxes (the "Special Taxes") to pay for the costs of the District and to authorize the issuance of bonds secured by the Special Taxes under the Act; WHEREAS, pursuant to the provisions of the Act and the Original Fiscal Agent Agreement, on August 7, 2003, the Authority issued, for and on behalf of the District, $12,155,000 initial principal amount of Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Bonds, Series 2003-A (the "Series 2003-A Bonds") for the purpose of financing various public improvements authorized to be funded by the District; WHEREAS, Section 2.12 of the Original Fiscal Agent Agreement authorizes the issuance by Supplemental Agreement of Parity Bonds (as such terms are defined in the Original Fiscal Agent Agreement) secured under the Original Fiscal Agent Agreement on a parity with the Series 2003-A Bonds; WHEREAS, on August 24, 2005, the Authority, for and on behalf of the District, issued $3,865,000 initial aggregate principal amount of its Temecula Public Financing Authority Community Facilities District No. 03-1 (Crown Hill) Special Tax Bonds, Series 2005- B (the "Series 2005-B Bonds") pursuant to the Original Fiscal Agent Agreement as supplemented and amended by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, between the Authority, for and on behalf of the District, and the Fiscal Agent (the "First Supplement"), and the Original Fiscal Agent Agreement, as amended and supplemented by the First Supplement, is herein referred to as the "Fiscal Agent Agreement"; WHEREAS, the Series 2005-B Bonds were issued as Parity Bonds, and the proceeds thereof were used to finance public improvements authorized to be funded by the District; WHEREAS, after due investigation and deliberation the Authority has determined that it is in the interests of the Authority and the District at this time for the Authority, for and on behalf of the District, to provide for the issuance of its Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Refunding Bonds, Series 2012 in the initial aggregate principal amount of $ (the "Series 2012 Bonds"), to defease and refund the outstanding Series 2003-A Bonds; -1- WHEREAS, this Second Supplement is a "Supplemental Agreement" as defined in Section 1.03 of the Original Fiscal Agent Agreement and the Series 2012 Bonds are "Parity Bonds" as defined in Section 1.03 of the Fiscal Agent Agreement and are to be secured under the Fiscal Agent Agreement, as amended and supplemented by this Second Supplement, on a parity with the Series 2005-13 Bonds; WHEREAS, the Authority and the Fiscal Agent desire to enter into this Second Supplement pursuant to Sections 2.12 and 8.01(E) of the Original Fiscal Agent Agreement, to provide for the issuance of the Series 2012 Bonds; WHEREAS, in providing for the issuance of the Series 2012 Bonds, it is necessary to supplement and amend the Fiscal Agent Agreement, as more particularly provided in Section 1 and Section 2 hereof, as such supplements and amendments are authorized by Sections 2.12 and 8.01(E) of the Original Fiscal Agent Agreement; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Series 2012 Bonds, when executed by the Authority for the District, authenticated and delivered by the Fiscal Agent and duly issued, the valid, binding and legal special obligations of the Authority for the District, and to constitute the Fiscal Agent Agreement, as amended and supplemented by this Second Supplement, a valid and binding agreement for the uses and purposes herein and therein set forth, in accordance with its terms, have been done or taken and the execution and delivery of this Second Supplement have been in all respects duly authorized. AGREEMENT: NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: SECTION 1. Supplement to Fiscal Agent Agreement. In accordance with the provisions of Section 2.14 and 8.01(E) of the Fiscal Agent Agreement, the Fiscal Agent Agreement is hereby amended by adding a new article thereto, to be designated as Article XI. Such Article XI shall read in its entity as follows: ARTICLE XI SERIES 2012 BONDS Section 11.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 11.01 shall, for all purposes of this Article XI but not for any other purposes of this Agreement, have the respective meanings specified in this Section 11.01. All terms defined in Section 1.03 of this Agreement and not otherwise defined in this Section 11.01 shall, when used in this Article XI, have the respective meanings given to such terms in Section 1.03. "Article XI" means this Article XI which has been incorporated in and made a part of this Agreement pursuant to Supplemental Agreement No. 2, together with all amendments of and supplements to this Article XI entered into pursuant to the provisions of Section 8.01. "Closing Date" means August __, 2012, being the date upon which there was a physical delivery of the Series 2012 Bonds in exchange for the amount representing the purchase price of the Series 2012 Bonds by the Original Purchaser. -2- "Escrow Agreement" means the Escrow Agreement, dated as of August 1, 2012, by and between the Authority and the Escrow Bank. "Escrow Bank" means U.S. Bank National Association, in its capacity as escrow bank under the Escrow Agreement. "2012 Costs of Issuance" means items of expense payable or reimbursable directly or indirectly by the Authority or the City and related to the authorization, sale and issuance of the Series 2012 Bonds and the defeasance and refunding of the Series 2003-A Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, fees and charges of the Fiscal Agent, fees and expenses of Fiscal Agent's counsel, expenses incurred by the City or the Authority in connection with the issuance of the Series 2012 Bonds and the defeasance and refunding of the Series 2003-A Bonds, Escrow Bank fees and expenses, special tax consultant fees and expenses, bond (underwriter's) discount, financial consultant fees, legal fees and charges, including bond counsel and disclosure counsel, rating agency fees, charges for execution, transportation and safekeeping of the Series 2012 Bonds and other costs, charges and fees in connection with the foregoing. "2012 Costs of Issuance Fund" means the fund by that name established and held by the Fiscal Agent pursuant to Section 11.07. "Original Purchaser" means Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus, the first purchaser of the Series 2012 Bonds upon their delivery by the Fiscal Agent on the Closing Date. "Refunding Law" means Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code. Section 11.02. Authorization of Series 2012 Bonds. Series 2012 Bonds in the aggregate principal amount of Million _ Hundred Thousand Dollars ($ ), are hereby authorized to be issued as Parity Bonds under and subject to the terms of this Agreement, the Act, the Refunding Law and other applicable laws of the State of California. Section 11.03. Terms of Series 2012 Bonds. (A) Form; Denominations. The Series 2012 Bonds shall be issued as fully registered Bonds without coupons in the denomination of $5,000 or any integral multiple in excess thereof. (B) Date of Bonds. The Series 2012 Bonds shall be dated the Closing Date, as defined in Section 11.01. (C) Maturities, Interest Rates. The Series 2012 Bonds shall mature and become payable on September 1 in each of the years, and shall bear interest at the respective rates per annum, as follows: -3- Maturity Date (September 1) Principal Interest Amount Rate (D) Interest, Method of Payment and CUSIP Numbers. Interest on the Series 2012 Bonds shall be payable as provided in Section 2.02(E) of this Agreement (except that the first Interest Payment Date for the Series 2012 Bonds shall be March 1, 2013), with the Closing Date as used therein being the Closing Date as defined in Section 11.01, payments shall be made on the Series 2012 Bonds as provided in Section 2.02(F), and CUSIP identification numbers for the Series 2012 Bonds shall be subject to Section 2.02(C). Section 11.04. Redemption of Series 2012 Bonds. (A) Redemption. (i) Optional Redemption. The Series 2012 Bonds are subject to optional redemption prior to their stated maturity on any Interest Payment Date, as a whole or in part, among maturities so as to maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the Series 2012 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices Any Interest Payment Date from March 1, 2013 to and including March 1, ____ September 1, ____ and any Interest Payment Date thereafter (ii) Mandatory Sinking Payment Redemption. The Series 2012 Bonds maturing on September 1, ____ are subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: -4- Redemption Date (September 1) Sinking Payments The Series 2012 Bonds maturing on September 1, ____ are subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain the substantially level debt service on the Bonds, as a result of any prior partial redemption of the Series 2012 Bonds pursuant to Section 11.04(A)(i) above or Section 11.04(A)(iii) below, as specified in writing by the Treasurer to the Fiscal Agent. (iii) Redemption From Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to Section 4.05(B)(ii) and Section 4.04(F), respectively, shall be used to redeem Series 2012 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), by lot and allocated among maturities of the Series 2012 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Any Interest Payment Date from March 1, 2013 to and including March 1, ____ September 1, ____ and any Interest Payment Date thereafter Redemption Prices 0/0 (B) Notice to Fiscal Agent. The Authority shall give the Fiscal Agent written notice of its intention to redeem Series 2012 Bonds pursuant to subsection (A)(i) or (A)(iii) not less than forty-five (45) days prior to the applicable redemption date, or such lesser number of days as shall be consented to by the Fiscal Agent in its sole discretion. (C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section 11.04(A), moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Series 2012 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase, at public or private sale as and when, and at -5- such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may Series 2012 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Series 2012 Bonds were to be redeemed in accordance with this Agreement. (D) Redemption Procedure by Fiscal Agent, Effect of Redemption. Notices of redemption of the Series 2012 Bonds, and other redemption procedures to be followed by the Fiscal Agent with regard to the Series 2012 Bonds, shall be as provided in Section 2.03(D), and the effect on Series 2012 Bonds called for redemption shall be as set forth in Section 2.03(E). Notwithstanding the provisions of Section 2.03(D), however, in the case of any redemption of the Series 2012 Bonds under Section 11.04(A)(i) above, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the Series 2012 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the Series 2012 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the Series 2012 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the Series 2012 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Series 2012 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of this Agreement. Section 11.05. Form of Series 2012 Bonds; Authentication and Delivery. (A) Form of Series 2Q12 Bonds. The Series 2012 Bonds, the form of Fiscal Agent's certificate of authentication, and the form of assignment to appear thereon, shall be substantially in the respective forms set forth in Exhibit C attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement and the Act. (B) Execution of Series 2012 Bonds. The Series 2012 Bonds shall be executed on behalf of the Authority by the signatures of its Chairman and its Secretary who are in office on the date of execution and delivery of Supplemental Agreement No. 2 or at any time thereafter, and the seal of the Authority shall be impressed, imprinted or reproduced by facsimile signature thereon. Either or both of such signatures may be made manually or may be affixed by facsimile thereof. If any officer whose signature appears on any Series 2012 Bond ceases to be such officer before delivery of the Series 2012 Bonds to the owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Series 2012 Bonds to the owner. Any Series 2012 Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Series 2012 Bond shall be the proper officers of the Authority although at the nominal date of such Series 2012 Bond any such person shall not have been such officer of the Authority. Only such of the Series 2012 Bonds as shall bear thereon a certificate of authentication in the form set forth in Exhibit C, manually executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of the Fiscal Agent shall be conclusive evidence that such Series 2012 Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Agreement. (C) Authentication and Delivery of Series 2012 Bonds. At any time after the execution of Supplemental Agreement No. 2 and delivery by the Authority of an Officer's Certificate for -6- the Series 2012 Bonds as required by Section 2.14(G), the Authority may issue the Series 2012 Bonds for the District in the aggregate principal amount set forth in Section 11.02 and deliver the Series 2012 Bonds to the Fiscal Agent for authentication and delivery to the Original Purchaser. The Authorized Officers of the Authority are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the Series 2012 Bonds in accordance with the provisions of the Act, the Refunding Law and this Agreement, as supplemented by Supplemental Agreement No. 2, to redeem the Series 2003-A Bonds with proceeds of the Series 2012 Bonds, to authorize the payment of 2012 Costs of Issuance from the proceeds of the Series 2012 Bonds and to do and cause to be done any and all acts and things necessary or convenient for delivery of the Series 2012 Bonds to the Original Purchaser and the redemption of the Series 2003-A Bonds pursuant to the Escrow Agreement. Section 11.06. Application of Proceeds of Sale of Series 2012 Bonds. The proceeds of the purchase of the Series 2012 Bonds by the Original Purchaser thereof ($ ) shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows: (A) deposit in the 2012 Subaccount of the Reserve Fund $ (B) deposit in the 2012 Costs of Issuance Fund $_; and (C) transfer to the Escrow Bank, for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement, $ In addition to the foregoing, on the Closing Date the Authority shall transfer or cause to be transferred (i) from amounts held in the Reserve Fund (other than in the 2005 Subaccount therein), $ to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement; (ii) from amounts held in the 2005 Subaccount of the Acquisition Account of the Improvement Fund, $ to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement; and (iii) from amounts held in the Special Tax Fund, $ to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement. The Fiscal Agent may, in its discretion, establish a temporary fund or account in its books and records to facilitate transfers required under this Section 11.06. Section 11.07. 2012 Costs of Issuance Fund. There is hereby established a separate fund to be known as the "2012 Costs of Issuance Fund", which shall be held by the Fiscal Agent, and to which a deposit shall be made as provided in Section 11.06(B). The moneys in the 2012 Costs of Issuance Fund shall be used and withdrawn by the Fiscal Agent from time to time to pay the 2012 Costs of Issuance, as set forth in one or more Officer's Certificates containing respective amounts to be paid to the designated payees, and delivered to the Fiscal Agent concurrently with the delivery of the Series 2012 Bonds or at any time thereafter. The Fiscal Agent shall pay all 2012 Costs of Issuance after receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee pursuant to an Officer's Certificate requesting payment of 2012 Costs of Issuance. The Fiscal Agent shall maintain the 2012 Costs of Issuance Fund for a period of 90 days from the date of delivery of the Series 2012 Bonds and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Treasurer for deposit by the Treasurer in the Administrative Expense Fund. Section 11.08. Security for Series 2012 Bonds. The Series 2012 Bonds shall be Parity Bonds which shall be secured in the manner and to the extent set forth in Section 3.02, in Articles IV and V, and in this Article XI. -7- Section 11.09. Private Activity Bond Limitations. The Authority shall assure that the proceeds of the Series 2003-A Bonds and of the Series 2012 Bonds are not so used as to cause the Series 2012 Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. Section 11.10. Federal Guarantee Prohibition. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Series 2012 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 11.11. Rebate Requirement. The Authority shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Series 2012 Bonds. If necessary, the Authority may use amounts in the Reserve Fund, amounts on deposit in the Administrative Expense Fund, and any other funds available to the District, including amounts advanced by the Authority or the City, in its respective sole discretion, to be repaid by the District as soon as practicable from amounts described in the preceding clauses, to satisfy its obligations under this Section 11.11. The Treasurer shall take note of any investment of monies hereunder in excess of the yield on the Series 2012 Bonds, and shall take such actions as are necessary to ensure compliance with this Section 11.11, such as increasing the portion of the Special Tax levy for Administration Expenses as appropriate to have funds available in the Administrative Expense Fund to satisfy any rebate liability under this Section 11.11. Section 11.12. No Arbitrage. The Authority shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the Series 2012 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Series 2012 Bonds would have caused the Series 2012 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Section 11.13. Yield of the Bonds. In determining the yield of the Series 2012 Bonds to comply with Section 11.11 and 11.12 hereof, the Authority will take into account redemption (including premium, if any) in advance of maturity based on the reasonable expectations of the Authority, as of the Closing Date, regarding prepayments of Special Taxes and use of prepayments for redemption of the Series 2012 Bonds, without regard to whether or not prepayments are received or Series 2012 Bonds redeemed. Section 11.14. Maintenance of Tax -Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the Series 2012 Bonds from the gross income of the Owners of the Series 2012 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Series 2012 Bonds. Section 11.15. Effect of this Article XI. Except as in this Article XI expressly provided or except to the extent inconsistent with any provision of this Article XI, the Series 2012 Bonds shall be deemed to be "Bonds" under and within the meaning of Section 1.03, and every term and condition contained in the foregoing provisions of this Agreement shall apply to the Series 2012 Bonds with full force and effect, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Article XI. SECTION 2. Attachment of Exhibit C. The Fiscal Agent Agreement is hereby further amended by incorporating therein an Exhibit C setting forth the form of the Series 2012 Bonds, -8- which shall read in its entirety as set forth in Exhibit A attached hereto and hereby made a part hereof. SECTION 3. Additional Amendments to Fi cis al Agentgreement. The Fiscal Agent Agreement is hereby further amended as follows: (A) Section 1.03 of the Fiscal Agent Agreement is hereby amended by adding thereto the following: "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Series 2012 Bonds" means the Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Refunding Bonds, Series 2012, authorized to be issued under Section 11.02. "Second Supplement" means the Second Supplemental Fiscal Agent Agreement, dated as of August 1, 2012, between the Authority, for and on behalf of the District, and the Fiscal Agent. (B) Section 1.03 of the Fiscal Agent Agreement is hereby further amended by deleting the term "Agreement" therein, and by inserting therein, in lieu thereof, the following: "Agreement" means this Fiscal Agent Agreement, as amended and supplemented by Supplemental Agreement No. 1 and by the Second Supplement, and as it may be further amended or supplemented from time to time by any additional Supplemental Agreement entered into pursuant to the provisions hereof. (C) Section 1.03 of the Fiscal Agent Agreement is hereby further amended by deleting the term "Bonds" therein, and by inserting therein, in lieu thereof, the following: "Bonds" means the Series 2003-A Bonds, the Series 2005-B Bonds, the Series 2012 Bonds, and, if the context requires, any additional Parity Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement. (D) Section 1.03 of the Fiscal Agent Agreement is hereby further amended by deleting the term "Continuing Disclosure Agreement" therein, and by inserting therein, in lieu thereof, the following: "Continuing Disclosure Agreement" means, collectively, (i) the Continuing Disclosure Agreement of the Authority, dated as of July 1, 2003, by and between the Authority and U.S. Bank National Association, as dissemination agent (the "Dissemination Agent"), as originally executed and as it may be amended from time to time in accordance with its terms; (ii) the Continuing Disclosure Agreement, dated as of August 1, 2005, by and between the Authority and the Dissemination Agent, as originally executed and as it may be amended from time to time in accordance with its terms; and (iii) the Continuing Disclosure Agreement pertaining to the Series 2012 Bonds, executed as of the Closing Date (as defined in Section 11.01) by the Authority, as originally executed and as it may be amended from time to time in accordance with its terms. (E) Section 1.03 of the Fiscal Agent Agreement is hereby further amended by deleting the term "Information Services" therein, and by inserting therein, in lieu thereof, the following: "Inforniation Services" means the Electronic Municipal Market Access System (referred to as "EMMA"), a facility of the Municipal Securities Rulemaking Board, (at http://emma.msrb.org); and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the Authority may designate in an Officer's Certificate delivered to the Fiscal Agent. -9- (F) Section 1.03 of the Fiscal Agent Agreement is hereby further amended by deleting clause (iii) of the term "Reserve Requirement" therein, and by inserting therein, in lieu thereof, the following: "(iii) ten percent (10%) of the original principal amount of the Bonds." (G) Section 1.03 of the Fiscal Agent Agreement is hereby further amended by deleting the term "Securities Depositories" therein, and by inserting therein, in lieu thereof, the following: "Securities Depositories" means The Depository Trust Company, 55 Water Street, New York, New York 10041-0099, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in an Officer's Certificate delivered to the Fiscal Agent. (H) Section 2.12 of the Fiscal Agent Agreement is hereby amended by deleting the second paragraph thereof, and by inserting therein, in lieu thereof, the following: "Notwithstanding the foregoing, from and after the Closing Date (as defined in Section 11.01), (i) the Authority may only issue Parity Bonds that are Refunding Bonds, and (ii) in connection with the issuance of Parity Bonds, the Authority need not satisfy the requirements of clauses (D), (E) and (F) above, and the Officer's Certificate in clause (G) above need not make reference to said clauses (D), (E) and (F)." (I) Section 4.04(A) of the Fiscal Agent Agreement is hereby amended by adding thereto, after the second sentence thereof, the following: "There is also hereby created within the Reserve Fund a separate subaccount designated as the "2012 Subaccount" which subaccount is hereby established for purposes of accounting for the use and disposition of Series 2012 Bonds, a portion of the proceeds of which will be deposited to such 2012 Subaccount pursuant to Section 11.06(A), and amounts in such subaccount shall for all purposes of this Agreement be deemed to be part of the amounts on deposit in the Reserve Fund and amounts in such 2012 Subaccount and any earnings thereon in such 2012 Subaccount shall be drawn upon pro rata with all other amounts in the Reserve Fund whenever a draw is made on the Reserve Fund under this Section 4.04." (J) The Fiscal Agent Agreement is hereby amended by adding thereto, as a new Section 5.20 thereof, the following: "Section 5.20. No Additional Bonds. Except as expressly permitted by Section 2.12 hereof, the Authority shall not issue any additional bonds secured by (A) a pledge of Special Taxes on a parity with or senior to the pledge thereof under Section 3.02 hereof; or (B) any amounts in any funds or accounts established hereunder." (K) The Fiscal Agent Agreement is hereby amended by adding thereto, as a new Section 5.21 thereof, the following: "Section 5.21. Authority Bid at Foreclosure Sale. The Authority will not bid at a foreclosure sale of property in respect of delinquent Special Taxes unless it expressly agrees to take the property subject to the lien for Special Taxes imposed by the District and that the Special Taxes levied on the property are payable while the Authority owns the property." -10- (L) The Fiscal Agent Agreement is hereby amended by deleting Sections 9.07(A) and (B) thereof, and by inserting therein, in lieu thereof, the following: "(A) Annual Reporting. Not later than October 30 of each calendar year, beginning with the October 30 first succeeding the Closing Date, and in each calendar year thereafter until the October 30 following the final maturity of the Bonds, the Treasurer shall cause the following information to be supplied to CDIAC: (i) the name of the Authority; (ii) the full name of the District; (iii) the name, title, and series of each Bond issue; (iv) any credit rating for any series of the Bonds and the name of the rating agency; (v) the Closing Date for each Bond issue and the original principal amount of each Bond issue; (vi) the amount of the Reserve Requirement; (vii) the principal amount of each series of the Bonds outstanding; (viii) the balance in the Reserve Fund; (ix) that there is no capitalized interest account for the Bonds; (x) the number of parcels in the District that are delinquent with respect to Special Tax payments, the amount that each parcel is delinquent, the total amount of Special Taxes due on the delinquent parcels, the length of time that each has been delinquent, when foreclosure was commenced for each delinquent parcel, the total number of foreclosure parcels for each date specified, and the total amount of tax due on the foreclosure parcels for each date specified; (xi) the balance, if any, in the accounts within the Improvement Fund; (xii) the assessed value of all parcels subject to the Special Tax to repay the Bonds as shown on the most recent equalized roll, the date of assessed value reported, and the source of the information; (xiii) the total amount of Special Taxes due, the total amount of unpaid Special Taxes, and whether or not the Special Taxes are paid under any County Teeter Plan (Chapter 6.6 (commencing with Section 54773) of the California Government Code); (xiv) the reason and the date, if applicable, that any series of the Bonds was retired; and (xv) contact information for the party providing the foregoing information. The annual reporting shall be made using such form or forms as may be prescribed by CDIAC. (B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal and interest on the Bonds, the Fiscal Agent shall notify the Treasurer of such failure or withdrawal in writing. The Treasurer shall notify CDIAC and the Original Purchaser of such failure or withdrawal within 10 days of such failure or withdrawal, and the Authority shall provide notice under the Continuing Disclosure Agreement of such event as required thereunder." SECTION 4. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Second Supplement shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect the validity of the remaining portions of this Second Supplement. The Authority hereby declares that it would have entered into this Second Supplement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Series 2012 Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Second Supplement may be held illegal, invalid or unenforceable. SECTION 5. Execution in Counterparts. This Second Supplement 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. SECTION 6. Governing Law. This Second Supplement shall be construed and governed in accordance with the laws of the State of California applicable to contracts made and performed in such State. -11- IN WITNESS WHEREOF, the Authority and the Fiscal Agent have caused this Second Supplement to be executed as of August 1, 2012. 20009.10:J11753 S-1 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL) By: Executive Director U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By Authorized Officer EXHIBIT A TO SECOND SUPPLEMENTAL FISCAL AGENT AGREEMENT No. EXHIBIT C FORM OF SERIES 2012 BONDS UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL) SPECIAL TAX REFUNDING BOND, SERIES 2012 INTEREST RATE MATURITY DATE BOND DATE CUSIP September 1, ____ August __, 2012 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: DOLLARS The Temecula Public Financing Authority (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) (the "District"), for value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be collected in the District or amounts in the funds and accounts held under the Agreement (as hereinafter defined), to the registered owner named above, or registered assigns, on the maturity date set forth above, unless redeemed prior thereto as hereinafter provided, the principal amount set forth above, and to pay interest on such principal amount from the Bond Date set forth above, or from the most recent interest payment date to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing March 1, 2013, at the interest rate set forth above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable to the registered owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office (as defined in the Agreement referred to below) of U.S. Bank National Association (the "Fiscal Agent"). Interest on this Bond shall be paid by check of the Fiscal Agent mailed on each interest payment date to the registered owner hereof as of the close of business on the 15th day of the month preceding the month in which the interest payment date occurs (the "Record Date") at such registered owner's address as it appears on the registration books maintained by the Fiscal Agent, or (i) if the Bonds are in book -entry -only form, or (ii) otherwise upon written request filed with the Fiscal Agent prior to any Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to the depository for the Bonds or to an account in the United States designated by such registered owner in such written request, respectively. This Bond is one of a duly authorized issue of bonds in the aggregate principal amount of $ approved by a resolution of the Board of Directors of the Authority adopted on July 10, 2012 (the "Resolution"), and being issued pursuant to the provisions of Section A-1 53311 et seq. of the California Government Code (the "Act") and Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, for the purpose of refunding the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crown Hill) Special Tax Bonds, Series 2003-A and is one of the series of bonds designated "Temecula Public Financing Authority Community Facilities District No. 03-1 (Crown Hill) Special Tax Refunding Bonds, Series 2012" (the "Bonds"). The creation of the Bonds and the terms and conditions thereof are provided for in the Fiscal Agent Agreement, dated as of July 1, 2003, between the Authority and the Fiscal Agent, as amended and supplemented by a First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, between the Authority and the Fiscal Agent and by a Second Supplemental Fiscal Agent Agreement, dated as of August 1, 2012, between the Authority and the Fiscal Agent (collectively, the "Agreement") and this reference incorporates the Resolution and the Agreement herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. The Authority has issued, for and on behalf of the District, under the Agreement its $3,865,000 Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Bonds, Series 2005-B (the "Series 2005-B Bonds"), which Series 2005-B Bonds are secured on a parity with the Bonds under the Agreement. Pursuant to and as more particularly provided in the Resolution and in the Agreement, additional bonds may be issued by the Authority from time to time secured by a lien on a parity with the lien securing the Bonds and the Series 2005-B, but any such additional bonds must be Refunding Bonds, as such term is defined in the Agreement. The Resolution is adopted and the Agreement is entered into under and this Bond is issued under, and all are to be construed in accordance with, the laws of the State of California. Pursuant to the Act, the Agreement and the Resolution, the principal of and interest on this Bond are payable solely from the annual special tax authorized under the Act to be collected within the District (the "Special Tax") and certain funds held under the Agreement. Interest on this Bond shall be payable from the interest payment date next preceding the date of authentication hereof, unless (i) it is authenticated on an interest payment date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an interest payment date and after the close of business on the Record Date preceding such interest payment date, in which event it shall bear interest from such interest payment date, or (iii) it is authenticated prior to the Record Date preceding the first interest payment date, in which event it shall bear interest from the Bond Date set forth above; provided, however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment hereon. Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the Authority, as may be permitted by law. The Bonds do not constitute obligations of the Authority for which the Authority is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described hereinabove. The City of Temecula has no liability or obligations whatsoever with respect to the Bonds or the Agreement. The Bonds are subject to redemption prior to their stated maturity on any interest payment date, as a whole or in part among maturities as provided in the Agreement, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: A-2 Redemption Dates Redemption Prices Any Interest Payment Date from March 1, 2013 to and including March 1, ____ September 1, and any interest payment date thereafter The Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, ____ and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The Bonds maturing on September 1, _ are subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The Bonds are also subject to redemption from the proceeds of Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to the Agreement, on any Interest Payment Date, among maturities as specified in the Agreement and by lot within a maturity, at a redemption price (expressed as a percentage at the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices Any interest payment date from March 1, 2013 to and including March 1, _ • September 1, _ and any interest payment date thereafter In the event of a redemption of less than all of the Bonds, the Bonds shall be redeemed by lot within a maturity, and among maturities in the manner specified in the Agreement. A-3 Notice of redemption with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner, to the extent and subject to the provisions of the Agreement. Notices of optional redemption may be conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the Bonds on the anticipated redemption date, and if the Fiscal Agent does not receive sufficient funds by the scheduled redemption date the redemption shall not occur and the Bonds for which notice of redemption was given shall remain outstanding for all purposes of the Agreement. This Bond shall be registered in the name of the owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon. No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such owner's order. The Fiscal Agent shall require the registered owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (u) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding interest payment date. Exchanges may only be made for Bonds in authorized denominations, as provided in the Agreement. The Agreement and the rights and obligations of the Authority thereunder may be modified or amended as set forth therein. The Bonds are not general obligations of the Authority, but are limited obligations payable solely from the revenues and funds pledged therefor under the Agreement. Neither the faith and credit of the Authority or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. • Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Bond does not exceed any debt limit prescribed by the laws or Constitution of the State of California. A-4 IN WITNESS WHEREOF, Temecula Public Financing Authority has caused this Bond to be dated the Bond Date set forth above, to be signed by the facsimile signature of its Executive Director and countersigned by the facsimile signature of its Secretary. [S E A L] ATTEST Secretary A-5 TEMECULA PUBLIC FINANCING AUTHORITY Executive Director FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the Resolution and in the Agreement which has been authenticated on A-6 U.S. Bank National Association, as Fiscal Agent By: Authorized Signatory ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within -registered Bond and hereby irrevocably constitute(s) and appoints(s) attorney, to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premises. Dated: Signature Guaranteed: Signature: Note: Signature(s) must be guaranteed by an eligible Note: The signature(s) on this Assignment must guarantor. correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. A-7 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT This CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement") is executed and entered into as of August 1, 2012, by and among Willdan Financial Services, as Dissemination Agent (the "Dissemination Agent"), U.S. Bank National Association, a national banking association organized and existing under and by virtue of the laws of the United States of America in its capacity as Fiscal Agent (the "Fiscal Agent"), and the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the Constitution and of the laws of the State of California (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) (the "District"); WITNESSETH: WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of July 1, 2003, by and between the Authority, for and on behalf of the District, and the Fiscal Agent, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, and by the Second Supplemental Fiscal Agent Agreement dated as of August 1, 2012 (collectively, the "Fiscal Agent Agreement"), the Authority has issued for the District its 2012 Special Tax Refunding Bonds in the aggregate principal amount of $ (the "2012 Bonds"); and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority, the Dissemination Agent and the Fiscal Agent for the benefit of the owners and beneficial owners of the 2012 Bonds and in order to assist the underwriter of the 2012 Bonds in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5); NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement. In addition, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Authority pursuant to, and described in, Sections 2 and 3 of this Disclosure Agreement. "Annual Report Date" shall mean the date in each year that is eight months after the end of the Authority's fiscal year, which date, as of the date of this Disclosure Agreement, is March 1. "Disclosure Representative" shall mean the Chief Financial Officer of the City of Temecula, as Treasurer of the Authority, or his or her designee, or such other office or employee as the Authority shall designate in writing to the Fiscal Agent from time to time. "Dissemination Agent" shall mean Willdan Financial Services, as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority and the Fiscal Agent a written acceptance of such designation. "District" shall mean Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill). D-1 "EMMA System" shall mean the Electronic Municipal Market Access System of the MSRB or such other electronic system designated by the MSRB (as defined below) or the Securities and Exchange Commission (the "S.E.C.") for compliance with S.E. C. Rule 15c2-12. "Listed Events" shall mean any of the events listed in Section 4(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Official Statement" shall mean the Official Statement, dated [July _, 2012], relating to the 2012 Bonds. "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus, Los Angeles, California. "Rule" shall mean 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. Section 2. Provision of Annual Reports. (a) The Authority shall, or, upon furnishing the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to the MSRB through the EMMA System in an electronic format and accompanied by identifying information as prescribed by the MSRB and to the Fiscal Agent [and to the Participating Underwriter] an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement, not later than the Annual Report Date, commencing with the report for the 2011-12 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Agreement; provided, however, that the audited financial statements of the Authority, 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 not available by that date. If the Authority's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 4(e). The Annual Report may be provided in electronic format to the MSRB through the EMMA System. (b) Not later than fifteen (15) Business Days prior to the Annual Report Date, the Authority shall provide the Annual Report (in a form suitable for reporting to the MSRB through the EMMA System) to the Dissemination Agent, the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent) [and the Participating Underwriter]. If by such date, the Fiscal Agent has not received a copy of the Annual Report, the Fiscal Agent shall contact the Disclosure Representative and the Dissemination Agent to inquire if the Authority is in compliance with the first sentence of this subsection (b). The Authority shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Authority and shall have no duty or obligation to review such Annual Report. (c) If the Fiscal Agent is unable to verify that an Annual Report has been provided to the MSRB through the EMMA System by the Annual Report Date, the Fiscal Agent shall D-2 send a notice to the MSRB through the EMMA System, in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the electronic filing requirements of MSRB for the Annual Reports; (ii) provide any Annual Reports received by it to the MSRB through the EMMA System and to the Fiscal Agent as provided herein; and (iii) to the extent it can confirm such filing of an Annual Report, file a report with the Authority, [the Participating Underwriter] and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System, Section 3. Content of Annual Reports. The Authority's Annual Report shall contain or incorporate by reference the following: (a) The Authority's audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to government entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar to that used for the Authority's audited financial statements, and the audited fmancial statements, if any, shall be filed in the same manner as the Annual Report when they become available. If the Authority's audited financial statements, if any, or unaudited financial statements are already filed, the Annual Report may reference that such financial statements are on file with the MSRB. (b) The following information regarding the 2012 Bonds and any parity bonds, or refunding bonds: (i) The principal amount of 2012 Bonds and any parity bonds, if any, or refunding bonds outstanding as of a date within 45 days preceding the Annual Report Date; (ii) The balance in the Reserve Fund, if any, and a statement of the Reserve Requirement as of a date within 60 days preceding the Annual Report Date and the balance in the other funds and accounts held under the Fiscal Agent Agreement; (iii) Information regarding the amount of the annual special taxes levied in the District in the format of Table 2 of the Official Statement, and the amount of Special Tax owed, as shown on such assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date; (iv) An update of Table 6 in the Official Statement, summarizing the assessed value -to - lien ratios for the property in the District. The assessed values in such table will be determined by reference to the value of the parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the September 2 next preceding the Annual Report Date. The lien values in such table will include all 2012 Bonds and any parity bonds D-3 or refunding bonds of the Authority for the District but will not include other debt secured by a tax or assessments Ievied on parcels within the District; (v) Information regarding the Special Tax delinquency rate for all parcels within the District on which the Special Taxes are levied, as shown on the assessment roll ofthe Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date in the format of Table 3 of the Official Statement and information pertaining to delinquencies deemed appropriate by the Authority; provided, however, that parcels with aggregate delinquencies of $5,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category; (vi) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary of the results of any foreclosure sales as of the September 30 next preceding the Annual Report Date; and (vii) If the Authority or the City establishes a community facilities district overlapping all or a portion of the District, the principal amount of bonds authorized for such community facilities district, the percentage of such bonds supported by special taxes on property within the District, and the amount of bonds issued by such community facilities district. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the Authority shall provide such further information, if any, as may be necessary to make the statements required under section 3(b), in the light ofthe circumstances under which they are made, not misleading for purposes of applicable federal securities laws. 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 Authority or related public entities, which have been submitted to the MSRB through the EMMA System or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Authority shall clearly identify each such other document so included by reference. Section 4. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 4, the Authority shall give, or cause to be given, in a timely manner, not in excess often business days after the occurrence of the event, notice of any of the following events with respect to the 2012 Bonds: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reelecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; D-4 (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security or other material events affecting the tax status of the security; (vii) Modifications to rights of security holders, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the securities, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the obligated person; (xiii) The consummation of a merger, consolidation or acquisition involving an obligated person or sale of all or substantially all of the assets of the obligated person, 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, if material; and (xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) The Dissemination Agent shall, within three (3) business days of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (e), provided, however, that the Dissemination Agent shall have no liability to Bond Owners for any failure to provide such notice. For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of the Listed Events described under clauses (ii), (iii), (vi), (x) and (xi), (xii), (xiii), (xiv) above shall mean actual knowledge by an officer at the corporate trust office of the Dissemination Agent. The Dissemination Agent shall have no responsibility for determining the materiality of any of the Listed Events. (c) As soon as practicable so as to satisfy the notice requirements of Section 5(a) , the Authority shall notify the Dissemination Agent in writing of the occurrence of any of the Listed Events. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (e). The 1 Por the purposes of the event identified in subparagraph (xii), 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governing 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 obligated person. D-5 Authority shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the MSRB through the EMMA System. (d) If the Authority determines that the Listed Event subject to a materiality requirement referenced in clauses (a)(ii), (vi), (vii), (viii), (x), (xiii) or (xiv) would not be material under applicable federal securities law, the Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (e). (e) If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event, and has received a notice of the occurrence in a format suitable for filing with the MSRB, the Dissemination Agent shall file a notice of such occurrence with the MSRB through the EMMA System, and shall provide a copy of such notice to the Participating Underwriter. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected 2012 Bonds pursuant to the Fiscal Agent Agreement. Section 5. Termination of Reporting Obligation. All of the Authority's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of (i) the legal defeasance of the 2012 Bonds, (ii) prior redemption of the 2012 Bonds or (iii) payment in full of all the 2012 Bonds. If such determination occurs prior to the final maturity of the 2012 Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 4(e). Section 6. Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist 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 initial Dissemination Agent shall be Willdan Financial Services. The Dissemination Agent may resign by providing forty-five (45) days' written notice to the Authority and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the Authority in a timely manner and in a form suitable for filing. If at any time there is not any other designated Dissemination Agent, the Fiscal Agent shall be the Dissemination Agent. Section 7. Amendment; Waiver. Notwithstanding any other provision ofthis Disclosure Agreement, the Authority, the Fiscal Agent and the Dissemination Agent may amend this Disclosure Agreement (and the Fiscal Agent and the Dissemination Agent shall agree to any amendment so requested by the Authority, so long as such amendment does not adversely affect the rights or obligations of the Fiscal Agent or the Dissemination Agent), and any provision ofthis Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 2(a), 3 or 4(a), 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 2012 Bonds, or 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 2012 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 either (i) is approved by owners of a majority of the owners of the 2012 Bonds affected thereby in the manner provided in the Fiscal Agent Agreement D-6 for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the 2012 Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Authority to meet its obligations, including its obligation to pay debt service on the 2012 Bonds. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB through the EMMA System in the same manner as for a Listed Event under Section 4(e). Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority 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 of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Authority 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. Section 9. Default. In the event of a failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent may (and, at the written direction of any Participating Underwriter or the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent), or any owner or beneficial owner of the 2012 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the Dissemination Agent or the Fiscal 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 Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 10. Duties, Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Section 7.01 and Section 7.02 of the Fiscal Agent Agreement are hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent Agreement, and the Fiscal Agent and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded to the Fiscal Agent thereunder. The Dissemination Agent and the Fiscal Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. This Disclosure Agreement does not apply to any other securities issued or to be issued by the Authority. The Dissemination Agent shall have no obligation to make any disclosure concerning the 2012 Bonds, the Authority or any other matter except as expressly set out herein, provided that no provision of this Disclosure Agreement shall limit the duties or obligations of the Fiscal Agent under the Fiscal Agent Agreement. The D-7 Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Annual Report or any notice of a Listed Event. The fact that the Fiscal Agent has or may have any banking, fiduciary or other relationship with the Authority or any other party, apart from the relationship created by the Fiscal Agent Agreement and this Disclosure Agreement, shall not be construed to mean that the Fiscal Agent has knowledge or notice of any event or condition relating to the 2012 Bonds, the Authority or the District except in its respective capacities under such agreements. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. Information disclosed hereunder by the Dissemination Agent may contain such disclaimer language concerning the Dissemination Agent's responsibilities hereunder with respect thereto as the Dissemination Agent may deem appropriate. The Dissemination Agent may conclusively rely on the determination of the Authority as to the materiality of any event for purposes of Section 4 hereof. Neither the Fiscal Agent nor the Dissemination Agent makes any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees, as amended from time to time, and all expenses, legal fees and advances made or incurred by the Dissemination in the performance of its duties hereunder. The Authority's obligations under this Section 10 shall survive the termination of this Disclosure Agreement. Section 11. Beneficiaries. The Participating Underwriter and the owners and beneficial owners from time to time of the 2012 Bonds shall be third party beneficiaries under this Disclosure Agreement. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the 2012 Bonds, and shall create no rights in any other person or entity. Section 12. Notices. Any notice or communications herein required or permitted to be given to the Authority, the Fiscal Agent or the Dissemination Agent shall be in writing and shall be deemed to have been sufficiently given or served for all purposes by being delivered or sent by telecopy or by being deposited, postage prepaid, in a post office letter box, to the addresses set forth below, or to such other address as may be provided to the other parties hereinafter listed in writing from time to time, namely: If to the Authority: Temecula Public Financing Authority 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 If to the Community Facilities District: Community Facilities District No. 03-01 (Crowne Hill) 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 If to the Willdan Financial Services Dissemination 27368 Via Industria, Suite 110 Agent: Temecula, California Telephone: [951/587-3546] Telecopier: 951/587-3510 D-8 If to the Fiscal Agent: U.S. Bank National Association 633 West Fifth Street, 24th Floor LM-CA-T24T Los Angeles, California 90071 Telephone: 213/615-6030 Telecopier: 213/615-6199 If to the Stifel, Nicolaus & Company, Incorporated, Participating dba Stone & Youngberg, a Division of Stifel Nicolaus Underwriter: One Ferry Building San Francisco, California 94111 Telephone: 415/445-2300 Attention: Municipal Research Department provided, however, that all such notices, requests or other communications may be made by telephone and promptly confirmed by writing. The parties may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications. Section 13. Future Determination of Obligated Persons. In the event the S.E.C. amends, clarifies or supplements the Rule in such a manner that requires any landowner within the Authority to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the Authority to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the Authority to disclose information concerning any owner of land within the Authority except as required as part of the information required to be disclosed by the Authority pursuant to Section 4 and Section 5 hereof. Section 14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. Section 15. State of California Law Governs. The validity, interpretation and performance of this Disclosure Agreement shall be governed by 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. Section 17. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. D-9 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as ofthe date first above written. TEMECULA PUBLIC FINANCING AUTHORITY, FOR AND ON BEHALF OF TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITES DISTRICT NO. 03-01 (CROWNE HILL) By: Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer D-10 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Temecula Public Financing Authority, for and on behalf of Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Name of Bond Issue: Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) 2012 Special Tax Bonds Date of Issuance: [August , 2012] NOTICE IS HEREBY GIVEN that the Temecula Public Financing Authority (the "Authority") has not provided an Annual Report with respect to the above-named 2012 Bonds as required by the Continuing Disclosure Agreement, dated as of August 1, 2012, by and among Willdan Financial Services as Dissemination Agent, U.S. Bank National Association, in its capacity as Fiscal Agent, and the Authority. [The Authority anticipates that the Annual Report will be filed by .1 Dated: , WILLDAN FINANCIAL SERVICES, as Dissemination Agent, on behalf of the Temecula Public Financing Authority Authorized Officer cc: Temecula Public Financing Authority Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus D -1I Attachment No. 3 Fiscal Agent Agreement for Wolf Creek Quint & Thimmig f11' 5/25/12 5/29/12 6/6/12 6/20/12 6/28/12 FISCAL AGENT AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent dated as of August 1, 2012 relating to: Temecula Public Financing Authority Conanunity Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds 20009.11:J11793 TABLE OF CONTENTS ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement 3 Section 1.02. Agreement for Benefit of Owners of the Bonds 3 Section 1.03. Definitions 3 ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation 12 Section 2.02. Terms of the 2012 Bonds 12 Section 2.03. Redemption 13 Section 2.04. Form of Bonds 16 Section 2.05. Execution of Bonds 16 Section 2.06. Transfer of Bonds 16 Section 2.07. Exchange of Bonds 17 Section 2.08. Bond Register 17 Section 2.09. Temporary Bonds 17 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen 17 Section 2.11. Limited Obligation 18 Section 2.12. No Acceleration 18 Section 2.13. Book -Entry System 18 Section 2.12. Issuance of Parity Bonds 19 ARTICLE III ISSUANCE OF 2012 BONDS Section 3.01. Issuance and Delivery of 2012 Bonds 21 Section 3.02. Pledge of Special Tax Revenues 21 Section 3.03. Validity of Bonds 21 ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of 2003 Bonds and Other Moneys 22 Section 4.02. Improvement Fund 22 Section 4.03. Costs of Issuance Fund 23 Section 4.04. Reserve Fund 24 Section 4.05. Bond Fund 25 Section 4.06. Special Tax Fund 26 Section 4.07. Administrative Expense Fund 27 ARTICLE V OTHER COVENANTS OF THE AUTHORITY Section 5.01. Punctual Payment 29 Section 5.02. Limited Obligation 29 Section 5.03. Extension of Time for Payment 29 Section 5.04. Against Encumbrances 29 Section 5.05. Books and Records 29 Section 5.06. Protection of Security and Rights of Owners 29 Section 5.07. Compliance with Act 29 Section 5.08. Collection of Special Tax Revenues 29 Section 5.09. Covenant to Foreclose 30 Section 5.10. Further Assurances 31 Section 5.11. Private Activity Bond Limitations 31 Section 5.12. Federal Guarantee Prohibition 31 Section 5.13. Rebate Requirement 31 Section 5.14. No Arbitrage 32 Section 5.15. Yield of the 2012 Bonds 32 Section 5.16. Maintenance of Tax -Exemption 32 Section 5.17. Continuing Disclosure to Owners 32 Section 5.18. Reduction of Special Taxes 32 Section 5.19. Limits on Special Tax Waivers and Bond Tenders 32 Section 5.20. No Additional Bonds 33 Section 5.21. City Bid at Foreclosure Sale 33 ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILrrY OF THE AUTHORITY Section 6.01. Deposit and Investment of Moneys in Funds 34 Section 6.02. Limited Obligation 35 Section 6.03. Liability of Authority 35 Section 6.04. Employment of Agents by Authority 36 ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent 37 Section 7.02. Liability of Fiscal Agent 38 Section 7.03. Information 39 Section 7.04. Notice to Fiscal Agent 39 Section 7.05. Compensation, Indemnification 39 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted 41 Section 8.02. Owners' Meetings 41 Section 8.03. Procedure for Amendment with Written Consent of Owners 42 Section 8.04. Disqualified Bonds 42 Section 8.05. Effect of Supplemental Agreement 42 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments 43 Section 8.07. Amendatory Endorsement of Bonds 43 ARTICLE DC MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties 44 Section 9.02. Successor is Deemed Included in All References to Predecessor 44 Section 9.03. Discharge of Agreement 44 Section 9.04. Execution of Documents and Proof of Ownership by Owners 45 Section 9.05. Waiver of Personal Liability 45 Section 9.06. Notices to and Demands on Authority and Fiscal Agent 45 Section 9.07. State Reporting Requirements 46 Section 9.08. Partial Invalidity 47 Section 9.09. Unclaimed Moneys 47 Section 9.10. Applicable Law 47 Section 9.11. Conflict with Act 47 Section 9.12. Condusive Evidence of Regularity 47 Section 9.13. Payment on Business Day 48 Section 9.14. Counterparts 48 EXHIBIT A — FORM OF 2012 BOND FISCAL AGENT AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds THIS FISCAL AGENT AGREEMENT (the "Agreement"), dated as of August 1, 2012, is by and between the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (the "District"), and U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, as fiscal agent (the "Fiscal Agent"). RECITALS: WHEREAS, the Board of Directors of the Authority has formed the District under the provisions of the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311, et seq. of the California Government Code) (the "Act") and Resolution No. TPFA 03-22 of the Board of Directors of the Authority adopted on October 28, 2003 (the "Resolution of Formation"); WHEREAS, the Board of Directors of the Authority, as the legislative body for the District, is authorized under the Act to levy special taxes to pay for the costs of the District and to authorize the issuance of bonds, including bonds to refund any bonds of the Authority for the District, secured by said special taxes under the Act; WHEREAS, under the provisions of the Act, on January 8, 2004 the Authority, for and on behalf of the District, issued $30,990,000 initial principal amount of its Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds (the "2003 Bonds") to finance various public improvements authorized to be funded by the District; WHEREAS, due to favorable interest rates in the financial markets, the Board of Directors of the Authority has determined to refund the 2003 Bonds in full; WHEREAS, under the provisions of the Act and Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), on July 10, 2012, the Board of Directors of the Authority adopted its Resolution No. TPFA-____ (the "Resolution"), which resolution, among other matters, authorized the issuance of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds (the "2012 Bonds") to provide moneys to defease and currently refund in whole the outstanding 2003 Bonds and provided that said issuance would be in accordance with this Agreement, and authorized the execution hereof; WHEREAS, it is in the public interest and for the benefit of the Authority, the District, the persons responsible for the payment of special taxes to be levied in the District and the owners of the 2012 Bonds that the Authority enter into this Agreement to provide for the -1- issuance of the 2012 Bonds, the disbursement of proceeds of the 2012 Bonds, the disposition of the special taxes securing the 2012 Bonds and the administration and payment of the 2012 Bonds; and WHEREAS, the Authority has determined that all things necessary to cause the 2012 Bonds, when executed by the Authority for the District and issued as in the Act, the Refunding Law, the Resolution and this Agreement provided, to be legal, valid and binding and special obligations of the Authority for the District in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery of this Agreement and the creation, authorization, execution and issuance of the 2012 Bonds, subject to the terms hereof, have in all respects been duly authorized. AGREEMENT: NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: -2- ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant to the provisions of the Act, the Refunding Law and the Resolution. Section 1.02. Agreement for Benefit of Owners of the Bonds. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the Authority shall be for the equal benefit, protection and security of the Owners of the Bonds. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement. Any action by any Owner to enforce the provisions of this Agreement shall be for the equal benefit and protection of all Owners of the Bonds. The Fiscal Agent may become the Owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not Fiscal Agent. Section 1.03. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. "Acquisition Account" means the account by that name established by Section 4.02(A) within the Improvement Fund. "Acquisition Agreement" means the Acquisition Agreement, dated as of October 1, 2003, between the Authority and Wolf Creek Development, LLC, as originally executed and as it may be amended from time to time. "Act" means the Mello -Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means costs directly related to the administration of the District consisting of the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the Treasurer or designee thereof or both) and the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Fiscal Agent; fees and costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties required of it under this Agreement; the costs of the Authority, the City or any designee of either the Authority or the City of complying with the disclosure provisions of the Act, the Continuing Disclosure Agreement and this Agreement, including those related to public inquiries regarding the Special Tax and disclosures to Bondowners and the Original Purchaser; the costs of the Authority, the City or any designee of either the Authority or the City related to an appeal of the Special Tax; any amounts required to be rebated to the federal government in order for the Authority to comply with Section 5.13; any fees or expenses of the Escrow Bank and any costs incurred by the Authority or the City (including fees and expenses of the Escrow Bank) under or in connection with the Escrow Agreement; an allocable share of the salaries of the City staff directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto. Administrative Expenses shall also include amounts advanced by the Authority or the City for any administrative purpose of the District, including costs related to prepayments of Special Taxes, recordings related to such prepayments and satisfaction of Special Taxes, amounts advanced to ensure compliance with Section 5.13, administrative costs related to the administration of any joint community facilities agreement regarding the District, and the costs of commencing and pursuing foreclosure of delinquent Special Taxes. Administrative Expenses shall include any such expenses incurred in prior years but not yet paid. "Administrative Expense Fund" means the fund by that name established by Section 4.07(A) hereof. "Agreement" means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions hereof. "Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of the provisions of Section 2.03(A)(ii) providing for mandatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking payment due in such Bond Year pursuant to Section 2.03(A)(ii)). "Auditor" means the auditor/controller of the County, or such other official at the County who is responsible for preparing property tax bills. "Authority" means the Temecula Public Financing Authority and any successor thereto. "Authority Attorney" means any attorney or firm of attorneys employed by the Authority or the City in the capacity of general counsel to the Authority. "Authorized Officer" means the Chairperson, Executive Director, Treasurer, Secretary or any other officer or employee authorized by the Board of Directors of the Authority or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer. "Bond Counsel" means (i) Quint & Thimmig LLP, or (ii) any other attorney or firm of attorneys acceptable to the Authority and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities. "Bond Fund" means the fund by that name established by Section 4.05(A) hereof. "Bond Register" means the books for the registration and transfer of Bonds maintained by the Fiscal Agent under Section 2.08 hereof. "Bond Year" means the one-year period beginning on September 2nd in each year and ending on September 1st in the following year, except that the first Bond Year shall begin on the Closing Date and end on September 1, 2012. "Bonds" means the 2012 Bonds, and, if the context requires, any Parity Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement. "Business Day" means any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust office are authorized or obligated by law or executive order to be closed. -4- "CDIAC" means the California Debt and Investment Advisory Commission of the office of the State Treasurer of the State of California or any successor agency or bureau thereto. "City" means the City of Temecula, California. "City Account" means the account by that name established by Section 4.02(A) within the Improvement Fund. "Closing Date" means August , 2012, being the date upon which there is a physical delivery of the 2012 Bonds in exchange for the amount representing the purchase price of the 2012 Bonds by the Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the 2012 Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the 2012 Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Code. "Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement pertaining to the 2012 Bonds, executed as of the Closing Date by the Authority, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Costs of Issuance" means items of expense payable or reimbursable directly or indirectly by the Authority or the City and related to the authorization, sale and issuance of the 2012 Bonds and the refunding and defeasance of the 2003 Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees and charges of the Fiscal Agent including its first annual administration fee, fees and expenses of Fiscal Agent's counsel, expenses incurred by the City or the Authority in connection with the issuance of the 2012 Bonds and the refunding and defeasance of the 2003 Bonds, Escrow Bank fees and expenses, special tax consultant fees and expenses, Bond (underwriter's) discount, legal fees and charges, including bond counsel and disclosure counsel, financial consultants' fees, rating agency fees, charges for execution, transportation and safekeeping of the 2012 Bonds, and other costs, charges and fees in connection with the foregoing. "Costs of Issuance Fund" means the fund by that name established by Section 4.03(A) hereof. "County" means the County of Riverside, California. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Debt Service" means the scheduled amount of interest and amortization of principal (including principal payable by reason of Section 2.03(A)(ii)) on the Bonds and the scheduled amount of interest and amortization of principal payable on any Parity Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. "Depository" means (a) initially, DTC, and (b) any other Securities Depository acting as Depository pursuant to Section 2.13. -5- "District" means the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek), formed by the Authority under the Act and the Resolution of Formation. "Escrow Agreement" means the Escrow Agreement, dated as of August 1, 2012, by and between the Authority and the Escrow Bank. "Escrow Bank" means U.S. Bank National Association, in its capacity as escrow bank under the Escrow Agreement. "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security --State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California but only if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States. "Federal Securities" means any of the following which are non -callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Fiscal Agent: (i) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as "stripped" obligations and coupons; or (ii) any of the following obligations of the following agencies of the United States of America: (a) direct obligations of the Export -Import Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America. "Fiscal Agent" means the Fiscal Agent appointed by the Authority and acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01. "Fiscal Year" means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. -6- "Improvement Fund" means the fund by that name created by and held by the Fiscal Agent pursuant to Section 4.02(A) hereof. "Independent Financial Consultant" means any consultant or firm of such consultants appointed by the Authority, the City or the Treasurer, and who, or each of whom: (i) is judged by the person or entity that approved them to have experience in matters relating to the issuance and/or administration of bonds under the Act; (ii) is in fact independent and not under the domination of the Authority; (iii) does not have any substantial interest, direct or indirect, with or in the Authority, or any owner of real property in the District, or any real property in the District; and (iv) is not connected with the City or the Authority as an officer or employee of the City or the Authority, but who may be regularly retained to make reports to the City or the Authority. "Information Servicgs" means the Electronic Municipal Market Access System (referred to as "EMMA"), a facility of the Municipal Securities Rulemaking Board, (at http:/ /emma.msrb.org); and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the Authority may designate in an Officer's Certificate delivered to the Fiscal Agent. "Interest Payment Dates" means March 1 and September 1 of each year, commencing March 1, 2013. "Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds. "Moody's" means Moody's Investors Service, and any successor thereto. "Officer's Certificate" means a written certificate of the Authority signed by an Authorized Officer of the Authority. "Ordinance" means any ordinance of the Authority levying the Special Taxes. "Original Purchaser" means Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus, the first purchaser of the 2012 Bonds from the Authority. "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04) all Bonds except: (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Authority pursuant to this Agreement or any Supplemental Agreement. "Owner" or "Bondowner" means any person who shall be the registered owner of any Outstanding Bond. "Parity Bonds" means bonds issued by the Authority for the District and secured on a parity with any then Outstanding Bonds pursuant to Section 2.14 hereof. "Participating Underwriter" shall have the meaning ascribed thereto in the Continuing Disclosure Agreement. -7- "Permitted Investments" means any of the following, but only to the extent that the same are acquired at Fair Market Value: (a) Federal Securities. (b) Registered state warrants or treasury notes or bonds of the State of California (the "State"), including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, which are rated in one of the two highest short-term or long-term rating categories by either Moody's or Standard and Poor's, and which have a maximum term to maturity not to exceed three years. (c) Time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, or a state or federal savings and loan association which may include the Fiscal Agent and its affiliates; provided, that the certificates of deposit shall be one or more of the following: continuously and fully insured by the Federal Deposit Insurance Corporation, and/or continuously and fully secured by securities described in subdivision (a) or (b) of this definition of Permitted Investments which shall have a market value, as determined on a marked -to -market basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of the principal amount of the certificates on deposit. (d) Commercial paper which at the time of purchase is of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody's or Standard and Poor's, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000) and that have an "A" or higher rating for the issuer's debentures, other than commercial paper, by either Moody's or Standard and Poor's, provided that purchases of eligible commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the outstanding commercial paper of an issuing corporation. Purchases of commercial paper may not exceed 20 percent of the total amount invested pursuant to this definition of Permitted Investments. (e) A repurchase agreement with a state or nationally charted bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, provided that all of the following conditions are satisfied: (1) the agreement is secured by any one or more of the securities described in subdivision (a) of this definition of Permitted Investments, (2) the underlying securities are required by the repurchase agreement to be held by a bank, trust company, or primary dealer having a combined capital and surplus of at least one hundred million dollars ($100,000,000) and which is independent of the issuer of the repurchase agreement, and (3) the underlying securities are maintained at a market value, as determined on a marked -to - market basis calculated at least weekly, of not less than 103 percent of the amount so invested. (f) An investment agreement or guaranteed investment contract with, or guaranteed by, a financial institution the long-term unsecured obligations of which are rated Aa2 and "AA" or better, respectively, by Moody's and Standard and Poor's at the time of initial investment. The investment agreement shall be subject to a downgrade provision with at least the following requirements: (1) the agreement shall provide that within five business days after the financial institution's long-term unsecured credit rating has been withdrawn, suspended, other than because of general -8- withdrawal or suspension by Moody's or Standard and Poor's from the practice of rating that debt, or reduced below "AA-" by Standard and Poor's or below "Aa3" by Moody's (these events are called "rating downgrades") the financial institution shall give notice to the Authority and, within the five-day period, and for as long as the rating downgrade is in effect, shall deliver in the name of the Authority or the Fiscal Agent to the Authority or the Fiscal Agent Federal Securities allowed as investments under subdivision (a) of this definition of Permitted Investments with aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement invested with the financial institution at that time, and shall deliver additional allowed federal securities as needed to maintain an aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement within three days after each evaluation date, which shall be at least weekly, and (2) the agreement shall provide that, if the financial institution's long-term unsecured credit rating is reduced below "A3" by Moody's or below "A-" by Standard and Poor's, the Fiscal Agent or the Authority may, upon not more than five business days' written notice to the financial institution, withdraw the investment agreement, with accrued but unpaid interest thereon to the date, and terminate the agreement. (g) The Local Agency Investment Fund of the State of California. (h) Investments in a money market fund (including any funds of the Fiscal Agent or its affiliates and including any funds for which the Fiscal Agent or its affiliates provides investment advisory or other management services) rated in the highest rating category (without regard to plus (+) or minus (-) designations) by Moody's or S&P. (i) Any other lawful investment for City funds. "Principal Office" means the corporate trust office of the Fiscal Agent set forth in Section 9.06, except for the purpose of maintenance of the registration books and presentation of Bonds for payment, transfer or exchange, such term shall mean the office at which the Fiscal Agent conducts its corporate agency business, or such other or additional offices as may be designated by the Fiscal Agent. "Project" means the facilities eligible to be funded by the District, as more particularly described in the Resolution of Formation. "Rate and Method of Apportionment of Special Taxes" means the rate and method of apportionment of special taxes for the District, as approved pursuant to the Resolution of Formation, and as it may be modified from time to time in accordance with the Act. "Record Date" means the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such day is a Business Day. "Refunding Bonds" means bonds issued by the Authority for the District the net proceeds of which are used to refund all or a portion of the then Outstanding Bonds; provided that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. "Refunding Law" means Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code. -9- hereof. "Reserve Fund" means the fund by that name established pursuant to Section 4.04(A) "Reserve Requirement" means, as of any date of calculation, an amount equal to seventy-five percent (75%) of the then Maximum Annual Debt Service. The Reserve Requirement as of the Closing Date is $ "Resolution" means Resolution No. TPFA 12-, adopted by the Board of Directors of the Authority on July 10, 2012. "Resolution of Formation" means Resolution No. TPFA 03-22, adopted by the Board of Directors of the Authority on October 28, 2003. "S&P" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, and any successor thereto. "Securities Depositories" means The Depository Trust Company, 55 Water Street, New York, New York 10041-0099, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in an Officer's Certificate delivered to the Fiscal Agent. "Special Tax A" shall have the meaning given such term in the Rate and Method of Apportionment of Special Taxes. "Special Tax B" shall have the meaning given such term in the Rate and Method of Apportionment of Special Taxes. "Special Tax Fund" means the fund by that name established by Section 4.06(A) hereof. "Special Tax Prepayments" means the proceeds of any prepayments of Special Tax A received by the Authority, as calculated pursuant to the Rate and Method of Apportionment of the Special Taxes, less any administrative fees or penalties collected as part of any such prepayment. "Special Tax Prepayments Account" means the account by that name established within the Bond Fund by Section 4.05(A) hereof. "Special Tax Revenues" means the proceeds of the Special Taxes received by the Authority, including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Special Tax Revenues" does not include any penalties collected in connection with delinquent Special Taxes, which amounts may be deposited to the Administrative Expense Fund or otherwise disposed of as determined by the Treasurer consistent with any applicable provisions of the Act. "Special Taxes" means the Special Tax A levied within the District pursuant to the Act, the Ordinance and this Agreement. "Supplemental Agreement" means an agreement the execution of which is authorized by a resolution which has been duly adopted by the Authority under the Act and which agreement is amendatory of or supplemental to this Agreement, but only if and to the extent that such agreement is specifically authorized hereunder. -10- "Tax Consultant" means any independent financial or tax consultant retained by the Authority or the City for the purpose of computing the Special Taxes. "Treasurer" means the Treasurer of the Authority or such other officer or employee of the Authority performing the functions of the chief financial officer of the Authority. "2003 Bonds" means the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds. "2012 Bonds" means the Bonds so designated and authorized to be issued under Section 2.01 hereof. -11- ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation. 2012 Bonds in the aggregate principal amount of Million Dollars ($____�W) are authorized to be issued by the Authority for the District under and subject to the terms of the Resolution and this Agreement, the Act, the Refunding Law and other applicable laws of the State of California. The 2012 Bonds are hereby designated as the "Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds." Section 2.02. Terms of the 2012 Bonds. (A) Form; Denominations. The 2012 Bonds shall be issued in fully registered form without coupons in the denomination of $5,000 or any integral multiple in excess thereof. (B) Date of 2012 Bonds. The 2012 Bonds shall be dated the Closing Date. (C) CUSIP Identification Numbers. "CUSIP" identification numbers shall be imprinted on the 2012 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2012 Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the 2012 Bonds. In addition, failure on the part of the Authority or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the Authority's contract with such Owners and shall not impair the effectiveness of any such notice. (D) Maturities, Interest Rates. The 2012 Bonds shall mature and become payable on September 1 in each of the years, and shall bear interest at the rates per annum as follows: Maturity Date (September 1) Principal Amount Interest Rate (E) Interest. The 2012 Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360 -day -12- year composed of twelve 30 -day months. Each 2012 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Bond Date; provided, however, that if at the time of authentication of a 2012 Bond, interest is in default thereon, such 2012 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. (F) Method of Payment. Interest on the 2012 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered Owner thereof at such registered Owner's address as it appears on the Bond Register maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer (i) to the Depository (so long as the Bonds are in book -entry form pursuant to Section 2.13), or (ii) to an account within the United States made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds received before the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such Bonds are transferred to a new Owner. The principal of the 2012 Bonds and any premium on the 2012 Bonds are payable by check in lawful money of the United States of America upon surrender of the 2012 Bonds at the Principal Office of the Fiscal Agent. All 2012 Bonds paid by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled 2012 Bonds and issue a certificate of destruction thereof to the Authority upon the Authority's request. Section 2.03. Redemption. (A) Redemption Dates. (i) Optional Redemption. The 2012 Bonds maturing on and after September 1, __ are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, ____, as a whole, or in part among maturities so as to maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, _ and March 1, ____ September 1, ___ and any Interest Payment Date thereafter % (ii) Mandatory Sinking Payment Redemption. The 2012 Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, __, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: -13- Redemption Date (September 1) Sinking Payments The 2012 Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, _, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the 2012 Bonds, as a result of any prior partial redemption of the 2012 Bonds pursuant to Section 2.03(A)(i) above or Section 2.03(A)(iii) below, as specified in writing by the Treasurer to the Fiscal Agent. (iii) Redemption From Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to Section 4.05(B)(ii) and Section 4.04(F), respectively, shall be used to redeem 2012 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), by lot and allocated among maturities of the 2012 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates any Interest Payment Date from March 1, 2013 to and including March 1, ____ September 1, __ and any Interest Payment Date thereafter Redemption Prices (B) Notice to Fiscal Agent. The Authority shall give the Fiscal Agent written notice of its intention to redeem 2012 Bonds pursuant to subsection (A)(i) or (A)(iii) not less than forty- five (45) days prior to the applicable redemption date, or such lesser number of days as the Fiscal Agent shall allow. (C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section 2.03(A), moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2012 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of 2012 Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) -14- as such Officer's Certificate may provide, but in no event may 2012 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2012 Bonds were to be redeemed in accordance with this Agreement. (D) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories, to one or more Information Services (or by such other means as permitted by such services), and to the respective registered Owners of any 2012 Bonds designated for redemption, at their addresses appearing on the Bond Register; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such 2012 Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2012 Bonds are to be called for redemption, shall designate the CUSIP numbers and Bond numbers of the 2012 Bonds to be redeemed by giving the individual CUSIP number and Bond number of each 2012 Bond to be redeemed or shall state that all 2012 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2012 Bonds of one or more maturities have been called for redemption, shall state as to any 2012 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2012 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such 2012 Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the 2012 Bonds under Section 2.03(A)(i) above, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2012 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2012 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the 2012 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2012 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the 2012 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of this Agreement. Upon the payment of the redemption price of 2012 Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, of the 2012 Bonds being redeemed with the proceeds of such check or other transfer. Whenever provision is made in this Agreement for the redemption of less than all of the 2012 Bonds or any given portion thereof, the Fiscal Agent shall select the 2012 Bonds to be redeemed, from all 2012 Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify 2012 Bonds to be redeemed so as to maintain substantially level debt service on the Bonds), and by lot within a maturity in any manner which the Fiscal Agent deems appropriate. Upon surrender of 2012 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the Authority, a new 2012 Bond or 2012 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2012 Bond or 2012 Bonds. -15- (E) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2012 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2012 Bonds so called shall cease to be entitled to any benefit under this Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice. All 2012 Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section, and any 2012 Bonds paid at maturity, shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled 2012 Bonds and issue a certificate of destruction thereof to the Authority. (F) Redemption of Parity Bonds. Redemption provisions, if any, pertaining to any Parity Bonds shall be set forth in the Supplemental Agreement providing for such Parity Bonds. Section 2.04. Form of Bonds. The 2012 Bonds, the form of Fiscal Agent's certificate of authentication and the form of assignment, to appear thereon, shall be substantially in the forms, respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement, the Resolution and the Act. Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the Authority by the manual or facsimile signatures of its Chairperson and Secretary who are in office on the date of adoption of this Agreement or at any time thereafter, and the seal of the Authority shall be impressed, imprinted or reproduced by facsimile signature thereon. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the owner. Any Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Bond shall be the proper officers of the Authority although at the nominal date of such Bond any such person shall not have been such officer of the Authority. Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of authentication of the Fiscal Agent shall be conclusive evidence that the Bonds registered hereunder have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Agreement. Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the Bond Register by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the Authority. The Fiscal Agent shall collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount of authorized denomination(s). -16- No transfers of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same series and maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange shall be paid by the Authority. The Fiscal Agent shall collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange. No exchanges of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Section 2.08. Bond Register. The Fiscal Agent will keep or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds, which books shall show the series number, date, amount, rate of interest and last known Owner of each Bond and shall at all times be open to inspection by the Authority during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as hereinbefore provided. The Authority and the Fiscal Agent will treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of such Bond for any and all purposes, and the Authority and the Fiscal Agent shall not be affected by any notice to the contrary. The Authority and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Authority, and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the Authority upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under to this Agreement as definitive Bonds authenticated and delivered hereunder. Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled by it and destroyed by the Fiscal Agent who shall deliver a certificate of destruction thereof to the Authority. -17- If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to the Fiscal Agent and indemnity for the Authority and the Fiscal Agent satisfactory to the Fiscal Agent shall be given, the Authority, at the expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Authority may require payment of a sum not exceeding the actual cost of preparing each new Bond delivered under this Section and of the expenses which may be incurred by the Authority and the Fiscal Agent for the preparation, execution, authentication and delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement. Section 2.11. Limited Obligation. All obligations of the Authority under this Agreement and the Bonds shall be special obligations of the Authority, payable solely from the Special Tax Revenues and the funds pledged therefore hereunder. Neither the faith and credit nor the taxing power of the Authority (except with respect to the levy of Special Taxes in the District, to the limited extent set forth herein) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. The City has no obligations whatsoever under this Agreement or otherwise with respect to the Bonds. Section 2.12. No Acceleration. The principal of the Bonds shall not be subject to acceleration hereunder. Nothing in this Section shall in any way prohibit the redemption of Bonds under Section 2.03 hereof, or the defeasance of the Bonds and discharge of this Agreement under Section 9.03 hereof. Section 2.13. Book -Entry System. DTC shall act as the initial Depository for the 2012 Bonds. One 2012 Bond for each maturity of the 2012 Bonds shall be initially executed, authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form). Upon initial execution, authentication, and delivery, the ownership of the 2012 Bonds shall be registered in the Bond Register in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint in writing. The representatives of the Authority and the Fiscal Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Agreement to qualify the Bonds for the Depository's book -entry system, including the execution of the Depository's required representation letter. With respect to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of DTC, neither the Authority nor the Fiscal Agent shall have any responsibility or obligation to any broker-dealer, bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the "DTC Participants") or to any person for which a DTC Participant acquires an interest in the Bonds (the "Beneficial Owners"). Without limiting the immediately preceding sentence, neither the Authority nor the Fiscal Agent shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede Sr Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the Authority elects to redeem the Bonds in part, (iv) the payment to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any amount with respect to the principal of or -18- interest on the Bonds, or (v) any consent given or other action taken by the Depository as Owner of the Bonds. Except as set forth above, the Fiscal Agent may treat as and deem DTC to be the absolute Owner of each Bond for which DTC is acting as Depository for the purpose of payment of the principal of and interest on such Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bonds, for the purpose of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Fiscal Agent shall pay all principal of and interest on the Bonds only to or upon the order of the Owners as shown on the Bond Register, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest on the Bonds to the extent of the sums or sums so paid. No person other than an Owner, as shown on the Bond Register, shall receive a physical Bond. Upon delivery by DTC to the Fiscal Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.06 hereof, references to "Cede & Co." in this Section 2.13 shall refer to such new nominee of DTC. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Fiscal Agent during any time that the Bonds are Outstanding, and discharging its responsibilities with respect thereto under applicable law. The Authority may terminate the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book -entry transfers through DTC is not in the best interest of the Beneficial Owners, and the Authority shall mail notice of such termination to the Fiscal Agent. Upon the termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is willing and able to undertake such functions upon reasonable or customary terms, or if the Authority determines that it is in the best interest of the Beneficial Owners of the 2012 Bonds that they be able to obtain certificated 2012 Bonds, the 2012 Bonds shall no longer be restricted to being registered in the Bond Register of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or name the Owners shall designate at that time, in accordance with Section 2.06. To the extent that the Beneficial Owners are designated as the transferee by the Owners, in accordance with Section 2.06, the 2012 Bonds will be delivered to such Beneficial Owners as soon as practicable. Section 2.14. Issuance of Parity Bonds. The Authority may issue one or more series of Parity Bonds, in addition to the 2012 Bonds authorized under Section 2.01 hereof, by means of a Supplemental Agreement and without the consent of any Bondowners, upon compliance with the provisions of this Section 2.14. Only Refunding Bonds that comply with the requirements of this Section 2.14 shall be Parity Bonds, and such Parity Bonds shall constitute Bonds hereunder and shall be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds hereunder on a parity with all other Bonds Outstanding hereunder. The Authority may issue Refunding Bonds that are Parity Bonds subject to the following specific conditions precedent: (A) Current Compliance. The Authority shall be in compliance on the date of issuance of the Parity Bonds with all covenants set forth in this Agreement and all Supplemental Agreements, and the principal amount of the Parity Bonds shall not -19- cause the Authority to exceed the maximum authorized indebtedness of the District under the provisions of the Act. (B) Payment Dates. The Supplemental Agreement providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on March 1 and September 1, and principal thereof shall be payable on September 1 in any year in which principal is payable (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis). (C) Funds and Accounts; Reserve Fund Deposit. The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts, and shall provide for a deposit to the Reserve Fund (or to a separate account created for such purpose) in an amount necessary so that the amount on deposit in the Reserve Fund (together with the amount in any such separate account), following the issuance of such Parity Bonds, is equal to the Reserve Requirement. (D) Refunding Bonds. The Parity Bonds shall be Refunding Bonds. (E) Officer's Certificate. The Authority shall deliver to the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of such Parity Bonds set forth in subsections (A), (B), (C) and (D) of this Section 2.14 have been satisfied. In delivering such Officer's Certificate, the Authorized Officer that executes the same may conclusively rely upon such certificates of the Fiscal Agent, the Tax Consultant and others selected with due care, without the need for independent inquiry or certification. Nothing in this Section 2.14 shall prohibit the Authority from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under Section 3.02 of this Agreement. -20- ARTICLE III ISSUANCE OF 2012 BONDS Section 3.01. Issuance and Delivery of 2012 Bonds. At any time after the execution of this Agreement, the Authority may issue the 2012 Bonds for the District in the aggregate principal amount set forth in Section 2.01 and deliver the 2012 Bonds to the Original Purchaser. The Authorized Officers of the Authority are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the 2012 Bonds in accordance with the provisions of the Act, the Refunding Law, the Resolution and this Agreement, to redeem the 2003 Bonds with proceeds of the 2012 Bonds, to authorize the payment of Costs of Issuance from the proceeds of the 2012 Bonds and to do and cause to be done any and all acts and things necessary or convenient for delivery of the 2012 Bonds to the Original Purchaser and the redemption of the 2003 Bonds pursuant to the Escrow Agreement. Section 3.02. Pledge of Special Tax Revenues. The Bonds shall be secured by a first pledge of all of the Special Tax Revenues (other than the Special Tax Revenues to be deposited to the Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 4.06(A)) and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and, until disbursed as provided herein, in the Special Tax Fund. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided herein) are hereby dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided herein and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in accordance with Section 9.03. Amounts in the Administrative Expense Fund, the Improvement Fund, the Costs of Issuance Fund, and the Special Tax Revenues to be deposited to the Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 4.06(A), are not pledged to the repayment of the Bonds. Any portion of the Project financed with the proceeds of the 2003 Bonds is not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of condemnation or destruction of any portion of the Project are not pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation imposed hereunder. Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be dependent upon the performance by any person of such persons obligation(s) with respect to the Project. -21- ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of 2012 Bonds and Other Moneys. (A) The proceeds of the purchase of the 2012 Bonds by the Original Purchaser (being $ ) shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows: (i) deposit in the Costs of Issuance Fund an amount equal to $ (ii) deposit in the Reserve Fund an amount equal to $____ (being an amount equal to the initial Reserve Requirement); and (iii) transfer to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement an amount equal to (B) In addition to the foregoing, on the Closing Date the Authority shall transfer or cause to be transferred certain moneys held with respect to the 2003 Bonds as follows: (i) transfer from the administrative expense fund held with respect to the 2003 Bonds to the Treasurer for deposit by the Treasurer in the Administrative Expense Fund, all amounts on deposit in such administrative expense fund; (ii) transfer from the special tax fund held with respect to the 2003 Bonds (a) to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement $ ; and (b) to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, all remaining amounts on deposit in such special tax fund; (iii) transfer from the reserve fund held with respect to the 2003 Bonds to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement, the $ _ on deposit in such reserve fund; (iv) transfer from the bond fund held with respect to the 2003 Bonds to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, any amounts on deposit in such bond fund; and (v) transfer from the acquisition account held with respect to the 2003 Bonds to the Fiscal Agent for deposit by the Fiscal Agent to the Improvement Fund, all amounts in such account. (C) The Fiscal Agent may establish a temporary fund or account in its records to facilitate any of the deposits or transfers referred to in this Section 4.01. Section 4.02. Improvement Fund (A) Establishment of Improvement Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Improvement Fund (the "Improvement Fund"). A deposit shall be made to the Improvement Fund as required by Section 4.01(B)(v). Moneys -22- in the Improvement Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority, and shall be disbursed for the payment or reimbursement of costs of the Project. (B) Procedure for Disbursement. Disbursements from the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer's Certificate, which shall: (a) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made (which shall be for a Project cost identified in the Acquisition Agreement, or for a cost of the Pechanga Parkway improvements not able to be funded from amounts in the City Account established under the Fiscal Agent Agreement for the 2003 Bonds), that the disbursement is a proper expenditure from the Improvement Fund, and the person to which the disbursement is to be paid; and (b) certify that no portion of the amount then being requested to be disbursed was set forth in any Officer's Certificate previously filed requesting a disbursement. Each such Officer's Certificate or other certificate submitted to the Fiscal Agent as described in this Section 4.02(B) shall be sufficient evidence to the Fiscal Agent of the facts stated therein, and the Fiscal Agent shall have no duty to confirm the accuracy of such facts. (C) Investment. Moneys in the Improvement Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits from the investment and deposit of amounts in the Improvement Fund shall be retained in the Improvement Fund, to be used for the purposes of the Improvement Fund. (D) Closing of Improvement Fund. Upon receipt by the Fiscal Agent of an Officer's Certificate stating that the Project has been completed and that all costs of the Project have been paid, or that any such costs are not required to be paid from the Improvement Fund, the Fiscal Agent shall transfer the amount, if any, remaining in the Improvement Fund to the Bond Fund to be used to pay Debt Service on the Bonds on the next Interest Payment Date, and when no amounts remain on deposit in the Improvement Fund, the Improvement Fund shall be closed. Section 4.03. Costs of Issuance Fund. (A) Establishment of Costs of Issuance Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Costs of Issuance Fund (the "Costs of Issuance Fund"), to the credit of which a deposit shall be made as required by Section 4.01(A)(i). Moneys in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of Costs of Issuance. (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by the Treasurer and delivered to the Fiscal Agent on the Closing Date, or otherwise in an Officer's Certificate delivered to the Fiscal Agent after the Closing Date. The Fiscal Agent shall pay all Costs of Issuance after receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee pursuant to an Officer's Certificate requesting payment of Costs of Issuance. The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of 90 days from the date of delivery of the 2012 Bonds and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Treasurer for deposit by the Treasurer in the Administrative Expense Fund. (C) Investment. Moneys in the Costs of Issuance Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment -23- shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of such fund. Section 4.04. Reserve Fund. (A) Establishment of Fund. There is hereby established as a separate fund to be held by the Fiscal Agent the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Reserve Fund (the "Reserve Fund"), to the credit of which a deposit shall be made as required by Section 4.01(A)(ii) equal to the Reserve Requirement as of the Closing Date for the 2012 Bonds, and deposits shall be made as provided in clause (ii) of the second paragraph of Section 4.06(A) and clause (ii) of Section 4.06(B). Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of principal of, and interest and any premium on, the Bonds and shall be subject to a lien in favor of the Owners of the Bonds. (B) Use of Reserve Fund. Except as otherwise provided in this Section, all amounts deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the provisions of this Section, for the purpose of redeeming Bonds from the Bond Fund. (C) Transfer Due to Deficiency in Bond Fund. Whenever transfer is made from the Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund, the Fiscal Agent shall provide written notice thereof to the Treasurer, specifying the amount withdrawn. (D) Transfer of Excess of Reserve Requirement. Whenever, on the Business Day prior to any September 1 occurring on or after September 1, 2013, or on any other date at the request of the Treasurer, the amount in the Reserve Fund exceeds the Reserve Requirement, the Fiscal Agent shall provide written notice to the Treasurer of the amount of the excess and shall transfer an amount equal to the excess from the Reserve Fund to the Bond Fund to be used for the payment of interest on the Bonds on the next Interest Payment Date in accordance with Section 4.05. (E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund equals or 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 Fiscal Agent shall upon the written direction of the Treasurer transfer the amount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in accordance with Section 2.03 and 4.05, as applicable, of all of the Outstanding Bonds. In the event that the amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be transferred to the Authority to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund pursuant to this Section 4.04(E) until after (i) the calculation of any amounts due to the federal government pursuant to Section 5.13 following payment of the Bonds and withdrawal of any such amount from the Reserve Fund for purposes of making such payment to the federal government, and (ii) payment of any fees and expenses due to the Fiscal Agent. (F) Transfer Upon Special Tax Prepayment. Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment pursuant to Section 2.03(A)(iii) and 4.05(B)(ii), funds in the Reserve Fund in the amount of any applicable -24- "Reserve Fund Credit," as such term is defined in and otherwise determined in accordance with Section H of the Rate and Method of Apportionment of Special Taxes, shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to Section 2.03(A)(iii). The Treasurer shall deliver to the Fiscal Agent an Officer's Certificate specifying any amount to be so transferred, and the Fiscal Agent may rely on any such Officer's Certificate. (G) Transfer to Pay Rebate. Amounts in the Reserve Fund shall be withdrawn, at the written request of an Authorized Officer, for purposes of paying any rebate liability under Section 5.13. (H) Investment. Moneys in the Reserve Fund shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Reserve Fund to be used for the purposes of such fund, including any of the purposes specified in this Section 4.04. Section 4.05. Bond Fund. (A) Establishment of Bond Fund and Special Tax Prepayments Account. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Bond Fund (the "Bond Fund"), to the credit of which deposits shall be made as required by Section 4.02(D), Section 4.04, clause (ii) of the second paragraph of Section 4.06(A) and Section 4.06(B), and any other amounts required to be deposited therein by this Agreement or the Act. There is also hereby created in the Bond Fund a separate account held by the Fiscal Agent, the Special Tax Prepayments Account, to the credit of which deposits shall be made as provided in clause (iii) of the second paragraph of Section 4.06(A). Moneys in the Bond Fund and the accounts therein shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds. (B) Disbursements. (i) Bond Fund Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the Owners of the Bonds the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments set forth in Section 2.03(A)(ii), or a redemption of the Bonds required by Section 2.03(A)(i) or (iii), such payments to be made in the priority listed in the second succeeding paragraph. Notwithstanding the foregoing, (a) amounts in the Bond Fund as a result of a transfer pursuant to Section 4.02(D) shall be used to pay the principal of and interest on the Bonds prior to the use of any other amounts in the Bond Fund for such purpose; and (b) amounts in the Bond Fund as a result of a transfer pursuant to clause (ii) of the second paragraph of Section 4.06(A) shall be immediately disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds. In the event that amounts in the Bond Fund are insufficient for the purposes set forth in the preceding paragraph, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve Fund shall be deposited in the Bond Fund. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments provided for in the first sentence of the first paragraph of this -25- Section 4.05(B)(i), the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Each such payment shall be made ratably to the Owners of the Bonds based on the then Outstanding principal amount of the Bonds, if there are insufficient funds to make the corresponding payment for all of the then Outstanding Bonds. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date. (ii) Special Tax Prepayments Account Disbursements. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under Section 2.03(A)(iii), and notice to the Fiscal Agent can timely be given under Section 2.03(B), and shall be used (together with any amounts transferred pursuant to Section 4.04(F)) to redeem Bonds on the redemption date selected in accordance with Section 2.03. (C) Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from the investment and deposit of amounts in the Bond Fund and the Special Tax Prepayments Account shall be retained in the Bond Fund and the Special Tax Prepayments Account, respectively, to be used for purposes of such fund and account. Section 4.06. Special Tax Fund. (A) Establishment of Special Tax Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Fund (the "Special Tax Fund"). The Authority shall transfer or cause to be transferred to the Fiscal Agent, as soon as practicable following receipt, all Special Tax Revenues received by the Authority and any amounts required by Section 4.01(B)(ii)(b) and Section 4.01(B)(iv) to be deposited to the Special Tax Fund, all which amounts shall be deposited by the Fiscal Agent to the Special Tax Fund. In addition, the Fiscal Agent shall deposit in the Special Tax Fund amounts to be transferred thereto pursuant to Section 4.07(B) hereof. Notwithstanding the foregoing, (i) the first Special Tax Revenues collected by the Authority in any Fiscal Year, in an amount equal to the portion of such Fiscal Year's Special Tax levy for Administrative Expenses (but not to exceed, in any Fiscal Year, $35,000), shall be deposited by the Treasurer in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Treasurer and shall be deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund up to the then Reserve Requirement; third, to the Administrative Expense Fund to the extent that amounts in such fund were used to pay costs related to the collection of such delinquencies; and fourth, to the Special Tax Fund for use as described in Section 4.06(B) below; and (iii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent (as specified in writing by the Treasurer to the Fiscal Agent) directly in the Special Tax Prepayments Account established pursuant to Section 4.05(A). -26- Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority and the Owners of the Bonds, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds and the Authority. (B) Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Improvement Fund, the Reserve Fund and the Special Tax Prepayments Account to the Bond Fund pursuant to Sections 4.02(D), 4.04(D), (E), and (F), and 4.05(B)(ii), such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date, and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement. In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of the Interest Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the Treasurer may transfer to the Administrative Expense Fund, from time to time, any amount in the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the Reserve Fund, if monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund. (C) Investment. Moneys in the Special Tax Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from such investment and deposit shall be retained in the Special Tax Fund to be used for the purposes thereof. Section 4.07. Administrative Expense Fund. (A) Establishment of Administrative Expense Fund. There is hereby established as a separate fund to be held by the Treasurer, the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Administrative Expense Fund (the "Administrative Expense Fund"), to the credit of which deposits shall be made as required by Sections 4.01(B)(i) and 4.03(B), and clause (i) of the second paragraph of Section 4.06(A). Moneys in the Administrative Expense Fund shall be held in trust by the Treasurer for the benefit of the Authority, and shall be disbursed as provided below. (B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Treasurer and paid to the Authority or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or Costs of Issuance, and the nature of such Administrative Expense or Costs of Issuance. Amounts transferred from the Costs of Issuance Fund to the Administrative Expense Fund pursuant to Section 4.03(3) shall be separately identified at all times, and shall be expended for purposes of the Administrative Expense Fund prior to the use of amounts transferred to the Administrative Expense Fund from the Special Tax Fund pursuant to Section 4.06(B). Annually, on the last day of each Fiscal Year, the Treasurer shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $35,000 that have not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund. -27- (C) Investment. Moneys in the Administrative Expense Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Treasurer in the Administrative Expense Fund to be used for the purposes thereof. -28- ARTICLE V OTHER COVENANTS OF THE AUTHORITY Section 5.01. Punctual Payment. The Authority will punctually pay or cause to be paid the principal of, and interest and any premium on, the Bonds when and as due in strict conformity with the terms of this Agreement and any Supplemental Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of this Agreement and all Supplemental Agreements and of the Bonds. Section 5.02. Limited Obligation. The Bonds are limited obligations of the Authority on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and, until disbursed as provided herein, the Special Tax Fund. Section 5.03. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the Authority shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the Authority, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have so extended or funded. Section 5.04. Against Encumbrances. The Authority will not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds, except as permitted by this Agreement. Section 5.05. Books and Records. The Authority will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Authority, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund and to the Special Tax Revenues. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in, writing. Section 5.06. Protection of Security and Rights of Owners. The Authority will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the Authority, the Bonds shall be incontestable by the Authority. Section 5.07. Compliance with Act. The Authority will comply with all applicable provisions of the Act and law in administering the District. Section 5.08. Collection of Special Tax Revenues. The Authority 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. -29- On or within five (5) Business Days of each June 1, the Fiscal Agent shall provide the Treasurer with a notice stating the amount then on deposit in the Bond Fund and the Reserve Fund, and informing the Authority that the Special Taxes may need to be levied pursuant to the Ordinance as necessary to provide for the debt service to become due on the Bonds in the calendar year that commences in the Fiscal Year for which the levy is to be made, and Administrative Expenses and replenishment (if necessary) of the Reserve Fund so that the balance therein equals the Reserve Requirement. The receipt of or failure to receive such notice by the Treasurer shall in no way affect the obligations of the Treasurer under the following two paragraphs. Upon receipt of such notice, the Treasurer shall communicate with the Auditor to ascertain 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 Treasurer shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each July 15 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final date on which 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 Treasurer shall 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 Treasurer shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on any outstanding Bonds of the District becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses (including amounts necessary to discharge any obligation under Section 5.13) during such year, taking into account the balances in such funds and in the Special Tax Fund. The Special Taxes so levied shall not exceed the maximum amounts as provided in the Rate and Method of Apportionment of Special Taxes. The Special Taxes, when levied, 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, 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; provided that, pursuant to and in accordance with the Ordinance, the Special Taxes may be collected by means of direct billing of the property owners within the District, in which event the Special Taxes shall become delinquent if not paid when due pursuant to said billing. Section 5.09. Covenant to Foreclose. Pursuant to Section 53356.1 of the Act, the Authority hereby covenants with and for the benefit of the Owners of the Bonds that it will order, and cause to be commenced as hereinafter provided, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due as provided in the following paragraph. The Treasurer shall notify the Authority Attorney of any such delinquency of which the Treasurer is aware, and the Authority Attorney shall commence, or cause to be commenced, such proceedings. On or about February 15 and June 15 of each Fiscal Year, the Treasurer shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenues theretofore received by the Authority, and: (A) Individual Delinquencies. If, as of any June 15, the Treasurer determines that any single parcel subject to the Special Tax in the District is delinquent in the -30- payment of Special Taxes in the aggregate amount of $5,000 or more, then the Treasurer shall promptly send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the Authority within 90 days after the notice of delinquency has been sent. (B) Aggregate Delinquencies. If the Treasurer determines that, as of any June 15, the total amount of delinquent Special Tax for the then current Fiscal Year for the entire District (including the total of delinquencies under subsection (A) above), exceeds 5% of the total Special Tax due and payable for the then current Fiscal Year, the Treasurer shall promptly notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency), and the Authority shall commence foreclosure proceedings within 90 days after the notices of delinquency have been sent. Notwithstanding the foregoing, the Treasurer may defer any mailing of notices of delinquency or foreclosure action if the amount in the Reserve Fund is at least equal to the Reserve Requirement. The Treasurer and the Authority Attorney, as applicable, are hereby authorized to employ counsel to conduct any such foreclosure proceedings. The fees and expenses of any such counsel (including a charge for Authority staff time) in conducting foreclosure proceedings shall be an Administrative Expense hereunder. Section 5.10. Further Assurances. The Authority will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in this Agreement. Section 5.11. Private Activity Bond Limitations. The Authority shall assure that the proceeds of the 2003 Bonds and of the 2012 Bonds are not so used as to cause the 2012 Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. Section 5.12. Federal Guarantee Prohibition. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the 2012 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 5.13. Rebate Requirement. The Authority shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the 2012 Bonds. If necessary, the Authority may use amounts in the Reserve Fund, amounts on deposit in the Administrative Expense Fund, and any other funds available to the District, including amounts advanced by the Authority or the City, in its respective sole discretion, to be repaid by the District as soon as practicable from amounts described in the preceding clauses, to satisfy its obligations under this Section 5.13. The Treasurer shall take note of any investment of monies hereunder in excess of the yield on the 2012 Bonds, and shall take such actions as are necessary to ensure compliance with this Section 5.13, such as increasing the portion of the Special Tax levy for Administration Expenses as appropriate to have funds available in the Administrative Expense Fund to satisfy any rebate liability under this Section 5.13. -31- In order to provide for the administration of this Section 5.13, the Treasurer may provide for the employment of independent attorneys, accountants and consultants compensated on such reasonable basis as the Treasurer may deem appropriate and in addition, and without limitation of the provisions of Sections 6.02, 6.03 and 6.04, the Treasurer may rely conclusively upon and be fully protected from all liability in relying upon the opinions, determinations, calculations and advice of such agents, attorneys and consultants employed hereunder. Any fees or expenses incurred by the Authority or the City under or pursuant to this Section 5.13 shall be Administrative Expenses. The Fiscal Agent may rely conclusively upon the Authority's determinations, calculations and certifications required by this Section. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the Authority's calculations hereunder. Section 5.14. No Arbitrage. The Authority shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the 2012 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the 2012 Bonds would have caused the 2012 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Section 5.15. Yield of the 2012 Bonds. In determining the yield of the 2012 Bonds to comply with Section 5.13 and 5.14 hereof, the Authority will take into account redemption (including premium, if any) in advance of maturity based on the reasonable expectations of the Authority, as of the Closing Date, regarding prepayments of Special Taxes and use of prepayments for redemption of the Bonds, without regard to whether or not prepayments are received or 2012 Bonds redeemed. Section 5.16. Maintenance of Tax -Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the 2012 Bonds from the gross income of the Owners of the 2012 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the 2012 Bonds. Section 5.17. Continuing Disclosure to Owners. In addition to its obligations under Section 9.07, the Authority hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Agreement, failure of the Authority to comply with the Continuing Disclosure Agreement shall not be considered a default hereunder; however, any Participating Underwriter or any holder or Beneficial Owner (as defined in Section 2.13) of the Bonds may take such actions as may be necessary and appropriate to compel performance by the Authority of its obligations thereunder, including seeking mandate or specific performance by court order. Section 5.18. Reduction of Special Taxes. The Authority covenants and agrees to not consent or conduct proceedings with respect to a reduction in the maximum Special Taxes that may be levied in the District below an amount, for any Fiscal Year, equal to 110% of the aggregate of the Debt Service due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative Expenses for such Fiscal Year. It is hereby acknowledged that Bondowners are purchasing the Bonds in reliance on the foregoing covenant, and that said covenant is necessary to assure the full and timely payment of the Bonds. Section 5.19. Limits on Special Tax Waivers and Bond Tenders. The Authority covenants not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare Special Tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds and -32- further covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the Authority having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. Section 5.20. No Additional Bonds. Except as expressly permitted by Section 2.14 hereof, the Authority shall not issue any additional bonds secured by (A) a pledge of Special Taxes on a parity with or senior to the pledge thereof under Section 3.02 hereof; or (B) any amounts in any funds or accounts established hereunder. Section 5.21. Authority Bid at Foreclosure Sale. The Authority will not bid at a foreclosure sale of property in respect of delinquent Special Taxes unless it expressly agrees to take the property subject to the lien for Special Taxes imposed by the District and that the Special Taxes levied on the property are payable while the Authority owns the property. -33- ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY OF THE AUTHORITY Section 6.01. Deposit and Investment of Moneys in Funds. Moneys in any fund or account created or established by this Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Officer's Certificate, the Fiscal Agent shall invest, to the extent reasonably practicable, any such moneys in Permitted Investments described in clause (h) of the definition thereof in Section 1.03, which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. The Treasurer shall make note of any investment of funds hereunder in excess of the yield on the Bonds, so that appropriate actions can be taken to assure compliance with Section 5.13. Moneys in any fund or account created or established by this Agreement and held by the Treasurer shall be invested by the Treasurer in any Permitted Investment, which in any event by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of interest earnings and profits resulting from investment of amounts in funds and accounts. Whenever in this Agreement any moneys are required to be transferred by the Authority to the Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted Investments. The Fiscal Agent and its affiliates or the Treasurer may act as sponsor, advisor, depository, principal or agent in the acquisition or disposition of any investment. Neither the Fiscal Agent nor the Treasurer shall incur any liability for losses arising from any investments made pursuant to this Section. The Fiscal Agent shall not be required to determine the legality of any investments. Except as otherwise provided in the next sentence, all investments of amounts deposited in any fund or account created by or pursuant to this Agreement, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Agreement or the Code) at Fair Market Value. The Fiscal Agent shall have no duty in connection with the determination of Fair Market Value other than to follow the investment direction of an Authorized Officer in any written direction of any Authorized Officer. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under the applicable provisions of the Code and (unless valuation is undertaken at least annually) investments in the subaccounts within the Reserve Fund shall be valued at their present value (within the meaning of section 148 of the Code). The Fiscal Agent shall not be liable for verification of the application of such sections of the Code. Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Treasurer hereunder, provided that the Fiscal Agent or the Treasurer, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Agreement. -34- The Fiscal Agent or the Treasurer, as applicable, shall sell at Fair Market Value, or present for redemption, any investment security whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such investment security is credited and neither the Fiscal Agent nor the Treasurer shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance herewith. The Authority acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent will furnish the Authority periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent hereunder. Section 6.02. Limited Obligation. The Authority's obligations hereunder are limited obligations of the Authority on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Special Tax Fund, the Bond Fund (including the Special Tax Prepayments Account therein) and the Reserve Fund created hereunder. Section 6.03. Liability of Authority. The Authority shall not incur any responsibility in respect of the Bonds or this Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon it. The Authority shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Authority shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder. In the absence of bad faith, the Authority, including the Treasurer, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Authority and conforming to the requirements of this Agreement. The Authority, including the Treasurer, shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Authority to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Authority and the Treasurer may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Authority may consult with counsel, who may be the Authority Attorney, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith The Authority shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactory established, if disputed. -35- Whenever in the administration of its duties under this Agreement the Authority or the Treasurer shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of wilful misconduct on the part of the Authority, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, an Appraiser, an Independent Financial Consultant or a Tax Consultant, and such certificate shall be full warrant to the Authority and the Treasurer for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Authority or the Treasurer may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 6.04. Employment of Agents by Authority. In order to perform its duties and obligations hereunder, the Authority and/or the Treasurer may employ such persons or entities as it deems necessary or advisable. The Authority shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. -36- ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent. U.S. Bank National Association is hereby appointed Fiscal Agent and paying agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph of this Section, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. The Fiscal Agent shall give the Treasurer written notice of any such succession hereunder. The Authority may at any time remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, corporation or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank, corporation or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 7.01, combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Fiscal Agent may at any time resign by giving written notice to the Authority and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the Authority shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent. Upon such acceptance, the successor Fiscal Agent shall be vested with all rights and powers of its predecessor hereunder without any further act. If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section within forty-five (45) days after the Fiscal Agent shall have given to the Authority written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent. If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is rendered unable to perform its duties hereunder, all such duties and all of the rights and powers of the Fiscal Agent hereunder shall be assumed by and vest in the Treasurer of the Authority in trust for the benefit of the Owners. The Authority covenants for the direct benefit of the Owners that its Treasurer in such case shall be vested with all of the rights and powers of the Fiscal Agent hereunder, and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent hereunder, in trust for the benefit of the Owners of the Bonds. In -37- such event, the Treasurer may designate a successor Fiscal Agent qualified to act as Fiscal Agent hereunder. Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the Authority, and the Fiscal Agent assumes no responsibility for the correctness of the same, or makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of this Agreement; but in the case of any such certificates or opinions by which any provision hereof are specifically required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement. Except as provided above in this paragraph, Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument. The Fiscal Agent shall not be liable for any error of judgment made in good faith unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent. The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, and its liability shall be limited to the proper accounting for such funds as it shall actually receive. The Fiscal Agent may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. -38- In order to perform its duties and obligations hereunder, the Fiscal Agent may employ such persons or entities as it deems necessary or advisable. The Fiscal Agent shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. Section 7.03. Information. The Fiscal Agent shall provide to the Authority such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the Authority shall reasonably request, including but not limited to quarterly statements reporting funds held and transactions by the Fiscal Agent. The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund, the Special Tax Fund, the Improvement Fund and the Costs of Issuance Fund. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Authority and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing upon reasonable prior notice. Section 7.04. Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed in good faith by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under this Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by an Officer's Certificate, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 7.05. Compensation, Indemnification. The Authority shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Agreement, but the Fiscal Agent shall not have a lien therefor on any funds at any time held by it under this Agreement. The Authority further agrees, to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents harmless against any costs, expenses, claims or liabilities whatsoever, including without limitation fees and expenses of its attorneys, which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or willful misconduct. The obligation of the Authority under this Section shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement, but any monetary -39- obligation of the Authority arising under this Section shall be limited solely to amounts on deposit in the Administrative Expense Fund. -40- ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted. This Agreement and the rights and obligations of the Authority and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the Authority to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the Authority of any pledge or lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the Owners of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or this Agreement), or (iii) reduce the percentage of Bonds required for the amendment hereof. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent. This Agreement and the rights and obligations of the Authority and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes: (A) to add to the covenants and agreements of the Authority in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the Authority; (B) to make modifications not adversely affecting any Outstanding series of Bonds of the Authority in any material respect; (C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement, or in regard to questions arising under this Agreement, as the Authority or the Fiscal Agent may deem necessary or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners of the Bonds; (D) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from gross federal income taxation of interest on the Bonds; and (E) in connection with the issuance of Parity Bonds under and pursuant to Section 2.14. The Fiscal Agent may in its discretion, but shall not be obligated to, enter into any such Supplemental Agreement authorized by this Section which materially adversely affects the Fiscal Agent's own rights, duties or immunities under this Fiscal Agent Agreement or otherwise with respect to the Bonds or any agreements related thereto. Section 8.02. Owners' Meetings. The Authority may at any time call a meeting of the Owners. In such event the Authority is authorized to fix the time and place of said meeting and to provide for the giving of notice thereof, and to fix and adopt rules and regulations for the conduct of said meeting. -41- Section 8.03. Procedure for Amendment with Written Consent of Owners. The Authority and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. A copy of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided. Such Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed. After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the Authority shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the papers required by this Section 8.03 to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon the Authority and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period. Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the Authority, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Article VIII; provided, however, that the Fiscal Agent shall not be deemed to have knowledge that any Bond is owned or held by the Authority unless the Authority is the registered Owner or the Fiscal Agent has received written notice that any other registered Owner is an Owner for the account of the Authority. Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations under this Agreement of the Authority and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental -42- Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes. Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The Authority may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the Authority, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the Authority may select and designate for that purpose, a suitable notation shall be made on such Bond. The Authority may determine that new Bonds, so modified as in the opinion of the Authority is necessary to conform to such Owners' action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such Bonds. Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. -43- ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person other than the Authority, the Fiscal Agent and the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent. Section 9.02. Successor is Deemed Included in All References to Predecessor. Whenever in this Agreement or any Supplemental Agreement either the Authority or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the Authority or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 9.03. Discharge of Agreement. The Authority shall have the option to pay and discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the following ways: (A) by well and truly paying or causing to be paid the principal of, and interest and any premium on, such Bonds Outstanding, as and when the same become due and payable; (B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the funds and accounts provided for in Sections 4.04 and 4.05 is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums; or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities in such amount as the Authority shall determine as confirmed by Bond Counsel or an independent certified public accountant will, together with the interest to accrue thereon and moneys then on deposit in the fund and accounts provided for in Sections 4.04 and 4.05, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. If the Authority shall have taken any of the actions specified in (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the Authority, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in this Agreement and all other obligations of the Authority under this Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the obligation of the Authority to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon, all amounts owing to the Fiscal Agent pursuant to Section 7.05, and otherwise to assure that no action is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from gross income for federal income tax purposes, shall continue in any event. Upon compliance by the Authority with the foregoing with respect to all Bonds Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the Authority and any Special Taxes thereafter received by the Authority shall not be remitted to the Fiscal Agent but shall be retained by the Authority to be used for any purpose permitted under the Act. Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing. Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing 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. Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registry books. Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the Authority or the Fiscal Agent in good faith and in accordance therewith. Section 9.05. Waiver of Personal Liability. No Boardmember, Councilmember, officer, official, agent or employee of the Authority, the City or the District shall be individually or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such Boardmember, Councilmember, officer, official, agent or employee from the performance of any official duty provided by law. Section 9.06. Notices to and Demands on Authority and Fiscal Agent. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the Authority may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Authority with the Fiscal Agent) as follows: Temecula Public Financing Authority c/o City of Temecula 41000 Main Street Temecula, CA 92589-9033 Attn: Director of Finance Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Authority to or on the Fiscal Agent may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Fiscal Agent with the Authority) as follows (provided that any such notice shall not be effective until actually received by the Fiscal Agent): -45- U.S. Bank National Association 633 W. Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Reference: Temecula CFD 03-03 (Wolf Creek) Section 9.07. State Reporting Requirements. The following requirements shall apply to the Bonds, in addition to those requirements under Section 5.17: (A) Annual Reporting. Not later than October 30 of each calendar year, beginning with the October 30 first succeeding the Closing Date, and in each calendar year thereafter until the October 30 following the final maturity of the Bonds, the Treasurer shall cause the following information to be supplied to CDIAC: (i) the name of the Authority; (ii) the full name of the District; (iii) the name, title, and series of the Bond issue; (iv) any credit rating for the Bonds and the name of the rating agency; (v) the Closing Date of the Bond issue and the original principal amount of the Bond issue; (vi) the amount of the Reserve Requirement; (vii) the principal amount of Bonds outstanding; (viii) the balance in the Reserve Fund; (ix) that there is no capitalized interest account for the Bonds; (x) the number of parcels in the District that are delinquent with respect to Special Tax payments, the amount that each parcel is delinquent, the total amount of Special Taxes due on the delinquent parcels, the length of time that each has been delinquent, when foreclosure was commenced for each delinquent parcel, the total number of foreclosure parcels for each date specified, and the total amount of tax due on the foreclosure parcels for each date specified; (xi) the balance, if any, in the accounts within the Improvement Fund; (xii) the assessed value of all parcels subject to the Special Tax to repay the Bonds as shown on the most recent equalized roll, the date of assessed value reported, and the source of the information; (xiii) the total amount of Special Taxes due, the total amount of unpaid Special Taxes, and whether or not the Special Taxes are paid under any County Teeter Plan (Chapter 6.6 (commencing with Section 54773) of the California Government Code); (xiv) the reason and the date, if applicable, that the Bonds were retired; and (xv) contact information for the party providing the foregoing information. The annual reporting shall be made using such form or forms as may be prescribed by CDIAC. (B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal and interest on the Bonds, the Fiscal Agent shall notify the Treasurer of such failure or withdrawal in writing. The Treasurer shall notify CDIAC and the Original Purchaser of such failure or withdrawal within 10 days of such failure or withdrawal, and the Authority shall provide notice under the Continuing Disclosure Agreement of such event as required thereunder. • (C) Special Tax Reporting. The Treasurer shall file a report with the Authority no later than January 1, 2013, and at least once a year thereafter, which annual report shall contain: (i) the amount of Special Taxes collected and expended with respect to the District, (ii) the amount of Bond proceeds collected and expended with respect to the District, and (iii) the status of the Project. It is acknowledged that the Special Tax Fund and the Special Tax Prepayments Account are the accounts into which Special Taxes collected on the District will be deposited for purposes of Section 50075.1(c) of the California Government Code, and the funds and accounts listed in Section 4.01 are the funds and accounts into which Bond proceeds will be deposited for purposes of Section 53410(c) of the California Government Code, and the annual report described in the preceding sentence is intended to satisfy the requirements of Sections 50075.1(d), 50075.3(d) and 53411 of the California Government Code. -46- (D) Amendment. The reporting requirements of this Section 9.07 shall be amended from time to time, without action by the Authority or the Fiscal Agent (i) with respect to subparagraphs (A) and (B) above, to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act, and (ii) with respect to subparagraph (C) above, to reflect any amendments to Section 50075.1, 50075.3, 53410 or 53411 of the California Government Code. Notwithstanding the foregoing, any such amendment shall not, in itself, affect the Authority's obligations under the Continuing Disclosure Agreement. The Authority shall notify the Fiscal Agent in writing of any such amendments which affect the reporting obligations of the Fiscal Agent under this Agreement. (E) No Liability. None of the Authority and its officers, agents and employees, the Treasurer or the Fiscal Agent shall be liable for any inadvertent error in reporting the information required by this Section 9.07. The Treasurer shall provide copies of any of such reports to any Bondowner upon the written request of a Bondowner and payment by the person requesting the information of the cost of the Authority to produce such information and pay any postage or other delivery cost to provide the same, as determined by the Treasurer. The term "Bondowner" for purposes of this Section 9.07 shall include any Beneficial Owner (as defined in Section 2.13) of the Bonds. Section 9.08. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The Authority hereby declares that it would have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable. Section 9.09. Unclaimed Money. Anything contained herein to the contrary notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when the payments of such principal, interest and premium have become payable, if such moneys was held by the Fiscal Agent at such date, shall be repaid by the Fiscal Agent to the Authority as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the Authority for the payment of the principal of, and interest and any premium on, such Bonds. Any right of any Owner to look to the Authority for such payment shall survive only so long as required under applicable law. Section 9.10. Applicable Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California. Section 9.11. Conflict with Act. In the event of a conflict between any provision of this Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Agreement. Section 9.12. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes. -47- Section 9.13. Payment on Business Day. In any case where the date of the maturity of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds or the date any action is to be taken pursuant to this Agreement is other than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date. Section 9.14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original. -48- IN WITNESS WHEREOF, the Authority caused this Fiscal Agent Agreement to be executed all as of August 1, 2012. 20009.11:J11743 S-1 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) By: Executive Director U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer No. EXHIBIT A FORM OF 2012 BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BOND INTEREST RATE MATURITY DATE BOND DATE CUSII' September 1, ____ August __, 2012 REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The Temecula Public Financing Authority (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (the "District"), for value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be collected in the District or amounts in the funds and accounts held under the Agreement (as hereinafter defined), to the registered owner named above, or registered assigns, on the maturity date set forth above, unless redeemed prior thereto as hereinafter provided, the principal amount set forth above, and to pay interest on such principal amount from the Bond Date set forth above, or from the most recent interest payment date to which interest has been or duly provided for, semiannually on March 1 and September 1, commencing March 1, 2013, at the interest rate set forth above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable to the registered owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office (as defined in the Agreement referred to below) of U.S. Bank National Association (the "Fiscal Agent"). Interest on this Bond shall be paid by check of the Fiscal Agent mailed on each interest payment date to the registered owner hereof as of the close of business on the 15th day of the month preceding the month in which the interest payment date occurs (the "Record Date") at such registered owner's address as it appears on the registration books maintained by the Fiscal Agent, or (i) if the Bonds are in book -entry -only form, or (ii) otherwise upon written request filed with the Fiscal Agent prior to any Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to the depository for the Bonds or to an account in the United States designated by such registered owner in such written request, respectively. This Bond is one of a duly authorized issue of bonds in the aggregate principal amount of $ approved by a resolution of the Board of Directors of the Authority adopted on July 10, 2012 (the "Resolution"), and being issued pursuant to the provisions of Section 53311 et seq. of the California Government Code (the "Act") and Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, for the purpose of refunding A-1 the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds, and is one of the series of bonds designated "Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds" (the "Bonds"). The creation of the Bonds and the terms and conditions thereof are provided for in the Fiscal Agent Agreement, dated as of August 1, 2012, between the Authority and the Fiscal Agent (the "Agreement") and this reference incorporates the Resolution and the Agreement herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. Pursuant to and as more particularly provided in the Resolution and in the Agreement, additional bonds may be issued by the Authority from time to time secured by a lien on funds held under the Agreement on a parity with the lien securing the Bonds. The Resolution is adopted and the Agreement is entered into under and this Bond is issued under, and all are to be construed in accordance with, the laws of the State of California. Pursuant to the Act, the Agreement and the Resolution, the principal of and interest on this Bond are payable solely from the annual special tax authorized under the Act to be collected within the District (the "Special Tax") and certain funds held under the Agreement. Interest on this Bond shall be payable from the interest payment date next preceding the date of authentication hereof, unless (i) it is authenticated on an interest payment date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an interest payment date and after the close of business on the Record Date preceding such interest payment date, in which event it shall bear interest from such interest payment date, or (iii) it is authenticated prior to the Record Date preceding the first interest payment date, in which event it shall bear interest from the Bond Date set forth above; provided, however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment hereon. Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the Authority, as may be permitted by law. The Bonds do not constitute obligations of the Authority for which the Authority is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described hereinabove. The City of Temecula has no liability or obligations whatsoever with respect to the District, the Bonds or the Agreement. The Bonds maturing on or after September 1, ____ are subject to redemption prior to their stated maturity on any interest payment date occurring on or after September 1, ____, as a whole or in part among maturities as provided in the Agreement, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, __ and March 1, ____ September 1, ___ and any interest payment date thereafter The Bonds maturing on September 1, _, are subject to mandatory sinking payment redemption in part on September 1, ____ and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: A-2 Redemption Date (September 1) Sinking Payments The Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The Bonds are also subject to redemption from the proceeds of Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to the Agreement, on any Interest Payment Date, among maturities as specified in the Agreement and by lot within a maturity, at a redemption price (expressed as a percentage at the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices Any interest payment date from March 1, to and including March 1, September 1, ___ and any interest payment date thereafter Notice of redemption with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner, to the extent and subject to the provisions of the Agreement. Notices of optional redemption may be conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the Bonds on the anticipated redemption date, and if the Fiscal Agent does not receive sufficient funds by the scheduled redemption date the redemption shall not occur and the Bonds for which notice of redemption was given shall remain outstanding for all purposes of the Agreement. This Bond shall be registered in the name of the owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon. A-3 No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such owner's order. The Fiscal Agent shall require the registered owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding interest payment date. Exchanges may only be made for Bonds in authorized denominations, as provided in the Agreement. The Agreement and the rights and obligations of the Authority thereunder may be modified or amended as set forth therein. The Agreement contains provisions permitting the Authority to make provision for the payment of the interest on, and the principal and premium, if any, of the Bonds so that such Bonds shall no longer be deemed to be outstanding under the terms of the Agreement. The Bonds are not general obligations of the Authority, but are limited obligations payable solely from the revenues and funds pledged therefor under the Agreement. Neither the faith and credit of the Authority or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Bond does not exceed any debt limit prescribed by the laws or Constitution of the State of California. A-4 IN WITNESS WHEREOF, Temecula Public Financing Authority has caused this Bond to be dated the Bond Date set forth above, to be signed by the facsimile signature of its Chairperson and countersigned by the facsimile signature of its Secretary. ATTEST Secretary A-5 TEMECULA PUBLIC FINANCING AUTHORITY Chairperson FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the Resolution and in the Agreement which has been authenticated on U.S. Bank National Association, as Fiscal Agent By: Authorized Signatory A-6 ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax identification or Social Security Number of Assignee) the within -registered Bond and hereby irrevocably constitute(s) and appoints(s) attorney, to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premises. Dated: Signature Guaranteed: Signature: Note: Signatures) must be guaranteed by an eligible Note: The signatures) on this Assignment must guarantor. correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. A-7 Attachment No. 4 Fiscal Agent Agreement for Harveston II Quint & lhimmig LLP 5/29/12 6/6/12 6/20/12 6/28/12 FISCAL AGENT AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent dated as of August 1, 2012 relating to: Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012 20009.12:J 11749 TABLE OF CONTENTS ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement 3 Section 1.02. Agreement for Benefit of Owners of the Bonds 3 Section 1.03. Definitions 3 ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation 11 Section 2.02. Terms of the Series 2012 Bonds 11 Section 2.03. Redemption 12 Section 2.04. Form of Bonds 15 Section 2.05. Execution of Bonds 15 Section 2.06. Transfer of Bonds 15 Section 2.07. Exchange of Bonds 16 Section 2.08. Bond Register 16 Section 2.09. Temporary Bonds 16 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen 17 Section 2.11. Limited Obligation 17 Section 2.12. No Acceleration 17 Section 2.13. Book -Entry System 17 Section 2.12. Issuance of Parity Bonds 18 ARTICLE III ISSUANCE OF SERIES 2012 BONDS Section 3.01. Issuance and Delivery of Series 2012 Bonds 20 Section 3.02. Pledge of Special Tax Revenues 20 Section 3.03. Validity of Bonds 20 ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of Series 2012 Bonds and Other Moneys 21 Section 4.02. [intentionally omitted] .21 Section 4.03. Costs of Issuance Fund 21 Section 4.04. Reserve Fund 22 Section 4.05. Bond Fund 23 Section 4.06. Special Tax Fund 24 Section 4.07. Administrative Expense Fund 25 ARTICLE V OTHER COVENANTS OF THE AUTHORITY Section 5.01. Punctual Payment 27 Section 5.02. Limited Obligation 27 Section 5.03. Extension of Time for Payment 27 Section 5.04. Against Encumbrances 27 Section 5.05. Books and Records 27 Section 5.06. Protection of Security and Rights of Owners 27 Section 5.07. Compliance with Act 27 Section 5.08. Collection of Special Tax Revenues 27 Section 5.09. Covenant to Foredose 28 Section 5.10. Further Assurances 29 Section 5.11. Private Activity Bond Limitations 29 Section 5.12. Federal Guarantee Prohibition 29 Section 5.13. Rebate Requirement 29 Section 5.14. No Arbitrage .30 Section 5.15. Yield of the Bonds 30 Section 5.16. Maintenance of Tax -Exemption 30 Section 5.17. Continuing Disclosure to Owners 30 Section 5.18. Reduction of Special Taxes 30 Section 5.19. Limits on Special Tax Waivers and Bond Tenders .30 Section 520. No Additional Bonds .31 Section 5.21. City Bid at Foreclosure Sale 31 ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY OF THE AUTI I(.)RITY Section 6.01. Deposit and Investment of Moneys in Funds 32 Section 6.02. Limited Obligation 33 Section 6.03. Liability of Authority 33 Section 6.04. Employment of Agents by Authority 34 ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent 35 Section 7.02. Liability of Fiscal Agent 36 Section 7.03. Information 37 Section 7.04. Notice to Fiscal Agent 37 Section 7.05. Compensation, Indemnification 37 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted 39 Section 8.02. Owners' Meetings 39 Section 8.03. Procedure for Amendment with Written Consent of Owners 40 Section 8.04. Disqualified Bonds 40 Section 8.05. Effect of Supplemental Agreement 40 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments 41 Section 8.07. Amendatory Endorsement of Bonds 41 ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties 42 Section 9.02. Successor is Deemed Included in All References to Predecessor 42 Section 9.03. Discharge of Agreement 42 Section 9.04. Execution of Documents and Proof of Ownership by Owners 43 Section 9.05. Waiver of Personal Liability 43 Section 9.06. Notices to and Demands on Authority and Fiscal Agent 43 Section 9.07. State Reporting Requirements 44 Section 9.08. Partial Invalidity 45 Section 9.09. Unclaimed Moneys 45 Section 9.10. Applicable Law 45 Section 9.11. Conflict with Act 45 Section 9.12. Conclusive Evidence of Regularity 45 Section 9.13. Payment on Business Day 46 Section 9.14. Counterparts 46 EXHIBIT A - FORM OF SERIES 2012 BOND FISCAL AGENT AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012 THIS FISCAL AGENT AGREEMENT (the "Agreement"), dated as of August 1, 2012, is by and between the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) (the "District"), and U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, as fiscal agent (the "Fiscal Agent"). RECITALS: WHEREAS, the Board of Directors of the Authority has formed the District under the provisions of the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311, et seq. of the California Government Code) (the "Act") and Resolution No. TPFA 03-27 of the Board of Directors of the Authority adopted on November 25, 2003 (the "Resolution of Formation"); WHEREAS, the Board of Directors of the Authority, as the legislative body for the District, is authorized under the Act to levy special taxes to pay for the costs of the District and to authorize the issuance of bonds, including bonds to refund any bonds of the Authority for the District, secured by said special taxes under the Act; WHEREAS, under the provisions of the Act, on September 9, 2004 the Authority, for and on behalf of the District, issued $4,845,000 initial principal amount of its Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004 (the "Series 2004 Bonds") to finance various public improvements authorized to be funded by the District; WHEREAS, due to favorable interest rates in the financial markets, the Board of Directors of the Authority has determined to refund the Series 2004 Bonds in full; WHEREAS, under the provisions of the Act and Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), on July 10, 2012, the Board of Directors of the Authority adopted its Resolution No. TPFA-_____ (the "Resolution"), which resolution, among other matters, authorized the issuance of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012 (the "Series 2012 Bonds") to provide moneys to defease and currently refund in whole the outstanding Series 2004 Bonds and provided that said issuance would be in accordance with this Agreement, and authorized the execution hereof; WHEREAS, it is in the public interest and for the benefit of the Authority, the District, the persons responsible for the payment of special taxes to be levied in the District and the owners of the Series 2012 Bonds that the Authority enter into this Agreement to provide for the -1- issuance of the Series 2012 Bonds, the disbursement of proceeds of the Series 2012 Bonds, the disposition of the special taxes securing the Series 2012 Bonds and the administration and payment of the Series 2012 Bonds; and WHEREAS, the Authority has determined that all things necessary to cause the Series 2012 Bonds, when executed by the Authority for the District and issued as in the Act, the Refunding Law, the Resolution and this Agreement provided, to be legal, valid and binding and special obligations of the Authority for the District in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery of this Agreement and the creation, authorization, execution and issuance of the Series 2012 Bonds, subject to the terms hereof, have in all respects been duly authorized. AGREEMENT: NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: -2- ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant to the provisions of the Act, the Refunding Law and the Resolution. Section 1.02. Agreement for Benefit of Owners of the Bonds. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the Authority shall be for the equal benefit, protection and security of the Owners of the Bonds. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement. Any action by any Owner to enforce the provisions of this Agreement shall be for the equal benefit and protection of all Owners of the Bonds. The Fiscal Agent may become the Owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not Fiscal Agent. Section 1.03. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. "Act" means the Mello -Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means costs directly related to the administration of the District consisting of the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the Treasurer or designee thereof or both) and the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Fiscal Agent; fees and costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties required of it under this Agreement; the costs of the Authority, the City or any designee of either the Authority or the City of complying with the disclosure provisions of the Act, the Continuing Disclosure Agreement and this Agreement, including those related to public inquiries regarding the Special Tax and disclosures to Bondowners and the Original Purchaser; the costs of the Authority, the City or any designee of either the Authority or the City related to an appeal of the Special Tax; any amounts required to be rebated to the federal government in order for the Authority to comply with Section 5.13; any fees or expenses of the Escrow Bank and any costs incurred by the Authority or the City (including fees and expenses of the Escrow Bank) under or in connection with the Escrow Agreement; an allocable share of the salaries of the City staff directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto. Administrative Expenses shall also include amounts advanced by the Authority or the City for any administrative purpose of the District, including costs related to prepayments of Special Taxes, recordings related to such prepayments and satisfaction of Special Taxes, amounts advanced to ensure compliance with Section 5.13, administrative costs related to the administration of any joint community facilities agreement regarding the District, and the costs of commencing and pursuing foreclosure of delinquent Special Taxes. Administrative Expenses shall include any such expenses incurred in prior years but not yet paid. -3- "Administrative Expense Fund" means the fund by that name established by Section 4.07(A) hereof. "Agreement" means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions hereof. "Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of the provisions of Section 2.03(A)(ii) providing for mandatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking payment due in such Bond Year pursuant to Section 2.03(A)(ii)). "Auditor" means the auditor/controller of the County, or such other official at the County who is responsible for preparing property tax bills. "Authority" means the Temecula Public Financing Authority and any successor thereto. "Authority Attorney" means any attorney or firm of attorneys employed by the Authority or the City in the capacity of general counsel to the Authority. "Authorized Officer" means the Chairperson, Executive Director, Treasurer, Secretary or any other officer or employee authorized by the Board of Directors of the Authority or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer. "Bond Counsel" means (i) Quint & Thimmig LLP, or (ii) any other attorney or firm of attorneys acceptable to the Authority and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities. "Bond Fund" means the fund by that name established by Section 4.05(A) hereof. "Bond Register" means the books for the registration and transfer of Bonds maintained by the Fiscal Agent under Section 2.08 hereof. "Bond Year" means the one-year period beginning on September 2nd in each year and ending on September 1st in the following year, except that the first Bond Year shall begin on the Closing Date and end on September 1, 2012. "Bonds" means the Series 2012 Bonds, and, if the context requires, any Parity Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement. "Business Day" means any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust office are authorized or obligated by law or executive order to be closed. "CDIAC" means the California Debt and Investment Advisory Commission of the office of the State Treasurer of the State of California or any successor agency or bureau thereto. "City" means the City of Temecula, California. -4- "Closing Date" means August __, 2012, being the date upon which there is a physical delivery of the Series 2012 Bonds in exchange for the amount representing the purchase price of the Series 2012 Bonds by the Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Series 2012 Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Series 2012 Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Code. "Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement pertaining to the Series 2012 Bonds, executed as of the Closing Date by the Authority, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Costs of Issuance" means items of expense payable or reimbursable directly or indirectly by the Authority or the City and related to the authorization, sale and issuance of the Series 2012 Bonds and the refunding and defeasance of the Series 2004 Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees and charges of the Fiscal Agent including its first annual administration fee, fees and expenses of Fiscal Agent's counsel, expenses incurred by the City or the Authority in connection with the issuance of the Series 2012 Bonds and the refunding and defeasance of the Series 2004 Bonds, Escrow Bank fees and expenses, special tax consultant fees and expenses, Bond (underwriter's) discount, legal fees and charges, including bond counsel and disclosure counsel, financial consultants' fees, rating agency fees, charges for execution, transportation and safekeeping of the Series 2012 Bonds, and other costs, charges and fees in connection with the foregoing. hereof. "Costs of Issuance Fund" means the fund by that name established by Section 4.03(A) "County" means the County of Riverside, California. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Debt Service" means the scheduled amount of interest and amortization of principal (including principal payable by reason of Section 2.03(A)(ii)) on the Bonds and the scheduled amount of interest and amortization of principal payable on any Parity Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. "Depository" means (a) initially, DTC, and (b) any other Securities Depository acting as Depository pursuant to Section 2.13. "District" means the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II), formed by the Authority under the Act and the Resolution of Formation. "Escrow Agreement" means the Escrow Agreement, dated as of August 1, 2012, by and between the Authority and the Escrow Bank. "Escrow Bank" means U.S. Bank National Association, in its capacity as escrow bank under the Escrow Agreement. -5- "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security --State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California but only if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States. "Federal Securities" means any of the following which are non -callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Fiscal Agent: (i) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as "stripped" obligations and coupons; or (ii) any of the following obligations of the following agencies of the United States of America: (a) direct obligations of the Export -Import Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America. "Fiscal Agent" means the Fiscal Agent appointed by the Authority and acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01. "Fiscal Year" means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. "Independent Financial Consultant" means any consultant or firm of such consultants appointed by the Authority, the City or the Treasurer, and who, or each of whom: (i) is judged by the person or entity that approved them to have experience in matters relating to the issuance and/or administration of bonds under the Act; (ii) is in fact independent and not under the domination of the Authority; (iii) does not have any substantial interest, direct or indirect, with or in the Authority, or any owner of real property in the District, or any real property in the District; and (iv) is not connected with the City or the Authority as an officer or -6- employee of the City or the Authority, but who may be regularly retained to make reports to the City or the Authority. "Information Services" means the Electronic Municipal Market Access System (referred to as "ENEMA"), a facility of the Municipal Securities Rulemaking Board, (at http://emma.msrb.org); and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the Authority may designate in an Officer's Certificate delivered to the Fiscal Agent. "Interest Payment Dates" means March 1 and September 1 of each year, commencing March 1, 2013. "Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds. "Moody's" means Moody's Investors Service, and any successor thereto. "Officer's Certificate" means a written certificate of the Authority signed by an Authorized Officer of the Authority. "Ordinance" means any ordinance of the Authority levying the Special Taxes. "Original Purchaser" means Stifel, Nicolaus & Company, Incorporated dba Stone & Youngberg, a Division of Stifel Nicolaus, the first purchaser of the Series 2012 Bonds from the Authority. "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04) all Bonds except: (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Authority pursuant to this Agreement or any Supplemental Agreement. "Owner' or "Bondowner" means any person who shall be the registered owner of any Outstanding Bond. "Parity Bonds" means bonds issued by the Authority for the District and secured on a parity with any then Outstanding Bonds pursuant to Section 2.14 hereof. "Participating Underwriter" shall have the meaning ascribed thereto in the Continuing Disclosure Agreement. "Permitted Investments" means any of the following, but only to the extent that the same are acquired at Fair Market Value: (a) Federal Securities. (b) Registered state warrants or treasury notes or bonds of the State of California (the "State"), including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, which are rated in one of the two highest short-term or long-term rating categories by either Moody's or Standard and Poor's, and which have a maximum term to maturity not to exceed three years. -7- (c) Time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, or a state or federal savings and loan association which may include the Fiscal Agent and its affiliates; provided, that the certificates of deposit shall be one or more of the following: continuously and fully insured by the Federal Deposit Insurance Corporation, and/or continuously and fully secured by securities described in subdivision (a) or (b) of this definition of Permitted Investments which shall have a market value, as determined on a marked -to -market basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of the principal amount of the certificates on deposit. (d) Commercial paper which at the time of purchase is of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody's or Standard and Poor's, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000) and that have an "A" or higher rating for the issuer's debentures, other than commercial paper, by either Moody's or Standard and Poor's, provided that purchases of eligible commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the outstanding commercial paper of an issuing corporation. Purchases of commercial paper may not exceed 20 percent of the total amount invested pursuant to this definition of Permitted Investments. (e) A repurchase agreement with a state or nationally charted bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, provided that all of the fpllowing conditions are satisfied: (1) the agreement is secured by any one or more of the securities described in subdivision (a) of this definition of Permitted Investments, (2) the underlying securities are required by the repurchase agreement to be held by a bank, trust company, or primary dealer having a combined capital and surplus of at least one hundred million dollars ($100,000,000) and which is independent of the issuer of the repurchase agreement, and (3) the underlying securities are maintained at a market value, as determined on a marked -to - market basis calculated at least weekly, of not less than 103 percent of the amount so invested. (f) An investment agreement or guaranteed investment contract with, or guaranteed by, a financial institution the long-term unsecured obligations of which are rated Aa2 and "AA" or better, respectively, by Moody's and Standard and Poor's at the time of initial investment. The investment agreement shall be subject to a downgrade provision with at least the following requirements: (1) the agreement shall provide that within five business days after the financial institution's long-term unsecured credit rating has been withdrawn, suspended, other than because of general withdrawal or suspension by Moody's or Standard and Poor's from the practice of rating that debt, or reduced below "AA-" by Standard and Poor's or below "Aa3" by Moody's (these events are called "rating downgrades") the financial institution shall give notice to the Authority and, within the five-day period, and for as long as the rating downgrade is in effect, shall deliver in the name of the Authority or the Fiscal Agent to the Authority or the Fiscal Agent Federal Securities allowed as investments under subdivision (a) of this definition of Permitted Investments with aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement invested with the financial institution at that time, and shall deliver additional allowed federal securities as needed to maintain an aggregate current market value equal to at least 105 percent of the principal amount of the investment -8- agreement within three days after each evaluation date, which shall be at least weekly, and (2) the agreement shall provide that, if the financial institution's long-term unsecured credit rating is reduced below "A3" by Moody's or below "A-" by Standard and Poor's, the Fiscal Agent or the Authority may, upon not more than five business days' written notice to the financial institution, withdraw the investment agreement, with accrued but unpaid interest thereon to the date, and terminate the agreement. (g) The Local Agency Investment Fund of the State of California. (h) Investments in a money market fund (including any funds of the Fiscal Agent or its affiliates and including any funds for which the Fiscal Agent or its affiliates provides investment advisory or other management services) rated in the highest rating category (without regard to plus (+) or minus (-) designations) by Moody's or S&P. (i) Any other lawful investment for City funds. "Principal Office" means the corporate trust office of the Fiscal Agent set forth in Section 9.06, except for the purpose of maintenance of the registration books and presentation of Bonds for payment, transfer or exchange, such term shall mean the office at which the Fiscal Agent conducts its corporate agency business, or such other or additional offices as may be designated by the Fiscal Agent. "Project" means the facilities eligible to be funded by the District, as more particularly described in the Resolution of Formation. "Rate and Method of Apportionment of Special Taxes" means the rate and method of apportionment of special taxes for the District, as approved pursuant to the Resolution of Formation, and as it may be modified from time to time in accordance with the Act. "Record Date" means the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such day is a Business Day. "Refunding Bonds" means bonds issued by the Authority for the District the net proceeds of which are used to refund all or a portion of the then Outstanding Bonds; provided that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. "Refunding Law" means Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code. "Reserve Fund" means the fund by that name established pursuant to Section 4.04(A) hereof. "Reserve Requirement" means, as of any date of calculation, an amount equal to the least of (i) the then Maximum Annual Debt Service, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the original principal amount of the Bonds. The Reserve Requirement as of the Closing Date is "Resolution" means Resolution No. TPFA 12-____, adopted by the Board of Directors of the Authority on July 10, 2012. -9- "Resolution of Formation" means Resolution No. TPFA 03-27, adopted by the Board of Directors of the Authority on November 25, 2003. "S&P" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, and any successor thereto. "Securities Depositories" means The Depository Trust Company, 55 Water Street, New York, New York 10041-0099, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in an Officer's Certificate delivered to the Fiscal Agent. "Series 2004 Bonds" means the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004. "Series 2012 Bonds" means the Bonds so designated and authorized to be issued under Section 2.01 hereof. "Special Tax Fund" means the fund by that name established by Section 4.06(A) hereof. "Special Tax Prepayments" means the proceeds of any Special Tax prepayments received by the Authority, as calculated pursuant to the Rate and Method of Apportionment of the Special Taxes, less any administrative fees or penalties collected as part of any such prepayment. "Special 'liax Prepayments Account" means the account by that name established within the Bond Fund by Section 4.05(A) hereof. "Special Tax Revenues" means the proceeds of the Special Taxes received by the Authority, including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Special Tax Revenues" does not include any penalties collected in connection with delinquent Special Taxes, which amounts may be deposited to the Administrative Expense Fund or otherwise disposed of as determined by the Treasurer consistent with any applicable provisions of the Act. "Special Taxes" means the special taxes levied within the District pursuant to the Act, the Ordinance and this Agreement. "Supplemental Agreement" means an agreement the execution of which is authorized by a resolution which has been duly adopted by the Authority under the Act and which agreement is amendatory of or supplemental to this Agreement, but only if and to the extent that such agreement is specifically authorized hereunder. "Tax Consultant" means any independent financial or tax consultant retained by the Authority or the City for the purpose of computing the Special Taxes. "Treasurer" means the Treasurer of the Authority or such other officer or employee of the Authority performing the functions of the chief financial officer of the Authority. -10- ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation. Series 2012 Bonds in the aggregate principal amount of Million Dollars ($ ) are authorized to be issued by the Authority for the District under and subject to the terms of the Resolution and this Agreement, the Act, the Refunding Law and other applicable laws of the State of California. The Series 2012 Bonds are hereby designated as the "Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012." Section 2.02. Terms of the Series 2012 Bonds. (A) Form; Denominations. The Series 2012 Bonds shall be issued in fully registered form without coupons in the denomination of $5,000 or any integral multiple in excess thereof. (B) Date of Series 2012 Bonds. The Series 2012 Bonds shall be dated the Closing Date. (C) CUSIP Identification Numbers. "CUSIP" identification numbers shall be imprinted on the Series 2012 Bonds, but such numbers shall not constitute a part of the contract evidenced by the Series 2012 Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the Series 2012 Bonds. In addition, failure on the part of the Authority or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the Authority's contract with such Owners and shall not impair the effectiveness of any such notice. (D) Maturities, Interest Rates. The Series 2012 Bonds shall mature and become payable on September 1 in each of the years, and shall bear interest at the rates per annum as follows: Maturity Date (September 1) Principal Amount Interest Rate -11- (E) Interest. The Series 2012 Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360 -day year composed of twelve 30 -day months. Each Series 2012 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Bond Date; provided, however, that if at the time of authentication of a Series 2012 Bond, interest is in default thereon, such Series 2012 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. (F) Method of Payment. Interest on the Series 2012 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered Owner thereof at such registered Owner's address as it appears on the Bond Register maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer (i) to the Depository (so long as the Bonds are in book -entry form pursuant to Section 2.13), or (ii) to an account within the United States made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds received before the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such Bonds are transferred to a new Owner. The principal of the Series 2012 Bonds and any premium on the Series 2012 Bonds are payable by check in lawful money of the United States of America upon surrender of the Series 2012 Bonds at the Principal Office of the Fiscal Agent. All Series 2012 Bonds paid by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Series 2012 Bonds and issue a certificate of destruction thereof to the Authority upon the Authority's request. Section 2.03. Redemption. (A) Redemption Dates. (i) Optional Redemption. The Series 2012 Bonds maturing on and after September 1, ____ are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, , as a whole, or in part among maturities so as to maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the Series 2012 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, __ and March 1, _ September 1, _ and any Interest Payment Date thereafter (ii) Mandatory Sinking Payment Redemption. The Series 2012 Bonds maturing on September 1, Y__, are subject to mandatory sinking payment redemption in part on September 1, ___, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with -12- accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The Series 2012 Bonds maturing on September 1, ___, are subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the Series 2012 Bonds, as a result of any prior partial redemption of the Series 2012 Bonds pursuant to Section 2.03(A)(i) above or Section 2.03(A)(iii) below, as specified in writing by the Treasurer to the Fiscal Agent. (iii) Redemption From Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to Section 4.05(B)(ii) and Section 4.04(F), respectively, shall be used to redeem Series 2012 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), by lot and allocated among maturities of the Series 2012 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage of the principal amount of the Series 2012 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates any Interest Payment Date from March 1, 2013 to and including March 1, ____ September 1, ____ and any Interest Payment Date thereafter Redemption Prices ok (B) Notice to Fiscal Agent. The Authority shall give the Fiscal Agent written notice of its intention to redeem Series 2012 Bonds pursuant to subsection (A)(i) or (A)(iii) not less than forty-five (45) days prior to the applicable redemption date, or such lesser number of days as the Fiscal Agent shall allow. (C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section 2.03(A), moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for -13- purchase of Outstanding Series 2012 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of Series 2012 Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may Series 2012 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Series 2012 Bonds were to be redeemed in accordance with this Agreement. (D) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories, to one or more Information Services (or by such other means as permitted by such services), and to the respective registered Owners of any Series 2012 Bonds designated for redemption, at their addresses appearing on the Bond Register; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such Series 2012 Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding Series 2012 Bonds are to be called for redemption, shall designate the CUSIP numbers and Bond numbers of the Series 2012 Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Series 2012 Bond to be redeemed or shall state that all Series 2012 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Series 2012 Bonds of one or more maturities have been called for redemption, shall state as to any Series 2012 Bond called in part the principal amount thereof to be redeemed, and shall require that such Series 2012 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such Series 2012 Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the Series 2012 Bonds under Section 2.03(A)(i) above, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the Series 2012 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the Series 2012 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the Series 2012 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the Series 2012 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Series 2012 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of this Agreement. Upon the payment of the redemption price of Series 2012 Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, of the Series 2012 Bonds being redeemed with the proceeds of such check or other transfer. Whenever provision is made in this Agreement for the redemption of less than all of the Series 2012 Bonds or any given portion thereof, the Fiscal Agent shall select the Series 2012 Bonds to be redeemed, from all Series 2012 Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify Series 2012 Bonds to be redeemed so as to maintain substantially level debt service on the Bonds), and by lot within a maturity in any manner which the Fiscal Agent deems appropriate. -14- Upon surrender of Series 2012 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the Authority, a new Series 2012 Bond or Series 2012 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Series 2012 Bond or Series 2012 Bonds. (E) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the Series 2012 Bonds so called for redemption shall have been deposited in the Bond Fund, such Series 2012 Bonds so called shall cease to be entitled to any benefit under this Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice. All Series 2012 Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section, and any Series 2012 Bonds paid at maturity, shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Series 2012 Bonds and issue a certificate of destruction thereof to the Authority. (F) Redemption of Parity Bonds. Redemption provisions, if any, pertaining to any Parity Bonds shall be set forth in the Supplemental Agreement providing for such Parity Bonds. Section 2.04. Form of Bonds. The Series 2012 Bonds, the form of Fiscal Agent's certificate of authentication and the form of assignment, to appear thereon, shall be substantially in the forms, respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement, the Resolution and the Act. Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the Authority by the manual or facsimile signatures of its Chairperson and Secretary who are in office on the date of adoption of this Agreement or at any time thereafter, and the seal of the Authority shall be impressed, imprinted or reproduced by facsimile signature thereon. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the owner. Any Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Bond shall be the proper officers of the Authority although at the nominal date of such Bond any such person shall not have been such officer of the Authority. Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of authentication of the Fiscal Agent shall be conclusive evidence that the Bonds registered hereunder have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Agreement. Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the Bond Register by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the Authority. The Fiscal Agent shall collect from the -15- Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount of authorized denomination(s). No transfers of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same series and maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange shall be paid by the Authority. The Fiscal Agent shall collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange. No exchanges of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Section 2.08. Bond Register. The Fiscal Agent will keep or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds, which books shall show the series number, date, amount, rate of interest and last known Owner of each Bond and shall at all times be open to inspection by the Authority during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as hereinbefore provided. The Authority and the Fiscal Agent will treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of such Bond for any and all purposes, and the Authority and the Fiscal Agent shall not be affected by any notice to the contrary. The Authority and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Authority, and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the Authority upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under to this Agreement as definitive Bonds authenticated and delivered hereunder. -16- Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled by it and destroyed by the Fiscal Agent who shall deliver a certificate of destruction thereof to the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to the Fiscal Agent and indemnity for the Authority and the Fiscal Agent satisfactory to the Fiscal Agent shall be given, the Authority, at the expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Authority may require payment of a sum not exceeding the actual cost of preparing each new Bond delivered under this Section and of the expenses which may be incurred by the Authority and the Fiscal Agent for the preparation, execution, authentication and delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement. Section 2.11. Limited Obligation. All obligations of the Authority under this Agreement and the Bonds shall be special obligations of the Authority, payable solely from the Special Tax Revenues and the funds pledged therefore hereunder. Neither the faith and credit nor the taxing power of the Authority (except with respect to the levy of Special Taxes in the District, to the limited extent set forth herein) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. The City has no obligations whatsoever under this Agreement or otherwise with respect to the Bonds. Section 2.12. No Acceleration. The principal of the Bonds shall not be subject to acceleration hereunder. Nothing in this Section shall in arty way prohibit the redemption of Bonds under Section 2.03 hereof, or the defeasance of the Bonds and discharge of this Agreement under Section 9.03 hereof. Section 2.13. Book -Entry System. DTC shall act as the initial Depository for the Series 2012 Bonds. One Series 2012 Bond for each maturity of the Series 2012 Bonds shall be initially executed, authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form). Upon initial execution, authentication, and delivery, the ownership of the Series 2012 Bonds shall be registered in the Bond Register in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint in writing. The representatives of the Authority and the Fiscal Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Agreement to qualify the Bonds for the Depository's book -entry system, including the execution of the Depository's required representation letter. With respect to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of DTC, neither the Authority nor the Fiscal Agent shall have any responsibility or obligation to any broker-dealer, bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the "DTC Participants") or to any person for which a DTC Participant acquires an interest in the Bonds (the "Beneficial Owners"). Without limiting the immediately preceding sentence, neither the Authority nor the Fiscal Agent shall have any -17- responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the Authority elects to redeem the Bonds in part, (iv) the payment to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any amount with respect to the principal of or interest on the Bonds, or (v) any consent given or other action taken by the Depository as Owner of the Bonds. Except as set forth above, the Fiscal Agent may treat as and deem DTC to be the absolute Owner of each Bond for which DTC is acting as Depository for the purpose of payment of the principal of and interest on such Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bonds, for the purpose of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Fiscal Agent shall pay all principal of and interest on the Bonds only to or upon the order of the Owners as shown on the Bond Register, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest on the Bonds to the extent of the sums or sums so paid. No person other than an Owner, as shown on the Bond Register, shall receive a physical Bond. Upon delivery by DTC to the Fiscal Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.06 hereof, references to "Cede & Co." in this Section 2.13 shall refer to such new nominee of DTC. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Fiscal Agent during any time that the Bonds are Outstanding, and discharging its responsibilities with respect thereto under applicable law. The Authority may terminate the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book -entry transfers through DTC is not in the best interest of the Beneficial Owners, and the Authority shall mail notice of such termination to the Fiscal Agent. Upon the termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is willing and able to undertake such functions upon reasonable or customary terms, or if the Authority determines that it is in the best interest of the Beneficial Owners of the Series 2012 Bonds that they be able to obtain certificated Series 2012 Bonds, the Series 2012 Bonds shall no longer be restricted to being registered in the Bond Register of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or name the Owners shall designate at that time, in accordance with Section 2.06. To the extent that the Beneficial Owners are designated as the transferee by the Owners, in accordance with Section 2.06, the Series 2012 Bonds will be delivered to such Beneficial Owners as soon as practicable. Section 2.14. Issuance of Parity Bonds. The Authority may issue one or more series of Parity Bonds, in addition to the Series 2012 Bonds authorized under Section 2.01 hereof, by means of a Supplemental Agreement and without the consent of any Bondowners, upon compliance with the provisions of this Section 2.14. Only Refunding Bonds that comply with the requirements of this Section 2.14 shall be Parity Bonds, and such Parity Bonds shall constitute Bonds hereunder and shall be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds hereunder on a parity with all other Bonds -18- Outstanding hereunder. The Authority may issue Refunding Bonds that are Parity Bonds subject to the following specific conditions precedent: (A) Current Compliance. The Authority shall be in compliance on the date of issuance of the Parity Bonds with all covenants set forth in this Agreement and all Supplemental Agreements, and the principal amount of the Parity Bonds shall not cause the Authority to exceed the maximum authorized indebtedness of the District under the provisions of the Act. (B) Payment Dates. The Supplemental Agreement providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on March 1 and September 1, and principal thereof shall be payable on September 1 in any year in which principal is payable (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis). (C) Funds and Accounts; Reserve Fund Deposit. The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts, and shall provide for a deposit to the Reserve Fund (or to a separate account created for such purpose) in an amount necessary so that the amount on deposit in the Reserve Fund (together with the amount in any such separate account), following the issuance of such Parity Bonds, is equal to the Reserve Requirement. (D) Refunding Bonds. The Parity Bonds shall be Refunding Bonds. (E) Officer's Certificate. The Authority shall deliver to the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of such Parity Bonds set forth in subsections (A), (B), (C) and (D) of this Section 2.14 have been satisfied. In delivering such Officer's Certificate, the Authorized Officer that executes the same may conclusively rely upon such certificates of the Fiscal Agent, the Tax Consultant and others selected with due care, without the need for independent inquiry or certification. Nothing in this Section 2.14 shall prohibit the Authority from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under Section 3.02 of this Agreement. -19- ARTICLE III ISSUANCE OF SERIES 2012 BONDS Section 3.01. Issuance and Delivery of Series 2012 Bonds. At any time after the execution of this Agreement, the Authority may issue the Series 2012 Bonds for the District in the aggregate principal amount set forth in Section 2.01 and deliver the Series 2012 Bonds to the Original Purchaser. The Authorized Officers of the Authority are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the Series 2012 Bonds in accordance with the provisions of the Act, the Refunding Law, the Resolution and this Agreement, to redeem the Series 2004 Bonds with proceeds of the Series 2012 Bonds, to authorize the payment of Costs of Issuance from the proceeds of the Series 2012 Bonds and to do and cause to be done any and all acts and things necessary or convenient for delivery of the Series 2012 Bonds to the Original Purchaser and the redemption of the Series 2004 Bonds pursuant to the Escrow Agreement. Section 3.02. Pledge of Special Tax Revenues. The Bonds shall be secured by a first pledge of all of the Special Tax Revenues (other than the Special Tax Revenues to be deposited to the Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 4.06(A)) and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and, until disbursed as provided herein, in the Special Tax Fund. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided herein) are hereby dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided herein and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in accordance with Section 9.03. Amounts in the Administrative Expense Fund, the Costs of Issuance Fund, and the Special Tax Revenues to be deposited to the Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 4.06(A), are not pledged to the repayment of the Bonds. Any portion of the Project financed with the proceeds of the Series 2004 Bonds is not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of condemnation or destruction of any portion of the Project are not pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation imposed hereunder. Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be dependent upon the performance by any person of such persons obligation(s) with respect to the Project. -20- ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of Series 2012 Bonds and Other Moneys. (A) The proceeds of the purchase of the Series 2012 Bonds by the Original Purchaser (being $__________) shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows: (i) deposit in the Costs of Issuance Fund an amount equal to $ (ii) deposit in the Reserve Fund an amount equal to $ (being an amount equal to the initial Reserve Requirement); and (iii) transfer to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement an amount equal to (B) In addition to the foregoing, on the Closing Date the Authority shall transfer or cause to be transferred certain moneys held with respect to the Series 2004 Bonds as follows: (i) transfer from the administrative expense fund held with respect to the Series 2004 Bonds to the Treasurer for deposit by the Treasurer in the Administrative Expense Fund, all amounts on deposit in such administrative expense fund; (ii) transfer from the special tax fund held with respect to the Series 2004 Bonds (a) to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement $ ; and (b) to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, all remaining amounts on deposit in such special tax fund; (iii) transfer from the reserve fund held with respect to the Series 2004 Bonds to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund established under the Escrow Agreement, the $ _ on deposit in such reserve fund; (iv) transfer from the bond fund held with respect to the Series 2004 Bonds to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, any amounts on deposit in such bond fund; and (v) transfer from the improvement fund held with respect to the Series 2004 Bonds to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund, any amounts in such fund. (C) The Fiscal Agent may establish a temporary fund or account in its records to facilitate any of the deposits or transfers referred to in this Section 4.01. Section 4.02. [intentionally omitted] Section 4.03. Costs of Issuance Fund. (A) Establishment of Costs of Issuance Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) 2012 Costs of Issuance Fund (the -21- "Costs of Issuance Fund"), to the credit of which a deposit shall be made as required by Section 4.01(A)(i). Moneys in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of Costs of Issuance. (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by the Treasurer and delivered to the Fiscal Agent on the Closing Date, or otherwise in an Officer's Certificate delivered to the Fiscal Agent after the Closing Date. The Fiscal Agent shall pay all Costs of Issuance after receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee pursuant to an Officer's Certificate requesting payment of Costs of Issuance. The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of 90 days from the date of delivery of the Series 2012 Bonds and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Treasurer for deposit by the Treasurer in the Administrative Expense Fund. (C) I_nvestment. Moneys in the Costs of Issuance Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of such fund. Section 4.04. Reserve Fund. (A) Establishment of Fund. There is hereby established as a separate fund to be held by the Fiscal Agent the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) 2012 Reserve Fund (the "Reserve Fund"), to the credit of which a deposit shall be made as required by Section 4.01(A)(ii) equal to the Reserve Requirement as of the Closing Date for the Series 2012 Bonds, and deposits shall be made as provided in clause (ii) of the second paragraph of Section 4.06(A) and clause (ii) of Section 4.06(B). Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of principal of, and interest and any premium on, the Bonds and shall be subject to a lien in favor of the Owners of the Bonds. (B) Use of Reserve Fund. Except as otherwise provided in this Section, all amounts deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the provisions of this Section, for the purpose of redeeming Bonds from the Bond Fund. (C) Transfer Due to Deficiency in Bond Fund. Whenever transfer is made from the Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund, the Fiscal Agent shall provide written notice thereof to the Treasurer, specifying the amount withdrawn. (D) Transfer of Excess of Reserve Requirement. Whenever, on the Business Day prior to any September 1 occurring on or after September 1, 2013, or on any other date at the request of the Treasurer, the amount in the Reserve Fund exceeds the Reserve Requirement, the Fiscal Agent shall provide written notice to the Treasurer of the amount of the excess and shall transfer an amount equal to the excess from the Reserve Fund to the Bond Fund to be used for the payment of interest on the Bonds on the next Interest Payment Date in accordance with Section 4.05. -22- (E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund equals or 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 Fiscal Agent shall upon the written direction of the Treasurer transfer the amount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in accordance with Section 2.03 and 4.05, as applicable, of all of the Outstanding Bonds. In the event that the amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be transferred to the Authority to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund pursuant to this Section 4.04(E) until after (i) the calculation of any amounts due to the federal government pursuant to Section 5.13 following payment of the Bonds and withdrawal of any such amount from the Reserve Fund for purposes of making such payment to the federal government, and (ii) payment of any fees and expenses due to the Fiscal Agent. (F) Transfer Upon Special Tax Prepayment. Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment pursuant to Section 2.03(A)(iii) and 4.05(B)(ii), funds in the Reserve Fund in the amount of any applicable "Reserve Fund Credit," as such term is defined in and otherwise determined in accordance with Section I of the Rate and Method of Apportionment of Special Taxes, shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to Section 2.03(A)(iii). The Treasurer shall deliver to the Fiscal Agent an Officer's Certificate specifying any amount to be so transferred, and the Fiscal Agent may rely on any such Officer's Certificate. (G) Transfer to Pay Rebate. Amounts in the Reserve Fund shall be withdrawn, at the written request of an Authorized Officer, for purposes of paying any rebate liability under Section 5.13. (H) Investment. Moneys in the Reserve Fund shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Reserve Fund to be used for the purposes of such fund, including any of the purposes specified in this' Section 4.04. Section 4.05. Bond Fund. (A) Establishment of Bond Fund and Special Tax Prepayments Account. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Series 2012 Bond Fund (the "Bond Fund"), to the credit of which deposits shall be made as required by Section 4.04, clause (ii) of the second paragraph of Section 4.06(A) and Section 4.06(B), and any other amounts required to be deposited therein by this Agreement or the Act. There is also hereby created in the Bond Fund a separate account held by the Fiscal Agent, the Special Tax Prepayments Account, to the credit of which deposits shall be made as provided in clause (iii) of the second paragraph of Section 4.06(A). Moneys in the Bond Fund and the accounts therein shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds. -23- (B) Disbursements. (i) Bond Fund Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the Owners of the Bonds the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments set forth in Section 2.03(A)(ii), or a redemption of the Bonds required by Section 2.03(A)(i) or (iii), such payments to be made in the priority listed in the second succeeding paragraph. Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer pursuant to clause (ii) of the second paragraph of Section 4.06(A) shall be immediately disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds. In the event that amounts in the Bond Fund are insufficient for the purposes set forth in the preceding paragraph, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve Fund shall be deposited in the Bond Fund. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments provided for in the first sentence of the first paragraph of this Section 4.05(B)(i), the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Each such payment shall be made ratably to the Owners of the Bonds based on the then Outstanding principal amount of the Bonds, if there are insufficient funds to make the corresponding payment for all of the then Outstanding Bonds. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date. (ii) Special Tax Prepayments Account Disbursements. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under Section 2.03(A)(iii), and notice to the Fiscal Agent can timely be given under Section 2.03(B), and shall be used (together with any amounts transferred pursuant to Section 4.04(F)) to redeem Bonds on the redemption date selected in accordance with Section 2.03. (C) Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from the investment and deposit of amounts in the Bond Fund and the Special Tax Prepayments Account shall be retained in the Bond Fund and the Special Tax Prepayments Account, respectively, to be used for purposes of such fund and account. Section 4.06. Special Tax Fund. (A) Establishment Qf Special Tax Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) 2012 Special Tax Fund (the "Special Tax Fund"). The Authority shall transfer or cause to be transferred to the Fiscal Agent, as soon as practicable following receipt, all Special Tax Revenues received by the Authority and any amounts required by Section 4.01(B)(ii)(b), 4.01(B)(iv) and 4.01(B)(v) to be deposited to the Special Tax Fund, all which amounts shall be deposited by the Fiscal Agent to the Special Tax Fund. In addition, the Fiscal Agent shall deposit in the Special Tax Fund amounts to be transferred thereto pursuant to Section 4.07(B) hereof. -24- Notwithstanding the foregoing, (i) the first Special Tax Revenues collected by the Authority in any Fiscal Year, in an amount equal to the portion of such Fiscal Year's Special Tax levy for Administrative Expenses (but not to exceed, in any Fiscal Year, $35,000), shall be deposited by the Treasurer in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Treasurer and shall be deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund up to the then Reserve Requirement; third, to the Administrative Expense Fund to the extent that amounts in such fund were used to pay costs related to the collection of such delinquencies; and fourth, to the Special Tax Fund for use as described in Section 4.06(B) below; and (iii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent (as specified in writing by the Treasurer to the Fiscal Agent) directly in the Special Tax Prepayments Account established pursuant to Section 4.05(A). Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority and the Owners of the Bonds, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds and the Authority. (B) Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Reserve Fund and the Special Tax Prepayments Account to the Bond Fund pursuant to Sections 4.04(D), (E), and (F), and 4.05(B)(ii), such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date, and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement. In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of the Interest Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the Treasurer may transfer to the Administrative Expense Fund, from time to time, any amount in the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the Reserve Fund, if monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund. (C) Investment. Moneys in the Special Tax Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from such investment and deposit shall be retained in the Special Tax Fund to be used for the purposes thereof. Section 4.07. Administrative Expense Fund. (A) Establishment of Administrative Expense Fund. There is hereby established as a separate fund to be held by the Treasurer, the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) 2012 Administrative Expense Fund (the "Administrative Expense Fund"), to the credit of which deposits shall be made as -25- required by Sections 4.01(B)(i) and 4.03(B), and clause (i) of the second paragraph of Section 4.06(A). Moneys in the Administrative Expense Fund shall be held in trust by the Treasurer for the benefit of the Authority, and shall be disbursed as provided below. (B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Treasurer and paid to the Authority or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or Costs of Issuance, and the nature of such Administrative Expense or Costs of Issuance. Amounts transferred from the Costs of Issuance Fund to the Administrative Expense Fund pursuant to Section 4.03(B) shall be separately identified at all times, and shall be expended for purposes of the Administrative Expense Fund prior to the use of amounts transferred to the Administrative Expense Fund from the Special Tax Fund pursuant to Section 4.06(B). Annually, on the last day of each Fiscal Year, the Treasurer shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $35,000 that have not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund. (C) Investment. Moneys in the Administrative Expense Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Treasurer in the Administrative Expense Fund to be used for the purposes thereof. -26- ARTICLE V OTHER COVENANTS OF THE AUTHORITY Section 5.01. Punctual Payment. The Authority will punctually pay or cause to be paid the principal of, and interest and any premium on, the Bonds when and as due in strict conformity with the terms of this Agreement and any Supplemental Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of this Agreement and all Supplemental Agreements and of the Bonds. Section 5.02. Limited Obligation. The Bonds are limited obligations of the Authority on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and, until disbursed as provided herein, the Special Tax Fund. Section 5.03. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the Authority shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the Authority, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have so extended or funded. Section 5.04. Against Encumbrances. The Authority will not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds, except as permitted by this Agreement. Section 5.05. Books and Records. The Authority will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Authority, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund and to the Special Tax Revenues. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. Section 5.06. Protection of Security and Rights of Owners. The Authority will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the Authority, the Bonds shall be incontestable by the Authority. Section 5.07. Compliance with Act. The Authority will comply with all applicable provisions of the Act and law in administering the District. Section 5.08. Collection of Special Tax Revenues. The Authority 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. -27- On or within five (5) Business Days of each June 1, the Fiscal Agent shall provide the Treasurer with a notice stating the amount then on deposit in the Bond Fund and the Reserve Fund, and informing the Authority that the Special Taxes may need to be levied pursuant to the Ordinance as necessary to provide for the debt service to become due on the Bonds in the calendar year that commences in the Fiscal Year for which the levy is to be made, and Administrative Expenses and replenishment (if necessary) of the Reserve Fund so that the balance therein equals the Reserve Requirement. The receipt of or failure to receive such notice by the Treasurer shall in no way affect the obligations of the Treasurer under the following two paragraphs. Upon receipt of such notice, the Treasurer shall communicate with the Auditor to ascertain 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 Treasurer shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each July 15 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final date on which 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 Treasurer shall 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 Treasurer shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on any outstanding Bonds of the District becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses (including amounts necessary to discharge any obligation under Section 5.13) during such year, taking into account the balances in such funds and in the Special Tax Fund. The Special Taxes so levied shall not exceed the maximum amounts as provided in the Rate and Method of Apportionment of Special Taxes. The Special Taxes, when levied, 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, 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; provided that, pursuant to and in accordance with the Ordinance, the Special Taxes may be collected by means of direct billing of the property owners within the District, in which event the Special Taxes shall become delinquent if not paid when due pursuant to said billing. Section 5.09. Covenant to Foreclose. Pursuant to Section 53356.1 of the Act, the Authority hereby covenants with and for the benefit of the Owners of the Bonds that it will order, and cause to be commenced as hereinafter provided, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due as provided in the following paragraph. The Treasurer shall notify the Authority Attorney of any such delinquency of which the Treasurer is aware, and the Authority Attorney shall commence, or cause to be commenced, such proceedings. On or about February 15 and June 15 of each Fiscal Year, the Treasurer shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenues theretofore received by the Authority, and: (A) Individual Delinquencies. If, as of any June 15, the Treasurer determines that any single parcel subject to the Special Tax in the District is delinquent in the -28- payment of Special Taxes in the aggregate amount of $1,000 or more, then the Treasurer shall promptly send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the Authority within 90 days after the notice of delinquency has been sent. (B) AggLegate Delinquencies. If the Treasurer determines that, as of any June 15, the total amount of delinquent Special Tax for the then current Fiscal Year for the entire District (including the total of delinquencies under subsection (A) above), exceeds 5% of the total Special Tax due and payable for the then current Fiscal Year, the Treasurer shall promptly notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency), and the Authority shall commence foreclosure proceedings within 90 days after the notices of delinquency have been sent. Notwithstanding the foregoing, the Treasurer may defer any mailing of notices of delinquency or foreclosure action if the amount in the Reserve Fund is at least equal to the Reserve Requirement. The Treasurer and the Authority Attorney, as applicable, are hereby authorized to employ counsel to conduct any such foreclosure proceedings. The fees and expenses of any such counsel (including a charge for Authority staff time) in conducting foreclosure proceedings shall be an Administrative Expense hereunder. Section 5.10. Further Assurances. The Authority will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in this Agreement. Section 5.11. Private Activit Bond Limitations. The Authority shall assure that the proceeds of the Series 2004 Bonds and of the Series 2012 Bonds are not so used as to cause the Series 2012 Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. Section 5.12. Federal Guarantee Prohibition. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Series 2012 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 5.13. Rebate Requirement. The Authority shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Series 2012 Bonds. If necessary, the Authority may use amounts in the Reserve Fund, amounts on deposit in the Administrative Expense Fund, and any other funds available to the District, including amounts advanced by the Authority or the City, in its respective sole discretion, to be repaid by the District as soon as practicable from amounts described in the preceding clauses, to satisfy its obligations under this Section 5.13. The Treasurer shall take note of any investment of monies hereunder in excess of the yield on the Series 2012 Bonds, and shall take such actions as are necessary to ensure compliance with this Section 5.13, such as increasing the portion of the Special Tax levy for Administration Expenses as appropriate to have funds available in the Administrative Expense Fund to satisfy any rebate liability under this Section 5.13. -29- In order to provide for the administration of this Section 5.13, the Treasurer may provide for the employment of independent attorneys, accountants and consultants compensated on such reasonable basis as the Treasurer may deem appropriate and in addition, and without limitation of the provisions of Sections 6.02, 6.03 and 6.04, the Treasurer may rely conclusively upon and be fully protected from all liability in relying upon the opinions, determinations, calculations and advice of such agents, attorneys and consultants employed hereunder. Any fees or expenses incurred by the Authority or the City under or pursuant to this Section 5.13 shall be Administrative Expenses. The Fiscal Agent may rely conclusively upon the Authority's determinations, calculations and certifications required by this Section. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the Authority's calculations hereunder. Section 5.14. No Arbitrage. The Authority shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the Series 2012 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Series 2012 Bonds would have caused the Series 2012 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Section 5.15. Yield of the Series 2012 Bonds. In determining the yield of the Series 2012 Bonds to comply with Section 5.13 and 5.14 hereof, the Authority will take into account redemption (including premium, if any) in advance of maturity based on the reasonable expectations of the Authority, as of the Closing Date, regarding prepayments of Special Taxes and use of prepayments for redemption of the Bonds, without regard to whether or not prepayments are received or Series 2012 Bonds redeemed. Section 5.16. Maintenance of Tax -Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the Series 2012 Bonds from the gross income of the Owners of the Series 2012 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Series 2012 Bonds. Section 5.17. Continuing Disclosure to Owners. In addition to its obligations under Section 9.07, the Authority hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Agreement, failure of the Authority to comply with the Continuing Disclosure Agreement shall not be considered a default hereunder; however, any Participating Underwriter or any holder or Beneficial Owner (as defined in Section 2.13) of the Bonds may take such actions as may be necessary and appropriate to compel performance by the Authority of its obligations thereunder, including seeking mandate or specific performance by court order. Section 5.18. Reduction of Special Taxes. The Authority covenants and agrees to not consent or conduct proceedings with respect to a reduction in the maximum Special Taxes that may be levied in the District below an amount, for any Fiscal Year, equal to 110% of the aggregate of the Debt Service due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative Expenses for such Fiscal Year. It is hereby acknowledged that Bondowners are purchasing the Bonds in reliance on the foregoing covenant, and that said covenant is necessary to assure the full and timely payment of the Bonds. Section 5.19. Limits on Special Tax Waivers and Bond Tenders. The Authority covenants not to exercise its rights under the Act to waive delinquency and redemption -30- penalties related to the Special Taxes or to declare Special Tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds and further covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the Authority having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. Section 5.20. No Additional Bonds. Except as expressly permitted by Section 2.14 hereof, the Authority shall not issue any additional bonds secured by (A) a pledge of Special Taxes on a parity with or senior to the pledge thereof under Section 3.02 hereof; or (B) any amounts in any funds or accounts established hereunder. Section 5.21. Authority Bid at Foreclosure Sale. The Authority will not bid at a foreclosure sale of property in respect of delinquent Special Taxes unless it expressly agrees to take the property subject to the lien for Special Taxes imposed by the District and that the Special Taxes levied on the property are payable while the Authority owns the property. -31- ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY OF TIIE AUTHORITY Section 6.01. Deposit and Investment of Moneys in Funds. Moneys in any fund or account created or established by this Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Officer's Certificate, the Fiscal Agent shall invest, to the extent reasonably practicable, any such moneys in Permitted Investments described in clause (h) of the definition thereof in Section 1.03, which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. The Treasurer shall make note of any investment of funds hereunder in excess of the yield on the Bonds, so that appropriate actions can be taken to assure compliance with Section 5.13. Moneys in any fund or account created or established by this Agreement and held by the Treasurer shall be invested by the Treasurer in any Permitted Investment, which in any event by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of interest earnings and profits resulting from investment of amounts in funds and accounts. Whenever in this Agreement any moneys are required to be transferred by the Authority to the Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted Investments. The Fiscal Agent and its affiliates or the Treasurer may act as sponsor, advisor, depository, principal or agent in the acquisition or disposition of any investment. Neither the Fiscal Agent nor the Treasurer shall incur any liability for losses arising from any investments made pursuant to this Section. The Fiscal Agent shall not be required to determine the legality of any investments. Except as otherwise provided in the next sentence, all investments of amounts deposited in any fund or account created by or pursuant to this Agreement, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Agreement or the Code) at Fair Market Value. The Fiscal Agent shall have no duty in connection with the determination of Fair Market Value other than to follow the investment direction of an Authorized Officer in any written direction of any Authorized Officer. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under the applicable provisions of the Code and (unless valuation is undertaken at least annually) investments in the subaccounts within the Reserve Fund shall be valued at their present value (within the meaning of section 148 of the Code). The Fiscal Agent shall not be liable for verification of the application of such sections of the Code. Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Treasurer hereunder, provided that the Fiscal Agent or the Treasurer, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Agreement. -32- The Fiscal Agent or the Treasurer, as applicable, shall sell at Fair Market Value, or present for redemption, any investment security whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such investment security is credited and neither the Fiscal Agent nor the Treasurer shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance herewith. The Authority acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent will furnish the Authority periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent hereunder. Section 6.02. Limited Obligation. The Authority's obligations hereunder are limited obligations of the Authority on behalf of the District and are payable solely from and' secured solely by the Special Tax Revenues and the amounts in the Special Tax Fund, the Bond Fund (including the Special Tax Prepayments Account therein) and the Reserve Fund created hereunder. Section 6.03. Liability of Authority. The Authority shall not incur any responsibility in respect of the Bonds or this Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon it. The Authority shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Authority shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder. In the absence of bad faith, the Authority, including the Treasurer, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Authority and conforming to the requirements of this Agreement. The Authority, including the Treasurer, shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Authority to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Authority and the Treasurer may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Authority may consult with counsel, who may be the Authority Attorney, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Authority shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactory established, if disputed. -33- Whenever in the administration of its duties under this Agreement the Authority or the Treasurer shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Authority, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, an Appraiser, an Independent Financial Consultant or a Tax Consultant, and such certificate shall be full warrant to the Authority and the Treasurer for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Authority or the Treasurer may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 6.04. Employment of Agents by Authority. In order to perform its duties and obligations hereunder, the Authority and/or the Treasurer may employ such persons or entities as it deems necessary or advisable. The Authority shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. -34- ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent. U.S. Bank National Association is hereby appointed Fiscal Agent and paying agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph of this Section, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. The Fiscal Agent shall give the Treasurer written notice of any such succession hereunder. The Authority may at any time remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, corporation or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank, corporation or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 7.01, combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Fiscal Agent may at any time resign by giving written notice to the Authority and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the Authority shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent. Upon such acceptance, the successor Fiscal Agent shall be vested with all rights and powers of its predecessor hereunder without any further act. If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section within forty-five (45) days after the Fiscal Agent shall have given to the Authority written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent. If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is rendered unable to perform its duties hereunder, all such duties and all of the rights and powers of the Fiscal Agent hereunder shall be assumed by and vest in the Treasurer of the Authority in trust for the benefit of the Owners. The Authority covenants for the direct benefit of the Owners that its Treasurer in such case shall be vested with all of the rights and powers of the Fiscal Agent hereunder, and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent hereunder, in trust for the benefit of the Owners of the Bonds. In -35- such event, the Treasurer may designate a successor Fiscal Agent qualified to act as Fiscal Agent hereunder. Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the Authority, and the Fiscal Agent assumes no responsibility for the correctness of the same, or makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of this Agreement; but in the case of any such certificates or opinions by which any provision hereof are specifically required to be fumished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement. Except as provided above in this paragraph, Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument. The Fiscal Agent shall not be liable for any error of judgment made in good faith unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent. The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, and its liability shall be limited to the proper accounting for such funds as it shall actually receive. The Fiscal Agent may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. -36- In order to perform its duties and obligations hereunder, the Fiscal Agent may employ such persons or entities as it deems necessary or advisable. The Fiscal Agent shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. Section 7.03. information. The Fiscal Agent shall provide to the Authority such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the Authority shall reasonably request, including but not limited to quarterly statements reporting funds held and transactions by the Fiscal Agent. The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund, the Special Tax Fund and the Costs of Issuance Fund. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Authority and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing upon reasonable prior notice. Section 7.04. Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed in good faith by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under this Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by an Officer's Certificate, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 7.05. Compensation, Indemnification. The Authority shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Agreement, but the Fiscal Agent shall not have a lien therefor on any funds at any time held by it under this Agreement. The Authority further agrees, to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents harmless against any costs, expenses, claims or liabilities whatsoever, including without limitation fees and expenses of its attorneys, which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or willful misconduct. The obligation of the Authority under this Section shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement, but any monetary -37- obligation of the Authority arising under this Section shall be limited solely to amounts on deposit in the Administrative Expense Fund. -38- ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted. This Agreement and the rights and obligations of the Authority and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the Authority to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the Authority of any pledge or lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the Owners of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or this Agreement), or (iii) reduce the percentage of Bonds required for the amendment hereof. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent. This Agreement and the rights and obligations of the Authority and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes: (A) to add to the covenants and agreements of the Authority in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the Authority; (B) to make modifications not adversely affecting any Outstanding series of Bonds of the Authority in any material respect; (C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement, or in regard to questions arising under this Agreement, as the Authority or the Fiscal Agent may deem necessary or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners of the Bonds; (D) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from gross federal income taxation of interest on the Bonds; and (E) in connection with the issuance of Parity Bonds under and pursuant to Section 2.14. The Fiscal Agent may in its discretion, but shall not be obligated to, enter into any such Supplemental Agreement authorized by this Section which materially adversely affects the Fiscal Agent's own rights, duties or immunities under this Fiscal Agent Agreement or otherwise with respect to the Bonds or any agreements related thereto. Section 8.02. Owners' Meetings. The Authority may at any time call a meeting of the Owners. In such event the Authority is authorized to fix the time and place of said meeting and to provide for the giving of notice thereof, and to fix and adopt rules and regulations for the conduct of said meeting. -39- Section 8.03. Procedure for Amendment with Written Consent of Owners. The Authority and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. A copy of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided. Such Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed. After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the Authority shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the papers required by this Section 8.03 to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon the Authority and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period. Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the Authority, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Article VIII; provided, however, that the Fiscal Agent shall not be deemed to have knowledge that any Bond is owned or held by the Authority unless the Authority is the registered Owner or the Fiscal Agent has received written notice that any other registered Owner is an Owner for the account of the Authority. Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations under this Agreement of the Authority and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental -40- Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes. Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The Authority may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the Authority, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the Authority may select and designate for that purpose, a suitable notation shall be made on such Bond. The Authority may determine that new Bonds, so modified as in the opinion of the Authority is necessary to conform to such Owners' action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such Bonds. Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. -41- ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person other than the Authority, the Fiscal Agent and the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent. Section 9.02. Successor is Deemed Included in All References to Predecessor. Whenever in this Agreement or any Supplemental Agreement either the Authority or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the Authority or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 9.03. Discharge of Agreement. The Authority shall have the option to pay and discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the following ways: (A) by well and truly paying or causing to be paid the principal of, and interest and any premium on, such Bonds Outstanding, as and when the same become due and payable; (B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the funds and accounts provided for in Sections 4.04 and 4.05 is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums; or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities in such amount as the Authority shall determine as confirmed by Bond Counsel or an independent certified public accountant will, together with the interest to accrue thereon and moneys then on deposit in the fund and accounts provided for in Sections 4.04 and 4.05, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. If the Authority shall have taken any of the actions specified in (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the Authority, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in this Agreement and all other obligations of the Authority under this Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the obligation of the Authority to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon, all amounts owing to the Fiscal Agent pursuant to Section 7.05, and otherwise to assure that no action is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from gross income for federal income tax purposes, shall continue in any event. -42- Upon compliance by the Authority with the foregoing with respect to all Bonds Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the Authority and any Special Taxes thereafter received by the Authority shall not be remitted to the Fiscal Agent but shall be retained by the Authority to be used for any purpose permitted under the Act. Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing. Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing 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. Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registry books. Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the Authority or the Fiscal Agent in good faith and in accordance therewith. Section 9.05. Waiver of Personal Liability. No Boardmember, Councilmember, officer, official, agent or employee of the Authority, the City or the District shall be individually or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such Boardmember, Councilmember, officer, official, agent or employee from the performance of any official duty provided by law. Section 9.06. Notices to and Demands on Authority and Fiscal Agent. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the Authority may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Authority with the Fiscal Agent) as follows: Temecula Public Financing Authority c/o City of Temecula 41000 Main Street Temecula, CA 92589-9033 Attn: Director of Finance Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Authority to or on the Fiscal Agent may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Fiscal Agent with the Authority) as follows (provided that any such notice shall not be effective until actually received by the Fiscal Agent): -43- U.S. Bank National Association 633 W. Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Reference: Temecula CFD 03-06 (Harveston II) Section 9.07. State Reporting Requirements. The following requirements shall apply to the Bonds, in addition to those requirements under Section 5.17: (A) Annual Reporting. Not later than October 30 of each calendar year, beginning with the October 30 first succeeding the Closing Date, and in each calendar year thereafter until the October 30 following the final maturity of the Bonds, the Treasurer shall cause the following information to be supplied to CDIAC: (i) the name of the Authority; (ii) the full name of the District; (iii) the name, title, and series of the Bond issue; (iv) any credit rating for the Bonds and the name of the rating agency; (v) the Closing Date of the Bond issue and the original principal amount of the Bond issue; (vi) the amount of the Reserve Requirement; (vii) the principal amount of Bonds outstanding; (viii) the balance in the Reserve Fund; (ix) that there is no capitalized interest account for the Bonds; (x) the number of parcels in the District that are delinquent with respect to Special Tax payments, the amount that each parcel is delinquent, the total amount of Special Taxes due on the delinquent parcels, the length of time that each has been delinquent, when foreclosure was commenced for each delinquent parcel, the total number of foreclosure parcels for each date specified, and the total amount of tax due on the foreclosure parcels for each date specified; (xi) that there is no balance in any improvement fund for the Bonds; (xii) the assessed value of all parcels subject to the Special Tax to repay the Bonds as shown on the most recent equalized roll, the date of assessed value reported, and the source of the information; (xiii) the total amount of Special Taxes due, the total amount of unpaid Special Taxes, and whether or not the Special Taxes are paid under any County Teeter Plan (Chapter 6.6 (commencing with Section 54773) of the California Government Code); (xiv) the reason and the date, if applicable, that the Bonds were retired; and (xv) contact information for the party providing the foregoing information. The annual reporting shall be made using such form or forms as may be prescribed by CDIAC. (B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal and interest on the Bonds, the Fiscal Agent shall notify the Treasurer of such failure or withdrawal in writing. The Treasurer shall notify CDIAC and the Original Purchaser of such failure or withdrawal within 10 days of such failure or withdrawal, and the Authority shall provide notice under the Continuing Disclosure Agreement of such event as required thereunder. (C) Special Tax Reporting. The Treasurer shall file a report with the Authority no later than January 1, 2013, and at least once a year thereafter, which annual report shall contain: (i) the amount of Special Taxes collected and expended with respect to the District, (ii) the amount of Bond proceeds collected and expended with respect to the District, and (iii) the status of the Project. It is acknowledged that the Special Tax Fund and the Special Tax Prepayments Account are the accounts into which Special Taxes collected on the District will be deposited for purposes of Section 50075.1(c) of the California Government Code, and the funds and accounts listed in Section 4.01 are the funds and accounts into which Bond proceeds will be deposited for purposes of Section 53410(c) of the California Government Code, and the annual report described in the preceding sentence is intended to satisfy the requirements of Sections 50075.1(d), 50075.3(d) and 53411 of the California Government Code. -44- (D) Amendment. The reporting requirements of this Section 9.07 shall be amended from time to time, without action by the Authority or the Fiscal Agent (i) with respect to subparagraphs (A) and (B) above, to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act, and (ii) with respect to subparagraph (C) above, to reflect any amendments to Section 50075.1, 50075.3, 53410 or 53411 of the California Government Code. Notwithstanding the foregoing, any such amendment shall not, in itself, affect the Authority's obligations under the Continuing Disclosure Agreement. The Authority shall notify the Fiscal Agent in writing of any such amendments which affect the reporting obligations of the Fiscal Agent under this Agreement. (E) No Liability. None of the Authority and its officers, agents and employees, the Treasurer or the Fiscal Agent shall be liable for any inadvertent error in reporting the information required by this Section 9.07. The Treasurer shall provide copies of any of such reports to any Bondowner upon the written request of a Bondowner and payment by the person requesting the information of the cost of the Authority to produce such information and pay any postage or other delivery cost to provide the same, as determined by the Treasurer. The term "Bondowner" for purposes of this Section 9.07 shall include any Beneficial Owner (as defined in Section 2.13) of the Bonds. Section 9.08. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The Authority hereby declares that it would have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable. Section 9.09. Unclaimed Money. Anything contained herein to the contrary notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when the payments of such principal, interest and premium have become payable, if such moneys was held by the Fiscal Agent at such date, shall be repaid by the Fiscal Agent to the Authority as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the Authority for the payment of the principal of, and interest and any premium on, such Bonds. Any right of any Owner to look to the Authority for such payment shall survive only so long as required under applicable law. Section 9.10. Applicable Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California. Section 9.11. Conflict with Act. In the event of a conflict between any provision of this Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Agreement. Section 9.12. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes. -45- Section 9.13. Payment on Business Day. In any case where the date of the maturity of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds or the date any action is to be taken pursuant to this Agreement is other than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date. Section 9.14. Counterparts. This Agreement may be executed in counterparts, each of Which shall be deemed an original. -46- IN WITNESS WHEREOF, the Authority caused this Fiscal Agent Agreement to be executed all as of August 1, 2012. 20009.12:111749 3-1 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) By: Executive Director U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer No. EXHIBIT A FORM OF SERIES 2012 BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) SPECIAL TAX REFUNDING BOND, SERIES 2012 INTEREST RATE MATURITY DATE BOND DATE CUSIP September 1, ____ August _, 2012 REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The Temecula Public Financing Authority (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) (the "District"), for value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be collected in the District or amounts in the funds and accounts held under the Agreement (as hereinafter defined), to the registered owner named above, or registered assigns, on the maturity date set forth above, unless redeemed prior thereto as hereinafter provided, the principal amount set forth above, and to pay interest on such principal amount from the Bond Date set forth above, or from the most recent interest payment date to which interest has been or duly provided for, semiannually on March 1 and September 1, commencing March 1, 2013, at the interest rate set forth above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable to the registered owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office (as defined in the Agreement referred to below) of U.S. Bank National Association (the "Fiscal Agent"). Interest on this Bond shall be paid by check of the Fiscal Agent mailed on each interest payment date to the registered owner hereof as of the close of business on the 15th day of the month preceding the month in which the interest payment date occurs (the "Record Date") at such registered owner's address as it appears on the registration books maintained by the Fiscal Agent, or (i) if the Bonds are in book -entry -only form, or (ii) otherwise upon written request filed with the Fiscal Agent prior to any Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to the depository for the Bonds or to an account in the United States designated by such registered owner in such written request, respectively. This Bond is one of a duly authorized issue of bonds in the aggregate principal amount of $_______ approved by a resolution of the Board of Directors of the Authority adopted on July 10, 2012 (the "Resolution"), and being issued pursuant to the provisions of Section 53311 et seq. of the California Government Code (the "Act") and Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code for the purpose of refunding A-1 the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004, and is one of the series of bonds designated "Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012" (the "Bonds"). The creation of the Bonds and the terms and conditions thereof are provided for in the Fiscal Agent Agreement, dated as of August 1, 2012, between the Authority and the Fiscal Agent (the "Agreement") and this reference incorporates the Resolution and the Agreement herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. Pursuant to and as more particularly provided in the Resolution and in the Agreement, additional bonds may be issued by the Authority from time to time secured by a lien on funds held under the Agreement on a parity with the lien securing the Bonds. The Resolution is adopted and the Agreement is entered into under and this Bond is issued under, and all are to be construed in accordance with, the laws of the State of California. Pursuant to the Act, the Agreement and the Resolution, the principal of and interest on this Bond are payable solely from the annual special tax authorized under the Act to be collected within the District (the "Special Tax") and certain funds held under the Agreement. Interest on this Bond shall be payable from the interest payment date next preceding the date of authentication hereof, unless (i) it is authenticated on an interest payment date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an interest payment date and after the close of business on the Record Date preceding such interest payment date, in which event it shall bear interest from such interest payment date, or (iii) it is authenticated prior to the Record Date preceding the first interest payment date, in which event it shall bear interest from the Bond Date set forth above; provided, however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment hereon. Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the Authority, as may be permitted by law. The Bonds do not constitute obligations of the Authority for which the Authority is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described hereinabove. The City of Temecula has no liability or obligations whatsoever with respect to the District, the Bonds or the Agreement. The Bonds maturing on or after September 1, are subject to redemption prior to their stated maturity on any interest payment date occurring on or after September 1, , as a whole or in part among maturities as provided in the Agreement, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, and March 1, ____ September 1, ____ and any interest payment date thereafter The Bonds maturing on September 1, , are subject to mandatory sinking payment redemption in part on September 1, ____ and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: A-2 Redemption Date (September 1) Sinking Payments The Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, ____ and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The Bonds are also subject to redemption from the proceeds of Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to the Agreement, on any Interest Payment Date, among maturities as specified in the Agreement and by lot within a maturity, at a redemption price (expressed as a percentage at the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices Any interest payment date from March 1, to and including March 1, ____ September 1, ____ and any interest payment date thereafter Notice of redemption with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner, to the extent and subject to the provisions of the Agreement. Notices of optional redemption may be conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the Bonds on the anticipated redemption date, and if the Fiscal Agent does not receive sufficient funds by the scheduled redemption date the redemption shall not occur and the Bonds for which notice of redemption was given shall remain outstanding for all purposes of the Agreement. This Bond shall be registered in the name of the owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon. A-3 No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such owner's order. The Fiscal Agent shall require the registered owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding interest payment date. Exchanges may only be made for Bonds in authorized denominations, as provided in the Agreement. The Agreement and the rights and obligations of the Authority thereunder may be modified or amended as set forth therein. The Agreement contains provisions permitting the Authority to make provision for the payment of the interest on, and the principal and premium, if any, of the Bonds so that such Bonds shall no longer be deemed to be outstanding under the terms of the Agreement. The Bonds are not general obligations of the Authority, but are limited obligations payable solely from the revenues and funds pledged therefor under the Agreement. Neither the faith and credit of the Authority or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Bond does not exceed any debt limit prescribed by the laws or Constitution of the State of California. A-4 IN WITNESS WHEREOF, Temecula Public Financing Authority has caused this Bond to be dated the Bond Date set forth above, to be signed by the facsimile signature of its Chairperson and countersigned by the facsimile signature of its Secretary. ATTEST Secretary A-5 TEMECULA PUBLIC FINANCING AUTHORITY Chairperson FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the Resolution and in the Agreement which has been authenticated on A-6 U.S. Bank National Association, as Fiscal Agent By: Authorized Signa tory ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within -registered Bond and hereby irrevocably constitute(s) and appoints(s) attorney, to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premises. Dated: Signature Guaranteed: Signature: Note: Signature(s) must be guaranteed by an eligible Note: The signature(s) on this Assignment must guarantor. correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. A-7 Attachment No. 5 Escrow Agreements for Crowne Hill, Wolf Creek, and Harveston II Quint & Thimmig LU' 5/29/12 6/6/12 6/20/12 6/28/12 ESCROW AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank dated as of August 1, 2012 relating to: Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Bonds, Series 2003-A 20009.10:J11755 Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. EXHIBIT A: TABLE OF CONTENTS Establishment of Refunding Fund 1 Deposit into Refunding Fund; Investment of Amounts 2 Instructions as to Application of Refunding Fund 2 Application of Proceeds from Prior Bond Funds 2 Application of Certain Terms of Prior Fiscal Agent Agreement 3 Proceedings for Redemption of Prior Bonds 3 Compensation to Escrow Bank 3 Liabilities and Obligations of Escrow Bank 3 Resignation of Escrow Bank 5 Amendment 5 Unclaimed Moneys 5 Execution in Counterparts 5 Applicable Law 5 SCHEDULE OF PAYMENTS ON PRIOR BONDS -i- ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement"), dated as of August 1, 2012, is by and between the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the "Authority"), for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL) (the "District"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as successor Fiscal Agent for the Prior Bonds hereinafter referred to and acting as escrow bank hereunder (the "Escrow Bank"). RECITALS: WHEREAS, the Board of Directors of the Authority has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, to form the District, to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes to finance certain facilities; and WHEREAS, pursuant to a Fiscal Agent Agreement, dated as of July 1, 2003 (as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, the "Prior Fiscal Agent Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), the Authority has issued its Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Special Tax Bonds, Series 2003-A (the "Prior Bonds"); and WHEREAS, the Authority has determined to issue, for and on behalf of the District, pursuant to the Prior Fiscal Agent Agreement, as amended and supplemented by the Second Supplemental Fiscal Agent Agreement, dated as of August 1, 2012 (the Prior Fiscal Agent Agreement, as so amended and supplemented, being referred to in this Agreement as the "2012 Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent, special tax bonds in the aggregate principal amount of $ (the "Refunding Bonds") at this time for the purposes of providing funds to currently refund and defease the Prior Bonds; and WHEREAS, the Authority and the Escrow Bank wish to enter into this Agreement for the purpose of providing the terms and conditions relating to the deposit and application of moneys to provide for the payment and redemption of the Prior Bonds in full, pursuant to and in accordance with the provisions of Section 9.03(B) of the Prior Fiscal Agent Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: Section 1. Establishment of Refunding Fund. There is hereby created an escrow fund (the "Refunding Fund") to be held in trust by the Escrow Bank as an irrevocable escrow securing the payment of the Prior Bonds, as hereinafter set forth. The Escrow Bank shall administer the Refunding Fund as provided in this Agreement. All cash in the Refunding Fund is hereby irrevocably pledged as a special fund for the payment of the principal of and interest and premium, if any, on the Prior Bonds in accordance with the provisions of this Agreement and the Prior Fiscal Agent Agreement. -1- If at any time the Escrow Bank shall receive actual knowledge that the cash in the Refunding Fund will not be sufficient to make any payment required by Section 3 hereof, the Escrow Bank shall notify the Authority of such fact and the Authority shall immediately cure such deficiency from any source of funds legally available to the District. The Escrow Bank shall have no obligation whatsoever to use its own funds to cure any such deficiency. Section 2. Deposit into Refunding Fund; Investment of Amounts. Concurrent with delivery of the Refunding Bonds, the Authority shall cause to be transferred to the Escrow Bank for deposit into the Refunding; Fund the amount of $ _ in immediately available funds, which shall be derived from (a) proceeds of sale of the Refunding Bonds in the amount of $ , (b) as described in Section 4(a) below, the moneys on deposit in the reserve fund established under the Prior Fiscal Agent Agreement (the "Reserve Fund") in the amount of $ and (c) as described in Section 4(b) below, the moneys held in the special tax fund established under the Prior Fiscal Agent Agreement (the "Special Tax Fund") in the amount of $ . The Escrow Bank, in its capacity as Fiscal Agent for the Prior Bonds, is hereby directed by the Authority to make the transfers of funds from the Reserve Fund and the Special Tax Fund under the Prior Fiscal Agent Agreement to the Refunding Fund as described in clauses (b) and (c) of the preceding sentence. The moneys deposited into the Refunding Fund pursuant to the preceding paragraph shall be held by the Escrow Bank in cash, uninvested. The funds deposited with and held by the Escrow Bank in the Refunding Fund shall be used by the Escrow Bank solely for the uses and purposes set forth herein. The Escrow Bank shall have no lien upon or right of set off against the funds at any time on deposit in the Refunding Fund. Section 3. Instructions as to Application of Refunding Fund. The total amount held in the Refunding Fund hereunder shall be applied by the Escrow Bank for the sole purpose of paying the principal of and interest, and premium, on the Prior Bonds in accordance with Section 2.03(A)(i) of the Prior Fiscal Agent Agreement and the schedule set forth in Exhibit A hereto. Following payment in full of the principal of and interest, and premium, on the Prior Bonds, any remaining amount on deposit in the Refunding Fund shall be transferred by the Escrow Bank on September 5, 2012 to U.S. Bank National Association in its capacity as fiscal agent under the 2012 Agreement, for deposit in the Special Tax Fund established pursuant to Section 4.06 of the 2012 Agreement. The Escrow Bank, in its capacity as Fiscal Agent under the Prior Fiscal Agent Agreement, is hereby directed to apply the amounts in the Refunding Fund to the payment and redemption of the Prior Bonds pursuant to the preceding paragraph. Section 4. Application of Proceeds from Prior Bond Funds. Upon receipt by the Escrow Bank from the Authority of certain amounts on deposit in the funds and accounts established under the Prior Fiscal Agent Agreement as of the date of delivery of the Refunding Bonds, such amount received shall be applied by the Escrow Bank as follows: (a) of amounts on deposit in the Reserve Fund established under the Prior Fiscal Agent Agreement, $ transferred by the Fiscal Agent to the Escrow Bank shall be deposited by the Escrow Bank in the Refunding Fund; and (b) of amounts on deposit in the Special Tax Fund established under the Prior Fiscal Agent Agreement, $__ transferred by the Fiscal Agent to the Escrow Bank shall be deposited by the Escrow Bank in the Refunding Fund. -2- After making the foregoing deposits and transfers, any other amounts remaining on deposit in or accruing to any funds and accounts established under the Prior Fiscal Agent Agreement shall be disposed of as provided in the 2012 Agreement. Section 5. Application of Certain Terms of Prior Fiscal Agent Agreement. All of the terms of the Prior Fiscal Agent Agreement relating to the making of payments of the principal of and interest on the Prior Bonds are incorporated in this Agreement as if set forth in full herein. Section 6. Proceedings for Redemption of Prior Bonds. The Authority hereby irrevocably elects to redeem all of the outstanding Prior Bonds in full on September 1, 2012 pursuant to the provisions of Sections 2.03(A)(i) of the Prior Fiscal Agent Agreement. It is hereby acknowledged that the Escrow Bank has already provided notice of redemption (on behalf of and at the direction and expense of the Authority) required under Sections 2.03(D) of the Prior Fiscal Agent Agreement as necessary to comply with Section 9.03(B) of the Prior Fiscal Agent Agreement and to so redeem the Prior Bonds on September 1, 2012. Section 7. Compensation to Escrow Bank. The Authority shall pay the Escrow Bank, promptly upon written request, full compensation for its duties under this Agreement, including out-of-pocket costs such as publication costs, redemption expenses, legal fees (including fees of outside counsel and the allocated costs of internal attorneys) and other costs and expenses relating hereto. Under no circumstances shall amounts deposited in or credited to the Refunding Fund be deemed to be available for said purposes. The obligation of the Authority under this Section 7 to pay compensation already earned by the Escrow Bank and to pay costs and expenses already incurred shall survive termination of this Agreement and shall survive the resignation or removal of the Escrow Bank. Section 8. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no obligation to make any payment or disbursement of any type or incur any financial liability in the performance of its duties under this Agreement unless the Authority shall have deposited sufficient funds therefor with the Escrow Bank. The Escrow Bank may rely and shall be fully protected in acting upon the written instructions of the Authority or its agents relating to any matter or action as Escrow Bank under this Agreement. The Authority covenants to indemnify, defend and hold harmless the Escrow Bank and its officers, employees, directors and agents, solely from funds of the District, against any loss, liability or expense, including legal fees (including the fees of outside counsel and internal attorneys), incurred in connection with the performance of any of the duties of Escrow Bank hereunder, except the Escrow Bank shall not be indemnified against any loss, liability or expense resulting from its negligence or willful misconduct. The indemnity provided in this Section 8 shall survive the termination of this Agreement and shall survive the resignation or removal of the Escrow Bank. The Escrow Bank shall have such duties as are expressly set forth herein and no implied duties shall be read into this Agreement against the Escrow Bank. The Escrow Bank shall not be liable for any act or omission of the Authority under this Agreement or the Prior Fiscal Agent Agreement. The Escrow Bank shall not be liable for the accuracy of any calculations provided as to the sufficiency of moneys deposited with it to pay the principal of and interest and premium on the Prior Bonds. -3- Any bank, federal savings association, national association or trust company into which the Escrow Bank may be merged or with which it may be consolidated shall become the Escrow Bank without any action of the Authority. The Escrow Bank shall have no liability or obligation to the holders of the Prior Bonds or the Refunding Bonds with respect to the payment of debt service by the Authority or with respect to the observance or performance by the Authority of the other conditions, covenants and terms contained in the Prior Fiscal Agent Agreement or the 2012 Agreement (collectively, the "Bond Agreements"), or with respect to the investment of any moneys in any fund or account established, held or maintained by the Authority pursuant to the Bond Agreements. The Escrow Bank may conclusively rely, as to the trust of the statements and correctness of the opinions expressed therein, on any certificate or opinion furnished to it in accordance with this Agreement or the Prior Fiscal Agent Agreement. The Escrow Bank may consult with counsel, whose opinion shall be full and complete authorization and protection to the Escrow Bank if it acts in accordance with such opinion. The Escrow Bank shall not be liable for any error of judgment made in good faith by an authorized officer. Nothing herein should be interpreted to require the Escrow Bank to expend, advance or risk its own funds or otherwise incur financial liability in the performance of any of its duties or the exercise of any of its rights hereunder, if it believes that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured. Any corporation or association succeeding to all or substantially all of the corporate trust business of the Escrow Bank shall be the successor of the Escrow Bank hereunder, without the execution or filing of any paper or any further act on the part of the any of the parties hereto. The Escrow Bank shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Bank be liable for any special indirect or consequential damages. The Escrow Bank shall not be responsible for any of the recitals or representations contained herein. The Escrow Agent may execute any of the trusts or powers under this Agreement or perform any duties under this Agreement either directly or by or through agents, attomeys, custodians or nominees, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed with due care. The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that, the Escrow Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority elects to give the Escrow Agent e-mail or facsimile instructions (or instructions by a similar electronic method) and the Escrow Agent in its discretion elects to act upon such instructions, the Escrow Agent's reasonable understanding of such instructions shall be deemed controlling. The Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent -4- written instruction. The Authority agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Agent, including without limitation the risk of the Escrow Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties. Section 9. Resignation of Escrow Bank. The Escrow Bank may at any time resign by giving written notice to the Authority, which notice shall indicate the date on which the resignation is to be effective (the "resignation date"). The Authority shall promptly appoint a successor Escrow Bank by the resignation date. Resignation of the Escrow Bank will be effective only upon acceptance of appointment by a successor Escrow Bank. If the Authority does not appoint a successor Escrow Bank by the resignation date, the Escrow Bank may, at the expense of the Authority, petition any court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Bank. Section 10. Amendment. This Agreement may be amended or modified by the parties hereto, but only if there shall have been filed with the Authority and the Escrow Bank (a) a written opinion of Bond Counsel stating that such amendment will not materially adversely affect the interests of the owners of the Prior Bonds, and that such amendment will not cause interest on the Prior Bonds or the Refunding Bonds to become includable in the gross income of the owners thereof for federal income tax purposes, and (b) a certification of Bond Counsel or an independent certified public accountant that the funds on deposit in the Refunding Fund will be in an amount at all times at least sufficient to make the payments specified in the first sentence of Section 3 hereof. Section 11. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Escrow Bank in trust for the payment and discharge of the principal of, and the interest and any premium on, the Prior Bonds which remains unclaimed for two (2) years after the date when the payment of such principal, interest and premium have become payable, if such moneys were held by the Escrow Bank at such date, shall be repaid by the Escrow Bank to the Authority as its absolute property free from any trust, and the Escrow Bank shall thereupon be released and discharged with respect thereto and the owners of such Prior Bonds shall look only to the Authority for the payment of the principal of, and interest and any premium on, such Prior Bonds. Any right of any Prior Bondowner to look to the Authority for such payment shall survive only so long as required under applicable law. Section 12. Execution in Counterparts. This 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. Section 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and performed in California. -5- IN WITNESS WHEREOF, the Authority and the Escrow Bank have each caused this Agreement to be executed by their duly authorized officers all as of the date first above written. 20009.10411752 S-1 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL) By Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By Vice President Payment Date September 1, 2012 EXHIBIT A SCHEDULE OF PAYMENTS ON PRIOR BONDS interest Scheduled Called Principal Principal Premium Total Due Exhibit A Escrow Agreement for Wolf Creek Quint di Thimmig LLP 5/25/12 6/6/12 6/20/12 6/28/12 ESCROW AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank dated as of August 1, 2012 relating to: Temecula Public Financing Authority Commtmity Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds 20009.11:311742 Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. EXHIBIT A: TABLE OF CONTENTS Establishment of Refunding Fund 1 Deposit into Refunding Fund; Investment of Amounts 2 Instructions as to Application of Refunding Fund 2 Application of Proceeds from Prior Bond Funds 2 Application of Certain Terms of Prior Fiscal Agent Agreement 3 Proceedings for Redemption of Prior Bonds 3 Compensation to Escrow Bank 3 Liabilities and Obligations of Escrow Bank 3 Resignation of Escrow Bank 5 Amendment 5 Unclaimed Moneys 5 Execution in Counterparts 5 Applicable Law 5 SCHEDULE OF PAYMENTS ON PRIOR BONDS -i- ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement"), dated as of August 1, 2012, is by and between the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the "Authority"), for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) (the "District"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as successor Fiscal Agent for the Prior Bonds hereinafter referred to and acting as escrow bank hereunder (the "Escrow Bank"). RECITALS: WHEREAS, the Board of Directors of the Authority has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, to form the District, to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes to finance certain facilities; and WHEREAS, pursuant to a Fiscal Agent Agreement, dated as of December 1, 2003 (the "Prior Fiscal Agent Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), the Authority has issued its Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds (the "Prior Bonds"); and WHEREAS, the Authority has determined to issue, for and on behalf of the District, pursuant to a Fiscal Agent Agreement, dated as of August 1, 2012 (the "2012 Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent, special tax refunding bonds in the aggregate principal amount of $________ (the "Refunding Bonds") at this time for the purposes of providing funds to currently refund and defease the Prior Bonds; and WHEREAS, the Authority and the Escrow Bank wish to enter into this Agreement for the purpose of providing the terms and conditions relating to the deposit and application of moneys to provide for the payment and redemption of the Prior Bonds in full, pursuant to and in accordance with the provisions of Section 9.03(B) of the Prior Fiscal Agent Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: Section 1. Establishment of Refunding Fund. There is hereby created an escrow fund (the "Refunding Fund") to be held in trust by the Escrow Bank as an irrevocable escrow securing the payment of the Prior Bonds, as hereinafter set forth. The Escrow Bank shall administer the Refunding Fund as provided in this Agreement, All cash in the Refunding Fund is hereby irrevocably pledged as a special fund for the payment of the principal of and interest and premium, if any, on the Prior Bonds in accordance with the provisions of this Agreement and the Prior Fiscal Agent Agreement. If at any time the Escrow Bank shall receive actual knowledge that the cash in the Refunding Fund will not be sufficient to make any payment required by Section 3 hereof, the -1- Escrow Bank shall notify the Authority of such fact and the Authority shall immediately cure such deficiency from any source of funds legally available to the District. The Escrow Bank shall have no obligation whatsoever to use its own funds to cure any such deficiency. Section 2. Deposit into Refunding Fund: Investment of Amounts. Concurrent with delivery of the Refunding Bonds, the Authority shall cause to be transferred to the Escrow Bank for deposit into the Refunding Fund the amount of $_ in immediately available funds, which shall be derived from (a) proceeds of sale of the Refunding Bonds in the amount of $ , (b) as described in Section 4(a) below, the moneys on deposit in the reserve fund established under the Prior Fiscal Agent Agreement (the "Reserve Fund") in the amount of $ and (c) as described in Section 4(b) below, the moneys held in the special tax fund established under the Prior Fiscal Agent Agreement (the "Special Tax Fund") in the amount of $ . The Escrow Bank, in its capacity as Fiscal Agent for the Prior Bonds, is hereby directed by the Authority to make the transfers of funds from the Reserve Fund and the Special Tax Fund under the Prior Fiscal Agent Agreement to the Refunding Fund as described in clauses (b) and (c) of the preceding sentence. The moneys deposited into the Refunding Fund pursuant to the preceding paragraph shall be held by the Escrow Bank in cash, uninvested. The funds deposited with and held by the Escrow Bank in the Refunding Fund shall be used by the Escrow Bank solely for the uses and purposes set forth herein. The Escrow Bank shall have no lien upon or right of set off against the funds at any time on deposit in the Refunding Fund. Section 3. Instructions as to Application of Refunding Fund. The total amount held in the Refunding Fund hereunder shall be applied by the Escrow Bank for the sole purpose of paying the principal of and interest, and premium, on the Prior Bonds in accordance with Section 2.03(A)(i) of the Prior Fiscal Agent Agreement and the schedule set forth in Exhibit A hereto. Following payment in full of the principal of and interest, and premium, on the Prior Bonds, any remaining amount on deposit in the Refunding Fund shall be transferred by the Escrow Bank on September 5, 2012 to U.S. Bank National Association in its capacity as fiscal agent under the 2012 Agreement, for deposit in the Special Tax Fund established pursuant to Section 4.06 of the 2012 Agreement. The Escrow Bank, in its capacity as Fiscal Agent under the Prior Fiscal Agent Agreement, is hereby directed to apply the amounts in the Refunding Fund to the payment and redemption of the Prior Bonds pursuant to the preceding paragraph. Section 4. Application of Proceeds from Prior Bond Funds. Upon receipt by the Escrow Bank from the Authority of certain amounts on deposit in the funds and accounts established under the Prior Fiscal Agent Agreement as of the date of delivery of the Refunding Bonds, such amount received shall be applied by the Escrow Bank as follows: (a) of amounts on deposit in the Reserve Fund established under the Prior Fiscal Agent Agreement, $__� transferred by the Fiscal Agent to the Escrow Bank shall be deposited by the Escrow Bank in the Refunding Fund; and (b) of amounts on deposit in the Special Tax Fund established under the Prior Fiscal Agent Agreement, $ _ transferred by the Fiscal Agent to the Escrow Bank shall be deposited by the Escrow Bank in the Refunding Fund. After making the foregoing deposits and transfers, any other amounts remaining on deposit in or accruing to any funds and accounts established under the Prior Fiscal Agent Agreement shall be disposed of as provided in the 2012 Agreement. -2- Section 5. Application of Certain Terms of Prior Fiscal Agent Agreement. All of the terms of the Prior Fiscal Agent Agreement relating to the making of payments of the principal of and interest on the Prior Bonds are incorporated in this Agreement as if set forth in full herein. Section 6. Proceedings for Redemption of Prior Bonds. The Authority hereby irrevocably elects to redeem all of the outstanding Prior Bonds in full on September 1, 2012 pursuant to the provisions of Sections 2.03(A)(i) of the Prior Fiscal Agent Agreement. It is hereby acknowledged that the Escrow Bank has already provided notice of redemption (on behalf of and at the direction and expense of the Authority) required under Sections 2.03(D) of the Prior Fiscal Agent Agreement as necessary to comply with Section 9.03(B) of the Prior Fiscal Agent Agreement and to so redeem the Prior Bonds on September 1, 2012. Section 7. Compensation to Escrow Bank. The Authority shall pay the Escrow Bank, promptly upon written request, full compensation for its duties under this Agreement, including out-of-pocket costs such as publication costs, redemption expenses, legal fees (including fees of outside counsel and the allocated costs of internal attorneys) and other costs and expenses relating hereto. Under no circumstances shall amounts deposited in or credited to the Refunding Fund be deemed to be available for said purposes. The obligation of the Authority under this Section 7 to pay compensation already earned by the Escrow Bank and to pay costs and expenses already incurred shall survive termination of this Agreement and shall survive the resignation or removal of the Escrow Bank. Section 8. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no obligation to make any payment or disbursement of any type or incur any financial liability in the performance of its duties under this Agreement unless the Authority shall have deposited sufficient funds therefor with the Escrow Bank. The Escrow Bank may rely and shall be fully protected in acting upon the written instructions of the Authority or its agents relating to any matter or action as Escrow Bank under this Agreement. The Authority covenants to indemnify, defend and hold harmless the Escrow Bank and its officers, employees, directors and agents, solely from funds of the District, against any loss, liability or expense, including legal fees (including the fees of outside counsel and internal attorneys), incurred in connection with the performance of any of the duties of Escrow Bank hereunder, except the Escrow Bank shall not be indemnified against any loss, liability or expense resulting from its negligence or willful misconduct. The indemnity provided in this Section 8 shall survive the termination of this Agreement and shall survive the resignation or removal of the Escrow Bank. The Escrow Bank shall have such duties as are expressly set forth herein and no implied duties shall be read into this Agreement against the Escrow Bank. The Escrow Bank shall not be liable for any act or omission of the Authority under this Agreement or the Prior Fiscal Agent Agreement. The Escrow Bank shall not be liable for the accuracy of any calculations provided as to the sufficiency of moneys deposited with it to pay the principal of and interest and premium on the Prior Bonds. Any bank, federal savings association, national association or trust company into which the Escrow Bank may be merged or with which it may be consolidated shall become the Escrow Bank without any action of the Authority. -3- The Escrow Bank shall have no liability or obligation to the holders of the Prior Bonds or the Refunding Bonds with respect to the payment of debt service by the Authority or with respect to the observance or performance by the Authority of the other conditions, covenants and terms contained in the Prior Fiscal Agent Agreement or the 2012 Agreement (collectively, the "Bond Agreements"), or with respect to the investment of any moneys in any fund or account established, held or maintained by the Authority pursuant to the Bond Agreements. The Escrow Bank may conclusively rely, as to the trust of the statements and correctness of the opinions expressed therein, on any certificate or opinion furnished to it in accordance with this Agreement or the Prior Fiscal Agent Agreement. The Escrow Bank may consult with counsel, whose opinion shall be full and complete authorization and protection to the Escrow Bank if it acts in accordance with such opinion. The Escrow Bank shall not be liable for any error of judgment made in good faith by an authorized officer. Nothing herein should be interpreted to require the Escrow Bank to expend, advance or risk its own funds or otherwise incur financial liability in the performance of any of its duties or the exercise of any of its rights hereunder, if it believes that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured. Any corporation or association succeeding to all or substantially all of the corporate trust business of the Escrow Bank shall be the successor of the Escrow Bank hereunder, without the execution or filing of any paper or any further act on the part of the any of the parties hereto. The Escrow Bank shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Bank be liable for any special indirect or consequential damages. The Escrow Bank shall not be responsible for any of the recitals or representations contained herein. The Escrow Agent may execute any of the trusts or powers under this Agreement or perform any duties under this Agreement either directly or by or through agents, attorneys, custodians or nominees, and shall not be responsible for any wilful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed with due care. The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that, the Escrow Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority elects to give the Escrow Agent e-mail or facsimile instructions (or instructions by a similar electronic method) and the Escrow Agent in its discretion elects to act upon such instructions, the Escrow Agent's reasonable understanding of such instructions shall be deemed controlling. The Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Authority agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Agent, including without limitation the risk of the Escrow Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties. -4- Section 9. Resignation of Escrow Bank. The Escrow Bank may at any time resign by giving written notice to the Authority, which notice shall indicate the date on which the resignation is to be effective (the "resignation date"). The Authority shall promptly appoint a successor Escrow Bank by the resignation date. Resignation of the Escrow Bank will be effective only upon acceptance of appointment by a successor Escrow Bank. If the Authority does not appoint a successor Escrow Bank by the resignation date, the Escrow Bank may, at the expense of the Authority, petition any court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Bank. Section 10. Amendment. This Agreement may be amended or modified by the parties hereto, but only if there shall have been filed with the Authority and the Escrow Bank (a) a written opinion of Bond Counsel stating that such amendment will not materially adversely affect the interests of the owners of the Prior Bonds, and that such amendment will not cause interest on the Prior Bonds or the Refunding Bonds to become includable in the gross income of the owners thereof for federal income tax purposes, and (b) a certification of Bond Counsel or an independent certified public accountant that the funds on deposit in the Refunding Fund will be in an amount at all times at least sufficient to make the payments specified in the first sentence of Section 3 hereof. Section 11. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Escrow Bank in trust for the payment and discharge of the principal of, and the interest and any premium on, the Prior Bonds which remains unclaimed for two (2) years after the date when the payment of such principal, interest and premium have become payable, if such moneys were held by the Escrow Bank at such date, shall be repaid by the Escrow Bank to the Authority as its absolute property free from any trust, and the Escrow Bank shall thereupon be released and discharged with respect thereto and the owners of such Prior Bonds shall look only to the Authority for the payment of the principal of, and interest and any premium on, such Prior Bonds. Any right of any Prior Bondowner to look to the Authority for such payment shall survive only so long as required under applicable law. Section 12. Execution in Counterparts. This 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. Section 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and performed in California. -5- IN WITNESS WHEREOF, the Authority and the Escrow Bank have each caused this Agreement to be executed by their duly authorized officers all as of the date first above written. 20009.11:J11742 S-1 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) By Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By Vice President Payment Date September 1,2012 EXHIBIT A SCHEDULE OF PAYMENTS ON PRIOR BONDS Interest Scheduled Called Principal Principal Premium Total Due Exhibit A Escrow Agreement for Harveston 11 Quint & himmig LU' 5/29/12 6/6/12 6/20/12 6/28/12 ESCROW AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank dated as of August 1, 2012 relating to: Temecula Public Financing Authority Conintwuty Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004 20009.12:111748 Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. EXHIBIT A: TABLE OF CONTENTS Establishment of Refunding Fund 1 Deposit into Refunding Fund; Investment of Amounts 2 Instructions as to Application of Refunding Fund 2 Application of Proceeds from Prior Bond Funds 2 Application of Certain Terms of Prior Fiscal Agent Agreement 3 Proceedings for Redemption of Prior Bonds 3 Compensation to Escrow Bank 3 Liabilities and Obligations of Escrow Bank 3 Resignation of Escrow Bank 5 Amendment 5 Unclaimed Moneys 5 Execution in Counterparts 5 Applicable Law 5 SCHEDULE OF PAYMENTS ON PRIOR BONDS ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement"), dated as of August 1, 2012, is by and between the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the "Authority"), for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) (the "District"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as successor Fiscal Agent for the Prior Bonds hereinafter referred to and acting as escrow bank hereunder (the "Escrow Bank"). RECITALS: WHEREAS, the Board of Directors of the Authority has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, to form the District, to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes to finance certain facilities; and WHEREAS, pursuant to a Fiscal Agent Agreement, dated as of August 1, 2004 (the "Prior Fiscal Agent Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), the Authority has issued its Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004 (the "Prior Bonds"); and WHEREAS, the Authority has determined to issue, for and on behalf of the District, pursuant to a Fiscal Agent Agreement, dated as of August 1, 2012 (the "2012 Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent, special tax refunding bonds in the aggregate principal amount of $ (the "Refunding Bonds") at this time for the purposes of providing funds to currently refund and defease the Prior Bonds; and WHEREAS, the Authority and the Escrow Bank wish to enter into this Agreement for the purpose of providing the terms and conditions relating to the deposit and application of moneys to provide for the payment and redemption of the Prior Bonds in full, pursuant to and in accordance with the provisions of Section 9.03(B) of the Prior Fiscal Agent Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: Section 1. Establishment of Refunding Fund. There is hereby created an escrow fund (the "Refunding Fund") to be held in trust by the Escrow Bank as an irrevocable escrow securing the payment of the Prior Bonds, as hereinafter set forth. The Escrow Bank shall administer the Refunding Fund as provided in this Agreement. All cash in the Refunding Fund is hereby irrevocably pledged as a special fund for the payment of the principal of and interest and premium, if any, on the Prior Bonds in accordance with the provisions of this Agreement and the Prior Fiscal Agent Agreement. If at any time the Escrow Bank shall receive actual knowledge that the cash in the Refunding Fund will not be sufficient to make any payment required by Section 3 hereof, the -1- Escrow Bank shall notify the Authority of such fact and the Authority shall immediately cure such deficiency from any source of funds legally available to the District. The Escrow Bank shall have no obligation whatsoever to use its own funds to cure any such deficiency. Section 2. Deposit into Refunding Fund; investment of Amounts. Concurrent with delivery of the Refunding Bonds, the Authority shall cause to be transferred to the Escrow Bank for deposit into the Refunding Fund the amount of $ in immediately available funds, which shall be derived from (a) proceeds of sale of the Refunding Bonds in the amount of $ , (b) as described in Section 4(a) below, the moneys on deposit in the reserve fund established under the Prior Fiscal Agent Agreement (the "Reserve Fund") in the amount of $ _, and (c) as described in Section 4(b) below, the moneys held in the special tax fund established under the Prior Fiscal Agent Agreement (the "Special Tax Fund") in the amount of $ . The Escrow Bank, in its capacity as Fiscal Agent for the Prior Bonds, is hereby directed by the Authority to make the transfers of funds from the Reserve Fund and the Special Tax Fund under the Prior Fiscal Agent Agreement to the Refunding Fund as described in clauses (b) and (c) of the preceding sentence. The moneys deposited into the Refunding Fund pursuant to the preceding paragraph shall be held by the Escrow Bank in cash, uninvested. The funds deposited with and held by the Escrow Bank in the Refunding Fund shall be used by the Escrow Bank solely for the uses and purposes set forth herein. The Escrow Bank shall have no lien upon or right of set off against the funds at any time on deposit in the Refunding Fund. Section 3. Instructions as to Application of Refunding Fund. The total amount held in the Refunding Fund hereunder shall be applied by the Escrow Bank for the sole purpose of paying the principal of and interest, and premium, on the Prior Bonds in accordance with Section 2.03(A)(i) of the Prior Fiscal Agent Agreement and the schedule set forth in Exhibit A hereto. Following payment in full of the principal of and interest, and premium, on the Prior Bonds, any remaining amount on deposit in the Refunding Fund shall be transferred by the Escrow Bank on September 5, 2012 to U.S. Bank National Association in its capacity as fiscal agent under the 2012 Agreement, for deposit in the Special Tax Fund established pursuant to Section 4.06 of the 2012 Agreement. The Escrow Bank, in its capacity as Fiscal Agent under the Prior Fiscal Agent Agreement, is hereby directed to apply the amounts in the Refunding Fund to the payment and redemption of the Prior Bonds pursuant to the preceding paragraph. Section 4. Application of Proceeds from Prior Bond Funds. Upon receipt by the Escrow Bank from the Authority of certain amounts on deposit in the funds and accounts established under the Prior Fiscal Agent Agreement as of the date of delivery of the Refunding Bonds, such amount received shall be applied by the Escrow Bank as follows: (a) of amounts on deposit in the Reserve Fund established under the Prior Fiscal Agent Agreement, $ transferred by the Fiscal Agent to the Escrow Bank shall be deposited by the Escrow Bank in the Refunding Fund; and (b) of amounts on deposit in the Special Tax Fund established under the Prior Fiscal Agent Agreement, $ transferred by the Fiscal Agent to the Escrow Bank shall be deposited by the Escrow Bank in the Refunding Fund. After making the foregoing deposits and transfers, any other amounts remaining on deposit in or accruing to any funds and accounts established under the Prior Fiscal Agent Agreement shall be disposed of as provided in the 2012 Agreement. -2- Section 5. Application of Certain Terms of Prior Fiscal Agent Agreement. All of the terms of the Prior Fiscal Agent Agreement relating to the making of payments of the principal of and interest on the Prior Bonds are incorporated in this Agreement as if set forth in full herein. Section 6. Proceedings for Redemption of Prior Bonds. The Authority hereby irrevocably elects to redeem all of the outstanding Prior Bonds in full on September 1, 2012 pursuant to the provisions of Sections 2.03(A)(i) of the Prior Fiscal Agent Agreement. It is hereby acknowledged that the Escrow Bank has already provided notice of redemption (on behalf of and at the direction and expense of the Authority) required under Sections 2.03(D) of the Prior Fiscal Agent Agreement as necessary to comply with Section 9.03(B) of the Prior Fiscal Agent Agreement and to so redeem the Prior Bonds on September 1, 2012. Section 7. Compensation to Escrow Bank. The Authority shall pay the Escrow Bank, promptly upon written request, full compensation for its duties under this Agreement, including out-of-pocket costs such as publication costs, redemption expenses, legal fees (including fees of outside counsel and the allocated costs of internal attorneys) and other costs and expenses relating hereto. Under no circumstances shall amounts deposited in or credited to the Refunding Fund be deemed to be available for said purposes. The obligation of the Authority under this Section 7 to pay compensation already earned by the Escrow Bank and to pay costs and expenses already incurred shall survive termination of this Agreement and shall survive the resignation or removal of the Escrow Bank. Section 8. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no obligation to make any payment or disbursement of any type or incur any financial liability in the performance of its duties under this Agreement unless the Authority shall have deposited sufficient funds therefor with the Escrow Bank. The Escrow Bank may rely and shall be fully protected in acting upon the written instructions of the Authority or its agents relating to any matter or action as Escrow Bank under this Agreement. The Authority covenants to indemnify, defend and hold harmless the Escrow Bank and its officers, employees, directors and agents, solely from funds of the District, against any loss, liability or expense, including legal fees (including the fees of outside counsel and internal attorneys), incurred in connection with the performance of any of the duties of Escrow Bank hereunder, except the Escrow Bank shall not be indemnified against any loss, liability or expense resulting from its negligence or willful misconduct. The indemnity provided in this Section 8 shall survive the termination of this Agreement and shall survive the resignation or removal of the Escrow Bank. The Escrow Bank shall have such duties as are expressly set forth herein and no implied duties shall be read into this Agreement against the Escrow Bank. The Escrow Bank shall not be liable for any act or omission of the Authority under this Agreement or the Prior Fiscal Agent Agreement. The Escrow Bank shall not be liable for the accuracy of any calculations provided as to the sufficiency of moneys deposited with it to pay the principal of and interest and premium on the Prior Bonds. Any bank, federal savings association, national association or trust company into which the Escrow Bank may be merged or with which it may be consolidated shall become the Escrow Bank without any action of the Authority. -3- The Escrow Bank shall have no liability or obligation to the holders of the Prior Bonds or the Refunding Bonds with respect to the payment of debt service by the Authority or with respect to the observance or performance by the Authority of the other conditions, covenants and terms contained in the Prior Fiscal Agent Agreement or the 2012 Agreement (collectively, the "Bond Agreements"), or with respect to the investment of any moneys in any fund or account established, held or maintained by the Authority pursuant to the Bond Agreements. The Escrow Bank may conclusively rely, as to the trust of the statements and correctness of the opinions expressed therein, on any certificate or opinion furnished to it in accordance with this Agreement or the Prior Fiscal Agent Agreement. The Escrow Bank may consult with counsel, whose opinion shall be full and complete authorization and protection to the Escrow Bank if it acts in accordance with such opinion. The Escrow Bank shall not be liable for any error of judgment made in good faith by an authorized officer. Nothing herein should be interpreted to require the Escrow Bank to expend, advance or risk its own funds or otherwise incur financial liability in the performance of any of its duties or the exercise of any of its rights hereunder, if it believes that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured. Any corporation or association succeeding to all or substantially all of the corporate trust business of the Escrow Bank shall be the successor of the Escrow Bank hereunder, without the execution or filing of any paper or any further act on the part of the any of the parties hereto. The Escrow Bank shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Bank be liable for any special indirect or consequential damages. The Escrow Bank shall not be responsible for any of the recitals or representations contained herein. The Escrow Agent may execute any of the trusts or powers under this Agreement or perform any duties under this Agreement either directly or by or through agents, attorneys, custodians or nominees, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed with due care. The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that, the Escrow Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority elects to give the Escrow Agent e-mail or facsimile instructions (or instructions by a similar electronic method) and the Escrow Agent in its discretion elects to act upon such instructions, the Escrow Agent's reasonable understanding of such instructions shall be deemed controlling. The Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Authority agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Agent, including without limitation the risk of the Escrow Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties. -4- Section 9. Resignation of Escrow Bank. The Escrow Bank may at any time resign by giving written notice to the Authority, which notice shall indicate the date on which the resignation is to be effective (the "resignation date"). The Authority shall promptly appoint a successor Escrow Bank by the resignation date. Resignation of the Escrow Bank will be effective only upon acceptance of appointment by a successor Escrow Bank. If the Authority does not appoint a successor Escrow Bank by the resignation date, the Escrow Bank may, at the expense of the Authority, petition any court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Bank. Section 10. Amendment. This Agreement may be amended or modified by the parties hereto, but only if there shall have been filed with the Authority and the Escrow Bank (a) a written opinion of Bond Counsel stating that such amendment will not materially adversely affect the interests of the owners of the Prior Bonds, and that such amendment will not cause interest on the Prior Bonds or the Refunding Bonds to become includable in the gross income of the owners thereof for federal income tax purposes, and (b) a certification of Bond Counsel or an independent certified public accountant that the funds on deposit in the Refunding Fund will be in an amount at all times at least sufficient to make the payments specified in the first sentence of Section 3 hereof. Section 11. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Escrow Bank in trust for the payment and discharge of the principal of, and the interest and any premium on, the Prior Bonds which remains unclaimed for two (2) years after the date when the payment of such principal, interest and premium have become payable, if such moneys were held by the Escrow Bank at such date, shall be repaid by the Escrow Bank to the Authority as its absolute property free from any trust, and the Escrow Bank shall thereupon be released and discharged with respect thereto and the owners of such Prior Bonds shall look only to the Authority for the payment of the principal of, and interest and any premium on, such Prior Bonds. Any right of any Prior Bondowner to look to the Authority for such payment shall survive only so long as required under applicable law. Section 12. Execution in Counterparts. This 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. Section 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and performed in California. -5- IN WITNESS WHEREOF, the Authority and the Escrow Bank have each caused this Agreement to be executed by their duly authorized officers all as of the date first above written. 20009.12:J11748 3-1 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) By Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By Vice President EXHIBIT A SCHEDULE OF PAYMENTS ON PRIOR BONDS Payment Date September 1, 2012 Interest Scheduled Called Principal Principal Total Due Exhibit A Attachment No. 6 Preliminary Official Statements for Crowne Hill, Wolf Creek, and Harveston II GEORGE W. MCFARLIN JAMES F. ANDERSON LAW OFFICES OF McFarlin & Anderson LLP 23282 MILL CREEK DRIVE SUITE 240 LAGUNA HILLS, CALIFORNIA 92653 (949)452-0500 June 27, 2012 Temecula Public Financing Authority 41000 Main Street Temecula, California 92589-9033 FAX (949) 452-0577 Re: Review of Preliminary Official Statements relating toSpecial Tax Refunding Bonds for Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne HilI), Community Facilities District No. 0303 (Wolf Creek) and Community Facilities District No. 0306 (Harveston 11) Ladies and Gentlemen: in connection with the Temecula Public Financing Authority financings for the above captioned Community Facilities Districts, the Preliminary Official Statement and other documents will be presented to the legislative body for approval. City staff, Disclosure Counsel, Bond Counsel, the Financial Advisor and the Underwriter have reviewed the documents and provided their input and comments in order that the documents comply with applicable securities laws requirements. The Authority Board's approval is currently scheduled for consideration at the July 10, 2012, Board meeting. Each Preliminary Official Statement discloses information with respect to among other things (i) the estimated sources and uses of funds, (ii)the use of a portion of the proceeds to refund outstanding bonds of the related District, (iii) the Bonds (interest rate, redemption terms, etc.), (iv) the security for repayment of the Bonds (Special Taxes, foreclosure covenants, etc.), (v) information regarding the applicable District (taxpayers, property ownership and development, assessed property values, overlapping assessment and community facilities districts,etc.), (vi) Bondowners' risks and (vii) various legal matters. The securities laws require that (i) each Preliminary Official Statement not contain any misleading information and (ii) not omit any material information. While it is important that the Board have its staff and other consultants review and provide input regarding the Preliminary Official Statements, the Preliminary Official Statements are the Authority's documents; and ultimate responsibility for the Preliminaryand final Official Statements rests with the legislative body. While staff, Disclosure Counsel and the consultants have discussed a range of topics relating to the financings so that the securities laws requirements are met, there is the possibility that, as elected officials, you might be aware of something or have a different perspective on something that should be considered and disclosed in the Preliminary Official Statement Some of the questions Board members and staff may ask, and may review the Preliminary Official Statements to be sure each discloses information concerning answers to those questions, include: McFarlin & Anderson LLP Temecula Public Financing Authority June 27, 2012 Page 2 of 2 1. Is there information about a District, the special tax revenues or the development within a District that would be important for an investor to know before purchasing the applicable Bonds? 2. Is there any pending or threatened litigation against the Authority, the City or the applicable District that could have a negative impact on the finances of any of them? 3. Are there any circumstances that exist or that are now unfolding that could place a demand on the Authority's finances with respect to a District, or, for that matter even though not security for the Bonds and not directly material to the repayment of the Bonds, circumstances that could create budget difficulties for the Authority or the City that are not described in a Preliminary Official Statement and that should be discussed beforea Preliminary Official Statement is finalized? Since you have a different perspective and knowledge base than members of the financing team, it is important that you review each Preliminary Official Statement and that your input and questions be considered in finalizing the documents. Staff and the financing team are available to review and respond to questions and comments you may have with respect to information included in these documents. Please review, in particular, the sections of each Preliminary Official Statement captioned "PLAN OF FINANCE" and "THE COMMUNITY FACILITIES DISTRICT' with a view as to whether all material information you are aware of is described accurately, whether anything you think might be importanthas been omitted, or whether there are risks that might have been omitted. If you have any questions or suggestions, please contact me at 949/452-0500, or you may call Peter Thorson at 213/253-0216. Sincerely, James F. Anderson cc: Genie Wilson, Chief Financial Officer Mr. Peter Thorson, Esq, Richards, Watson & Gershon Mr. Paul Thimmig, Esq., Quint & Thimmig LLP g I PRELIMINARY OFFICIAL STATEMENT DATED JULY 2012 c NEW ISSUE RATING S&P: o (See "RATING" herein.) u In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications 4 described herein, under existing law, the interest on the 2012 Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item offax preference in computing the federal alternative minimum fax for individuals and 7-0 • corporations under the Internal Revenue Code of 986, as amended, but is taken into account in computing an adjustment used in determining w the federal alternative minimum fax for certain corporations. In the further opinion of Bond Counsel, such interest is exempt from p co California personal income taxes. See "LEGAL MATTERS— Tax Exemption" herein. .b $10,390,000' = TEMECULA PUBLIC FINANCING AUTHORITY E 3 COMMUNITY FACILITIES DISTRICT NO. 03-01 Ts, SPECIAL TAX REFUNDING BOCROWNE LNDS, SERIES 2012 cn c Dated: Date of Delivery Due: September 1, as on the inside cover t A The Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax Refunding Bonds, :: Series 2012 (the "2012 Bonds") are being issued under the Mello-Roos Community Facilities Act of 1982, Article 11, commencing with 3'1 Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, and a Fiscal Agent Agreement, dated as ;~ 4iof July 1, 2003, by and between the Temecula Public Financing Authority (the "Authority") and U.S. Bank National Association, as Fiscal 73 Agent, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, and by the Second c 0 Supplemental Fiscal Agent Agreement dated as of August 1, 2012 (collectively, the "Fiscal Agent Agreement"), and are payable from proceeds of Special Taxes (as defined herein) levied on property within the Temecula Public Financing Authority Community Facilities b y District No. 03-01 (Crowne Hill) (the "District") according to the rate and method of apportionment of special tax approved by the a = qualified electors of the District and by the Board of Directors of the Authority, acting as the legislative body of the District. The 2012 Bonds are being issued (i) to fund, together with other available moneys, the defeasance and redemption of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax Bonds, Series 2003-A (the LE "Prior Bonds"), (ii) to pay the costs of issuing the 2012 Bonds and (iii) to establish a Reserve Fund for the 2012 Bonds. See "PLAN OF e I FINANCE" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. g 43 Interest on the 2012 Bonds is payable on March 1, 2013, and semi-annually thereafter on March 1 and September 1. The 2012 o o Bonds will be issued in denominations of $5,000 or integral multiples in excess thereof. The 2012 Bonds, when delivered, will be initially c registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as a a securities depository for the 2012 Bonds as described herein under "THE 2012 BONDS — Book-Entry and DTC." E i3 The 2012 Bonds are subject to optional redemption, mandato ryredemPtion from prepayments of Special Taxes and mandatory 0 .z o g sinking payment redemption as described herein. t 8 THE 2012 BONDS, THE INTEREST THEREON, AND ANY PREMIUM PAYABLE ON THE REDEMPTION OF ▪ § ANY OF THE 2012 BONDS, ARE NOT AN INDEBTEDNESS OF THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT y SET FORTH IN THE FISCAL AGENT AGREEMENT), THE STATE OF CALIFORNIA (THE "STATE") OR ANY OF ITS g e POLITICAL SUBDIVISIONS, AND NEITHER THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT SET FORTH IN ,a ° THE FISCAL AGENT AGREEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE 2012 BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT >, (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) OR THE STATE OR ANY i POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE • p SPECIAL TAXES LEVIED WITHIN THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 a E BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY BUT ARE LIMITED 8 0OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED IN cTHE FISCAL AGENT AGREEMENT. This cover a contains certain In ormatlon orquick reference only.It is not a summaryofthe issue. Potential investors �▪ `� P� l f l co 2 must read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to .E �, the 2012 Bonds. Investment in the 2012 Bonds involves risks which may not be appropriate for some investors. See "BONDOWNERS' •h) o t RISKS" herein for a discussion of special risk factors that should be considered In evaluating the investment quality of the 2012 Bonds. ,� 1 b MATURITY SCHEDULE i~ o (See Inside Cover) ^) Please refer to the inside cover page for a summary of the principal amounts, interest rates, reoffering yields and CUSIP® o numbers for the 2012 Bonds. The 2012 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Quint & Thimmig LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. McFarlin & Anderson LLP, Laguna Hills, California is acting as Disclosure Counsel. Certain legal matters will be passed on for the Authority and the District by p 9, Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, acting as general counsel to the Authority, and for the m Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, Califomia. It is anticipated that the 2012 .E g Bonds, in book-entry form, will be available through the facilities of DTC on or about August_, 2012. . N STONE & YOUNGBERG g o y A DIVISION OF STIFELNICOLAUS o Preliminary, subject to change. Dated: [July 1, 2012 MATURITY SCHEDULE $10,390,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) SPECIAL TAX REFUNDING BONDS, SERIES 2012 $ Serial Bonds Base CUSIP® No. Maturity Principal Interest CUSIP® Maturity Principal Interest CUSIP® (September 1) Amount Rate Price No. (September 1 Amount Rate Price Lk, 2013 $ % % 2020 $ % % 2014 2021 2015 2022 2016 2023 2017 2024 2018 2025 2019 $ % Terni Bonds due September 1, 20 Yield % CUSIPt No. $_ % Term Bonds due September 1, 2033 Yield % CUSIPt No. t CUSIP® A registered trademark of the American Bankers Association. Copyright 0 1999-2012 Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. CUSIP® data herein is provided by Standard & Poor's CUSIP® Service Bureau. 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. The Authority, the District and the Underwriter take no responsibility for the accuracy of such numbers. Preliminary, subject to change. TEMECULA PUBLIC FINANCING AUTHORITY BOARD OF DIRECTORS Charles W. Washington, Chairperson Jeff Comerchero, Member Maryann Edwards, Member Michael S. Naggar, Member Ron Roberts, Member AUTHORITY/CITY STAFF Bob Johnson, Executive Director and City Manager of the City of Temecula Genie Wilson, Authority Treasurer and Chief Financial Officer of the City of Temecula Susan Jones, A iithority Secretary and City Clerk of the City of Temecula SPECIAL SERVICES Bond Counsel Quint & Thimmig LLP San Francisco, California Authority Counsel Richards, Watson & Gershon A Professional Corporation Los Angeles, California Disclosure Counsel McFarlin & Anderson LLP Laguna Hills, California Special Tax Consultant Willdan Financial Services Temecula, California Financial Advisor to the Authority Fieldman, Rolapp & Associates Irvine, California Fiscal Agent and Escrow Agent U.S. Bank National Association Los Angeles, California GENERAL INFORMATION ABOUT THE OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the 2012 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the 2012 Bonds. All summaries of the documents referred to in this Official Statement 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. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Authority, in any press release by the Authority and in any oral statement made with the approval of an authorized officer of the Authority or any other entity described or referenced herein, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend," and similar expressions identify "forward-looking statements" within the meaning of the 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 subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward- looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results and those differences may be material. 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, give rise to any implication that there has been no change in the affairs of the Authority or any other entity described or referenced herein since the date hereof. The Authority does not plan to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. Limited Offering. No dealer, broker, salesperson or other person has been authorized by the Authority to give any information or to make any representations in connection with the offer or sale of the 2012 Bonds other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any 2012 Bonds nor shall there be any sale of the 2012 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Involvement of Underwriter. The Underwriter has submitted the following statement 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. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 2012 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 Underwriter may offer and sell the 2012 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof and said public offering prices may be changed from time to time by the Underwriter. THE 2012 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE 2012 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. TABLE OF CONTENTS INTRODUCTION 1 General 1 The Authority 1 The Community Facilities District 2 Purpose of the 2012 Bonds 2 Sources of Payment for the 2012 Bonds 2 Assessed Values 3 Tax Exemption 4 Risk Factors Associated with Purchasing the 2012 Bonds 4 Forward Looking Statements 4 Professionals Involved in the Offering 4 Other Information 5 CONTINUING DISCLOSURE 5 PLAN OF FINANCE 6 ESTIMATED SOURCES AND USES OF FUNDS 6 THE 2012 BONDS 6 Description of the 2012 Bonds 6 Debt Service Schedule 8 Terms of Redemption 9 Transfer and Exchange of Bonds 11 Book -Entry and DTC 12 SECURITY FOR THE 2012 BONDS 12 General 12 Special Taxes 12 Rate and Method 13 Special Taxes and the Teeter Plan 17 Proceeds of Foreclosure Sales 17 Special Tax Fund 18 Bond Fund 19 Reserve Fund 19 Administrative Expense Fund 20 Investment of Moneys in Funds 20 Additional Bonds for Refunding Purposes Only 20 THE AUTHORITY 21 Authority for Issuance 21 THE COMMUNITY FACILITIES DISTRICT 22 General 22 Special Tax Levy by Land Use Category 23 Special Tax Collections 24 Property Ownership 25 Estimated Assessed Values 25 Direct and Overlapping Debt 27 Overlapping Assessment and Community Facilities Districts 30 Other Overlapping Direct Assessments 30 Estimated Value -to -Lien Ratios 30 BONDOWNERS' RISKS 34 Risks of Real Estate Secured Investments Generally 34 Special Taxes Are Not Personal Obligations34 The 2012 Bonds Are Limited Obligations of the Authority for the District 34 Property Values 34 Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property 35 Economic Uncertainty 36 Disclosure to Future Purchasers 36 Hazardous Substances 36 State Budget 37 Levy and Collection of the Special Tax; Insufficiency of the Special Tax 37 Exempt Properties 38 Depletion of Reserve Fund 38 Potential Delay and Limitations in Foreclosure Proceedings 39 Bankruptcy and Foreclosure Delay 40 Payments by FDIC and Other Federal Agencies 40 Payment of Special Tax Not a Personal Obligation of the Property Owners 42 Factors Affecting Parcel Values and Aggregate Value 42 No Acceleration Provisions 43 Collection of Special Tax 43 Right to Vote on Taxes Act 43 Ballot Initiatives and Legislative Measures44 Limited Secondary Market 44 Loss of Tax Exemption 45 IRS Audit of Tax -Exempt Bond Issues 45 Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption 45 Limitations on Remedies 45 LEGAL MATTERS 46 Legal Opinion 46 Tax Exemption 46 No Litigation 46 No General Obligation of the Authority or APPENDIX A — General Information About the the District 46 City of Temecula A-1 RATING 47 UNDERWRITING 47 PROFESSIONAL FEES 47 MISCELLANEOUS 47 APPENDIX B — Rate and Method of Apportionment of Special Tax Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) B-1 APPENDIX C — Summary of Certain Provisions of the Fiscal Agent Agreement .. C-1 APPENDIX D — Form of Authority Continuing Disclosure Agreement D-1 APPENDIX E — Form of Opinion of Bond Counsel E-1 APPENDIX F — Book -Entry System F-1 APPENDIX G — Boundary Map of the Community Facilities District G-1 REGIONAL LOCATION MAP [Regional Map to be provided by Stone & Youngberg] AERIAL MAP [Aerial Map provided by 1 OFFICIAL STATEMENT $10,390,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) SPECIAL TAX REFUNDING BONDS, SERIES 2012 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 2012 Bonds to potential investors is made only by means of the entire Official Statement. General This Official Statement, including the cover page and appendices hereto, is provided to furnish information regarding the issuance and sale by the Temecula Public Financing Authority (the "Authority"), on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) (the "District" or the "Community Facilities District") of $10,390,000* aggregate principal amount of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax Refunding Bonds, Series 2012 (the "2012 Bonds"). The 2012 Bonds are issued pursuant to the Act (as defined below), Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law") and a Fiscal Agent Agreement, dated as of July 1, 2003, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, and by the Second Supplemental Fiscal Agent Agreement dated as of August 1, 2012 (collectively, the "Fiscal Agent Agreement"), by and between the Authority, for and on behalf of the District, and U.S. Bank National Association, as Fiscal Agent (the "Fiscal Agent"). See "THE AUTHORITY — Authority for Issuance" herein. The 2012 Bonds are on a parity with the Authority's Community Facilities District No. 03-01 Special Tax Bonds, Series 2005-B (the "2005 Bonds"), issued in the aggregate principal amount of $3,865,000, of which as of June 1, 2012, [$3,290,000] aggregate principal amount are outstanding. The Authority estimates that in addition to $45,000 of 2005 Bonds which mature on September 1, 2012, the Authority will redeem approximately [$745,000] of 2005 Bonds on September 1, 2012 with available moneys. The Authority may issue additional bonds secured on a parity with the 2005 Bonds and the 2012 Bonds for refunding purposes only. The 2005 Bonds, 2012 Bonds and any parity bonds are referred to herein as the "Bonds." Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings given such terms in the Fiscal Agent Agreement, some of which are set forth in Appendix C hereto "Summary of Certain Provisions of the Fiscal Agent Agreement." The Authority The Authority was formed on April 10, 2001, pursuant to a Joint Exercise of Powers Agreement between the City of Temecula, California (the "City") and the Redevelopment Agency of the City of Temecula, in accordance with Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California. See "THE AUTHORITY" and Preliminary, subject to change. 1 "THE COMMUNITY FACILITIES DISTRICT." The Community Facilities District The District was formed and established by the Board of Directors of the Authority on March 25, 2003, pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the California Government Code, and referred to herein as the "Act"), following a public hearing and a landowner election at which the then qualified electors of the District, by more than a two-thirds vote, authorized the District to incur bonded indebtedness in the aggregate not -to -exceed amount of $25,000,000 and approved the levy of special taxes (the "Special Taxes") on certain real property located in the District. Once duly established, a community facilities district is a legally constituted governmental entity established for the purpose of financing specific facilities and services within defined boundaries. Subject to approval by a two-thirds vote of the qualified voters within a community facilities district and compliance with the provisions of the Act, a community facilities district may issue bonds and may levy and collect special taxes to repay such bonded indebtedness and interest thereon. The District consists of land located in the easterly portion of the City of Temecula, in the south- westerly portion of the County of Riverside (the "County"). The District is bounded generally on the west by Butterfield Stage Road, on the north by Pauba Road and by Temecula Parkway on the south. The property within the District is governed by the Butterfield Stage Ranch Specific Plan. 796 homes have been constructed in the District. The District is part of an approximately [1,045] residential unit master -planned community called Crowne Hill. The District encompasses Phases 2, Phase 2B and Phase 3 of Crowne Hill, consisting of 796 completed homes of [approximately 1,045] completed homes within Crowne Hill. Included within Crowne Hill (but not within the boundaries of the District) is an elementary school, two neighborhood parks (approximately 3.5 acres and 5.2 acres, respectively), plus many other open space/greenbelt/slope areas and five private homeowner parks Homes at the southerly end of the master -planned community are occupied and are not part of the District. Purpose of the 2012 Bonds The 2012 Bonds are being issued (i) to fund, together with other available moneys, the defeasance and redemption of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax Bonds, Series 2003-A (the "Prior Bonds"), (ii) to pay the costs of issuing the 2012 Bonds and (iii) to establish a Reserve Fund for the 2012 Bonds. See "PLAN OF FINANCE" herein. Sources of Payment for the 2012 Bonds The Bonds are secured by and payable from a first pledge of "Special Tax Revenues," defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes received by the Authority, including any scheduled payments thereof and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Special Tax Revenues" do not include any penalties collected in connection with delinquent Special Taxes which amounts may be forgiven or disposed of by the Authority in its discretion, and if collected, will be used in a manner consistent with the Act. "Special Taxes" are defined in the Fiscal Agent Agreement as the special taxes levied within the District pursuant to the Act, the ordinance adopted by the legislative body of the District providing for the levy of the Special Taxes and the Fiscal Agent Agreement. The Special Taxes will be levied in accordance with the Rate and Method of 2 Apportionment of Special Tax (the "Rate and Method") recorded as a lien on the Property pursuant to the Notice of Special Tax Lien. Under the Fiscal Agent Agreement, Special Tax Revenues include amounts levied to pay Administrative Expenses. In accordance with the Fiscal Agent Agreement, such amounts will not be paid to the Fiscal Agent, but will be deposited in the Administrative Expense Fund held by the Treasurer and such amounts are not pledged to the payment of the 2012 Bonds. Pursuant to the Act, the Rate and Method, the Resolution of Formation (as defined herein) and the Fiscal Agent Agreement, so long as any Bonds are outstanding, the Authority will annually levy the Special Tax against the land within the District not exempt from Special Taxes under the Act and the Rate and Method ("Taxable Property") in accordance with the proceedings for the authorization and issuance of the Bonds and the Rate and Method, to make provision for the collection of the Special Tax in amounts which will be sufficient to (a) (i) pay debt service due on all Bonds, for the calendar year that commences in such Fiscal Year; (ii) pay Administrative Expenses; and (iii) pay any amounts required to replenish any bond or interest reserve funds for any Outstanding Bonds; less (b) a credit for funds available to reduce the annual Special Tax levy under the Fiscal Agent Agreement. See "SECURITY FOR THE 2012 BONDS — Special Taxes and the Teeter Plan" herein. The Rate and Method establishes two zones within the District. The Rate and Method exempts from the Special Tax up to 93.41 acres of Public Property and/or Property Owner's Association Property within Zone 1 of the District and up to 30.43 acres of Public Property and/or Property Owner's Association Property within Zone 2 of the District. In Fiscal Year 2012-13, there are approximately [24.82] acres of exempt property in Zone 1 and an aggregate of approximately [ 12.6] acres of exempt property in Zone 2. See "SECURITY FOR THE 2012 BONDS — Rate and Method" and "BONDOWNERS' RISKS — Exempt Properties." The Authority has also covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Special Tax. For a more detailed description of the foreclosure covenant, see "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY OR THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE FISCAL AGENT AGREEMENT. Assessed Values The gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12 is $[279,383,354], which is approximately (a) [20.42]' times the sum of the principal amount of the 2005 Bonds estimated to be outstanding as of June 1, 2012, and the 2012 Bonds and (b) [19.56]' times the gross combined overlapping tax and assessment debt as set forth in Table 7. In addition as indicated above, the Authority estimates that in addition to $45,000 of 2005 Bonds which mature on September 1, 2012, the Authority will redeem approximately [$745,000] of 2005 Bonds on September 1, 2012 with available moneys. The gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12 of $[279,383,354], is approximately (a) [ ]' times the sum of the principal 'Preliminary, subject to change. 'Preliminary, subject to change. 3 amount of the 2005 Bonds estimated to be outstanding after the September 1, 2012, and the 2012 Bonds. The gross assessed valuation may not be representative of the actual market value of property in the District because Article XIIIA of the California Constitution limits any increase in assessed value to no more than 2% a year unless a property is sold or transferred. See "THE COMMUNITY ITY FACILITIES DISTRICT — Estimated Assessed Value -to -Lien Ratios" and `BONDOWNERS' RISKS — Land Values." Tax Exemption In the opinion of Bond Counsel, subject, however, to certain qualifications described herein, under existing law, interest on the 2012 Bonds is excludable from gross income of the Bondowners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the 2012 Bonds. See "LEGAL MATTERS — Tax Exemption" herein. Risk Factors Associated with Purchasing the 2012 Bonds Investment in the 2012 Bonds involves risks that may not be appropriate for some investors. See the section of this Official Statement entitled "BONDOWNERS' RISKS" for a discussion of certain risk factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2012 Bonds. Forward Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" herein. 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. NEITHER THE AUTHORITY NOR THE DISTRICT PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will serve as the fiscal agent, paying agent, registrar and authentication and transfer agent for the 2012 Bonds, and will perform the other functions required of it under the Fiscal Agent Agreement. Quint & Thimmig LLP, San Francisco, California, is serving as Bond Counsel to the Authority. McFarlin & Anderson LLP, Laguna Hills, California, is acting as Disclosure Counsel to the Authority. Stradling Yocca Carlson & Rauth, Newport Beach, California, is acting as Underwriter's Counsel. 4 Bond Counsel and Disclosure Counsel have served and continue to serve as counsel to the Underwriter in other transactions. Willdan Financial Services, Temecula, California, acted as Special Tax Consultant for the Authority. Fieldman, Rolapp and Associates, Irvine, California, acts as Financial Advisor to the Authority. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Fiscal Agent, the Underwriter and the Special Tax Consultant is contingent upon the sale and delivery of the 2012 Bonds. Payment of the fees and expenses of the rating agency is not contingent upon the sale and delivery of the 2012 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 2012 Bonds, certain sections of the Fiscal Agent Agreement, security for the 2012 Bonds, special risk factors, the Authority, the District and other information are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the 2012 Bonds, the Fiscal Agent Agreement, and other resolutions and documents are qualified in their entirety by reference to the complete texts of the 2012 Bonds, the Fiscal Agent Agreement, such resolutions and other documents. All such descriptions are further qualified in their entirety by reference to laws and to principles of equity relating to or affecting generally the enforcement of creditors' rights. Copies of such documents may be obtained upon written request from the Temecula Public Financing Authority, 41000 Main Street, Temecula, California 92590 Attention: Treasurer. The Authority may charge for copying and mailing any documents requested. CONTINUING DISCLOSURE The Authority. The Authority has covenanted for the benefit of the owners of the 2012 Bonds to provide annually certain financial information and operating data relating to the 2012 Bonds, the District, ownership and development of the property in the District which is subject to the Special Tax, the occurrence of delinquencies in payment of the Special Tax, and the status of foreclosure proceedings, if any, respecting Special Tax delinquencies (the "Authority Annual Report"), and to provide notice of the occurrence of certain enumerated events. The Authority Annual Report is to be provided by the Authority not later than eight months after the end of the Authority's fiscal year (which currently would be March 1), commencing with the report due March 1, 2013. The Authority, the City and related entities have never failed to comply in all material respects with any previous undertakings with regard to Securities and Exchange Commission Rule 15c2 -12(b)(5) (the "Rule") to provide annual reports or notices of material events. [Confirm; discuss documentation of review of timing and content of filings for all City, RDA and Authority financings.] Filing of Annual Reports; Forms of Reports. Each Authority Annual Report will be filed by the Special Tax Consultant, as dissemination agent for the Authority with the Electronic Municipal Market Access System (EMMA) of the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with the Rule; provided, however, a default under the Authority Continuing Disclosure Agreement will not, in itself, constitute a default under the Fiscal Agent Agreement, and the sole remedy under the Authority Continuing Disclosure Agreement in the event of any failure of the Authority to comply with the Authority Continuing Disclosure Agreement will be an action to compel performance. For a complete listing of items of information which will be provided in the Authority Annual Reports, see APPENDIX D — "Form of Authority Continuing 5 Disclosure Agreement." PLAN OF FINANCE Current Refunding of Prior Bonds. A portion of the proceeds of the 2012 Bonds will be deposited into an escrow fund established under an escrow agreement, dated as of August 1, 2012 (the "Escrow Agreement"), by and between the Authority and U.S. Bank National Association, as escrow agent (the "Escrow Agent"). Amounts deposited under the Escrow Agreement will be held in cash uninvested in an amount sufficient to pay on September 1, 2012, (i) the interest due on the Prior Bonds, (ii) the principal of the Prior Bonds maturing on September 1, 2012, and (iii) the principal of the Prior Bonds maturing on and after September 1, 2013, at a redemption price equal to 102% of the principal amount of such Prior Bonds. As a result of the deposit and application of funds as provided for in the Escrow Agreement, the obligation to make payments of the principal of and interest on the Prior Bonds will be defeased as of the closing date. ESTIMATED SOURCES AND USES OF FUNDS The proceeds from the sale of the 2012 Bonds will be deposited into the respective accounts and funds established by the Authority under the Fiscal Agent Agreement, as follows: Sources: Principal Amount of 2012 Bonds $ Other Available Funds Less: Underwriter's Discount Total Sources $ Uses: Deposit into Refunding Fund $ Deposit into Improvement Fund Deposit into Reserve Fund Deposit into Costs of Issuance Fund (1) [Deposit into Special Tax Fund] Deposit into Administrative Expense Fund Total Uses $ (1) Includes, among other things, rating agency fees, the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Special Tax Consultant and the Fiscal Agent, the escrow agent, the cost of printing the Preliminary and final Official Statements and reimbursement to the Authority. THE 2012 BONDS Description of the 2012 Bonds The 2012 Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semi-annually on each March 1 and September 1, commencing on March 1, 2013 (each an "Interest Payment Date"), and will mature in the amounts and on the dates set forth on the inside cover page hereof. The 2012 Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple thereof and when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the 2012 Bonds. Ownership interests in the 2012 Bonds may be purchased in book -entry form only, in denominations of $5,000 or any integral multiple thereof within a 6 single maturity. So long as the 2012 Bonds are held in book -entry form, principal of, premium, if any, and interest on the 2012 Bonds will be paid directly to DTC for distribution to the beneficial owners of the 2012 Bonds in accordance with the procedures adopted by DTC. See "THE 2012 BONDS — Book -Entry and DTC." In the event that the 2012 Bonds are not registered in the name of Cede & Co., as nominee of DTC or another eligible depository, both the principal and redemption price, including any premium, of the 2012 Bonds shall be payable by check in lawful money of the United States of America upon surrender of the 2012 Bonds at the principal office of the Fiscal Agent as specified in the Fiscal Agent Agreement; and interest on the 2012 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first-class mail to the registered owner thereof at such registered owner's address as it appears on the Bond Register maintained by the Fiscal Agent at the close of business on the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such day is a Business Day (the "Record Date"), or by wire transfer to an account within the United States made on such Interest Payment Date upon written instructions of any Bondowner of $1,000,000 or more in aggregate principal amount of 2012 Bonds received before the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such 2012 Bonds are transferred to a new Bondowner. The registered owner of any 2012 Bond will be the person or persons in whose name or names a 2012 Bond is registered on the registration books kept for that purpose by the Fiscal Agent in accordance with the terms of the Fiscal Agent Agreement (initially being DTC with respect to all of the 2012 Bonds). So long as the 2012 Bonds are in book -entry only form, all references in this Official Statement to the owners or holders of the 2012 Bonds mean DTC and not the Beneficial Owners. The 2012 Bonds will bear interest at the rates set forth on the cover hereof payable on the Interest Payment Dates in each year. Interest will be calculated on the basis of a 360 -day year comprised of twelve 30 -day months. Each 2012 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as defined above) preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the date of issuance of the 2012 Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. The principal of, and interest and premium, if any, payable on the 2012 Bonds will be payable when due, by wire transfer of the Fiscal Agent to DTC, which will in turn remit such principal, interest and premium, if any, to its Participants (as described in APPENDIX F — "Book -Entry System"), which Participants will in turn remit such principal, interest and premium, if any, to the Beneficial Owners (as defined in APPENDIX F — "Book -Entry System") of the 2012 Bonds as described in APPENDIX F — "Book -Entry System." 7 Debt Service Schedule The following table presents the annual debt service on the 2012 Bonds (including sinking fund redemptions), assuming that there are no optional redemptions or mandatory redemptions from prepayments of Special Taxes. Table 1 Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Debt Service Schedule 2005 2012 2012 Aggregate Year Ending Bonds Debt Bonds Bonds Debt September 1 Servicer) Principal Interest Service 2013 $ $ $ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 (1) $ Excludes $745,000 aggregate principal amount of 2005 Bonds, which the Authority estimates it will redeem on September I, 2012 with available moneys and $45,000 of principal amount of 2005 Bonds which matures on September 1, 2012. 8 Terms of Redemption The 2012 Bonds are subject to redemption upon the circumstances, on the dates and at the prices set forth as follows. Optional Redemption. The 2012 Bonds [maturing on and after September 1, 20 ] are subject to optional redemption prior to their stated maturity on any Interest Payment Date [occurring on or after September 1, 20_,] as a whole or in part, among maturities so as to maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: [Discuss redemption terms:] Redemption Date Redemption Price [Any Interest Payment Date from March 1, 2013 to and including March 1, September 1, 20_ and March 1, 20_ September 1, 20_ and March 1, 20_ September 1, 20_ and any Interest Payment Date thereafter Mandatory Sinking Payment Redemption. The 2012 Bonds maturing on September 1, 20_, are subject to mandatory sinking payment redemption in part on September 1, 20_, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) 20 20_ (maturity) Sinking Payments The 2012 Bonds maturing on September 1, 2033, are subject to mandatory sinking payment redemption in part on September 1, 20_, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: 9 Redemption Date (September 1) 20 2033 (maturity) Sinking Payments The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain the substantially level debt service on the 2012 Bonds as a result of any prior partial redemption of the 2012 Bonds pursuant to an optional redemption or mandatory redemption from prepaid Special Taxes, as specified in writing by the Treasurer to the Fiscal Agent. Redemption from Special Tax Prepayments.* Special Tax Prepayments and any corresponding transfers from the Reserve Fund shall be used to redeem the 2012 Bonds on the next Interest Payment Date for which notice of redemption can timely be given, by lot and allocated among maturities of the 2012 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Date Redemption Price Any Interest Payment Date from March 1, 2013 to and including March 1, 2020 103% September 1, 2020 and March 1, 2021 102 September 1, 2021 and March 1, 2022 101 September 1, 2022 and any Interest Payment Date thereafter 100 Purchase In Lieu of Redemption. In lieu of any redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2012 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may 2012 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2012 Bonds were to be redeemed in accordance with the Fiscal Agent Agreement. Notice of Redemption. The Fiscal Agent shall cause notice of any redemption to be mailed by first-class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories, to one or more Information Services, and to the respective registered Bondowners of any 2012 Bonds designated for redemption, at their addresses appearing on the bond registration books in the principal office of the Fiscal Agent; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of the 2012 Bonds. ' Preliminary, subject to change. 10 Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2012 Bonds are to be called for redemption, shall designate the CUSIP® numbers and Bond numbers of the 2012 Bonds to be redeemed by giving the individual CUSIP® number and Bond number of each 2012 Bond to be redeemed or shall state that all 2012 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2012 Bonds of one or more maturities have been called for redemption, shall state as to any 2012 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2012 Bonds be then surrendered at the principal office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on the 2012 Bonds called for redemption will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any optional redemption of the 2012 Bonds or any redemption of 2012 Bonds from special tax prepayments, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2012 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2012 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the 2012 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2012 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the 2012 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of the Fiscal Agent Agreement. Partial Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds or any given portion thereof, the Fiscal Agent shall select the Bonds to be redeemed, from all Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify Bonds to be redeemed so as to maintain, as much as practicable, the same debt service profile for the Bonds as in effect prior to such redemption unless otherwise specified in the Fiscal Agent Agreement), and by lot within a maturity in any manner which the Fiscal Agent deems appropriate. Upon surrender of 2012 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the registered Bondowner, at the expense of the Authority, a new 2012 Bond or 2012 Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2012 Bond or 2012 Bonds. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2012 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2012 Bonds so called shall cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date for such 2012 Bonds. Transfer and Exchange of Bonds Any 2012 Bond may, in accordance with the terms of the Fiscal Agent Agreement, be transferred upon the books required to be kept pursuant to the Fiscal Agent Agreement by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2012 Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Fiscal Agent. 2012 Bonds may be exchanged at the principal office of the Fiscal Agent for a like aggregate principal amount of 2012 Bonds of authorized denominations and of the same series and maturity. The Fiscal Agent shall collect from the Bondowner requesting such exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. 11 No transfer or exchange shall be required to be made of any 2012 Bonds (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Book -Entry and DTC DTC will act as securities depository for the 2012 Bonds. The 2012 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 fully registered 2012 Bond certificate will be issued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. All references in this Official Statement to the Bondowners or an owner of 2012 Bonds shall mean DTC or its designee and not the beneficial owners of the 2012 Bonds. See APPENDIX F — "Book -Entry System." SECURITY FOR THE 2012 BONDS General The 2012 Bonds are secured by a first pledge of all of the Special Tax Revenues and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. Pursuant to the Act and the Fiscal Agent Agreement, and subject to the Maximum Special Taxes that may be levied in any Fiscal Year under the Rate and Method and the Act, the Authority will annually levy in each Fiscal Year the Special Taxes in an amount required for the payment of principal of and interest on any outstanding 2012 Bonds becoming due and payable during the calendar year commencing in each Fiscal Year, including any necessary replenishment or expenditure of the Reserve Fund for the 2012 Bonds and an amount estimated to be sufficient to pay the Administrative Expenses during such year. The Special Tax Revenues and all deposits into said funds (until disbursed as provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose. Amounts in the Administrative Expense Fund, the Improvement Fund, and the Cost of Issuance Fund are not pledged to the repayment of the 2012 Bonds. The facilities financed with proceeds of the Prior Bonds or the 2005 Bonds are not in any way pledged to pay the debt service on the 2012 Bonds. Any proceeds of condemnation or destruction of any portion of such facilities are not pledged to pay the debt service on the 2012 Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement. Special Taxes The Authority has covenanted in the Fiscal Agent Agreement to 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. The Fiscal Agent Agreement provides that the Special Taxes are payable and will be collected in the same manner and at the same time and in the same installment as the general taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after 12 delinquency as do the general taxes on real property; provided, the Authority may provide for direct collection of the Special Taxes from property owners in certain circumstances. Because the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the 2012 Bonds. Although the Special Tax, when levied, will constitute a lien on parcels subject to taxation within the District, it does not constitute a personal indebtedness of the owners of property within the District. There is no assurance that the owners of real property in the District will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. See "BONDOWNERS' RISKS" herein. NEITHER THE FAITH AND CREDIT OF THE AUTHORITY NOR THE TAXING POWER OF THF, AUTHORITY (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM SOURCES PLEDGED IN THE FISCAL AGENT AGREEMENT. Rate and Method General. The Special Tax is levied and collected according to the Rate and Method set forth in APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne I -fill) Rate and Method of Apportionment of Special Tax." The qualified electors of the District approved the Rate and Method on March 25, 2003. Capitalized terms used in the following paragraphs but not defined herein have the meanings given them in the Rate and Method. The Rate and Method provides the means by which the Board of Directors of the Authority may annually levy the Special Taxes within the District up to the Maximum Special Tax. The Rate and Method provides that the Annual Special Tax may not be levied after Fiscal Year 2043-44. Special Tax Requirement. Annually, at the time of levying the Special Tax for the District, the Authority will determine the amount of money to be collected from Taxable Property in the District (the "Special Tax Requirement"), which will be the amount required in any Fiscal Year to pay the following: (i) the annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) periodic cost on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) Administrative Expenses; (iv) an amount equal to any anticipated shortfall due to Special Tax delinquency in the prior Fiscal Year; and 13 (v) any amount required to establish or replenish any reserve funds for the outstanding Bonds; less (vi) a credit for funds available to reduce the annual Special Tax levy as determined pursuant to the Fiscal Agent Agreement. Developed and Undeveloped Property; Exempt Property. The Rate and Method declares that for each Fiscal Year, all Parcels of Taxable Property within the District of each Zone shall be classified as either Developed Property, Approved Property, Undeveloped Property, Public Property and/or Property Owner's Association Property that is not Exempt Property and shall be subject to the levy of Special Taxes in accordance with the Rate and Method. (i) "Taxable Property" means all Parcels in the District which have not prepaid their respective Special Taxes in their entirety pursuant to the Rate and Method, or are not exempt from the Special Tax pursuant to law or the Rate and Method. (ii) "Developed Property" means all Parcels of Taxable Property, not classified as Approved Property, Undeveloped Property, Public Property and/or Property Owner's Association Property that are not Exempt Property pursuant to the provisions of the Rate and Method, (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) a building permit for new construction has been issued prior to April 1st preceding the Fiscal Year in which the Special Tax is being levied. (iii) "Approved Property" means for the any Fiscal Year, all Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) for which a building permit was not issued prior to the April 1st preceding the Fiscal Year in which the Special Tax is being levied. (iv) "Public Property" means any property within the boundary of the District which, as of January 1st of the preceding Fiscal Year for which the Special Tax is being levied is used for rights-of- way or any other purpose and is owned by, dedicated to, or irrevocably offered for dedication to the federal government, the State of California, the County, City or any other local jurisdiction, provided, however, that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. (v) "Undeveloped Property" means all Taxable Property not classified as Developed Property, Approved Property, Public Property and/or Property Owner Association Property that is not Exempt Property (as defined in the Rate and Method). (vi) "Zones" means Zone 1 or Zone 2 as geographically identified on the boundary map of the District attached to the Rate and Method. (vii) `Exemptions" is defined to include the following: Zone 1. The Rate and Method provides that no Special Tax shall be levied on up to 93.41 acres of Public Property and/or Property Owner Association Property within Zone 1 of the District. As of June 1, 2012, there are approximately 24.82 acres of Public Property and/or Property Owner Association Property within Zone 1. The District Administrator will assign Exempt Property status in the chronological order in which property becomes Public Property and/or Property Owner's Association Property within Zone 1. After the limit of 93.41 acres within Zone 1 of the District has been reached, the Maximum Special Tax obligation for any additional Public Property and/or Property Owner's Association Property shall be prepaid in full pursuant to the Rate and Method, prior to the transfer or dedication of 14 such property. Until the Maximum Special Tax obligation is prepaid as provided in the preceding sentence, the Public Property and/or Property Owner's Association Property within the District shall be subject to the levy of the Special Tax as provided for in the Rate and Method. Zone 2. The Rate and Method provides that no Special Tax shall be levied on up to 30.43 acres of Public Property and/or Property Owner Association Property within Zone 2 of the District. As of June 1, 2012, there are approximately 12.60 acres of Public Property and/or Property Owner Association Property within Zone 2. The District Administrator will assign Exempt Property status in the chronological order in which property becomes Public Property and/or Property Owner's Association Property within Zone 2. After the limit of 30.43 acres within Zone 2 of the District has been reached, the Maximum Special Tax obligation for any additional Public Property and/or Property Owner's Association Property shall be prepaid in full pursuant to the Rate and Method, prior to the transfer or dedication of such property. Until the Maximum Special Tax obligation is prepaid as provided in the preceding sentence, the Public Property and/or Property Owner's Association Property within the District shall be subject to the levy of the Special Tax as provided for in the Rate and Method. Maximum Special Tax. The Maximum Special Tax is defined in the Rate and Method as follows: (i) Undeveloped Property and Approved Property: Zone 1. The Maximum Special Tax for each Parcel of Undeveloped Property within Zone 1 shall be $5,547 per acre. The Maximum Special Tax for each Parcel of Approved Property within Zone 1 shall be the Backup Special Tax computed as described below. Zone 2. The Maximum Special Tax for each Parcel of Undeveloped Property within Zone 2 shall be $8,519 per acre. The Maximum Special Tax for each Parcel of Approved Property within Zone 2 shall be the Backup Special Tax computed as described below. (ii) Developed Property: The Maximum Special Tax for each Parcel of Residential Property within its applicable Zone that is classified as Developed Property shall be the greater of (i) the applicable Assigned Special Tax described in the Rate and Method, or (ii) the amount derived by application of the Backup Special Tax. The Maximum Special Tax for each Parcel of Non -Residential Property shall be the Assigned Special Tax described in the Rate and Method. The Assigned Annual Special Tax for Developed Property ranges from $308 for a multifamily residential unit to $5,136 per residential unit in Zone 1 and from $473 for a multifamily residential unit to $1,927 per residential unit in Zone 2. See APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Rate and Method of Apportionment of Special Tax — Table 1" and " — Table 2" herein for a listing of the Assigned Annual Special Tax rates for various sizes of units in each Zone. Zone 1 Backup Special Tax. The Backup Special Tax shall be $5,547 per acre for Parcels of Residential Property that are included in a Final Map. Zone 2 Backup Special Tax. The Backup Special Tax shall be $8,519 per acre for Parcels of Residential Property that are included in a Final Map. Notwithstanding the foregoing, if parcels of Residential Property are subsequently changed or modified by recordation of a lot line adjustment or similar instrument, then the Backup Special Tax shall be recalculated. Method of Apportionment. The Rate and Method provides each Fiscal Year, the Authority shall levy the Special Tax on all Taxable Property until the amount of Special Taxes equals the Special Tax 15 Requirement in accordance with the following steps: First: The Special Tax shall be levied Proportionately on each Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax rate in Tables 1 or 2 of the Rate and Method as needed to satisfy the Special Tax Requirement; Second: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Parcel of Approved Property at up to 100% of the Maximum Special Tax for Approved Property; Third: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Undeveloped Property; Fourth: If additional moneys are needed to satisfy the Special Tax Requirement after the first three steps have been completed, the Special Tax to be levied on each Parcel of Developed Property whose Maximum Special Tax is derived 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 Parcel; and Fifth: If additional moneys 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 Parcel of Public Property and/or Property Owner Association Property that is not Exempt Property at up to 100% pursuant to the provisions of the Maximum Special Tax. Notwithstanding the above, pursuant to Section 53321 of the Act as in effect at the time of formation of the District, the Rate and Method states that under no circumstances will the Special Taxes levied against any Parcel of Residential Property be increased by more than ten percent (10%) per Fiscal Year as a consequence of delinquency or default by the owner of any other Parcel within the District. For such purposes, Residential Property is a Parcel of Developed Property for which a building permit has been issued for purpose of constructing one or more residential dwelling units. In Fiscal Year 2012-13, Special Taxes will be levied at approximately [63.26%] of the Assigned Special Tax rate on Developed Property. Prepayment of Maximum Special Taxes. The Maximum Special Tax obligation for a Parcel of Developed Property, Approved Property for which a building permit has been issued or Public Property and/or Property Owner's Association Property that is not Exempt Property may in certain circumstances be prepaid in whole or in part, provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to the Parcel at the time of prepayment. The Prepayment Amount for an applicable Parcel after the issuance of 2012 Bonds is calculated based on Bond Redemption Amounts and other costs, all as specified in APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-1 (Crowne Hill) Rate and Method of Apportionment of Special Tax — Section H" herein. Any such prepayment will result in a redemption of Bonds prior to maturity. See "THE 2012 BONDS — Terms of Redemption." I6 Special Taxes and the Teeter Plan The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. By policy, the County does not include assessments, reassessments and special taxes, including the Special Taxes of the District, in its Teeter program. Proceeds of Foreclosure Sales Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax, the Authority 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. Under the Fiscal Agent Agreement, on or about February 15 and June 15 of each Fiscal Year, the Treasurer shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenue theretofore received by the Authority, and: Individual Delinquencies. If the Treasurer determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of $2,500 or more, then the Treasurer will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Authority within 90 days of such determination. Notwithstanding the foregoing, the Treasurer may defer such action if the amount in the Reserve Fund is at least equal to the Reserve Requirement. Aggregate Delinquencies. If the Treasurer determines that the total amount of delinquent Special Tax for the prior Fiscal Year for the entire District (including total individual delinquencies described above) exceeds 5% of the total Special Tax due and payable for the prior Fiscal Year, the Treasurer shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and the Authority will commence foreclosure proceedings within 90 days of such determination against each parcel of land in the District with a Special Tax delinquency. It should be noted that any foreclosure proceedings commenced as described above could be stayed by the commencement of bankruptcy proceedings by or against the owner of the delinquent property. See "BONDOWNERS' RISKS — Bankruptcy and Foreclosure DeIay." No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. See `BONDOWNERS' RISKS — Potential Delay and Limitations in Foreclosure Proceedings." If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the Authority) must cause a Notice of Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days (or in certain limited cases a shorter period) from the date of service of the Notice of Levy and 20 days from the subsequent notice of sale in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made. The constitutionality of the 17 aforementioned legislation, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. Any parcel subject to foreclosure sale must be sold at the minimum bid price unless a lesser minimum bid price is authorized by the owners of 75% of the principal amount of the Bonds Outstanding. No assurances can be given that the real property subject to sale or foreclosure will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the Authority or the District to purchase or otherwise acquire any lot or parcel of property offered for sale or subject to foreclosure if there is no other purchaser at such sale. The Act does specify that the Special Tax will have the same lien priority in the case of delinquency as for ad valorem property taxes. If the Reserve Fund is depleted and if delinquencies in the payment of Special Taxes exist, there could be a default or delay in payments to the Bondowners of the 2012 Bonds pending prosecution of foreclosure proceedings and receipt by the Authority of foreclosure sale proceeds, if any. However, within the limits of the Rate and Method and the Act, the Authority may adjust the Special Taxes levied on all property within the District in future Fiscal Years to provide an amount, taking into account such delinquencies, required to pay debt service on the Bonds and to replenish the Reserve Fund. There is, however, no assurance that the maximum Special Tax rates as permitted by the Rate and Method will be at all times sufficient to pay the amounts required to be paid on the Bonds by the Fiscal Agent Agreement. Special Tax Fund Pursuant to the Fiscal Agent Agreement, except as described below, all Special Tax Revenues received by the Authority will be deposited in the Special Tax Fund, which will be held by the Fiscal Agent on behalf of the Authority. Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority and the Bondowners. Pending disbursement, moneys in the Special Tax Fund will be subject to a lien in favor of the Bondowners and the Authority established under the Fiscal Agent Agreement. Disbursements. Moneys in the Special Tax Fund will be disbursed as needed to pay the obligations of the Authority as provided in the Fiscal Agent Agreement. The Authority shall promptly remit any Special Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund, except that, (i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses shall be deposited by the Treasurer in the Administrative Expense Fund, (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Treasurer and shall be deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund up to the then Reserve Requirement; and third, to the Special Tax Fund for transfer to the Bond Fund and the Reserve Fund in accordance with the Fiscal Agent Agreement, and (iii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent directly in the Special Tax Prepayments Account established in the Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Improvement Fund, the Reserve Fund and the Special Tax Prepayments Account to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date and (ii) to the Reserve Fund an amount, 18 taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement. Investment. Moneys in the Special Tax Fund will be invested and deposited as described in "— Investment of Moneys in Funds" below and APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." Interest earnings and profits resulting from such investment and deposit will be retained in the Special Tax Fund to be used for the purposes of such Fund. Bond Fund The Fiscal Agent will hold the Bond Fund in trust for the benefit of the Bondowners. There is created in the Bond Fund, as a separate account to be held by the Fiscal Agent, the Special Tax Prepayments Account. Moneys in the Bond Fund and the accounts therein shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds and for the other purposes as provided below, and, pending such disbursement, shall be subject to a lien in favor of the owners of the Bonds. Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under the Fiscal Agent Agreement and shall be used (together with any applicable amounts transferred from the Reserve Fund) to redeem Bonds on the applicable redemption date. Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the owners of the Bonds the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments or an optional redemption of the Bonds. In the event that amounts in the Bond Fund are insufficient for the purposes set forth in the preceding sentence, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments described above, the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to the payment of principal due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date. Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account shall be invested and deposited in accordance with the provisions of the Fiscal Agent Agreement as described in "Investment of Moneys in Funds" below. See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." Reserve Fund In order to further secure the payment of principal of and interest on the 2012 Bonds, certain proceeds of the 2012 Bonds will be deposited into the Reserve Fund in an amount equal to the Reserve Requirement (see "ESTIMATED SOURCES AND USES OF FUNDS" herein). Reserve Requirement is defined in the Fiscal Agent Agreement to mean with respect to the 2012 Bonds an amount, as of any date of calculation, equal to the least of (i) the then largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds, (ii) 125% of the then average annual debt service on the Bonds, or (iii) 10% of the original principal amount of the 2012 Bonds. The moneys in the Reserve Fund will only be used for payment of principal of, interest and any 19 redemption premium on, the 2012 Bonds and at the direction of the Authority, for payment of rebate obligations related to the 2012 Bonds. If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment, funds in the Reserve Fund in the amount, if any, of any applicable "Reserve Fund Credit," as such term is defined and otherwise determined in accordance with the Rate and Method shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of Bonds. The "Reserve Fund Credit" is calculated as the lesser of (a) the expected reduction in the Reserve Requirement, if any, associated with the redemption of Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement in effect after the redemption of Bonds as a result of the prepayment from the balance in the Reserve Fund on the prepayment date, but in no event shall such amount be less than zero. The effect of the terms of the Rate and Method is that such transfer shall be made only to the extent that the amount remaining on deposit in the Reserve Fund is at least equal to the Reserve Requirement. Moneys in the Reserve Fund will be invested as described in "Investment of Moneys in Funds" below. See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement" for a description of the timing, purpose and manner of disbursements from the Reserve Fund. Administrative Expense Fund There is established as a separate fund to be held by the Treasurer, the Administrative Expense Fund to the credit of which deposits shall be made from the Special Tax Revenues as described above. Amounts in the Administrative Expense Fund shall be withdrawn by the Treasurer and paid to the Authority or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or a Costs of Issuance, and the nature of such Administrative Expense or Costs of Issuance. Annually, on the last day of each Fiscal Year, the Treasurer shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $20,000 that have not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund. In accordance with the Fiscal Agent Agreement, amounts deposited in the Administrative Expense Fund are held by the Treasurer and such amounts are not pledged to the payment of the 2012 Bonds. Investment of Moneys in Funds Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, as directed by an Authorized Officer, that mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. In the absence of any direction from an Authorized Officer, the Fiscal Agent will invest, to the extent reasonably practicable, any such moneys in money market funds rated in the highest rating category by Moody's or S&P (including those for which the Fiscal Agent or its affiliates or its subsidiaries provide investment, advisory or other services). See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement" for a definition of "Permitted Investments." Additional Bonds for Refunding Purposes Only Bonds secured on a parity with the 2005 Bonds and the 2012 Bonds (each a series of "Additional Bonds") may be issued for refunding purposes where the net proceeds are used to refund all or a portion of the then outstanding Bonds, provided that the debt service on the Additional Bonds in any Bond Year 20 is not in excess of the debt service on the Bonds being refunded and the final maturity of the Additional Bonds is not later than the final maturity of the Bonds being refunded. See APPENDIX C —"Summary of Certain Provisions of the Fiscal Agent Agreement." The Authority may issue bonds or other obligations for the District payable from Net Taxes which are subordinate to the 2012 Bonds. THE AUTHORITY The Temecula Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated April 10, 2001 (the "Joint Powers Agreement"), by and between the City and the Redevelopment Agency of the City of Temecula. The Joint Powers Agreement was entered into pursuant to the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California. Pursuant to Health & Safety Code Section 34178(b)(3), the Joint Powers Agreement remains valid, notwithstanding legislation enacted in 2011 terminating all redevelopment agencies in California. The Authority was formed for the primary purpose of assisting in the financing and refinancing of public capital improvements in the City. The Authority is administered by a five -member Board of Directors, which currently consists of the members of the City Council of the City. The Authority has no independent staff. The Executive Director of the Authority is the City Manager of the City, and the Treasurer of the Authority is the City's Chief Financial Officer. The Executive Director administers the day-to-day affairs of the Authority, and the 'Treasurer has custody of all money of the Authority from whatever source. Authority for Issuance The 2012 Bonds are issued pursuant to the Act, the Refunding Law and the Fiscal Agent Agreement. In addition, as required by the Act, the Board of Directors of the Authority has taken the following actions with respect to establishing the District and authorizing issuance of the 2012 Bonds: Resolutions of Intention: On January 28, 2003, the Board of Directors of the Authority adopted Resolution No. TPFA 03-1 stating its intention to establish the District and to authorize the levy of a special tax therein, and on the same day the Authority adopted Resolution No. TPFA 03-02 stating its intention to incur bonded indebtedness in an amount not to exceed $25,000,000 within the District for the purpose of financing the cost of certain public improvements (the "Facilities") and to eliminate an existing special assessment lien (the "Prior Lien"). Resolution of Formation: Immediately following the conclusion of a noticed public hearing on March 25, 2003, the Authority adopted Resolution No. TPFA 03-05 (the "Resolution of Formation"), which established the District and authorized the levy of a special tax within the District. Resolution of Necessity: On March 25, 2003, the Authority adopted Resolution No. TPFA 03-06 declaring the necessity to incur bonded indebtedness in an amount not to exceed $25,000,000 within the District and submitting that proposition to the qualified electors of the District. Resolution Calling Election: On March 25, 2003, the Authority adopted Resolution No. TPFA 03-07 calling an election by the landowners for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit. Landowner Election and Declaration of Results: On March 25, 2003, an election was held within the District in which the landowners eligible to vote, being the qualified electors within the District, 21 unanimously waived all time limits for holding the election and ballot arguments, and approved a ballot proposition authorizing the issuance of up to $25,000,000 in bonds to finance the costs of the Facilities and the costs of eliminating the Prior Lien, the levy of a special tax and the establishment of an appropriations limit for the District. On March 25, 2003, the Authority adopted Resolution No. TPFA 03- 08, pursuant to which the Authority approved the canvass of the votes and declared the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit. The landowner election was ratified at proceedings conducted on May 13, 2003. Special Tax Lien and Levy: A Notice of Special Tax Lien was recorded in the real property records of Riverside County on April 4, 2003, as Document No. 2003-238653. An Amended Notice of Special Tax Lien was recorded in the real property records of Riverside County on May 19, 2003, as Document No. 2003-358388. Ordinance Levying Special Taxes: On April 8, 2003, the Authority adopted Ordinance No. TPFA 03-01 levying the Special Tax within the District. Resolution Authorizing Issuance of the 2012 Bonds: On [July 10], 2012, the Authority adopted Resolution No. TPFA approving issuance of the 2012 Bonds. THE COMMUNITY FACILITIES DISTRICT General [CONFIRM/UPDATE] The District consists of land located in the easterly portion of the City of Temecula, in the south-westerly portion of the County. The District is bounded generally on the west by Butterfield Stage Road, on the north by Pauba Road and by Temecula Parkway on the south. The property within the District is governed by the Butterfield Stage Ranch Specific Plan adopted by the County in 1987. (The City was not incorporated at that time.) The District is part of an approximately [1,045] residential unit master -planned community called Crowne Hill. Included within Crowne Hill (but not within the boundaries of the District) is an elementary school, two neighborhood parks (approximately 3.5 acres and 5.2 acres, respectively), plus many other open space/greenbelt/slope areas and five private homeowner parks. Homes at the southerly end of Crowne Hill are occupied and are not part of the District. 796 homes have been constructed in the District. 22 Special Tax Levy by Land Use Category The following table shows the estimated Special Taxes for Fiscal Year 2012-13 by land use category: Table 2 Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Estimated Fiscal Year 2012-13 Special Tax Levy by Land Use Category(1) Estimated Fiscal Year Estimated Fiscal Year Estimated 2012/13 Land Use Residential Number of 2012/13 Fiscal Year 2012/13 Percent of Classification Floor Area Parcels Special Tax Rate(» Lv.' Total Zone 1 A -Residential 4,300 or more sq. ft. 28 $3,249.29/parcel $90,979.84 9.69% 3,700 or more, but less B -Residential than 4,300 sq. ft. 85 $1,554.40/parcel 132,124.00 14.07 3,200 or more, but less C -Residential than 3,700 sq. ft. 87 $1,428.52/parcel 124,281.24 13.23 2,900 or more, but less D -Residential than 3,200 sq. ft. 117 $1,109.66/parcel 129,830.22 13.82 2,600 or more, but less E -Residential than 2,900 sq. ft. 174 $1,008.44/parcel 175,468.56 18.68 2,300 or more, but less F -Residential than 2,600 sq. ft. 64 $912.28/parcel 58,385.92 6.22 2,000 or more, but less G -Residential than 2,300 sq. ft. 29 $902.78/parcel 26,180.62 2.79 H -Residential Less than 2,000 sq. ft. 0 $0.00/parcel 0 0.00 J -Multifamily Residential N/A 0 $0.00/unit 0 0.00 J -Non -Residential Property N/A 0 $0.00/acre 0 0.00 Zone 2 A -Residential 3,300 or more sq. ft. 16 $1,219.10/parcel 19,505.60 2.08 2,800 or more, but less B -Residential than 3,300 sq. ft. 21 $1,153.94/parcel 24,232.74 2.58 2,500 or more, but less C -Residential than 2,800 sq. ft. 16 $973.64/parcel 15,578.24 1.66 2,300 or more, but less D -Residential than 2,500 sq. ft. 58 $951.50/parcel 55,187.00 5.88 2,100 or more, but less E -Residential than 2,300 sq. ft. 43 $908.48/parcel 39,064.64 4.16 17 -Residential Less than 2,100 sq. ft. 58 $832.56/parcel 48,288.48 5.14 G -Multifamily Residential N/A 0 $0.00 0 0.00 I -I -Non -Residential 0 $0.00 0 0.00 Totals 796 $939,107.10 100.00% (I)Levied parcels are estimated to be levied at [63.26]% of their assigned special tax rate for Fiscal Year 2012/13. Zone 1 includes 24.82 acres(46 parcels) of exempt property. Zone 2 includes 1.60 acres (8 parcels) of exempt property. 'Preliminary, subject to change. Source: Willdan Financial Services. 23 Special Tax Collections [Review] The Special Tax on Developed Property authorized for the 2011-12 Fiscal Year in the District was $1,094,803.86 which was levied against 796 parcels. Of those parcels, 21 had not paid either or both installments of Special Taxes as of June 25, 2012. For the Fiscal Year 2011-12, no Special Taxes were levied on Approved Property or Undeveloped Property. The Special Tax on Developed Property authorized for the 2012-13 Fiscal Year in the District is estimated to be $[939,107.10] to be levied against 796 parcels. Table 3 below sets forth the Special Tax collections for Fiscal Years 2006-07 through the second installment of Fiscal Year 2011-12. Historically, no foreclosure actions have been commenced with respect to parcels in the District. The Authority has been successful in collecting delinquent payments to enable payment of debt service without a draw on the reserve fund. Table 3 Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax CollectionsWWW (As of June 30 of the applicable Fiscal Year) Subject Fiscal Year June 25, 2012 Fiscal Year Fiscal Year Ending Aggregate Parcels Parcels Amount June 30 Special Tax Levied Delinquent Delinquent(2) Fiscal Year Delinquency Rate Remaining Parcels Delinquent Remaining Amount Delinquent Remaining Delinquency Rate 2007 $1,117,218.22 777 96 $115,011.06 10.29% 2008 1,118, 852.12 796 112 161, 810.12 14.46 2009 1,117,956.40 796 107 126,774.79 11.34 2010 1,118,599.24 796 76 83,789.08 7.49 2011 1,114,369.76 796 50 60,574.42 5.44 2012(3) 1,094,803.86 796 35 37,009.86 3.38 (1) (2) (3) 0 $0.00 0.00% 2 2,515.74 0.22 3 2,831.79 0.25 3 3,921.54 0.35 4 5,778.63 0.52 21 27,533.31 2.51 Delinquency information is provided to the Authority by the County of Riverside. Fiscal year delinquency amounts are as of June 25, 2007, July 18, 2008, May 20, 2009, May 27, 2010, May 12, 2011 and May 17, 2012. Information reflects second installment delinquency information from the County of Riverside. Source: Willdan Financial Services. 24 Property Ownership Based on the preliminary Fiscal Year [2012-13] Assessor's Roll, as of January 1, 2012, there were approximately 796 homes in the District subject to the Special Tax. There have been no prepayments of Special Taxes within the District. Table 4 Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Top Owners of Taxable Property and Allocation of Fiscal Year 2011-12 Assessed Value Based on Fiscal Year 2012-13 Special Tax Liability Merchant Builder and/or Property Owner Named) Michael Lang Hikmat Ghuloum Hayat Haddad James D. Salas Alicia L. Kvitsonis Richard M. Sipkoi & Catherina M. Sipkoi Mark S. Clark & Juanette G Clark Jeffrey E. Stone & Regina A. Stone Sandor Lanni & Brenda Braun Lanni Donald E. Mackellar & Tracy L. Mackellar Subtotal Individual Owners Total Fiscal Year 2012-13 Number of Parcels 2 4 3 1 1 1 1 1 1 1 16 780 796 Fiscal Year 2011-12 Assessed Value $1,790,000 1,307,000 1,049,000 982,000 952,000 940,000 929,000 894,000 856,000 754,000 $10,453,000 268,930,354 $279,383,354 Fiscal Year 2012-13 Total Special Tax Amount $6,498.56 4,280.48 3,647.84 3,249.28 3,249.28 3,249.28 3,249.28 3,249.28 3,249.28 3,249.28 37,171.84 901,935.26 $939,107.10 (1) Ownership information is based on Riverside County's preliminary Fiscal Year 2012-13 secured tax roll. (2) Totals may not add due to rounding. Source: Willdan Financial Services. Estimated Assessed Values Percent Share of Total Special Taxes(2) 0,69% 0.46 0.39 0.35 0.35 0.35 0.35 0.35 0.35 0.35 3.96 96.04 100.00% The assessed values, direct and overlapping debt and total tax burden on individual parcels varies among parcels within the District. The value of individual parcels is significant because in the event of a delinquency in the payment of Special Taxes, the Authority may foreclose only against delinquent parcels. Based on the Fiscal Year 2011-12 assessed value of approximately $279,383,354 the parcels in the District have an assessed value -to -lien ratio of approximately 19.56`:1 taking into account the other indebtedness payable from taxes or special assessments allocable thereto, as set forth in Table 7. This gross assessed valuation may not be representative of the actual market value of property in the District because Article XIIIA of the California Constitution limits any increase in assessed value to no more than 2% a year unless a property is sold or transferred. See "BONDOWNERS' RISKS — Land Values." As a consequence, assessed values are typically less than actual market values unless the property has recently changed ownership or has been reassessed. The following table shows the historical assessed valuation for parcels taxed in the District for 25 Fiscal Year 2007-08 through 2011-12 and the historical number of parcels taxed in the District. Table 5 Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Historical Assessed Valuation for Taxable Parcels Assessed Value No. of of Single Family Parcels Fiscal Year Homes] (I) Taxed 2007.08(2) $410,839,059 796 2008-09(2) 378,053,683 796 2009-10t2j 282,865,528 796 2010-11 279,254,739 796 2011-12 279,383,354 796 Includes Assessed Values for parcels that were levied. (2) According to the Riverside County Assessor's office, there were Proposition 8 property assessment reductions throughout the County in Fiscal Years 2007-08, 2008-09 and 2009-10 as an economic adjustment due to a decline in market value thus reducing the assessed values. Source: Riverside County Secured Rolls, as compiled by California Municipal Statistics, Inc. 26 The following table shows the assessed value by land use category on which Special Taxes were levied: Land Use Classification Zone A Table 6 Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Fiscal Year 2011-12 Assessed Value by Land Use CategoryWIW Total Assessed Value(') 2012 Bonds" 2005 Bonds(2). 2011-12 Assessed Aeereeate Bonds Value to Lien" A -Residential $25,332,198 $1,006,577 318,733 1,325,310 19.11 B -Residential 35,447,992 1,461,790 462,877 1,924,667 18.42 C -Residential 34,404,402 1,375,001 435,395 1,810,396 19.00 D -Residential 40,482,471 1,436,402 454,838 1,891,240 21.41 E -Residential 55,416,206 1,941,330 614,723 2,556,053 21.68 F -Residential 19,264,534 645,960 204,544 850,504 22.65 G -Residential 8,090,612 289,655 91,720 381,375 21.21 Zone B A -Residential $5,960,538 $215,805 68,335 284,140 20.98 B -Residential 7,272,441 268,104 84,895 352,999 20.60 C -Residential 5,280,099 172,355 54,576 226,931 23.27 D -Residential 16,617,784 610,571 193,338 803,909 20.67 E -Residential 11,838,417 432,200 136,857 569,057 20.80 F -Residential 13,975,660 534,250 169,169 703,419 19.87 Totals $279,383,354 $10,390,000 3,290,000 13,680,000 20.42 (1) Source: Assessed values as reported on the Fiscal Year 2011-12 equalized tax roll of the County of Riverside. (2) Excludes $745,000 of 2005 Bonds which the Authority estimates will be redeemed on September 1, 2012 with available moneys and excludes $45,000 of 2005 Bonds which mature on September 1, 2012. Preliminary, subject to change. Direct and Overlapping Debt Table 7 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied within the District prepared by California Municipal Statistics, Inc. and based on what was levied for Fiscal Year 2011-12 (the "Debt Report"). The Debt Report is included for general information purposes only. In certain cases, the percentages of debt calculations are based on assessed values, which will change significantly as sales occur and assessed values increase to reflect housing values. The Authority believes the information is current as of its date, but makes no representation as to its completeness or accuracy. The Authority may only issue parity bonds for refunding purposes. Other public agencies, such as the City, may issue additional indebtedness at any time, without the consent or approval of the District or the Authority. See " - Overlapping Assessment and Community Facilities Districts" below. The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long term obligations generally are not payable from property taxes, assessment or special taxes on land in the District. In many cases long term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The ability of the Authority to collect the Special Taxes or issue and sell refunding bonds could be adversely affected if additional debt is issued within the District. 27 The property within the District, at any time, could become subject to additional debt either by the formation of additional community facilities districts or the imposition of other taxes and assessments by the Authority, the District, the City or other public agencies at any time. The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Taxes and may increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. The Authority has not undertaken to commission annual appraisals of the market value of property in the District for purposes of its Annual Reports pursuant to the Authority Continuing Disclosure Agreement, and information regarding property values for purposes of a direct and overlapping debt analysis which may be contained in such reports will be based on assessed values as determined by the County Assessor. See Appendix D hereto for the form of the Authority Continuing Disclosure Agreement. Direct and overlapping bonded indebtedness as of June 1, 2012 is shown in the following table compiled by California Municipal Statistics, Inc. Neither the Authority nor the Underwriter has independently verified the information in the table and neither makes any representations as to completeness or accuracy. 28 Table 7 Temecula Public Financing Authority Community Facilities District 03-01 (Crown Hill) Direct and Overlapping Debt 2011-12 Local Secured Assessed Valuation:$279,383,354 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/12 Metropolitan Water District General Obligation Bonds 0.016% $ 30,925 Eastern Municipal Water District, I.D. No. U-8 General Obligation Bonds 1.954 90,031 Temecula Valley Unified School District General Obligation Bonds 1.703 479,219 Temecula Public Financing Authority Community Facilities District No. 03-1 100. 13.680,000 (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $14,280,175 OVERLAPPING GENERAL FUND DEBT: Riverside County General Fund Obligations 0.192% $1,259,054 Riverside County Pension Obligations 0.192 686,477 Riverside County Board of Education Certificates of Participation 0.192 9,706 Mt. San Jacinto Community College District General Fund Obligations 0.510 60,945 City of Temecula Certificates of Participation 2.799 751,112 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $2,767,294 Less: Riverside County supported obligations 25,174 TOTAL NET OVERLAPPING GENERAL FUND DEBT $2,742,120 GROSS COMBINED TOTAL DEBT $17,047,469 (2) NET COMBINED TOTAL DEBT $17,022,295 (1) Refunding Mello -Roos Act bonds to be sold ($10,390,000 preliminary) and $3,290,000 of 2005 Bonds outstanding as of June 15, 2012 (includes an estimated $745,000* of 2005 Bonds which the Authority expects to redeem on September 1, 2012 with available moneys; and $45,000 of 2005 Bonds which mature on September 1, 2012 which will be paid with Special Taxes on deposit with the Fiscal Agent). (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. Ratios to 2011-12 Local Secured Assessed Valuation: Direct Debt ($13,680,000) 4.90% Total Direct and Overlapping Tax and Assessment Debt5.11% Ratios to Adjusted Assessed Valuation: Gross Combined Total Debt 6.10% Net Combined Total Debt 6.09% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0 Source: California Municipal Statistics, Inc. ' Preliminary, subject to change. 29 Overlapping Assessment and Community Facilities Districts Additional Debt Payable from Taxes or Assessments. Neither the Authority nor the District has any control over the amount of additional debt payable from taxes or assessments levied on all or a portion of the property within a special district which may be incurred in the future by other governmental agencies, including, but not limited to, the County, the City or any other governmental agency having jurisdiction over all or a portion of the property within the District. Furthermore, nothing prevents the owners of property within the District from consenting to the issuance of additional debt by other governmental agencies which would be secured by taxes or assessments on a parity with the Special Taxes. To the extent such indebtedness is payable from assessments, other special taxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes will be secured by liens on the property within a district on a parity with a lien of the Special Taxes. Accordingly, the debt on the property within the District could increase, without any corresponding increase in the value of the property therein, and thereby severely reduce the ratio that exists at the time the 2012 Bonds are issued between the value of the property and the debt secured by the Special Taxes and other taxes and assessments which may be levied on such property. The incurring of such additional indebtedness could also affect the ability and willingness of the property owners within the District to pay the Special Taxes when due. Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given that the proceeds of any foreclosure sale of the property with delinquent Special Taxes would be sufficient to pay the delinquent Special Taxes. See "BONDOWNERS' RISKS." Other Overlapping Direct Assessments Metropolitan Water District Standby. Property within the District is subject to a Metropolitan Water District Standby ("MWD Standby") assessment. The MWD Standby assessment is fixed unless there is a vote to increase the assessment. This pay-as-you-go assessment is used for water conservation programs, emergency programs, water treatment and capital improvements such as transporting water from Colorado and Northern California to Southern California. The assessment levied for Fiscal Year 2011-12 was $6.94 per equivalent dwelling unit Estimated Value -to -Lien Ratios Table 8 below set forth Value -to -Lien category ranges for the 796 parcels subject to the levy of Special Taxes in Fiscal Year 2012-13 utilizing the assessed values of $279,383,354 as of January 1, 2011. 30 Value -to -Lien Category 25:00 to 29.99:1 20:1 to 24:99 15:00 to 19.99:1 10:00 to 14.99:1 1:00:1 to 4.99:1(7) Total(s) (1) (2) (5) (4) (5) (6) m (8) s Number of Parcels 4 365 424 2 1 796 Fiscal Year 2012-13 Special Taxt'l' Table 8 Temecula Public Financing Authority Community Facilities District 03-01 (Crowne Hill) Combined Assessed Value and Value -to -Burden Ratio* Percentage Share of Special Tax* 3,929 367,915 563,503 2,857 903 939,107 0.42% 39.18 60.00 0.30 0.10 100.00% Allocable Share of 2012 Bonds (2)' S43,474 4,070,503 6,234,426 31,609 9,988 $10,390,000 Allocable Share of 2005 Bondst3l" $13,766 1,288,927 1,974,135 10,009 3,163 $3,290,000 Allocable Share of Direct and Overlapping Debtt4" 3,570 257,626 337,765 1,091 123 $600,175 Combined Overlapping Debt(5)= 60,810 5,617,056 8,546,326 42,709 13.274 $14,280,175 Fiscal Year 2011-12 Taxable Property Assessed Value' $1,635,147 118,388,609 158,804,026 499,435 56,137 $279,383,354 Combined Value-to-Lier Burden Ratio Special Taxes shown reflect estimated Fiscal Year 2012-13 Special Taxes on Developed Property as of June 15, 2012, estimated at [63.26]% . Calculated by multiplying the Percentage Share of Special Tax by the total 2012 Bonds principal amount of $[10,390,000)* and the Percentage Share of Special Tax by the total 2005 Bonds principal amount of $3,290,000. Amount outstanding as of June 1, 2012. The Authority estimates that in addition to $45,000 of 2005 Bonds which mature on September 1, 2012, the Authority will redeem approximately [$745,000] of 2005 Bonds on September 1, 2012 with available moneys. See "Direct and Overlapping Debt" above for a description of overlapping liens; includes Temecula Valley Unified School District community facilities district debt and general obligation bonded debt of the Metropolitan Water district, Eastem Municipal Water District and Temecula Valley Unified School District. The combined overlapping liens include the 2012 Bonds. Source: Assessed values as reported on the Fiscal Year 2011-12 equalized tax roll of the County of Riverside. The property owner applied for tax relief through proposition 60 to transfer the base year value of a prior residence within the same county to the residence within the District. Totals may not sum due to rounding. Preliminary, subject to change. Source: Willdan Financial Services. 31 26.89 21.08 18.58 11.69 4.23 19.56 Table 9 on the following page sets forth estimated Fiscal Year 2011-12 overall tax rates projected to be applicable to Detached Units with the indicated square footages, one with the lowest square footage within the District and the other with the highest square footage within the District. The table also sets forth those entities with fees, charges, ad valorem taxes and special taxes regardless of whether those entities have issued debt. The estimated tax rates and amounts presented below are based on currently available information. The actual amounts charged may vary and may increase or decrease in future years. 32 Table 9 Temecula Public Financing Authority Community Facilities District 03-01 (Crowne Hill) Estimated Fiscal Year 2011-12 Tax Rates(» (Detached Units with 1,596 sq. ft. and 6,114 sq. ft.)(2) Assessed Valuations and Property Taxes Estimated Assessed Valuation I-Iomeowner's Exemption Net Assessed Value(3) Ad Valorem Property Taxes General Purposes General Purposes Total Ad Valorem Property Taxes Single Family 1,596 Sq. Ft. $213,000.00 47,000.00 $206,000.00 Single Family 6,114 Sq. Ft. $982,000.00 0.00 $982,000.00 Percent of Total AV Projected Amount Projected Amount 1.03197% $2,125.86 1.02897% $10,104.49 $2,125.86 $10,104.49 Assessments, Special Taxes and Parcel Charges(3) RANCHO CAL WTR R DIV DEBT SV $177.00 $855.00 FLD CNTL STORM WATER/CLEAN WATER 3.12 5.42 TEMECULA PARKS/LIGHTING SVS 74.44 74.44 TEMECULA RESIDENTIAL ST LIGHTS 25.68 N/A TEMECULA TRASH/RECYCLING 223.04 223.04 TEMECULA CFD 03-01 CROWNE HILL 970.60 3,788.00 TEMECULA PERIMTR LDS ZN 20 175.00 N/A MWD STANBY EAST 6.94 34.70 EMWD STANDBY -COMBINED CHARGE 11.60 8.00 Total Assessment Special Taxes and Parcel Charges $1,667.42 $4,988.60 Projected Total Property Taxes $3,793.28 $15,093.09 Projected Total Effective Tax Rate 1.84% 1.54% (1) (2) (3) (4) These amounts arc based on Fiscal Year 2011-12 charges. Fiscal Year 2012-13 data will not be available until approximately November 2012. Fiscal Year 2011-12 assessed valuation for a single family detached residential unit with the largest and the smallest square footage, selected to provide representative effective tax rates for homes within the District. Net Assessed Value reflects estimated total assessed value for the parcel net of homeowner's exemption. All charges and special assessments for the 1,596 sq. ft. home are based on a Lot size of less than one (1) acre. All charges and special assessments for the 6.114 sq. ft. home are based on a Lot size greater than one (1) acre. Source: Willdan Financial Services. 33 BONDOWNERS' RISKS In addition to the other information contained in this Official Statement, the following risk factors should be carefully considered in evaluating the investment quality of the 2012 Bonds. The Authority cautions prospective investors that this discussion does not purport to be comprehensive or definitive, the risk factors are listed in no particular order of importance, and this discussion does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the 2012 Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Any such failure to pay Special Taxes could result in the inability of the Authority to make full and punctual payments of debt service on the 2012 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. Risks of Real Estate Secured Investments Generally The Bondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses. Special Taxes Are Not Personal Obligations The owners of land within the District are not personally liable for the payment of the Special Taxes. Rather, the Special Tax is an obligation only of the land within the District. If the value of the land within the District is not sufficient to fully secure the Special Tax, then the Authority has no recourse against the owners under the laws by which the Special Tax has been levied and the 2012 Bonds have been issued. The 2012 Bonds Are Limited Obligations of the Authority for the District The Authority has no obligation to pay principal of and interest on the 2012 Bonds in the event Special Tax collections are delinquent, other than from amounts, if any, on deposit in certain funds and accounts held under the Fiscal Agent Agreement, or funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent, nor is the Authority obligated to advance funds to pay such debt service on the Bonds. Property Values The value of the taxable property within the District is an important factor in evaluating the investment quality of the 2012 Bonds. In the event that a property owner defaults in the payment of a Special Tax installment, the Authority's only remedy is to commence foreclosure proceedings on such property. Prospective purchasers of the 2012 Bonds should not assume that the property within the District could be sold for the assessed value described herein at a foreclosure sale for delinquent Special Tax installments or for an amount adequate to pay delinquent Special Tax installments. Reductions in property values within the District due to a downturn in the economy or the real estate market, events such as earthquakes, wildfires, droughts or floods, stricter land use regulations, threatened or endangered species or other events may adversely impact the security underlying the liens. Additionally, the value of 34 undeveloped property is inherently less than the value of developed property. None of the estimated Fiscal Year 2012-13 Special Tax levy is on property classified as Undeveloped Property. The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the Riverside County Assessor, generally not to exceed an increase of more than 2% per fiscal year as limited by Proposition 13 and as amended by Proposition 8. For example, the County performed reductions of assessed values of residential parcels throughout the County pursuant to Proposition 8 in Fiscal Years 2007-08, 2008-09 and 2009-10. No assurance can be given that Fiscal Year 2011-12 assessed values reflect market values or that a parcel could actually be sold for its assessed value. The actual market value of the property is subject to future events such as a downturn in the economy, occurrences of certain acts of nature and the decisions of various governmental agencies as to land use, all of which could adversely impact the value of the land in the which is the security for the 2012 Bonds. As discussed herein, many factors could adversely affect property values or prevent or delay additional land development within the District. None of the estimated Fiscal Year 2012-13 Special Tax levy is on property classified as Undeveloped Property. Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property While the Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property and such Taxable Property is subject to other parity liens and similar claims. The table in the section entitled "THE COMMUNTIY FACILITIES DISTRICT — Direct and Overlapping Debt" presents the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment securing which is or may become an obligation of one or more of the parcels of Taxable Property, and said table does not show the additional amount of other governmental bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2012 Bonds. In general, the Special Tax and all other taxes, assessments and charges collected on the County tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the 2012 Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro -rata basis. Although the Special Taxes will generally have priority over non- governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. 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 of the most serious in terms 35 of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to a hazardous substance. See "Hazardous Substances" below. Economic Uncertainty The 2012 Bonds are being issued at a time of economic uncertainty and volatility. Unemployment rates have decreased to approximately 8.0% for the Temecula area as of April 2012 (not seasonally adjusted) as compared to 9.3% for calendar year 2011 and approximately 11.8% (not seasonally adjusted) for Riverside County as of April 2012, as compared to 13.6% for calendar year 2011. The Authority cannot predict how long these conditions will last or whether to what extent they may affect the ability of homeowners to pay Special Taxes or the marketability of the 2012 Bonds. Disclosure to Future Purchasers The Authority recorded a notice of the Special Tax lien in the Office of the County Recorder on April 4, 2003, as Document No. 2003-238653, as amended by a recording on May 19, 2003, as Document No. 2003-358388, as an approval of an amended notice. 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 or a home 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 1 102.6b 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. Hazardous Substances While governmental taxes, assessments, and charges are a common claim against the value of a taxed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the District may be required by law to remedy conditions of the parcels related to the 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 substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure. The assessed values of the property within the District do not take into account the possible reduction in marketability and value of any of the parcels of Taxable Property by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The 36 Authority has not independently verified and is not aware that the owner (or operator) of any of the parcels of Taxable Property has such a current liability with respect to any such parcels of Taxable Property, except as expressly noted. However, it is possible that such liabilities do currently exist and that the Authority is not aware of them. Further, it is possible that liabilities may arise in the future with respect to any of the parcels of 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 Iiabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the value of a parcel of Taxable Property that is realizable upon a delinquency. State Budget As a result of the slow State and United States of America economies, the State is experiencing serious budgetary shortfalls for the current and prior fiscal years. The effect of the State revenue shortfalls on the local or State economy or on the demand for, or value of, the property within the District cannot be predicted. Levy and Collection of the Special Tax; Insufficiency of the Special Tax The principal source of payment of principal of and interest on the 2012 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized by the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the 2012 Bonds. Other funds which might be available include funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular taxed parcels and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the 2012 Bonds, and certainly not a direct relationship. The Special Tax levied in any particular tax year on a parcel of Taxable Property is based upon the revenue needs and application of the Rate and Method. Application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel of Taxable Property by comparison with similar development factors with respect to the other parcels of Taxable Property within the District. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected: (1) Reduction in the number of parcels of Taxable Property, for such reasons as acquisition of parcels of Taxable Property by a government and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. 37 (2) Failure of the owners of parcels of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels. In addition, if a substantial portion of land within the District becomes Property Owner's Association Property or Public Property, then whether sufficient Special Taxes will be collected to pay principal and interest on the 2012 Bonds when due will depend on the ability and/or willingness of owners of such property to pay the Special Tax levied on the non-exempt portion of their property. Except as set forth above under "SECURITY FOR THE 2012 BONDS — Special Taxes" and " — Rate and Method" herein, the Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid, the property is then is subject to sale by the Authority for the District. In addition, the Rate and Method limits the increase of Special Taxes levied on residential parcels of Developed Property to cure delinquencies of other property owners in the District. See "SECURITY FOR TI -IE 2012 BONDS — Rate and Method" herein. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2012 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Authority of the proceeds of sale if the Reserve Fund is depleted. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method (see "SECURITY FOR THE 2012 BONDS — Rate and Method" herein). 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 within 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. It is possible that property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could become exempt from the Special Tax. In addition, although 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, meaning that such property could become exempt from the Special Tax. In the event that additional property is dedicated to the City or other public entities, this additional property might become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. Depletion of Reserve Fund The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement (see "SECURITY FOR THE 2012 BONDS — Special Tax Fund — Disbursements" herein). Funds in the Reserve Fund may be used to pay principal of and interest on the 2012 Bonds in the event the proceeds of the levy and collection of the Special Tax against property within the District is insufficient. If funds in 38 the Reserve Fund for the 2012 Bonds are depleted, 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 to the Bondowners pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the Ievy of the Special Tax against property within the District at the maximum tax rates under the Rate and Method, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy of the Special Tax. Potential Delay and Limitations in Foreclosure Proceedings The payment of property owners' taxes and the ability of the Authority to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings, may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales" and `BONDOWNERS' RISKS — Bankruptcy and Foreclosure Delay" herein. In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. The ability of the Authority to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC") has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution which has made a loan which is secured by property within the District. See `BONDOWNERS' RISKS — Payments by FDIC and Other Federal Agencies." The FDIC has adopted a policy statement regarding the payment of state and local real property taxes (the "Policy Statement") which provides that the FDIC intends to pay valid real property taxes, interest and penalties, in accordance with state law, on property which at the time of the tax levy is owned by a financial institution in an FDIC receivership, unless abandonment of the FDIC interest is determined to be appropriate. However, the Policy Statement is unclear as to whether the FDIC considers special taxes such as the Special Taxes to be "real property taxes" which it intends to pay. Furthermore, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, it will not permit its lien to be foreclosed by a taxing authority without its specific consent, and that it will not pay or recognize liens for any penalties, fines, or similar claims imposed for the non-payment of taxes Other laws generally affecting creditors' rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of such military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service. The Authority and the District are unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. In addition, potential investors should be aware that judicial foreclosure proceedings are not summary remedies and can be subject to significant procedural and other delays caused by crowded court calendars and other factors beyond control of the Authority or the District. Potential investors should assume that, under current conditions, it is estimated that a contested judicial foreclosure of the lien of 39 Special Taxes will take up to two or three years from initiation to the lien foreclosure sale. At a Special Tax lien foreclosure sale, each parcel will be sold for not less than the "minimum bid amount" which is equal to the sum of all delinquent Special Tax installments, penalties and interest thereon, costs of collection (including reasonable attorneys' fees), post judgment interest and costs of sale. Each parcel is sold at foreclosure for the amounts secured by the Special Tax lien on such parcel and multiple parcels may not be aggregated in a single "bulk" foreclosure sale. If any parcel fails to obtain a "minimum bid," the Authority may, but is not obligated to, seek superior court approval to sell such parcel at an amount less than the minimum bid. Such Superior Court approval requires the consent of the owners of 75% of the aggregate principal amount of the Outstanding Bonds. Delays and uncertainties in the Special Tax lien foreclosure process create significant risks for Bondowners. high rates of special tax payment delinquencies which continue during the pendency of protracted Special Tax lien foreclosure proceedings, could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon foreclosure. In that event, there could be a default in payment of the principal of, and interest on, the 2012 Bonds. See "Special Tax Collections" above. Bankruptcy and Foreclosure Delay The payment of Special Taxes and the ability of the Authority to foreclose the lien of delinquent Special Taxes as discussed in the section herein entitled "SECURITY FOR THE 2012 BONDS" may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. In addition, the prosecution of a judicial foreclosure may be delayed due to congested local court calendars or procedural delays. The various legal opinions to be delivered concurrently with the delivery of the 2012 Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, bankruptcy of a property owner or of a partner or other equity owner of a property owner, could result in a stay of enforcement of the lien for the Special Taxes, a delay in prosecuting Superior Court foreclosure proceedings or adversely affect the ability or willingness of a property owner to pay the Special Taxes and could result in the possibility of delinquent Special Taxes not being paid in full. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2012 Bonds and the possibility of delinquent Special Taxes not being paid in full. Moreover, amounts received upon foreclosure sales may not be sufficient to fully discharge delinquent installments. To the extent that a significant percentage of the property in the District is owned by any major landowner or any other property owner, and such owner is the subject of bankruptcy proceedings, the payment of the Special Tax and the ability of the Authority to foreclose the lien of a delinquent unpaid Special Tax could be extremely curtailed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. Payments by FDIC and Other Federal Agencies The ability of the Authority to collect interest and penalties specified by state law and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to properties in which 40 the FDIC, the Drug Enforcement Agency, the Internal Revenue Service or other similar federal governmental agencies such as the Federal National Mortgage Association ("FNMA") or Freddie Mac, has or obtains an interest. Mortgage Interests. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." The foregoing is generally interpreted to mean that, unless the United States Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable State and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the Authority wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the "Ninth Circuit"), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see the caption " — Levy and Collection of the Special Tax;' Insufficiency of the Special Tax." The Authority has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within the District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. 41 The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. With respect to property in California owned by the FDIC on January 9, 1997 and that was owned by the Resolution Trust Corporation (the "RTC") on December 31, 1995, or that became the property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC's prior practice of paying special taxes imposed pursuant to the Act if the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special taxes may be challenged by the FDIC. The Authority is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Bondowners should assume that the Authority will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the 2012 Bonds. Based upon the secured tax roll as of January 1, 2011, the FDIC does not presently own any of the property in the District. The Authority expresses no view concerning the likelihood that the risks described above will materialize while the 2012 Bonds are outstanding. Payment of Special Tax Not a Personal Obligation of the Property Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcels of Taxable Property. If the value of the parcels of Taxable Property is not sufficient, taking into account other obligations also payable thereby to fully secure the Special Tax, the Authority has no recourse against the owner. Factors Affecting Parcel Values and Aggregate Value Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in the District in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on the parcels of Taxable Property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes and volcanic eruptions, topographic conditions such as earth movements, landslides, liquefaction, floods or fires, and climatic conditions such as tornadoes, droughts, and the possible reduction in water allocation or availability. It can be expected that one or more of such conditions may occur and may result in damage to improvements of varying seriousness, that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the parcels of Taxable Property may well depreciate or disappear. Seismic Conditions. The District, like all California communities, may be subject to unpredictable seismic activity. The occurrence of seismic activity in the District could result in substantial damage to properties in the District which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in greater reliance on undeveloped property in the payment of Special Taxes. Prior to the issuance of grading permits, engineering reports addressing 42 geologic, seismic or soil limitations and foundation design were prepared for applicable Planning Areas. None of the school sites lies within the Alquist-Priolo Earthquake Fault Zone. Legal Requirements. Other events which may affect the value of a parcel of Taxable Property in the District include changes in the law or application of the law. Such changes may include, without limitation, Local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. No Acceleration Provisions The 2012 Bonds do not contain a provision allowing for the acceleration of the 2012 Bonds in the event of a payment default or other default under the terms of the 2012 Bonds or the Fiscal Agent Agreement. So long as the 2012 Bonds are in book -entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights and remedies of Bondowners. Collection of Special Tax In order to pay debt service on the 2012 Bonds, it is necessary that the Special Tax levied against land within the District be paid in a timely manner. The Authority has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Tax in order to obtain funds to pay debt service on the 2012 Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments to the Bondowners pending prosecution of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the Authority, as the Governing Board of the District, to cause such an action to be commenced and diligently pursued to completion, the Act does not specify the obligations of the Governing Board with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." Right to Vote on Taxes Act An initiative measure, Proposition 218, commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996, general election. The Initiative added Article XIIIC ("Article XIIIC") and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." The provisions of the Initiative, as they relate to community facilities districts, are subject to interpretation by the courts. Among other things, Section 3 of Article XIII states that" ... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill signed into law by the Governor of the State enacting Government Code Section 5854, states that: 43 "Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution." Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2012 Bonds. It may be possible, however, for voters of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the 2012 Bonds but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2012 Bonds. Like its antecedents, the Initiative is likely to undergo both judicial and legislative scrutiny before its impact on the District and its obligations can be determined. Certain provisions of the Initiative may be examined by the courts for their constitutionality under both State and federal constitutional law. The Authority is not able to predict the outcome of any such examination. The foregoing discussion of the Initiative should not be considered an exhaustive or authoritative treatment of the issues. The Authority does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative enactments may all affect the impact of the Initiative on the 2012 Bonds as well as the market for the 2012 Bonds. Legislative and court calendar delays and other factors may prolong any uncertainty regarding the effects of the Initiative. Ballot Initiatives and Legislative Measures The Initiative was adopted pursuant to a measure qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations as to the ability of the State, the County, the City, the Authority, the District or local districts to increase revenues or to increase appropriations or as to the ability of a property owner to complete the development of the property. Limited Secondary Market There can be no guarantee that there will be a secondary market for the 2012 Bonds or, if a secondary market exists, that such 2012 Bonds can be sold for any particular price. Although the Authority and the District have committed to provide certain statutorily -required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. The failure to provide the annual financial and operating information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended 44 or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS — Tax Exemption," the interest on the 2012 Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the 2012 Bonds as a result of future acts or omissions of the Authority in violation of certain provisions of the Code and the covenants of the Fiscal Agent Agreement. In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the 2012 Bonds, the Authority has covenanted in the Fiscal Agent Agreement not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the 2012 Bonds under the Internal Revenue Code of 1986, as amended. Should such an event of taxability occur, the 2012 Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption or mandatory sinking fund redemption provisions of the Fiscal Agent Agreement. IRS Audit of Tax -Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2012 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2012 Bonds might be affected as a result of such an audit of the 2012 Bonds (or by an audit of similar bonds). Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption 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, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Examples of such proposals include a proposal in the fall of 2011 which would have reduced the tax value of all itemized deductions and targeted tax expenditures for high- income taxpayers in tax years commencing on or after January 1, 2013. The concept of "high-income taxpayers" in the proposal generally captured taxpayers with adjusted gross income of $250,000 or more for married couples filing jointly (or $200,000 for single taxpayers). Among the targeted tax expenditures was interest on any bond excludable from gross income under Section 103 of the Code, whether the bond is outstanding on the enactment date of the proposed legislation or is issued thereafter. Another example of such proposal from the fall of 2011 would have required the Office of Management and Budget to establish steadily declining annual ratios for debt as a percentage of gross domestic product, effective for taxable years beginning on or after January 1, 2013. Under the proposal, if the ratios were not met, automatic cuts in spending and tax preferences, such as tax-exempt interest, would be triggered. Prospective purchasers of the 2012 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion. Limitations on Remedies Remedies available to the Bondowners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2012 Bonds or to preserve the tax-exempt status of the 2012 Bonds. See "Payments by FDIC and other Federal Agencies," "No Acceleration Provisions" and `Billing of Special Taxes" herein 45 LEGAL MATTERS Legal Opinion The legal opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, approving the validity of the 2012 Bonds will be made available to purchasers at the time of original delivery and the form of such opinion is attached hereto as Appendix E. Tax Exemption In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, subject to the Authority's compliance with certain covenants, interest on the 2012 Bonds is excludable from gross income of the owners thereof for federal income tax purposes under Section 55 of the Code, is not includable as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the Authority to comply with one or more of such covenants could cause interest on the 2012 Bonds to not be excludable from gross income under Section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the 2012 Bonds. In the further opinion of Bond Counsel, interest on the 2012 Bonds is exempt from California personal income taxes. Bondowners should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2012 Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2012 Bonds other than as expressly described above. The form of Bond Counsel's opinion is set forth in Appendix E. No Litigation At the time of delivery of the 2012 Bonds, the Authority and the District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory agency, public board or body pending with respect to which they have been served with process or to their knowledge threatened against the Authority or the District affecting their existence, or the titles of their respective officers which would materially adversely affect the ability of the Authority to perform its obligations under the 2012 Bonds or certain documents related thereto or seeking to restrain or to enjoin the issuance, sale or delivery of the 2012 Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the 2012 Bonds, or in any way contesting or affecting the validity or enforceability of the 2012 Bonds, or the Fiscal Agent Agreement or any action of the Authority or the District contemplated by either of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement hereto, or contesting the powers of the Authority or the District or their authority with respect to the 2012 Bonds or any action of the Authority or the District contemplated by either of said documents, nor, to the knowledge of the Authority, is there any basis therefor. No General Obligation of the Authority or the District 46 The 2012 Bonds are not general obligations of the Authority or the District, but are limited obligations of the Authority for the District payable solely from proceeds of the Special Tax and proceeds of the 2012 Bonds, including amounts in the Reserve Fund, the Special Tax Fund and the Bond Fund. Any tax levied for the payment of the 2012 Bonds shall be limited to the Special Taxes to be collected within the jurisdiction of the District. RATING Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., has assigned a rating of to the 2012 Bonds. Such rating reflects only the views of such organization and any explanation of the significance of such rating should be obtained from the rating agency furnishing the same at the following addresses: Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Except as set forth in the Continuing Disclosure Agreement, the Authority undertakes no responsibility to bring to the attention of Owners of the Bonds any downward revision or withdrawal of a rating. The Authority undertakes no responsibility to oppose any such revision or withdrawal. UNDERWRITING The 2012 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus at a purchase price of $ (which represents the aggregate principal amount of the 2012 Bonds ($ less an underwriter's discount of $ ). The purchase agreement relating to the 2012 Bonds provides that the Underwriter will purchase all of the 2012 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell 2012 Bonds to certain dealers and others at prices lower than the offering price stated on the cover page hereof. The offering prices may be changed from time to time by the Underwriter. PROFESSIONAL FEES Fees payable to certain professionals, in connection with the 2012 Bonds, including the Underwriter, Stradling Yocca Carlson & Rauth, as Underwriter's Counsel, Quint & Thimmig LLP, as Bond Counsel, McFarlin & Anderson LLP, as Disclosure Counsel, Fieldman, Rolapp & Associates, as Financial Advisor, U.S. Bank National Association, as the Fiscal Agent, and Willdan Financial Services, as Special Tax Consultant, are contingent upon the issuance of the 2012 Bonds. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries thereof which summaries do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statement of the contents thereof. 47 Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. This Official Statement is not to be construed as a contract or agreement between the District or the Authority and the purchasers or owners of any of the 2012 Bonds. 48 The execution and delivery of the Official Statement by the District has been duly authorized by the Authority on behalf of the District. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILIIIES DISTRICT NO. 03-01 (CROWNE HILL) By: Bob Johnson, Executive Director, Temecula Public Financing Authority, on behalf of the District 49 APPENDDXA GENERAL INFORMATION ABOUT THE CITY OF TEMECULA The following information is provided for background purposes only. The City of Temecula has no liability or responsibility whatsoever with respect to the 2012 Bonds or the Fiscal Agent Agreement. Introduction Following a vote by the residents on November 7, 1989, the City incorporated under the general laws of the State of California on December 1, 1989. The City has a Council -Manager form of government and is represented by the five members of the City Council who are each elected at -large to serve a four-year term. The Mayor is selected annually by the members of the City Council. The Temecula Community Services District (TCSD) was also established in 1989. The TCSD is responsible for providing parks and recreation services to the citizens of Temecula, as well as street lighting and slope maintenance in certain areas of the district. Other governmental entities, such as the State of California, the County of Riverside and various school, water and other districts, also provide various levels of service within the City. However, the City Council does not have a continuing oversight responsibility over these other governmental entities. Located on Interstate 15, the City of Temecula is the 11th largest city in the Inland Empire and the 5th largest in Riverside County (as of January, 2012), encompassing 30.15 square miles. The City of Temecula is 85 miles southeast of Los Angeles, 60 miles north of San Diego, 61 miles southeast of Orange County and 20 miles inland from the cities of San Juan Capistrano and Oceanside. Population From 2003 - 2012, the City's population grew from 74,157 to 103,092, a gain of 28,935 or 39.0%. In this same period, Riverside County added 497,358, a gain of 28.7%. CITY OF TEMECULA AND COUNTY OF RIVERSIDE POPULATION FROM 2003 TO 2012 (1) Year Temecula Riverside County Population % Change Population % Change 2003 74,157 -- 1,730,219 -- 2004 76,407 3.0 1,814,485 4.9 2005 78,808 3.1 1,895,695 4.5 2006' 90,120 14.4 1,975,913 4.2 2007 93,122 3.3 2,049,902 3.7 2008 95,332 2.4 2,102,741 2.6 2009 97,741 2.5 2,140,626 1.8 2010 99,757 2.1 2,179,692 1.8 2011 101,255 1.5 2,205,731 1.2 2012 103,092 1.8 2,227,577 1.0 • Includes annexation ofRedhawk area. 111 As of January 1 of each calendar year. Source: California Department ofF'inance. A-1 Construction Activity The following table shows a five year history of construction activity in the City. [CIRB functions passing to CBIA; in transition during month of May. Expects conversion to be completed in June] CITY OF TEMECULA BUILDING PERMITS AND VALUATIONS (Calendar Year 2006 — 2010) 2006 2007 2008 2009 2010 Valuation ($000): Residential 145,638,382 194,888,351 100,451,479 72,006,373 68,489,143 Non-residential 144,623,957 151.320.960 138,074,079 20.866.892 14,235 576 Total 290,262,339 346,209,311 238,525,558 92,873,265 82,724,719 Residential Units: Single family 589 697 301 323 342 Multiple family 18 237 274 32 6 Total 607 934 575 355 348 Source: (Construction Industry Research Board'. Economic Condition and Outlook Temecula's economic base is anchored by a number of firms specializing in biomedical technology and supplies, high technology controllers and semi -conductors, among others. The City's retail base is also experiencing growth and is home to several auto dealers including Honda, Lincoln, Mercury, Hyundai, Subaru, Toyota and Nissan. The following table sets forth major manufacturing and non -manufacturing employers: A-2 CITY 01? TEMECULA LARGEST EMPLOYERS BY NUMBER OF EMPLOYEES (As of June, 2011) Employer Abbott Vascular (Abbott Laboratories f/k/a Guidant Corporation or Abbott Cardiovascular Systems, Inc.) Temecula Valley Unified School District Professional Ilospital Supply International Rectifier Costco Wholesale Corporation Macy's Deportment Stores, Inc. Chcmi-Con International Norni Reeves Auto Group Southwest 'Traders Milgard Manufacturing I'lant Equipment, Inc. Temecula Creek Inn Channell Commercial Corp. Albertson's ITP Enterprises Inc. Dayton Hudson Corporation/Target JC Penny Company Toyota of Temecula Valley City of Temecula Lowe's Source: City Finance Department. Approximate No. of Employees A-3 Type of Business 2,938 Medical equipment 2.749 Public school system 1,100 Medical equipment and supplies 700 Power semiconductors 373 Wholesale warehouse 300 Retail 272 Manufacturing 260 Auto Dealer 233 Distribution 210 Windows 200 Telephone equipment 195 Ilotel 184 Cable enclosures 180 Grocery 178 Pharmaceutical 174 Retail 170 Retail 170 Auto Dealer 153 Government 152 Building Supplies Taxpayer(] CITY OF TEMECULA PRINCIPAL SECURED PROPERTY OWNERS FOR FISCAL YEAR 2011-12 Type of Business Secured 2011-12 Assessed Valuation (in 000s) Percent of Total Assessed (Valuation) Total 2011-12 Assessed Valuation (in 000s) Abbott Vascular (2) Temecula Towne Center Associates International Rectifier Corporation Inland Western Temecula Common Federal National Mortgage Association Temecula Properties BACM 2006-5 Rancho California Alexander and Baldwin Inc. Temecula Villa Apartments Macy's Department Stores, Inc (31 Total 2011-12 Assessed Valuation Medical Appliances Mfg. Regional Mall Electronics Mfg. Real Estate Investment Trust Mortgage Buyer Industrial Commercial Commercial Commercial Retail Department Store Totals $207,308 148,865 86,702 64,300 54,897 54,696 53,162 48,639 48,058 37.841 $804,468 1.86% 1.33 .78 .58 .49 .49 .48 .44 .43 .34 7.20% $463,010 148,865 86,702 64,300 54,897 54,696 53,162 48,639 48,058 47.666 $1,069,996 $11,167,952 $11,842,873 (0 Assessed values of parcels owned by related entities have been aggregated. (2) The facility operating in the City is locally now known as Abbott Vascular, which is a subsidiary of Abbott Laboratories. Ownership of some parcels is in the name of Advanced Cardiovascular Systems, Inc., or Abbott Cardiovascular Systems, Inc. Abbott Laboratories acquired Advanced Cardiovascular Systems, Inc. in April 2006, in connection with Boston Scientific Corporation's purchase of Guidant Corporation. Some personal property and fixtures may be listed as owned by Abbott Vascular, Inc. (') Owner had pending appeals on one or more parcels. Source: City of Temecula. CITY OF TEMECULA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY FOR THE FISCAL YEARS 2002-03 THROUGH 2011-12 (Values in Thousands) [UPDATE] Total Fiscal Secured and Real Estate Year Unsecured Exemptions 2002-03 6,201,896 (30,010) 2003-04 6,931,291 (43,142) 2004-05 7,794,688 (53,240) 2005-06 10,328,097 (51,063) 2006-07 11,836,051 (75,082) 2007-08 13,434,244 (88,037) 2008-09 13,537,220 (101,367) 2009-10 12,003,561 (112,286) 2010-11 11,932,655 (116,038) 2011-12 Source: Riverside County Assessor's ice. Net Taxable Assessed Value 6,171,886 6,888,149 7,741,448 10,277,034 11,760,969 13,346,207 13,435,853 11,891,275 11,816,617 A-4 Homeowners Exemption (82,926) (92,362) (94,237) (108,654) (111,392) (113,341) (114,841) (115,783) (115,944) Net Total Estimated Assessed Actual Value Value 6,088,960 6,088,960 6,795,787 6,795,787 7,647,211 7,647,211 10,168,380 10,168,380 11,649,577 11,649,577 13,232,866 13,232,866 13,321,012 13,321,012 11,775,492 11,775,492 11,700,673 11,700,673 General Information Agriculture. The climate and soil in the City are particularly favorable for growing avocado, grape and citrus crops. There are currently several agricultural management firms in the Temecula area which manage agricultural production of thousands of acres of land owned by individual investors, partnerships and corporations. The agricultural managers apply economies of scale, by combining many small and medium sized parcels of land as if these parcels were one large ranch. In addition, a substantial wine industry has been developed in the area near the City. As of January, 2012, there were approximately fifty-seven (57) vineyards and wineries which produce wine with locally grown grapes. Climate. Temecula Valley enjoys a mild Mediterranean climate with year-round temperatures averaging in the mid 70s. The weather is comparable to the Napa Valley, as evidenced by a thriving wine industry, with warm, dry days and cool evenings. Summer -time temperatures, which can average in the mid 80s or the mid 90s during the day, are often cooled by afternoon ocean breezes blowing into the valley through gaps in the Santa Ana foothills to the west. Although separated from the Pacific by the Santa Rosa range of mountains, the Rainbow Gap funnels the mild beach climate into the valley. Mild winter temperatures average in the mid 60s. Yearly average rainfall in the Temecula Valley is approximately 14 inches, as compiled by the Rancho California Water District. The quality of air in the Temecula Valley is consistently better than that of surrounding communities. Ocean breezes flow through the Rainbow Gap almost every day, sweeping away smog. In the summer, Pacific winds yield temperatures up to 10 degrees lower than in towns just a few miles away. Education. The City is served by Temecula Valley Unified School District, one of the fastest growing school districts in the State, with 5 high schools (including 2 alternative schools), 6 middle schools, [4/3] charter schools, 1 home -schooling program, 17 elementary schools and 1 adult school. In addition, there are 11 private schools and several preschools. The general boundaries extend north to Jean Nicholas Road in French Valley, south to the Riverside County line, east to Vail Lake and west to the Temecula city limit. The School District covers approximately 150 square miles. As of [April 19, 2012], approximately [28,671] students (Grades K-12) are enrolled in the School District. The University of California, Riverside opened an extension center in the City, San Joaquin Valley College is located in the City and Mt. San Jacinto Community College operates a campus ten miles north of the City to serve the growing population. In addition, the Cal State San Marcos facility continues to expand with construction on the opening of their satellite campus in their newly renovated building on Margarita Road. In the past two years a state-of-the-art Social and Behavioral Sciences building, a parking structure and a public safety building have been completed. Cal State San Marcos has a substantial specialized and general undergraduate curriculum. The City began the 2000's with a well- educated population, and its population trends and school performance figures have allowed it to maintain that position. Transportation. Interstate 15 and its connecting arterials provide convenient links to San Diego and Riverside, Los Angeles (Interstate 10), Orange County (Highway 91) and San Bernardino (Interstate 215). The French Valley Airport, 4 miles north of Interstate 15 on Winchester Road, accommodates business jets and commuter airlines. A-5 Housing. Temecula is unique in that its residents are about equidistant from both San Diego and Orange County via the Interstate 15 freeway. As a result, it is receiving growth impulses from the south as well as the north, as families spill into the Inland Empire from Southern California's more congested coastal counties. Temecula's rapid population growth represents a relatively new phenomenon in Southern California. A large number of the City's new residents have migrated north from San Diego County along the Interstate 15 freeway. Normally, a Southern California community undergoes rapid growth only when population spills from Orange or Los Angeles counties. The latest population data shows Temecula with 103,092 residents as of January 1, 2012, which includes the March, 2004 annexation of the community of Redhawk, which became official June 30, 2005. A-6 APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT APPENDIX D FORM OF AUTHORITY CONTINUING DISCLOSURE AGREEMENT APPENDIX E FORM OF OPINION OF BOND COUNSEL APPENDIX F BOOK -ENTRY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2012 Bonds, payment of principal of and interest on the 2012 Bonds to Direct Participants, Indirect Participants or Beneficial Owners (as such terms are defined below) of the 2012 Bonds, confirmation and transfer of beneficial ownership interests in the 2012 Bonds and other bond - related transactions by and between DTC, Direct Participants, Indirect Participants and Beneficial Owners of the 2012 Bonds is based solely on information furnished by DTC to the Authority which the Authority believes to be reliable, but the Authority, 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 2012 Bonds. The 2012 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 fully -registered 2012 Bond will be issued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with 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 I7A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 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 book -entry 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 infonnation about DTC can be found at www.dtcc.com. The information on such website is not incorporated herein by such reference or otherwise. Purchases of 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2012 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2012 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 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants F-1 acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2012 Bonds, except in the event that use of the book -entry system for the 2012 Bonds is discontinued. To facilitate subsequent transfers, all 2012 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 the 2012 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2012 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2012 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 2012 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2012 Bonds, such redemptions, tenders, defaults, and proposed amendments to the 2012 Bonds documents. For example, Beneficial Owners of the 2012 Bonds may wish to ascertain that the nominee holding the 2012 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the altemativc, Beneficial Owners may wish to provide their names and addresses to the Fiscal Agent and request that copies of notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2012 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 Authority 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 the 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the 2012 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 Authority or the Fiscal Agent, 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 casc 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 Fiscal Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the 1 Authority or the Fiscal Agent, 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. DTC may discontinue providing its services as depository with respect to the 2012 Bonds at any time by giving reasonable notice to the Authority or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, the 2012 Bond certificates are required to be printed and delivered. F-2 The Authority may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, the 2012 Bond certificates will be printed and delivered to DTC. The information in this Section concerning DTC and DTC's book -entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event that (a) DTC determines not to continue to act as securities depository for the 2012 Bonds, or (b) the Authority determines that DTC shall no longer act and delivers a written certificate to the Fiscal Agent to that effect, then the Authority will discontinue the Book -Entry System with DTC for the 2012 Bonds. If the Authority determines to replace DTC with another qualified securities depository, the Authority will prepare or direct the preparation of a new single separate, fully -registered 2012 Bond for cach maturity of the 2012 Bonds registered in the name of such successor or substitute securities depository as are not inconsistent with the terms of the Fiscal Agent Agreement. If the Authority fails to identify another qualified securities depository to replace the incumbent securities depository for the 2012 Bonds, then the 2012 Bonds shall no longer be restricted to being registered in the 2012 Bond registration books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository or its nominee transferring or exchanging the 2012 Bonds shall designate. In the event that the Book -Entry System is discontinued, the following provisions would also apply: (i) the 2012 Bonds will be made available in physical form, (ii) principal of, and redemption premiums if any, on the 2012 Bonds will be payable upon surrender thereof at the trust office of the Fiscal Agent identified in the Fiscal Agent Agreement, and (iii) the 2012 Bonds will be transferable and exchangeable as provided in the Fiscal Agent Agreement. The Authority and the Fiscal Agent do not have any responsibility or obligation to DTC Participants, to the persons for whom they act as nominees, to Beneficial Owners, or to any other person who is not shown on the registration books as being an owner of the 2012 Bonds, with respect to (i) the accuracy of any records maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC Participant of any amount in respect of the principal of redemption price of or interest on the 2012 Bonds; (111) the delivery of any notice which is permitted or required to be given to registered owners under the Fiscal Agent Agreement; (iv) the selection by DTC or any DTC Participant of any person to receive payment in the event of a partial redemption of the 2012 Bonds; (v) any consent given or other action taken by DTC as registered owner; or (vi) any other matter arising with respect to the 2012 Bonds or the Fiscal Agent Agreement. The Authority and the Fiscal Agent cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal of or interest on the 2012 Bonds paid to DTC or its nominee, as the registered owner, or any notices to the Beneficial Owners or that they will do so on a timely basis or will serve and act in a manner described in this Official Statement. The Authority and the Fiscal Agent are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner in respect to the 2012 Bonds or any error or delay relating thereto. F-3 APPENDIX G BOUNDARY MAP OF THE COMMUNITY FACILITIES DISTRICT Preliminary Official Statement for Wolf Creek PRELIMINARY OFFICIAL STATEMENT DATED JULY, 2012 NEW ISSUE RATING: NOT RATED _ (See `BATING" herein.) In the opinion of Quint & Thimmig LLP, San Francisco. California, Bond Counsel, subject, however, to certain qualifications described herein, under existing law, the interest on the 2012 Bonds is excludable from gross income of the owners thereoffor federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "LEGAL MATTERS— Tax Exemption" herein. $24,960,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BONDS Dated: Date of Delivery Due: September 1, as on the inside cover The Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds (the "2012 Bonds") are being issued under the Mello -Roos Community Facilities Act of 1982, Article 1 I, commencing with Section 53580, of Chapter 3 of Part I of Division 2 of Title 5 of the California Government Code and a Fiscal Agent Agreement, dated as of August 1, 2012, by and between the Temecula Public Financing Authority (the "Authority") and U.S. Bank National Association, as Fiscal Agent, and are payable from proceeds of Special Taxes (as defined herein) levied on property within the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (the "District") according to the rate and method of apportionment of special tax approved by the qualified electors of the District and by the Board of Directors of the Authority, acting as the legislative body of the District. The 2012 Bonds are being issued (i) to fund, together with other available moneys, the defeasance and redemption of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds (the "Prior Bonds"), (ii) to pay the costs of issuing the 2012 Bonds and (iii) to establish a Reserve Fund for the 2012 Bonds. See "PLAN OF FINANCE" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. Interest on the 2012 Bonds is payable on March I, 2013, and semi-annually thereafter on March 1 and September 1. The 2012 Bonds will be issued in denominations of $5,000 or integral multiples in excess thereof. The 2012 Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the 2012 Bonds as described herein under "THE 2012 BONDS — Book -Entry and DTC." The 2012 Bonds are subject to optional redemption, mandatory redemption from prepayments of Special Taxes and mandatory sinking payment redemption as described herein. THE 2012 BONDS, TIIE INTEREST THEREON, AND ANY PREMIUM PAYABLE ON THE REDEMPTION OF ANY OF THE 2012 BONDS, ARE NOT AN INDEBTEDNESS OF THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT), THE STATE OF CALIFORNIA (THE "STATE") OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE AUTIIORITY (EXCEPT TO THE LIMITED EXTENT SET FORTH IN TIIF. FISCAL AGENT AGREEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE 2012 BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAI. TAXES LEVIED WITHIN THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. TIIE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED IN TIIE FISCAL AGENT AGREEMENT. This cover page contains certain information for quick reference only. It is not a sunonary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an Informed investment decision with respect to the 2012 Bonds. Investment in the 2012 Bonds involves risks which may not be appropriate for some investors. See "BONDOWNERS' RISKS" herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2012 Bonds. MAI URI IY SCHL•Ul1LE (See Inside Cover) Please refer to the inside cover page for a summary of the principal amounts, interest rates, reoffering yields and CUSIP® numbers for the 2012 Bonds. The 2012 Bonds arc offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Quint & Thimmig LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. McFarlin & Anderson LLP, Laguna Hills, Califomia is acting as Disclosure Counsel. Certain legal matters will be passed on for the Authority and the District by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, Cali fomia, acting as general counsel to the Authority, and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. It is anticipated that the 2012 Bonds, in book -entry form, will be available through the facilities of DTC on or about August _, 2012. STONE & YOUNGBERG A DIVISION OF STIFEI. NICOLAUS • Preliminary, subject to change. Dated: [July 1 2012 MATURITY SCHEDULE $24,960,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BONDS $ Serial Bonds Base CUSIP® No. Maturity Principal Interest CUSIP® Maturity. Principal Interest CUSIP® (September I) Amount Rate Price No. (September I Amount Rate Price No 2013 $ % % 2020 $ % % 2014 2021 2015 2022 2016 2023 2017 2024 2018 2025 2019 $ % Term Bonds due September 1. 20 Yield % CUSIPt No. S % Term Bonds due September I. 2034 Yield % CUSIPt No. CUSIP' A registered trademark of the American Bankers Association. Copyright 0 1999-2012 Standard & Poor's, a Division of The McGraw -Dill Companies, Inc. CUSIP® data herein is provided by Standard & Poor's CUSIP® Service 13urcau. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP® Service Burcau. CUSIP® numbers are provided for convenience of reference only. The Authority. the District and the Underwriter take no responsibility for the accuracy of such numbers. Preliminary, subject to change. TEMECULA PUBLIC FINANCING AUTHORITY BOARD OF DIRECTORS Charles W. Washington, Chairperson Jeff Comerchero, Member Maryann Edwards, Member Michael S. Naggar, Member Ron Roberts, Member AUTHORITY/CITY STAFF Bob Johnson, Executive Director and City Manager of the City of Temecula Genie Wilson, Authority Treasurer and Chief Financial Officer of the City of Temecula Susan Jones, Authority Secretary and City Clerk of the City of Temecula SPECIAL SERVICES Bond Counsel Quint & Thimmig LLP San Francisco, California Authority Counsel Richards, Watson & Gershon A Professional Corporation Los Angeles, California Disclosure Counsel McFarlin & Anderson LLP Laguna Hills, California Special Tax Consultant Willdan Financial Services Temecula, California Financial Advisor to the Authority Fieldman, Rolapp & Associates Irvine, California Fiscal Agent and Escrow Agent U.S. Bank National Association Los Angeles, Califomia GENERAL INFORMATION ABOUT THE OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the 2012 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the 2012 Bonds. All summaries of the documents referred to in this Official Statement 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. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Authority, in any press release by the Authority and in any oral statement made with the approval of an authorized officer of the Authority or any other entity described or referenced herein, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend," and similar expressions identify "forward-looking statements" within the meaning of the 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 subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward- looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results and those differences may be material. 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, give rise to any implication that there has been no change in the affairs of the Authority or any other entity described or referenced herein since the date hereof. The Authority does not plan to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. Limited Offering. No dealer, broker, salesperson or other person has been authorized by the Authority to give any information or to make any representations in connection with the offer or sale of the 2012 Bonds other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any 2012 Bonds nor shall there be any sale of the 2012 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Involvement of Underwriter. The Underwriter has submitted the following statement 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. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 2012 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 Underwriter may offer and sell the 2012 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof and said public offering prices may be changed from time to time by the Underwriter. TI -IE 2012 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE 2012 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. TABLE OF CONTENTS INTRODUCTION 1 General 1 The Authority The Community Facilities District Purpose of the 2012 Bonds 2 Sources of Payment for the 2012 Bonds 2 Assessed Values 3 Tax Exemption 3 Risk Factors Associated with Purchasing the 2012 Bonds 4 Forward Looking Statements 4 Professionals Involved in the Offering 4 Other Information 5 CONTINUING DISCLOSURE 5 PLAN OF FINANCE 5 ESTIMATED SOURCES AND USES OF FUNDS 6 THE 2012 BONDS 6 Description of the 2012 Bonds 6 Debt Service Schedule 8 Terms of Redemption 9 Transfer and Exchange of Bonds 11 Book -Entry and DTC 12 SECURITY FOR THE 2012 BONDS 12 General 12 Special Taxes 12 Rate and Method 13 Special Taxes and the Teeter Plan 17 Proceeds of Foreclosure Sales 17 Special 'fax Fund 18 Bond Fund 19 Reserve Fund 20 Administrative Expense Fund 20 Investment of Moneys in Funds 21 Additional Bonds for Refunding Purposes Only 21 THE AUTHORITY 21 Authority for Issuance 21 THE COMMUNITY FACILITIES DISTRICT 22 General 22 Special Tax Levy by Land Use Category 24 Special Tax Collections 25 Property Ownership 26 Estimated Assessed Values 26 Direct and Overlapping Debt 28 Overlapping Assessment and Community Facilities Districts 30 Other Overlapping Direct Assessments 30 Estimated Value -to -Lien Ratios 30 BONDOWNERS' RISKS 34 Risks of Real Estate Secured Investments Generally 34 Special Taxes Are Not Personal Obligations34 The 2012 Bonds Are Limited Obligations of the Authority for the District 34 Property Values 34 Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property35 Economic Uncertainty 36 Disclosure to Future Purchasers 36 Government Approvals 36 Local, State and Federal Land Use Regulations 36 Endangered and Threatened Species 37 Hazardous Substances 37 State Budget 38 Levy and Collection of the Special Tax; Insufficiency of the Special Tax 38 Exempt Properties 39 Depletion of Reserve Fund 39 Potential Delay and Limitations in Foreclosure Proceedings 40 Bankruptcy and Foreclosure Delay 41 Payments by FDIC and Other Federal Agencies 41 Payment of Special Tax Not a Personal Obligation of the Property Owners 43 Factors Affecting Parcel Values and Aggregate Value 43 No Acceleration Provisions 44 Collection of Special Tax 44 Right to Vote on Taxes Act 44 Ballot Initiatives and Legislative Measures45 Limited Secondary Market 45 Loss of Tax Exemption 45 IRS Audit of Tax -Exempt Bond Issues 46 Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption 46 Limitations on Remedies 46 LEGAL MATTERS 46 Legal Opinion 46 Tax Exemption 47 No Litigation 47 No General Obligation of the Authority or the District 47 NO RATINGS 48 UNDERWRITING 48 PROFESSIONAL FEES. 48 MISCELLANEOUS 48 APPENDIX A — General Information About the City of Temecula A -I APPENDIX B — Rate and Method of Apportionment of Special Tax Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) B -I APPENDIX C — Summary of Certain Provisions of the Fiscal Agent Agreement C -I APPENDIX D — Form of Authority Continuing Disclosure Agreement D -I APPENDIX E — Form of Opinion of Bond Counsel E-1 APPENDIX F— Book -Entry System F -I APPENDIX G — Boundary Map of the Community Facilities District G-1 REGIONAL LOCATION MAP [Regional Map to be provided by Stone & Youngberg] AERIAL MAP [Aerial Map provided by the City with text by S&Y] OFFICIAL STATEMENT $24,960,000* TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BONDS 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 2012 Bonds to potential investors is made only by means of the entire Official Statement. General This Official Statement, including the cover page and appendices hereto, is provided to furnish information regarding the issuance and sale by the Temecula Public Financing Authority (the "Authority"), on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (the "District" or the "Community Facilities District") of $24,960,000' aggregate principal amount of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds (the "2012 Bonds"). The 2012 Bonds are issued pursuant to the Act (as defined below), Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law") and a Fiscal Agent Agreement, dated as of August 1, 2012 (the "Fiscal Agent Agreement"), by and between the Authority, for and on behalf of the District, and U.S. Bank National Association, as Fiscal Agent (the "Fiscal Agent"). See "THE AUTHORITY — Authority for Issuance" herein. The Authority may issue additional bonds secured on a parity with the 2012 Bonds for refunding purposes only. The 2012 Bonds and any parity bonds are referred to herein as the "Bonds." Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings given such terms in the Fiscal Agent Agreement, some of which are set forth in Appendix C hereto "Summary of Certain Provisions of the Fiscal Agent Agreement." The Authority The Authority was formed on April 10, 2001, pursuant to a Joint Exercise of Powers Agreement between the City of Temecula, California (the "City") and the Redevelopment Agency of the City of Temecula, in accordance with Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California. See "THE AUTHORITY" and "THE COMMUNITY FACILITIES DISTRICT." The Community Facilities District The District was formed and established by the Board of Directors of the Authority on October 28, 2003, pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the California Government Code, and referred to herein as the "Act"), following a public hearing and a landowner election at which the then qualified electors of the District, by more than a two-thirds Preliminary, subject to change. vote, authorized the District to incur bonded indebtedness in the aggregate not -to -exceed amount of $33,000,000 and approved the levy of a Special Tax A (the "Special Tax") on certain real property located in the District for the payment of debt service or acquisition of public improvements. The voters also approved the levy of a Special Tax B to pay costs relating to the maintenance of a flood control channel. Once duly established, a community facilities district is a legally constituted governmental entity established for the purpose of financing specific facilities and services within defined boundaries. Subject to approval by a two-thirds vote of the qualified voters within a community facilities district and compliance with the provisions of the Act, a community facilities district may issue bonds and may levy and collect special taxes to repay such bonded indebtedness and interest thereon. The District is located at the south end of Temecula along the northeast side of Pechanga Parkway, extending southeast from Loma Linda Road to Deer Hollow Way, just under a mile south of Temecula Parkway and just over a mile east of the Interstate 15 Freeway. The District is a master - planned community of approximately 557 acres with approximately 1,778 residential lots constituting Developed Property under the Rate and Method. In addition, there are approximately 20 acres of vacant land permitted to be developed for commercial uses and 1.6 acres of vacant land permitted to be developed for residential purposes (all of which is classified as "Undeveloped Property" under the Rate and Method, elementary and middle schools, an approximately 43 -acre sports park, an approximately 6 -acre neighborhood park, three park activity nodes along Wolf Creek Drive, paseos, a recreation center, a library and a fire station. Purpose of the 2012 Bonds The 2012 Bonds are being issued (i) to fund, together with other available moneys, the defeasance and redemption of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds (the "Prior Bonds"), (ii) to pay the costs of issuing the 2012 Bonds and (iii) to establish a Reserve Fund for the 2012 Bonds. See "PLAN OF FINANCE" herein. Sources of Payment for the 2012 Bonds The Bonds are secured by and payable from a first pledge of "Special Tax Revenues," other than the first Special Tax Revenues collected by the Authority in any fiscal year, in an amount equal to the portion of such fiscal year's Special Tax A levy for Administrative Expenses in an amount not to exceed, in any fiscal year $35,000, which are to be deposited to the Administrative Expense Fund. "Special Tax Revenues" is defined in the Fiscal Agent Agreement as the proceeds of the Special Tax A received by the Authority, including any scheduled payments thereof and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Special Tax Revenues" do not include any penalties collected in connection with delinquent Special Taxes which amounts niay be forgiven or disposed of by the Authority in its discretion, and if collected, will be used in a manner consistent with the Act. "Special Taxes" are defined in the Fiscal Agent Agreement as the Special Tax A levied within the District pursuant to the Act, the ordinance adopted by the legislative body of the District providing for the levy of the Special Taxes and the Fiscal Agent Agreement. The Special Taxes will be levied in accordance with the Rate and Method of Apportionment of Special Tax (the "Rate and Method") recorded as a lien on the Property pursuant to the Notice of Special Tax Lien. Under the Fiscal Agent Agreement, Special Tax Revenues include amounts levied to pay Administrative Expenses. In accordance with the Fiscal Agent Agreement, such amounts will not be paid to the Fiscal Agent, but will be deposited in the Administrative Expense Fund held by the Treasurer and such amounts are not pledged to the payment of the 2012 Bonds. 2 Pursuant to the Act, the Rate and Method, the Resolution of Formation (as defined herein) and the Fiscal Agent Agreement, so long as any Bonds are outstanding, the Authority will annually levy the Special Tax against the land within the District not exempt from Special Taxes under the Act and the Rate and Method ("Taxable Property") in accordance with the proceedings for the authorization and issuance of the Bonds and the Rate and Method, to make provision for the collection of the Special Tax in amounts which will be sufficient to (a) (i) pay debt service due on all Bonds, for the calendar year that commences in such Fiscal Year; (ii) pay Administrative Expenses; and (iii) pay any amounts required to replenish any bond or interest reserve funds for any Outstanding Bonds; less (b) a credit for funds available to reduce the annual Special Tax levy under the Fiscal Agent Agreement. See "SECURITY FOR THE 2012 BONDS — Special Taxes and the Teeter Plan" herein. The Rate and Method exempts from the Special Tax up to 33 acres of Public School District Property and up to 232 acres of Public Property and/or Property Owner's Association Property of the District. In Fiscal Year 2012-13, there are 32.45 acres of Public School District Property, approximately 72.18 acrcs of Public Property and approximately 34.63 acres of Property Owner's Association Property within the District. See "SECURITY FOR THE 2012 BONDS — Rate and Method" and "BONDOWNERS' RISKS — Exempt Properties. The Authority has also covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Special Tax. For a more detailed description of the foreclosure covenant, see "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY OR THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE FISCAL AGENT AGREEMENT. Assessed Values The gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12, plus an estimated $6,318,500 additional value from 17 new homes sold since April 1, 201 I] is $571,853,986, which is approximately (a) [22.91]• times the sum of the principal amount of the 2012 Bonds and (b) [10.84]. times the gross combined overlapping tax and assessment debt as set forth in Table 7. This gross assessed valuation may not be representative of the actual market value of property in the District because Article XIIIA of the California Constitution limits any increase in assessed value to no more than 2% a year unless a property is sold or transferred. See "THE COMMUNITY FACILITIES DISTRICT — Estimated Assessed Value -to -Lien Ratios" and "BONDOWNERS' RISKS — Land Values." Tax Exemption In the opinion of Bond Counsel, subject, however, to certain qualifications described herein, under existing law, interest on the 2012 Bonds is excludable from gross income of the Bondowners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 'Preliminary, subject to change. 3 1986, as amended, but is taken into account in computing an adjustment used in determining the federal altemative minimum tax for certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the 2012 Bonds. See "LEGAL, MM I ERS — Tax Exemption" herein. Risk Factors Associated with Purchasing the 2012 Bonds Investment in the 2012 Bonds involves risks that may not be appropriate for some investors. See the section of this Official Statement entitled "BONDOWNERS' RISKS" for a discussion of certain risk factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2012 Bonds. Forward Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" herein. • 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. NEITIIER THE AUTHORITY NOR THE DISTRICT PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will serve as the fiscal agent, paying agent, registrar and authentication and transfer agent for the 2012 Bonds, and will perform the other functions required of it under the Fiscal Agent Agreement. Quint & Thimmig LLP, San Francisco, California, is serving as Bond Counsel to the Authority. McFarlin & Anderson LLP, Laguna Hills, California, is acting as Disclosure Counsel to the Authority. Stradling Yocca Carlson & Routh, Newport Beach, California, is acting as Underwriter's Counsel. Bond Counsel and Disclosure Counsel have served and continue to serve as counsel to the Underwriter in other transactions. Willdan Financial Services, Temecula, California, acted as Special Tax Consultant for the Authority. Fieldman, Rolapp and Associates, Irvine, California, acts as Financial Advisor to the Authority. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Fiscal Agent, the Underwriter and the Special Tax Consultant is contingent upon the sale and delivery of the 2012 Bonds. Payment of the fees and expenses of the rating agency is not contingent upon the sale and delivery of the 2012 Bonds. 4 Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the 2012 Bonds, certain sections of the Fiscal Agent Agreement, security for the 2012 Bonds, special risk factors, the Authority, the District and other information are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the 2012 Bonds, the Fiscal Agent Agreement, and other resolutions and documents are qualified in their entirety by reference to the complete texts of the 2012 Bonds, the Fiscal Agent Agreement, such resolutions and other documents. All such descriptions are further qualified in their entirety by reference to laws and to principles of equity relating to or affecting generally the enforcement of creditors' rights. Copies of such documents may be obtained upon written request from the Temecula Public Financing Authority, 41000 Main Street, Temecula, California 92590 Attention: Treasurer. The Authority may charge for copying and mailing any documents requested. CONTINUING DISCLOSURE The Authority. The Authority has covenanted for the benefit of the owners of the 2012 Bonds to provide annually certain financial information and operating data relating to the 2012 Bonds, the District, ownership and development of the property in the District which is subject to the Special Tax, the occurrence of delinquencies in payment of the Special Tax, and the status of foreclosure proceedings, if any, respecting Special Tax delinquencies (the "Authority Annual Report"), and to provide notice of the occurrence of certain enumerated events. The Authority Annual Report is to be provided by the Authority not later than eight months after the end of the Authority's fiscal year (which currently would be March I), commencing with the report due March 1, 2013. The Authority, the City and related entities have never failed to comply in all material respects with any previous undertakings with regard to Securities and Exchange Commission Rule 15c2 -12(b)(5) (the "Rule") to provide annual reports or notices of material events. [Confirm; discuss documentation of review of timing and content of filings for all City, RDA and Authority financings.] Filing of Annual Reports; Forms of Reports. Each Authority Annual Report will be filed by the Special Tax Consultant, as dissemination agent for the Authority with the Electronic Municipal Market Access System (EMMA) of the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with the Rule; provided, however, a default under the Authority Continuing Disclosure Agreement will not, in itself, constitute a default under the Fiscal Agent Agreement, and the sole remedy under the Authority Continuing Disclosure Agreement in the event of any failure of the Authority to comply with the Authority Continuing Disclosure Agreement will be an action to compel performance. For a complete listing of items of information which will be provided in the Authority Annual Reports, see APPENDIX D — "Form of Authority Continuing Disclosure Agreement." PLAN OF FINANCE Current Refunding of Prior Bonds. A portion of the proceeds of the 2012 Bonds will be deposited into an escrow fund established under an escrow agreement, dated as of August 1, 2012 (the "Escrow Agreement"), by and between the Authority and U.S. Bank National Association, as escrow agent (the "Escrow Agent"). Amounts deposited under the Escrow Agreement will be held in cash uninvested in an amount sufficient to pay on September 1, 2012, (i) the interest due on the Prior Bonds, (ii) the principal of the Prior Bonds maturing on September 1, 2012 and (iii) the principal of the Prior Bonds maturing on and after September 1, 2013, at a redemption price equal to 102% of the principal 5 amount of such Prior Bonds. As a result of the deposit and application of funds as provided for in the Escrow Agreement, the obligation to make payments of the principal of and interest on the Prior Bonds will be defeased as of the closing date. ESTIMATED SOURCES AND USES OF FUNDS The proceeds from the sale of the 2012 Bonds will be deposited into the respective accounts and funds established by the Authority under the Fiscal Agent Agreement, as follows: (I) Sources: Principal Amount of 2012 Bonds Other Available Funds Less: Underwriter's Discount Total Sources Uses: Deposit into Refunding Fund Deposit into Improvement Fund Deposit into Reserve Fund Deposit into Costs of Issuance Fund Itl (Deposit into Special Tax Fundl Deposit into Administrative Expense Fund Total Uses $ Includes, among other things, the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Special 'fax Consultant and the Fiscal Agent, the escrow agent, the cost of printing the Preliminary and final Official Statements and reimbursement to the Authority. THE 2012 BONDS Description of the 2012 Bonds The 2012 Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semi-annually on each March 1 and September 1, commencing on March 1, 2013 (each an "Interest Payment Date"), and will mature in the amounts and on the dates set forth on the inside cover page hereof. The 2012 Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple thereof and when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the 2012 Bonds. Ownership interests in the 2012 Bonds may be purchased in book -entry form only, in denominations of $5,000 or any integral multiple thereof within a single maturity. So long as the 2012 Bonds are held in book -entry form, principal of, premium, if any, and interest on the 2012 Bonds will be paid directly to DTC for distribution to the beneficial owners of the 2012 Bonds in accordance with the procedures adopted by DTC. See "THE 2012 BONDS — Book -Entry and DTC." In the event that the 2012 Bonds are not registered in the name of Cede & Co., as nominee of DTC or another eligible depository, both the principal and redemption price, including any premium, of the 2012 Bonds shall be payable by check in lawful money of the United States of America upon surrender of the 2012 Bonds at the principal office of the Fiscal Agent as specified in the Fiscal Agent Agreement; and interest on the 2012 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first-class mail to the registered owner thereof at such registered owner's address as it appears on the Bond Register maintained by the Fiscal Agent at the close of business on the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such day is a Business Day (the 6 "Record Date"), or by wire transfer to an account within the United States made on such Interest Payment Date upon written instructions of any Bondowner of $1,000,000 or more in aggregate principal amount of 2012 Bonds received before the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such 2012 Bonds are transferred to a new Bondowner. The registered owner of any 2012 Bond will be the person or persons in whose name or names a 2012 Bond is registered on the registration books kept for that purpose by the Fiscal Agent in accordance with the terms of the Fiscal Agent Agreement (initially being DTC with respect to all of the 2012 Bonds). So long as the 2012 Bonds are in book -entry only form, all references in this Official Statement to the owners or holders of the 2012 Bonds mean DTC and not the Beneficial Owners. The 2012 Bonds will bear interest at the rates set forth on the cover hereof payable on the Interest Payment Dates in each year. Interest will be calculated on the basis of a 360 -day year comprised of twelve 30 -day months. Each 2012 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as defined above) preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the date of issuance of the 2012 Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. The principal of, and interest and premium, if any, payable on the 2012 Bonds will be payable when due, by wire transfer of the Fiscal Agent to DTC, which will in turn remit such principal, interest and premium, if any, to its Participants (as described in APPENDIX F — "Book -Entry System"), which Participants will in turn remit such principal, interest and premium, if any, to the Beneficial Owners (as defined in APPENDIX F— "Book -Entry System") of the 2012 Bonds as described in APPENDIX F — "Book -Entry System." 7 Debt Service Schedule The following table presents the annual debt service on the 2012 Bonds (including sinking fund redemptions), assuming that there are no optional redemptions or mandatory redemptions from prepayments of Special Taxes. Table 1 Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Debt Service Schedule 2012 Year Ending Bonds Debt September 1 Principal Interest Service 2013 $ $ $ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 8 Terms of Redemption The 2012 Bonds are subject to redemption upon the circumstances, on the dates and at the prices set forth as follows. Optional Redemption. The 2012 Bonds maturing on and after September 1, 20_ are subject to optional redemption prior to their stated maturity on any interest Payment Date occurring on or after September 1, 20_, as a whole, or in part among maturities so as to maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Date September 1, 20_ and March 1, 20 September 1, 20_ and March 1, 20_ September 1, 20_ and any Interest Payment Date thereafter Redemption Price I0_% Mandatory Sinking Payment Redemption. The 2012 Bonds maturing on September 1, 20_, are subject to mandatory sinking payment redemption in part on September 1, 20_, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September I) 20 20_ (maturity) Sinking Payments The 2012 Bonds maturing on September 1, 2034, are subject to mandatory sinking payment redemption in part on September 1, 20_, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: 9 Redemption Date (September 1) 20 2034 (maturity) Sinking Payments The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the 2012 Bonds as a result of any prior partial redemption of the 2012 Bonds pursuant to an optional redemption or mandatory redemption from prepaid Special Taxes, as specified in writing by the Treasurer to the Fiscal Agent. Redemption from Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund shall be used to redeem the 2012 Bonds on the next Interest Payment Date for which notice of redemption can timely be given, by lot and allocated among maturities of the 2012 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Date Redemption Price Any Interest Payment Date from March 1, 2013 to and including March 1, 2020 103% September 1, 2020 and March 1, 2021 102 September I, 2021 and March 1, 2022 101 September 1, 2022 and any interest Payment Date thereafter 100 Purchase In Lieu of Redemption. In lieu of any redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2012 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may 2012 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2012 Bonds were to be redeemed in accordance with the Fiscal Agent Agreement. Notice of Redemption. The Fiscal Agent shall cause notice of any redemption to be mailed by first-class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories, to one or more Information Services (or by such other means as permitted by such services), and to the respective registered Bondowners of any 2012 Bonds designated for redemption, at their addresses appearing on the Bond Register; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of the 2012 Bonds. • Preliminary, subject to change. 10 Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2012 Bonds are to be called for redemption, shall designate the CUSIP® numbers and Bond numbers of the 2012 Bonds to be redeemed by giving the individual CUSIP® number and Bond number of each 2012 Bond to be redeemed or shall state that all 2012 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2012 Bonds of one or more maturities have been called for redemption, shall state as to any 2012 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2012 Bonds be surrendered at the principal office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on the 2012 Bonds called for redemption will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any optional redemption of the 2012 Bonds, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2012 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2012 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the 2012 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2012 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the 2012 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of the Fiscal Agent Agreement. Partial Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds or any given portion thereof, the Fiscal Agent shall select the Bonds to be redeemed, from all Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify Bonds to be redeemed so as to maintain, as much as practicable, the same debt service profile for the Bonds as in effect prior to such redemption unless otherwise specified in the Fiscal Agent Agreement), and by lot within a maturity in any manner which the Fiscal Agent deems appropriate. Upon surrender of 2012 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the registered Bondowner, at the expense of the Authority, a new 2012 Bond or 2012 Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2012 Bond or 2012 Bonds. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2012 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2012 Bonds so called shall cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date for such 2012 Bonds. Transfer and Exchange of Bonds Any 2012 Bond may, in accordance with the terms of the Fiscal Agent Agreement, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2012 Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Fiscal Agent. 2012 Bonds may be exchanged at the principal office of the Fiscal Agent for a like aggregate principal amount of 2012 Bonds of authorized denominations and of the same series and maturity. The Fiscal Agent shall collect from the Bondowner requesting such exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. 11 No transfer or exchange shall be required to be made of any 2012 Bonds (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Book -Entry and DTC DTC will act as securities depository for the 2012 Bonds. The 2012 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 fully registered 2012 Bond certificate will be issued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. All references in this Official Statement to the Bondowners or an owner of 2012 Bonds shall mean 01(2 or its designee and not the beneficial owners of the 2012 Bonds. See APPENDIX F — "Book -Entry System." SECURITY FOR THE 2012 BONDS General The 2012 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than amounts to be deposited in the Administrative Expense Fund in an amount not to exceed $35,000 in any fiscal year) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. Pursuant to the Act and the Fiscal Agent Agreement, and subject to the Maximum Special Taxes that may be levied in any Fiscal Year under the Rate and Method and the Act, the Authority will annually levy in each Fiscal Year the Special Taxes in an amount required for the payment of principal of and interest on any outstanding 2012 Bonds becoming due and payable during the calendar year commencing in each Fiscal Year, including any necessary replenishment of the Reserve Fund for the 2012 Bonds and an amount estimated to be sufficient to pay the Administrative Expenses during such year. The Special Tax Revenues and all deposits into said funds (until disbursed as provided in the Fiscal Agent Agreement) are pledged to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose. Amounts in the Administrative Expense Fund, the Improvement Fund, and the Cost of Issuance Fund are not pledged to the repayment of the 2012 Bonds. The Improvements constructed or acquired with the proceeds of the Prior Bonds are not in any way pledged to pay the debt service on the 2012 Bonds. Any proceeds of condemnation or destruction of any Improvements financed with the proceeds of the Prior Bonds are not pledged to pay the debt service on the 2012 Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement. Special Taxes The Authority has covenanted in the Fiscal Agent Agreement to comply with all requirements of the Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcement of delinquent Special Taxes. The Fiscal Agent Agreement provides that the Special Taxes are payable and will be collected in the same manner and at the same time and in the same installment as the general taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after 12 delinquency as do the general taxes on real property; provided, the Authority may provide for direct collection of the Special Taxes from property owners in certain circumstances. Because the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the 2012 Bonds. Although the Special Tax, when levied, will constitute a lien on parcels subject to taxation within the District, it does not constitute a personal indebtedness of the owners of property within the District. There is no assurance that the owners of real property in the District will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. See "BONDOWNERS' RISKS" herein. NEITHER THE FAITH AND CREDIT OF Mt AUTHORITY NOR THE TAXING POWER OF THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM SOURCES PLEDGED IN THE FISCAL AGENT AGREEMENT. Rate and Method General. The Special Tax is levied and collected according to the Rate and Method set forth in APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Rate and Method of Apportionment of Special Tax." The qualified electors of the District approved the Rate and Method on October 28, 2003. Capitalized terms used in the following paragraphs but not defined herein have the meanings given them in the Rate and Method. The Rate and Method provides the means by which the Board of Directors of the Authority may annually levy the Special Taxes within the District up to the Maximum Special Tax. The Rate and Method provides that the Annual Special Tax A may not be levied after Fiscal Year 2053-54. Special Tax A Requirement; Special Tax B Requirement. Annually, at the time of levying the Special Tax for improvements with respect to the District, the Authority will determine the amount of money to be collected from Taxable Property in the District (the "Special Tax A Requirement"), which will be the amount required in any Fiscal Year to pay the following: (i) annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) periodic cost on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) Administrative Expenses; (iv) an amount equal to any anticipated shortfall due to Special Tax delinquency in the prior Fiscal Year; and 13 (v) any amount required to establish or replenish any reserve funds for the outstanding Bonds; less (vi) a credit for funds available to reduce the annual Special Tax levy as determined pursuant to the Fiscal Agent Agreement. In addition, annually at the time of levying the special tax for services with respect to the District, the Authority will determine the amount of money to be collected from Taxable Property in the District, which will be the amount required in any Fiscal Year to pay the estimated costs of providing services, including the salaries of City staff related to and a proportionate share of City overhead costs, for the maintenance of the Flood Control Channel in an amount not to exceed [Confirm with Willdan: $117,165.94 for Fiscal Year 2012-13, increasing by 2% each Fiscal Year thereafter ("the Special Tax B Requirement"). Revenues derived from the levy and collection of Special Tax B do not constitute "Special Taxes" or "Special Tax Revenues" as such terms are used herein and are not pledged to the payment of debt service on the 2012 Bonds. Developed and Undeveloped Property; Exempt Property. The Rate and Method declares that for each Fiscal Year, all Parcels of Taxable Property within the District shall be classified as either Developed Property, Approved Property, Undeveloped Property, Public Property and/or Property Owner's Association Property that is not Exempt Property and shall be subject to the levy of Special Taxes in accordance with the Rate and Method. (i) "Taxable Property" means all Parcels in the District which have not prepaid their respective Special Taxes in their entirety pursuant to the Rate and Method, or are not exempt from the Special Tax pursuant to law or the Rate and Method. (ii) "Developed Property" means all Parcels of Taxable Property, not categorized as Approved Property, Undeveloped Property, Public Property and/or Property Owner's Association Property that are not Exempt Property pursuant to the provisions of the Rate and Method, (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) a building permit for new construction has been issued prior to April 1st preceding the Fiscal Year in which the Special Tax is being levied. (iii) "Approved Property" means for the any Fiscal Year, all Parcels of Taxable Property: (i) that arc included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) for which a building permit was not issued prior to the April 1st preceding the Fiscal Year in which the Special Tax is being levied. (iv) "Public Property'' means any property within the boundary of the District which, as of January 1st of the preceding Fiscal Year for which the Special Tax is being levied is used for rights-of- way or any other purpose and is owned by, dedicated to, or irrevocably offered for dedication to the federal government, the State of California, the County of Riverside (the "County"), City or any other local jurisdiction, provided, however, that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. (v) "Public School District Property" means 33 acres that are acquired or known to the District Administrator to be acquired by Temecula Valley Unified School District located within the Wolf Creek Specific Plan No. 12 approved on January 23, 2001, or as subsequently modified, supplemented or amended. 14 (vi) "Undeveloped Property" means all Taxable Property not classified as Developed Property, Approved Property, Public Property and/or Property Owner's Association Property that is not Exempt Property (as defined in the Rate and Method). (vii) "Exemptions" is defined to include the following: The Rate and Method provides that no Special Tax shall be levied on up to 33 acres of Public School District Property and up to 232 acres of Public Property and/or Property Owner's Association Property within the District. As of June 1, 2012, there was approximately 32.45 acres of Public School District Property, approximately 72.18 acres of Public Property and approximately 34.63 acres of Property Owner's Association Property within the District. The District Administrator will assign Exempt Property status in the chronological order in which property becomes Public Property and/or Property Owner's Association Property. After the limit of 232 acres within the District has been reached, the Maximum Special 'fax obligation for any additional Public Property and/or Property Owner's Association Property shall be prepaid in full pursuant to the Rate and Method, prior to the transfer or dedication of such property. Until the Maximum Special Tax obligation is prepaid as provided in the preceding sentence, the Public Property and/or Property Owner's Association Property within the District shall be subject to the levy of the Special Tax as provided for in the Rate and Method. Maximum Special Tax. The Maximum Special Tax is defined in the Rate and Method as follows: Approved Property. The Maximum Special Tax A for each Parcel of Approved Property shall be $9,374 per acre. The Maximum Special Tax B for each Parcel of Approved Property in Fiscal Year 2012- 13 is $451.09 and shall increase by 2.00% each following Fiscal Year. The Maximum Special Tax for each Parcel categorized as Approved Property shall be the Maximum Special Tax A plus the Maximum Special Tax B. Developed Property. The Maximum Special Tax A for each Parcel of Residential Property that is categorized as Developed Property shall be the greater of (i) the applicable Assigned Special Tax described in the Rate and Method, or (ii) the amount derived by application of the Backup Special Tax A. The Maximum Special Tax for each Parcel of Non -Residential Property or Multifamily Residential Property shall be the Assigned Special Tax described in the Rate and Method. The Assigned Special Tax for each Parcel of Developed Property, except Multiple Land Use Property, ranges from $987 to $2,294 per single-family residential unit and $9,374 per acre for a multifamily residential unit in the District. See APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Rate and Method of Apportionment of Special Tax — Table 1" herein for a listing of the Assigned Annual Special Tax rates for various sizes of units in the District. Backup Special Tax. The Backup Special Tax shall be $9,374 per acre for Parcels of Developed Property that are included in a Final Map. Notwithstanding the foregoing, if parcels of Residential Property are subsequently changed or modified by recordation of a lot line adjustment or similar instrument, then the Backup Special Tax shall be recalculated. Method of Apportionment. The Rate and Method provides that each Fiscal Year, the Authority shall levy the Special Tax on all Taxable Property until the amount of Special Taxes equals the Special Tax Requirement in accordance with the following steps: 15 First: The Special Tax A shall be levied Proportionately on each Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax rate in Table 1 of the Rate and Method as needed to satisfy the Special Tax A Requirement. The Special Tax B shall be levied Proportionately on each Parcel of Developed Property at up to 100% of the Maximum Special Tax B as needed to satisfy the Special Tax B Requirement; Second: If additional moneys are needed to satisfy the Special Tax A Requirement after the first step has been completed, the Special Tax A shall be levied Proportionately on each Parcel of Approved Property at up to 100% of the Maximum Special Tax A for Approved Property. If additional moneys are needed to satisfy the Special Tax B Requirement after the first step has been completed, the Special Tax B shall be levied Proportionately on each Parcel of Approved Property at up to 100% of the Maximum Special Tax B for Approved Property; Third: If additional moneys are needed to satisfy the Special Tax A Requirement after the fust two steps have been completed, the Special Tax A shall be levied Proportionately on each Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for Undeveloped Property. If additional moneys are needed to satisfy the Special Tax B Requirement after the first two steps have been completed, the Special Tax B shall be levied Proportionately on each Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax B for Undeveloped Property; Fourth: If additional moneys are needed to satisfy the Special Tax A Requirement after the fust three steps have been completed, the Special Tax A to be levied on each Parcel of Developed Property whose Maximum Special Tax A is derived through the application of the Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to the Maximum Special Tax A for each such Parcel; and Fifth: If additional moneys are needed to satisfy the Special Tax A Requirement after the first four steps have been completed, then the Special Tax A shall be levied Proportionately on each Parcel of Public Property and/or Property Owner's Association Property that is not Exempt Property pursuant to the provisions of the Rate and Method at up to 100% of the Maximum Special Tax A. Notwithstanding the above, pursuant to Section 53321 of the Act as in effect at the time of formation of the District, the Rate and Method states that under no circumstances will the Special Taxes levied against any Parcel of Residential Property be increased by more than ten percent (10%) per Fiscal Year as a consequence of delinquency or default by the owner of any other Parcel within the District. For such purposes, Residential Property is a Parcel of Developed Property for which a building permit has been issued for purpose of constructing one or more residential dwelling units. In Fiscal Year 2012-13, Special Taxes are expected to be levied at approximately _ [81.13%] of the Assigned Special Tax rate on Developed Property. No Special Taxes are expected to be levied on Undeveloped Property in Fiscal Year 2012-13. If additional moneys are needed to satisfy the Special Tax A Requirement after the levy of Special Taxes at the applicable Assigned Special Tax rate increased as permitted by the Rate and Method (including as permitted by Section 53321 of the Act at the time of formation of the District), the Special Tax A will be levied Proportionately on each Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for Undeveloped Property. As of June 1, 2012, there are approximately 21.6 acres of Undeveloped Property. The Authority cannot predict how much property will constitute Undeveloped Property in Fiscal Year 2013-14 or in any future fiscal year. Prepayment in Full — Special Tax A. The Maximum Special Tax A obligation may only be prepaid and permanently satisfied for a Parcel of Developed Property, Approved Property for which a building permit has been issued, or Public Property and/or Property Owner's Association Property that is 16 not Exempt Property pursuant to the Rate and Method, except that a Special Tax B may be levied on such Parcel after the prepayment has occurred. The Maximum Special Tax A obligation applicable to such Parcel may be fully prepaid and the obligation of the Parcel to pay the Special Tax A permanently satisfied as described in the Rate and Method, provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to the Parcel at the time of prepayment. The Prepayment Amount for an applicable Parcel after the issuance of 2012 Bonds is calculated based on Bond Redemption Amounts and other costs, all as specified in APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Rate and Method of Apportionment of Special Tax — Section 111" herein. Any such prepayment will result in a redemption of Bonds prior to maturity. See "THE 2012 BONDS — Terms of Redemption." Prepayment in Part - Special Tax A. The Maximum Special Tax A on a Parcel of Developed Property or a Parcel of Approved Property for which a building permit has been issued may be partially prepaid in increments of $5,000. The amount of the prepayment shall be calculated pursuant to the Rate and Method. Special Taxes and the Teeter Plan The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. By policy, the County does not include assessments, reassessments and special taxes, including the Special Taxes of the District, in its Teeter program. Proceeds of Foreclosure Sales Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special 'Fax, the Authority 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. Under the Fiscal Agent Agreement, on or about February 15 and June 15 of each Fiscal Year, the Treasurer shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenue theretofore received by the Authority, and: Individual Delinquencies. If, as of any June 15, the Treasurer determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of $5,000 or more, then the Treasurer will promptly send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Authority within 90 days after the notice of delinquency has been sent. Aggregate Delinquencies. If the Treasurer determines that, as of any June 15, the total amount of delinquent Special Tax for the then current Fiscal Year for the entire District (including total individual delinquencies described above) exceeds 5% of the total Special Tax due and payable for the then Fiscal Year, the Treasurer shall promptly notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency), and the Authority will commence foreclosure proceedings within 90 days after the notices of delinquency have been sent. Notwithstanding the foregoing, the Treasurer may defer any mailing of notices of delinquency or foreclosure action if the amount in the Reserve Fund is at least equal to the Reserve Requirement. 17 It should be noted that any foreclosure proceedings commenced as described above could be stayed by the commencement of bankruptcy proceedings by or against the owner of the delinquent property. See `BONDOWNERS' RISKS — Bankruptcy and Foreclosure Delay." No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. See `BONDOWNERS' RISKS — Potential Delay and Limitations in Foreclosure Proceedings." If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the Authority) must cause a Notice of Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days (or in certain limited cases a shorter period) from the date of service of the Notice of Levy and 20 days from the subsequent notice of sale in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made. The constitutionality of the aforementioned legislation, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. Any parcel subject to foreclosure sale must be sold at the minimum bid price unless a lesser minimum bid price is authorized by the owners of 75% of the principal amount of the Bonds Outstanding. No assurances can be given that the real property subject to sale or foreclosure will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the Authority or the District to purchase or otherwise acquire any lot or parcel of property offered for sale or subject to foreclosure if there is no other purchaser at such sale. The Act does specify that the Special Tax will have the same lien priority in the case of delinquency as for ad valorem property taxes. If the Reserve Fund is depleted and if delinquencies in the payment of Special Taxes exist, there could be a default or delay in payments to the Bondowners of the 2012 Bonds pending prosecution of foreclosure proceedings and receipt by the Authority of foreclosure sale proceeds, if any. However, within the limits of the Rate and Method and the Act, the Authority may adjust the Special Taxes levied on all property within the District in future Fiscal Years to provide an amount, taking into account such delinquencies, required to pay debt service on the Bonds and to replenish the Reserve Fund. There is, however, no assurance that the maximum Special Tax rates as permitted by the Rate and Method will be at all times sufficient to pay the amounts required to be paid on the Bonds by the Fiscal Agent Agreement. Special Tax Fund Pursuant to the Fiscal Agent Agreement, except as described below, all Special Tax Revenues received by the Authority will be deposited in the Special Tax Fund, which will be held by the Fiscal Agent on behalf of the Authority. Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority and the Bondowners. Pending disbursement, moneys in the Special Tax Fund will be subject to a lien in favor of the Bondowners and the Authority established under the Fiscal Agent Agreement. Disbursements. Moneys in the Special Tax Fund will be disbursed as needed to pay the obligations of the Authority as provided in the Fiscal Agent Agreement. The Authority shall promptly remit any Special Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special 'fax Fund, except that, (i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses shall be deposited by the Treasurer in the Administrative 18 Expense Fund, (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Treasurer and shall be deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund up to the then Reserve Requirement; and third, to the Special Tax Fund for transfer to the Bond Fund and the Reserve Fund in accordance with the Fiscal Agent Agreement and (iii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent directly in the Special Tax Prepayments Account established in the Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Improvement Fund, the Reserve Fund and the Special Tax Prepayments Account to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement. Investment. Moneys in the Special Tax Fund will be invested and deposited as described in "— Investment of Moneys in Funds" below and APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." Interest earnings and profits resulting from such investment and deposit will be retained in the Special Tax Fund to be used for the purposes of such Fund. Bond Fund The Fiscal Agent will hold the Bond Fund in trust for the benefit of the Bondowners. There is created in the Bond Fund, as a separate account to be held by the Fiscal Agent, the Special Tax Prepayments Account. Moneys in the Bond Fund and the accounts therein shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds and for the other purposes as provided below, and, pending such disbursement, shall be subject to a lien in favor of the owners of the Bonds. Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under the Fiscal Agent Agreement and shall be used (together with any applicable amounts transferred from the Reserve Fund) to redeem Bonds on the applicable redemption date. Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the owners of the Bonds the principal, and interest and any premium, then duc and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments or an optional redemption of the Bonds. In the event that amounts in the Bond Fund are insufficient for the purposes set forth in the preceding sentence, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments described above, the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to the payment of principal due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date 19 Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account shall be invested and deposited in accordance with the provisions of the Fiscal Agent Agreement as described in "Investment of Moneys in Funds" below. See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." Reserve Fund In order to further secure the payment of principal of and interest on the 2012 Bonds, certain proceeds of the 2012 Bonds will be deposited into the Reserve Fund in an amount equal to the initial Reserve Requirement (see "ESTIMATED SOURCES AND USES OF FUNDS" herein). Reserve Requirement is defined in the Fiscal Agent Agreement to mean with respect to the 2012 Bonds an amount, as of any date of calculation, equal to 75% of the then largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds. The moneys in the Reserve Fund will only be used for payment of principal of, interest and any redemption premium on, the 2012 Bonds and at the direction of the Authority, for payment of rebate obligations related to the 2012 Bonds. If Special Taxes are prepaid and Bonds arc to be redeemed with the proceeds of such prepayment, funds in the Reserve Fund in the amount, if any, of any applicable "Reserve Fund Credit," as such term is defined and otherwise determined in accordance with the Rate and Method shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of Bonds. The "Reserve Fund Credit" is calculated as the lesser of (a) the expected reduction in the Reserve Requirement, if any, associated with the redemption of Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement in effect after the redemption of Bonds as a result of the prepayment from the balance in the Reserve Fund on the prepayment date, but in no event shall such amount be less than zero. The effect of the terms of the Rate and Method is that such transfer shall be made only to the extent that the amount remaining on deposit in the Reserve Fund is at least equal to the Reserve Requirement. Moneys in the Reserve Fund will be invested as described in "Investment of Moneys in Funds" below. See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement" for a description of the timing, purpose and manner of disbursements from the Reserve Fund. Administrative Expense Fund There is established as a separate fund to be held by the Treasurer, the Administrative Expense Fund to the credit of which deposits shall be made from the Special Tax Revenues as described above. The first Special Tax Revenues collected by the Authority in any fiscal year, in an amount equal to the portion of such fiscal year's Special Tax levy for Administrative Expenses (but not to exceed, in any fiscal year, $35,000) shall be deposited by the treasurer in the Administrative Expense Fund. Amounts in the Administrative Expense Fund shall be withdrawn by the Treasurer and paid to the Authority or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or a Costs of Issuance, and the nature of such Administrative Expense or Costs of Issuance. Annually, on the last day of each Fiscal Year, the Treasurer shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $35,000 that have not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund. In addition to the foregoing, if in any fiscal year there are sufficient funds in the Special Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of the Interest Payment Dates occurring in the Bond Year that commences in such fiscal year, the 20 Treasurer may transfer to the Administrative Expense Fund, from time to time, any amount in the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the Reserve Fund, if moneys are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund. In accordance with the Fiscal Agent Agreement amounts deposited in the Administrative Expense Fund are held by the Treasurer and such amounts are not pledged to the payment of the 2012 Bonds. Investment of Moneys in Funds Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, as directed by an Authorized Officer, that mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. In the absence of any direction from an Authorized Officer, the Fiscal Agent will invest, to the extent reasonably practicable, any such moneys in money market funds rated in the highest rating category by Moody's or S&P (including those for which the Fiscal Agent or its affiliates or its subsidiaries provide investment, advisory or other services). See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement" for a definition of "Permitted Investments." Additional Bonds for Refunding Purposes Only Bonds secured on a parity with the 2012 Bonds (each a series of "Additional Bonds") may be issued for refunding purposes where the net proceeds are used to refund all or a portion of the then outstanding Bonds, provided that the debt service on the Additional Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded and the final maturity of the Additional Bonds is not later than the final maturity of the Bonds being refunded. See APPENDIX C —"Summary of Certain Provisions of the Fiscal Agent Agreement." The Authority may issue bonds or other obligations for the District payable from Net Taxes which are subordinate to the 2012 Bonds. THE AUTHORITY The Temecula Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated April 10, 2001 (the "Joint Powers Agreement"), by and between the City and the Redevelopment Agency of the City of Temecula. The Joint Powers Agreement was entered into pursuant to the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California. Pursuant to Health & Safety Code Section 34178(b)(3), the Joint Powers Agreement remains valid, notwithstanding legislation enacted in 2011 terminating all redevelopment agencies in California. The Authority was formed for the primary purpose of assisting in the financing and refinancing of public capital improvements in the City. The Authority is administered by a five -member Board of Directors, which currently consists of the members of the City Council of the City. The Authority has no independent staff. The Executive Director of the Authority is the City Manager of the City, and the Treasurer of the Authority is the City's Chief Financial Officer. The Executive Director administers the day-to-day affairs of the Authority, and the Treasurer has custody of all money of the Authority from whatever source. Authority for Issuance The 2012 Bonds are issued pursuant to the Act, the Refunding Law and the Fiscal Agent 21 Agreement. In addition, as required by the Act, the Board of Directors of the Authority has taken the following actions with respect to establishing the District and authorizing issuance of the 2012 Bonds: Resolutions of Intention: On July 22, 2003, the Board of Directors of the Authority adopted Resolution No. TPFA 03-16 stating its intention to establish the District and to authorize the levy of a special tax therein, and on the same day the Authority adopted Resolution No. TPFA 03-17 stating its intention to incur bonded indebtedness in an amount not to exceed $33,000,000 within the District for the purpose of financing the cost of certain public improvements (the "Improvements") and to eliminate an existing special assessment lien (the "Prior Lien"), imposed by the County of Riverside Assessment District No. 159R and the County of Riverside Assessment District No. 159. Resolution of Formation: Immediately following the conclusion of a noticed public hearing on October 28, 2003, the Authority adopted Resolution No. TPFA 03-22 (the "Resolution of Formation"), which established the District and authorized the levy of a special tax within the District. Resolution of Necessity: On October 28, 2003, the Authority adopted Resolution No. TPFA 03-23 declaring the necessity to incur bonded indebtedness in an amount not to exceed $33,000,000 within the District and submitting that proposition to the qualified electors of the District. Resolution Calling Election: On October 28, 2003, the Authority adopted Resolution No. TPFA 03-24 calling an election by the landowners for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit. Landowner Election and Declaration of Results: On October 28, 2003, an election was held within the District in which the landowners eligible to vote, being the qualified electors within the District, unanimously waived all time limits for holding the election and ballot arguments, and approved a ballot proposition authorizing the issuance of up to $33,000,000 in bonds to finance the costs of the Improvements and the costs of eliminating the Prior Liens, the levy of a special tax and the establishment of an appropriations limit for the District. On October 28, 2003, the Authority adopted Resolution No. TPFA 03-25, pursuant to which the Authority approved the canvass of the votes and declared the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit. Special Tax Lien and Levy: A Notice of Special Tax Lien was recorded in the real property records of the County on November 13, 2003, as Document No. 2003-894897. Ordinance Levying Special Taxes: On November 18, 2003, the Authority adopted Ordinance No. 2003-02 levying the Special Tax within the District. Resolution Authorizing Issuance of the 2012 Bonds: On [July 10], 2012, the Authority adopted Resolution No. TPFA approving issuance of the 2012 Bonds. THE COMMUNITY FACILITIES DISTRICT General The District is located at the south end of Temecula along the northeast side of Pechanga Parkway, extending southeast from Loma Linda Road to Deer Hollow Way, just under a mile south of Temecula Parkway and just over a mile east of the Interstate 15 Freeway. The District is a master - planned community known as Wolf Creek, of approximately 557 acres, with approximately 1,778 residential lots constituting Developed Property under the Rate and Method. 22 In addition, there are approximately 20 acres of vacant land permitted to be developed for commercial uses and 1.6 acres of vacant land permitted to be developed for residential purposes (all of which is classified as "Undeveloped Property" under the Rate and Method, elementary and middle schools, an approximately 43 -acre sports park, an approximately 6 -acre neighborhood park, three park activity nodes along Wolf Creek Drive, paseos, a recreation center, a library and a fire station. Unincorporated County area is across Pechanga Parkway to the west and southwest and also the area nearby to the south. The property within the District is governed by the Wolf Creek Specific Plan. The Wolf Creek development includes a narrow 6.7 -acre park contiguous to Wolf Creek Drive North and Wolf Creek Drive South, including three activity nodes, spanning from the north half to the south half of the project, as well as a paseo system along the backbone roads. In addition, a 6 -acre park, located at the main corner of Wolf Valley Road and Wolf Creek Loop Road in the center of the District, includes various amenities such as an open play field, picnic areas, public restrooms, tot lots, monumentation, landscaping, walkways and bike and pedestrian lanes, parking and possible art components in public places. In addition to the public parks, a private recreational facility was constructed that is owned and maintained by the Wolf Creek Maintenance Corporation ("WCMC"). The City also constructed an approximately 43 -acre sports facility which includes baseball and soccer fields and many other amenities and recreational components. In addition to the above listed amenities, schools and parks, the community provides a wide range of housing. The lot sizes span between 20,000 square foot custom lots to 3,000 square foot courtyard lots. The Temecula Valley Unified School District developed the Temecula Luiseno Elementary School within Phase I of the project. The elementary school supplements the Earle Stanley Gardner Middle School, which opened August 27,2003, adjacent to the first phase of the project and the Great Oak High School at Deer Hollow and Pechanga Parkway (outside the boundary of the District). A fire station is located in the center of the District, which also enhances fire protection and emergency response for the surrounding community. The Wolf Creek development is situated on the floor of Wolf Valley. The Pechanga Creek Channel is located offsite to the southwest, across Pechanga Parkway. The parcel slopes gently to the northwest, with a grade change of approximately 120 feet and overall slope of less than two percent. The Wolf Creek Channel, an earthen channel, is located on the northeast side of Pechanga Parkway. The natural terrain and drainage onsite have been modified by agricultural uses. Views consist of the coastal Santa Ana Mountains to the northwest and the Santa Margarita and Agua Tibia ranges to the southeast and southwest. Historic flood control problems in the vicinity of the District were remedied by the construction of a wide grass -lined flood control channel along the Pechanga Parkway, designed to contain the 100 -year floods for the surrounding area. The Wolf Creek development is surrounded on four sides by existing development. It is located immediately adjacent to the developed areas of Rainbow Canyon on the west, and the Redhawk residential and golf course community to the east and the south. Commercial uses exist to the northwest of the Wolf Creek development, including a building supply store, mini warehouse, convenience market and nursery. The Temecula Creek Inn and Golf Course Resort is located to the northwest. The developed portion of the Pechanga Indian Reservation is located southwest of the property across Pechanga Parkway where a casino and support commercial uses have been constructed. 23 Until 1972, farming operations were conducted on the site. Since 1972, the majority of the property had been leased for the commercial production of turf and groundcover sod and other agricultural uses. The Agricultural Preserve status of the site expired in 1989 through the Notice of Non - Renewal process. In 1987, comprehensive planning efforts were initiated for the Wolf Creek proposed development in response to growth of the surrounding community, and the emerging pattern of development associated with the Rainbow Canyon, Vail Ranch and Redhawk projects. Another major factor contributing to the need for comprehensive planning of the site was the formation of the County Assessment Districts to construct new roadways, drainage facilities and other utility improvements serving the area. Special Tax Levy by Land Use Category The following table shows the estimated Special Taxes for Fiscal Year 2012-13 by land use category: Table 2 Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Estimated Fiscal Year 2012-13 Special Tax Levy by Land Use Category° Est. Fiscal Year Land Use Number of 2012/13 Special Classification Parcels Tax Rate"' Developed Fiscal Year 2012/13 Fiscal Year 2012/13 Levv Percent of Total' A-4,000 or more sq. ft. 67 $1,861.20/parcel $122,161.10 6.35% B — 3,600 or more, but Tess 162 $ I,297.32/parcel 205,885.80 10.70 than 4,000 sq. ft. C — 3,200 or more, but less 335 $1,247.82/parcel 409,510.70 21.28 than 3,600 sq. ft. D— 2,800 or more, but less 482 $1, 103.40/parcel 521,013.08 27.08 than 3,200 sq. ft. E. — 2,400 or more, but less 352 $997.42/parcel 343,944.76 17.88 than 2,800 sq. ft. F —2,000 or more, but less 222 $908.68/parcel 197,619.96 10.27 than 2,400 sq. ft. 0— Less than 2,000 sq. R 158 $800.78/parcel 123,947.84 6.44 Approved 2 $0.00/acre 0.00 0.00 Undeveloped 21.6 acres/ $0.00/acre 0.00 0.00 8 parcels Exempt HOA 34.63 acres/ $0.00 0.00 0.00 71 parcels Public 72.18 acres/ $0.00 0.00 0.00 27 parcels Public School 32.45 acres/ $0.00 0.00 0.00 2 parcels Totals: 1,888 $1,924,083.24 100.00% parcels (1) Levied parcels are estimated to be levied at 81.13% of their assigned special tax rate for Fiscal Year 2012/13. Preliminary, subject to change. Source: Willdan Financia/ Services. 24 Special Tax Collections [UPDATE] The Special Tax on Developed Property authorized for the 2011-12 Fiscal Year in the District was $2,157,055.70 which was levied against 1,755 parcels. Of those parcels, 37 had not paid either or both installments of Special Taxes as ofJune 25, 2012. For the Fiscal Year 2011-12, no Special Taxes were levied on Approved Property or Undeveloped Property. The Special Tax on Developed Property authorized for the 2012-13 Fiscal Year in the District is estimated to be $[1,924,083.24] to be levied against [1,778] parcels. Table 3 below sets forth the Special Tax collections for Fiscal Years 2006-07 through the second installment of Fiscal Year 2011-12. Historically, no foreclosure actions have been commenced with respect to parcels in the District. The Authority has been successful in collecting delinquent payments to enable payment of debt service without a draw on the reserve fund. Table 3 Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Special Tax Collections(» (As of June 30 of the applicable Fiscal Year) Subject Fiscal Year June 25, 2012 Fiscal Year Fiscal Year Fiscal Year Remaining Remaining Remaining Ending Aggregate Special Parcels Parcels Amount Delinquency Parcels Amount Delinquency June 30 Tax Levied Delinquent Delinquent(3) Rate Delinquent Delinquent Rate 2007 $2,212,215.00 1,595 134 $251,392.74 11.36% 2 $2,337.50 0.11% 2008 2,211,461.40 1,588 IM 189,898.00 8.59 I1 12,090.84 0.55 2009 2,253,126.34 1,707 192 211,312.10 9.38 11 10,817.39 0.48 2010 2,213,437.50 1,788 129 133,841.05 6.05 10 13,458.60 0.61 2011 2,160,568.90 1,599 80 78,568.62 3.64 6 7,742.69 0.36 201201 2,157,055.70 1,755 63 52,886.98 2.45 37 33,598.75 1.56 (I) Delinquency information is provided to the Authority by the County of Riverside. (2) There was a decline in the number of parcels taxed due to a merger of lots. In Fiscal Year 2011-12, the lots were further subdivided and the number of parcels increased. (3) Fiscal year delinquency amounts are as of lune 25, 2007, July 18, 2008, May 20, 2009, May 27, 2010, May 12, 2011 and May 17, 2012. (4) Information refects second installment delinquency information from the County of Riverside. Source: Willdan Financial Services. 25 Property Ownership [Update] Based on the preliminary Fiscal Year [2012-13] Assessor's Roll, as of January 1, 2012, there were approximately [1,778] homes in the District subject to the Special Tax. There have been no prepayments of Special Taxes. Table 4 Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Top Owners of Taxable Property and Allocation of Fiscal Year 2011-12 Assessed Value Based on Fiscal Year 2012-13 Special Tax Liability Fiscal Year Fiscal Year 2012-13 Fiscal Year 2012-13 Number 2011-12 Total Percent Share Merchant Builder and/or of AssessedSpecial Tax of Total Property Owner Name') Parcels Valuet2l Amount Special Taxes(4) Federal National Mortgage Assn. 7 $2,126,808 $7,165.20 0.37% Robert A. Borden & Merry J. Borden 3 1,008,145 3,328.66 0.17 Robert W. Brooks & Linda D. Brooks 3 1,015,668 3,328.66 0.17 HSBC Bank USA 3 907,039 3,034.58 0.16 Younieh Mahmood ]Boma & Hagh Mahvash 2 683,000 2,493.32 0.13 Naeem Preeminent Inv. Corp. 2 692,000 2,303.36 0.12 Aurora Loan Services. 2 _610,000 2,161.88 0.11 Subtotal 22 $7,042,660 $23,815.6 1.24% IndividualOwners(5)l61 1756 564,811,326 1,900,267.58 98.76 Total 1,778 $571,853,986 $1,924,083.24 100.00% t0 Ownership information is based on Riverside County's preliminary Fiscal Year 2012-13 secured tax roll. (2) The gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12, plus an estimated 556,318,500 additional value from 17 new homes sold since April 1, 2011 is 5571,853,986. The 17 homes are listed under Individual Owners. pl The Fiscal Year [2012-13] Special Tax levy is estimated to be [51,924,083.24]. (4) Totals may not add due to rounding. (5) County records relating to Fiscal Ycar 2011-12 indicate Woodside 05S ownership of 52 parcels, with an assessed value of 58,067,763. These parcels have an estimated Special Tax levy of 552,582.22 which is 2.73% of the estimated Fiscal Year 2012-13 Special Tax. As of June 15, 2012, homes on these parcels appear to have been completed and sales closed to individual owners based on a review of development in the District and information from a Woodside Homes representative. (6) County records relating to Fiscal Year 2011-12 indicate Standard Pacific Corp. ownership of 28 parcels, with an assessed value of $9,946,240. These parcels have an estimated Special Tax levy of $39,135.72 which is 2.03% of the estimated Fiscal Year 2012-13 Special Tax. As of June 15, 2012, homes on these parcels appear to have been completed and sales closed to individual owners based on a review of development in the District and information from a Standard Pacific Corp. representative. Source: Willdan Financial Services. Estimated Assessed Values The assessed values, direct and overlapping debt and total tax burden on individual parcels varies among parcels within the District. The value of individual parcels is significant because in the event of a delinquency in the payment of Special Taxes, the Authority may foreclose only against delinquent parcels. 26 The gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12, plus an estimated $6,318,500 additional value from 17 new homes sold since April 1, 2011 is $571,853,986, which results in an estimated value -to -lien ratio of approximately [10.84]:1 taking into account the indebtedness payable from taxes or special assessments allocable thereto, as set forth in Table 7. This gross valuation may not be representative of the actual market value of property in the District because Article XIIIA of the California Constitution limits any increase in assessed value to no more than 2% a year unless a property is sold or transferred. See "BONDOWNERS' RISKS — Land Values." As a consequence, assessed values are typically less than actual market values unless the property has recently changed ownership or has been reassessed. The following table shows the historical assessed valuation for parcels taxed in the District for Fiscal Year 2006-07 through 2011-12 and the historical number of parcels taxed in the District. Table 5 Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Historical Assessed Valuation for Taxable Parcels Assessed Value Number of Parcels of Parcels Fiscal Year Taxed (1) Taxed 2006-071�1 $362,890,907 1,579 2007-08131 579,550,787 1,588 2008-09131 607,03 7,3 82 1,707 2009-10W 492,553,590 1,788 2010-11 515,167,398 1,599(4) 2011-12 565,149,524 1,755 (1) Includes Assessed Values for parcels that were levied. (2) Fiscal Year 2006-07 was calculated using the list of taxed parcels in Fiscal Year 2007-08. (3) According to the Riverside County Assessor's office, there were Proposition 8 property assessment reductions throughout the County in Fiscal Years 2007-08, 2008-09 and 2009-10 as an economic adjustment due to a decline in market value thus reducing the assessed values. (4) There was a decline in the number of parcels taxed duc to a merger of lots. In Fiscal Year 2011-12, the lots were further subdivided and the number of parcels increased. .Source: Riverside County Secured Rolls, as compiled by California Municipal Statistics, Inc. 27 levied: The following table shows the assessed value by land use category on which Special Taxes were Table 6 Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Fiscal Year 2011-12 Assessed Value by Land Use Categoryt0 2011-12 Land Use Total Assessed Assessed Classification Value�1 2012 Bonds' Value to Lien A — 4,000 or more sq. ft. 529,614,940 51,584,724 18.69 11 — 3,600 or more, but 61,957,543 2,670,835 23.20 Icss than 4,000 sq. ft. C — 3,200 or more, but 118,697,433 5,312,341 22.34 less than 3,600 sq. ft. D — 2,800 or more, but 156,538,635 6,758,796 23,16 Icss than 3,200 sq. ft. F. — 2,400 or more, but Tess 107,645,410 4,461,793 24.13 than 2,800 sq. ft. F — 2,000 or more, but less 60,759,345 2,563,607 23.70 than 2,400 sq. ft. G —Less than 2,000 sq. 8, 36,640.680 1,607,902 22.79 Totals: 5571,853,986 524,960,000 22.91 (I)Source: Assessed values as reported on the Fiscal Year 2011-12 equalized tax roll of the County of Riverside. (2)The gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12, plus the estimated $6,318,500 additional value from l7 new homes sold since April 1, 2011 is 5571,853,986. 'Preliminary, subject to change. Direct and Overlapping Debt Table 7 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied within the District prepared by California Municipal Statistics, Inc. and based on what was levied for Fiscal Year 2011-12 (the "Debt Report"). The Debt Report is included for general information purposes only. In certain cases, the percentages of debt calculations are based on assessed values, which will change significantly as sales occur and assessed values increase to reflect housing values. The Authority believes the information is current as of its date, but makes no representation as to its completeness or accuracy. The Authority may only issue parity bonds for refunding purposes. Other public agencies, such as the City, may issue additional indebtedness at any time, without the consent or approval of the District or the Authority. See " — Overlapping Assessment and Community Facilities Districts" below. The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long term obligations generally are not payable from property taxes, assessment or special taxes on land in the District. In many cases long term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The ability of the Authority to collect the Special Taxes or issue and sell refunding bonds could be adversely affected if additional debt is issued within the District. The property within the District, at any time, could become subject to additional debt either by the formation of additional community facilities districts or the imposition of other taxes and assessments by the Authority, the District, the City or other public agencies at any time. The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Taxes and may increase the possibility that foreclosure proceeds will not be adequate to pay 28 delinquent Special Taxes. The Authority has not undertaken to commission annual appraisals of the market value of property in the District for purposes of its Annual Reports pursuant to the Authority Continuing Disclosure Agreement, and information regarding property values for purposes of a direct and overlapping debt analysis which may be contained in such reports will be based on assessed values as determined by the County Assessor. See Appendix D hereto for the form of the Authority Continuing Disclosure Agreement. Direct and overlapping bonded indebtedness as of June 1, 2012 is shown in the following table compiled by California Municipal Statistics, Inc. Neither the Authority nor the Underwriter has independently verified the information in the table and neither makes any representations as to completeness or accuracy. Table 7 Temecula Public Financing Authority Community Facilities District 03-03 (Wolf Creek) Secured Properly Tax Roll and Direct and Overlapping Debt 2011-12 Local Secured Assessed Valuation: $565,149,524 (Taxable Parcels) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/12 Metropolitan Water District General Obligation Bonds 0.032% $ 62,674 Eastern Municipal Water District, I.D. No. U-8 General Obligation Bonds 4.356 200,686 Temecula Valley Unified School District General Obligation Bonds 3.452 971,220 Temecula Valley Unified School District Community Facilities District No. 2004-1 A 100. 11,865,000 Temecula Valley Unified School District Community Facilities District No. 2004-1 B 99.453 14,679,196 Temecula Public Financing Authority Community Facilities District No. 03-03 100. 24.960,000 (1) TOTAL DIRECT AND OVERLAPPING 'FAX AND ASSESSMENT DEBT $52,738,776 OVERLAPPING GENERAL FUND DEBT: Riverside County General Fund Obligations 0.390% $2,557,454 Riverside County Pension Obligations 0.390 1,394,406 Riverside County Board of Education Certificates of Participation 0.390 19,715 Mt. San Jacinto Community College District General Fund Obligations 1.033 123,444 City of Temecula Certificates of Participation 5.673 1.511.628 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $5,606,647 Less: Riverside County supported obligations 51.133 TOTAL NET OVERLAPPING GENERAL FUND DEBT $5,555,514 GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT $58,345,423 (2) $58,294,290 (I) Refunding Mello -Roos Act bonds to be sold (preliminary). (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. Ratios to 2011-12 Local Secured Assessed Valuation: Direct Debt ($24,960,000) 4.40% Total Direct and Overlapping Tax and Assessment Debt 9.31% Ratios to Adjusted Assessed Valuation: Gross Combined Total Debt 10.30% Net Combined Total Debt 10.29% STATE SCI FOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0 3rource: California Mernicipn/ Statistics Inc. 29 Overlapping Assessment and Community Facilities Districts Temecula Valley Unified School District. Temecula Valley Unified School District formed its Community Facilities District No. 2004-1 for the construction of school facilities. The boundaries of Community Facilities District No. 2004-1 are co -terminus with the boundaries of the District. Community Facilities District No. 2004-1 issued $12,700,000 aggregate principal amount of its Improvement Area A 2007 Special Tax Bonds, of which $11,865,000 arc outstanding as ofJune 1, 2012 and $14,760,000 Improvement Area B Special Tax Bonds on July 7, 2011, of which $14,760,000 aggregate principal amount are outstanding as ofJune 1, 2012. Additional Debt Payable from Taxes or Assessments. Neither the Authority nor the District has any control over the amount of additional debt payable from taxes or assessments levied on all or a portion of the property within a special district which may be incurred in the future by other governmental agencies, including, but not limited to, the County, the City or any other govemmental agency having jurisdiction over all or a portion of the property within the District. Furthermore, nothing prevents the owners of property within the District from consenting to the issuance of additional debt by other governmental agencies which would be secured by taxes or assessments on a parity with the Special Taxes. To the extent such indebtedness is payable from assessments, other special taxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes will be secured by liens on the property within a district on a parity with a lien of the Special Taxes. Accordingly, the debt on the property within the District could increase, without any corresponding increase in the value of the property therein, and thereby severely reduce the ratio that exists at the time the 2012 Bonds are issued between the value of the property and the debt secured by the Special Taxes and other taxes and assessments which may be levied on such property. The incurring of such additional indebtedness could also affect the ability and willingness of the property owners within the District to pay the Special Taxes when due. Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given that the proceeds of any foreclosure sale of the property with delinquent Special Taxes would be sufficient to pay the delinquent Special Taxes. See "BONDOWNERS' RISKS." Other Overlapping Direct Assessments Metropolitan Water District Standby. Property within the District is subject to a Metropolitan Water District Standby ("MWD Standby") assessment. The MWD Standby assessment is fixed unless there is a vote to increase the assessment. This pay-as-you-go assessment is used for water conservation programs, emergency programs, water treatment and capital improvements such as transporting water from Colorado and Northern California to Southern California. The assessment levied for Fiscal Year 2011-12 was $6.94 per equivalent dwelling unit. Estimated Value -to -Lien Ratios Table 8 below set forth Value -to -Lien category ranges for the 1,778 parcels subject to the levy of Special Taxes in Fiscal Year 2012-13 utilizing the gross assessed valuation of the taxable property in the District for Fiscal Year 2011-12, plus an estimated $6,318,500 additional value from 17 new homes sold since April 1, 2011 which together aggregate $571,853,986. 30 Value -to -Lien Category 25:00:1 and Over 20.00:1 to 24.99:1 15:00:1 to 19.99:1 10.00:1 to 14.99:1 5:00:1 to 9.99:1 1.00 to 4.99:1(6) Total° Table 8 Temecula Public Financing Authority Community Facilities District 03-03 (Wolf Creek) Combined Assessed Value and Value -to -Burden Ratio' Number Fiscal Year Percentage Allocable of 2012-13 Share of Share of2012 Parcels* Special Tax" Special Tax* Bonds (2)' Allocable Share of Combined Direct and Overlapping Overlapping Debt" Debt" 15 $15,872.34 0.83% $205,902 82,705 $208,607 4 4,465.24 .23 57,925 1,203 59,128 7 7,941.74 .41 103,024 117,683 220,707 1,337 1,393,258.08 72.41 18,073,917 20,255,489 38,329,406 383 470,054.82 24.43 6,097,745 7,096,460 13,194,205 32 32,491,02 1.69 421.487 305.230 726.723 1,778 $1,924,083.24 100.00% $24,960,000 $27,778,776 $52,738,776 Fiscal Year 2011-12 Combined Taxable Property Value -to -Lien Assessed Values[ r Burden Ratio' 85,562,000 26.66% 1,452,000 24.56 4,050,383 18.35 434,583,358 11.34 124,483,459 9.43 1.722,286 2.37 $571,853,986 10.84% Special Taxes shown reflect estimated Fiscal Year 2012-13 Special Taxes on Developed Property as of June 15, 2012, estimated at 81.13% of the assigned Special Tax rates for Fiscal Year 2012-13. Calculated by multiplying the Percentage Share of Special Tax by the total 2012 Bonds principal amount of $[24,960,000].• See 'Direct and Overlapping Debt" above for a description of overlapping liens; includes Temecula Valley Unified School District community facilities district debt and general obligation bonded debt of the Metropolitan Water District, Eastern Municipal Water District and Temecula Valley Unified School District. The combined overlapping liens include the 2012 Bonds. Source: Assessed values as reported on the Fiscal Year 2011-12 equalized tax roll of the County of Riverside, as of January 1, 2011, plus an estimated $6,318,500 additional value from [17] new homes sold since April 1, 2011, the date at which properties constituted Developed Property under the Rate and Method for Fiscal Year 2011-12. These 32 parcels are vacant property with no improvement value. Totals may not sum due to rounding. Preliminary, subject to change. Source: Wilidan Financial Services. 31 Table 9 on the following page sets forth estimated Fiscal Year 2011-12 overall tax rates projected to be applicable to Detached Units with the indicated square footages, one with the lowest square footage within the District and the other with the highest square footage within the District. The table also sets forth those entities with fees, charges, ad valorem taxes and special taxes regardless of whether those entities have issued debt. The estimated tax rates and amounts presented below arc based on currently available information. The actual amounts charged may vary and may increase or decrease in future years. 32 Table 9 Temecula Public Financing Authority Community Facilities District 03-03 (Wolf Creek) Estimated Fiscal Year 2011-12 Tax Rates (Detached Units with 1,650 sq. ft. and 5,344 sq. ft.) Assessed Valuations and Property Taxes Estimated Assessed Valuation Homeowner's Exemption Net Assessed Value Ad Valorem Property Taxes General Purposes Total Ad Valorem Property Taxes Percent of Total AV 1.03197% Assessments, Special Taxes and Parcel Charges Rancho Cal Wtr R Div Debt Sv Fld Cntrl Storm Water/Clean Water Temecula Parks/Lighting Svs Temecula Residential St Lights Temecula Trash/Recycling Temecula CFD 03-03 Wolf Creek A Temecula Perimtr Lds Zn 28 MWD Standby East EMWD Standby -Combined Charge Temecula VL USD CFD 2004-1 IA.13 Total Assessment Special Taxes and Parcel Charges Projected Total Property Taxes Projected Total Effective Tax Rate (I) (2) (3) (4) Single Family Single Family 1.650 Sq. Ft. 5 344 Sq. Ft. $256,304.00 $492,000.00 0.00 -$7.000.00 5256,304.00 $485,000.00 Projected Amount $2,644.98 $2,644.98 $123.00 1.04 74.44 12.84 891.00 129.00 6.94 11.60 725.82 $1,975.68 $4 620.66 1.80% Projected Amount $5,005.05 $5,005.05 $213.00 4.00 74.44 25.68 223.04 2,070.86 129.00 6.94 11.60 2,111.12 $4,869.68 $9,874.73 2.04% Fiscal Year 2011-12 assessed valuation for a single family detached residential unit with the largest and the smallest square footage, selected to provide representative effective tax rates for homes within the District. Net Assessed Value reflects estimated total assessed value for the parcel net of homeowner's exemption. These amounts are based on Fiscal Year 2011-12 charges. Fiscal Year 2012-13 data will not be available until approximately November 2012. All charges and special assessments are based on a Lot size of less than one (1) acre. Source: Willdan Financial Services. 33 BONDOWNERS' RISKS In addition to the other information contained in this Official Statement, the following risk factors should be carefully considered in evaluating the investment quality of the 2012 Bonds. The Authority cautions prospective investors that this discussion does not purport to be comprehensive or definitive, the risk factors are listed in no particular order of importance, and this discussion does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the 2012 Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Any such failure to pay Special Taxes could result in the inability of the Authority to make full and punctual payments of debt service on the 2012 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. Risks of Real Estate Secured Investments Generally The Dondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses. Special Taxes Are Not Personal Obligations The owners of land within the District are not personally liable for the payment of the Special Taxes. Rather, the Special Tax is an obligation only of the land within the District, if the value of the land within the District is not sufficient to fully secure the Special Tax, then the Authority has no recourse against the owners under the laws by which the Special Tax has been levied and the 2012 Bonds have been issued. The 2012 Bonds Are Limited Obligations of the Authority for the District The Authority has no obligation to pay principal of and interest on the 2012 Bonds in the event Special Tax collections are delinquent, other than from amounts, if any, on deposit in certain funds and accounts held under the Fiscal Agent Agreement, or funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent, nor is the Authority obligated to advance funds to pay such debt service on the Bonds. Property Values The value of the taxable property within the District is an important factor in evaluating the investment quality of the 2012 Bonds. In the event that a property owner defaults in the payment of a Special Tax installment, the Authority's only remedy is to commence foreclosure proceedings on such property. Prospective purchasers of the 2012 Bonds should not assume that the property within the District could be sold for the assessed value described herein at a foreclosure sale for delinquent Special Tax installments or for an amount adequate to pay delinquent Special Tax installments. Reductions in property values within the District due to a downturn in the economy or the real estate market, events such as earthquakes, wildfires, droughts or floods, stricter land use regulations, threatened or endangered species or other events may adversely impact the security underlying the liens. Additionally, the value of 34 undeveloped property is inherently less than the value of developed property. None of the estimated Fiscal Year 2012-13 Special Tax levy is on property classified as Undeveloped Property. The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the Riverside County Assessor, generally not to exceed an increase of more than 2% per fiscal year as limited by Proposition 13 and as amended by Proposition 8. For example, the County performed reductions of assessed values of residential parcels throughout the County pursuant to Proposition 8 in Fiscal Years 2007-08, 2008-09 and 2009-10. No assurance can be given that Fiscal Year 2011-12 assessed values reflect market values or that a parcel could actually be sold for its assessed value. The actual market value of the property is subject to future events such as a downturn in the economy, occurrences of certain acts of nature and the decisions of various governmental agencies as to land use, all of which could adversely impact the value of the land in the which is the security for the 2012 Bonds. As discussed herein, many factors could adversely affect property values or prevent or delay additional land development within the District. None of the estimated Fiscal Year 2012-13 Special Tax levy is on property classified as Undeveloped Property. Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property While the Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property and such Taxable Property is subject to other parity liens and similar claims. The table in the section entitled "THE COMMUNTIY FACILITIES DISTRICT — Direct and Overlapping Debt" presents the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment securing which is or may become an obligation of one or more of the parcels of Taxable Property, and said table does not show the additional amount of other governmental bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2012 Bonds. In general, the Special Tax and all other taxes, assessments and charges collected on the County tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the 2012 Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, thc Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro -rata basis. Although the Special Taxes will generally have priority over non- governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. 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 of the most serious in terms 35 of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to a hazardous substance. See "Hazardous Substances" below. Economic Uncertainty The 2012 Bonds are being issued at a time of economic uncertainty and volatility. Unemployment rates have decreased to approximately 8.0% for the Temecula area as of April 2012 (not seasonally adjusted) as compared to 9.3% for calendar year 2011 and approximately 11.8% (not seasonally adjusted) for Riverside County as of April 2012, as compared to 13.6% for calendar year 2011. The Authority cannot predict how long these conditions will last or whether to what extent they may affect the ability of homeowners to pay Special Taxes or the marketability of the 2012 Bonds. Disclosure to Future Purchasers The Authority recorded a notice of the Special Tax lien in the Office of the County Recorder on November 13, 2003, as Document No. 2003-894897. 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 or a home 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 1 102.6b 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. Government Approvals The current landowners or their predecessors have secured most discretionary approvals, permits and government entitlements necessary to develop the land within the District. With respect to development of the approximately 21.6 acres of Undeveloped Property which remains, in -tract improvements are complete but necessary commercial infrastructure improvements remain to be completed. The installation of the necessary infrastructure is subject to the receipt of construction or building permits from the City and other public agencies. The failure to obtain any such approval could adversely affect construction within the District. A slow down or stoppage of the construction process could adversely affect land values. No assurance can be given that permits will be obtained in a timely fashion, if at all. The failure to do so may result in the prevention, or significant delays in the development of the property within the District or portions thereof. In accordance with the Rate and Method, no Special Tax is currently being levied on Undeveloped Property. Local, State and Federal Land Use Regulations There can be no assurance that land development operations with respect to the approximately 21.6 acres of Undeveloped Property within the District will not be adversely affected by future government policies, including, but not limited to, governmental policies which directly or indirectly restrict or control development. In the past, citizens of a number of local communities in California have placed measures on the ballot designed to control the rate of future development. During the past several years, state and federal regulatory agencies have significantly expanded their involvement in local land use matters through increased regulatory enforcement of various environmental laws, including the Endangered Species Act, the Clean Water Act and the Clean Air Act, among others. Such regulations can 36 substantially impair the rate and amount of development without requiring just compensation unless the effect of the regulation is to deny all economic use of the affected property. Bondowners should assume that any event that significantly impacts the ability to construct homes on the remaining Undeveloped Property within the District could cause land values within the District to decrease and could affect the willingness and ability of the owners of land to pay the Special Taxes when due or to proceed with remaining development of the Undeveloped Property within the District. Endangered and Threatened Species It is illegal to harm or disturb any plants or animals in their habitat that have been listed as endangered species by the United States Fish & Wildlife Service ("FWS") under the Federal Endangered Species Act or by the California Department of Fish & Game ("CDFG") under the California Endangered Species Act without a permit. Thus, the presence of an endangered plant or animal could delay development of Undeveloped Property in the District or reduce the value of Undeveloped Property. In accordance with the Rate and Method, no Special Tax is currently being levied on Undeveloped Property. Failure to develop the Undeveloped Property in the District as planned, or substantial delays in the completion of any planned development of the Undeveloped Property subjects the owners of Undeveloped Property to the possibility of owing Special Taxes in the future should it become necessary to levy Special Taxes on Undeveloped Property. In that event, the presence of an endangered plant or animal may affect the willingness and ability of the owners of Undeveloped Property to pay the Special Taxes when due. Hazardous Substances While governmental taxes, assessments, and charges are a common claim against the value of a taxed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the District may be required by law to remedy conditions of the parcels related to the 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 substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure. The assessed values of the property within the District do not take into account the possible reduction in marketability and value of any of the parcels of Taxable Property by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The Authority has not independently verified and is not aware that the owner (or operator) of any of the parcels of Taxable Property has such a current liability with respect to any such parcels of Taxable Property, except as expressly noted. However, it is possible that such liabilities do currently exist and that the Authority is not aware of them. Further, it is possible that liabilities may arise in the future with respect to any of the parcels of Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified 37 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 substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the value of' a parcel of Taxable Property that is realizable upon a delinquency. State Budget As a result of the slow State and United States of America economies, the State is experiencing serious budgetary shortfalls for the current and prior fiscal years. The effect of the State revenue shortfalls on the local or State economy or on the demand for, or value of, the property within the District cannot be predicted. Levy and Collection of the Special Tax; insufficiency of the Special Tax The principal source of payment of principal of and interest on the 2012 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized by the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of thc Special Tax, together with other available funds, will not be sufficient to pay debt service on the 2012 Bonds. Other funds which might be available include funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular taxed parcels and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on thc 2012 Bonds, and certainly not a direct relationship. The Special Tax levied in any particular tax year on a parcel of Taxable Property is based upon the revenue needs and application of the Rate and Method. Application of the Rate and Method will, in tum, be dependent upon certain development factors with respect to each parcel of Taxable Property by comparison with similar development factors with respect to the other parcels of Taxable Property within the District. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected: (1) Reduction in the number of parcels of Taxable Property, for such reasons as acquisition of parcels of Taxable Property by a government and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. (2) Failure of the owners of parcels of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels. In addition, if a substantial portion of land within the District becomes Property Owner's Association Property or Public Property, then whether sufficient Special Taxes will be collected to pay principal and interest on the 2012 Bonds when due will depend on the ability and/or willingness of owners of such property to pay the Special Tax levied on the non-exempt portion of their property. 38 Except as set forth above under "SECURITY FOR THE 2012 BONDS — Special Taxes" and "— Rate and Method" herein, the Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes arc collected and, except as provided in the special covenant for foreclosure described in "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid, the property is then is subject to sale by the Authority for the District. In addition, the Rate and Method limits the increase of Special Taxes levied on residential parcels of Developed Property to cure delinquencies of other property owners in the District. See "SECURITY FOR TI -IE 2012 BONDS — Rate and Method" herein. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2012 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Authority of the proceeds of sale if the Reserve Fund is depleted. See "SECURITY FOR TILE 2012 BONDS — Proceeds of Foreclosure Sales." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method (see "SECURITY FOR THE 2012 BONDS — Rate and Method" herein). 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 within 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. It is possible that property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could become exempt from the Special Tax. In addition, although 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, meaning that such property could become exempt from the Special Tax. In the event that additional property is dedicated to the City or other public entities, this additional property might become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. Depletion of Reserve Fund The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement (see "SECURITY FOR THE 2012 BONDS — Special Tax Fund — Disbursements" herein). Funds in the Reserve Fund may be used to pay principal of and interest on the 2012 Bonds in the event the proceeds of the levy and collection of the Special Tax against property within the District is insufficient. If funds in the Reserve Fund for the 2012 Bonds are depleted, 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 to the Bondowners pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Special Tax against property within the District at the maximum tax rates under the Rate and Method, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy of the Special Tax. 39 Potential Delay and Limitations in Foreclosure Proceedings The payment of property owners' taxes and the ability of the Authority to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings, may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales" and "BONDOWNERS' RISKS — Bankruptcy and Foreclosure Delay" herein. In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. The ability of the Authority to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC") has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution which has made a loan which is secured by property within the District. See `BONDOWNERS' RISKS — Payments by FDIC and Other Federal Agencies." The FDIC has adopted a policy statement regarding the payment of state and local real property taxes (the "Policy Statement") which provides that the FDIC intends to pay valid real property taxes, interest and penalties, in accordance with state law, on property which at the time of the tax levy is owned by a financial institution in an FDIC receivership, unless abandonment of the FDIC interest is determined to be appropriate. However, the Policy Statement is unclear as to whether the FDIC considers special taxes such as the Special Taxes to be "real property taxes" which it intends to pay. Furthermore, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, it will not permit its lien to be foreclosed by a taxing authority without its specific consent, and that it will not pay or recognize liens for any penalties, fines, or similar claims imposed for the non-payment of taxes Other laws generally affecting creditors' rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of such military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service. The Authority and the District are unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. In addition, potential investors should be aware that judicial foreclosure proceedings are not summary remedies and can be subject to significant procedural and other delays caused by crowded court calendars and other factors beyond control of the Authority or the District. Potential investors should assume that, under current conditions, it is estimated that a contested judicial foreclosure of the lien of Special Taxes will take up to two or three years from initiation to the lien foreclosure sale. At a Special Tax lien foreclosure sale, each parcel will be sold for not less than the "minimum bid amount" which is equal to the sum of all delinquent Special Tax installments, penalties and interest thereon, costs of collection (including reasonable attorneys' fees), post judgment interest and costs of sale. Each parcel is sold at foreclosure for the amounts secured by the Special Tax lien on such parcel and multiple parcels may not be aggregated in a single "bulk" foreclosure sale. If any parcel fails to obtain a "minimum bid," the Authority may, but is not obligated to, seek superior court approval to sell such parcel at an amount less than the minimum bid. Such Superior Court approval requires the consent of the owners of 75% of 40 the aggregate principal amount of the Outstanding Bonds. Delays and uncertainties in the Special Tax lien foreclosure process create significant risks for Bondowners. High rates of special tax payment delinquencies which continue during the pendency of protracted Special Tax lien foreclosure proceedings, could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon foreclosure. In that event, there could be a default in payment of the principal of, and interest on, the 2012 Bonds. Sec "Special Tax Collections" above. Bankruptcy and Foreclosure Delay The payment of Special Taxes and the ability of the Authority to foreclose the lien of delinquent Special Taxes as discussed in the section herein entitled "SECURITY FOR THE 2012 BONDS" may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. In addition, the prosecution of a judicial foreclosure may be delayed due to congested local court calendars or procedural delays. The various legal opinions to be delivered concurrently with the delivery of the 2012 Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, bankruptcy of a property owner or of a partner or other equity owner of a property owner, could result in a stay of enforcement of the lien for the Special Taxes, a delay in prosecuting Superior Court foreclosure proceedings or adversely affect the ability or willingness of a property owner to pay the Special Taxes and could result in the possibility of delinquent Special Taxes not being paid in full. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2012 Bonds and the possibility of delinquent Special Taxes not being paid in full. Moreover, amounts received upon foreclosure sales may not be sufficient to fully discharge delinquent installments. To the extent that a significant percentage of the property in the District is owned by any major landowner or any other property owner, and such owner is the subject of bankruptcy proceedings, the payment of the Special Tax and the ability of the Authority to foreclose the lien of a delinquent unpaid Special Tax could be extremely curtailed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. Payments by FDIC and Other Federal Agencies The ability of the Authority to collect interest and penalties specified by state law and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to properties in which the FDIC, the Drug Enforcement Agency, the Internal Revenue Service or other similar federal governmental agencies such as the Federal National Mortgage Association ("FNMA") or Freddie Mac, has or obtains an interest. Mortgage Interests. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or 41 Laws of any State to the contrary notwithstanding." The foregoing is generally interpreted to mean that, unless the United States Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable State and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the Authority wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Ruse v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the "Ninth Circuit"), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see the caption "— Levy and Collection of the Special Tax;' Insufficiency of the Special Tax." Table 4 above indicates that FNMA owns 7 parcels within the District. The Authority has not otherwise undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within the District, and therefore expresses no view concerning the extent to which the risks described above will materialize while the Bonds are outstanding. FDIC. Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. With respect to property in California owned by the FDIC on January 9, 1997 and that was owned by the 42 Resolution Trust Corporation (the "RTC") on December 31, 1995, or that became the property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC's prior practice of paying special taxes imposed pursuant to the Act if the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special taxes may be challenged by the FDIC. The Authority is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Bondowners should assume that the Authority will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the 2012 Bonds. Based upon the secured tax roll as of January 1, 2011, the FDIC does not presently own any of the property in the District. The Authority expresses no view concerning the likelihood that the risks described above will materialize while the 2012 Bonds are outstanding. Payment of Special Tax Not a Personal Obligation of the Property Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcels of Taxable Property. If the value of the parcels of Taxable Property is not sufficient, taking into account other obligations also payable thereby to fully secure the Special Tax, the Authority has no recourse against the owner. Factors Affecting Parcel Values and Aggregate Value Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in the District in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on the parcels of Taxable Property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes and volcanic eruptions, topographic conditions such as earth movements, landslides, liquefaction, floods or fires, and climatic conditions such as tornadoes, droughts, and the possible reduction in water allocation or availability. It can be expected that one or more of such conditions may occur and may result in damage to improvements of varying seriousness, that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the parcels of Taxable Property may well depreciate or disappear. Seismic Conditions. The District, like all California communities, may be subject to unpredictable seismic activity. The occurrence of seismic activity in the District could result in substantial damage to properties in the District which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in greater reliance on undeveloped property in the payment of Special Taxes. Prior to the issuance of grading permits, engineering reports addressing geologic, seismic or soil limitations and foundation design were prepared for applicable Planning Areas. None of the school sites lies within the Alquist-Priolo Earthquake Fault Zone. Legal Requirements. Other events which may affect the value of a parcel of Taxable Property in the District include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. 43 No Acceleration Provisions The 2012 Bonds do not contain a provision allowing for the acceleration of the 2012 Bonds in the event of a payment default or other default under the terms of the 2012 Bonds or the Fiscal Agent Agreement. So long as the 2012 Bonds are in book -entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights and remedies of Bondowners. Collection of Special Tax In order to pay debt service on the 2012 Bonds, it is necessary that the Special Tax levied against land within the District be paid in a timely manner. The Authority has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Tax in order to obtain funds to pay debt service on the 2012 Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments to the Bondowners pending prosecution of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the Authority, as the Governing Board of the District, to cause such an action to be commenced and diligently pursued to completion, the Act does not specify the obligations of the Governing Board with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." Right to Vote on Taxes Act An initiative measure, Proposition 218, commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996, general election. The Initiative added Article XIIIC ("Article XIIIC") and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." The provisions of the Initiative, as they relate to community facilities districts, are subject to interpretation by the courts. Among other things, Section 3 of Article XIII states that" ... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge" The Act provides for a procedure, which includes notice hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill signed into law by the Governor of the State enacting Government Code Section 5854, states that: "Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution." 44 Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2012 Bonds. It may be possible, however, for voters of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the 2012 Bonds but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2012 Bonds. Like its antecedents, the Initiative is likely to undergo both judicial and legislative scrutiny before its impact on the District and its obligations can be determined. Certain provisions of the Initiative may be examined by the courts for their constitutionality under both State and federal constitutional law. The Authority is not able to predict the outcome of any such examination. The foregoing discussion of the Initiative should not be considered an exhaustive or authoritative treatment of the issues. The Authority does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative enactments may all affect the impact of the Initiative on the 2012 Bonds as well as the market for the 2012 Bonds. Legislative and court calendar delays and other factors may prolong any uncertainty regarding the effects of the Initiative. Ballot Initiatives and Legislative Measures The Initiative was adopted pursuant to a measure qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations as to the ability of the State, the County, the City, the Authority, the District or local districts to increase revenues or to increase appropriations or as to the ability of a property owner to complete the development of the property. Limited Secondary Market There can be no guarantee that there will be a secondary market for the 2012 Bonds or, if a secondary market exists, that such 2012 Bonds can be sold for any particular price. Although the Authority and thc District have committed to provide certain statutorily -required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. The failure to provide the annual financial and operating information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS — Tax Exemption," the interest on the 2012 Bonds could become includable in gross income for federal income tax purposes retroactive to the date of 45 issuance of the 2012 Bonds as a result of future acts or omissions of the Authority in violation of certain provisions of the Code and the covenants of the Fiscal Agent Agreement. In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the 2012 Bonds, the Authority has covenanted in the Fiscal Agent Agreement not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the 2012 Bonds under the Internal Revenue Code of 1986, as amended. Should such an event of taxability occur, the 2012 Bonds arc not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption or mandatory sinking fund redemption provisions of the Fiscal Agent Agreement. IRS Audit of Tax -Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2012 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2012 Bonds might be affected as a result of such an audit of the 2012 Bonds (or by an audit of similar bonds). Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption 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, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Examples of such proposals include a proposal in the fall of 2011 which would have reduced the tax value of all itemized deductions and targeted tax expenditures for high- income taxpayers in tax years commencing on or after January 1, 2013. The concept of "high-income taxpayers" in the proposal generally captured taxpayers with adjusted gross income of $250,000 or more for married couples filing jointly (or $200,000 for single taxpayers). Among the targeted tax expenditures was interest on any bond excludable from gross income under Section 103 of the Code, whether the bond is outstanding on the enactment date of the proposed legislation or is issued thereafter. Another example of such proposal from the fall of 2011 would have required the Office of Management and Budget to establish steadily declining annual ratios for debt as a percentage of gross domestic product, effective for taxable years beginning on or after January 1, 2013. Under the proposal, if the ratios were not met, automatic cuts in spending and tax preferences, such as tax-exempt interest, would be triggered. Prospective purchasers of the 2012 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion. Limitations on Remedies Remedies available to the Bondowners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2012 Bonds or to preserve the tax-exempt status of the 2012 Bonds. See "Payments by FDIC and other Federal Agencies," "No Acceleration Provisions" and "Billing of Special Taxes" herein LEGAL MATTERS Legal Opinion The legal opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, approving 46 the validity of the 2012 Bonds will be made available to purchasers at the time of original delivery and the form of such opinion is attached hereto as Appendix E. Tax Exemption In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, subject to the Authority's compliance with certain covenants, interest on the 2012 Bonds is excludable from gross income of the owners thereof for federal income tax purposes under Section 55 of the Code, is not includable as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the Authority to comply with one or more of such covenants could cause interest on the 2012 Bonds to not be excludable from gross income under Section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the 2012 Bonds. In the further opinion of Bond Counsel, interest on the 2012 Bonds is exempt from California personal income taxes. Bondowners should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2012 Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2012 Bonds other than as expressly described above. The form of Bond Counsel's opinion is set forth in Appendix E. No Litigation At the time of delivery of the 2012 Bonds, the Authority and the District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory agency, public board or body pending with respect to which they have been served with process or to their knowledge threatened against the Authority or the District affecting their existence, or the titles of their respective officers which would materially adversely affect the ability of the Authority to perform its obligations under the 2012 Bonds or certain documents related thereto or seeking to restrain or to enjoin the issuance, sale or delivery of the 2012 Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the 2012 Bonds, or in any way contesting or affecting the validity or enforceability of the 2012 Bonds, or the Fiscal Agent Agreement or any action of the Authority or the District contemplated by either of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement hereto, or contesting the powers of the Authority or the District or their authority with respect to the 2012 Bonds or any action of the Authority or the District contemplated by either of said documents, nor, to the knowledge of the Authority, is there any basis therefor. No General Obligation of the Authority or the District The 2012 Bonds are not general obligations of the Authority or the District, but are limited obligations of the Authority for the District payable solely from proceeds of the Special Tax and proceeds of the 2012 Bonds, including amounts in the Reserve Fund, the Special Tax Fund and the Bond Fund. Any tax levied for the payment of the 2012 Bonds shall be limited to the Special Taxes to be collected within the jurisdiction of the District. 47 NO RATINGS The 2012 Bonds have not been rated by any securities rating agency. UNDERWRITING The 2012 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus at a purchase price of $ (which represents the aggregate principal amount of the 2012 Bonds ($ , less an underwriter's discount of $ ). The purchase agreement relating to the 2012 Bonds provides that the Underwriter will purchase all of the 2012 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell 2012 Bonds to certain dealers and others at prices lower than the offering price stated on the cover page hereof. The offering prices may be changed from time to time by the Underwriter. PROFESSIONAL FEES Fees payable to certain professionals, in connection with the 2012 Bonds, including the Underwriter, Stradling Yocca Carlson & Rauth, as Underwriter's Counsel, Quint & Thimmig LLP, as Bond Counsel, McFarlin & Anderson LLP, as Disclosure Counsel, Fieldman, Rolapp & Associates, as Financial Advisor, U.S. Bank National Association, as the Fiscal Agent, and Willdan Financial Services, as Special Tax Consultant, are contingent upon the issuance of the 2012 Bonds. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries thereof which summaries do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statement of the contents thereof. Any statements in this Official Statement involving mattcrs of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. This Official Statement is not to be construed as a contract or agreement between the District or the Authority and the purchasers or owners of any of the 2012 Bonds. The execution and delivery of the Official Statement by the District has been duly authorized by the Authority on behalf of the District. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) By: Bob Johnson, Executive Director, Temecula Public Financing Authority, on behalf of the District 48 APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF TEMECULA The following information is provided for background purposes only. The City of Temecula has no liability or responsibility whatsoever with respect to the 2012 Bonds or the Fiscal Agent Agreement. Introduction Following a vote by the residents on November 7, 1989, the City incorporated under the general laws of the State of California on December 1, 1989. The City has a Council -Manager form of government and is represented by the five members of the City Council who are each elected at -large to serve a four-year term. The Mayor is selected annually by the members of the City Council. The Temecula Community Services District (TCSD) was also established in 1989. The TCSD is responsible for providing parks and recreation services to the citizens of Temecula, as well as street lighting and slope maintenance in certain areas of the district. Other governmental entities, such as the State of California, the County of Riverside and various school, water and other districts, also provide various levels of service within the City. However, the City Council docs not have a continuing oversight responsibility over these other governmental entities. Located on Interstate 15, the City of Temecula is the 11th largest city in the Inland Empire and the 5th largest in Riverside County (as of January, 2012), encompassing 30.15 square miles. The City of Temecula is 85 miles southeast of Los Angeles, 60 miles north of San Diego, 61 miles southeast of Orange County and 20 miles inland from the cities of San Juan Capistrano and Oceanside. Population From 2003 - 2012, the City's population grew from 74,157 to 103,092, a gain of 28,935 or 39.0%. In this same period, Riverside County added 497,358, a gain of 28.7%. CITY OF TEMECULA AND COUNTY OF RIVERSIDE POPULATION FROM 2003 TO 2012 (1) Year Temecula Riverside County Population % Change Population % Change 2003 74,157 -- 1,730,219 -- 2004 76,407 3.0 1,814,485 4,9 2005 78,808 3.1 1,895,695 4.5 2006' 90,120 14.4 1,975,913 4.2 2007 93,122 3.3 2,049,902 3.7 2008 95,332 2.4 2,102,741 2.6 2009 97,741 2.5 2,140,626 1.8 2010 99,757 2.1 2,179,692 1.8 2011 101,255 1.5 2,205,731 1.2 2012 103,092 1.8 2,227,577 1.0 Includes annexation ofRedhawk area. (0 As of January 1 of each calendar year. Source: California Department of Finance. Construction Activity A-1 The following table shows a five year history of construction activity in the City. [CIRB functions passing to CBIA; in transition during month of May. Expects conversion to be completed in June] CITY OF TEMECULA BUILDING PERMITS AND VALUATIONS (Calendar Year 2006 — 2010) 2006 2007 2008 2009 2010 Valuation ($000): Residential 145,638,382 194,888,351 100,451,479 72,006,373 68,489,143 Non-residential 144,623.957 151 320,960 138 074,079 20,866.892 14,235,576 Total 290,262,339 346,209,311 238,525,558 92,873,265 82,724,719 Residential Units: Single family 589 697 301 323 342 Multiple family 18 237 274 37 6 Total 607 934 575 355 348 Source: (Construction Industry Research Board]. Economic Condition and Outlook Temecula's economic base is anchored by a number of firms specializing in biomedical technology and supplies, high technology controllers and semi -conductors, among others. The City's retail base is also experiencing growth and is home to several auto dealers including Honda, Lincoln, Mercury, Hyundai, Subaru, Toyota and Nissan. The following table sets forth major manufacturing and non -manufacturing employers: A-2 CITY OF TEMECULA LARGEST EMPLOYERS BY NUMBER OF EMPLOYEES (As of Jane, 2011) Employer Abbott Vascular (Abbott Laboratories f/lc/n Guidant Corporation or Abbott Cardiovascular Systems. Inc.) Temecula Valley Unified School District Professional Ilospital Supply International Rectifier Costco Wholesale Corporation Macy's Department Stores. Inc. Chemi-Cun International Norm Reeves Auto Group Southwest Traders Milgnrd Manufacturing Plant Equipment, Inc. Temecula Creek Inn Channell Commercial Corp. Albertson's EH 'Enterprises Inc. Dayton Hudson Corporation/Target JC Penny Company Toyota of Temecula Valley City of Temecula Lowe's Source: City Finance Department. Approximate No. of Employees A-3 Type of Business 2,938 Medical equipment 2,749 Public school system 1.100 Medical equipment and supplies 700 Power semi -conductors 373 Wholesale warehouse 300 Retail 272 Manufacturing 260 Auto Dcalcr 233 Distribution 210 Windows 200 Telephone equipment 195 Ilotel 184 Cable enclosures 180 Grocery 178 Pharmaceutical 174 Retail 170 Retail 170 Auto Dealer 153 Government 152 Building Supplies CITY OF TEMECULA PRINCIPAL SECURED PROPERTY OWNERS FOR FISCAL YEAR 2011-12 Taxpayer") Abbott Vascular (2) Temecula Towne Center Associates International Rectifier Corporation Inland Western Temecula Common Federal National Mortgage Association Temecula Properties BACM 2006-5 Rancho California Alexander and Baldwin Inc. Temecula Villa Apartments Macy's Department Stores, Inc (3) Type of Business Secured 2011-12 Assessed Valuation (in 000s) Percent of Total Assessed (Valuation) Total 2011-12 Assessed Valuation (in 000s) Total 2011-12 Assessed Valuation Medical Appliances Mfg. Regional Mall Electronics Mfg. Real Estate Investment Trust Mortgage Buyer Industrial Commercial Commercial Commercial Retail Department Store Totals $207,308 148,865 86,702 64,300 54,897 54,696 53,162 48,639 48,058 37.841 $804,468 1.86% 1.33 .78 .58 .49 .49 .48 .44 .43 .34 7.20% $463,010 148,865 86,702 64,300 54,897 54,696 53,162 48,639 48,058 47.666 $1,069,996 $11,167,952 $11,842,873 (I) Assessed values of parcels owned by related entities have been aggregated. t2I The facility operating in the City is locally now known as Abbott Vascular, which is a subsidiary of Abbott Laboratories. Ownership of some parcels is in the name of Advanced Cardiovascular Systems, Inc., or Abbott Cardiovascular Systems, Inc. Abbott Laboratories acquired Advanced Cardiovascular Systems, Inc. in April 2006, in connection with Boston Scientific Corporation's purchase of Guidant Corporation. Some personal property and fixtures may be listed as owned by Abbott Vascular, Inc. (3) Owner had pending appeals on one or more parcels. Source: City of Temecula. CITY OF TEMECULA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY FOR THE FISCAL YEARS 2002-03 THROUGH 2011-12 (Values in Thousands) [UPDATE] Total Fiscal Secured and Real Estate Year Unsecured Exemptions 2002-03 6,201,896 (30,010) 2003-04 6,931,291 (43,142) 2004-05 7,794,688 (53,240) 2005-06 10,328,097 (51,063) 2006-07 11,836,051 (75,082) 2007-08 13,434,244 (88,037) 2008-09 13,537,220 (101,367) 2009-10 12,003,561 (112,286) 2010-11 11,932,655 (116,038) 2011-12 Source: Riverside County Assessor's Office. Net Taxable Assessed Value 6,171,886 6,888,149 7,741,448 10,277,034 11,760,969 13,346,207 13,435,853 11,891,275 11,816,617 A-4 Net Total Estimated Homeowners Assessed Actual Exemption Value Value (82,926) 6,088,960 6,088,960 (92,362) 6,795,787 6,795,787 (94,237) 7,647,211 7,647,211 (108,654) 10,168,380 10,168,380 (111,392) 11,649,577 11,649,577 (113,341) 13,232,866 13,232,866 (114,841) 13,321,012 13,321,012 (115,783) 11,775,492 11,775,492 (115,944) 11,700,673 11,700,673 General Information Agriculture. The climate and soil in the City are particularly favorable for growing avocado, grape and citrus crops. There are currently several agricultural management firms in the Temecula area which manage agricultural production of thousands of acres of land owned by individual investors, partnerships and corporations. The agricultural managers apply economies of scale, by combining many small and medium sized parcels of land as if these parcels were one large ranch. In addition, a substantial wine industry has been developed in the area near the City. As of January, 2012, there were approximately fifty-seven (57) vineyards and wineries which produce wine with locally grown grapes. Climate. Temecula Valley enjoys a mild Mediterranean climate with year-round temperatures averaging in the mid 70s. The weather is comparable to the Napa Valley, as evidenced by a thriving wine industry, with warm, dry days and cool evenings. Summer -time temperatures, which can average in the mid 80s or the mid 90s during the day, are often cooled by afternoon ocean breezes blowing into the valley through gaps in the Santa Ana foothills to the west. Although separated from the Pacific by the Santa Rosa range of mountains, the Rainbow Gap funnels the mild beach climate into the valley. Mild winter temperatures average in the mid 60s. Yearly average rainfall in the Temecula Valley is approximately 14 inches, as compiled by the Rancho California Water District. The quality of air in the Temecula Valley is consistently better than that of surrounding communities. Ocean breezes flow through the Rainbow Gap almost every day, sweeping away smog. In the summer, Pacific winds yield temperatures up to 10 degrees lower than in towns just a few miles away. Education. The City is served by Temecula Valley Unified School District, one of the fastest growing school districts in the State, with 5 high schools (including 2 alternative schools), 6 middle schools, [4/3] charter schools, 1 home -schooling program, 17 elementary schools and 1 adult school. In addition, there are 11 private schools and several preschools. The general boundaries extend north to Jean Nicholas Road in French Valley, south to the Riverside County line, east to Vail Lake and west to the Temecula city limit. The School District covers approximately 150 square miles. As of [April 19, 2012], approximately [28,671] students (Grades K-12) are enrolled in the School District. The University of California, Riverside opened an extension center in the City, San Joaquin Valley College is located in the City and Mt. San Jacinto Community College operates a campus ten miles north of the City to serve the growing population. In addition, the Cal State San Marcos facility continues to expand with construction on the opening of their satellite campus in their newly renovated building on Margarita Road. In the past two years a state-of-the-art Social and Behavioral Sciences building, a parking structure and a public safety building have been completed. Cal State San Marcos has a substantial specialized and general undergraduate curriculum. The City began the 2000's with a well- educated population, and its population trends and school performance figures have allowed it to maintain that position. Transportation. Interstate 15 and its connecting arterials provide convenient links to San Diego and Riverside, Los Angeles (Interstate 10), Orange County (Highway 91) and San Bernardino (interstate 215). The French Valley Airport, 4 miles north of Interstate 15 on Winchester Road, accommodates business jets and commuter airlines. A-5 Housing. Temecula is unique in that its residents are about equidistant from both San Diego and Orange County via the interstate 15 freeway. As a result, it is receiving growth impulses from the south as well as the north, as families spill into the Inland Empire from Southern California's more congested coastal counties. Teniecula's rapid population growth represents a relatively new phenomenon in Southern California. A large number of the City's new residents have migrated north from San Diego County along the Interstate 15 freeway. Normally, a Southern California community undergoes rapid growth only when population spills from Orange or Los Angeles counties. The latest population data shows Temecula with 103,092 residents as of January I, 2012, which includes the March, 2004 annexation of the community of Redhawk, which became official June 30, 2005. A-6 APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT APPENDIX D FORM OF AUTHORITY CONTINUING DISCLOSURE AGREEMENT APPENDIX E FORM OF OPINION OF BOND COUNSEL APPENDIX F BOOK -ENTRY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2012 Bonds, payment of principal of and interest on the 2012 Bonds to Direct Participants, Indirect Participants or Beneficial Owners (as such terms are defined below) of the 2012 Bonds, confirmation and transfer of beneficial ownership interests in the 2012 Bonds and other bond - related transactions by and between DTC, Direct Participants, Indirect Participants and Beneficial Owners of the 2012 Bonds is based solely on information furnished by DTC to the Authority which the Authority believes to be reliable, but the Authority, 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 2012 Bonds. The 2012 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 fully -registered 2012 Bond will be issued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with 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 Unifonn Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 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 book -entry 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 arc 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 www.dtcc.com. The information on such website is not incorporated herein by such reference or otherwise. Purchases of 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2012 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2012 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 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants F-1 acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2012 Bonds, except in the event that use of the book -entry system for the 2012 Bonds is discontinued. To facilitate subsequent transfers, all 2012 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 the 2012 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2012 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2012 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 2012 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2012 Bonds, such redemptions, tenders, defaults, and proposed amendments to the 2012 Bonds documents. For example, Beneficial Owners of the 2012 Bonds may wish to ascertain that the nominee holding the 2012 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 Fiscal Agent and request that copies of notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2012 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 Authority 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 the 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the 2012 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 Authority or the Fiscal Agent, 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 Fiscal Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Fiscal Agent, 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. DTC may discontinue providing its services as depository with respect to the 2012 Bonds at any time by giving reasonable notice to the Authority or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, the 2012 Bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, the 2012 Bond certificates will be printed and F-2 delivered to DTC. The information in this Section conccming DTC and DTC's book -entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event that (a) DTC determines not to continue to act as securities depository for the 2012 Bonds, or (b) the Authority determines that DTC shall no longer act and delivers a written certificate to the Fiscal Agent to that effect, then the Authority will discontinue the Book -Entry System with DTC for the 2012 Bonds. If the Authority determines to replace DTC with another qualified securities depository, the Authority will prepare or direct the preparation of a new single separate, fully -registered 2012 Bond for each maturity of the 2012 Bonds registered in the name of such successor or substitute securities depository as are not inconsistent with the terms of the Fiscal Agent Agreement. if the Authority fails to identify another qualified securities depository to replace the incumbent securities depository for the 2012 Bonds, then the 2012 Bonds shall no longer be restricted to being registered in the 2012 Bond registration books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository or its nominee transferring or exchanging the 2012 Bonds shall designate. in the event that the Book -Entry System is discontinued, the following provisions would also apply: (i) the 2012 Bonds will be made available in physical form, (ii) principal of, and redemption premiums if any, on the 2012 Bonds will be payable upon surrender thereof at the trust office of the Fiscal Agent identified in the Fiscal Agent Agreement, and (iii) the 2012 Bonds will be transferable and exchangeable as provided in the Fiscal Agent Agreement. The Authority and the Fiscal Agent do not have any responsibility or obligation to DTC Participants, to the persons for whom they act as nominees, to Beneficial Owners, or to any other person who is not shown on the registration books as being an owner of the 2012 Bonds, with respect to (i) the accuracy of any records maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC Participant of any amount in respect of the principal of redemption price of or interest on the 2012 Bonds; (iii) the delivery of any notice which is permitted or required to be given to registered owners under the Fiscal Agent Agreement; (iv) the selection by DTC or any DTC Participant of any person to receive payment in the event of a partial redemption of the 2012 Bonds; (v) any consent given or other action taken by DTC as registered owner; or (vi) any other matter arising with respect to the 2012 Bonds or the Fiscal Agent Agreement. The Authority and the Fiscal Agent cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal of or interest on the 2012 Bonds paid to DTC or its nominee, as the registered owner, or any notices to the Beneficial Owners or that they will do so on a timely basis or will serve and act in a manner described in this Official Statement. The Authority and the Fiscal Agent are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner in respect to the 2012 Bonds or any error or delay relating thereto. F-3 APPENDIX G BOUNDARY MAP OF THE COMMUNITY FACILITIES DISTRICT Preliminary Official Statement for Harveston II C 0 c 0 0 E 0 m • . U O os .5 a E 0 a Hv mo =i, c 0 u « h 0 E H - .. B 0 Q C C a •0 c .0 • 0 .0 c 3 E -o c o O y ac a T ✓ 5 C o o 'C Lai E o 5 0 R 1.- T g 5 Jo 0 c u 0 c0 m € o c C T ✓ a 0 c o 0 0 .. O 2 2U' m .5 0 E 0 g T 0 F^ o PRELIMINARY OFFICIAL STATEMENT DATED JULY 2012 NEW ISSUE RATING: S&P: (See "RATING" herein.) In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing law, the interest on the 2012 Bonds is excludable from gross income of the owners thereoffor federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "LEGAL MATTERS—Tax Exemption" herein. $4,335,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON 1I) SPECIAL TAX REFUNDING BONDS, SERIES 2012 Dated: Date of Delivery Due: September 1, as on the inside cover The Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012 (the "2012 Bonds") are being issued under the Mello -Roos Community Facilities Act of 1982, Article I I, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, and a Fiscal Agent Agreement, dated as of August 1, 2012, by and between the Temecula Public Financing Authority (the "Authority") and U.S. Bank National Association, as Fiscal Agent, and are payable from proceeds of Special Taxes (as defined herein) levied on property within the Temecula Public Financing Authority Community Facilities District No. 03-06 (Iiarveston II) (the "District") according to the rate and method of apportionment of special tax approved by the qualified electors of the District and by the Board of Directors of the Authority, acting as the legislative body of the District. The 2012 Bonds are being issued (i) to fund, together with other available moneys, the defeasance and redemption of the Temecula Public Financing Authority Community Facilities District No. 03-06 (liarveston 11) Special Tax Bonds, Series 2004 (the "Prior Bonds"), (ii) to pay the costs of issuing the 2012 Bonds and (iii) to establish a Reserve Fund for the 2012 Bonds. See "PLAN OF FINANCE" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. Interest on the 2012 Bonds is payable on March 1, 2013, and semi-annually thereafter on March I and September I. The 2012 Bonds will be issued in denominations of $5,000 or integral multiples in excess thereof. The 2012 Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the 2012 Bonds as described herein under "THE 2012 BONDS — Book -Entry and DTC." The 2012 Bonds are subject to optional redemption mandatory redemption from prepayments of Special Taxes and mandatory ,sinking payment redemption as described herein TIIE 2012 BONDS, THE INTEREST THEREON, AND ANY PREMIUM PAYABLE ON THE REDEMPTION OF ANY OF THE 2012 BONDS, ARE NOT AN INDEBTEDNESS OF THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT), THE STATE OF CALIFORNIA (TILE "STATE") OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT), TIIE STATE NOR ANV OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE 2012 BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT (EXCEPT TO TIIE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTIIER THAN THE SPECIAL TAXES LEVIED WITHIN THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY BUT ARE LIMITED OBLIGATIONS OF TIIE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE FISCAL AGENT AGREEMENT. This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the 2012 Bonds. Investment in the 2012 Bonds involves risks which may not be appropriate for some investors. See "BONDOWNERS' RISKS" herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2012 Bonds. MA 1 URI1 Y SCIILDULL (Sec Inside Cover) Please refer to the inside cover page for a summary of the principal amounts, interest rates, reoffering yields and CUSIP® numhers for the 2012 Bonds. The 2012 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Quint & Thimmig LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. McFarlin & Anderson LLP, Laguna Hills, California is acting as Disclosure Counsel. Certain legal matters will be passed on for the Authority and the District by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, acting as general counsel to the Authority, and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, It is anticipated that the 2012 Bonds, in book-cntry form, will be available through the facilities of DTC on or about August _, 2012. STONE & YOUNGBERG A DIVISION OF STIFEI. NICOI-AIJS • Preliminary, subject to change. Dated: [July 1 2012 MATURITY SCHEDULE $4,335,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) SPECIAL TAX REFUNDING BONDS, SERIES 2012 $ Serial Bonds Base CUSIPdD No. Maturity Principal Interest CUSIP® Maturity Principal Interest CUSIP® (September 1) Amours Rate l'rice No (September I Amount Rate Price No. 2013 $ % % 2020 $ % 2014 2021 2015 2022 2016 2023 2017 2024 2018 2025 2019 %Term Bonds due September I, 20_ Yield % CUSIPt No. % Term Bonds due September I. 2034 Yield % CUSIPt No. CUSIP® A registered trademark of the American Bankers Association. Copyright 01999-2012 Standard & I'oor's, a Division erne McGraw-Hill Companies, Inc. CUSIP® data herein is provided by Standard & Poor's CUSIP® Service Bureau. This data is nut intended to create a database and docs not serve in any way as a substitute for thc CUSIP® Service Bureau. CUSIP®numbers are provided for convenience of reference only. The Authority, the District and thc Underwriter lake no responsibility for thc accuracy of such numbers. • Preliminary, subject to change. TEMECULA PUBLIC FINANCING AUTHORITY BOARD OF DIRECTORS Charles W. Washington, Chairperson Jeff Comerchero, Member Maryann Edwards, Member Michael S. Naggar, Member Ron Roberts, Member AUTHORITY/CITY STAFF Bob Johnson, Executive Director and City Manager of the City of Temecula Genie Wilson, Authority Treasurer and Chief Financial Officer of the City of Temecula Susan Jones, Authority Secretary and City Clerk of the City of Temecula SPECIAL SERVICES Bond Counsel Quint & Thimmig LLP San Francisco, California Authority Counsel Richards, Watson & Gershon A Professional Corporation Los Angeles, California Disclosure Counsel McFarlin & Anderson LLP Laguna Hills, California Special Tax Consultant Willdan Financial Services Temecula, California Financial Advisor to the Authority Fieldman, Rolapp & Associates Irvine, California Fiscal Agent and Escrow Agent U.S. Bank National Association Los Angeles, California GENERAL INFORMATION ABOUT THE OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the 2012 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the 2012 Bonds. All summaries of the documents referred to in this Official Statement 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. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Authority, in any press release by the Authority and in any oral statement made with the approval of an authorized officer of the Authority or any other entity described or referenced herein, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend," and similar expressions identify "forward-looking statements" within the meaning of the 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 subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward- looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results and those differences may be material. 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, give rise to any implication that there has been no change in the affairs of the Authority or any other entity described or referenced herein since the date hereof. The Authority does not plan to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. Limited Offering. No dealer, broker, salesperson or other person has been authorized by the Authority to give any information or to make any representations in connection with the offer or sale of the 2012 Bonds other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any 2012 Bonds nor shall there be any sale of the 2012 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Involvement of Underwriter. The Underwriter has submitted the following statement 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. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 2012 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 Underwriter may offer and sell the 2012 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof and said public offering prices may be changed from time to time by the Underwriter. THE 2012 BONDS HAVE NOT BEEN REGISTERED UNDER TFIE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE 2012 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. TABLE OF CONTENTS INTRODUCTION 1 General 1 The Authority 1 The Community Facilities District 1 Purpose of the 2012 Bonds 2 Sources of Payment for the 2012 Bonds 2 Assessed Values 3 Tax Exemption 4 Risk Factors Associated with Purchasing the 2012 Bonds 4 Forward Looking Statements 4 Professionals Involved in the Offering 4 Other Information 5 CONTINUING DISCLOSURE 5 PLAN OF FINANCE 6 ESTIMATED SOURCES AND USES OF FUNDS 6 THE 2012 BONDS 6 Description of the 2012 Bonds 6 Debt Service Schedule 8 Terms of Redemption 9 Transfer and Exchange of Bonds 11 Book -Entry and DTC 12 SECURITY FOR THE 2012 BONDS 12 General 12 Special Taxes 13 Rate and Method 13 Special Taxes and the Teeter Plan 16 Proceeds of Foreclosure Sales 16 Special Tax Fund 17 Bond Fund 18 Reserve Fund 19 Administrative Expense Fund 19 Investment of Moneys in Funds 20 Additional Bonds for Refunding Purposes Only 20 THE AUTHORITY 20 Authority for Issuance 21 THE COMMUNITY FACILITIES DISTRICT 22 General 22 Special Tax Levy by Land Use Category 23 Special Tax Collections 23 Property Ownership 25 Estimated Assessed Values 25 Direct and Overlapping Debt 27 Overlapping Assessment and Community Facilities Districts 30 Other Overlapping Direct Assessments30 Estimated Value -to -Lien Ratios 30 BONDOWNERS' RISKS 35 Risks of Real Estate Secured Investments Generally 35 Special Taxes Are Not Personal Obligations 35 The 2012 Bonds Are Limited Obligations of the Authority for the District 35 Property Values 35 Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property 36 Economic Uncertainty 37 Disclosure to Future Purchasers 37 Government Approvals 37 Local, State and Federal Land Use Regulations 37 Endangered and Threatened Species 38 Hazardous Substances 38 State Budget 39 Levy and Collection of the Special Tax; Insufficiency of the Special Tax 39 Exempt Properties 40 Depletion of Reserve Fund 40 Potential Delay and Limitations in Foreclosure Proceedings 41 Bankruptcy and Foreclosure Delay 42 Payments by FDIC and Other Federal Agencies 42 Payment of Special Tax Not a Personal Obligation of the Property Owners 44 Factors Affecting Parcel Values and Aggregate Value 44 No Acceleration Provisions 45 Collection of Special Tax 45 Right to Vote on Taxes Act 45 Ballot Initiatives and Legislative Measures 46 Limited Secondary Market 46 Loss of Tax Exemption 46 IRS Audit of Tax -Exempt Bond Issues 47 Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption 47 Limitations on Remedies 47 LEGAL MATTERS 47 Legal Opinion 47 Tax Exemption 48 No Litigation 48 No General Obligation of the Authority or the District 48 RATING 49 UNDERWRITING 49 PROFESSIONAL FEES 49 MISCELLANEOUS 49 APPENDIX A — General Information About the City of Temecula A-1 APPENDIX B — Rate and Method of Apportionment of Special Tax Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston li) . B-1 APPENDIX C — Summary of Certain Provisions of the Fiscal Agent Agreement .. C-1 APPENDIX D — Form of Authority Continuing Disclosure Agreement D -I APPENDIX E — Form of Opinion of Bond Counsel E-1 APPENDIX F — Book -Entry System F-1 APPENDIX G — Boundary Map of the Community Facilities District G-1 REGIONAL LOCATION MAP [Regional Map to be provided by Stone & Youngberg] AERIAL MAP [Aerial Map provided by the City and text added by S&Y] OFFICIAL STATEMENT $4,335,000' TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) SPECIAL TAX REFUNDING BONDS, SERIES 2012 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 Oficial Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Oficial Statement. The offering of the 2012 Bonds to potential investors is made only by means of the entire Official Statement. General This Official Statement, including the cover page and appendices hereto, is provided to furnish information regarding the issuance and sale by the Temecula Public Financing Authority (the "Authority"), on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) (the "District" or the "Community Facilities District") of $4,335,000 aggregate principal amount of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) Special Tax Refunding Bonds, Series 2012 (the "2012 Bonds"). The 2012 Bonds are issued pursuant to the Act (as defined below), Article 11, commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Govemment Code (the "Refunding Law"), and a Fiscal Agent Agreement, dated as of August 1, 2012 (the "Fiscal Agent Agreement"), by and between the Authority, for and on behalf of the District, and U.S. Bank National Association, as Fiscal Agent (the "Fiscal Agent"). See "THE AUTHORITY — Authority for Issuance" herein. The Authority may issue additional bonds secured on a parity with the 2012 Bonds for refunding purposes only. The 2012 Bonds and any parity bonds are referred to herein as the "Bonds." Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings given such terms in the Fiscal Agent Agreement, some of which are set forth in Appendix C hereto "Summary of Certain Provisions of the Fiscal Agent Agreement." The Authority The Authority was formed on April 10, 2001, pursuant to a Joint Exercise of Powers Agreement between the City of Temecula, California (the "City") and the Redevelopment Agency of the City of Temecula, in accordance with Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California. See "THE AUTHORITY" and "THE COMMUNITY FACILITIES DISTRICT." The Community Facilities District The District was formed and established by the Board of Directors of the Authority on November 25, 2003, pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of (he California Government Code, and referred to herein as the "Act"), following a public hearing and a landowner election at which the then qualified electors of the District, by more than a two-thirds 'Preliminary, subject to change. vote, authorized the District to incur bonded indebtedness in the aggregate not -to -exceed amount of $5,500,000 and approved the levy of a Special Tax (the "Special Tax") on certain real property located in the District for the payment of debt service and administrative expenses of the District. Once duly established, a community facilities district is a legally constituted governmental entity established for the purpose of financing specific facilities and services within defined boundaries. Subject to approval by a two-thirds vote of the qualified voters within a community facilities district and compliance with the provisions of the Act, a community facilities district may issue bonds and may levy and collect special taxes to repay such bonded indebtedness and interest thereon. The District is part of a master -planned community that includes a large residential area surrounding a 17 -acre lake and park in the center of the community. The District is a portion of a master - planned community called Harveston, developed with a total of 1,621 single-family dwelling units, plus a 300 -unit apartment complex. In addition, there is a 2.23 -acre retail center in the center of the community, approximately 22.25 acres of Undeveloped Property (as defined in the Rate and Method), a private Lake House/Village Club, a park surrounding the lake connected to a paseo to the 20 -acre community park, a child care center, a community facility and an approximately I2 -acre elementary school, which opened in September, 2001. Harveston was developed in four phases, which are referred to as Phase 1, Phase 2, Phase 2B and Phase 3 and comprise the central portion of the community. The entire community is encompassed within Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston), for which $17,545,000 aggregate principal amount of special tax refunding bonds were issued in September 2006, and which are presently outstanding in the amount of $15,750,000. The District encompasses Phase 2, Phase 2B and Phase 3 of Harveston. Phase 1 is not within the boundaries of the District and while properties in Phase 1 pay special taxes with respect to Community Facilities District No. 01-2 (1-Iarveston), properties in Phase I do not pay Special Taxes with respect to the District. Purpose of the 2012 Bonds The 2012 Bonds are being issued (i) to fund, together with other available moneys, the defeasance and. redemption of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Bonds, Series 2004 (the "Prior Bonds"), (ii) to pay the costs of issuing the 2012 Bonds and (iii) to establish a Reserve Fund for the 2012 Bonds. See "PLAN OF FINANCE" herein. Sources of Payment for the 2012 Bonds The Bonds are secured by and payable from a first pledge of "Special Tax Revenues," other than the first Special Tax Revenues collected by the Authority in any fiscal year, in an amount equal to the portion of such fiscal year's Special Tax levy for Administrative Expenses in an amount not to exceed, in any fiscal year, $35,000 which are to be deposited to the Administrative Expense Fund. "Special Tax Revenues" is defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes received by the Authority, including any scheduled payments thereof and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Special Tax Revenues" do not include any penalties collected in connection with delinquent Special Taxes which amounts may be forgiven or disposed of by the Authority in its discretion, and if collected, will be used in a manner consistent with the Act. "Special Taxes" are defined in the Fiscal Agent Agreement as the special taxes levied within the District pursuant to the Act, the ordinance adopted by the legislative body of the District providing for the levy of the Special Taxes and the Fiscal Agent Agreement. The Special Taxes will be levied in accordance with the Rate and Method of Apportionment of Special Tax (the "Rate and Method") 2 recorded as a lien on the Property pursuant to the Notice of Special Tax Lien. Under the Fiscal Agent Agreement, Special Tax Revenues include amounts levied to pay Administrative Expenses. In accordance with the Fiscal Agent Agreement, such amounts will not be paid to the Fiscal Agent, but will be deposited in the Administrative Expense Fund held by the Treasurer and such amounts are not pledged to the payment of the 2012 Bonds. Pursuant to the Act, the Rate and Method, the Resolution of Formation (as defined herein) and the Fiscal Agent Agreement, so long as any Bonds are outstanding, the Authority will annually levy the Special Tax against the land within the District not exempt from Special Taxes under the Act and the Rate and Method ("Taxable Property") in accordance with the proceedings for the authorization and issuance of the Bonds and the Rate and Method, to make provision for the collection of the Special Tax in amounts which will be sufficient to (a) (i) pay debt service due on all Bonds, for the calendar year that commences in such Fiscal Year; (ii) pay Administrative Expenses; and (iii) pay any amounts required to replenish any bond or interest reserve funds for any Outstanding Bonds; less (b) a credit for funds available to reduce the annual Special Tax levy under the Fiscal Agent Agreement. See "SECURITY FOR THE 2012 BONDS — Special Taxes and the Teeter Plan" herein. The Rate and Method exempts from the Special Tax up to 107.44 acres of Property Owners' Association Property, Public Property and Service Commercial Property located within the District. In Fiscal Year 2012-13, there are [42.79] acres of Property Owner Association Property and an aggregate of [22.25] acres of Public Property. See "SECURITY FOR THE 2012 BONDS — Rate and Method" and "BONDOWNERS' RISKS — Exempt Properties." The Authority has also covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Special Tax. For a more detailed description of the foreclosure covenant, see "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY OR THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED IN THE FISCAL AGENT AGREEMENT. Assessed Values The Fiscal Year 2011-12 assessed valuation of the 1,132 parcels which will be taxed in Fiscal Year 2012-13 is $296,366,946, [plus an estimated $250,408] additional value from one new home sold since April 1, 2011] is approximately (a) [19.69]' times the sum of the principal amount of the 2012 Bonds and the bonds of Community Facilities District No. 01-2 (Harveston) and (b) [18.88]' times the gross combined overlapping tax and assessment debt as set forth in Table 7. This gross assessed valuation may not be representative of the actual market value of property ,in the District because Article XIIIA of the California Constitution limits any increase in assessed value to no more than 2% a year unless a property is sold or transferred. See "THE COMMUNITY FACILITIES DISTRICT — Estimated Assessed Value -to -Lien Ratios" and "BONDOWNERS' RISKS — Land Values." 'Preliminary, subject to change. 3 Tax Exemption In the opinion of Bond Counsel, subject, however, to certain qualifications described herein, under existing law, interest on the 2012 Bonds is excludable from gross income of the Bondowners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the 2012 Bonds. See "LEGAL MATTERS — Tax Exemption" herein. Risk Factors Associated with Purchasing the 2012 Bonds Investment in the 2012 Bonds involves risks that may not be appropriate for some investors. See the section of this Official Statement entitled "BONDOWNERS' RISKS" for a discussion of certain risk factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2012 Bonds. Forward Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" herein. 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. NEITHER THE AUTHORITY NOR THE DISTRICT PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will serve as the fiscal agent, paying agent, registrar and authentication and transfer agent for the 2012 Bonds, and will perform the other functions required of it under the Fiscal Agent Agreement. Quint & Thimmig LLP, San Francisco, California, is serving as Bond Counsel to the Authority. McFarlin & Anderson LLP, Laguna Hills, California, is acting as Disclosure Counsel to the Authority. Stradling Yocca Carlson & Rauth, Newport Beach, California, is acting as Underwriter's Counsel. Bond Counsel and Disclosure Counsel have served and continue to serve as counsel to the Underwriter in other transactions. Willdan Financial Services, Temecula, California, acted as Special Tax Consultant for the Authority. Fieldman, Rolapp and Associates, Irvine, California, acts as Financial Advisor to the 4 Authority. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Fiscal Agent, the Underwriter and the Special Tax Consultant is contingent upon the sale and delivery of the 2012 Bonds. Payment of the fees and expenses of the rating agency is not contingent upon the sale and delivery of the 2012 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 2012 Bonds, certain sections of the Fiscal Agent Agreement, security for the 2012 Bonds, special risk factors, the Authority, the District and other information are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the 2012 Bonds, the Fiscal Agent Agreement, and other resolutions and documents are qualified in their entirety by reference to the complete texts of the 2012 Bonds, the Fiscal Agent Agreement, such resolutions and other documents. All such descriptions are further qualified in their entirety by reference to laws and to principles of equity relating to or affecting generally the enforcement of creditors' rights. Copies of such documents may be obtained upon written request from the Temecula Public Financing Authority, 41000 Main Street, Temecula, California 92590 Attention: Treasurer. The Authority may charge for copying and mailing any documents requested. CONTINUING DISCLOSURE The Authority. The Authority has covenanted for the benefit of the owners of the 2012 Bonds to provide annually certain financial information and operating data relating to the 2012 Bonds, the District, ownership and development of the property in the District which is subject to the Special Tax, the occurrence of delinquencies in payment of the Special Tax, and the status of foreclosure proceedings, if any, respecting Special Tax delinquencies (the "Authority Annual Report"), and to provide notice of the occurrence of certain enumerated events. The Authority Annual Report is to be provided by the Authority not later than eight months after the end of the Authority's fiscal year (which currently would be March 1), commencing with the report due March 1, 2013. The Authority, the City and related entities have never failed to comply in all materia] respects with any previous undertakings with regard to Securities and Exchange Commission Rule 15c2 -12(b)(5) (the "Rule") to provide annual reports or notices of material events. [Confirm/discuss documentation of review of timing and content of filings for all City, RDA and Authority financings.] Filing of Annual Reports; Forms of Reports. Each Authority Annual Report will be filed by the Special Tax Consultant, as dissemination agent for the Authority with the Electronic Municipal Market Access System (EMMA) of the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with the Rule; provided, however, a default under the Authority Continuing Disclosure Agreement will not, in itself, constitute a default under the Fiscal Agent Agreement, and the sole remedy under the Authority Continuing Disclosure Agreement in the event of any failure of the Authority to comply with the Authority Continuing Disclosure Agreement will be an action to compel performance. For a complete listing of items of information which will be provided in the Authority Annual Reports, see APPENDIX D — "Form of Authority Continuing Disclosure Agreement." 5 PLAN OF FINANCE Current Refunding of Prior Bonds. A portion of the proceeds of the 2012 Bonds will be deposited into an escrow fund established under an escrow agreement, dated as of August 1, 2012 (the "Escrow Agreement"), by and between the Authority and U.S. Bank National Association, as escrow agent (the "Escrow Agent"). Amounts deposited under the Escrow Agreement will be held in cash uninvested in an amount sufficient to pay on September 1, 2012, (i) the interest due on the Prior Bonds, (ii) the principal of the Prior Bonds maturing on September 1, 2012, and (iii) the principal of the Prior Bonds maturing on and after September 1, 2013, at a redemption price equal to the principal amount of such Prior Bonds. As a result of the deposit and application of funds as provided for in the Escrow Agreement, the obligation to make payments of the principal of and interest on the Prior Bonds will be defeased as of the closing date. ESTIMATED SOURCES AND USES OF FUNDS The proceeds from the sale of the 2012 Bonds will be deposited into the respective accounts and funds established by the Authority under the Fiscal Agent Agreement, as follows: 0) Sources: Principal Amount of 2012 Bonds $ Other Available Funds Less: Underwriter's Discount _( ) Total Sources $ Uses: Deposit into Refunding Fund $ Deposit into Reserve Fund Deposit into Costs of Issuance Fund (p [Deposit into Special Tax Fund) Deposit into Administrative Expense Fund Total Uses $ Includes, among other things, rating agency fees, the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Special Tax Consultant and the Fiscal Agent, the escrow agent, the cast of printing the Preliminary and final Official Statements and reimbursement to the Authority. THE 2012 BONDS Description of the 2012 Bonds The 2012 Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semi-annually on each March 1 and September 1, commencing on March 1, 2013 (each an "interest Payment Date"), and will mature in the amounts and on the dates set forth on the inside cover page hereof. The 2012 Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple thereof and when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the 2012 Bonds. Ownership interests in the 2012 Bonds may be purchased in book -entry form only, in denominations of $5,000 or any integral multiple thereof within a single maturity. So long as the 2012 Bonds are held in book -entry form, principal of, premium, if any, and interest on the 2012 Bonds will be paid directly to DTC for distribution to the beneficial owners of the 2012 Bonds in accordance with the procedures adopted by DTC. See "THE 2012 BONDS — Book -Entry 6 and DTC." In the event that the 2012 Bonds are not registered in the name of Cede & Co., as nominee of DTC or another eligible depository, both the principal and redemption price, including any premium, of the 2012 Bonds shall be payable by check in lawful money of the United States of America upon surrender of the 2012 Bonds at the principal office of the Fiscal Agent as specified in the Fiscal Agent Agreement; and interest on the 2012 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first-class mail to the registered owner thereof at such registered owner's address as it appears on the Bond Register maintained by the Fiscal Agent at the close of business on the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such day is a Business Day (the "Record Date"), or by wire transfer to an account within the United States made on such Interest Payment Date upon written instructions of any Bondowner of $1,000,000 or more in aggregate principal amount of 2012 Bonds received before the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such 2012 Bonds are transferred to a new Bondowner. The registered owner of any 2012 Bond will be the person or persons in whose name or names a 2012 Bond is registered on the registration books kept for that purpose by the Fiscal Agent in accordance with the terms of the Fiscal Agent Agreement (initially being DTC with respect to all of the 2012 Bonds). So long as the 2012 Bonds are in book -entry only form, all references in this Official Statement to the owners or holders of the 2012 Bonds mean DTC and not the Beneficial Owners. The 2012 Bonds will bear interest at the rates set forth on the cover hereof payable on the Interest Payment Dates in each year. Interest will be calculated on the basis of a 360 -day year comprised of twelve 30 -day months. Each 2012 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as defined above) preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the date of issuance of the 2012 Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. The principal of, and interest and premium, if any, payable on the 2012 Bonds will be payable when due, by wire transfer of the Fiscal Agent to DTC, which will in turn remit such principal, interest and premium, if any, to its Participants (as described in APPENDIX F — "Book -Entry System"), which Participants will in turn remit such principal, interest and premium, if any, to the Benefibial Owners (as defined in APPENDIX F— "Book -Entry System") of the 2012 Bonds as described in APPENDIX F — "Book -Entry System." 7 Debt Service Schedule The following table presents the annual debt service on the 2012 Bonds (including sinking fund redemptions), assuming that there are no optional redemptions or mandatory redemptions from prepayments of Special Taxes. Table 1 Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) Debt Service Schedule 2012 Year Ending Bonds Debt September 1 Principal Interest Service 2013 $ $ $ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 8 Terms of Redemption The 2012 Bonds are subject to redemption upon the circumstances, on the dates and at the prices set forth as follows. Optional Redemption. The 2012 Bonds maturing on and after September 1, 20_ are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, 20 as a whole, or in part among maturities so as to maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: Redemption Date Redemption Price Any Interest Payment Date from March 1, 2013 to and including March 1, 2020 103% September 1, 2020 and March 1, 2021 102 September 1, 2021 and March 1, 2022 101 September 1, 2022 and any Interest Payment Date thereafter 100 Mandatory Sinking Payment Redemption. The 2012 Bonds maturing on September 1, 20_, are subject to mandatory sinking payment redemption in part on September 1, 20_, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) 20 20_ (maturity) Sinking Payments The 2012 Bonds maturing on September 1, 2034, are subject to mandatory sinking payment redemption in part on September 1, 20_, and on each September I thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: 9 Redemption Date (September 1) 20 2034 (maturity) Sinking Payments The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the 2012 Bonds as a result of any prior partial redemption of the 2012 Bonds pursuant to an optional redemption or mandatory redemption from prepaid Special Taxes, as specified in writing by the Treasurer to the Fiscal Agent. Redemption from Special Tax Prepayments.' Special Tax Prepayments and any corresponding transfers from the Reserve Fund shall be used to redeem the 2012 Bonds on the next Interest Payment Date for which notice of redemption can timely be given, by lot and allocated among maturities of the 2012 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage of the principal amount of the 2012 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Date Redemption Price Any Interest Payment Date from March I, 2013 to and including March 1, 2020 103% September 1, 2020 and March 1, 2021 102 September 1, 2021 and March 1, 2022 101 September 1, 2022 and any Interest Payment Date thereafter 100 Purchase In Lieu of Redemption. In lieu of any redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2012 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may 2012 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2012 Bonds were to be redeemed in accordance with the Fiscal Agent Agreement. Notice of Redemption. The Fiscal Agent shall cause notice of any redemption to be mailed by first-class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories, to one or more Information Services (or by such other means as permitted by such services), and to the respective registered Bondowners of any 2012 Bonds designated for redemption, at their addresses appearing on the Bond Register; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or Preliminary, subject to change. 10 any defect therein, shall not affect the validity of the proceedings for the redemption of the 2012 Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2012 Bonds are to be called for redemption, shall designate the CUSIP® numbers and Bond numbers of the 2012 Bonds to be redeemed by giving the individual CUSIP® number and Bond number of each 2012 Bond to be redeemed or shall state that all 2012 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2012 Bonds of one or more maturities have been called for redemption, shall state as to any 2012 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2012 Bonds be surrendered at the principal office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on the 2012 Bonds called for redemption will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any optional redemption of the 2012 Bonds or any redemption of 2012 Bonds from special tax prepayments, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2012 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2012 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the 2012 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2012 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the 2012 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of the Fiscal Agent Agreement. Partial Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds or any given portion thereof, the Fiscal Agent shall select the Bonds to be redeemed, from all Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify Bonds to be redeemed so as to maintain, as much as practicable, the same debt service profile for the Bonds as in effect prior to such redemption unless otherwise specified in the Fiscal Agent Agreement), and by lot within a maturity in any manner which the Fiscal Agent deems appropriate. Upon surrender of 2012 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the registered Bondowner, at the expense of the Authority, a new 2012 Bond or 2012 Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2012 Bond or 2012 Bonds. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2012 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2012 Bonds so called shall cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date for such 2012 Bonds. Transfer and Exchange of Bonds Any 2012 Bond may, in accordance with the terms of the Fiscal Agent Agreement, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2012 Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Fiscal Agent. 2012 Bonds may be exchanged at the principal office of the Fiscal Agent for a like aggregate principal amount of 2012 Bonds of authorized denominations and of the same series and maturity. The Fiscal Agent shall collect from the Bondowner requesting such exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. 11 No transfer or exchange shall be required to be made of any 2012 Bonds (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Book -Entry and DTC DTC will act as securities depository for the 2012 Bonds. The 2012 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 fully registered 2012 Bond certificate will be issued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. All references in this Official Statement to the Bondowners or an owner of 2012 Bonds shall mean OTC or its designee and not the beneficial owners of the 2012 Bonds. See APPENDIX F — "Book -Entry System." SECURITY FOR THE 2012 BONDS General The 2012 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than amounts which are to be deposited to the Administrative Expense Fund in an amount not to exceed $35,000) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. Pursuant to the Act and the Fiscal Agent Agreement, and subject to the Maximum Special Taxes that may be levied in any Fiscal Year under the Rate and Method and the Act, the Authority will annually levy in each Fiscal Year the Special Taxes in an amount required for the payment of principal of and interest on any outstanding 2012 Bonds becoming due and payable during the calendar year commencing in each Fiscal Year, including any necessary replenishment of the Reserve Fund for the 2012 Bonds and an amount estimated to be sufficient to pay the Administrative Expenses during such year. The Special Tax Revenues and all deposits into said funds (until disbursed as provided in the Fiscal Agent Agreement) are pledged to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose. Amounts in the Administrative Expense Fund and the Cost of Issuance Fund are not pledged to the repayment of the 2012 Bonds. The Improvements constructed or acquired with the proceeds of the Prior Bonds are not in any way pledged to pay the debt service on the 2012 Bonds. Any proceeds of condemnation or destruction of any Improvements financed with the proceeds of the Prior Bonds are not pledged to pay the debt service on the 2012 Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement. 12 Special Taxes The Authority has covenanted in the Fiscal Agent Agreement to comply with all requirements of the Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcement of delinquent Special Taxes. The Fiscal Agent Agreement provides that the Special Taxes are payable and will be collected in the same manner and at the same time and in the same installment as the general taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided, the Authority may provide for direct collection of the Special Taxes from property owners in certain circumstances. Because the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the 2012 Bonds. Although the Special Tax, when levied, will constitute a lien on parcels subject to taxation within the District, it does not constitute a personal indebtedness of the owners of property within the District. There is no assurance that the owners of real property in the District will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. See "BONDOWNERS' RISKS" herein. NEITHER THE FAITH AND CREDIT OF THE AUTHORITY NOR THE TAXING POWER OF THE AUTHORITY (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2012 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2012 BONDS. THE 2012 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM SOURCES PLEDGED IN THE FISCAL AGENT AGREEMENT. Rate and Method General. The Special Tax is levied and collected according to the Rate and Method set forth in APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Rate and Method of Apportionment of Special Tax." The then qualified electors of the District approved the Rate and Method on November 25, 2003. Capitalized terms used in the following paragraphs but not defined herein have the meanings given them in the Rate and Method. The Rate and Method provides the means by which the Board of Directors of the Authority may annually levy the Special Taxes within the District up to the Maximum Special Tax. The Rate and Method provides that the Annual Special Tax may be levied for a period not to exceed 50 fiscal years, commencing with Fiscal Year 2004-05. Special Tax Requirement. Annually, at the lime of levying the Special Tax, the Authority will determine the amount of money to be collected from Taxable Property in the District that which will be the amount required in any Fiscal Year to: (a) (i) pay debt service on all outstanding Bonds for the calendar year that commences in such Fiscal Year; (ii) pay periodic costs on the Bonds, including, but not limited to, credit enhancement, liquidity support and rebate payments on the Bonds; (iii) pay Administrative Expenses; and (iv) pay any amount required to establish or replenish any reserve funds for 13 any outstanding Bonds; less (b) a credit for funds available to reduce the annual Special Tax levy as determined pursuant to the Fiscal Agent Agreement. Developed and Undeveloped Property; Exempt Property. The Rate and Method declares that for each Fiscal Year, all Parcels of Taxable Property within the District shall be classified as either Developed Property, Update Property, Undeveloped Property, Taxable Public Property and/or Taxable Property Owner's Association Property that is not Exempt Property and shall be subject to the levy of Special Taxes in accordance with the Rate and Method. "Taxable Property" means all of the Assessor's Parcels within the boundaries of the District that are not exempt from the Special Tax pursuant to law or the Rate and Method. "Developed Property" means all Taxable Property, exclusive of Property Owner Association Property and Public Property, for which (a) a Final Subdivision was recorded prior to the January 1" preceding the Fiscal Year in which the Special Tax is being levied and (b) a building permit was issued after January 1, 2003, but prior to the April 1" preceding the Fiscal Year in which the Special Tax is being levied. "Update Property" means an Assessor's Parcel of Undeveloped Property for which a building permit has been issued, but which has not yet been classified as Developed Property, Taxable Property Owner Association Property or Taxable Public Property. "Public Property" means any property within the boundaries of the District that is used for rights-of-way or any other purpose and is owned by or irrevocably offered for dedication to the federal government, the State, the County of Riverside (the "County"), the City or any other public agency. Once a parcel has been designated as Public Property, it shall retain such status permanently. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Property or Taxable Public Property. The Rate and Method provides exemptions from the Special Tax for up to 107.44 Acres of Property Owner Association Property, Public Property, and Service Commercial Property. [As of June 1, 2012, there were approximately 42.79 acres of Property Owner Association Property and an aggregate of approximately [22.25 acres of Public Property. There is no Service Commercial Property as of June 1, 2012.] The Chief Financial Officer of the City, or designee thereof, responsible for determining the Special Taxes (the "CFD Administrator") will assign Exempt Property status to Assessor's Parcels in the chronological order in which such Parcels are known to the CFD Administrator to become Property Owner Association Property, Public Property or Service Commercial Property. Once an Assessor's Parcel of Public Property has been classified as exempt, its Exempt Property status will be permanent, independent of its future uses. Property Owner Association Property or Public Property that is not exempt from Special Tax levies shall be subject to the levy of Special Tax and shall be taxed Proportionately as part of the fourth and fifth steps, respectively, of the levy described below, at up to 100% of the applicable Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property. All Assessors' Parcels that have fully prepaid their Special Tax Lien pursuant to the Rate and Method are exempt from future Special Tax levies. Maximum Special Tax. The Maximum Special Tax is defined in the Rate and Method as follows: Developed Property. The Maximum Special Tax shall be the greater of (i) the amount derived by application of the Assigned Special Tax described in the Rate and Method, or (ii) the amount derived by application of the Backup Special Tax. The Assigned Special Tax for Developed Property, is $327 per Single -Family Property and Apartment Property and $2,525 per acre for Non -Residential Property in the District. See APPENDIX B — "Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Rate and Method of Apportionment of Special Tax — Table 1" herein for a listing of the Assigned Annual 14 Special Tax amount. Backup Special Tax. The Backup Special Tax for Developed Property is $2,525 per acre for Parcels of Residential Property and Non -Residential Property. Method of Apportionment. The Rate and Method provides that each Fiscal Year, the CFD Administrator shall levy the Special Tax as follows: First: The Special Tax shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax as needed to satisfy the Special Tax Requirement; Second: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax as needed to satisfy the Special Tax Requirement; Third: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy of Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor's Parcel; Fourth: If additional moneys are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then 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; and Fifth: If additional moneys 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 Public Property up to the Maximum Special Tax for Taxable Public Property. Notwithstanding the above, pursuant to Section 53321 of the Act as in effect at the time of formation of the District, the Rate and Method states that under no circumstances will the Special Taxes levied against any Parcel of Residential Property be increased by more ten percent (10%) per Fiscal Year as a consequence of delinquency or default by the owner or owners of any other Parcel within the District. For such purposes, a parcel will be considered used for private residential purposes not later than the date on which an occupancy permit for private residential use is issued. in Fiscal Year 2012-13, Special Taxes will be levied at approximately [91.12%] of the Assigned Special Tax rate on Developed Property. If additional moneys are needed to satisfy the Special Tax Requirement after the levy of Special Taxes at the applicable Assigned Special Tax rate increased as permitted by the Rate and Method (including as permitted by Section 53321 at the time of formation of the District), the Special Tax will be levied Proportionately on each Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for Undeveloped Property. As of June, 1, 2012, there are approximately [22.25] acres of Undeveloped Property. The Authority cannot predict how much property will constitute Undeveloped Property in Fiscal Year 2013-14 or in any future fiscal year.] Prepayment in Full. The Special Tax obligation with respect to any Assessor's Parcel of Developed Property or Update Property may be fully prepaid. In addition, the Special Tax obligation or 15 any Assessor's Parcel of Taxable Public Property and/or Taxable Property Owner Association Property may be prepaid. A prepayment may be made on an Assessor's Parcel only if there are no delinquent Special Tax levies 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 such written notice, the CFD Administrator shall notify such owner of the prepayment amount of such Assessor's Parcel. The CFD Administrator may charge the Assessor's Parcel owner a reasonable fee for providing these figures, which must be paid by the owner of the Assessor's Parcel prior to the calculation of the prepayment amount. Prepayment must be made not less than 15 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given to the Fiscal Agent pursuant to the Fiscal Agent Agreement. Prepayments will be used for redemption of Bonds. See "THE SERIES 2012 BONDS — Terms of Redemption — Redemption From Special Tax Prepayments." Prepayment in Part. The Maximum Special Tax on a Parcel of Developed Property or Update Property may also be partially prepaid. The amount of the prepayment shall be calculated pursuant to the Rate and Method. Prepayments will be used for redemption of Bonds. See "THE SERIES 2012 BONDS — Terms of Redemption — Redemption From Special Tax Prepayments." Special Taxes and the Teeter Plan The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. By policy, the County does not include assessments, reassessments and special taxes, including the Special Taxes of the District, in its Teeter program. Proceeds of Foreclosure Sales Pursuant to Section 53356.] of the Act, in the event of any delinquency in the payment of the Special Tax, the Authority 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. Under the Fiscal Agent Agreement, on or about February 15 and Jtine 15 of each Fiscal Year, the Treasurer shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenue theretofore received by the Authority, and: Individual Delinquencies. If, as of any June 15, the Treasurer determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of $1,000 or more, then the Treasurer will promptly send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Authority within 90 days after the notice of delinquency has been sent. Aggregate Delinquencies. If the Treasurer determines that as of any June 15 the total amount of delinquent Special Tax for the then current Fiscal Year for the entire District (including total individual delinquencies described above) exceeds 5% of the total Special Tax due and payable for the then Fiscal Year, the Treasurer shall promptly notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency), and the Authority will commence foreclosure proceedings within 90 days after the notices of delinquency have been sent. 16 Notwithstanding the foregoing, the Treasurer may defer any mailing of notices of delinquency or foreclosure action if the amount in the Reserve Fund is at least equal to the Reserve Requirement. It should be noted that any foreclosure proceedings commenced as described above could be stayed by the commencement of bankruptcy proceedings by or against the owner of the delinquent property. See `BONDOWNERS' RISKS — Bankruptcy and Foreclosure Delay." No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. See `BONDOWNERS' RISKS — Potential Delay and Limitations in Foreclosure Proceedings." If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the Authority) must cause a Notice of Levy to be issued. Under current law, ajudgment debtor (property owner) has 120 days (or in certain limited cases a shorter period) from the date of service of the Notice of Levy and 20 days from the subsequent notice of sale in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made. The constitutionality of the aforementioned legislation, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. Any parcel subject to foreclosure sale must be sold at the minimum bid price unless a lesser minimum bid price is authorized by the owncrs of 75% of the principal amount of the Bonds Outstanding. No assurances can be given that the real property subject to sale or foreclosure will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the Authority or the District to purchase or otherwise acquire any lot or parcel of property offered for sale or subject to foreclosure if there is no other purchaser at such sale. The Act does specify that the Special Tax will have the same lien priority in the case of delinquency as for ad valorem property taxes. If the Reserve Fund is depleted and if delinquencies in the payment of Special Taxes exist, there could be a default or delay in payments to the Bondowners of the 2012 Bonds pending prosecution of foreclosure proceedings and receipt by the Authority of foreclosure sale proceeds, if any. However, within the limits of the Rate and Method and the Act, the Authority may adjust the Special Taxes levied on all property within the District in future Fiscal Years to provide an amount, taking into account such delinquencies, required to pay debt service on the Bonds and to replenish the Reserve Fund. There is, however, no assurance that the maximum Special Tax rates as permitted by the Rate and Method will be at all times sufficient to pay the amounts required to be paid on the Bonds by the Fiscal Agent Agreement. Special Tax Fund Pursuant to the Fiscal Agent Agreement, except as described below, all Special Tax Revenues received by the Authority will be deposited in the Special Tax Fund, which will be held by the Fiscal Agent on behalf of the Authority. Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority and the Bondowners. Pending disbursement, moneys in the Special Tax Fund will be subject to a lien in favor of the Bondowners and the Authority established under the Fiscal Agent Agreement. Disbursements. Moneys in the Special Tax Fund will be disbursed as needed to pay the obligations of the Authority as provided in the Fiscal Agent Agreement. The Authority shall promptly 17 remit any Special Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund, except that, (i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses shall be deposited by the Treasurer in the Administrative Expense Fund, (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Treasurer and shall be deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund up to the then Reserve Requirement; and third, to the Special Tax Fund for transfer to the Bond Fund and the Reserve Fund in accordance with the Fiscal Agent Agreement and (iii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent directly in the Special Tax Prepayments Account established in the Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Reserve Fund and the Special Tax Prepayments Account to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement. Investment. Moneys in the Special Tax Fund will be invested and deposited as described in "— Investment of Moneys in Funds" below and APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." Interest earnings and profits resulting from such investment and deposit will be retained in the Special Tax Fund to be used for the purposes of such Fund. Bond Fund The Fiscal Agent will hold the Bond Fund in trust for the benefit of the Bondowners. There is created in the Bond Fund, as a separate account to be held by the Fiscal Agent, the Special Tax Prepayments Account. Moneys in the Bond Fund and the accounts therein shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds and for the other purposes as provided below, and, pending such disbursement, shall be subject to a lien in favor of the owners of the Bonds. Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under the Fiscal Agent Agreement and shall be used (together with any applicable amounts transferred from the Reserve Fund) to redeem Bonds on the applicable redemption date. Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the owners of the Bonds the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments or an optional redemption of the Bonds. In the event that amounts in the Bond Fund are insufficient for the purposes set forth in the preceding sentence, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments described above, the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to the payment of principal I8 due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date. Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account shall be invested and deposited in accordance with the provisions of the Fiscal Agent Agreement as described in "Investment of Moneys in Funds" below. Sce APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." Reserve Fund In order to further secure the payment of principal of and interest on the 2012 Bonds, certain proceeds of the 2012 Bonds will be deposited into the Reserve Fund in an amount equal to the initial Reserve Requirement (see "ESTIMATED SOURCES AND USES OF FUNDS" herein). Reserve Requirement is defined in the Fiscal Agent Agreement to mean with respect to the 2012 Bonds an amount, as of any date of calculation, equal to the least of (i) the then largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds, (ii) 125% of the then average annual debt service on the Bonds, or (iii) 10% of the original principal amount of the 2012 Bonds. The moneys in the Reserve Fund will only be used for payment of principal of, interest and any redemption premium on, the 2012 Bonds and at the direction of the Authority, for payment of rebate obligations related to the 2012 Bonds. If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment, funds in the Reserve Fund in the amount, if any, of any applicable "Reserve Fund Credit," as such term is defined and otherwise determined in accordance with the Rate and Method shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of Bonds. The "Reserve Fund Credit" is calculated as the expected reduction in the Reserve Requirement, if any, associated with the redemption of Bonds as a result of the prepayment. No Reserve Fund Credit shall be granted if the Reserve Fund is anticipated to be below 100% of the Reserve Requirement immediately after the first principal payment date in the next Fiscal Year. Moneys in the Reserve Fund will be invested as described in "Investment of Moneys in Funds" below. See APPENDIX C — "Summary of Certain Provisions of' the Fiscal Agent Agreement" for a description of the timing, purpose and manner of disbursements from the Reserve Fund. Administrative Expense Fund There is established as a separate fund to be held by the Treasurer, the Administrative Expense Fund to the credit of which deposits shall be made from the Special Tax Revenues as described above. The first Special Tax Revenues collected by the Authority in any fiscal year, in an amount equal to the portion of such fiscal year's Special Tax levy for Administrative Expenses (but not to exceed, in any fiscal year, $35,000) shall be deposited by the treasurer in the Administrative Expense Fund, Amounts in the Administrative Expense Fund shall be withdrawn by the Treasurer and paid to the Authority or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or a Costs of Issuance, and the nature of such Administrative Expense or Costs of Issuance. Annually, on the last day of each Fiscal Year, the Treasurer shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $35,000 that have not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund. In addition to the foregoing, if in any fiscal year there are sufficient funds in the Special Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in 19 respect of the Interest Payment Dates occurring in the Bond Year that commences in such fiscal year, the Treasurer may transfer to the Administrative Expense Fund, from time to time, any amount in the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the Reserve Fund, if moneys are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund. In accordance with the Fiscal Agent Agreement, amounts deposited in the Administrative Expense Fund are held by the Treasurer and such amounts are not pledged to the payment of the 2012 Bonds. Investment of Moneys in Funds Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, as directed by an Authorized Officer, that mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. In the absence of any direction from an Authorized Officer, the Fiscal Agent will invest, to the extent reasonably practicable, any such moneys in money market funds rated in the highest rating category by Moody's or S&P (including those for which the Fiscal Agent or its affiliates or its subsidiaries provide investment, advisory or other services). See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement" for a definition of "Permitted Investments." Additional Bonds for Refunding Purposes Only Bonds secured on a parity with the 2012 Bonds (each a series of "Additional Bonds") may be issued for refunding purposes where the net proceeds are used to refund all or a portion of the then outstanding Bonds, provided that the debt service on the Additional Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded and the final maturity of the Additional Bonds is not later than the final maturity of the Bonds being refunded. See APPENDIX C — "Summary of Certain Provisions of the Fiscal Agent Agreement." The Authority may issue bonds or other obligations for the District payable from Net Taxes which are subordinate to the 2012 Bonds. THE AUTHORITY The Temecula Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated April 10, 2001 (the "Joint Powers Agreement"), by and between the City and the Redevelopment Agency of the City of Temecula. The Joint Powers Agreement was entered into pursuant to the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California. Pursuant to Health & Safety Code Section 34178(6)(3), the Joint Powers Agreement remains valid, notwithstanding legislation enacted in 2011 terminating all redevelopment agencies in California. The Authority was formed for the primary purpose of assisting in the financing and refinancing of public capital improvements in the City. The Authority is administered by a five -member Board of Directors, which currently consists of the members of the City Council of the City. The Authority has no independent staff. The Executive Director of the Authority is the City Manager of the City, and the Treasurer of the Authority is the City's Chief Financial Officer. The Executive Director administers the day-to-day affairs of the Authority, and the Treasurer has custody of all money of the Authority from whatever source. 20 Authority for Issuance The 2012 Bonds are issued pursuant to the Act, the Refunding Law and the Fiscal Agent Agreement. In addition, as required by the Act, the Board of Directors of the Authority has taken the following actions with respect to establishing the District and authorizing issuance of the 2012 Bonds: Resolutions of Intention: On October 22, 2003, the Board of Directors of the Authority adopted Resolution No. TPFA 03-20 stating its intention to establish the District and to authorize the levy of a special tax therein, and on the same day the Authority adopted Resolution No. TPFA 03-21 stating its intention to incur bonded indebtedness in an amount not to exceed $5,500,000 within the District for the purpose of financing the cost of the Improvements. Resolution of Formation: Immediately following the conclusion of a noticed public hearing on November 25, 2003, the Authority adopted Resolution No. TPFA 03-27 (the "Resolution of Formation"), which established the District and authorized the levy of a special tax within the District. Resolution of Necessity: On November 25, 2003, the Authority adopted Resolution No. TPFA 03- 28 declaring the necessity to incur bonded indebtedness in an amount not to exceed $5,500,000 within the District and submitting that proposition to the qualified electors of the District. Resolution Calling Election: On November 25, 2003, the Authority adopted Resolution No. TPFA 03-29 calling an election by the landowners for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit. Landowner Election and Declaration of Results: On November 25, 2003, an election was held within the District in which the landowners eligible to vote, being the qualified electors within the District, unanimously waived all time limits for holding the election and ballot arguments, and approved a ballot proposition authorizing the issuance of up to $5,500,000 in bonds to finance the costs of the Improvements, the levy of a special tax and the establishment of an appropriations limit for the District. On November 25, 2003, the Authority adopted Resolution No. TPFA 03-30, pursuant to which the Authority approved the canvass of the votes and declared the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit. Special Tax Lien and Levy: A Notice of Special Tax Lien was recorded in the real property records of the Riverside County on December 11, 2003, as Document No. 2003-970556. Ordinance Levying Special Taxes: On November 25, 2003, the Authority adopted Ordinance No. 2003-06 levying the Special Tax within the District. Resolution Authorizing Issuance of the 2012 Bonds: On [July 10], 2012, the Authority adopted Resolution No. TPFA approving issuance of the 2012 Bonds. 21 THE COMMUNITY FACILITIES DISTRICT General [CONFIRM/UPDATE] The District is part of a master -planned community called Harveston that includes a large residential area surrounding a I7 -acre lake and park in the center of the community. The master -planned community is developed with a total of 1,621 single-family dwelling units, plus a 300 - unit apartment complex. In addition, there is a 2.23 -acre retail center in the center of the community, a private Lake HouseNillage Club, a park surrounding the lake connected to a paseo to the 20 -acre community park, a child care center, a community facility and an approximately 12 -acre elementary school, which opened in September, 2001. The master -planned community was developed in four phases, which are referred to as Phase 1, Phase 2, Phase 2B and Phase 3 and comprise the central portion of the community. The entire community is encompassed within Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston), for which $17,545,000 aggregate principal amount of special tax refunding bonds were issued in September 2006. The District encompasses Phase 2, Phase 2B and Phase 3. Phase 1 is not within the boundaries of the District and while properties in Phase 1 pay special taxes with respect to Community Facilities District No. 01-2 (Harveston), properties in Phase 1 do not pay Special Taxes with respect to the District. Formation proceedings reference "Potential Annexation" property. Such property has not been, and is not anticipated to be, annexed to the District. Phase 1, which is not part of the District, contains a total of approximately 360 single family homes and a 300 unit apartment complex. In addition, Phase I includes the completed lake and Lake Park, the retail center, the Lake HouseNillage Club, the child care center and the Ysabel Barnett Elementary School. Phase 2 contains a total of 681 homes. (Identify if built out.] Phase 2 also includes the 20 -acre community park which includes two lighted soccer fields and two lighted baseball fields. Phase 2B contains a total of 198 detached homes. [identify if built out.] Phase 3 contains a total of 382 homes, including 64 attached homes and 318 detached homes. [identify what portion is built out.] [In total, for Fiscal Year 2012-13, the District, which encompasses Phases 2, 2B and 3 (and which does not include Phase 1), contains [1,132] parcels taxed as Developed Property and is estimated to include approximately 1,261 homes at build out.] 22 Special Tax Levy by Land Use Category The following table shows the estimated Special Taxes for Fiscal Year 2012-13 by land use category: Table 2 Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) Estimated Fiscal Year 2012-13 Special Tax Levy by Land Use Category(I) Land Use Number of Classification Parcels 1 -Single Family Property 1,132 2 -Apartment Property 0 3 -Non -Residential Property 0 Potential Annexational 22 Undeveloped') 22.25 acres/ 44 parcels Estimated Fiscal Veer 2012/13 Special Tax Rate" $297.96/parcel $0.00/unit $0.00/acre $0.00/parcel $0.00/acre Estimated Fiscal Year 2012/13 Levy' $337,290.72 0 0 0 0 Estimated Fiscal Year 2012/13 Percent of Total' 100.00% 0.00% 0.00% 0.00% 0.00% Exempt HOA 42.79 acres/ 94 parcels $0.00 0 0.00% Public 22.25 acres/ I I parcels $0.00 0 0.00% Totals 1,303 parcels $337,290.72 100.00% (1) Levied parcels are estimated to be levied at [91.12)% of their assigned special tax rate for Fiscal Year 2012/13. (2) The Rate and Method references a potential annexation, but the annexation did not occur and is not expected in the future. (3) Undeveloped Property consists of 44 parcels, 43 of which are individual parcels and 1 of which is expected to be further subdivided into approximately 64 lots. 'Preliminary, subject to change. Source: Willdan Financia/ Services. Special Tax Collections [UPDATE] The Special Tax on Developed Property authorized for the 2011-12 Fiscal Year in the District was $373,038.36 which was levied against 1,115 parcels. Of those parcels, 30 had not paid the either or both installments of Special Taxes as of June 25, 2012. For the Fiscal Year 2011-12, no Special Taxes were levied on Approved Property or Undeveloped Property. The Special Tax on Developed Property authorized for the 2012-13 Fiscal Year in the District is estimated to be [$337,290.72] to be levied against [1,132] parcels. Table 3 below sets forth the Special Tax collections for Fiscal Years 2006-07 through the second installment of Fiscal Year 2011-12. Historically, no foreclosure actions have been commenced with respect to parcels in the District. The Authority has been successful in collecting delinquent payments to enable payment of debt service without a draw on the reserve fund. 23 Table 3 Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston ll) Special Tax Collections») (As of June 30 of the applicable Fiscal Year) Subject Fiscal Year June 25, 2012 Fiscal Year Fiscal Year Fiscal Ycar Remaining Remaining Remaining Ending Aggregate Parcels Amount Delinquency Parcels Amount Delinquency June 30 Special Tax Parcels Levied Delinquent Delinquent(r7 Rate Delinquent Delinquent Rate 2007 $301,660.74 969 86 $19,482.88 6.46% 1 $241.82 0.08% 2008 245,971.04 812 150 36,804.78 14.96 1 302.92 0.12 2009 254,995.92 996 195 43,374.57 17.01 3 768.06 0.30 2010 239,580.60 1,015 89 15,932.70 6.65 3 708.12 0.30 2011 237,085.24 1,084 56 9,348.84 3.94 4 813.44 0.34 2012j31 373,038.36 1,115 61 13,179.27 3.53 30 6,712.88 1.80 (1) Delinquency information is provided to the Authority by the County of Riverside. There was an audit of the boundaries of the District that determined that parcels outside the boundaries ofthc District had been nixed in Fiscal Ycar 2010-11 and prior fiscal years. The information presented reflects parcels within the District boundaries in each fiscal year. (2) Fiscal year delinquency amounts arc as ono= 25. 2007, July 18, 2008, May 20, 2009, May 27, 2010, May 12, 2011 and May 17.2012. (3) Information reflects second installment delinquency information from the County of Riverside. Sourer: Willdan 6Mancini Services. 24 Property Ownership Based on the estimated Fiscal Year 2012-13 Assessor's Roll, as of [January 1, 2012], there were approximately [1,132] homes in the District subject to the Special Tax. There have been no prepayments of Special Taxes. Table 4 Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) Top Owners of Taxable Property and Allocation of Fiscal Year 2011-12 Assessed Value Based on Fiscal Year 2012-13 Special Tax Liability Merchant Builder and/or Property Owner Namet» Richmond American tlomes Of Maryland Inc.t4l Federal National Mortgage Association Lennar Homes Of California(4) Butterfield Land Co Alfonso Oliver & Zhang Liyan Joseph Bailey & Wendy R Bailey Ruben R. Briones & Maria H. Briones BRICK Jimmy Fu & Claire Fu Edward R. Holland Subtotal Individual Owners Total(3) Fiscal Year 2012-13 Number of Parcels Fiscal Year 2011- 12 Assessed Value 68 $8,717,117 5 1,227,180 626,032 588,505 471,549 600,145 612,000 582,363 637,000 591,000 $14,652,891 281,964,463 $296,617,354 4 3 2 2 2 2 2 2 92 1,040 1,132 Preliminary Fiscal Year 2012-13 Total Special Tax Amount(2) $20,261.28 1,489.80 1,191.84 893.88 595.92 595.92 595.92 595.92 595.92 595.92 $27,412,32 309,878.40 $337,290.72 Percent Share of Total Special Taxes(3) 6.01% 0.44 0.35 0.26 0.18 0.18 0.18 0.18 0.18 0.18 8.14% 91.86 100.00% OI Ownership information is based on Riverside County's preliminary Fiscal Year 2012-13 secured tax roll. (2) The Fiscal Year 2011-12 gross assessed valuation of the 1,132 parcels in the District which will be taxed in Fiscal Year 2012- 12, plus an estimated $250,408 additional value from one new home sold since April 1, 2011] is 8296,617,354. The ane additional home sale is listed under [Individual Owners.] (2) The Fiscal Year 2012-13 Special Tax levy is estimated to be S[337,290.72]. r'I Totals may not add due to rounding. (4) Richmond American Homes of Maryland Inc. ownership consists of parcels categorized as Developed Property and _ parcels categorized as Undeveloped Property. Special Tax amount reflects the levy on the Developed Property. (5) As of June 15, 2012, Lennar !tomes of California has completed and sold all of its homes within the District. Source: Willdan Financial Services. Estimated Assessed Values The assessed values, direct and overlapping debt and total tax burden on individual parcels varies among parcels within the District. The value of individual parcels is significant because in the event of a delinquency in the payment of Special Taxes, the Authority may foreclose only against delinquent parcels. The Fiscal Year 2011-12 gross assessed valuation of the 1,132 parcels in the District which will be taxed in Fiscal Year 2012-12, plus an estimated $250,408 additional value from one new home sold since April 1, 2011] is $296,617,354. Based on the assessed value of approximately $296,617,354 the parcels in the 25 District have an assessed value -to -lien ratio of approximately [18.88].:1 taking into account the other indebtedness payable from taxes or special assessments allocable thereto, as set forth in Table 7. This gross assessed valuation may not be representative of the actual market value of property in the District because Article XIIIA of the California Constitution limits any increase in assessed value to no more than 2% a year unless a property is sold or transferred. See "BONDOWNERS' RISKS — Land Values." As a consequence, assessed values are typically less than actual market values unless the property has recently changed ownership or has been reassessed. The following table shows the historical assessed valuation for parcels taxed in the District for Fiscal Year 2007-08 through 2011-12 and the historical number of parcels taxed in the District. Table 5 Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston H) Historical Assessed Valuation for Taxable Parcels(" Assessed Value of Single Family Number Fiscal Year Homes (2) of Parcels 2007-05(3( $368,394,801 812 2008-09(3( 377,609,763 996 2009-10(31 288,410,875 1,015 2010-11 286,663,301 1,084 2011-12 294,869,562 1,115 (1) (2) Includes Assessed Values for parcels within the District that were levied. There was an audit of the boundaries of the District that determined that parcels outside the boundaries of the District had been taxed in Fiscal Year 2010-11 and prior fiscal years. According to the Riverside County Assessor's office, there were Proposition 8 property assessment reductions throughout the County in Fiscal Years 2007-08, 2008-09 and 2009-10 as art economic adjustment due to a decline in market value thus reducing the assessed values. Source: Riverside County Secured Rolls, as compiled by California Municipal Statistics, Inc. 26 levied: The following table shows the assessed value by land use category on which Special Taxes were Table 6 Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Fiscal Year 2011-12 Assessed Value by Land Use Category[» Land Use Total Assessed Portion of CFD No. Total District 2011-12 Assessed Classification Valuer�1 2012 Bonds. 01-02 Bonds(3). Bonds Value to Lien Single Family Property $296,617,354 $4,335,000 $10,732,587 $15,067,587 19.69 (1) Source: Assessed values as reported on the Fiscal Year 2011-12 equalized tax roll of the County of Riverside. (2) The Fiscal Year 2011-12 gross assessed valuation of the 1,132 parcels in the District which will be taxed in Fiscal Year 2012-12, plus an estimated $250,408 additional value from one new home sold since April 1, 2011 is $296,617,354. (3) The District's share of CommunityFacilities District No. 01-2 (Harveston) outstanding bonds of $15,750,000 as oflune 15,2012. Preliminary, subject to change: Direct and Overlapping Debt Table 7 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied within the District prepared by California Municipal Statistics, Inc. and based on what was levied for Fiscal Year 2011-12 (the "Debt Report"). The Debt Report is included for general information purposes only. In certain cases, the percentages of debt calculations are based on assessed values, which will change significantly as sales occur and assessed values increase to reflect housing values. The Authority believes the information is current as of its date, but makes no representation as to its completeness or accuracy. The Authority may only issue parity bonds for refunding purposes. Other public agencies, such as the City, may issue additional indebtedness at any time, without the consent or approval of the District or the Authority. See " — Overlapping Assessment and Community Facilities Districts" below. The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long term obligations generally arc not payable from property taxes, assessment or special taxes on land in the District. In many cases long term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The ability of the Authority to collect the Special Taxes or issue and sell refunding bonds could be adversely affected if additional debt is issued within the District. The property within the District, at any time, could become subject to additional debt either by the formation of additional community facilities districts or the imposition of other taxes and assessments by the Authority, the District, the City or other public agencies at any time. The imposition of additional Liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Taxes and may increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. The Authority has not undertaken to commission annual appraisals of the market value of property in the District for purposes of its Annual Reports 'pursuant to the Authority Continuing 27 Disclosure Agreement, and information regarding property values for purposes of a direct and overlapping debt analysis which may be contained in such reports will be based on assessed values as determined by the County Assessor. See Appendix D hereto for the form of the Authority Continuing Disclosure Agreement. Direct and overlapping bonded indebtedness as of June 1, 2012 is shown in the following table compiled by California Municipal Statistics, Inc. Neither the Authority nor the Underwriter has independently verified the information in the table and neither makes any representations as to completeness or accuracy. 28 Table 7 Temecula Public Financing Authority Community Facilities District 03-06 (Harveston II) Secured Property Tax Roll and Direct and Overlapping Debt 2011-12 Local Secured Assessed Valuation: $296,366,946 (2012-13 'Taxable Parcels) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/12 Metropolitan Water District General Obligation Bonds 0.0I7% $ 32,780 Eastern Municipal Water District, I.D. No. U-8 General Obligation Bonds 2.278 104,963 Temecula Valley Unified School District General Obligation Bonds 1.805 507,970 Temecula Public Financing Authority Community Facilities District No. 01-2 Series A 68.443 10,732,587 Temecula Public Financing Authority Community Facilities District No. 03-06 100. 4.335,000 (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 515,713,300 OVERLAPPING GENERAL FUND DEBT: Riverside County General Fund Obligations 0.204% 51,337,745 Riverside County Pension Obligations 0.204 729,382 Riverside County Board of Education Certificates of Participation 0.204 10,312 Mt. San Jacinto Community College District General Fund Obligations 0.540 64,530 City of Temecula Certificates of Participation 2.967 790,587 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT 52,932,556 Less: Riverside County supported obligations 26.747 TOTAL NET OVERLAPPING GENERAL FUND DEBT 52,905,809 GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT 518,645,856 (2) 518,619,109 (1) Refunding Mello -Roos Act bonds to be sold (preliminary). (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. Ratios to 2011-12 Local Secured Assessed Valuation: Direct Debt ($4,335,000) 1.46% Total Direct and Overlapping Tax and Assessment Debt 5.30% Ratios to Adjusted Assessed Valuation: Gross Combined Total Debt 6.29% Net Combined Total Debt 6.28% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: 50 Source.. Cal/'onnia Municipal Statistic, Inc. 29 . Overlapping Assessment and Community Facilities Districts Community Facilities District No. 01-2 (Harveston). Community Facilities District No. 01-2 (Harveston) levies a "Special Tax A" which is pledged to Community Facilities District No. 01-2 for bonds it issued in 2006. Such bonds were issued as two series in the aggregate principal amount of $17,545,000. Community Facilities District No. 01-2 (Harveston) also levies Special Tax B in an amount equal to $[225,601.02] for Fiscal Year 2011-2012, increasing by 1% each Fiscal Year thereafter. The Maximum Special Tax B is $749.17 per acre for Fiscal Year 2011-12 for "Other Undeveloped Property" and $[117.02] per unit for "Developed Property" as defined in the applicable Community Facilities District No. 01-2 (Harveston) rate and method. The foregoing amounts increase by an amount equal to 1.00% of the maximum tax rates in effect for the prior Fiscal Year. The Special Tax B is secured by a lien on a parity with the lien on property in the District which secures payment of the Special Tax to be used to pay debt service on the 2012 Bonds, and so is on a parity with the lien securing payment of the Special Taxes. The Special Tax B is used for maintenance of approximately 7.5 acres of landscaped park land and for maintenance of the approximately 8.5 -acre lake. Additional Debt Payable from Taxes or Assessments. Neither the Authority nor the District has any control over the amount of additional debt payable from taxes or assessments levied on all or a portion of the property within a special district which may be incurred in the future by other governmental agencies, including, but not limited to, the County, the City or any other governmental agency having jurisdiction over all or a portion of the property within the District. Furthermore, nothing prevents the owners of property within the District from consenting to the issuance of additional debt by other governmental agencies which would be secured by taxes or assessments on a parity with the Special Taxes. To the extent such indebtedness is payable from assessments, other special taxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes will be secured by liens on the property within a district on a parity with a lien of the Special Taxes. Accordingly, the debt on the property within the District could increase, without any corresponding increase in the value of the property therein, and thereby severely reduce the ratio that exists at the time the 2012 Bonds are issued between the value of the property and the debt secured by the Special Taxes and other taxes and assessments which may be levied on such property. The incurring of such additional indebtedness could also affect the ability and willingness of the property owners within the District to pay the Special Taxes when due. Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given that the proceeds of any foreclosure sale of the property with delinquent Special Taxes would be sufficient to pay the delinquent Special Taxes. See "BONDOWNERS' RISKS." Other Overlapping Direct Assessments Metropolitan Water District Standby. Property within the District is subject to a Metropolitan Water District Standby ("MWD Standby") assessment. The MWD Standby assessment is fixed unless there is a vote to increase the assessment. This pay-as-you-go assessment is used for water conservation programs, emergency programs, water treatment and capital improvements such as transporting water from Colorado and Northern California to Southern California. The assessment levied for Fiscal Year 201 1-12 was $6.94 per equivalent dwelling unit. Estimated Value -to -Lien Ratios Table 8 below set forth Value -to -Lien category ranges for the [1,132] parcels subject to the levy of Special Taxes in Fiscal Year 2012-13 utilizing the assessed values of $296,366,946 as of January 1, 2011 utilizing the Fiscal Year 2011-12 gross assessed valuation of the 1,132 parcels which will be taxed in Fiscal Year 2012-13, plus an estimated $250,408 additional value from one new homes sold since 30 April 1, 2011] which together aggregate S296,617,354. 31 Value -to -Lien Category 30:00 and Over 25:1 to 29:99 20:00 to 24.99:1 15:00 to 19.99:1 10:00 to 14.99 :1 5.00 to 9.99:1 1.00 to 4.99:1(6) Totalt') Table 8 Temecula Public Financing Authority Community Facilities District 03-06 (Harveston II) Combined Assessed Value and Value -to -Burden Ratio Allocable Number Fiscal Year Percentage Share of of 2012-13 Share of 2012 Bonds Parcels Special Tax" Special Tax* (a)' 8 52,383 0.69% 530,635 73 21,751 6.45 279,554 334 99,519 29.51 1,279,055 655 195,164 57.86 2,508,326 8 2,384 0.71 30,636 51 15,196 4.51 195,305 3 894 0.27 11.489 1,132 5337,291 100.00% 54,335,000 Allocable Share of CFD No. 01-2 Bonds Allocable Share of Direct and Overlapping Debt" 25,283 379,305 2,298,813 7,449,184 73,169 463,086 43747 10,732,587 5,638 40,226 173,729 412,458 2,592 10,491 580 645,714 Combined Overlapping Debt*". 61,556 699,085 3,751,597 10,369,968 106,397 668,882 55 816 15,713,301 Fiscal Year 2011-12 Taxable Proper Assessed Value Combined Value -to -Lien Burden Ratio 52,581,706 18,598,195 80,048,540 189,131,562 1,186,992 4,804,583 265.776 5296,617,354 41.94 26.60 21.34 18.24 11.16 7.18 4.76 18.88 Special Taxes shown reflect Developed Property as of2012 as confirmed by Willdan Financial Services with the County of Riverside. Calculated by multiplying the Percentage Share of Special Tax by the total 2012 Bonds principal amount of 54,335,000? See "Direct and Overlapping Debt" above for a description of overlapping liens; includes Temecula Valley Unified School District community facilities district debt and general obligation bonded debt of the Metropolitan Water District, Eastern Municipal Water District and Temecula Valley Unified School District. The combined overlapping liens include the 2012 Bonds. Source: Assessed values as reported on the Fiscal Year 2011-12 equalized tax roll of the County of Riverside. [[These parcels are vacant and had no structural value as of [January 1, 20112012.]] Totals may not sum duc to rounding. Preliminary, subject to change. Source: WiRdan Financial Services. 32 Table 9 on the following page sets forth estimated Fiscal Year 2011-12 overall tax rates projected to be applicable to Detached Units with the indicated square footages, one with the lowest square footage within the District and the other with the highest square footage within the District. The table also sets forth those entities with fees, charges, ad valorem taxes and special taxes regardless of whether those entities have issued debt. The estimated tax rates and amounts presented below are based on currently available information. The actual amounts charged may vary and may increase or decrease in future years. 33 Table 9 Temecula Public Financing Authority Community Facilities District 03-06 (Harveston 11) Estimated Fiscal Year 2011-12 Tax Rates (Detached Units with 1,530 sq. 0. and 3,675 sq. ft.) Assessed Valuations and Property Taxes Estimated Assessed Valuation Homeowner's Exemption Net Assessed Value Ad Valorem Property Taxes General Purposes Total Ad Valorem Property Taxes Percent of Total AV 1,03197% Assessments, Special Taxes and Parcel Charges RANCHO CAL WTR R DIV DEBT SV FLD CNTL STORM WATER/CLEAN WATER TEMECULA PARKS/LIGHTING SVS TEMECULA RESIDENTIAL ST LIGHTS TEMECULA TRASH/RECYCLING TEMECULA CFD 03-06 HARVESTON II TEMECULA CFD 01-2 HARVESTON B TEMECULA CFD 01-2 HARVESTON A TEMECULA PERIMTR LDS ZN 24 MWD STANBY EAST EMWD STANDBY -COMBINED CHARGE Total Assessment Special Taxes and Parcel Charges Projected Total Property Taxes Projected Total Effective Tax Rate (1) (2) (3) (4) Single Family Single Family 1,530 Sq. Ft. 3.675 Sq. Ft. $191,430.00 $345,000.00 -$7.000.00 -$7,000.00 $184,430.00 $338,000.00 Projected Amount $1,903.26 $1,903.26 $120.90 74.44 12.84 557.76 231.32 653.78 100.00 6.94 11.60 Projected Amount $3.488.06 $3,488.06 $315.00 3.36 74.44 25.68 223.04 784.98 116.60 1,044.10 100.00 6.94 11.60 $1,769.58 $2,705.74 $3.672.84 1.99% $6,193.80 1.83% Fiscal Year 2011-12 assessed valuation for a single family detached residential unit with the largest and the smallest square footage, selected to provide representative effective tax rates for homes within the District. Net Assessed Value reflects estimated total assessed value for the parcel net of homeowner's exemption. These amounts arc based on Fiscal Year 2011-12 charges. Fiscal Year 2012-13 data will not be available until approximately November 2012. All charges and special assessments are based on a Lot size of less than one (I) acre. Source: Willdan Financial Services. 34 BONDOWNF,RS' RISKS In addition to the other information contained in this Official Statement, the following risk factors should be carefully considered in evaluating the investment quality of the 2012 Bonds. The Authority cautions prospective investors that this discussion does not purport to be comprehensive or definitive, the risk factors are listed in no particular order of importance, and this discussion does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the 2012 Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Any such failure to pay Special Taxes could result in the inability of the Authority to make full and punctual payments of debt service on the 2012 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. Risk; of Real Estate Secured Investments Generally The Bondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses. Special Taxes Are Not Personal Obligations The owners of land within the District are not personally liable for the payment of the Special Taxes. Rather, the Special Tax is an obligation only of the land within the District. If the value of the land within the District is not sufficient to fully secure the Special Tax, then the Authority has no recourse against the owners under the laws by which the Special Tax has been levied and the 2012 Bonds have been issued. The 2012 Bonds Are Limited Obligations of the Authority for the District The Authority has no obligation to pay principal of and interest on the 2012 Bonds in the event Special Tax collections are delinquent, other than from amounts, if any, on deposit in certain funds and accounts held under the Fiscal Agent Agreement, or funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent, nor is the Authority obligated to advance funds to pay such debt service on the Bonds. Property Values The value of the taxable property within the District is an important factor in evaluating the investment quality of the 2012 Bonds. In the event that a property owner defaults in the payment of a Special Tax installment, the Authority's only remedy is to commence foreclosure proceedings on such property. Prospective purchasers of the 2012 Bonds should not assume that the property within the District could be sold for the assessed value described herein at a foreclosure sale for delinquent Special Tax installments or for an amount adequate to pay delinquent Special Tax installments. Reductions in property values within the District due to a downturn in the economy or the real estate market, events such as earthquakes, wildfires, droughts or floods, stricter land use regulations, threatened or endangered species or other events may adversely impact the security underlying the liens. Additionally, the value of 35 undeveloped property is inherently less than the value of developed property. None of the estimated Fiscal Year 2012-13 Special Tax levy is on property classified as Undeveloped Property. The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the Riverside County Assessor, generally not to exceed an increase of more than 2% per fiscal year as limited by Proposition 13 and as amended by Proposition 8. For example, the County performed reductions of assessed values of residential parcels throughout the County pursuant to Proposition 8 in Fiscal Years 2007-08, 2008-09 and 2009-10. No assurance can be given that Fiscal Year 2011-12 assessed values reflect market values or that a parcel could actually be sold for its assessed value. The actual market value of the property is subject to future events such as a downturn in the economy, occurrences of certain acts of nature and the decisions of various governmental agencies as to land use, all of which could adversely impact the value of the land in the which is the security for the 2012 Bonds. As discussed herein, many factors could adversely affect property values or prevent or delay additional land development within the District. None of the estimated Fiscal Year 2012-13 Special Tax levy is on property classified as Undeveloped Property. Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property While the Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property and such Taxable Property is subject to other parity liens and similar claims. The table in the section entitled "THE COMMUNTIY FACILITIES DISTRICT — Direct and Overlapping Debt" presents the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment securing which is or may become an obligation of one or more of the parcels of Taxable Property, and said table does not show the additional amount of other governmental bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2012 Bonds. In general, the Special Tax and all other taxes, assessments and charges collected on the County tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the 2012 Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro -rata basis. Although the Special Taxes will generally have priority over non- govemmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. 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 of the most serious in terms 36 of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to a hazardous substance. See "Hazardous Substances" below. Economic Uncertainty The 2012 Bonds arc being issued at a time of economic uncertainty and volatility. Unemployment rates have decreased to approximately 8.0% for the Temecula area as of April 2012 (not seasonally adjusted) as compared to 9.3% for calendar year 2011 and approximately 11.8% (not seasonally adjusted) for Riverside County as of April 2012, as compared to 13.6% for calendar year 2011. The Authority cannot predict how long these conditions will last or whether to what extent they may affect the ability of homeowners to pay Special Taxes or the marketability of the 2012 Bonds. Disclosure to Future Purchasers The Authority recorded a notice of the Special Tax lien in the Office of the County Recorder on December 11, 2003, as Document No. 2003-970556. 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 or a home in thc 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 1 102.6b 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. Government Approvals The current landowners or their predecessors have secured most discretionary approvals, permits and government entitlements necessary to develop the land within the District. Nevertheless, development of the approximately 22.25 acres of Undeveloped Property which remains within the District is contingent upon the construction of necessary local in -tract improvements. The installation of the necessary improvements and infrastructure is subject to the receipt of construction or building permits from the City and other public agencies. The failure to obtain any such approval could adversely affect construction within the District. A slow down or stoppage of the construction process could adversely affect land values. No assurance can be given that permits will be obtained in a timely fashion, if at all. The failure to do so may result in the prevention, or significant delays in the development of the property within the District or portions thereof. In accordance with the Rate and Method, no Special Tax is currently being levied on Undeveloped Property. Local, State and Federal Land Use Regulations There can be no assurance that land development operations within the District with respect to the approximately 22.25 acres of Undeveloped Property will not be adversely affected by future government policies, including, but not limited to, governmental policies which directly or indirectly restrict or control development. In the past, citizens of a number of local communities in California have placed measures on the ballot designed to control the rate of future development. During the past several years, state and federal regulatory agencies have significantly expanded their involvement in local land use matters through increased regulatory enforcement of various environmental laws, including the Endangered Species Act, the Clean Water Act and the Clean Air Act, among others. Such regulations can substantially 37 impair the rate and amount of development without requiring just compensation unless the effect of the regulation is to deny all economic use of the affected property. Bondowners should assume that any event that significantly impacts the ability to construct homes on land in the District could cause the land values within the District to decrease substantially and could affect the willingness and ability of the owners of land to pay the Special Taxes when due or to proceed with development of land in the District. Endangered and Threatened Species It is illegal to harm or disturb any plants or animals in their habitat that have been listed as endangered species by the United States Fish & Wildlife Service ("FWS") under the Federal Endangered Species Act or by the California Department of Fish & Game ("CDFG") under the California Endangered Species Act without a permit. Thus, the presence of an endangered plant or animal could delay development of Undeveloped Property in the District or reduce the value of Undeveloped Property. In accordance with the Rate and Method, no Special Tax is currently being levied on Undeveloped Property. Failure to develop the Undeveloped Property in the District as planned, or substantial delays in the completion of any planned development of the Undeveloped Property subjects the owners of Undeveloped Property to the possibility of owing Special Taxes in the future should it become necessary to levy Special Taxes on Undeveloped Property. In that event, the presence of an endangered plant or animal may affect the willingness and ability of the owners of Undeveloped Property to pay the Special Taxes when due. Hazardous Substances While governmental taxes, assessments, and charges are a common claim against the value of a - taxed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the District may be required by law to remedy conditions of the parcels related to the 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 substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure. The assessed values of the property within the District do not take into account the possible reduction in marketability and value of any of the parcels of Taxable Property by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The Authority has not independently verified and is not aware that the owner (or operator) of any of the parcels of Taxable Property has such a current liability with respect to any such parcels of Taxable Property, except as expressly noted. However, it is possible that such liabilities do currently exist and that the Authority is not aware of them. Further, it is possible that liabilities may arise in the future with respect to any of the parcels of 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 38 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 substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the value of a parcel of Taxable Property that is realizable upon a delinquency. State Budget As a result of the slow State and United States of America economies, the State is experiencing serious budgetary shortfalls for the current and prior fiscal years. The effect of the State revenue shortfalls on the local or State economy or on the demand for, or value of, the property within the District cannot be predicted. Levy and Collection of the Special Tax; insufficiency of the Special Tax The principal source of payment of principal of and interest on the 2012 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized by the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the 2012 Bonds. Other funds which might be available include funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular taxed parcels and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the 2012 Bonds, and certainly not a direct relationship. The Special Tax levied in any particular tax year on a parcel of Taxable Property is based upon the revenue needs and application of the Rate and Method. Application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel of Taxable Property by comparison with similar development factors with respect to the other parcels of Taxable Property within the District. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected: (1) Reduction in the number of parcels of Taxable Property, for such reasons as acquisition of parcels of Taxable Property by a govemment and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. (2) Failure of the owners of parcels of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels. In addition, if a substantial portion of land within the District becomes Property Owner's Association Property or Public Property, then whether sufficient Special Taxes will be collected to pay principal and interest on the 2012 Bonds when due will depend on the ability and/or willingness of owners of such property to pay the Special Tax levied on the non-exempt portion of their property. 39 Except as set forth above under "SECURITY FOR THE 2012 BONDS — Special Taxes" and "— Rate and Method" herein, the Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid, the property is then is subject to sale by the Authority for the District. In addition, the Rate and Method limits the increase of Special Taxes levied on residential parcels of Developed Property to cure delinquencies of other property owners in the District. See "SECURITY FOR THE 2012 BONDS — Rate and Method" herein. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2012 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Authority of the proceeds of sale if the Reserve Fund is depleted. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method (see "SECURITY FOR THE 2012 BONDS — Rate and Method" herein). 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 within 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. It is possible that property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could become exempt from the Special Tax. In addition, although 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, meaning that such property could become exempt from the Special Tax. In the event that additional property is dedicated to the City or other public entities, this additional property might become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. Depletion of Reserve Fund The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement (see "SECURITY FOR THE 2012 BONDS — Special Tax Fund — Disbursements" herein). Funds in the Reserve Fund may be used to pay principal of and interest on the 2012 Bonds in the event the proceeds of the levy and collection of the Special Tax against property within the District is insufficient. If funds in the Reserve Fund for the 2012 Bonds are depleted, 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 to the Bondowners pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Special Tax against property within the District at the maximum tax rates under the Rate and Method, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy of the Special Tax. 40 Potential Delay and Limitations in Foreclosure Proceedings The payment of property owners' taxes and the ability of the Authority to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings, may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales" and `BONDOWNERS' RISKS — Bankruptcy and Foreclosure Delay" herein. In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. The ability of the Authority to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC") has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution which has made a loan which is secured by property within the District. See `BONDOWNERS' RISKS — Payments by FDIC and Other Federal Agencies." The FDIC has adopted a policy statement regarding the payment of state and local real property taxes (the "Policy Statement") which provides that the FDIC intends to pay valid real property taxes, interest and penalties, in accordance with state law, on property which at the time of the tax levy is owned by a financial institution in an FDIC receivership, unless abandonment of the FDIC interest is determined to be appropriate. However, the Policy Statement is unclear as to whether the FDIC considers special taxes such as the Special Taxes to be "real property taxes" which it intends to pay. Furthermore, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, it will not permit its lien to be foreclosed by a taxing authority without its specific consent, and that it will not pay or recognize liens for any penalties, fines, or similar claims imposed for the non-payment of taxes Other laws generally affecting creditors' rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of such military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service. The Authority and the District are unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. In addition, potential investors should be aware that judicial foreclosure proceedings are not summary remedies and can be subject to significant procedural and other delays caused by crowded court calendars and other factors beyond control of the Authority or the District. Potential investors should assume that, under current conditions, it is estimated that a contested judicial foreclosure of the lien of Special Taxes will take up to two or three years from initiation to the lien foreclosure sale. At a Special Tax lien foreclosure sale, each parcel will be sold for not less than the "minimum bid amount" which is equal to the sum of all delinquent Special Tax installments, penalties and interest thereon, costs of collection (including reasonable attorneys' fees), post -judgment interest and costs of sale. Each parcel is sold at foreclosure for the amounts secured by the Special Tax lien on such parcel and multiple parcels may not be aggregated in a single "bulk" foreclosure sale. If any parcel fails to obtain a "minimum bid," the Authority may, but is not obligated to, seek superior court approval to sell such parcel at an amount 41 less than the minimum bid. Such Superior Court approval requires the consent of the owners of 75% of the aggregate principal amount of the Outstanding Bonds. Delays and uncertainties in the Special Tax lien foreclosure process create significant risks for Bondowners. High rates of special tax payment delinquencies which continue during the pendency of protracted Special Tax lien foreclosure proceedings, could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon foreclosure. In that event, there could be a default in payment of the principal of, and interest on, the 2012 Bonds. See "Special Tax Collections" above. Bankruptcy and Foreclosure Delay The payment of Special Taxes and the ability of the Authority to foreclose the lien of delinquent Special Taxes as discussed in the section herein entitled "SECURITY FOR THE 2012 BONDS" may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the Statc relating to judicial foreclosure. In addition, the prosecution of a judicial foreclosure may be delayed due to congested local court calendars or procedural delays. The various legal opinions to be delivered concurrently with the delivery of the 2012 Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, bankruptcy of a property owner or of a partner or other equity owner of a property owncr, could result in a stay of enforcement of the lien for the Special Taxes, a delay in prosecuting Superior Court foreclosure proceedings or adversely affect the ability or willingness of a property owner to pay the Special Taxes and could result in the possibility of delinquent Special Taxes not being paid in full. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2012 Bonds and the possibility of delinquent Special Taxes not being paid in full. Moreover, amounts received upon foreclosure sales may not be sufficient to fully discharge delinquent installments. To the extent that a significant percentage of the property in the District is owned by any major landowner or any other property owner, and such owner is the subject of bankruptcy proceedings, the payment of the Special Tax and the ability of the Authority to foreclose the lien of a delinquent unpaid Special Tax could be extremely curtailed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. Payments by FDIC and Other Federal Agencies The ability of the Authority to collect interest and penalties specified by state law and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to properties in which the FDIC, the Drug Enforcement Agency, the Internal Revenue Service or other similar federal governmental agencies such as the Federal National Mortgage Association ("FNMA") or Freddie Mac, has or obtains an interest. Mortgage Interests. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme 42 Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." The foregoing is generally interpreted to mean that, unless the United States Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable State and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the Authority wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the "Ninth Circuit"), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see the caption "— Levy and Collection of the Special Tax;' Insufficiency of the Special Tax." Table 4 in this Official Statement indicates that FNMA owns 5 parcels within the District. The Authority has not otherwise undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within the District, and therefore expresses no view concerning the extent to which the risks described above will materialize while the Bonds arc outstanding. FDIC. Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. 43 With respect to property in California owned by the FDIC on January 9, 1997 and that was owned by the Resolution Trust Corporation (the "RTC") on December 31, 1995, or that became the property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC's prior practice of paying special taxes imposed pursuant to the Act if the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special taxes may be challenged by the FDIC. The Authority is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Bondowners should assume that the Authority will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the 2012 Bonds. Based upon the secured tax roll as of January 1, 2011, the FDIC does not presently own any of the property in the District. The Authority expresses no view concerning the likelihood that the risks described above will materialize while the 2012 Bonds are outstanding. Payment of Special Tax Not a Personal Obligation of the Property Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcels of Taxable Property. If the value of the parcels of Taxable Property is not sufficient, taking into account other obligations also payable thereby to fully secure the Special Tax, the Authority has no recourse against the owner. Factors Affecting Parcel Values and Aggregate Value Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in the District in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on the parcels of Taxable Property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes and volcanic eruptions, topographic conditions such as earth movements, landslides, liquefaction, floods or fires, and climatic conditions such as tornadoes, droughts, and the possible reduction in water allocation or availability. It can be expected that one or more of such conditions may occur and may result in damage to improvements of varying seriousness, that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the parcels of Taxable Property may well depreciate or disappear. Seismic Conditions. The District, like all California communities, may be subject to unpredictable seismic activity. The occurrence of seismic activity in the District could result in substantial damage to properties in the District which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in greater reliance on undeveloped property in the payment of Special Taxes. Prior to the issuance of grading permits, engineering reports addressing geologic, seismic or soil limitations and foundation design were prepared for applicable Planning Areas. None of the school sites lies within the Alquist-Priolo Earthquake Fault Zone. Legal Requirements. Other events which may affect the value of a parcel of Taxable Property in the District include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of 44 statewide tax and governmental spending limitation measures. No Acceleration Provisions The 2012 Bonds do not contain a provision allowing for the acceleration of the 2012 Bonds in the event of a payment default or other default under the terms of the 2012 Bonds or the Fiscal Agent Agreement. So long as the 2012 Bonds are in book -entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights and remedies of Bondowners. Collection of Special Tax In order to pay debt service on the 2012 Bonds, it is necessary that the Special Tax levied against land within the District be paid in a timely manner. The Authority has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Tax in order to obtain funds to pay debt service on the 2012 Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments to the Bondowners pending prosecution of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the Authority, as the Governing Board of the District, to cause such an action to be commenced and diligently pursued to completion, the Act does not specify the obligations of the Governing Board with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See "SECURITY FOR THE 2012 BONDS — Proceeds of Foreclosure Sales." Right to Vote on Taxes Act An initiative measure, Proposition 218, commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996, general election. The Initiative added Article XIIIC ("Article XIIIC") and Article XIBD to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." The provisions of the Initiative, as they relate to community facilities districts, are subject to interpretation by the courts. Among other things, Section 3 of Article XIII states that" ... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill signed into law by the Governor of the State enacting Government Code Section 5854, states that: "Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution." 45 Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2012 Bonds. It may be possible, however, for voters of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the 2012 Bonds but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2012 Bonds. Like its antecedents, the Initiative is likely to undergo both judicial and legislative scrutiny before its impact on the District and its obligations can be determined. Certain provisions of the Initiative may be examined by the courts for their constitutionality under both State and federal constitutional law. The Authority is not able to predict the outcome of any such examination. Thc foregoing discussion of the Initiative should not be considered an exhaustive or authoritative treatment of the issues. The Authority does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative enactments may all affect the impact of the Initiative on the 2012 Bonds as well as the market for the 2012 Bonds. Legislative and court calendar delays and other factors may prolong any uncertainty regarding the effects of the Initiative. Ballot Initiatives and Legislative Measures The Initiative was adopted pursuant to a measure qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the State Legislature. Thc adoption of any such initiative or enactment of legislation might place limitations as to the ability of the State, the County, the City, the Authority, the District or local districts to increase revenues or to increase appropriations or as to the ability of a property owner to complete the development of the property. Limited Secondary Market There can be no guarantee that there will be a secondary market for the 2012 Bonds or, if a secondary market exists, that such 2012 Bonds can be sold for any particular price. Although the Authority and the District have committed to provide certain statutorily -required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. The failure to provide the annual financial and operating information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS — Tax Exemption," the interest on the 2012 46 Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the 2012 Bonds as a result of future acts or omissions of the Authority in violation of certain provisions of the Code and the covenants of the Fiscal Agent Agreement. In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the 2012 Bonds, the Authority has covenanted in the Fiscal Agent Agreement not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the 2012 Bonds under the Internal Revenue Code of 1986, as amended. Should such an event of taxability occur, the 2012 Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption or mandatory sinking fund redemption provisions of the Fiscal Agent Agreement. IRS Audit of Tax -Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2012 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2012 Bonds might be affected as a result of such an audit of the 2012 Bonds (or by an audit of similar bonds). Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption 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, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Examples of such proposals include a proposal in the fall of 2011 which would have reduced the tax value of all itemized deductions and targeted tax expenditures for high- income taxpayers in tax years commencing on or after January 1, 2013. The concept of "high-income taxpayers" in the proposal generally captured taxpayers with adjusted gross income of $250,000 or more for married couples filing jointly (or $200,000 for single taxpayers). Among the targeted tax expenditures was interest on any bond excludable from gross income under Section 103 of the Code, whether the bond is outstanding on the enactment date of the proposed legislation or is issued thereafter. Another example of such proposal from the fall of 2011 would have required the Office of Management and Budget to establish steadily declining annual ratios for debt as a percentage of gross domestic product, effective for taxable years beginning on or after January 1, 2013. Under the proposal, if the ratios were not met, automatic cuts in spending and tax preferences, such as tax-exempt interest, would be triggered. Prospective purchasers of the 2012 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion. Limitations on Remedies Remedies available to the Bondowners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2012 Bonds or to preserve the tax-exempt status of the 2012 Bonds. See "Payments by FDIC and other Federal Agencies," "No Acceleration Provisions" and "Billing of Special Taxes" herein Legal Opinion LEGAL MATTERS 47 The legal opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, approving the validity of the 2012 Bonds will be made available to purchasers at the time of original delivery and the form of such opinion is attached hereto as Appendix E. Tax Exemption In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, subject to the Authority's compliance with certain covenants, interest on the 2012 Bonds is excludable from gross income of the owners thereof for federal income tax purposes under Section 55 of the Code, is not includable as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the Authority to comply with one or more of such covenants could cause interest on the 2012 Bonds to not be excludable from gross income under Section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the 2012 Bonds. In the further opinion of Bond Counsel, interest on the 2012 Bonds is exempt from California personal income taxes. Bondowners should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, thc 2012 Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2012 Bonds other than as expressly described above. The form of Bond Counsel's opinion is set forth in Appendix E. No Litigation At the time of delivery of the 2012 Bonds, the Authority and the District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory agency, public board or body pending with respect to which they have been served with process or to their knowledge threatened against the Authority or the District affecting their existence, or the tides of their respective officers which would materially adversely affect the ability of the Authority to perform its obligations under the 2012 Bonds or certain documents related thereto or seeking to restrain or to enjoin the issuance, sale or delivery of the 2012 Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the 2012 Bonds, or in any way contesting or affecting the validity or enforceability of the 2012 Bonds, or the Fiscal Agent Agreement or any action of the Authority or the District contemplated by either of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement hereto, or contesting the powers of the Authority or the District or their authority with respect to the 2012 Bonds or any action of the Authority or the District contemplated by either of said documents, nor, to the knowledge of the Authority, is there any basis therefor. No General Obligation of the Authority or the District The 2012 Bonds are not general obligations of the Authority or the District, but are limited obligations of the Authority for the District payable solely from proceeds of the Special Tax and proceeds of the 2012 Bonds, including amounts in the Reserve Fund, the Special Tax Fund and the Bond Fund. Any tax levied for the payment of the 2012 Bonds shall be limited to the Special Taxes to be collected within the jurisdiction of the District. 48 RATING Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., has assigned a rating of to the 2012 Bonds. Such rating reflects only the views of such organization and any explanation of the significance of such rating should be obtained from the rating agency furnishing the same at the following addresses: Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Except as set forth in the Continuing Disclosure Agreement, the Authority undertakes no responsibility to bring to the attention of Owners of the Bonds any downward revision or withdrawal of a rating. The Authority undertakes no responsibility to oppose any such revision or withdrawal. UNDERWRITING The 2012 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus at a purchase price of $ (which represents the aggregate principal amount of the 2012 Bonds ($ , less an underwriter's discount of $ ). The purchase agreement relating to the 2012 Bonds provides that the Underwriter will purchase all of the 2012 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell 2012 Bonds to certain dealers and others at prices lower than the offering price stated on the cover page hereof. The offering prices may be changed from time to time by the Underwriter. PROFESSIONAL FEES Fees payable to certain professionals, in connection with the 2012 Bonds, including the Underwriter, Stradling Yocca Carlson & Rauth, as Underwriter's Counsel, Quint & Thimmig LLP, as Bond Counsel, McFarlin & Anderson LLP, as Disclosure Counsel, Fieldman, Rolapp & Associates, as Financial Advisor, U.S. Bank National Association, as the Fiscal Agent, and Willdan Financial Services, as Special Tax Consultant, are contingent upon the issuance of the 2012 Bonds. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries thereof which summaries do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statement of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. This Official Statement is not to be construed as a contract or agreement between the District or the Authority and the purchasers or owners of any of the 2012 Bonds. 49 The execution and delivery of the Official Statement by the District has been duly authorized by the Authority on behalf of the District. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) By: Bob Johnson, Executive Director, Temecula Public Financing Authority, on behalf of the District 50 APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF TEMECULA The following information is provided for background purposes only. The City of Temecula has no liability or responsibility whatsoever with respect to the 2012 Bonds or the Fiscal Agent Agreement Introd action Following a vote by the residents on November 7, 1989, the City incorporated under the general laws of the State of California on December 1, 1989. The City has a Council -Manager form of govemment and is represented by the five members of the City Council who are each elected at -large to serve a four-year term. The Mayor is selected annually by the members of the City Council. The Temecula Community Services District (TCSD) was also established in 1989. The TCSD is responsible for providing parks and recreation services to the citizens of Temecula, as well as street lighting and slope maintenance in certain areas of the district. Other governmental entities, such as the State of California, the County of Riverside and various school, water and other districts, also provide various levels of service within the City. However, the City Council does not have a continuing oversight responsibility over these other governmental entities. Located on Interstate 15, the City of Temecula is the 111° largest city in the Inland Empire and the 51h largest in Riverside County (as of January, 2012), encompassing 30.15 square miles. The City of Temecula is 85 miles southeast of Los Angeles, 60 miles north of San Diego, 61 miles southeast of Orange County and 20 miles inland from the cities of San Juan Capistrano and Oceanside. Population From 2003 - 2012, the City's population grew from 74,157 to 103,092, a gain of 28,935 or 39.0%. In this same period, Riverside County added 497,358, a gain of 28.7%. CITY OF TEMECULA AND COUNTY OF RIVERSIDE POPULATION FROM 2003 TO 2012 (1) Year Temecula Riverside County Population % Change Population % Change 2003 74,157 -- 1,730,219 2004 76,407 3.0 1,814,485 4.9 2005 78,808 3.1 1,895,695 4.5 2006' 90,120 14.4 1,975,913 4.2 2007 93,122 3.3 2,049,902 3.7 2008 95,332 2.4 2,102,741 2.6 2009 97,741 2.5 2,140,626 1.8 2010 99,757 2.1 2,179,692 1.8 201 I 101,255 1.5 2,205,731 1.2 2012 103,092 1.8 2,227,577 1.0 Includes annexation of Redhowk area. (I) As of January 1 of each calendar year. Source: California Department of Finance. Construction Activity A-1 The following table shows a five year history of construction activity in the City. [CIRI3 functions passing to CI31A; in transition during month of May. Expects conversion to be completed in June' CITY OF TEMECULA BUILDING PERMITS AND VALUATIONS (Calendar Year 2006 — 2010) 2006 2007 2008 2009 2010 Valuation (8000): Residential 145,638,382 194,888,351 100,451,479 72,006,373 68,489,143 Non-residential 144 623 957 151,320,960 138 074,079 20 866 892 14 235 576 Total 290,262,339 346,209,311 238,525,558 92,873,265 82,724,719 Residential Units: Single family 589 697 301 323 342 Multiple family 18 237 274 32 6 Total 607 934 575 355 348 Source: [Construction industry Research Board]. Economic Condition and Outlook Teniecula's economic base is anchored by a number of firms specializing in biomedical technology and supplies, high technology controllers and semi -conductors, among others. The City's retail base is also experiencing growth and is home to several auto dealers including Honda, Lincoln, Mercury, Hyundai, Subaru, Toyota and Nissan. The following table sets forth major manufacturing and non -manufacturing employers: A-2 CITY OF TEMECULA LARGEST EMPLOYERS BY NUMBER OF EMPLOYEES (As of June, 2011) Employer Abbott Vascular (Abbott Laboratories f/k/a Guidant Corporation or Abbott Cardiovascular Systems, Inc.) Temecula Valley Unified School District Professional I lospital Supply International Rectifier Costco Wholesale Corporation Macy's Department Stores, Inc. Chemi-Con International Norm Reeves Auto Group Southwest Traders Milgard Manufacturing Plant Equipment, Inc. Temecula Creek Inn Channell Commercial Corp. Albertson's ITP Enterprises Inc. Dayton Hudson Corporationffarget JC Penny Company Toyota of Temecula Valley City of Temecula Lowe's Source: City Finance Department. Approximate No. of Employees A-3 Type of Business 2,938 Medical equipment 2,749 I'ublic school system 1,100 Medical equipment and supplies 700 Power semi -conductors 373 Wholesale warehouse 300 Retail 272 Manufacturing 260 Auto Dealer 233 Distribution 210 Windows 200 'Telephone equipment 195 Ilotel 184 Cable enclosures I80 Grocery 178 Pharmaceutical 174 Retail 170 Retail 170 Auto Dealer 153 Government 152 I3uilding Supplies Taxpayer° CITY OF TEMECULA PRINCIPAL SECURED PROPERTY OWNERS FOR FISCAL YEAR 2011-12 Type of Business Secured 2011-12 Assessed Valuation (in 000s) Percent of Total Assessed (Valuation) Total 2011-12 Assessed Valuation (in 000s) Abbott Vascular (2) Temecula Towne Center Associates International Rectifier Corporation Inland Western Temecula Common Federal National Mortgage Association Temecula Properties BACM 2006-5 Rancho California Alexander and Baldwin Inc. Temecula Villa Apartments Macy's Department Stores, Inc.t3l Total 2011-12 Assessed Valuation Medical Appliances Mfg. Regional Mall Electronics Mfg. Real Estate investment Trust Mortgage Buyer Industrial Commercial Commercial Commercial Retail Department Store Totals $207,308 148,865 86,702 64,300 54,897 54,696 53,162 48,639 48,058 37.841 $804,468 1.86% 1.33 .78 .58 .49 .49 .48 .44 .43 .34 7.20% $463,010 148,865 86,702 64,300 54,897 54,696 53,162 48,639 48,058 47.666 $1,069,996 $11,167,952 $11,842,873 (1) Assessed values of parcels owned by related entities have been aggregated. PI The facility operating in the City is locally now known as Abbott Vascular, which is a subsidiary of Abbott Laboratories. Ownership of some parcels is in the name of Advanced Cardiovascular Systems, Inc., or Abbott Cardiovascular Systems, Inc. Abbott Laboratories acquired Advanced Cardiovascular Systems, Inc. in April 2006, in connection with Boston Scientific Corporation's purchase of Guidant Corporation. Some personal property and fixtures may he listed as owned by Abbott Vascular, Inc. 03 Owner had pending appeals on one or more parcels. Source: City of Temecula. CITY OF TEMECULA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY FOR THE FISCAL YEARS 2002-03 THROUGH 2011-12 (Values in Thousands) [UPDATE] Fiscal Year 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-1I 2011-12 Total Secured and Unsecured 6,201,896 6,931,291 7,794,688 10,328,097 11,836,051 13,434,244 13,537,220 12,003,561 11,932,655 Real Estate Exemptions (30,010) (43,142) (53,240) (51,063) (75,082) (88,037) (101,367) (112,286) (116,038) Source: Riverside County Assessor 's Office. Net Taxable Assessed Value 6,171,886 6,888,149 7,741,448 10,277,034 11,760,969 13,346,207 13,435,853 11,891,275 11,816,617 A-4 Net Total Estimated Homeowners Assessed Actual Exemption Value Value (82,926) 6,088,960 6,088,960 (92,362) 6,795,787 6,795,787 (94,237) 7,647,211 7,647,211 (108,654) 10,168,380 10,168,380 (111,392) 11,649,577 11,649,577 (113,341) 13,232,866 13,232,866 (114,841) 13,321,012 13,321,012 (115,783) 11,775,492 11,775,492 (115,944) 11,700,673 11,700,673 General Information Agriculture. The climate and soil in the City are particularly favorable for growing avocado, grape and citrus crops. There are currently several agricultural management firms in the Temecula area which manage agricultural production of thousands of acres of land owned by individual investors, partnerships and corporations. The agricultural managers apply economies of scale, by combining many small and medium sized parcels of land as if these parcels were one large ranch. In addition, a substantial wine industry has been developed in the area near the City. As of January, 2012, there were approximately fifty-seven (57) vineyards and wineries which produce wine with locally grown grapes. Climate. Temecula Valley enjoys a mild Mediterranean climate with year-round temperatures averaging in the mid 70s. The weather is comparable to the Napa Valley, as evidenced by a thriving wine industry, with warm, dry days and cool evenings. Summer -time temperatures, which can average in the mid 80s or the mid 90s during the day, are often cooled by afternoon ocean breezes blowing into the valley through gaps in the Santa Ana foothills to the west. Although separated from the Pacific by the Santa Rosa range of mountains, the Rainbow Gap funnels the mild beach climate into the valley. Mild winter temperatures average in the mid 60s. Yearly average rainfall in the Temecula Valley is approximately 14 inches, as compiled by the Rancho California Water District. The quality of air in the Temecula Valley is consistently better than that of surrounding communities. Ocean breezes flow through the Rainbow Gap almost every day, sweeping away smog. In the summer, Pacific winds yield temperatures up to 10 degrees lower than in towns just a few miles away. Education. The City is served by Temecula Valley Unified School District, one of the fastest growing school districts in the State, with 5 high schools (including 2 alternative schools), 6 middle schools, [4/3] charter schools, 1 home -schooling program, 17 elementary schools and 1 adult school. In addition, there are 11 private schools and several preschools. The general boundaries extend north to Jean Nicholas Road in French Valley, south to the Riverside County line, east to Vail Lake and west to the Temecula city limit. The School District covers approximately 150 square mites. As of [April 19, 2012], approximately [28,671] students (Grades K-12) are enrolled in the School District. The University of California, Riverside opened an extension center in the City, San Joaquin Valley College is located in the City and Mt. San Jacinto Community College operates a campus ten miles north of the City to serve the growing population. In addition, the Cal State San Marcos facility continues to expand with construction on the opening of their satellite campus in their newly renovated building on Margarita Road. In the past two years a state-of-the-art Social and Behavioral Sciences building, a parking structure and a public safety building have been completed. Cal State San Marcos has a substantial specialized and general undergraduate curriculum. The City began the 2000's with a well- educated population, and its population trends and school performance figures have allowed it to maintain that position. Transportation. Interstate 15 and its connecting arterials provide convenient links to San Diego and Riverside, Los Angeles (Interstate 10), Orange County (Highway 91) and San Bernardino (Interstate 215). The French Valley Airport, 4 miles north of Interstate 15 on Winchester Road, accommodates business jets and commuter airlines. A-5 Housing. Temecula is unique in that its residents are about equidistant from both San Diego and Orange County via the Interstate 15 freeway. As a result, it is receiving growth impulses from the south as well as the north, as families spill into the Inland Empire from Southern California's more congested coastal counties. Tentecula's rapid population growth represents a relatively new phenomenon in Southern California. A large number of the City's new residents have migrated north from San Diego County along the Interstate 15 freeway. Normally, a Southern California community undergoes rapid growth only when population spills from Orange or Los Angeles counties. The latest population data shows Temecula with 103,092 residents as of January 1, 2012, which includes the March, 2004 annexation of the community of Redhawk, which became official June 30. 2005. A-6 APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT APPENDIX ll FORM OF AUTHORITY CONTINUING DISCLOSURE AGREEMENT APPENDIX E FORM OF OPINION OF BOND COUNSEL APPENDIX F BOOK -ENTRY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2012 Bonds, payment of principal of and interest on the 2012 Bonds to Direct Participants, Indirect Participants or Beneficial Owners (as such terms are defined below) of the 2012 Bonds, confirmation and transfer of beneficial ownership interests in the 2012 Bonds and other bond - related transactions by and between DTC, Direct Participants, Indirect Participants and Beneficial Owners of the 2012 Bonds is based solely on information furnished by DTC to the Authority which the Authority believes to be reliable, but the Authority, 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 2012 Bonds. The 2012 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 fully -registered 2012 Bond will be issued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with 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 1934. DTC holds and provides asset servicing for over 3.5 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 book -entry 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 www.dtcc.com. The information on such website is not incorporated herein by such reference or otherwise. Purchases of 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2012 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2012 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 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants F-1 acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2012 Bonds, except in the event that use of the book -entry system for the 2012 Bonds is discontinucd. To facilitate subsequent transfers, all 2012 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 the 2012 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2012 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2012 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 2012 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2012 Bonds, such redemptions, tenders, defaults, and proposed amendments to the 2012 Bonds documents. For example, Beneficial Owners of the 2012 Bonds may wish to ascertain that the nominee holding the 2012 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 Fiscal Agent and request that copies of notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2012 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 Authority 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 the 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the 2012 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 Authority or the Fiscal Agent, 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 Fiscal Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Fiscal Agent, 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. DTC may discontinue providing its services as depository with respect to the 2012 Bonds at any time by giving reasonable notice to the Authority or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, the 2012 Bond certificates are required to be printed and delivered. F-2 The Authority may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, the 2012 Bond certificates will be printed and delivered to DTC. The information in this Section concerning DTC and DTC's book -entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event that (a) DTC determines not to continue to act as securities depository for the 2012 Bonds, or (b) the Authority determines that DTC shall no longer act and delivers a written certificate to the Fiscal Agent to that effect, then the Authority will discontinue the Book -Entry System with DTC for the 2012 Bonds. If the Authority determines to replace DTC with another qualified securities depository, the Authority will prepare or direct the preparation of a new single separate, fully -registered 2012 Bond for each maturity of the 2012 Bonds registered in the name of such successor or substitute securities depository as are not inconsistent with the terms of the Fiscal Agent Agreement. If the Authority fails to identify another qualified securities depository to replace the incumbent securities depository for the 2012 Bonds, then the 2012 Bonds shall no longer be restricted to being registered in the 2012 Bond registration books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository or its nominee transferring or exchanging the 2012 Bonds shall designate. In the event that the Book -Entry System is discontinued, the following provisions would also apply: (i) the 2012 Bonds will be made available in physical form, (ii) principal of, and redemption premiums if any, on the 2012 Bonds will be payable upon surrender thereof at the trust office of the Fiscal Agent identified in the Fiscal Agent Agreement, and (iii) the 2012 Bonds will be transferable and exchangeable as provided in the Fiscal Agent Agreement. The Authority and the Fiscal Agent do not have any responsibility or obligation to DTC Participants, to the persons for whom they act as nominees, to Beneficial Owners, or to any other person who is not shown on the registration books as being an owner of the 2012 Bonds, with respect to (i) the accuracy of any records maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC Participant of any amount in respect of the principal of redemption price of or interest on the 2012 Bonds; (iii) the delivery of any notice which is permitted or required to be given to registered owners under the Fiscal Agent Agreement; (iv) the selection by DTC or any DTC Participant of any person to receive payment in the event of a partial redemption of the 2012 Bonds; (v) any consent given or other action taken by DTC as registered owner; or (W) any other matter arising with respect to the 2012 Bonds or the Fiscal Agent Agreement. The Authority and the Fiscal Agent cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal of or interest on the 2012 Bonds paid to DTC or its nominee, as the registered owner, or any notices to the Beneficial Owners or that they will do so on a timely basis or will serve and act in a manner described in this Official Statement The Authority and the Fiscal Agent are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner in respect to the 2012 Bonds or any error or delay relating thereto. F-3 APPENDIX G BOUNDARY MAP OF THE COMMUNITY FACILITIES DISTRICT Attachment No. 7 Bond Purchase Agreements for Crowne Hill, Wolf Creek, and Harveston II Stradling Yocca Carlson & Rauth Draft of 7/2/12 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) SPECIAL TAX REFUNDING BONDS, SERIES 2012 BOND PURCHASE AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Temecula, California Ladies and Gentlemen: ,2012 Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus (the "Underwriter"), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (the "Purchase Agreement") with the Temecula Public Financing Authority ("Authority"), acting on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) (the "District"), which, upon acceptance, will be binding upon the Authority and upon the Underwriter. This offer is made subject to acceptance of it by the Authority prior to 5:00 p.m. PDT on the date hereof, and if not accepted will be subject to withdrawal by the Underwriter upon written notice delivered to the Authority at any time prior to the acceptance hereof by the Authority. The Authority acknowledges and agrees that: (i) the purchase and sale of the Bonds (defined below) pursuant to this Purchase Agreement is an arm's-length commercial transaction between the Authority and the Underwriter; (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as a "municipal advisor" (as defined in Section 158 of the Securities Exchange Act of 1934, as amended); (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Authority with respect to the offering contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Authority on other matters); and (iv) the Authority has consulted its own legal, financial and other advisors to the extent it has deemed appropriate with respect to this transaction. 1. Purchase, Sale and Delivery of the Bonds. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not Tess than all) of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax Refunding Bonds, Series 2012 (the "Bonds") in the aggregate principal amount specified in Fxhibit A hereto. The Bonds shall be datcd the Closing Date (hereinafter defined), shall bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing March 1, 2013) at the DOCSOC/ 1570468 v3/022245-0257 rates per annum, shall mature on September 1 in each of the years and in the amounts, and shall be subject to redemption, all as set forth in Exhibit A hereto. The purchase price for the Bonds shall be the amount specified as such in Exhibit A hereto. (b) The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable as provided in, the Fiscal Agent Agreement by and between the Authority and U.S. Bank National Association, as Fiscal Agent (the "Fiscal Agent"), dated as of July 1, 2003, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, and by the Second Supplemental Fiscal Agent Agreement dated as of August 1, 2012 (as so amended and supplemented, the "Fiscal Agent Agreement"), approved by Resolution No. TPFA 12- adopted by the Board of Directors of the Temecula Public Financing Authority, (the "Board of Directors"), as the legislative body of the Authority and the District, on July 10, 2012 (the "Resolution of Issuance"). The Bonds and interest thereon (together with the Authority's Community Facilities District No. 03-01 Special Tax Bonds, Series 2005-B, with which the Bonds are on a parity) will be payable from a special tax (the "Special Tax") levied and collected on the taxable land within the District in accordance with Resolution No. TPFA 03-05 adopted by the Board of Directors on March 25, 2003 (the "Resolution of Formation"). Proceeds of the sale of the Bonds will be used in accordance with the Fiscal Agent Agreement, the Escrow Agreement, dated as of August 1, 2012 (the "Escrow Agreement"), by and between the Authority and U.S. Bank National Association, as Escrow Bank (the "Escrow Bank"), Article 11 (commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), and the Mello -Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Law"), to refund the Authority's outstanding Temecula Public Financing Authority Communities District No. 03-01 (Crowne Hill) Special Tax Bonds, Series 2003-A (the "2003 Bonds"). The Authority's Ordinance No. TPFA 03-01, the Resolution of Issuance, the Resolution of Formation and its Resolution Nos. TPFA 03-1, 03-06, 03-07 and 03-08 are collectively referred to herein as the "District Resolutions." (c) Subsequent to its receipt of the Authority's 15c2-12 Certificate, in substantially the form attached hereto as Exhibit B, deeming the Preliminary Official Statement for the Bonds, dated , 2012 (which Preliminary Official Statement, together with the cover page and all appendices thereto, is herein collectively referred to as the "Preliminary Official Statement"), final for purposes of Rule 15c2-12 of the Securities and Exchange Commission ("Rule 15c2-12"), the Underwriter has distributed copies of the Preliminary Official Statement. The Authority hereby ratifies the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter to use and distribute in printed and/or electronic format the final Official Statement dated the date hereof (including all information previously permitted to have been omitted by Rule 15c2-12, and any supplements and amendments thereto as have been approved by the Authority as evidenced by the execution and delivery of such document by an officer of the Authority) (the "Official Statement"), the Fiscal Agent Agreement, the Escrow Agreement, the Continuing Disclosure Agreement of the Authority (the "Authority Disclosure Agreement"), this Purchase Agreement, and all information contained therein, and all other documents, certificates and written statements furnished by the Authority to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the Municipal Securities Rulemaking Board (the "MSRB") through the Electronic Municipal Marketplace Access website of the MSRB on or before the Closing Date and otherwise to comply with all applicable statutes and regulations in 2 DOCSOC/ 1570468v3/022245-0257 connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12. (d) The Underwriter agrees to make a bona fide public offer all the Bonds, initially at the prices set forth in Exhibit A hereto. Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. The Underwriter reserves the right to: (i) over -allot or effect transactions which stabilize or maintain the market price of the Bonds at levels above those that might otherwise prevail in the open market, and (ii) discontinue such stabilizing, if commenced, at any time without prior notice. (e) At 8:00 a.m., Pacific Daylight Time, on August _, 2012, or at other time or date as shall be agreed upon by the Underwriter and the Authority (such time and date being herein referred to as the "Closing Date"), the Authority will deliver (i) to The Depository Trust Company ("DTC") or to U.S. Bank National Association, acting as DTC's agent, the Bonds in definitive form (all Bonds being in book -entry form registered in the name of Cede & Co. and having the CUSIP numbers assigned to them printed thereon), duly executed by the officers of the Authority and authenticated by the Fiscal Agent, as provided in the Fiscal Agent Agreement, and (ii) to the Underwriter, at the offices of Bond Counsel, or at such other place as shall be mutually agreed upon by the Authority and the Underwriter, the documents mentioned in Section 3(d) below; and the Underwriter shall accept such delivery and pay the purchase price of the Bonds in immediately available funds (such delivery and payment being herein referred to as the "Closing"). 2. Representations, Warranties and Agreements of the Authority. The Authority represents, warrants and covenants to and agrees with the Underwriter that: (a) The Authority is duly organized and validly existing as a joint exercise of powers authority under the laws of the State of Califomia and has duly authorized the formation of the District pursuant to the Resolution of Formation and the Law. The Board of Directors, as the legislative body of the Authority and the District, has duly adopted the District Resolutions, and has caused to be recorded a Notice of Special Tax Lien in the real property records of the County of Riverside as Document No. 2003-238653 and an Amended Notice of Special Lien recorded as Document No. 2003-358388 (collectively, the "Notice of Special Tax Lien"). (Such District Resolutions and Notice of Special Tax Lien are collectively referred to herein as the "Formation Documents"). Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The District is duly organized and validly existing as a community facilities district under the laws of the State of California. The Authority has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Fiscal Agent Agreement as provided herein, and (ii) to execute, deliver, carry out, give effect to and consummate the transactions on its part contemplated by the Formation Documents and by the Fiscal Agent Agreement, the Escrow Agreement, this Purchase Agreement, and the Authority Disclosure Agreement (collectively, the "Authority Documents") and the Official Statement. (b) The Authority has complied, and will at the Closing Date be in compliance, in all material respects, with the Formation Documents and the Authority Documents, and any immaterial non-compliance by the Authority will not impair the ability of the Authority to carry out, give effect to or consummate the transactions on its part contemplated by the foregoing. From and after the date 3 DOCSOC/ 1570468v3/022245-0257 of issuance of the Bonds, the Authority will continue to comply with the covenants of the Authority contained in the Authority Documents. (c) The Board of Directors has duly and validly: (i) adopted the District Resolutions, (ii) called, held and conducted in accordance with all requirements of the Law an election within the District to approve the levy of the Special Tax within the District and to authorize bonded indebtedness of the District in an amount not to exceed $25,000,000, (iii) authorized and approved the issuance of the Bonds and due performance by the Authority of its obligations set forth in the Authority Documents, (iv) authorized the preparation, delivery and distribution of the Preliminary Official Statement and the Official Statement, and (v) authorized and approved the performance by the Authority of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by, each of the Authority Documents (including, without limitation, the collection of the Special Tax), the Bonds and the Official Statement; and, at the Closing Date, the Formation Documents will be in full force and effect and the Authority Documents and the Bonds will constitute the valid, legal and binding obligations of the Authority and (assuming due authorization, execution and delivery by other parties thereto, where necessary) will be enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. (d) To the best of the Authority's knowledge, neither the Authority nor the District is in breach of or default under any applicable law or administrative rule or regulation of the State of California (the "State") or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order to which the Authority or the District is subject, or under any loan agreement, note, resolution, fiscal agent agreement, contract, agreement or other instrument to which the Authority or District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance by the Authority or the District of their respective obligations under the Bonds, the Formation Documents or the Authority Documents, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order to which the Authority or the District is subject, or a material breach of or default under any loan agreement, note, resolution, fiscal agent agreement, trust agreement, contract, agreement or other instrument to which the Authority or the District is a party or is otherwise subject or bound. (e) Except for compliance with the blue sky or other states securities law filings, as to which the Authority makes no representations, all approvals, consents, authorizations, elections and orders of or filings or registrations with any State governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the Authority of its obligations hereunder, or under the Formation Documents or the Authority Documents, have been obtained and are in full force and effect. (f) The Special Tax constituting the source of payment of the Bonds has been duly and lawfully authorized and may be levied under the Law, the State Constitution and the applicable laws of the State; and such Special Tax, when levied, will constitute a valid and legally binding continuing lien on the properties on which it has been levied; except as described in the Official Statement, the 4 D OC SOC/ 15 70468v3/022245-025 7 Authority is unaware of any outstanding special assessment liens or special tax liens applicable to any property within the District other than the special taxes authorized to be levied by the Authority on behalf of the District; and the Authority has no present intention of conducting further proceedings leading to the levying of any additional special assessments or special taxes against any such property. (g) The Authority shall not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without the prior written consent of the Underwriter, which consent shall not be unreasonably delayed or withheld. Until the date which is twenty-five (25) days after the "end of the underwriting period" (as hereinafter defined), if any event shall occur of which the Authority is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement, in light of the circumstances existing at such time, not misleading, the Authority shall forthwith notify the Underwriter of such event and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter's opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time; and the Authority shall promptly furnish to the Underwriter a reasonable number of copies of such supplement. If any such amendment or supplement of the Official Statement shall occur after the Closing Date, the Authority also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of such amendment or supplement to the Official Statement. As used herein, the term "end of the underwriting period" means the later of such time as (i) the Authority delivers the Bonds to the Underwriter, or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the "end of the underwriting period" shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Authority at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the "end of the underwriting period." (h) The Fiscal Agent Agreement creates a valid pledge of the Special Taxes and the moneys in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, the Special Tax Fund established pursuant to the Fiscal Agent Agreement, including the investments thereof, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon to maturity or to the date of redemption if redeemed prior to maturity, and premium, if any, the Authority will faithfully perform and abide by all of its obligations under the Fiscal Agent Agreement. (i) Except as disclosed in the 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 with respect to which the Authority has been served with process or has received pleadings or equivalent documents is pending or, to the best knowledge of the Authority, is threatened (i) which would materially adversely affect the ability of the Authority to perform its obligations under the Bonds, the Formation Documents or the Authority Documents, or (ii) seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement and the Escrow Agreement, or the collection or application of the Special Tax pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge 5 DOCSOC/ 1570468 v3/022245.0257 thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Formation Documents, the Authority Documents, or any action contemplated by any of said documents, or (iii) in any way contesting the completeness or accuracy of the Official Statement or the powers or authority of the Authority with respect to the Bonds, the Formation Documents, the Authority Documents, or any action of the Authority contemplated by any of said documents; nor is there any action pending with respect to which the Authority has been served with process or has received pleadings or equivalent documents or, to the best knowledge of the Authority, threatened against the Authority which alleges that interest on the Bonds is not excludable from gross income for federal income tax purposes or is not exempt from California personal income taxation. (j) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer and sale under the "Blue Sky" or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, the Authority shall not be required to register as a dealer or a broker of securities or to consent to service of process in connection with any blue sky filing. (k) Any certificate signed by any official of the Authority authorized by the Board of Directors of the Authority to do so shall be deemed a representation and warranty to the Underwriter as to the statements made therein. (1) The Authority will apply the proceeds of the Bonds in accordance with the Fiscal Agent Agreement and as described in the Official Statement. (m) The information contained in the Preliminary Official Statement (other than under the caption "THE BONDS — Book -Entry Only System," as to which no view is expressed) was as of the date thereof, and the information contained in the Official Statement (other than under the caption "THE BONDS — Book -Entry Only System," as to which no view is expressed) is as of its date and will be on the Closing Date, true and correct in all material respects; and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (n) The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the Authority as of its date, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of Rule I5c2-12. The Authority hereby covenants and agrees that, within seven (7) business days from the date hereof, or, if sooner, upon reasonable written notice from the Underwriter, within sufficient time to accompany any confirmation requesting payment for Bonds from any customer of the Underwriter the Authority shall cause a final printed form of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Underwriter and the Authority so that the Underwriter may comply with paragraph (b)(4) of Rule 15c2-12 and Rules G-12, G-15, G-32 and G-36 of the MSRB. (o) Except as disclosed in the Official Statement, the Authority is not, and has not been within the last five (5) years, in breach of any reporting obligation that it has undertaken under Rule 15c2-12. To the best knowledge of the Authority neither the City nor the Redevelopment Agency of the City of Temecula is, or has been within the last five (5) years, in breach of any reporting obligation that it has undertaken under Rule 15c2-12. 6 DOCSOC/ I570468v3/022245.0257 (p) The Authority shall not amend, terminate, or rescind, and will not agree to any amendment, termination, or rescission of the Formation Documents, the Authority Documents or this Purchase Agreement without the prior written consent of the Underwriter. (q) The Authority shall not voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to the Authority as set forth in this Purchase Agreement. (r) The Authority shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exemption from personal income taxation of the State or the exclusion from gross income for federal income tax purposes of the interest on the Bonds. 3. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Authority contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the Authority made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Authority of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Formation Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and the refunding of the 2003 Bonds and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Quint & Thimmig LLP, Bond Counsel for the Authority, and Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel to the Underwriter, shall be necessary and appropriate. (b) The information contained in the Official Statement will, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, be true and correct in all material respects and will not, as of the Closing Date or as of the date of' any supplement or amendment thereto pursuant to Section 2(g) hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) Between the date hereof and the Closing Date, the market price or marketability of the Bonds at the initial offering prices set forth in the Official Statement or the ability of the Underwriter to enforce contracts for the sale of Bonds shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: (1) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the Unitcd Statcs, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration or a decision rendered by a court established under Article III of the Constitution of the United States of America.or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press 7 DOCSOC/ 1570468 v3/022245-0257 release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States of America, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon the interest that would be received by the owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; (2) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement is or would be in violation of the federal securities laws, rules or regulations as amended and then in effect; (3) any amendment to the federal or Califomia Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority, its property, income, securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Authority to refund the 2003 Bonds as contemplated by the Formation Documents, the Authority Documents or the Official Statement; (4) any event occurring, or information becoming known, which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or results in the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading misleading and (x) the Authority refuses to permit the Official Statement to be supplemented to supply such statement or information or (y) the effect of any such supplement would be to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; (5) a declaration of war or an escalation of, or engagement in, military hostilities by the United States or the occurrence of any other national or international emergency or calamity relating to the effective operation of the government of, or the financial community in, the United States; (6) the declaration of a general banking moratorium by federal, State of New York or State of California authorities, or the general suspension of trading on any national securities exchange or the fixing and maintaining in force of minimum or maximum prices for trading or maximum ranges for prices for securities on the New York Stock Exchange or other national securities exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission (the "SEC") or any other governmental authority having jurisdiction; 8 DOC SOC/ 1570468v3/022245-0257 (7) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; (8) there shall have been any material adverse change in the financial affairs of the Authority or the District; (9) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a change to the net capital requirements of, underwriters established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or (10) a stop order, release, regulation, or no -action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made to the effect that the issuance, offering, or sale of the Bonds, including all the underlying obligations as contemplated hereby or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of federal securities laws at the Closing Date. (d) On the Closing Date, the Underwriter shall have received originals or true and correct copies of the following documents, in either printed or electronic format in each case satisfactory in form and substance to the Underwriter: (1) The Authority Documents, together with a certificate dated as of the Closing Date of the Secretary of the Authority to the effect that each Formation Document is a true, correct and complete copy of the one duly adopted by the Board of Directors; (2) The Official Statement; (3) An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Authority, of Quint & Thimmig LLP, Bond Counsel for the Authority, in the form attached to the Official Statement as Appendix E, and a letter of such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such approving opinion may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; (4) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Quint & Thimmig LLP, Bond Counsel for the Authority, to the effect that (i) the Escrow Agreement, the Authority Disclosure Agreement and this Purchase Agreement have been duly authorized, executed and delivered by the Authority, and, assuming such agreements constitute valid and binding obligations of the respective other parties thereto, they constitute the legally valid and binding agreements of the Authority enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor's rights or remedies and by general principles of equity (regardless of whether such enforceability is considered in equity or at law); (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (iii) the information contained in the Official Statement on the cover and under the captions `INTRODUCTION," "PLAN OF FINANCE," "THE 2012 BONDS (excluding the subheading "Debt Service Schedule")," "SECURITY FOR THE 2012 BONDS," "LEGAL MATTERS — Tax Exemption," and Appendices C and E thereof is accurate, 9 DOCS OC/ 1570468v3/022245-025 7 insofar as such information purports to summarize or replicate certain provisions of the Law, the Bonds, the Escrow Agreement and the Fiscal Agent Agreement and the exclusion from gross income for federal income tax purposes and exemption from State of California personal income taxes of interest on the Bonds present a fair and accurate summary of such provisions; (5) An opinion, dated the Closing Date and addressed to the Authority and the Underwriter of McFarlin & Anderson LLP, Disclosure Counsel, to the effect that, without having undertaken to determine independently the accuracy, completeness or faimess of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Authority and the District, Richards, Watson & Gershon, A Professional Corporation, as Counsel to the Authority, Bond Counsel, Fieldman Rolapp & Associates, as financial advisor to the Authority, the Underwriter and others, and their examination of certain documents, no facts have come to their attention which would lead them to believe that the Official Statement as of its date or as of the Closing Date contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial, statistical, economic, engineering, or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, or any information about feasibility, valuation, appraisals, market absorption, real estate, archaeological, or environmental matters, the Appendices to the Official Statement or any information about debt service requirements, book -entry, The Depository Trust Company, or tax exemption contained in the Official Statement); (6) An opinion, dated the Closing Date and addressed to the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel for the Underwriter, in form and substance acceptable to the Underwriter; (7) A certificate or certificates, dated the Closing Date and signed by an authorized officer of the Authority, ratifying the use and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offering and sale of the Bonds; and certifying that (i) the representations and warranties of the Authority contained in Section 2 hereof are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best of his or her knowledge, no event has occurred since the date of the Official Statement affecting the matters discussed therein which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make the statements and information contained in the Official Statement not misleading in any material respect; and (iii) the Authority has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Authority Documents and the Oficial Statement at or prior to the Closing Date; (8) An opinion, dated the Closing Date and addressed to the Underwriter, of legal counsel to the Authority, to the effect that (i) to the best of his or her knowledge and except as disclosed in the Official Statement, there is no litigation, action, suit, proceeding or investigation at law or in equity as to which the Authority is or would be a party, before or by any court, governmental agency or body, pending and notice of which has been served on and received by the Authority or, to the best of his or her knowledge, threatened against the Authority, challenging the creation, organization or existence of the Authority or the District, or the validity of the Financing Documents or contesting the authority of the Authority to enter into or perform its obligations under any of such documents, or with respect to which an unfavorable decision, ruling or finding would 10 DOC SOC/ 1570468v310 2 22 45-02 5 7 materially adversely affect the ability of the Authority to perform its obligations under the Bonds, the Formation Documents or the Authority Documents, or which seeks to restrain or enjoin the issuance, sale and delivery of the Bonds or which challenges the exclusion from gross income for federal income tax purposes or State of California personal income taxes of interest on the Bonds, or the application of the proceeds thereof in accordance with the Fiscal Agent Agreement and the Escrow Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the Bonds, or which in any way contests or affects the validity or enforceability of the Bonds, the Formation Documents or the Authority Documents or the accuracy of the Official Statement, or any action of the Authority contemplated by any of said documents; (ii) the Authority is duly organized and validly existing as a joint exercise of powers authority under the laws of the State of California and the District is duly organized and validly existing as a community facilities district under the laws of the State of California, (iii) the Board of Directors has duly and validly adopted the Formation Documents and Authority Documents at meetings of the Board of Directors which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Formation Documents and Authority Documents are now in full force and effect and have not been amended; (iv); to the best of such counsel's knowledge, the authorization, execution and delivery of the Authority Documents and compliance with the provisions thereof by the Authority of its obligations thereunder, will not conflict with, or constitute a breach or default under, in any material respect, any law, administrative regulation, court decree, resolution, ordinance or other agreement to which the Authority or District is subject or by which it is bound; and (v) without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, but on the basis of its participation in conferences with representatives of the Authority, the District, Bond Counsel, Disclosure Counsel, the Underwriter, and others, and their examination of certain documents, no information in the Sections of the Official Statement entitled "The Authority," "The Community Facilities District," "Bondowners Risks" has come to the attention of such counsel which would lead him or her to believe that the information with respect to the Authority and the District in said sections of the Official Statement, as of its date and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any Appendix to the Official Statement or any other financial, statistical or economic data or forecasts, numbers, charts, graphs, estimates, projections, assumptions or expressions of opinion, or any information about valuation or appraisals, or any information about book -entry or DTC contained in the Official Statement); (9) One or more certificates dated the Closing Date from Wildan Financial Services addressed to the Authority and the Underwriter to the effect that (i) the Special Tax, if collected in the maximum amounts permitted, and without regard to the portion thereof levied to pay Administrative Expenses, will generate in each Fiscal Year at least 110% of the debt service payable with respect to the Bonds in the calendar year that begins in such Fiscal Year; (ii) all information appearing in the Official Statement for which Willdan Financial Services is identified as being the source is true and correct as of the date of the Official Statement and as of the Closing Date; and (iii) the statements concerning the Special Tax and the statistical and financial data set forth in the tables and discussion in the Official Statement which were derived from information supplied by Willdan Financial Services for use in the Official Statement are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and no events or occurrences have been ascertained by 11 DOCS OC/ 1570468v3/022245-0257 Willdan Financial Services or have come to its attention that would substantially change such information set forth in the Official Statement; (10) A certificate of the Authority dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; (11) A certificate of U.S. Bank National Association and an opinion of counsel to U.S. Bank National Association dated the Closing Date and addressed to the Authority and the Underwriter to the effect that U.S. Bank National Association has authorized the execution and delivery of the Fiscal Agent Agreement and the Escrow Agreement and that the Fiscal Agent Agreement and the Escrow Agreement are valid and binding obligations of U.S. Bank National Association enforceable in accordance with their terms; (12) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the statements and information contained in the Preliminary Official Statement and the Official Statement, of the Authority's representations and warranties contained herein and the due performance or satisfaction by the Authority at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Authority in connection with the transactions contemplated hereby and by the Official Statement; (13) Written confirmation from the Authority's financial advisor and/or dissemination agent in a form acceptable to the Underwriter that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing disclosure undertakings pursuant to Rule 15e2-12 in each of the last five fiscal years; (14) Evidence that the federal tax information Form 8038-G has been prepared for filing; (15) Evidence satisfactory to the Underwriter that the Bonds have received a rating of not less than " " from Standard & Poor's Ratings Services and that such rating has not been revoked or revised; (16) Evidence that notice of the defeasance of the 2003 Bonds and termination of disclosure obligations relating to the 2003 Bonds has been prepared for filing with the EMMA system of the MSRB; and (17) A defeasance opinion of Quint & Thimmig LLP, Bond Counsel for the Authority, in form satisfactory to the Underwriter. If the Authority shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the Authority shall be under any further obligation hereunder, except that the respective obligations of the Authority and the Underwriter set forth in Section 5 hereof shall continue in full force and effect. 12 DOCSOC/ 1570468 vL022245-0257 4. Conditions of the Authority's Obligations. The Authority's obligations hereunder are subject to the Underwriter's performance of its obligations hereunder, and are also subject to the following conditions: (a) As of the Closing Date, no litigation shall be pending or, to the knowledge of the duly authorized officer of the Authority executing the certificate referred to in Section 3(d)(7) hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any authority for or the validity of the Bonds, the Formation Documents, the Authority Documents or the existence or powers of the Authority; and (b) As of the Closing Date, the Authority shall receive the approving opinion of Bond Counsel referred to in Section 3(d)(3) hereof, dated as of the Closing Date. 5. Expenses. Whether or not the Bonds are delivered to the Underwriter as set forth herein: (a) The Underwriter shall be under no obligation to pay, and the Authority shall pay or cause to be paid (out of any legally available funds of the District), all expenses incident to the performance of the Authority's obligations hereunder, including, but not limited to, the cost of printing and delivering the Bonds to DTC, the cost of preparation, printing, distribution and delivery of the Preliminary Official Statement, and the Official Statement, the reasonable cost of confirming that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing disclosure undertakings pursuant to Rule 15c2-12 in each of the last five fiscal years; and all other agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter (excluding the fees and disbursements of the Underwriter's counsel); and the fees and disbursements of the Fiscal Agent for the Bonds and Bond Counsel, Disclosure Counsel and any accountants, engineers or any other experts or consultants the Authority has retained in connection with the Bonds; and (b) The Authority shall be under no obligation to pay, and the Underwriter shall pay, any fees of the California Debt and Investment Advisory Commission, the cost of obtaining CUSIP numbers, the cost of preparation of any "blue sky" or legal investment memoranda and this Purchase Agreement; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of its counsel and any advertising expenses. 6. Notices. Any notice or other communication to be given to the Authority under this Purchase Agreement may be given by delivering the same in writing to the Authority at 41000 Main Street, Temecula, California 92590, Attention: Director of Finance; and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company, Incorporated, One Ferry Building, Suite 275, San Francisco, CA 94111, Attention: Sara Brown. 7. Parties in Interest. This Purchase Agreement is made solely for the benefit of the Authority and the Underwriter (including their successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. The term "successor" shall not include any owner of a Bond merely by virtue of such ownership. 13 DOCSOC/ 1570468v3/022245.0257 8. Survival of Representations and Warranties. The representations and warranties of the Authority set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the Authority and regardless of delivery of and payment for the Bonds. 9. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority and shall be valid and enforceable as of the time of such acceptance. 10. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the Authority. 11. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in California. 12. Counterparts. This Purchase Agreement may be executed simultaneously in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Very truly yours, STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Managing Director ACCEPTED at a.m./p.m. PDT: TEMECULA PUBLIC FINANCING AUTHORITY FOR AND ON BEHALF OF THE TEMECULA PUBLIC FINANCE AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) By: Treasurer 14 DOC SOC/ 1570468v3/022245-0257 EXHIBIT A MATURITY SCHEDULE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) SPECIAL TAX REFUNDING BONDS, SERIES 2012 Maturity Date Principal (September 1) Anrnunt Interest Rate Yield % Price The purchase price of the Bonds shall be $ which is the principal amount thereof ($ ) Less net original issue discount of $ and less Underwriter's discount of The Bonds shall be subject to redemption in accordance with the following: A -I DOCSOC/ 1570468v3/022245-0257 EXHIBIT B TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) SPECIAL TAX REFUNDING BONDS, SERIES 2012 RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he or she is the Executive Director of the Temecula Public Financing Authority (the "Authority"), and, as such, is duly authorized to execute and deliver this certificate and further hereby certifies that: (1) this certificate is being delivered in connection with the sale and issuance of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Special Tax Refunding Bonds, Series 2012 (the "Bonds") in order to enable the underwriter of the Bonds to comply with Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the "Rule"); (2) in connection with the sale and issuance of the Bonds, there has been prepared a Preliminary Official Statement dated , 2012 setting forth information concerning the Bonds and the Authority (the "Preliminary Official Statement"); and (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term "Permitted Omissions" refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all as set forth in the Rule. IN WITNESS WHEREOF, 1 have hereunto set my hand as of , 2012. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) By: Its: Executive Director Preliminary, subject to change. B-1 DOCSOC/ 1570468v3/022245.0257 Bond Purchase Agreement for Wolf Creek Stradling Yocca Carlson & Rauth Draft of 7/2/12 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BONDS BOND PURCHASE AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Temecula, California Ladies and Gentlemen: ,2012 Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus (the "Underwriter"), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (the "Purchase Agreement") with the Temecula Public Financing Authority ("Authority"), acting on behalf of' the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (thc "District"), which, upon acceptance, will be binding upon the Authority and upon the Underwriter. This offer is made subject to acceptance of it by the Authority prior to 5:00 p.m. PDT on the date hereof, and if not accepted will be subject to withdrawal by the Underwriter upon written notice delivered to the Authority at any time prior to the acceptance hereof by the Authority. The Authority acknowledges and agrees that: (i) the purchase and sale of the Bonds (defined below) pursuant to this Purchase Agreement is an arm's-length commercial transaction between the Authority and the Underwriter; (ii) in connection therewith and with the discussions, undertakings and procedures leading up to thc consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as a "municipal advisor" (as defined in Section 15B of the Securities Exchange Act of 1934, as amended); (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Authority with respect to the offering contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Authority on other matters); and (iv) the Authority has consulted its own legal, financial and other advisors to the extent it has deemed appropriate with respect to this transaction. 1. Purchase, Sale and Delivery of the Bonds. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less than all) of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds (the "Bonds") in the aggregate principal amount specified in Exhibit A hereto. The Bonds shall be datcd the Closing Date (hereinafter defined), shall bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing March 1, 2013) at the DOCSOG 1564479v6/022245-0256 rates per annum, shall mature on September 1 in each of the years and in the amounts, and shall be subject to redemption, all as set forth in Exhibit A hereto. The purchase price for the Bonds shall be the amount specified as such in Exhibit A hereto. (b) The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable as provided in, the Fiscal Agent Agreement by and between the Authority and U.S. Bank National Association, as Fiscal Agent (the "Fiscal Agent"), dated as of August 1, 2012 (the "Fiscal Agent Agreement"), approved by Resolution No. TPFA 12 - adopted by the Board of Directors of the Temecula Public Financing Authority, (the "Board of Directors"), as the legislative body of the Authority and the District, on July 10, 2012 (the "Resolution of Issuance"). The Bonds and interest thereon will be payable from a special tax (the "Special Tax") levied and collected on the taxable land within the District in accordance with Resolution No. TPFA 03-22 adopted by the Board of Directors on October 28, 2003 (the "Resolution of Formation") and referred to in the Fiscal Agent Agreement as "Special Tax A." Proceeds of the sale of the Bonds will be used in accordance with the Fiscal Agent Agreement, the Escrow Agreement, dated as of August 1, 2012 (the "Escrow Agreement"), by and between the Authority and U.S. Bank National Association, as Escrow Bank (the "Escrow Bank"), Article 11 (commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"), and the Mello -Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Law"), to refund the Authority's outstanding Temecula Public Financing Authority Communities District No. 03-03 (Wolf Creek) 2003 Special Tax Bonds (the "2003 Bonds"). The Authority's Ordinance No. TPFA 03-02, the Resolution of Issuance, the Resolution of Formation and its Resolution Nos. TPFA 03-16, 03-17, 03-23, 03-24 and 03-25 are collectively referred to herein as the "District Resolutions." (c) Subsequent to its receipt of the Authority's 15c2-12 Certificate, in substantially the form attached hereto as Exhibit B, deeming the Preliminary Official Statement for the Bonds, dated 2012 (which Preliminary Official Statement, together with the cover page and all appendices thereto, is herein collectively referred to as the "Preliminary Official Statement"), final for purposes of Rule 15c2-12 of the Securities and Exchange Commission ("Rule 15c2-12"), the Underwriter has distributed copies of the Preliminary Official Statement. The Authority hereby ratifies the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter to use and distribute in printed and/or electronic format the final Official Statement dated the date hereof (including all information previously permitted to have been omitted by Rule 15c2-12, and any supplements and amendments thereto as have been approved by the Authority as evidenced by the execution and delivery of such document by an officer of the Authority) (the "Official Statement"), the Fiscal Agent Agreement, the Escrow Agreement, the Continuing Disclosure Agreement of the Authority (the "Authority Disclosure Agreement"), this Purchase Agreement, and all information contained therein, and all other documents, certificates and written statements furnished by the Authority to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the Municipal Securities Rulemaking Board (the "MSRB") through the Electronic Municipal Marketplace Access website of the MSRB on or before the Closing Date and otherwise to comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12. (d) The Underwriter agrees to make a bona fide public offer all the Bonds, initially at the prices set forth in Exhibit A hereto. Subsequent to the initial public offering of the Bonds, the 2 DOC SOC/ 1564479v6/022245-0256 Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. The Underwriter reserves the right to: (i) over -allot or effect transactions which stabilize or maintain the market price of the Bonds at levels above those that might otherwise prevail in the open market, and (ii) discontinue such stabilizing, if commenced, at any time without prior notice. (e) At 8:00 a.m., Pacific Daylight Time, on August_, 2012, or at other time or date as shall be agreed upon by the Underwriter and the Authority (such time and date being herein referred to as the "Closing Date"), the Authority will deliver (i) to The Depository Trust Company ("DTC") or to U.S. Bank National Association, acting as DTC's agent, the Bonds in definitive form (all Bonds being in book -entry form registered in the name of Cede & Co. and having the CUSIP numbers assigned to them printed thereon), duly executed by the officers of the Authority and authenticated by the Fiscal Agent, as provided in the Fiscal Agent Agreement, and (ii) to the Underwriter, at the offices of Bond Counsel, or at such other place as shall be mutually agreed upon by the Authority and the Underwriter, the documents mentioned in Section 3(d) below; and the Underwriter shall accept such delivery and pay the purchase price of the Bonds in immediately available funds (such delivery and payment being herein referred to as the "Closing"). 2. Representations, Warranties and Agreements of the Authority. The Authority represents, warrants and covenants to and agrees with the Underwriter that: (a) The Authority is duly organized and validly existing as a joint exercise of powers authority under the laws of the State of California and has duly authorized the formation of the District pursuant to the Resolution of Formation and the Law. The Board of Directors, as the legislative body of the Authority and the District, has duly adopted the District Resolutions, and has caused to be recorded a Notice of Special Tax Lien (thc "Notice of Special Tax Lien") in the real property records of the County of Riverside as Document No. 2003-894897. (Such District Resolutions and Notice of Special Tax Lien are collectively referred to herein as the "Formation Documents"). Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The District is duly organized and validly existing as a community facilities district under the laws of the State of California. The Authority has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Fiscal Agent Agreement as provided herein, and (ii) to execute, deliver, carry out, give effect to and consummate the transactions on its part contemplated by the Formation Documents and by the Fiscal Agent Agreement, the Escrow Agreement, this Purchase Agreement, and the Authority Disclosure Agreement (collectively, the "Authority Documents") and the Official Statement. (b) The Authority has complied, and will at the Closing Date be in compliance, in all material respects, with the Formation Documents and the Authority Documents, and any immaterial non-compliance by the Authority will not impair the ability of the Authority to carry out, give effect to or consummate the transactions on its part contemplated by the foregoing. From and after the date of issuance of the Bonds, the Authority will continue to comply with the covenants of the Authority contained in the Authority Documents. (c) The Board of Directors has duly and validly: (i) adopted the District Resolutions, (ii) called, held and conducted in accordance with all requirements of the Law an election within the District to approve the levy of the Special Tax within the District and to authorize bonded 3 DOCSOC/ 1564479v6/022245-0256 indebtedness of the District in an amount not to exceed $33,000,000, (iii) authorized and approved the issuance of the Bonds and due performance by the Authority of its obligations set forth in the Authority Documents, (iv) authorized the preparation, delivery and distribution of the Preliminary Official Statement and the Official Statement, and (v) authorized and approved the performance by the Authority of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by, each of the Authority Documents (including, without limitation, the collection of the Special Tax), the Bonds and the Official Statement; and, at the Closing Date, the Formation Documents will be in full force and effect and the Authority Documents and the Bonds will constitute the valid, legal and binding obligations of the Authority and (assuming due authorization, execution and delivery by other parties thereto, where necessary) will be enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. (d) To the best of the Authority's knowledge, neither the Authority nor the District is in breach of or default under any applicable law or administrative rule or regulation of the State of California (the "State") or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order to which the Authority or the District is subject, or under any loan agreement, note, resolution, fiscal agent agreement, contract, agreement or other instrument to which the Authority or District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance by the Authority or the District of their respective obligations under the Bonds, the Formation Documents or the Authority Documents, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order to which the Authority or the District is subject, or a material breach of or default under any loan agreement, note, resolution, fiscal agent agreement, trust agreement, contract, agreement or other instrument to which the Authority or the District is a party or is otherwise subject or bound. (e) Except for compliance with the blue sky or other states securities law filings, as to which the Authority makes no representations, all approvals, consents, authorizations, elections and orders of or filings or registrations with any State govemmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the Authority of its obligations hereunder, or under the Formation Documents or the Authority Documents, have been obtained and are in full force and effect. (0 The Special Tax constituting the source of payment of the Bonds has been duly and lawfully authorizcd and may be levied under the Law, the State Constitution and the applicable laws of the State; and such Special Tax, when levied, will constitute a valid and legally binding continuing lien on the properties on which it has been levied; except as described in the Official Statement, the Authority is unaware of any outstanding special assessment liens or special tax liens applicable to any property within the District other than the special taxes authorized to be levied by the Authority on behalf of the District; and the Authority has no present intention of conducting further proceedings leading to the levying of any additional special assessments or special taxes against any such property. 4 DOC SOC/ 1564479v6/022245-0256 (g) The Authority shall not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without the prior written consent of the Underwriter, which consent shall not be unreasonably delayed or withheld. Until the date which is twenty-five (25) days after the "end of the underwriting period" (as hereinafter defined), if any event shall occur of which the Authority is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement, in light of the circumstances existing at such time, not misleading, the Authority shall forthwith notify the Underwriter of such event and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter's opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time; and the Authority shall promptly furnish to the Underwriter a reasonable number of copies of such supplement. If any such amendment or supplement of the Official Statement shall occur after the Closing Date, the Authority also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of such amendment or supplement to the Official Statement. As used herein, the term "end of the underwriting period" means the later of such time as (i) the Authority delivers the Bonds to the Underwriter, or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the "end of the underwriting period" shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Authority at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the "end of the underwriting period." (h) The Fiscal Agent Agreement creates a valid pledge of the Special Taxes and the moneys in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, the Special Tax Fund established pursuant to the Fiscal Agent Agreement, including the investments thereof, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon to maturity or to the date of redemption if redeemed prior to maturity, and premium, if any, the Authority will faithfully perform and abide by all of its obligations under the Fiscal Agent Agreement. (i) Except as disclosed in the 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 with respect to which the Authority has been served with process or has received pleadings or equivalent documents is pending or, to the best knowledge of the Authority, is threatened (i) which would materially adversely affect the ability of the Authority to perform its obligations under the Bonds, the Formation Documents or the Authority Documents, or (ii) seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement and the Escrow Agreement, or the collection or application of the Special Tax pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Formation Documents, the Authority Documents, or any action contemplated by any of said documents, or (iii) in any way contesting the completeness or accuracy of the Official Statement or the powers or authority of the Authority with respect to the Bonds, the Formation Documents, the Authority Documents, or any action of the Authority contemplated by any of said documents; nor is there any action pending with respect to which the Authority has been served with process or has 5 DOC SOC/ I 564479v6/022245-0256 received pleadings or equivalent documents or, to the best knowledge of the Authority, threatened against the Authority which alleges that interest on the Bonds is not excludable from gross income for federal income tax purposes or is not exempt from California personal income taxation. (1) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer and sale under the "Blue Sky" or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, the Authority shall not be required to register as a dealer or a broker of securities or to consent to service of process in connection with any blue sky filing. (k) Any certificate signed by any official of the Authority authorized by the Board of Directors of the Authority to do so shall be deemed a representation and warranty to the Underwriter as to the statements made therein. (I) The Authority will apply the proceeds of the Bonds in accordance with the Fiscal Agent Agreement and as described in the Official Statement. (m) The information contained in the Preliminary Official Statement (other than under the caption "TI -IE BONDS — Book -Entry Only System," as to which no view is expressed) was as of the date thereof, and the information contained in the Official Statement (other than under the caption "THE BONDS — Book -Entry Only System," as to which no view is expressed) is as of its date and will be on the Closing Date, true and correct in all material respects; and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in Tight of the circumstances under which they were made, not misleading. (n) The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the Authority as of its date, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of Rule 15c2-12. The Authority hereby covenants and agrees that, within seven (7) business days from the date hereof, or, if sooner, upon reasonable written notice from the Underwriter, within sufficient time to accompany any confirmation requesting payment for Bonds from any customer of the Underwriter the Authority shall cause a final printed form of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Underwriter and the Authority so that the Underwriter may comply with paragraph (b)(4) of Rule 15c2-12 and Rules G-12, G-15, G-32 and G-36 of the MSRB. (o) Except as disclosed in the Official Statement, the Authority is not, and has not been within the last five (5) years, in breach of any reporting obligation that it has undertaken under Rule 15c2-12. To the best knowledge of the Authority neither the City nor the Redevelopment Agency of the City of Temecula is, or has been within the last five (5) years, in breach of any reporting obligation that it has undertaken under Rule 15c2-12. (p) The Authority shall not amend, terminate, or rescind, and will not agree to any amendment, termination, or rescission of the Formation Documents, the Authority Documents or this Purchase Agreement without the prior written consent of the Underwriter. (q) The Authority shall not voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to the Authority as set forth in this Purchase Agreement. 6 DOCSOC/ l 564479v6/022245-0256 (r) The Authority shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exemption from personal income taxation of the State or the exclusion from gross income for federal income tax purposes of the interest on the Bonds. 3. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Authority contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the Authority made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Authority of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Formation Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and the refunding of the 2003 Bonds and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Quint & Thimmig LLP, Bond Counsel for the Authority, and Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel to the Underwriter, shall be necessary and appropriate. (b) The information contained in the Official Statement will, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, be true and correct in all material respects and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) Between the date hereof and the Closing Date, the market price or marketability of the Bonds at the initial offering prices set forth in the Official Statement or the ability of the Underwriter to enforce contracts for the sale of Bonds shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: (1) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States of America, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon the interest that would be received by the owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; 7 DOC SOC/1564479v6/022245-0256 (2) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under the Trust indenture Act of' 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement is or would be in violation of the federal securities laws, rules or regulations as amended and then in effect; (3) any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority, its property, income, securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Authority to refund the 2003 Bonds as contemplated by the Formation Documents, the Authority Documents or the Official Statement; (4) any event occurring, or information becoming known, which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or results in the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading misleading and (x) the Authority refuses to permit the Official Statement to be supplemented to supply such statement or information or (y) the effect of any such supplement would be to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; (5) a declaration of war or an escalation o1 or engagement in, military hostilities by the United States or the occurrence of any other national or international emergency or calamity relating to the effective operation of the government of, or the financial community in, the United States; (6) the declaration of a general banking moratorium by federal, State of New York or State of California authorities, or the general suspension of trading on any national securities exchange or the fixing and maintaining in force of minimum or maximum prices for trading or maximum ranges for prices for securities on the New York Stock Exchange or other national securities exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission (the "SEC") or any other governmental authority having jurisdiction; (7) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occur -ed; (8) there shall have been any material adverse change in the financial affairs of the Authority or the District; 8 DOCSOC/1564479v6/022245-0256 (9) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a change to the net capital requirements of, underwriters established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or (10) a stop order, release, regulation, or no -action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made to the effect that the issuance, offering, or sale of the Bonds, including all the underlying obligations as contemplated hereby or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of federal securities laws at the Closing Date. (d) On the Closing Date, the Underwriter shall have received originals or true and correct copies of the following documents, in either printed or electronic format in each case satisfactory in form and substance to the Underwriter: (1) The Authority Documents, together with a certificate dated as of the Closing Date of the Secretary of the Authority to the effect that each Formation Document is a true, correct and complete copy of the one duly adopted by the Board of Directors; (2) The Official Statement; (3) An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Authority, of Quint & Thimmig LLP, Bond Counsel for the Authority, in the form attached to the Official Statement as Appendix E, and a letter of such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such approving opinion may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; (4) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Quint & Thimmig LLP, Bond Counsel for the Authority, to the effect that (i) the Escrow Agreement, the Authority Disclosure Agreement and this Purchase Agreement have been duly authorized, executed and delivered by the Authority, and, assuming such agreements constitute valid and binding obligations of the respective other parties thereto, they constitute the legally valid and binding agreements of the Authority enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor's rights or remedies and by general principles of equity (regardless of whether such enforceability is considered in equity or at law); (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (iii) the information contained in the Official Statement on the cover and under the captions "INTRODUCTION," "PLAN OF FINANCE," "THE 2012 BONDS (excluding the subheading "Debt Service Schedule")," "SECURITY FOR THE 2012 BONDS," "LEGAL MATTERS — Tax Exemption," and Appendices C and E thereof is accurate, insofar as such information purports to summarize or replicate certain provisions of the Law, the Bonds, the Escrow Agreement and the Fiscal Agent Agreement and the exclusion from gross income for federal income tax purposes and exemption from State of California personal income taxes of interest on the Bonds present a fair and accurate summary of such provisions; 9 DOCSOC/ 1564479v6/022245-0256 (5) An opinion, dated the Closing Date and addressed to the Authority and the Underwriter of McFarlin & Anderson LLP, Disclosure Counsel, to the effect that, without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Authority and the District, Richards, Watson & Gershon, A Professional Corporation, as Counsel to the Authority, Bond Counsel, Fieldman Rolapp & Associates, as financial advisor to the Authority, the Underwriter and others, and their examination of certain documents, no facts have come to their attention which would lead them to believe that the Official Statement as of its date or as of the Closing Date contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial, statistical, economic, engineering, or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, or any information about feasibility, valuation, appraisals, market absorption, real estate, archaeological, or environmental matters, the Appendices to the Official Statement or any information about debt service requirements, book -entry, The Depository Trust Company, or tax exemption contained in the Official Statement); (6) An opinion, dated the Closing Date and addressed to the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel for the Underwriter, in form and substance acceptable to the Underwriter; (7) A certificate or certificates, dated the Closing Date and signed by an authorized officer of the Authority, ratifying the use and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offering and sale of the Bonds; and certifying that (i) the representations and warranties of the Authority contained in Section 2 hereof are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best of his or her knowledge, no event has occurred since the date of the Official Statement affecting the matters discussed therein which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make the statements and information contained in the Official Statement not misleading in any material respect; and (iii) the Authority has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Authority Documents and the Official Statement at or prior to the Closing Date; (8) An opinion, dated the Closing Date and addressed to the Underwriter, of legal counsel to the Authority, to the effect that (i) to the best of his or her knowledge and except as disclosed in the Official Statement, there is no litigation, action, suit, proceeding or investigation at law or in equity as to which the Authority is or would be a party, before or by any court, governmental agency or body, pending and notice of which has been served on and received by the Authority or, to the best of' his or her knowledge, threatened against the Authority, challenging the creation, organization or existence of the Authority or the District, or the validity of the Financing Documents or contesting the authority of the Authority to enter into or perform its obligations under any of such documents, or with respect to which an unfavorable decision, ruling or finding would materially adversely affect the ability of the Authority to perform its obligations under the Bonds, the Formation Documents or the Authority Documents, or which seeks to restrain or enjoin the issuance, sale and delivery of the Bonds or which challenges the exclusion from gross income for federal income tax purposes or State of California personal income taxes of interest on the Bonds, or the application of the proceeds thereof in accordance with the Fiscal Agent Agreement and the Escrow 10 DOCS OC/ 1564479v6/022245-0256 Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the Bonds, or which in any way contests or affects the validity or enforceability of the Bonds, the Formation Documents or the Authority Documents or the accuracy of the Official Statement, or any action of the Authority contemplated by any of said documents; (ii) the Authority is duly organized and validly existing as a joint exercise of powers authority under the laws of the State of California and the District is duly organized and validly existing as a community facilities district under the laws of the State of California, (iii) the Board of Directors has duly and validly adopted the Formation Documents and Authority Documents at meetings of the Board of Directors which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Formation Documents and Authority Documents are now in full force and effect and have not been amended; (iv); to the best of such counsel's knowledge, the authorization, execution and delivery of the Authority Documents and compliance with the provisions thereof by the Authority of its obligations thereunder, will not conflict with, or constitute a breach or default under, in any material respect, any law, administrative regulation, court decree, resolution, ordinance or other agreement to which the Authority or District is subject or by which it is bound; and (v) without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, but on the basis of its participation in conferences with representatives of the Authority, the District, Bond Counsel, Disclosure Counsel, the Underwriter, and others, and their examination of certain documents, no information in the Sections of the Official Statement entitled "The Authority," "The Community Facilities District," "Bondowners Risks" has come to the attention of such counsel which would lead him or her to believe that the information with respect to the Authority and the District in said sections of the Official Statement, as of its date and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any Appendix to the Official Statement or any other financial, statistical or economic data or forecasts, numbers, charts, graphs, estimates, projections, assumptions or expressions of opinion, or any information about valuation or appraisals, or any information about book -entry or DTC contained in the Official Statement); (9) One or more certificates dated the Closing Date from Wildan Financial Services addressed to the Authority and the Underwriter to the effect that (i) the Special Tax, if collected in the maximum amounts permitted, and without regard to the portion thereof levied to pay Administrative Expcnses, will generate in each Fiscal Year at least 110% of the debt service payable with respect to the Bonds in the calendar year that begins in such Fiscal Year; (ii) all information appearing in the Official Statement for which Willdan Financial Services is identified as being the source is true and correct as of the date of the Official Statement and as of the Closing Date; and (iii) the statements concerning the Special Tax and the statistical and financial data set forth in the tables and discussion in the Official Statement which were derived from information supplied by Willdan Financial Services for use in the Official Statement are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and no events or occurrences have been ascertained by Willdan Financial Services or have come to its attention that would substantially change such information set forth in the Official Statement; (10) A certificate of the Authority dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 11 DOCSOC/ 1564479v6/022245-0256 (11) A certificate of U.S. Bank National Association and an opinion of counsel to U.S. Bank National Association dated the Closing Date and addressed to the Authority and the Underwriter to the effect that U.S. Bank National Association has authorized the execution and delivery of the Fiscal Agent Agreement and the Escrow Agreement and that the Fiscal Agent Agreement and the Escrow Agreement are valid and binding obligations of U.S. Bank National Association enforceable in accordance with their terms; (12) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the statements and information contained in the Preliminary Official Statement and the Official Statement, of the Authority's representations and warranties contained herein and the due performance or satisfaction by the Authority at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Authority in connection with the transactions contemplated hereby and by the Official Statement; (13) Written confirmation from the Authority's financial advisor and/or dissemination agent in a form acceptable to the Underwriter that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing disclosure undertakings pursuant to Rule 15e2-12 in each of the last five fiscal years; (14) Evidence that the federal tax information Form 8038-G has been prepared for filing; (15) Evidence that notice of the defeasance of the 2003 Bonds and termination of disclosure obligations relating to the 2003 Bonds has been prepared for filing with the EMMA system of the MSRB; and (16) A defeasance opinion of Quint & Thimmig LLP, Bond Counsel for the Authority, in form satisfactory to the Underwriter. If the Authority shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the Authority shall be under any further obligation hereunder, except that the respective obligations of the Authority and the Underwriter set forth in Section 5 hereof shall continue in full force and effect. 4. Conditions of the Authority's Obligations. The Authority's obligations hereunder are subject to the Underwriter's performance of its obligations hereunder, and are also subject to the following conditions: (a) As of the Closing Date, no litigation shall be pending or, to the knowledge of the duly authorized officer of the Authority executing the certificate referred to in Section 3(d)(7) hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any authority for or the validity of the Bonds, the Formation Documents, the Authority Documents or the existence or powers of the Authority; and 12 DOCSOC/1564479v6/022245-0256 (b) As of the Closing Date, the Authority shall receive the approving opinion of Bond Counsel referred to in Section 3(d)(3) hereof, dated as of the Closing Date. 5. Expenses. Whether or not the Bonds are delivered to the Underwriter as set forth herein: (a) The Underwriter shall be under no obligation to pay, and the Authority shall pay or cause to be paid (out of any legally available funds of the District), all expenses incident to the performance of the Authority's obligations hereunder, including, but not limited to, the cost of printing and delivering the Bonds to DTC, the cost of preparation, printing, distribution and delivery of the Preliminary Official Statement, and the Official Statement, the reasonable cost of confirming that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing disclosure undertakings pursuant to Rule 15c2 -I2 in each of the last five fiscal years; and all other agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter (excluding the fees and disbursements of the Underwriter's counsel); and the fees and disbursements of the Fiscal Agent for the Bonds and Bond Counsel, Disclosure Counsel and any accountants, engineers or any other experts or consultants the Authority has retained in connection with the Bonds; and (b) The Authority shall be under no obligation to pay, and the Underwriter shall pay, any fees of the California Debt and Investment Advisory Commission, the cost of obtaining CUSIP numbers, the cost of preparation of any "blue sky" or legal investment memoranda and this Purchase Agreement; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of its counsel and any advertising expenses. 6. Notices. Any notice or other communication to be given to the Authority under this Purchase Agreement may be given by delivering the same in writing to the Authority at 41000 Main Street, Temecula, California 92590, Attention: Director of Finance; and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company, Incorporated, One Ferry Building, Suite 275, San Francisco, CA 94111, Attention: Sara Brown. 7. Parties in Interest. This Purchase Agreement is made solely for the benefit of the Authority and the Underwriter (including their successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. The term "successor" shall not include any owner of a Bond merely by virtue of such ownership. 8. Survival of Representations and Warranties. The representations and warranties of the Authority set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the Authority and regardless of delivery of and payment for the Bonds. 9. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority and shall be valid and enforceable as of the time of such acceptance. 13 DOCSOC/ 1564479v6/022245-0256 10. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the Authority. 11. Governing Law. This Purchase Agreement shall be govemed by the laws of the State of California applicable to contracts made and performed in Califomia. 12. Counterparts. This Purchase Agreement may be executed simultaneously in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Very truly yours, STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Managing Director ACCEPTED at a.m./p.m. PDT: TEMECULA PUBLIC FINANCING AUTHORITY FOR AND ON BEHALF OF THE TEMECULA PUBLIC FINANCE AUTHORITY COMMUNITY FACILI 1 IES DISTRICT NO. 03-03 (WOLF CREEK) By: Treasurer 14 DOCSOC/ 1564479v61022245-0256 EXHIBIT A MATURITY SCHEDULE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BONDS Maturity Date Principal (September 1) Antolini* Interest Rate Yield $ Price The purchase price of the Bonds shall be $ , which is the principal amount thereof ($ ) less net original issue discount of $ and less Underwriter's discount of The Bonds shall be subject to redemption in accordance with the following: A- I DOCSOC/ 1564479 0/022245-0256 EXHIBIT B S TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) 2012 SPECIAL TAX REFUNDING BONDS RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he or she is the Executive Director of the Temecula Public Financing Authority (the "Authority"), and, as such, is duly authorized to execute and deliver this certificate and further hereby certifies that: (1) this certificate is being delivered in connection with the sale and issuance of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Refunding Bonds (the "Bonds") in order to enable the underwriter of the Bonds to comply with Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the "Rule"); (2) in connection with the sale and issuance of the Bonds, there has been prepared a Preliminary Official Statement dated , 2012 setting forth information concerning the Bonds and the Authority (the "Preliminary Official Statement"); and (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term "Permitted Omissions" refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all as set forth in the Rule. IN WITNESS WHEREOF, I have hereunto set my hand as of , 2012. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-03 (WOLF CREEK) By: Its: Executive Director Preliminary, subject la change. B-1 DOCSOC/ 1564479v6/022245.0256 Bond Purchase Agreement for Harveston 11 Stradling Yocca Carlson & Rauth Draf? of 7/2/12 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (IIARVESTON II) SPECIAL TAX REFUNDING BONDS, SERIES 2012 BOND PURCHASE AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) Temecula, California Ladies and Gentlemen: ,2012 Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus (the "Underwriter"), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (the "Purchase Agreement") with the Temecula Public Financing Authority ("Authority"), acting on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) (the "District"), which, upon acceptance, will be binding upon the Authority and upon the Underwriter. This offer is made subject to acceptance of it by the Authority prior to 5:00 p.m. PDT on the date hereof, and if not accepted will be subject to withdrawal by the Underwriter upon written notice delivered to the Authority at any time prior to the acceptance hereof by the Authority. The Authority acknowledges and agrees that: (i) the purchase and sale of the Bonds (defined below) pursuant to this Purchase Agreement is an arm's-length commercial transaction between the Authority and the Underwriter; (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as a "municipal advisor" (as defined in Section 1513 of the Securities Exchange Act of 1934, as amended); (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Authority with respect to the offering contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Authority on other matters); and (iv) the Authority has consulted its own legal, financial and other advisors to the extent it has deemed appropriate with respect to this transaction. 1. Purchase, Sale and Delivery of the Bonds. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less than all) of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) Special Tax Refunding Bonds, Series 2012 (the "Bonds") in the aggregate principal amount specified in Exhibit A hereto. The Bonds shall be dated the Closing Date (hereinafter defined), shall bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing March 1, 2013) at the DOC S OC/ 1570460v3/022245-0256 rates per annum, shall mature on September 1 in each of the years and in the amounts, and shall be subject to redemption, all as set forth in Exhibit A hereto. The purchase price for the Bonds shall be the amount specified as such in Exhibit A hereto. (b) The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable as provided in, the Fiscal Agent Agreement by and between the Authority and U.S. Bank National Association, as Fiscal Agent (the "Fiscal Agent"), dated as of August 1, 2012 (the "Fiscal Agent Agreement"), approved by Resolution No. TPFA 12 - adopted by the Board of Directors of the Temecula Public Financing Authority, (the "Board of Directors"), as the legislative body of the Authority and the District, on July 10, 2012 (the "Resolution of Issuance"). The Bonds and interest thereon will be payable from a special tax (the "Special Tax") levied and collected on the taxable land within the District in accordance with Resolution No. TPFA 03-27 adopted by the Board of Directors on November 25, 2003 (the "Resolution of Formation"). Proceeds of the sale of the Bonds will be used in accordance with the Fiscal Agent Agreement, the Escrow Agreement, dated as of August 1, 2012 (the "Escrow Agreement"), by and between the Authority and U.S. Bank National Association, as Escrow Bank (the "Escrow Bank"), Article 11 (commencing with Section 53580, of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Govemment Code (the "Refunding Law"), and the Mello -Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Law"), to refund the Authority's outstanding Temecula Public Financing Authority Communities District No. 03-06 (1-larveston II) Special Tax Bonds, Series 2004 (the "2004 Bonds"). The Authority's Ordinance No. TPFA 03-06, the Resolution of Issuance, the Resolution of Formation and its Resolution Nos. TPFA 03-21, 03-28, 03-29 and 03-30 are collectively referred to herein as the "District Resolutions." (c) Subsequent to its receipt of the Authority's 15c2-12 Certificate, in substantially the form attached hereto as Exhibit 13, deeming the Preliminary Official Statement for the Bonds, dated , 2012 (which Preliminary Official Statement, together with the cover page and all appendices thereto, is herein collectively referred to as the "Preliminary Official Statement"), final for purposes of Rule 15c2-12 of the Securities and Exchange Commission ("Rule 15c2-12"), the Underwriter has distributed copies of the Preliminary Official Statement. The Authority hereby ratifies the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter to use and distribute in printed and/or electronic format the final Official Statement dated the date hereof (including all information previously permitted to have been omitted by Rule 15e2-12, and any supplements and amendments thereto as have been approved by the Authority as evidenced by the execution and delivery of such document by an officer of the Authority) (the "Official Statement"), the Fiscal Agent Agreement, the Escrow Agreement, the Continuing Disclosure Agreement of the Authority (the "Authority Disclosure Agreement"), this Purchase Agreement, and all information contained therein, and all other documents, certificates and written statements furnished by the Authority to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the Municipal Securities Rulemaking Board (thc "MSRB") through the Electronic Municipal Marketplace Access website of the MSRB on or before thc Closing Date and otherwise to comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12. (d) The Underwriter agrees to make a bona fide public offer all the Bonds, initially at the prices set forth in Exhibit A hereto. Subsequent to the initial public offering of the Bonds, the 2 DOCSOC/ I 570460v3/022245-0256 Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. The Underwriter reserves the right to: (i) over -allot or effect transactions which stabilize or maintain the market price of the Bonds at levels above those that might otherwise prevail in the open market, and (ii) discontinue such stabilizing, if commenced, at any time without prior notice. (e) At 8:00 a.m., Pacific Daylight Time, on August _, 2012, or at other time or date as shall be agreed upon by the Underwriter and the Authority (such time and date being herein referred to as the "Closing Date"), the Authority will deliver (i) to The Depository Trust Company ("DTC") or to U.S. Bank National Association, acting as DTC's agcnt, the Bonds in definitive form (all Bonds being in book -entry form registered in the name of Cede & Co. and having the CUSIP numbers assigned to them printed thereon), duly executed by the officers of the Authority and authenticated by the Fiscal Agent, as provided in the Fiscal Agent Agreement, and (ii) to the Underwriter, at the offices of Bond Counsel, or at such other place as shall be mutually agreed upon by the Authority and the Underwriter, the documents mentioned in Section 3(d) below; and the Underwriter shall accept such delivery and pay the purchase price of the Bonds in immediately available funds (such delivery and payment being herein referred to as the "Closing"). 2. Representations, Warranties and Agreements of the Authority. The Authority represents, warrants and covenants to and agrees with the Underwriter that: (a) The Authority is duly organized and validly existing as a joint exercise of powers authority under the laws of the State of California and has duly authorized the formation of the District pursuant to the Resolution of Formation and the Law. The Board of Directors, as the legislative body of the Authority and the District, has duly adopted the District Resolutions, and has caused to be recorded a Notice of Special Tax Lien (the "Notice of Special Tax Lien") in the real property records of the County of Riverside as Document No. 2003-970556. (Such District Resolutions and Notice of Special Tax Lien are collectively referred to herein as the "Formation Documents"). Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The District is duly organized and validly existing as a community facilities district under the laws of the State of California. The Authority has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Fiscal Agent Agreement as provided herein, and (ii) to execute, deliver, carry out, give effect to and consummate the transactions on its part contemplated by the Formation Documents and by the Fiscal Agent Agreement, the Escrow Agreement, this Purchase Agreement, and the Authority Disclosure Agreement (collectively, the "Authority Documents") and the Official Statement. (b) The Authority has complied, and will at the Closing Date be in compliance, in all material respects, with the Formation Documents and the Authority Documents, and any immaterial non-compliance by the Authority will not impair the ability of the Authority to carry out, give effect to or consummate the transactions on its part contemplated by the foregoing. From and after the date of issuance of the Bonds, the Authority will continue to comply with the covenants of the Authority contained in the Authority Documents. (c) The Board of Directors has duly and validly: (i) adopted the District Resolutions, (ii) called, held and conducted in accordance with all requirements of the Law an election within the District to approve the levy of the Special Tax within the District and to authorize bonded 3 DOCSOC/ 1 570460v3/022245-0256 indebtedness of the District in an amount not to exceed $5,500,000, (iii) authorized and approved the issuance of the Bonds and due performance by the Authority of its obligations set forth in the Authority Documents, (iv) authorized the preparation, delivery and distribution of the Preliminary Official Statement and the Official Statement, and (v) authorized and approved the performance by the Authority of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by, each of the Authority Documents (including, without limitation, the collection of the Special Tax), the Bonds and the Official Statement; and, at the Closing Date, the Formation Documents will be in full force and effect and the Authority Documents and the Bonds will constitute the valid, legal and binding obligations of the Authority and (assuming due authorization, execution and delivery by other parties thereto, where necessary) will be enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. (d) To the best of the Authority's knowledge, neither the Authority nor the District is in breach of or default under any applicable law or administrative rule or regulation of the State of California (the "State") or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order to which the Authority or the District is subject, or under any loan agreement, note, resolution, fiscal agent agreement, contract, agreement or other instrument.to which the Authority or District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance by the Authority or the District of their respective obligations under the Bonds, the Formation Documents or the Authority Documents, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order to which the Authority or the District is subject, or a material breach of or default under any loan agreement, note, resolution, fiscal agent agreement, trust agreement, contract, agreement or other instrument to which the Authority or the District is a party or is otherwise subject or bound. (c) Except for compliance with the blue sky or other states securities law filings, as to which the Authority makes no representations, all approvals, consents, authorizations, elections and orders of or filings or registrations with any State governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the Authority of its obligations hereunder, or under the Formation Documents or the Authority Documents, have been obtained and are in full force and effect. (f) The Special Tax constituting the source of payment of the Bonds has been duly and lawfully authorized and may be levied under the Law, the State Constitution and the applicable laws of the State; and such Special Tax, when levied, will constitute a valid and legally binding continuing lien on the properties on which it has been levied; except as described in the Official Statement, the Authority is unaware of any outstanding special assessment liens or special tax liens applicable to any property within the District other than the special taxes authorized to be levied by the Authority on behalf of the District; and the Authority has no present intention of conducting further proceedings leading to the levying of any additional special assessments or special taxes against any such property. 4 DOCSOC/ 1570460v3/022245-0256 (g) The Authority shall not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without the prior written consent of the Underwriter, which consent shall not be unreasonably delayed or withheld. Until the date which is twenty-five (25) days after the "end of the underwriting period" (as hereinafter defined), if any event shall occur of which the Authority is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement, in light of the circumstances existing at such time, not misleading, the Authority shall forthwith notify the Underwriter of such event and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter's opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time; and the Authority shall promptly furnish to the Underwriter a reasonable number of copies of such supplement. if any such amendment or supplement of the Official Statement shall occur after the Closing Date, the Authority also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of such amendment or supplement to the Official Statement. As used herein, the term "end of the underwriting period" means the later of such time as (i) the Authority delivers the Bonds to the Underwriter, or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the "end of the underwriting period" shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Authority at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the "end of the underwriting period." (h) The Fiscal Agent Agreement creates a valid pledge of the Special Taxes and the moneys in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, the Special Tax Fund established pursuant to the Fiscal Agent Agreement, including the investments thereof, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon to maturity or to the date of redemption if redeemed prior to maturity, and premium, if any, the Authority will faithfully perform and abide by all of its obligations under the Fiscal Agent Agreement. (i) Except as disclosed in the 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 with respect to which the Authority has been served with process or has received pleadings or equivalent documents is pending or, to the best knowledge of the Authority, is threatened (i) which would materially adversely affect the ability of the Authority to perform its obligations under the Bonds, the Formation Documents or the Authority Documents, or (ii) seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement and the Escrow Agreement, or the collection or application of the Special Tax pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Formation Documents, the Authority Documents, or any action contemplated by any of said documents, or (iii) in any way contesting the completeness or accuracy of the Official Statement or the powers or authority of the Authority with respect to the Bonds, the Formation Documents, the Authority Documents, or any action of the Authority contemplated by any of said documents; nor is there any action pending with respect to which the Authority has been served with process or has 5 DOCSOC/1570460v3/022245-0256 received pleadings or equivalent documents or, to the best knowledge of the Authority, threatened against the Authority which alleges that interest on the Bonds is not excludable from gross income for federal income tax purposes or is not exempt from California personal income taxation. 0) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer and sale under the "Blue Sky" or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, the Authority shall not be required to register as a dealer or a broker of securities or to consent to service of process in connection with any blue sky filing. (k) Any certificate signed by any official of the Authority authorized by the Board of Directors of the Authority to do so shall be deemed a representation and warranty to the Underwriter as to the statements made therein. (1) The Authority will apply the proceeds of the Bonds' in accordance with the Fiscal Agent Agreement and as described in the Official Statement. (m) The information contained in the Preliminary Official Statement (other than under the caption "THE BONDS — Book -Entry Only System," as to which no view is expressed) was as of the date thereof, and the information contained in the Official Statement (other than under the caption "THE BONDS — Book -Entry Only System," as to which no view is expressed) is as of its date and will be on the Closing Date, true and correct in all material respects; and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (n) The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the Authority as of its date, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of Rule I5c2-12. The Authority hereby covenants and agrees that, within seven (7) business days from the date hereof, or, if sooner, upon reasonable written notice from the Underwriter, within sufficient time to accompany any confirmation requesting payment for Bonds from any customer of the Underwriter the Authority shall cause a final printed form of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Underwriter and the Authority so that the Underwriter may comply with paragraph (b)(4) of Rule 15e2 -I2 and Rules G-12, G-15, G-32 and G-36 of the MSRB. (o) Except as disclosed in the Official Statement, the Authority is not, and has not been within the last five (5) years, in breach of any reporting obligation that it has undertaken under Rule 15c2-12. To the best knowledge of the Authority neither the City nor the Redevelopment Agency of the City of Temecula is, or has been within the last five (5) years, in breach of any reporting obligation that it has undertaken under Rule 15c2-12. (p) The Authority shall not amend, terminate, or rescind, and will not agree to any amendment, termination, or rescission of the Formation Documents, the Authority Documents or this Purchase Agreement without the prior written consent of the Underwriter. (q) The Authority shall not voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to the Authority as set forth in this Purchase Agreement. 6 DOCS OC/ 1570460v3/022245-0256 (r) The Authority shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exemption from personal income taxation of the State or the exclusion from gross income for federal income tax purposes of the interest on the Bonds. 3. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Authority contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the Authority made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Authority of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Formation Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and the refunding of the 2004 Bonds and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Quint & Thimmig LLP, Bond Counsel for the Authority, and Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel to the Underwriter, shall be necessary and appropriate. (b) The information contained in the Official Statement will, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, be true and correct in all material respects and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) Between the date hereof and the Closing Date, the market price or marketability of the Bonds at the initial offering prices set forth in the Official Statement or the ability of the Underwriter to enforce contracts for the sale of Bonds shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: (1) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States of America, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon the interest that would be received by the owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; 7 DOC SOC/ 1570460v3/022245-0256 (2) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of' the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or al] underlying arrangements, as contemplated hereby or by the Official Statement is or would be in violation of the federal securities laws, rules or regulations as amended and then in effect; (3) any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority, its property, income, securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Authority to refund the 2004 Bonds as contemplated by the Formation Documents, the Authority Documents or the Official Statement; (4) any event occurring, or information becoming known, which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or results in the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in Tight of the circumstances under which they were made, not misleading misleading and (x) the Authority refuses to permit the Official Statement to be supplemented to supply such statement or information or (y) the effect of any such supplement would be to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; (5) a declaration of war or an escalation of, or engagement in, military hostilities by the United States or the occurrence of any other national or international emergency or calamity relating to the effective operation of the govemment of, or the financial community in, the United States; (6) the declaration of a general banking moratorium by federal, State of New York or State of California authorities, or the general suspension of trading on any national securities exchange or the fixing and maintaining in force of minimum or maximum prices for trading or maximum ranges for prices for securities on the New York Stock Exchange or other national securities exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission (the "SEC") or any other governmental authority having jurisdiction; (7) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; (8) there shall have been any material adverse change in the financial affairs of the Authority or the District; 8 D OC S O C/ 1570460v3 /022245-025 6 (9) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a change to the net capital requirements of, underwriters established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or (10) a stop order, release, regulation, or no -action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made to the effect that the issuance, offering, or sale of the Bonds, including all the underlying obligations as contemplated hereby or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of federal securities laws at the Closing Date. (d) On the Closing Date, the Underwriter shall have received originals or true and correct copies of the following documents, in either printed or electronic format in each case satisfactory in form and substance to the Underwriter: (1) The Authority Documents, together with a certificate dated as of the Closing Date of the Secretary of the Authority to the effect that each Formation Document is a true, correct and complete copy of the one duly adopted by the Board of Directors; (2) The Official Statement; (3) An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Authority, of Quint & Thimmig LLP, Bond Counsel for the Authority, in the form attached to the Official Statement as Appendix E, and a letter of such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such approving opinion may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; (4) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Quint & Thimmig LLP, Bond Counsel for the Authority, to the effect that (i) the Escrow Agreement, the Authority Disclosure Agreement and this Purchase Agreement have been duly authorized, executed and delivered by the Authority, and, assuming such agreements constitute valid and binding obligations of the respective other parties thereto, they constitute the legally valid and binding agreements of the Authority enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor's rights or remedies and by general principles of equity (regardless of whether such enforceability is considered in equity or at law); (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (iii) the information contained in the Official Statement on the cover and under the captions "INTRODUCTION," "PLAN OF FINANCE," "THE 2012 BONDS (excluding the subheading "Debt Service Schedule")," "SECURITY FOR THE 2012 BONDS," "LEGAL MATTERS — Tax Exemption," and Appendices C and E thereof is accurate, insofar as such information purports to summarize or replicate certain provisions of the Law, the Bonds, the Escrow Agreement and the Fiscal Agent Agreement and the exclusion from gross income for federal income tax purposes and exemption from State of California personal income taxes of interest on the Bonds present a fair and accurate summary of such provisions; 9 DOCSOC/1570460v3/022245-0256 (5) An opinion, dated the Closing Date and addressed to the Authority and the Underwriter of McFarlin & Anderson LLP, Disclosure Counsel, to the effect that, without having undertaken to determine independently the accuracy, completeness or faimess of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Authority and the District, Richards, Watson & Gershon, A Professional Corporation, as Counsel to the Authority, Bond Counsel, Fieldman Rolapp & Associates, as financial advisor to the Authority, the Underwriter and others, and their examination of certain documents, no facts have come to their attention which would lead them to believe that the Official Statement as of' its date or as of the Closing Date contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial, statistical, economic, engineering, or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, or any information about feasibility, valuation, appraisals, market absorption, real estate, archaeological, or environmental matters, the Appendices to the Official Statement or any information about debt service requirements, book -entry, The Depository Trust Company, or tax exemption contained in the Official Statement); (6) An opinion, dated the Closing Date and addressed to the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel for the Underwriter, in form and substance acceptable to the Underwriter; (7) A certificate or certificates, dated the Closing Date and signed by an authorized officer of the Authority, ratifying the use and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offering and sale of the Bonds; and certifying that (i) the representations and warranties of the Authority contained in Section 2 hereof are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best of his or her knowledge, no event has occurred since the date of the Official Statement affecting the matters discussed therein which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make the statements and information contained in the Official Statement not misleading in any material respect; and (iii) the Authority has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Authority Documents and the Official Statement at or prior to the Closing Date; (8) An opinion, dated the Closing Date and addressed to the Underwriter, of legal counsel to the Authority, to the effect that (i) to the best of his or her knowledge and except as disclosed in the Official Statement, there is no litigation, action, suit, proceeding or investigation at law or in equity as to which the Authority is or would be a party, before or by any court, governmental agency or body, pending and notice of which has been served on and received by the Authority or, to the best of his or her knowledge, threatened against the Authority, challenging the creation, organization or existence of the Authority or the District, or the validity of the Financing Documents or contesting the authority of the Authority to enter into or perform its obligations under any of such documents, or with respect to which an unfavorable decision, ruling or finding would materially adversely affect the ability of the Authority to perform its obligations under the Bonds, the Formation Documents or the Authority Documents, or which seeks to restrain or enjoin the issuance, sale and delivery of the Bonds or which challenges the exclusion from gross income for federal income tax purposes or State of California personal income taxes of interest on the Bonds, or the application of the proceeds thereof in accordance with the Fiscal Agent Agreement and the Escrow 10 DOCSOC/ 1570460v3/022245-0256 Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the Bonds, or which in any way contests or affects the validity or enforceability of the Bonds, the Formation Documents or the Authority Documents or the accuracy of the Official Statement, or any action of the Authority contemplated by any of said documents; (ii) the Authority is duly organized and validly existing as a joint exercise of powers authority under the laws of the State of California and the District is duly organized and validly existing as a community facilities district under the laws of the State of California, (iii) the Board of Directors has duly and validly adopted the Formation Documents and Authority Documents at meetings of the Board of Directors which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Formation Documents and Authority Documents are now in full force and effect and have not been amended; (iv); to the best of such counsel's knowledge, the authorization, execution and delivery of the Authority Documents and compliance with the provisions thereof by the Authority of its obligations thereunder, will not conflict with, or constitute a breach or default under, in any material respect, any law, administrative regulation, court decree, resolution, ordinance or other agreement to which the Authority or District is subject or by which it is bound; and (v) without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, but on the basis of its participation in conferences with representatives of the Authority, the District, Bond Counsel, Disclosure Counsel, the Underwriter, and others, and their examination of certain documents, no information in the Sections of the Official Statement entitled "The Authority," "The Community Facilities District," "Bondowners Risks" has come to the attention of such counsel which would lead him or her to believe that the information with respect to the Authority and the District in said sections of the Official Statement, as of its date and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any Appendix to the Official Statement or any other financial, statistical or economic data or forecasts, numbers, charts, graphs, estimates, projections, assumptions or expressions of opinion, or any information about valuation or appraisals, or any information about book -entry or DTC contained in the Official Statement); (9) One or more certificates dated the Closing Date from Wildan Financial Services addressed to the Authority and the Underwriter to the effect that (i) the Special Tax, if collected in the maximum amounts permitted, and without regard to the portion thereof levied to pay Administrative Expenses, will generate in each Fiscal Year at least 110% of the debt service payable with respect to the Bonds in the calendar year that begins in such Fiscal Year; (ii) all information appearing in the Official Statement for which Willdan Financial Services is identified as being the source is true and correct as of the date of the Official Statement and as of the Closing Date; and (iii) the statements concerning the Special Tax and the statistical and financial data set forth in the tables and discussion in the Official Statement which were derived from information supplied by Willdan Financial Services for use in the Official Statement are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and no events or occurrences have been ascertained by Willdan Financial Services or have come to its attention that would substantially change such information set forth in the Official Statement;; (10) A certificate of the Authority dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 11 DOCS001570460v3/022245-0256 (I 1) A certificate of U.S. Bank National Association and an opinion of counsel to U.S. Bank National Association dated the Closing Date and addressed to the Authority and the Underwriter to the effect that U.S. Bank National Association has authorized the execution and delivery of the Fiscal Agent Agreement and the Escrow Agreement and that the Fiscal Agent Agreement and the Escrow Agreement are valid and binding obligations of U.S. Bank National Association enforceable in accordance with their terms; (12) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the statements and information contained in the Preliminary Official Statement and the Official Statement, of the Authority's representations and warranties contained herein and the due performance or satisfaction by the Authority at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Authority in connection with the transactions contemplated hereby and by the Official Statement; (13) Written confirmation from the Authority's financial advisor and/or dissemination agent in a form acceptable to the Underwriter that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing disclosure undertakings pursuant to Rule 15c2-12 in each of the last five fiscal years; (14) Evidence that the federal tax information Form 8038-G has been prepared for filing; (15) of not Icss than " revoked or revised; Evidence satisfactory to the Underwriter that the Bonds have received a rating " from Standard & Poor's Ratings Services and that such rating has not been (16) Evidence that notice of the defeasance of the 2004 Bonds and termination of disclosure obligations relating to the 2004 Bonds has been prepared for filing with the EMMA system of the MSRB; and (17) A defeasance opinion of Quint & Thimmig LLP, Bond Counsel for the Authority, in form satisfactory to the Underwriter. If the Authority shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be tcrminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the Authority shall be under any further obligation hereunder, except that the respective obligations of the Authority and the Underwriter set forth in Section 5 hereof shall continue in full force and effect. 4. Conditions of the Authority's Obligations. The Authority's obligations hereunder are subject to the Underwriter's performance of its obligations hereunder, and are also subject to the following conditions: (a) As of the Closing Date, no litigation shall be pending or, to the knowledge of the duly authorized officer of the Authority executing the certificate referred to in Section 3(d)(7) hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any 12 DOC SOC/ 1570460v3/022245-0256 authority for or the validity of the Bonds, the Formation Documents, the Authority Documents or the existence or powers of the Authority; and (b) As of the Closing Date, the Authority shall receive the approving opinion of Bond Counsel referred to in Section 3(d)(3) hereof, dated as of the Closing Date. 5. Expenses. Whether or not the Bonds are delivered to the Underwriter as set forth herein: (a) The Underwriter shall be under no obligation to pay, and the Authority shall pay or cause to be paid (out of any legally available funds of the District), all expenses incident to the performance of the Authority's obligations hereunder, including, but not limited to, the cost of printing and delivering the Bonds to DTC, the cost of preparation, printing, distribution and delivery of the Preliminary Official Statement, and the Official Statement, the reasonable cost of confirming that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing disclosure undertakings pursuant to Rule 15c2-12 in each of the last five fiscal years; and all other agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter (excluding the fees and disbursements of the Underwriter's counsel); and the fees and disbursements of the Fiscal Agent for the Bonds and Bond Counsel, Disclosure Counsel and any accountants, engineers or any other experts or consultants the Authority has retained in connection with the Bonds; and (b) The Authority shall be under no obligation to pay, and the Underwriter shall pay, any fees of the California Debt and Investment Advisory Commission, the cost of obtaining CUSIP numbers, the cost of preparation of any "blue sky" or legal investment memoranda and this Purchase Agreement; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of its counsel and any advertising expenses. 6. Notices. Any notice or other communication to be given to the Authority under this Purchase Agreement may be given by delivering the same in writing to the Authority at 41000 Main Street, Temecula, California 92590, Attention: Director of Finance; and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company, Incorporated, One Ferry Building, Suite 275, San Francisco, CA 94111, Attention: Sara Brown. 7. Parties in Interest. This Purchase Agreement is made solely for the benefit of the Authority and the Underwriter (including their successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. The term "successor" shall not include any owner of a Bond merely by virtue of such ownership. 8. Survival of Representations and Warranties. The representations and warranties of the Authority set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of thc Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the Authority and regardless of delivery of and payment for the Bonds. 13 DOC SOC/ 1570460v3/022245-0256 9. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority and shall be valid and enforceable as of the time of such acceptance. 10. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the Authority. 11. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in California. 12. Counterparts. This Purchase Agreement may be executed simultaneously in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Very truly yours, STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Managing Director ACCEPTED at a.m./p.m. PDT: TEMECULA PUBLIC FINANCING AUTHORITY FOR AND ON BEHALF OF THE TEMECULA PUBLIC FINANCE AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON Il) By: Treasurer 14 DOCSOC/ 1570460v3/022245 -0256 ($ ) less net original issue discount of $ and less Underwriter's discount of EXHIBIT A MATURITY SCHEDULE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) SPECIAL TAX REFUNDING BONDS, SERIES 2012 Maturity Date Principal (September I) Amount Mterest Rate Yield Price $ The purchase price of the Bonds shall be $ , which is the principal amount thereof The Bonds shall be subject to redemption in accordance with the following: A- I DOCSOC/ 1570460v3/022245-0256 EXHIBIT B TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON II) SPECIAL TAX REFUNDING BONDS, SERIES 2012 RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he or she is the Executive Director of the Temecula Public Financing Authority (the "Authority"), and, as such, is duly authorized to execute and deliver this certificate and further hereby certifies that: (1) this certificate is being delivered in connection with the sale and issuance of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Special Tax Refunding Bonds, Series 2012 (the "Bonds") in order to enable the underwriter of the Bonds to comply with Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the "Rule"); (2) in connection with the sale and issuance of the Bonds, there has been prepared a Preliminary Official Statement dated , 2012 setting forth information concerning the Bonds and the Authority (the "Preliminary Official Statement"); and (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term "Permitted Omissions" refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all as set forth in the Rule. IN WITNESS WHEREOF, I have hereunto set my hand as of , 2012. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-06 (HARVESTON 11) By: Its: Executive Director • Preliminary, subject to change. B-1 DOCS001570460v3/022245.0256 Attachment No. 8 Continuing Disclosure Agreements for Crowne Hill, Wolf Creek, and Harveston II APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT This CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement") is executed and entered into as of August 1, 2012, by and among Willdan Financial Services, as Dissemination Agent (the "Dissemination Agent"), U.S. Bank National Association, a national banking association organized and existing under and by virtue of the laws of the United States of America in its capacity as Fiscal Agent (the "Fiscal Agent"), and the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the Constitution and of the laws of the State of Califomia (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) (the "District"); WITNESSETH: WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of July 1, 2003, by and between the Authority, for and on behalf of the District, and the Fiscal Agent, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2005, and by the Second Supplemental Fiscal Agent Agreement dated as of August 1, 2012 (collectively, the "Fiscal Agent Agreement"), the Authority has issued for the District its 2012 Special Tax Refunding Bonds in the aggregate principal amount of $ (the "2012 Bonds"); and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority, the Dissemination Agent and the Fiscal Agent for the benefit of the owners and beneficial owners of the 2012 Bonds and in order to assist the underwriter of the 2012 Bonds in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5); NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows: Section I. Definitions. Capitalized undefined terms uscd herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement. In addition, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Authority pursuant to, and described in, Sections 2 and 3 of this Disclosure Agreement. "Annual Report Date" shall mean the date in each year that is eight months after the end of the Authority's fiscal year, which date, as of the date of this Disclosure Agreement, is March 1. "Disclosure Representative" shall mean the Chief Financial Officer of the City of Temecula, as Treasurer of the Authority, or his or her designee, or such other office or employee as the Authority shall designate in writing to the Fiscal Agent from time to time. "Dissemination Agent" shall mean Willdan Financial Services, as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority and the Fiscal Agent a written acceptance of such designation. "District" shall mean Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill). D -I "EMMA System" shall mean the Electronic Municipal Market Access System of the MSRB or such other electronic system designated by the MSRB (as defined below) or the Securities and Exchange Commission (the "S.E.C.") for compliance with S.E. C. Rule 15c2-12. "Listed Events" shall mean any of the events listed in Section 4(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. Bonds. "Official Statement" shall mean the Official Statement, dated [July , 2012], relating to the 2012 "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus, Los Angeles, Califomia. "Rule" shall mean 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. Section 2. Provision of Annual Reports. (a) The Authority shall, or, upon furnishing the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to the MSRB through the EMMA System in an electronic format and accompanied by identifying information as prescribed by the MSRB and to the Fiscal Agent [and to the Participating Underwriter] an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement, not later than the Annual Report Date, commencing with the report for the 2011-12 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Agreement; provided, however, that the audited financial statements of the Authority, 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 not available by that date. If the Authority's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 4(e). The Annual Report may be provided in electronic format to the MSRB through the EMMA System. (b) Not later than fifteen (15) Business Days prior to the Annual Report Date, the Authority shall provide the Annual Report (in a form suitable for reporting to the MSRB through the EMMA System) to the Dissemination Agent, the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent) [and the Participating Underwriter]. If by such date, the Fiscal Agent has not received a copy of the Annual Report, the Fiscal Agent shall contact the Disclosure Representative and the Dissemination Agent to inquire if the Authority is in compliance with the first sentence of this subsection (b). The Authority shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Authority and shall have no duty or obligation to review such Annual Report. (c) if the Fiscal Agent is unable to verify that an Annual Report has been provided to the MSRB through the EMMA System by the Annual Report Date, the Fiscal Agent shall D-2 send a notice to the MSRB through the EMMA System, in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the electronic filing requirements of MSRB for the Annual Reports; (ii) provide any Annual Reports received by it to the MSRB through the EMMA System and to the Fiscal Agent as provided herein; and (iii) to the extent it can confirm such filing of an Annual Report, file a report with the Authority, [the Participating Underwriter] and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System. Section 3. Content of Annual Reports. The Authority's Annual Report shall contain or incorporate by reference the following: (a) The Authority's audited fmancial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to government entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar to that used for the Authority'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. If the Authority's audited financial statements, if any, or unaudited financial statements are already filed, the Annual Report may reference that such financial statements are on file with the MSRB. (b) The following information regarding the 2012 Bonds and any parity bonds, or refunding bonds: (i) The principal amount of 2012 Bonds and any parity bonds, if any, or refunding bonds outstanding as of a date within 45 days preceding the Annual Report Date; (ii) The balance in the Reserve Fund, if any, and a statement of the Reserve Requirement as of a date within 60 days preceding the Annual Report Date and the balance in the other funds and accounts held under the Fiscal Agent Agreement; (iii) Information regarding the amount of the annual special taxes levied in the District in the format of Table 2 of the Official Statement, and the amount of Special Tax owed, as shown on such assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date; (iv) An update of Table 6 in the Official Statement, summarizing the assessed value -to - lien ratios for the property in the District. The assessed values in such table will be determined by reference to the value of the parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the September 2 next preceding the Annual Report Date. The lien values in such table will include all 2012 Bonds and any parity bonds D-3 or refunding bonds of the Authority for the District but will not include other debt secured by a tax or assessments levied on parcels within the District; (v) Information regarding the Special Tax delinquency rate for all parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date in the format of Table 3 of the Official Statement and information pertaining to delinquencies deemed appropriate by the Authority; provided, however, that parcels with aggregate delinquencies of $5,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category; (vi) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary of the results of any foreclosure sales as of the September 30 next preceding the Annual Report Date; and (vii) If the Authority or the City establishes a community facilities district overlapping all or a portion of the District, the principal amount of bonds authorized for such community facilities district, the percentage of such bonds supported by special taxes on property within the District, and the amount of bonds issued by such community facilities district. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the Authority shall provide such further information, if any, as may be necessary to make the statements required under section 3(b), in the light of the circumstances under which they are made, not misleading for purposes of applicable federal securities laws. 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 Authority or related public entities, which have been submitted to the MSRB through the EMMA System or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Authority shall clearly identify each such other document so included by reference. Section 4. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 4, the Authority shall give, or cause to be given, in a timely manner, not in excess often business days after the occurrence of the event, notice of any of the following events with respect to the 2012 Bonds: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; D-4 (vi) Adverse tax opinions, the issuance by the internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security or other material events affecting the tax status of the security; (vii) Modifications to rights of security holders, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the securities, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the obligated person;' (xiii) The consummation ofa merger, consolidation or acquisition involving an obligated person or sale of all or substantially all of the assets of the obligated person, 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, if material; and (xiv) Appointment ofa successor or additional trustee or the change of name ofa trustee, if material. (b) The Dissemination Agent shall, within three (3) business days of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (e), provided, however, that the Dissemination Agent shall have no liability to Bond Owners for any failure to provide such notice. For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of the Listed Events described under clauses (ii), (iii), (vi), (x) and (xi), (xii), (xiii), (xiv) above shall mean actual knowledge by an officer at the corporate trust office of the Dissemination Agent. The Dissemination Agent shall have no responsibility for determining the materiality of any of the Listed Events. (c) As soon as practicable so as to satisfy the notice requirements of Section 5(a) , the Authority shall notify the Dissemination Agent in writing of the occurrence of any of the Listed Events. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (e). The ' For the purposes of [he event identified in subparagraph (xii), the event is considered to occur when any of the following occur: the appointment ofa 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders ofa 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 obligated person. D-5 Authority shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the MSRB through the EMMA System. (d) If the Authority determines that the Listed Event subject to a materiality requirement referenced in clauses (a)(ii), (vi), (vii), (viii), (x), (xiii) or (xiv) would not be material under applicable federal securities law, the Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (e). (e) If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event, and has received a notice of the occurrence in a format suitable for filing with the MSRB, the Dissemination Agent shall file a notice of such occurrence with the MSRB through the EMMA System, and shall provide a copy of such notice to the Participating Underwriter. Notwithstanding the foregoing, notice of Listcd Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected 2012 Bonds pursuant to the Fiscal Agent Agreement. Section 5. Termination of Reporting Obligation. Al] of the Authority's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of (i) the legal defeasance of the 2012 Bonds, (ii) prior redemption of the 2012 Bonds or (iii) payment in full of all the 2012 Bonds. If such determination occurs prior to the final maturity of the 2012 Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 4(e). Section 6. Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist 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 initial Dissemination Agent shall be Willdan Financial Services. The Dissemination Agent may resign by providing forty-five (45) days' written notice to the Authority and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the Authority in a timely manner and in a form suitable for filing. If at any time there is not any other designated Dissemination Agent, the Fiscal Agent shall be the Dissemination Agent. Section 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority, the Fiscal Agent and the Dissemination Agent may amend this Disclosure Agreement (and the Fiscal Agent and the Dissemination Agent shall agree to any amendment so requested by the Authority, so long as such amendment does not adversely affect the rights or obligations of the Fiscal Agent or the Dissemination Agent), 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 Sections 2(a), 3 or 4(a), 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 2012 Bonds, or 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 2012 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 either (i) is approved by owners of a majority of the owners of the 2012 Bonds affected thereby in the manner provided in the Fiscal Agent Agreement D-6 for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the 2012 Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Authority to meet its obligations, including its obligation to pay debt service on the 2012 Bonds. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB through the EMMA System in the same manner as for a Listed Event under Section 4(e). Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority 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 of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice ofoccurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Authority 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. Section 9. Default. In the event of a failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent may (and, at the written direction of any Participating Underwriter or the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent), or any owner or beneficial owner of the 2012 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the Dissemination Agent or the Fiscal 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 Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 10. Duties, Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Section 7.01 and Section 7.02 of the Fiscal Agent Agreement are hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent Agreement, and the Fiscal Agent and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded to the Fiscal Agent thereunder. The Dissemination Agent and the Fiscal Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. This Disclosure Agreement does not apply to any other securities issued or to be issued by the Authority. The Dissemination Agent shall have no obligation to make any disclosure conceming the 2012 Bonds, the Authority or any other matter except as expressly set out herein, provided that no provision of this Disclosure Agreement shall limit the duties or obligations of the Fiscal Agent under the Fiscal Agent Agreement. The D-7 Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Annual Report or any notice of a Listed Event. The fact that the Fiscal Agent has or may have any banking, fiduciary or other relationship with the Authority or any other party, apart from the relationship created by the Fiscal Agent Agreement and this Disclosure Agreement, shall not be construed to mean that the Fiscal Agent has knowledge or notice of any event or condition relating to the 2012 Bonds, the Authority or the District except in its respective capacities under such agreements. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. Information disclosed hereunder by the Dissemination Agent may contain such disclaimer language concerning the Dissemination Agent's responsibilities hereunder with respect thereto as the Dissemination Agent may deem appropriate. The Dissemination Agent may conclusively rely on the determination of the Authority as to the materiality of any event for purposes of Section 4 hereof. Neither the Fiscal Agent nor the Dissemination Agent makes any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees, as amended from time to time, and all expenses, legal fees and advances made or incurred by the Dissemination in the performance of its duties hereunder. The Authority's obligations under this Section 10 shall survive the termination of this Disclosure Agreement. Section 11. Beneficiaries. The Participating Underwriter and the owners and beneficial owners from time to time of the 2012 Bonds shall be third party beneficiaries under this Disclosure Agreement. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the 2012 Bonds, and shall create no rights in any other person or entity. Section 12. Notices. Any notice or communications herein required or permitted to be given to the Authority, the Fiscal Agent or the Dissemination Agent shall be in writing and shall be deemed to have been sufficiently given or served for all purposes by being delivered or sent by telecopy or by being deposited, postage prepaid, in a post office letter box, to the addresses set forth below, or to such other address as may be provided to the other parties hereinafter listed in writing from time to time, namely: If to the Authority: Temecula Public Financing Authority 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 If to the Community Facilities District: Community Facilities District No. 03-01 (Crowne Hill) 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 If to the Willdan Financial Services Dissemination 27368 Via Industria, Suite 110 Agent: Temecula, California Telephone: [951/587-3546] Teleeopier: 951/587-3510 D-8 If to the Fiscal Agent: U.S. Bank National Association 633 West Fifth Street, 24th Floor LM-CA-T24T Los Angeles, California 90071 Telephone: 213/615-6030 Te]ecopicr: 213/615-6199 If to the Stifel, Nicolaus & Company, Incorporated, Participating dba Stone & Youngberg, a Division of Stifel Nicolaus Underwriter: One Ferry Building San Francisco, Califomia 94111 Telephone: 415/445-2300 Attention: Municipal Research Department provided, however, that all such notices, requests or other communications may be made by telephone and promptly confirmed by writing. The parties may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications. Section 13. Future Determination of Obligated Persons. In the event the S.E.C. amends, clarifies or supplements the Rule in such a manner that requires any landowner within the Authority to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the Authority to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the Authority to disclose information conceming any owner of land within the Authority except as required as part of the information required to be disclosed by the Authority pursuant to Section 4 and Section 5 hereof. Section 14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. Section 15. State of California Law Governs. The validity, interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of Califomia. 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. Section 17. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. D-9 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. TEMECULA PUBLIC FINANCING AUTHORITY, FOR AND ON BEHALF OF TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-01 (CROWNE HILL) By: Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer D-10 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Temecula Public Financing Authority, for and on behalf of Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) 2012 Special Tax Bonds Date of issuance: [August _, 2012] NOTICE IS HEREBY GIVEN that the Temecula Public Financing Authority (the "Authority") has not provided an Annual Report with respect to the above-named 2012 Bonds as required by the Continuing Disclosure Agreement, dated as of August 1, 2012, by and among Willdan Financial Services as Dissemination Agent, U.S. Bank National Association, in its capacity as Fiscal Agent, and the Authority. [The Authority anticipates that the Annual Report will be filed by .] Dated: WILLDAN FINANCIAL SERVICES, as Dissemination Agent, on behalf of the Temecula Public Financing Authority Authorized Officer cc: Temecula Public Financing Authority Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus D-1 I Continuing Disclosure Agreement for Wolf Creek APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT This CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement") is executed and entered into as of August 1, 2012, by and among Willdan Financial Services, as Dissemination Agent (the "Dissemination Agent"), U.S. Bank National Association, a national banking association organized and existing under and by virtue of the laws of the United States of America, in its capacity as Fiscal Agent (the "Fiscal Agent"), and the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the Constitution and of the laws of the State of California (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) (the "District"); WITNESSETH: WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of August I , 2012 (the "Fiscal Agent Agreement"), by and between the Authority, for and on behalf of the District, and the Fiscal Agent, the Authority has issued for the District its 2012 Special Tax Refunding Bonds in the aggregate principal amount of $ (the "2012 Bonds"); and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority, the Dissemination Agent and the Fiscal Agent for the benefit of the owners and beneficial owners of the 2012 Bonds and in order to assist the underwriter of the 2012 Bonds in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5); NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement. In addition, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Authority pursuant to, and described in, Sections 2 and 3 of this Disclosure Agreement. "Annual Report Date" shall mean the date in each year that is eight months after the end of the Authority's fiscal year, which date, as of the date of this Disclosure Agreement, is March 1. "Disclosure Representative" shall mean the Chief Financial Officer of the City of Temecula, as Treasurer of the Authority, or his or her designee, or such other office or employee as the Authority shall designate in writing to the Fiscal Agent from time to time. "Dissemination Agent" shall mean Willdan Financial Services as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority and the Fiscal Agent a written acceptance of such designation. "District" shall mean Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek). D- I "EMMA System" shall mean the Electronic Municipal Market Access System of the MSRB or such other electronic system designated by the MSRB (as defined below) or the Securities and Exchange Commission (the "S.E.C.") for compliance with S.E. C. Rule 15c2-12. "Listed Events" shall mean any of the events listed in Section 4(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. Bonds. "Official Statement" shall mean the Official Statement, dated [July _, 2012], relating to the 2012 "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus, Los Angeles, California. "Rule" shall mean Rule 15c2-12(bx5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Provision of Annual Reports. (a) The Authority shall, or, upon furnishing the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to the MSRB through the EMMA System in an electronic format and accompanied by identifying information as prescribed by the MSRB and to the Fiscal Agent [and to the Participating Underwriter] an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement, not later than the Annual Report Date, commencing with the report for the 2011-12 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Agreement; provided, however, that the audited financial statements of the Authority, 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 not available by that date. If the Authority's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 4(e). The Annual Report may be provided in electronic format to the MSRB through the EMMA System. (b) Not later than fifteen (15) Business Days prior to the Annual Report Date, the Authority shall provide the Annual Report (in a fonn suitable for reporting to the MSRB through the EMMA System) to the Dissemination Agent, the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent) [and the Participating Underwriter]. If by such date, the Fiscal Agent has not received a copy of the Annual Report, the Fiscal Agent shall contact the Disclosure Representative and the Dissemination Agent to inquire if the Authority is in compliance with the first sentence of this subsection (b). The Authority shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Authority and shall have no duty or obligation to review such Annual Report. (c) If the Fiscal Agent is unable to verify that an Annual Report has been provided to the MSRB through the EMMA System by the Annual Report Date, the Fiscal Agent shall send a notice to the MSRB through the EMMA System, in substantially the form attached as Exhibit A. D-2 (d) The Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the electronic filing requirements of MSRB for the Annual Reports; (ii) provide any Annual Reports received by it to the MSRB through the EMMA System and to the Fiscal Agent as provided herein; and (iii) to the extent it can confirm such filing of an Annual Report, file a report with the Authority, [the Participating Underwriter] and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System. Section 3. Content of Annual Reports. The Authority's Annual Report shall contain or incorporate by reference the following: (a) The Authority's audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to government entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar to that used for the Authority'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. If the Authority's audited financial statements, if any, or unaudited financial statements are already filed, the Annual Report may reference that such financial statements are on file with the MSRB. (b) The following information regarding the 2012 Bonds and any parity bonds, or refunding bonds: (i) The principal amount of 2012 Bonds and any parity bonds, if any, or refunding bonds outstanding as of a date within 45 days preceding the Annual Report Date; (ii) The balance in the Reserve Fund, if any, and a statement of the Reserve Requirement as of a date within 60 days preceding the Annual Report Date and the balance in the other funds and accounts held under the Fiscal Agent Agreement; (iii) Information regarding the amount of the annual special taxes levied in the District in the format of Table 2 of the Official Statement, and the amount of Special Tax owed, as shown on such assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date; (iv) While there are funds in the Improvement Fund and each account or subaccount thereof, the balance in the Improvement Fund as ofa date within 30 days preceding the date of the Annual Report; (v) An update of Table [6 in the Official Statement, summarizing the assessed value -to - lien ratios for the property in the District. The assessed values in such table will be determined by reference to the value of the parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the Riverside County D-3 Assessor last equalized prior to the September 2 next preceding the Annual Report Date. The lien values in such table will include all 2012 Bonds and any parity bonds or refunding bonds of the Authority for the District but will not include other debt secured by a tax or assessments levied on parcels within the District; (vi) Information regarding the Special Tax delinquency rate for all parcels within the District on which the Special Taxes arc levied, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date in the format of Table 3 of the Official Statement and information pertaining to delinquencies deemed appropriate by the Authority; provided, however, that parcels with aggregate delinquencies of $5,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category; (vii) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary of the results of any foreclosure sales as of the September 30 next preceding the Annual Report Date; (viii) While there is more than 5 acres of Undeveloped Property within the District, a summary of (a) zoning changes, if any, approved by the City of Temecula (the "City") for property subject to the Special Tax in the District and (b) building permits issued by the City for property subject to the Special Tax in the District; and (ix) If the Authority or the City establishes a community facilities district overlapping all or a portion of the District, the principal amount of bonds authorized for such community facilities district, the percentage of such bonds supported by special taxes on property within the District, and the amount of bonds issued by such community facilities district. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the Authority shall provide such further information, if any, as may be necessary to make the statements required under section 3(b), in the light of the circumstances under which they are made, not misleading for purposes of applicable federal securities laws. 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 Authority or related public entities, which have been submitted to the MSRB through the EMMA System or the Securities and Exchange Commission. if the document included by reference is a final official statement, it must be available from the MSRB. The Authority shall clearly identify each such other document so included by reference. Section 4. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 4, the Authority shall give, or cause to be given, in a timely manner, not in excess of ten business days after the occurrence of the event, notice of any of the following events with respect to the 2012 Bonds: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; D-4 (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security or other material events affecting the tax status of the security; (vii) Modifications to rights of security holders, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the securities, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the obligated person;[ (xiii) The consummation ofa merger, consolidation or acquisition involving an obligated person or sale of all or substantially all of the assets of the obligated person, 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, if material; and (xiv) Appointment ofa successor or additional trustee or the change of name ofa trustee, if material. (b) The Dissemination Agent shall, within three (3) business days of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (e), provided, however, that the Dissemination Agent shall have no liability to Bond Owners for any failure to provide such notice. For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of the Listed Events described under clauses (ii), (iii), (vi), (x) and (xi), (xii), (xiii), (xiv) above shall mean actual knowledge by an officer at the corporate trust office of 1 For the purposes of the event identified in subparagraph (xii), the event is considered to occur when any of the following occur: the appointment ofa 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders ofa 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 obligated person. D-5 the Dissemination Agent. The Dissemination Agent shall have no responsibility for determining the materiality of any of the Listed Events. (c) As soon as practicable so as to satisfy the notice requirements of Section 5(a) , the Authority shall notify the Dissemination Agent in writing of the occurrence of any of the Listed Events. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (e). The Authority shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the MSRB through the EMMA System. (d) If the Authority determines that the Listed Event subject to a materiality requirement referenced in clauses (a)(ii), (vi), (vii), (viii), (x), (xi ii) or (xiv) would not be material under applicable federal securities law, the Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (e). (e) If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event, and has received a notice of the occurrence in a format suitable for filing with the MSRB, the Dissemination Agent shall file a notice of such occurrence with the MSRB through the EMMA System, and shall provide a copy of such notice to the Participating Underwriter. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected 2012 Bonds pursuant to the Fiscal Agent Agreement. Section 5. Termination of Reporting Obligation. All of the Authority's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of (i) the legal defeasance of the 2012 Bonds, (ii) prior redemption of the 2012 Bonds or (iii) payment in full of all the 2012 Bonds. If such determination occurs prior to the final maturity of the 2012 Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 4(e). Section 6. Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist 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 initial Dissemination Agent shall be Willdan Financial Services. The Dissemination Agent may resign by providing forty-five (45) days' written notice to the Authority and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the Authority in a timely manner and in a form suitable for filing. If at any time there is not any other designated Dissemination Agent, the Fiscal Agent shall be the Dissemination Agent. Section 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority, the Fiscal Agent and the Dissemination Agent may amend this Disclosure Agreement (and the Fiscal Agent and the Dissemination Agent shall agree to any amendment so requested by the Authority, so long as such amendment does not adversely affect the rights or obligations of the Fiscal Agent or the Dissemination Agent), and any provision of this Disclosure Agreement maybe waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 2(a), 3 or 4(a), 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 2012 Bonds, or type of business conducted; D-6 (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 ofthe Rule at the time of the primary offering of the 2012 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 either (i) is approved by owners of a majority of the owners ofthe 2012 Bonds affected thereby in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the 2012 Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact ofthe change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability ofthe Authority to meet its obligations, including its obligation to pay debt service on the 2012 Bonds. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB through the EMMA System in the same manner as for a Listed Event under Section 4(e). Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority 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 of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Authority 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. Section 9. Default. In the event of a failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent may (and, at the written direction of any Participating Underwriter or the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent), or any owner or beneficial owner of the 2012 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the Dissemination Agent or the Fiscal 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 Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 10. Duties, Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Section 7.01 and Section 7.02 of the Fiscal Agent Agreement are hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent D-7 Agreement, and the Fiscal Agent and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded to the Fiscal Agent thereunder. The Dissemination Agent and the Fiscal Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. This Disclosure Agreement does not apply to any other securities issued or to be issued by the Authority. The Dissemination Agent shall have no obligation to make any disclosure concerning the 2012 Bonds, the Authority or any other matter except as expressly set out herein, provided that no provision of this Disclosure Agreement shall limit the duties or obligations of the Fiscal Agent under the Fiscal Agent Agreement. The Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Annual Report or any notice of a Listed Event. The fact that the Fiscal Agent has or may have any banking, fiduciary or other relationship with the Authority or any other party, apart from the relationship created by the Fiscal Agent Agreement and this Disclosure Agreement, shall not be construed to mean that the Fiscal Agent has knowledge or notice of any event or condition relating to the 2012 Bonds, the Authority or the District except in its respective capacities under such agreements. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. Information disclosed hereunder by the Dissemination Agent may contain such disclaimer language concerning the Dissemination Agent's responsibilities hereunder with respect thereto as the Dissemination Agent may deem appropriate. The Dissemination Agent may conclusively rely on the determination of the Authority as to the materiality of any event for purposes of Section 4 hereof. Neither the Fiscal Agent nor the Dissemination Agent makes any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees, as amended from time to time, and all expenses, legal fees and advances made or incurred by the Dissemination in the performance of its duties hereunder. The Authority's obligations under this Section 10 shall survive the termination of this Disclosure Agreement. Section 1 1. Beneficiaries. The Participating Underwriter and the owners and beneficial owners from time to time of the 2012 Bonds shall be third party beneficiaries under this Disclosure Agreement. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the 2012 Bonds, and shall create no rights in any other person or entity. Section 12. Notices. Any notice or communications herein required or permitted to be given to the Authority, the Fiscal Agent or the Dissemination Agent shall be in writing and shall be deemed to have been sufficiently given or served for all purposes by being delivered or sent by telecopy or by being deposited, postage prepaid, in a post office letter box, to the addresses set forth below, or to such other address as may be provided to the other parties hereinafter listed in writing from time to time, namely: If to the Authority: Temecula Public Financing Authority 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 If to the Community Facilities District: Community Facilities District No. 03-03 (Wolf Creek) 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 D-8 If to the Willdan Financial Services Dissemination 27368 Via Industria, Suite 110 Agent: Temecula, California Telephone: [951/587-35461 Telecopier: 951/587-3510 If to the Fiscal Agent: U.S. Bank National Association 633 West Fifth Street, 24th Floor LM-CA-T24T Los Angeles, California 90071 Telephone: 213/615-6030 Telecopier: 213/615-6199 If to the Stifel, Nicolaus & Company, Incorporated, Participating dba Stone & Youngberg, a Division of Stifel Nicolaus Underwriter: One Ferry Building San Francisco, Califomia 94111 Telephone: 415/445-2300 Attention: Municipal Research Department provided, however, that all such notices, requests or other communications may be made by telephone and promptly confirmed by writing. The parties may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications. Section 13. Future Determination of Obligated Persons. In the event the S.E.C. amends, clarifies or supplements the Rule in such a manner that requires any landowner within the Authority to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the Authority to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the Authority to disclose information conceming any owner of land within the Authority except as required as part of the information required to be disclosed by the Authority pursuant to Section 4 and Section 5 hereof. Section 14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. Section 15. State of California Law Governs. The validity, interpretation and performance of this Disclosure Agreement shall be governed by 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. Section 17. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. D-9 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. TEMECULA PUBLIC FINANCING AUTHORITY, FOR AND ON BEHALF OF TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT' NO. 03-03 (WOLF CREEK) By: Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer D-10 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Temecula Public Financing Authority, for and on behalf of Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) 2012 Special Tax Bonds Date of Issuance: [August 2012] NOTICE IS HEREBY GIVEN that the Temecula Public Financing Authority (the "Authority") has not provided an Annual Report with respect to the above-named 2012 Bonds as required by the Continuing Disclosure Agreement, dated as of August 1, 2012, by and among Willdan Financial Services, as Dissemination Agent, U.S. Bank National Association, in its capacity as Fiscal Agent, and the Authority. [The Authority anticipates that the Annual Report will be filed by ,] Dated: WILLDAN FINANCIAL SERVICES, as Dissemination Agent, on behalf of the Temecula Public Financing Authority Authorized Officer cc: Temecula Public Financing Authority Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus D-11 Continuing Disclosure Agreement for Harveston II APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT This CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement") is executed and entered into as of August 1, 2012, by and among Willdan Financial Services, as Dissemination Agent (the "Dissemination Agent), U.S. Bank National Association, a national banking association organized and existing under and by virtue of the laws of the United States of America, in its capacity as Fiscal Agent (the "Fiscal Agent"), and the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the Constitution and of the laws of the State ofCalifomia (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) (the "District"); WITNESSETH: WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of August 1, 2012 (the "Fiscal Agent Agreement"), by and between the Authority, for and on behalf of the District, and the Fiscal Agent, the Authority has issued for the District its 2012 Special Tax Refunding Bonds in the aggregate principal amount of $ (the "2012 Bonds"); and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority, the Dissemination Agent and the Fiscal Agent for the benefit of the owners and beneficial owners of the 2012 Bonds and in order to assist the underwriter of the 2012 Bonds in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5); NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement. In addition, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Authority pursuant to, and described in, Sections 2 and 3 of this Disclosure Agreement. "Annual Report Date" shall mean the date in each year that is eight months after the end of the Authority's fiscal year, which date, as of the date of this Disclosure Agreement, is March 1. "Disclosure Representative" shall mean the Chief Financial Officer of the City of Temecula, as Treasurer of the Authority, or his or her designee, or such other office or employee as the Authority shall designate in writing to the Fiscal Agent from time to time. "Dissemination Agent" shall mean Willdan Financial Services as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority and the Fiscal Agent a written acceptance of such designation. "District" shall mean Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11). D-1 "EMMA System" shall mean the Electronic Municipal Market Access System of the MSRB or such other electronic system designated by the MSRB (as defined below) or the Securities and Exchange Commission (the "S.E.C.") for compliance with S.E. C. Rule 15c2-12. "Listed Events" shall mean any of the events listed in Section 4(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Official Statement" shall mean the Official Statement, dated [July 2012], relating to the 2012 Bonds. "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus, Los Angeles, California. "Rule" shall mean 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. Section 2. Provision of Annual Reports. (a) The Authority shall, or, upon furnishing the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to the MSRB through the EMMA System in an electronic format and accompanied by identifying information as prescribed by the MSRB and to the Fiscal Agent [and to the Participating Underwriter] an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement, not later than the Annual Report Date, commencing with the report for the 2011-12 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Agreement; provided, however, that the audited financial statements of the Authority, 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 not available by that date. If the Authority's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 4(e). The Annual Report may be provided in electronic format to the MSRB through the EMMA System. (b) Not later than fifteen (15) Business Days prior to the Annual Report Date, the Authority shall provide the Annual Report (in a form suitable for reporting to the MSRB through the EMMA System) to the Dissemination Agent, the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent) [and the Participating Underwriter]. If by such date, the Fiscal Agent has not received a copy of the Annual Report, the Fiscal Agent shall contact the Disclosure Representative and the Dissemination Agent to inquire if the Authority is in compliance with the first sentence of this subsection (b). The Authority shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Authority and shall have no duty or obligation to review such Annual Report. (c) If the Fiscal Agent is unable to verify that an Annual Report has been provided to the MSRB through the EMMA System by the Annual Report Date, the Fiscal Agent shall send a notice to the MSRB through the EMMA System, in substantially the form attached as Exhibit A. D-2 (d) The Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the electronic filing requirements of MSRB for the Annual Reports; (ii) provide any Annual Reports received by it to the MSRB through the EMMA System and to the Fiscal Agent as provided herein; and (iii) to the extent it can confirm such filing of an Annual Report, file a report with the Authority, [the Participating Underwriter] and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System. Section 3. Content of Annual Reports. The Authority's Annual Report shall contain or incorporate by reference the following: (a) The Authority's audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to government entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar to that used for the Authority'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. If the Authority's audited financial statements, if any, or unaudited financial statements are already filed, the Annual Report may reference that such financial statements are on file with the MSRB. (b) The following information regarding the 2012 Bonds and any parity bonds, or refunding bonds: (i) The principal amount of 2012 Bonds and any parity bonds, if any, or refunding bonds outstanding as of a date within 45 days preceding the Annual Report Date; (ii) The balance in the Reserve Fund, if any, and a statement of the Reserve Requirement as of a date within 60 days preceding the Annual Report Date and the balance in the other funds and accounts held under the Fiscal Agent Agreement; (iii) information regarding the amount of the annual special taxes levied in the District in the format of Table 2 of the Official Statement, and the amount of Special Tax owed, as shown on such assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date; (iv) An update of Table 6 in the Official Statement, summarizing the assessed value -to - lien ratios for the property in the District. The assessed values in such table will be determined by reference to the value of the parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the September 2 next preceding the Annual Report Date. The lien values in such table will include all 2012 Bonds and any parity bonds or refunding bonds of the Authority for the District, of Temecula Public Financing D-3 Authority Community Facilities District No. 01-2 (Harveston), but will not include other debt secured by a tax or assessments levied on parcels within the District; (v) Information regarding the Special Tax delinquency rate for all parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the Riverside County Assessor last equalized prior to the September 30 next preceding the Annual Report Date in the format of Table 3 of the Official Statement and information pertaining to delinquencies deemed appropriate by the Authority; provided, however, that parcels with aggregate delinquencies of $5,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category; (vi) A summary of special tax delinquencies for Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston); (vii) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary of the results of any foreclosure sales as of the September 30 next preceding the Annual Report Date; (viii) While there is more than 5 acres of Undeveloped Property within the District, a summary of (a) zoning changes, if any, approved by the City of Temecula (the "City") for property subject to the Special Tax in the District and (b) building permits issued by the City for property subject to the Special Tax in the District; and (ix) If the Authority or the City establishes a community facilities district overlapping all or a portion of the District, the principal amount of bonds authorized for such community facilities district, the percentage of such bonds supported by special taxes on property within the District, and the amount of bonds issued by such community facilities district. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the Authority shall provide such further information, if any, as may be necessary to make the statements required under section 3(b), in the light of the circumstances under which they are made, not misleading for purposes of applicable federal securities laws. 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 Authority or related public entities, which have been submitted to the MSRB through the EMMA System or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Authority shall clearly identify each such other document so included by reference. Section 4. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 4, the Authority shall give, or cause to be given, in a timely manner, not in excess of ten business days after the occurrence of the event, notice of any of the following events with respect to the 2012 Bonds: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; D-4 (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security or other material events affecting the tax status of the security; (vii) Modifications to rights of security holders, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the securities, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the obligated person;' (xiii) The consummation ofa merger, consolidation or acquisition involving an obligated person or sale of all or substantially all of' the assets of the obligated person, 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, if material; and (xiv) Appointment ofa successor or additional trustee or the change of name ofa trustee, if material. (b) The Dissemination Agent shall, within three (3) business days of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (e), provided, however, that the Dissemination Agent shall have no liability to Bond Owners for any failure to provide such notice. For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of the Listed Events described under clauses (ii), (iii), (vi), 1 For the purposes of the event identified in subparagraph (xii), the event is considered to occur when any of the following occur: the appointment ofa 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders ofa 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 obligated person. D-5 (x) and (xi), (xii), (xiii), (xiv) above shall mean actual knowledge by an officer at the corporate trust office of the Dissemination Agent. The Dissemination Agent shall have no responsibility for determining the materiality of any of the Listed Events. (c) As soon as practicable so as to satisfy the notice requirements of Section 5(a) , the Authority shall notify the Dissemination Agent in writing of the occurrence of any of the Listed Events. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (e). The Authority shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the MSRB through the EMMA System. (d) If the Authority determines that the Listed Event subject to a materiality requirement referenced in clauses (a)(ii), (vi), (vii), (viii), (x), (xiii) or (xiv) would not be material under applicable federal securities law, the Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (e). (e) If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event, and has received a notice of the occurrence in a format suitable for filing with the MSRB, the Dissemination Agent shall file a notice of such occurrence with the MSRB through the EMMA System, and shall provide a copy of such notice to the Participating Underwriter. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected 2012 Bonds pursuant to the Fiscal Agent Agreement. Section 5. Termination of Reporting Obligation. All of the Authority's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of(i) the legal defeasance of the 2012 Bonds, (ii) prior redemption of the 2012 Bonds or (iii) payment in full of all the 2012 Bonds. If such determination occurs prior to the final maturity of the 2012 Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 4(e). Section 6. Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist 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 initial Dissemination Agent shall be Willdan Financial Services. The Dissemination Agent may resign by providing forty-five (45) days' written notice to the Authority and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the Authority in a timely manner and in a form suitable for filing. If at any time there is not any other designated Dissemination Agent, the Fiscal Agent shall be the Dissemination Agent. Section 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority, the Fiscal Agent and the Dissemination Agent may amend this Disclosure Agreement (and the Fiscal Agent and the Dissemination Agent shall agree to any amendment so requested by the Authority, so long as such amendment does not adversely affect the rights or obligations of the Fiscal Agent or the Dissemination Agent), 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 Sections 2(a), 3 or 4(a), 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 2012 Bonds, or type of business conducted; D-6 (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 2012 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 either (i) is approved by owners of a majority of the owners of the 2012 Bonds affected thereby in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the 2012 Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Authority to meet its obligations, including its obligation to pay debt service on the 2012 Bonds. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB through the EMMA System in the same manner as for a Listed Event under Section 4(e). Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority 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 of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Authority 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. Section 9. Default. In the event of a failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent may (and, at the written direction of any Participating Underwriter or the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent), or any owner or beneficial owner of the 2012 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the Dissemination Agent or the Fiscal 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 Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any tailure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 10. Duties, Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Section 7.01 and Section 7.02 of the Fiscal Agent Agreement are hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent D-7 Agreement, and the Fiscal Agent and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded to the Fiscal Agent thereunder. The Dissemination Agent and the Fiscal Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. This Disclosure Agreement does not apply to any other securities issued or to be issued by the Authority. The Dissemination Agent shall have no obligation to make any disclosure concerning the 2012 Bonds, the Authority or any other matter except as expressly set out herein, provided that no provision of this Disclosure Agreement shall limit the duties or obligations of the Fiscal Agent under the Fiscal Agent Agreement. The Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Annual Report or any notice of a Listed Event. The fact that the Fiscal Agent has or may have any banking, fiduciary or other relationship with the Authority or any other party, apart from the relationship created by the Fiscal Agent Agreement and this Disclosure Agreement, shall not be construed to mean that the Fiscal Agent has knowledge or notice of any event or condition relating to the 2012 Bonds, the Authority or the District except in its respective capacities under such agreements. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. Information disclosed hereunder by the Dissemination Agent may contain such disclaimer language concerning the Dissemination Agent's responsibilities hereunder with respect thereto as the Dissemination Agent may deem appropriate. The Dissemination Agent may conclusively rely on the determination of the Authority as to the materiality of any event for purposes of Section 4 hereof. Neither the Fiscal Agent nor the Dissemination Agent makes any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees, as amended from time to time, and all expenses, legal fees and advances made or incurred by the Dissemination in the performance of its duties hereunder. The Authority's obligations under this Section 10 shall survive the termination of this Disclosure Agreement. Section 11. Beneficiaries. The Participating Underwriter and the owners and beneficial owners from time to time of the 2012 Bonds shall be third party beneficiaries under this Disclosure Agreement. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the 2012 Bonds, and shall create no rights in any other person or entity. Section 12. Notices. Any notice or communications herein required or permitted to be given to the Authority, the Fiscal Agent or the Dissemination Agent shall be in writing and shall be deemed to have been sufficiently given or served for all purposes by being delivered or sent by telecopy or by being deposited, postage prepaid, in a post office letter box, to the addresses set forth below, or to such other address as may be provided to the other parties hereinafter listed in writing from time to time, namely: If to the Authority: If to the Community Facilities District: Temecula Public Financing Authority 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 Community Facilities District No. 03-06 (Harveston II) 41000 Main Street Temecula, California 92590 Attention: Chief Financial Officer Telephone: 951/694-6430 Telecopier: 951/694-6479 D-8 If to the Willdan Financial Services Dissemination 27368 Via Industria, Suite 110 Agent: Temecula, California Telephone: [951/587-3546] Telecopier: 951/587-3510 If to the Fiscal Agent: U.S. Bank National Association 633 West Fifth Street, 24'" Floor LM-CA-T24T Los Angeles, California 90071 Telephone: 213/615-6030 Telecopier: 213/615-6199 If to the Stifcl, Nicolaus & Company, Incorporated, Participating dba Stone & Youngberg, a Division of Stifel Nicolaus Underwriter: One Ferry Building San Francisco, California 94111 Telephone: 415/445-2300 Attention: Municipal Research Department provided, however, that all such notices, requests or other communications may be made by telephone and promptly confirmed by writing. The parties may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications. Section 13. Future Determination of Obligated Persons. In the event the S.E.C. amends, clarifies or supplements the Rule in such a manner that requires any landowner within the Authority to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the Authority to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the Authority to disclose information concerning any owner of land within the Authority except as required as part of the information required to be disclosed by the Authority pursuant to Section 4 and Section 5 hereof. Section 14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. Section 15. State of California Law Governs. The validity, interpretation and performance of this Disclosure Agreement shall be governed by 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. Section 17. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without thc filing of any paper or any thither act. D-9 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. TEMECULA PUBLIC FINANCING AUTHORITY, FOR AND ON BEHALF OF TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILI HES DISTRICT NO. 03-06 (HARVESTON II) By: Bob Johnson, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Officer D-10 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Temecula Public Financing Authority, for and on behalf of Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston 11) 2012 Special Tax Bonds Date of Issuance: [August _, 2012] NOTICE IS HEREBY GIVEN that the Temecula Public Financing Authority (the "Authority") has not provided an Annual Report with respect to the above-named 2012 Bonds as required by the Continuing Disclosure Agreement, dated as of August 1, 2012, by and among Willdan Financial Services, as Dissemination Agent, U.S. Bank National Association, in its capacity as Fiscal Agent, and the Authority. [The Authority anticipates that the Annual Report will be filed by .] Dated: WILLAN FINANCIAL SERVICES, as Dissemination Agent, on behalf of the Temecula Public Financing Authority Authorized Officer cc: Temecula Public Financing Authority Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus D-11 Attachment No. 9 Indemnity Agreement for Crowne Hill Quint & Thimmig LLP 6/21/12 INDEMNITY AGREEMENT This Indemnity Agreement (this "Agreement"), dated as of July 1, 2012, is by and between the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"), and Lennar Homes of California, Inc., a Delaware Corporation (the "Developer"). RECITALS: WHEREAS, the Authority, for the Authority's Community Facilities District No. 03-1 (Crowne Hill) (the "CFD"), and the Developer are parties to an Acquisition Agreement, dated as of June 1, 2003 (as supplemented by Supplement No. 1 to Acquisition Agreement, dated as of August 1, 2005, between the Authority and the Developer, the "Acquisition Agreement"), pursuant to which the Authority has agreed to use amounts in an Improvement Fund (as defined in the Acquisition Agreement) to purchase certain Facilities (as defined in the Acquisition Agreement) from the Developer, subject to the terms and conditions set forth in the Acquisition Agreement; and WHEREAS, in Section 8.01 of the Acquisition Agreement, the Developer has covenanted that, with respect to any contracts or subcontracts for the construction of the Facilities to be acquired from the Developer under the Acquisition Agreement, the Developer will assure compliance with any applicable law or regulation for the payment of prevailing wages (the "Prevailing Wage Requirement"); and WHEREAS, City of Temecula (the "City") Staff assist the Authority with the administration of the Acquisition Agreement, including the review of Payment Requests (as defined in the Acquisition Agreement) submitted by the Developer to the Authority for payment for the Purchase Prices (as defined in the Acquisition Agreement) of Facilities under the Acquisition Agreement; and WHEREAS, in connection with the submittal of certain Payment Requests by the Developer to the Authority pursuant to the Acquisition Agreement (the "Deficient Payment Requests"), the Developer has been unable to provide documentary evidence that there has been compliance with the Prevailing Wage Requirement with regard to the construction of certain Facilities; and WHEREAS, the Authority is willing to process the Deficient Payment Requests, to the extent that they comply with all applicable provisions of the Acquisition Agreement, even though the Developer cannot provide documentary evidence of compliance with the Prevailing Wage Requirement that applies to the Facilities that are the subject of the Deficient Payment Requests, if the Developer indemnifies the Authority, the CFD and the City against any and all claims that may arise by reason of any failure to comply with the Prevailing Wage Requirement; and WHEREAS, the Authority and the Developer now desire to enter into this Agreement in order for the Developer to provide such indemnity to the Authority, the CFD and the City, so that the Developer's Payment Requests can be processed by the Authority under the Acquisition Agreement. AGREEMENT: Now, therefore, in consideration of the foregoing recitals and for other consideration the receipt and sufficiency of which is hereby acknowledged, the Authority and the Developer hereby agree as follows: 20009.10:J11796 Section 1. Developer Indemnification of Authority and City. (a) To the fullest extent permitted by law, the Developer agrees to indemnify, hold harmless and defend the Authority, the CFD, the City, and each of their respective past, present and future officers, councilmembers, members, directors, officials, employees and agents (collectively, the "Indemnified Parties"), against any and all losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind or character (including, without limitation, reasonable attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) to which the Indemnified Parties, or any of them, may become subject under or any statutory law (including federal or state securities laws) or at common law or otherwise, arising out of or based upon or in any way relating to any violation of the Prevailing Wage Requirement with respect to any Facilities for which the Developer has submitted a Payment Request under the Acquisition Agreement. Notwithstanding the foregoing, this Agreement shall not apply to the extent, with respect to any such Indemnified Party, such damages are caused by the willful misconduct of the respective Indemnified Party seeking indemnifica tion. (b) In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought hereunder, the Developer, upon written notice from the Indemnified Party, shall assume the investigation and defense thereof, including the employment of counsel selected by the indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Developer shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Indemnified Party may only employ separate counsel at the expense of the Developer if in the judgment of such Indemnified Party a conflict of interest exists by reason of common representation or if all parties commonly represented do not agree as to the action (or inaction) of counsel. (c) The rights of any persons to indemnity hemunder shall survive the final payment for any Facilities under the terms of the Acquisition Agreement, and shall survive the termination of the Acquisition Agreement. (d) The obligations of the Developer under this Section are independent of any other contractual obligation of the Developer to provide indemnity to the Authority, the CFD, the City or otherwise, and the obligation of the Developer to provide indemnity hereunder shall not be interpreted, construed or limited in light of any other separate indemnification obligation of the Developer. Section 2. Processing Payment Requests. The Authority hereby agrees, in light of the Developer's indemnification obligations under Section 1, to process Payment Requests under the Acquisition Agreement without any requirement for the Developer to provide documentary evidence of compliance with the Prevailing Wage Requirement relative to the Facilities that are the subject of a Payment Request. Except as expressly provided in the preceding sentence, all Payment Requests shall be processed by the Authority in strict compliance with the terms and provisions of the Acquisition Agreement. Section 3. Release of Claim to Excess Improvement Funds. The Developer hereby acknowledges that, of the funds currently held in the Improvement Fund, any and all pending and future Payment Requests submitted or to be submitted by the Developer under the Acquisition Agreement will not request more than an aggregate of $_______ in payment for the Purchase Prices (as defined in the Acquisition Agreement) of Facilities. The Developer hereby relinquishes any right, title or interest it may have under the Acquisition Agreement or otherwise to any amounts in the Improvement Fund in excess of $ Section 4. Attorneys Fees. In the event that any action or suit is instituted by either party against the other arising out of this Agreement, the party in whose favor final judgment shall be entered shall be entitled to recover from the other party all costs and expenses of suit, including reasonable attorneys' fees. Section 5. Notices. Any notice under this Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered, or transmitted by telecopy or facsimile transmission (which shall be immediately confirmed by telephone and shall be followed by mailing an original of the same within twenty-four hours after such transmission), or seventy-two hours following deposit of the same in any United States Post Office, registered or certified mail, postage prepaid, addressed as follows: Authority: Temecula Public Financing Authority 41000 Main Street Temecula, California 92589-9033 Attention: Director of Public Works with a copy to: City of Temecula 41000 Main Street Temecula, California 92589-9033 Attention City Attorney Developer: Lennar Homes of California, Inc. 391 North Main Street #300 Corona, California 92880 Attention Jeff Clemens Either party may change its address or addresses for delivery of notice by delivering written notice of such change of address to the other party. Section 6. Severability. If any part of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent possible. Section 7. Other Agreements. Nothing herein shall be construed as affecting the Authority's or the Developer's rights, or duties to perform their respective obligations, under the Acquisition Agreement or any other agreement by or between the Developer and the Authority, the CFD or the City. This Agreement shall not confer any additional rights, or waive any rights given, by either party hereto under any development or other agreement to which they are a party. Section 8. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other party, or the failure by a party to exercise its rights upon the default of the other party, shall not constitute a waiver of such party's right to insist and demand strict compliance by the other party with the terms of this Agreement thereafter. Section 9. Merger. No other agreement, statement or promise made by any party or any employee, officer or agent of any party with respect to any matters covered hereby that is not in writing and signed by all the parties to this Agreement shall be binding. Section 10. Parties in Interest. Nothing in this Agreement, expressed or implied, is intended to or shall be construed to confer upon or to give to any person or entity other than the Authority, the CFD, the City, and the Developer any rights, remedies or claims under or by reason of this Agreement or any covenants, conditions or stipulations hereof; and all covenants, conditions, promises, and agreements in this Agreement contained by or on behalf of the Authority or the Developer shall be for the sole and exclusive benefit of the Authority, the CFD, the City, and the Developer. The City and the CFD are intended third party beneficiaries of this Agreement. Section 11. Amendment. This Agreement may be amended only by written instrument executed by both the Authority and the Developer. Section 12. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original. Section 13. Governing Law The provisions of this Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in the State of California. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first -above written. TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-1 (CROWNE HILL) By: Executive Director LENNAR HOMES OF CALIFORNIA, INC. By: Its: 20009.10:J11796 REQUESTS TO SPEAK REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. Date j r,t I Li / 0) -Z," r 1 wi to speak on Agenda Item No. Subject 0 / 1r, t-2- For Against Public Comment Please note that all information presented at a City Council meeting becomes public record. All information provided is optional. �/ (/ Name: V V l uj Phone: � IV Address: ( ` City/State/Zip i P.�y7 P C 1 / C71)— If you are representing an organization or group, please give the name: REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. c. Date 7 - I D - Zo ra Subject For Against Public Comment I wish to speak on Agenda Item No. C ' Please note that all information presented at a City Council meeting becomes public record. Al! information provided is optional. Name: E Phone % -)VState/ZipAddress: If you are representing an organization or group, please give the name: 9...M. Cs' \I CM RSAN2A 1-1L Date REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. I wish to speak on Agenda Item No. Subject ❑ For ❑ Against ❑ Public Comment Please note that all information presented at a City Council meeting becomes public record c All information provided is optional. Name: gA_ U S C1 to Phone: Address: City/State/Zip If you are representing an organization or group, please give the name: 3 Date REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. I wish to speak on Agenda Item No. Subject For Against Public Comment Please note that all information presented at a City Council meeting becomes public record All information provided is optional. Name: Address: R -r' (LLEL� Phone: City/State/Zip If you are representing an organization or group, please give the name: Date Subject DFor n Against ❑ Public Comment Please note that all information presented at a City Council meeting becomes public record All information provided is optional. REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. 711bh.)--- I wish to speak on Agenda Item No. Name: A-wN € Pic-, Phone: Address: City/State/Zip If you are representing an organization or group, please give the name: Date Subject REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. I wish to speak on Agenda Item No. ❑ For ❑ Against ❑ Public Comment Please note that all information presented at a City Council meeting becomes public record All information provided is optional. Name: —/ OYY'VL__ C490ic.R4-r Phone: Address: City/State/Zip If you are representing an organization or group, please give the name: Date REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. 7J)o/i� I wish to speak on Agenda Item No. Subject El For El Against 0 Public Comment Please note that all information presented at a City Council meeting becomes public record //�� ,, L All information provided is optional. Name: At) oi .� Phone: Address: City/State/Zip If you are representing an organization or group, please give the name: REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. Date 17//0) % Z I wish to speak on Agenda Item No. Subject nFor El Against ri Public Comment Please note that all information presented at a City Council meeting becomes public record All information provided is optional. Name: Address: A4-0-cLi Phone: City/State/Zip If you are representing an organization or group, please give the name: Date REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. SII o fi 7 -- Subject For Against Public Comment I wish to speak on Agenda Item No. Please note that all information presented at a City Council meeting becomes public record. All information provided is optional. Name: Address: fr>v(._ ki) Phone: City/State/Zip If you are representing an organization or group, please give the name: V Date REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. )7i 0/1 Subject n For Against Public Comment I wish to speak on Agenda Item No. Please note that all information presented at a City Council meeting becomes public record All information provided is optional. Name: Address: �A-7Y�IC� ktt ES Phone: City/State/Zip If you are representing an organization or group, please give the name: o Date REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. 17Il b) 1 D -- I wish to speak on Agenda Item No. Subject Fl For ❑ Against nPublic Comment Please note that all information presented at a City Council meeting becomes public record All information provided is optional. Name: Address: 4_ g-eetyier Phone: City/State/Zip If you are representing an organization or group, please give the name: REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. Date j` , / 2 I wish to speak on Agenda Item No. Subject ❑ For ❑ Against �ublic Comment Please note that all information presented at a City Council meeting becomes public record ,All information provided is optional. Name: % /z -e_... C / _J/1 /rmPhone: Address City/State/Zip ? C - �� If you are representing an organization or group, please give the name: 6, 7 % -.0. e , ' . - 7 . . , 1 CA 9s ? REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. Date 7// 0/2 012 1 wish to speak on Agenda Item No. Subject -TERM L J m --s For Against Public Comment Please note that all information presented at a City Council meeting becomes public record. All information provided is optional. Name: ria -9 2,q,'72 Phone: Address: City/State/Zip rC ECUZ.19, C4 '2 fz If you are representing an organization or group, please give the name: 13 REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the City Clerk. The City Clerk will call your name when the matter comes up. Please go to the public podium and state your name for the record. Date�vL , I wish to speak on Agenda Item No. Subject For Against / 'e Z-- /741. Public Comment Please note that all information presented at a City Council meeting becomes public record. A11 i ormation provided is optional. Name: '�G (% REQUEST TO SPEAK CITY OF TEMECULA After completing, please return to the Staff Member conducting the meeting. Date 71 /0 //,2 Subject ❑ For ❑ Against ublic Comment Name: Please note that all information presented at the meeting becomes public record All information provided is optional. Phone: Address: City/State/Zip If you are representing an organization or group, please give the name: DOCUMENTS SUBMITTED FOR THE RECORD 77/4/1 My name is Anne Pica and I am President of Citizens for Fair Representation in Menifee. I am not speaking on whether the City Clerk was right or wrong in her decision to do a random count. But to speak to you in regards to what the city council can and should do for the people of Temecula. I am speaking on behalf of the 5531 registered voters in the city of Temecula who signed a petition to place term limits on the ballot. That is a ground swell of people crying out to the city council that they want the opportunity to vote on term limits for their City Council members. A Large group of Citizens have come before this city council a couple of times that I know of and asked this council to place term limits on the ballot. It is within the power of the city council to do this and oblige the people you swore to serve. This City Council has the power to place the term limit measure on the ballot without a petition. And that is what your citizenry is asking you to do. This is an election year for two of you. If this City Council continues to show deaf ears to the voters who come before the Council what makes you think they will vote you back in office. I know I would not vote for you if you turned your back to the request of a large block of voters and used the excuse that they failed to qualify under the 500 sampling system so we don't have to do anything. They are not standing here contesting that the petition qualified but are standing here representing 5531 of your constituents who are asking this city council to put the term limit measure on the ballot and let the whole city make the decision whether they want term limits or not. It is within the city Councils power to do this. To do other wise will be perceived as self serving by this 5 member city council and denying the people the opportunity to decide if they want term limits or not. Thank you, Anne E Pica President of C.F.F.R. July 10, 2012 -lo lig cOU4rc/L At the most recent City city meeting some of the supporters of Term Limits made what I call disparaging comments about the City Clerk, Susan Jones. These comments were an attempt to blame her for their own failure to get the Term Limit measure approved and on this fall's ballot. Why are they trying to blame her, when in fact the group did not do all that they could have done to ensure their success? First, they could have gone to the County Register of Voters Office, before they even started, to ensure they fully understood the petition process. Second, they could have offered to pay the difference to have a full signature check conducted, if they really thought a full review of the signatures was so important. Last, and most importantly, they could have obtained a list of all registered voters in the City of Temecula and they could have themselves checked that the names were valid, the addresses were valid, and that there were no duplicate names. If for example a duplicate name was found, they could have simply not turned in one of the pages with a duplicate signature. If they would have followed these simple steps they could have guaranteed success of their proposed measure, especially since they turned in their signed petitions days before the deadline. Now it appears they are trying to unfairly place blame on the City Clerk for their own failure by not doing all that they could have done. City Council members DO NOT reward them for not doing their job. Term Limits is a restriction and violation of our first Amendment rights of Freedom of Expression. Today, we have the right to show that Freedom of Expression by voting for any qualified candidate. Term Limits would clearly restrict those rights. In this Case, writing for the majority, Justice John Paul Stevens concluded that Term Limits would violate the "basic principle: that the right to choose representatives belongs not to the States, but to the people." M `r/le f! Ke s._ JD TO: THE TEMECULA CITY COUNCIL SUBJECT: TERM LIMITS We are very thankful to the City Council members for their support of our residents' opposition to the San Diego Gas & Electric power -line proposal and the Granite Construction Liberty Quarry proposal over the last ten years. The term limit proposal is embarrassing in this context. I have little doubt that a great share of those that cue up to sign the term limit petition know little of these struggles despite the 10 years of local headlines. It's hard for me not to think of them as ill- informed ingrates. What if the county had term limits and it was time for Supervisor Bob Buster to have to step down, just arbitrarily, despite his years of invaluable public service? Magnificent public service careers are thrown to the winds to the detriment of the whole community by those who don't appreciate such career service with their nihilistic notions of "that government is best which governs least." What, like the Articles of Confederation government that was overthrown by our founding fathers? Don't we owe a great debt to our city council members for the fabulous job they have done with their visionary building of such a forward- looking city since incorporation in 1989? Aren't we ail profiting from this? Is their reward to be the punishment of term limits by citizens who don't respect the great advantages that accrue from dedicated career public servants. I, for one, appreciate that our city's progressive development plans have resulted in this handsome, new, community center. On opening night the term limit people were present to spoil the evening. We who opposed and defeated the Liberty Quarry in the 7 year EIR process look to the city now to run a possibly costly law suit to overturn a precedent that would make a mockery of the whole EIR process. We don't need this distraction. Ken Johnson 7/12/Jz� Paul Jacobs Temecula, CA 92592 July 10, 2012 COPY (text only) of COMPLAINT to be delivered to: California Secretary of State California Attorney General California Fair Political Practices Commission Honorable (Agency Director): I allege that the Temecula City Council has violated the public trust and the Brown Act to thwart a term limits proposition from being placed on the November ballot by the people of Temecula, California. Misinformation and abuse of California's petition signature verification law enabled the City to squelch the people's rightful place to petition their government. CALIFORNIA CONSTITUTION ARTICLE 2 VOTING, INITIATIVE AND REFERENDUM, AND RECALL SECTION 1. All political power is inherent in the people. Government is instituted for their protection, security, and benefit, and they have the right to alter or reform it when the public good may require. Believing those words, a handful of local citizens voluntarily collected 5,531 signatures to put term limits for the Temecula City Council on the ballot. When the petition was delivered to the City Clerk acting in the capacity as the local election official, a random sampling signature verification process was used because the Registrar of Voters reportedly told the City Clerk that it would cost as much as $20,980 for a full signature review, according to a March 19, 2012 newspaper article in the Press -Enterprise (htto://www.pe.com/local-news/rivers ide-county/temecu la/temec u la -head l ines-index/201203 19-temecula- city-council-term-limit-effort-fails.ece). (Exhibit 1 — Press -Enterprise story) Based on that erroneous information, the City Clerk chose the minimum requirement of checking only 500 of the submitted signatures. It was later revealed that the actual cost to verify 5,531 signatures would have been only $2,765 — a small investment for the sake of democracy that the City Clerk deemed "would be a waste of public funds" in the aforementioned newspaper article. CA Government Code 54950.....The people, in delegating authority, do not give their public servants the right to decide what is good for the people to know and what is not good for them to know. The people insist on remaining informed so that they may retain control over the instruments they have created. The City decided the people would never know the results of a full signature verification process. A City Clerk works for the people of a community, but ultimately answers to their political and municipal bosses. In the capacity as the local elections official, a City Clerk is not really at arm's length to act independently in the interest of the people. In handling this particular petition, advice from the City Attorney apparently directed a narrow application of elections law to favor Council incumbents. An employee does not work against their employer. The review of 500 signatures projected a signature verification of 93.3 percent. The sampling fell short of the California Elections Code 9030 (d,f) requirements to trigger verification of the remaining 5,030 signatures submitted on the petition. The random sampling found one duplicate signature, and although the petitioner was penalized 112 signatures via the sampling process, the individual who signed twice faced no enforcement of Elections Code 18612. There appears to be selective enforcement of elections law in this instance. Local elected officials tend to be well connected. Politicians in a community are sure to have a number of critics and supporters. One or more ardent supporter with knowledge of the random sampling signature verification process could easily sabotage a petition effort by signing more than once, or otherwise falsifying a signature. The saboteur would know that the chances of being caught and prosecuted for a misdemeanor are practically nil. This scenario is especially possible when a small number of known circulators are regularly seen in front of local stores with petitions, as was the situation in Temecula. Imagine an election where you could discard 90 percent of the ballots because a small random sampling determined the results. To a registered voter, a signature on a petition is as meaningful as the signature they place on a vote -by - mail ballot. The proponent of the term limits initiative requested the Temecula City Council to place the petition issues on a meeting agenda for the purposes of presenting irregularities, miscommunications and misinformation that led to the legal, but minimal, partial signature verification process. The City Council ignored this public request to place the issue on the agenda, and instead violated the Brown Act by engaging in a cumulative 12 -minute debate during Public and Council Comments of the June 26, 2012 public meeting. (Exhibit 2 — DVD enclosed) As an involved citizen, I also participated in the meeting and wrote about it in a blog posted June 30 on the Temecula Patch http://temecula.patch.com/blog_posts/temecula-denies-the-peoples-place-in- democracy where I outline my allegation of the Brown Act violation. One person leaving comments has been persistent in defense of the City's position, exemplifying the exuberance of at least one Council supporter. (Exhibit 3 — Patch Blog) It appears the intent of Elections Code 9030 is to prevent undue financial hardship for large municipalities where petitions may be submitted frequently and in number. Temecula has been burdened by few, if any, petitions with a sufficient number of signatures to qualify for review by the Registrar of Voters. The City would suffer no financial hardship from the expenditure of $2,765 in the interest of the people's right to alter or reform local government by referendum. California's elections law were not written to exclude the people from the public process in defiance of the State Constitution. Law was written with a level of trust that parameters intended for expediency would not be used to limit or deny the inherent political power of the people. The City of Temecula has blocked the people from knowing whether a valid number of signatures were obtained or not. Based on the random verification process, The Amended Certificate of the Registrar of Voters reflects that the petition was projected to be insufficient by 281 signatures — a margin of less than one percent — and 5,030 signatures were never reviewed. (Exhibit 4 — Press Release from proponent.) Prayer for Relief With profound respect and reverence for the pubic process in our precious democracy, 1 beseech higher authority to intervene and amend California elections code as needed to protect the people's constitutional right to control the instrument of government they have created. Citizens of Temecula lack time, financial, and legal resources to obtain injunctive relief through the courts. We turn to higher government to prevent local government from abusing its authority upon the people. If your agency cannot intervene to recommend or compel the City of Temecula to put the term limits proposition on the ballot because of the City's narrow and unjust application of elections law, circumstances require the installation of thresholds to remedy existing law so that citizens will not be wrongly circumvented from the public process in the future. Temecula has a population upwards of 100,000 residents. The signatures of 5,531 residents were collected in earnest, and 5,000 people who signed those petitions were disenfranchised for the sake of a wealthy city saving $2,765. The letter of the law may have been followed, but the spirit of the California State Constitution has been broken. Your pubic office is sought to remedy wrongs perpetrated against the public good. Trust in local government has failed the people. It is up to your office to decide if the place of the people is on the field or in the bleachers of democracy. Because the deadline for the Registrar of Voters to put term limits on the ballot is August 10, your urgent attention is requested. Sincerely, Paul Jacobs Exhibits 1) Press -Enterprise article dated March 19, 2012 2) DVD of Public and Council Comments from June 26, 2012 Temecula City Council meeting 3) Temecula Patch blog 4) Press Release from petition proponent with Amended Certificate of Registrar of Voters