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012417 CC Agenda
In 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 REGULAR MEETING CITY COUNCIL CHAMBERS 41000 MAIN STREET TEMECULA, CALIFORNIA JANUARY 24, 2017 — 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 PM - 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 City Manager Annual Performance Evaluation. The City Council will meet in closed session pursuant to Government Code Section 54957 to evaluate the performance of the City Manager and establish goals and performance objectives for the next year as required by the City Manager's Employment Agreement and pursuant to Government Code Section 54957.6 to meet with its designated representatives, Mayor Maryann Edwards and City Attorney Peter Thorson, to provide direction to the designated representatives concerning the negotiation of changes, if any, to salary, compensation and/or benefits for the unrepresented employee position of City Manager. Any such changes would be approved by the Council as an Agenda Item in open session at a regular Council Meeting. 2. Labor Negotiations. The City Council will meet in closed session with its designated representatives to discuss labor negotiations pursuant to Government Code Section 54957.6. The City's designated representatives are: City Manager Aaron Adams, City Attorney Peter Thorson, Assistant City Manager Greg Butler, Director of Finance Jennifer Hennessy, Human Resources Manager Isaac Garibay and Economic Development Analyst Charles Walker. The employee organization is the California Teamsters Public, Professional and Medical Employees Union Local 911. Next in Order: Ordinance: 17-01 Resolution: 17-07 CALL TO ORDER: Mayor Maryann Edwards Prelude Music: Aubrey Chang Invocation: Pastor Dave Cope of Calvary Chapel Bible Fellowship Flag Salute: Mayor Pro Tem Matt Rahn ROLL CALL: Comerchero, Naggar, Rahn, Stewart, Edwards 1 PRESENTATIONS/PROCLAMATIONS Presentation for Reality Rally Event Presentation from Veterans of Foreign Wars to EMT of the Year Scott Gutierrez and Firefighter of the Year Anne Marie Miller PUBLIC COMMENTS A total of 30 minutes is provided for members of the public to 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 may 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 may 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. 1 Waive Reading of Standard Ordinances and Resolutions RECOMMENDATION: 1.1 That the City Council waive the reading of the text of all standard ordinances and resolutions included in the agenda except as specifically required by the Government Code. 2 Approve the Action Minutes of January 10, 2017 RECOMMENDATION: 2.1 That the City Council approve the City Council, Joint Meeting of the City Council/Planning Commission, and Joint Meeting of the City Council/Old Town Local Review Board action minutes of January 10, 2017. 2 3 Approve the List of Demands RECOMMENDATION: 3.1 That the City Council adopt a resolution entitled: RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS SET FORTH IN EXHIBIT A 4 Approve a Cooperative Agreement Between the City of Temecula and Nonprofit Senior Golden Years in Support of Various Senior Services Activities RECOMMENDATION: 4.1 That the City Council approve the Cooperative Agreement between the City of Temecula and nonprofit Senior Golden Years in support of various Senior Services activities. 5 Approve a Cooperative Agreement Between the City of Temecula and the Temecula Valley Genealogical Society in Support of Facility Use RECOMMENDATION: 5.1 That the City Council approve the Cooperative Agreement with the Temecula Valley Genealogical Society for in-kind services in support of Facility Use. 6 Approve the Agreement for Consultant Services with Stantec Consulting Services Inc. for the Butterfield Stage Road — Phase III, PW 15-11 RECOMMENDATION: 6.1 Approve the Agreement for Consultant Services with Stantec Consulting Services Inc., in the amount of $50,000, for professional design and engineering services in support of the Butterfield Stage Road — Phase III, PW 15-11; 6.2 Authorize the City Manager to approve Extra Work Authorizations not to exceed the contingency amount of $5,000, which is 10% of the Agreement amount. 7 Approve the First Amendment to Utility Agreement with Eastern Municipal Water District for Interstate 15 / State Route 79 South Ultimate Interchange, PW04-08 RECOMMENDATION: 7.1 That the City Council approve the First Amendment to Utility Agreement with Eastern Municipal Water District to relocate utilities for the Interstate 15 / State Route 79 South Ultimate Interchange project (Project). 3 8 Approve an Appropriation and the Agreement for Consultant Services with Michael Baker International, Inc. for Temecula Park and Ride, PW06-09 RECOMMENDATION: 8.1 Approve an appropriation from the General Fund, in the amount of $330,000 for Temecula Park and Ride, PW06-09, for additional administration, design, environmental, and site maintenance costs; 8.2 Approve the Agreement for Consultant Services with Michael Baker International, Inc., in an amount not to exceed $57,416, for additional design services; 8.3 Authorize the City Manager to approve extra work authorizations not to exceed the contingency amount of $5,741.60, which is equal to 10% of the Agreement amount. 9 Summarily Vacate Restricted Access Along a Portion of Campanula Way at Parcel 1 of Parcel Map 36461 RECOMMENDATION: 9.1 That the City Council adopt a resolution entitled: RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA TO SUMMARILY VACATE RESTRICTED ACCESS ALONG A PORTION OF CAMPANULA WAY AT PARCEL 1 OF PARCEL MAP 36461 PURSUANT TO THE AUTHORITY PROVIDED BY CHAPTER 4, PART 3, DIVISION 9 OF THE STREETS AND HIGHWAY CODE 10 Accept the Improvements and File the Notice of Completion for the Main Street Bridge Over Murrieta Creek (Replacement), PW03-05 RECOMMENDATION: 10.1 Accept the Improvements for the Main Street Bridge Over Murrieta Creek (Replacement), PW03-05, as complete; 10.2 Direct the City Clerk to File and Record the Notice of Completion. 11 Accept the Improvements and File the Notice of Completion for the Old Town Temecula Community Theater Remediation, PW12-04 RECOMMENDATION: 11.1 Accept the Improvements for the Old Town Temecula Community Theater Remediation, PW12-04, as complete; 11.2 Direct the City Clerk to File and Record the Notice of Completion. 4 12 Approve Plans and Specifications, and Authorize the Solicitation of Construction Bids for Pavement Rehabilitation Program — Margarita Road (Rancho California Road to Temecula Parkway), PW 12-11 RECOMMENDATION: 12.1 Approve the Plans and Specifications, and authorize the Department of Public Works to solicit construction bids for the Pavement Rehabilitation Program — Margarita Road (Rancho California Road to Temecula Parkway), PW12-11; 12.2 Make a finding that this project is exempt from CEQA per Section 15301, Class 1(c) of the CEQA Guidelines. 13 Approve Plans and Specifications, and Authorize the Solicitation of Construction Bids for Butterfield Stage Road at La Serena Way — Traffic Signal Installation, PW15-11TS RECOMMENDATION: 13.1 That the City Council approve the Plans and Specifications, and authorize the Department of Public Works to solicit Construction Bids for the Butterfield Stage Road at La Serena — Traffic Signal Installation, PW15-11TS (Project). ******************** 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 ******************** 5 TEMECULA COMMUNITY SERVICES DISTRICT MEETING Next in Order: Ordinance: CSD 17-01 Resolution: CSD 17-01 CALL TO ORDER: President Jeff Comerchero ROLL CALL: DIRECTORS: Edwards, Naggar, Rahn, Stewart, Comerchero CSD PUBLIC COMMENTS A total of 30 minutes is provided for members of the public to 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 may 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 may 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. 14 Approve the Action Minutes of January 10, 2017 RECOMMENDATION: 14.1 That the Board of Directors approve the action minutes of January 10, 2017. CSD DIRECTOR OF COMMUNITY SERVICES REPORT CSD GENERAL MANAGER REPORT CSD BOARD OF DIRECTORS REPORTS CSD ADJOURNMENT Next regular meeting: Tuesday, February 14, 2017, 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 SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY MEETING Next in Order: Ordinance: SARDA 17-01 Resolution: SARDA 17-01 CALL TO ORDER: Chairperson Maryann Edwards ROLL CALL: DIRECTORS: Comerchero, Naggar, Rahn, Stewart, Edwards SARDA PUBLIC COMMENTS A total of 15 minutes is provided for members of the public to 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 may 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 Agency Business items on the agenda, a Request to Speak form may be filed with the City Clerk prior to the Board of Directors addressing that item. Each speaker is limited to five minutes. SARDA 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 Successor Agency to the Temecula Redevelopment Agency request specific items be removed from the Consent Calendar for separate action. 15 Approve Recognized Obligation Payment Schedule for the Period of July 1, 2017 through June 30, 2018 (ROPS 17-18) RECOMMENDATION: 15.1 That the Board of Directors adopt a resolution entitled: RESOLUTION NO. SARDA 17- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY APPROVING A RECOGNIZED OBLIGATION PAYMENT SCHEDULE FOR THE PERIOD OF JULY 1, 2017 THROUGH JUNE 30, 2018 PURSUANT TO HEALTH AND SAFETY CODE SECTION 34177 AND TAKING CERTAIN ACTIONS IN CONNECTION THEREWITH 7 SARDA EXECUTIVE DIRECTOR REPORT SARDA BOARD OF DIRECTORS REPORTS SARDA ADJOURNMENT Next regular meeting: Tuesday, February 14, 2017, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. TEMECULA PUBLIC FINANCING AUTHORITY MEETING Next in Order: Ordinance: TPFA 17-01 Resolution: TPFA 17-01 CALL TO ORDER: Chairperson Maryann Edwards ROLL CALL: DIRECTORS: Comerchero, Naggar, Rahn, Stewart, Edwards TPFA PUBLIC COMMENTS A total of 15 minutes is provided for members of the public to 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 may 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 may 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. 16 Approve the Action Minutes of January 10, 2017 RECOMMENDATION: 16.1 That the Board of Directors approve the action minutes of January 10, 2017. JOINT MEETING OF THE CITY COUNCIL AND TEMECULA PUBLIC FINANCING AUTHORITY PUBLIC HEARING 17 Approve Issuance of Special Tax Bonds for the Temecula Public Financing Authority Community Facilities Districts No. 03-02 (Roripaugh Ranch) and No. 16-01 (Roripaugh Ranch Phase 2) RECOMMENDATION: 9 17.1 That the City Council hold a public hearing in accordance with Section 6586.5(a)(2) of the California Government Code with respect to the financing of public improvements by means of the issuance of community facilities district special tax bonds by the Temecula Public Financing Authority for its Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), and adopt by a majority vote the resolution entitled: RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA MAKING FINDINGS WITH RESPECT TO AND APPROVING THE ISSUANCE OF BONDS BY THE TEMECULA PUBLIC FINANCING AUTHORITY 17.2 That the Temecula Public Financing Authority adopt by a 4/5ths vote the resolution entitled: RESOLUTION NO. TPFA 17- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS FOR COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2), AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS 17.3 That the Temecula Public Financing Authority adopt by a majority vote the resolution entitled: RESOLUTION NO. TPFA 17- 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. 03-02 (RORIPAUGH RANCH), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS ADJOURNMENT OF JOINT MEETING TPFA EXECUTIVE DIRECTOR REPORT TPFA BOARD OF DIRECTORS REPORTS TPFA ADJOURNMENT Next regular meeting: Tuesday, February 14, 2017, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. 10 TEMECULA HOUSING AUTHORITY — No Meeting RECONVENE TEMECULA CITY COUNCIL CITY COUNCIL BUSINESS 18 Approve the CAFR Report for the Year Ended June 30, 2016 RECOMMENDATION: 18.1 That the City Council receive and file the City Comprehensive Annual Financial Report (CAFR) as June 30, 2016. JOINT MEETING OF THE CITY COUNCIL AND COMMUNITY SERVICES COMMISSION 19 Conduct Annual Joint Meeting Between the City Council and the Community Services Commission RECOMMENDATION: 19.1 That the City Council conduct the annual joint meeting between the City Council and the Community Services Commission. ADJOURNMENT OF JOINT MEETING DEPARTMENTAL REPORTS 20 City Council Travel/Conference Report 21 Community Development Department Monthly Report 22 Fire Department Monthly Report 23 Police Department Monthly Report 24 Public Works Department Monthly Reports BOARD/COMMISSION REPORTS CITY MANAGER REPORT CITY ATTORNEY REPORT ADJOURNMENT Mid -Year Budget Workshop: Thursday, January 26, 2017, at 8:30 AM, City Council Chambers, 41000 Main Street, Temecula, California. Next regular meeting: Tuesday, February 14, 2017, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. 11 NOTICE TO THE PUBLIC The agenda packet (including staff reports and public Closed Session information) will be available for public 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 agenda packet may also be accessed on the City's website — www.temeculaca.gov — and will be available for public viewing at the respective meeting. 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 viewing 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.temeculaca.qov — and will be available for public review at the respective meeting. If you have questions regarding any item on the agenda for this meeting, please contact the City Clerk's Department, (951) 694-6444. 12 PRESENTATIONS r -I City of Temecula Certificate of Recognition Presented on behalf of the City Council and the citizens of the City of Temecula to: Scott Gutierrez The City Council would like to congratulate Scott Gutierrez for receiving the EMT of the Year award. Recently, while off duty, Scott rendered aid to a civilian suffering a heart attack. Scott performed CPR and used the AED on the individual until fire personnel arrived. Scott's quick actions aided in saving the gentleman's life. Scott is a dedicated, thoughtful, and compassionate person who always gives his personal best. We are proud to recognize Scott for receiving this special honor and thank him for his dedicated service to this honorable career and for his passion to serve our communities. We wish Scott all the best in his personal and professional future. IN WITNESS WHEREOF, I have hereunto affixed my hand and official seal this twenty-fourth day of January, 2017. Maryann Edwards, Mayor Randi Johl, City Clerk r -I City of Temecula Certificate of Recognition Presented on behalf of the City Council and the citizens of the City of Temecula to: Anne Marie Miller The City Council would like to congratulate Anne Marie Miller for receiving the Firefighter of the Year award. Anne Marie managed the fire explorer program in addition to her regular duties. Anne Marie is dedicated to her career and consistently goes above and beyond her duties. We are proud to recognize Anne Marie for receiving this special honor and thank her for her dedicated service to this honorable career and for her passion to serve our communities. We wish Anne Marie all the best in her personal and professional future. IN WITNESS WHEREOF, I have hereunto affixed my hand and official seal this twenty-fourth day of January, 2017. Maryann Edwards, Mayor Randi Johl, City Clerk 1. CITY COUNCIL CONSENT Item No. 1 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Randi Johl, City Clerk DATE: January 24, 2017 SUBJECT: Waive Reading of Standard Ordinances and Resolutions PREPARED BY: Randi Johl, City Clerk RECOMMENDATION: That the City Council waive the reading of the text of all standard ordinances and resolutions included in the agenda except as specifically required by the Government Code. BACKGROUND: The City of Temecula is a general law city formed under the laws of the State of California. With respect to adoption of ordinances and resolutions, the City adheres to the requirements set forth in the Government Code. Unless otherwise required, the full reading of the text of standard ordinances and resolutions is waived. FISCAL IMPACT: None ATTACHMENTS: None Item No. 2 ACTION MINUTES TEMECULA CITY COUNCIL REGULAR MEETING CITY COUNCIL CHAMBERS 41000 MAIN STREET TEMECULA, CALIFORNIA JANUARY 10, 2017 — 7:00 PM 5:30 PM - The City Council convened 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. The City Council will meet in closed session pursuant to Government Code Section 54956.8 regarding real property owned by the Temecula West Village, LLC, consisting of approximately 55 acres located west of Interstate 15 and southwesterly of Temecula Parkway and Camino Estribo in the City of Temecula. The property is also known as the "South Parcel (Civic Use)" parcel within the proposed Altair Specific Plan and shown on Figure 2-2 of the Draft Environmental Impact Report for the Altair Specific Plan and related entitlements. The parties to the negotiations for the potential sale of the property to the City are: Temecula West Village, LLC, and the City of Temecula. Negotiators for the City of Temecula are: Aaron Adams, Peter Thorson, Greg Butler, and Luke Watson. Under negotiation are price and terms for the City's acquisition of the property. 2. City Manager Annual Performance Evaluation. The City Council will meet in closed session pursuant to Government Code Section 54957 to evaluate the performance of the City Manager and establish goals and performance objectives for the next year as required by the City Manager's Employment Agreement and pursuant to Government Code Section 54957.6 to meet with its designated representatives, Mayor Maryann Edwards and City Attorney Peter Thorson, to provide direction to the designated representatives concerning the negotiation of changes, if any, to salary, compensation and/or benefits for the unrepresented employee position of City Manager. Any such changes would be approved by the Council as an Agenda Item in open session at a regular Council Meeting. 3. Labor Negotiations. The City Council will meet in closed session with its designated representatives to discuss labor negotiations pursuant to Government Code Section 54957.6. The City's designated representatives are: City Manager Aaron Adams, City Attorney Peter Thorson, Assistant City Manager Greg Butler, Director of Finance Jennifer Hennessy, Human Resources Manager Isaac Garibay and Economic Development Analyst Charles Walker. The employee organization is the California Teamsters Public, Professional and Medical Employees Union Local 911. At 5:30 PM Mayor Edwards called the City Council meeting to order and recessed to Closed Session to consider the matters described on the Closed Session agenda. The City Council meeting convened at 7:04 PM Action Minutes 011017 1 CALL TO ORDER: Mayor Maryann Edwards Prelude Music: Susan Miyamoto Invocation: Pastor Scott Treadway of Rancho Community Church Flag Salute: Council Member Naggar ROLL CALL: Comerchero, Naggar, Rahn, Stewart, Edwards PRESENTATIONS/PROCLAMATIONS Presentation to Incoming/Outgoing Mayor and TCSD President Presentation of 10 -Year Service Pin to Bob Nagel and 5 -Year Service Pin to Robert (Skip) Carter Presentation of Certificate of Recognition to Rancho Christian High School California State Champions Football Team and Coaches PUBLIC COMMENTS The following individuals addressed the City Council: • Michael McCracken • Craig Puma • Bernard Budney CITY COUNCIL REPORTS CONSENT CALENDAR 1 Waive Reading of Standard Ordinances and Resolutions - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 1.1 That the City Council waive the reading of the text of all standard ordinances and resolutions included in the agenda except as specifically required by the Government Code. 2 Approve the Action Minutes of December 13, 2016 - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 2.1 Approve the City Council, Joint Meeting of the City Council/Temecula Community Services District, and Joint Meeting of the City Council/Successor Agency to the Temecula Redevelopment Agency action minutes of December 13, 2016. Action Minutes 011017 2 3 Approve the List of Demands - Approved Staff Recommendation (4-0-1, Council Member Stewart abstained) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn and Edwards with Council Member Stewart abstaining. RECOMMENDATION: 3.1 That the City Council adopt a resolution entitled: RESOLUTION NO. 17-01 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA ALLOWING CERTAIN CLAIMS AND DEMANDS AS SET FORTH IN EXHIBIT A 4 Approve the City Treasurer's Report as of November 30, 2016 - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 4.1 That the City Council approve and file the City Treasurer's Report as of November 30, 2016. 5 Approve Annual Citywide Records Retention Schedule and Records Destruction - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 5.1 That the City Council adopt a resolution entitled: RESOLUTION NO. 17-02 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA APPROVING REVISIONS TO THE ESTABLISHED CITYWIDE RECORDS RETENTION SCHEDULE, THEREBY AMENDING AND RESTATING THE RECORDS RETENTION POLICY, AND APPROVING THE DESTRUCTION OF CERTAIN RECORDS 6 Approve Annual Boards and Commissions Handbook for Calendar Year 2017 - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 6.1 That the City Council approve the annual Boards and Commissions Handbook for calendar year 2017. Action Minutes 011017 3 7 Approve Annual Legislative Platform for Calendar Year 2017 - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 7.1 That the City Council approve the annual Legislative Platform for calendar year 2017. 8 Award a Consultant Services Agreement with Triad Consulting & System Design Group, LLC for Design, Vendor Selection, and Project Management Services for a Surveillance System - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 8.1 Award a three-year Consultant Services Agreement with Triad Consulting & System Design Group, LLC, in an amount not to exceed $153,150, for Design, Vendor Selection, and Project Management Services for a Surveillance System; 8.2 Authorize the City Manager to approve Contract Change Orders up to 10% of the contract amount of $15,315. 9 Adopt Resolutions and Authorize Execution of Related Agreements and Documents for the Implementation of a Local Transaction and Use Tax (Measure S) - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 9.1 Adopt a resolution entitled: RESOLUTION NO. 17-03 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA AUTHORIZING THE MAYOR TO EXECUTE AGREEMENTS WITH THE STATE BOARD OF EQUALIZATION FOR IMPLEMENTATION OF A LOCAL TRANSACTIONS AND USE TAX 9.2 Adopt a resolution entitled: RESOLUTION NO. 17-04 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA AUTHORIZING THE EXAMINATION OF TRANSACTIONS (SALES) AND USE TAX RECORDS Action Minutes 011017 4 9.3 Adopt a resolution entitled: RESOLUTION NO. 17-05 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA AUTHORIZING THE CITY MANAGER TO EXECUTE ON BEHALF OF THE CITY CERTAIN AGREEMENTS AND DOCUMENTS WITH THE STATE BOARD OF EQUALIZATION FOR IMPLEMENTATION OF A LOCAL TRANSACTIONS AND USE TAX RECESS At 7:36 PM, the City Council recessed and convened as the Temecula Community Services District Meeting, the Successor Agency to the Temecula Redevelopment Agency Meeting and the Temecula Public Financing Authority Meeting. At 7:48 PM, the City Council resumed with the remainder of the City Council Agenda. RECONVENE TEMECULA CITY COUNCIL PUBLIC HEARING 13 Amend and Adopt the 2016 California Building Codes - Approved Staff Recommendation (5-0) Council Member Rahn made the motion; it was seconded by Council Member Stewart; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 13.1 That the City Council adopt the Ordinance introduced on December 13, 2016: ORDINANCE NO. 16-12 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TEMECULA AMENDING SECTIONS 15.04.010 THROUGH 15.04.080, INCLUSIVE, OF THE TEMECULA MUNICIPAL CODE TO ADOPT BY REFERENCE THE 2016 EDITIONS OF THE CALIFORNIA BUILDING CODE; CALIFORNIA MECHANICAL CODE; CALIFORNIA PLUMBING CODE; CALIFORNIA ELECTRICAL CODE; CALIFORNIA ADMINISTRATIVE CODE; CALIFORNIA ENERGY CODE; CALIFORNIA GREEN BUILDING STANDARDS CODE; CALIFORNIA HISTORICAL BUILDING CODE; CALIFORNIA EXISTING BUILDING CODE; CALIFORNIA RESIDENTIAL CODE; AND CALIFORNIA REFERENCE STANDARDS CODE; TOGETHER WITH CERTAIN AMENDMENTS, ADDITIONS AND DELETIONS TO SAID CODES City Attorney Thorson read by title only Ordinance No. 16-12. Action Minutes 011017 5 14 Amend and Adopt the 2016 California Fire Code - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Stewart; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 14.1 That the City Council adopt the Ordinance introduced on December 13, 2016: ORDINANCE NO. 16-14 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TEMECULA ADOPTING BY REFERENCE THE 2016 EDITION OF THE CALIFORNIA FIRE CODE BASED ON THE 2015 INTERNATIONAL FIRE CODE, IN ITS ENTIRETY, REGULATING AND GOVERNING THE SAFEGUARD OF LIFE AND PROPERTY FROM FIRE AND EXPLOSION HAZARDS ARISING FROM THE STORAGE, HANDLING AND USE OF HAZARDOUS SUBSTANCES, MATERIALS AND DEVICES, AND FROM CONDITIONS HAZARDOUS TO LIFE OR PROPERTY IN THE OCCUPANCY OF BUILDINGS AND PREMISES IN THE CITY OF TEMECULA, INCLUDING CERTAIN AMENDMENTS, ADDITIONS, AND DELETIONS, AND PROVIDING FOR THE ISSUANCE OF PERMITS AND THE COLLECTION OF FEES City Attorney Thorson read by title only Ordinance No. 16-14. 15 Consider Planning Application PA16-1657, a Major Modification Application to Allow Revisions to a Previously Approved Car Wash Generally Located at the Northwest corner of Jefferson Avenue and Del Rio Road at 28111 Jefferson Avenue - Approved Staff Recommendation (5-0) Council Member Naggar made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 15.1 That the City Council consider a resolution entitled: RESOLUTION NO. 17-06 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA APPROVING PLANNING APPLICATION PA16-1657, A MAJOR MODIFICATION APPLICATION TO ALLOW REVISIONS TO A RECENTLY APPROVED CAR WASH GENERALLY LOCATED AT THE NORTHWEST CORNER OF JEFFERSON AVENUE AND DEL RIO ROAD AT 28111 JEFFERSON AVENUE (APN: 921-060-006) Action Minutes 011017 6 CITY COUNCIL BUSINESS 16 Amend the Agreement for Law Enforcement Services Between the City of Temecula and the County of Riverside Funding an Additional 11 Sworn Officers - Approved Staff Recommendation (5-0) Council Member Rahn made the motion; it was seconded by Council Member Comerchero; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 16.1 Approve the Amendment to the Agreement for Law Enforcement Services between the City of Temecula and the County of Riverside (Agreement), adjusting the police officer count; 16.2 Approve an Appropriation of $895,115 to the Police Department FY2016-17 Operating Budget, for salaries, benefits, training and equipment costs related to the additional police officer positions (for three months). 17 Selection of 2017 City Council Committees - Approved Staff Recommendation (5-0) Council Member Comerchero made the motion; it was seconded by Council Member Rahn; and electronic vote reflected approval by Council Members Comerchero, Naggar, Rahn, Stewart and Edwards. RECOMMENDATION: 17.1 That the City Council consider and appoint members to serve on various City Council Committees for calendar year 2017. JOINT MEETING OF THE CITY COUNCIL, PLANNING COMMISSION AND OLD TOWN LOCAL REVIEW BOARD 18 Conduct Annual Joint Meeting Between the City Council and the Planning Commission — Receive and file. RECOMMENDATION: 18.1 That the City Council conduct the annual joint meeting between the City Council and the Planning Commission. 19 Conduct Annual Joint Meeting Between the City Council and the Old Town Local Review Board — Receive and file. RECOMMENDATION: 19.1 That the City Council conduct the annual joint meeting between the City Council and the Old Town Local Review Board. BOARD/COMMISSION REPORTS CITY MANAGER REPORT Action Minutes 011017 7 CITY ATTORNEY REPORT City Attorney Thorson reported there were no reportable actions in regards to the Closed Session items and any actions for these items will take place in open session. ADJOURNMENT At 9:22 PM, the City Council meeting was formally adjourned to Tuesday, January 24, 2017, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. Maryann Edwards, Mayor ATTEST: Randi Johl, City Clerk [SEAL] Action Minutes 011017 8 Item No. 3 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Jennifer Hennessy, Finance Director DATE: January 24, 2017 SUBJECT: Approve the List of Demands PREPARED BY: Pascale Brown, Accounting Manager Pam Espinoza, Accounting Specialist RECOMMENDATION: That the City Council adopt a resolution entitled: RESOLUTION NO. 17- 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. 17- 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 $2,021,898.18. 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 24th day of January, 2017. Maryann Edwards, Mayor ATTEST: Randi Johl, City Clerk [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing Resolution No. 17- was duly and regularly adopted by the City Council of the City of Temecula at a meeting thereof held on the 24th day of January, 2017, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: Randi Johl, City Clerk CITY OF TEMECULA LIST OF DEMANDS 12/21/2016 TOTAL CHECK RUIN: $ 478,184.87 12/28/2016 TOTAL CHECK RUN: 867,079.87 01/05/2017 TOTAL CHECK RUN: 260,833.97 12/28/2016 TOTAL PAYROLL RUN: 396,974.05 12/29/2016 TOTAL PAYROLL RUN: 18,825.42 TOTAL LIST OF DEMANDS FOR 01/24/2017 COUNCIL MEETING: $ 2,021,898.18 DISBURSEMENTS BY FUND: CHECKS: CITY OF TEMECULA LIST OF DEMANDS 001 GENERAL FUND $ 713,569.35 125 PEG PUBLIC EDUCATION & GOVERNMENT 2,400.00 135 BUSINESS INCUBATOR RESOURCE 1,389.29 140 COMMUNITY DEV BLOCK GRANT 1,550.80 150 AB 2766 FUND 1,945.47 165 AFFORDABLE HOUSING 1,074.57 190 TEMECULA COMMUNITY SERVICES DISTRICT 236,581.82 192 TCSD SERVICE LEVEL B STREET LIGHTS 73,006.90 194 TCSD SERVICE LEVEL D REFUSE RECYCLING 869.87 196 TCSD SERVICE LEVEL "L" LAKE PARK MAINT. 16,007.07 197 TEMECULA LIBRARY FUND 9,054.23 210 CAPITAL IMPROVEMENT PROJECTS FUND 324,864.85 277 CFD-RORIPAUGH 12,000.00 300 INSURANCE FUND 31,114.79 305 WORKER'S COMPENSATION 3,181.22 320 INFORMATION TECHNOLOGY 53,338.45 330 CENTRAL SERVICES 9,720.39 340 FACILITIES 36,347.38 472 CFD 01-2 HARVESTON A&B DEBT SERVICE 20.43 473 CFD 03-1 CROWNE HILL DEBT SERVICE FUND 20.43 474 AD03-4 JOHN WARNER ROAD DEBT SERVICE 20.43 475 CFD03-3 WOLF CREEK DEBT SERVICE FUND 20.43 476 CFD 03-6 HARVESTON 2 DEBT SERVICE FUND 20.43 477 CFD 03-02 RORIPAUGH DEBT SERVICE FUND 122.61 501 SERVICE LEVEL"C"ZONE 1 SADDLEWOOD 2,411.68 502 SERVICE LEVEL"C"ZONE 2 WINCHESTER CREEK 1,721.00 503 SERVICE LEVEL"C"ZONE 3 RANCHO HIGHLANDS 1,904.86 504 SERVICE LEVEL"C"ZONE 4 THE VINEYARDS 394.48 505 SERVICE LEVEL"C"ZONE 5 SIGNET SERIES 1,806.55 506 SERVICE LEVEL"C"ZONE 6 WOODCREST COUNTRY 912.25 507 SERVICE LEVEL"C"ZONE 7 RIDGEVIEW 1,230.81 508 SERVICE LEVEL"C"ZONE 8 VILLAGE GROVE 9,963.54 509 SERVICE LEVEL"C"ZONE 9 RANCHO SOLANA 115.60 510 SERVICE LEVEL"C"ZONE 10 MARTINIQUE 431.64 511 SERVICE LEVEL"C"ZONE 11 MEADOWVIEW 104.69 512 SERVICE LEVEL"C"ZONE 12 VINTAGE HILLS 4,094.26 513 SERVICE LEVEL"C"ZONE 13 PRESLEY DEVELOP. 1,725.71 514 SERVICE LEVEL"C"ZONE 14 MORRISON HOMES 742.58 515 SERVICE LEVEL"C"ZONE 15 BARCLAY ESTATES 565.07 516 SERVICE LEVEL"C"ZONE 16 TRADEWINDS 1,040.23 517 SERVICE LEVEL"C"ZONE 17 MONTE VISTA 117.50 518 SERVICE LEVEL"C"ZONE 18 TEMEKU HILLS 5,256.50 519 SERVICE LEVEL"C"ZONE 19 CHANTEMAR 2,708.76 520 SERVICE LEVEL"C"ZONE 20 CROWNE HILL 8,055.91 521 SERVICE LEVEL"C"ZONE 21 VAIL RANCH 11,695.60 522 SERVICE LEVEL"C"ZONE 22 SUTTON PLACE 223.86 523 SERVICE LEVEL"C"ZONE 23 PHEASENT RUN 349.54 524 SERVICE LEVEL"C"ZONE 24 HARVESTON 6,826.50 525 SERVICE LEVEL"C"ZONE 25 SERENA HILLS 2,257.02 526 SERVICE LEVEL"C"ZONE 26 GALLERYTRADITION 103.23 527 SERVICE LEVEL"C"ZONE 27 AVONDALE 548.89 528 SERVICE LEVEL"C"ZONE 28 WOLF CREEK 10,368.29 529 SERVICE LEVEL"C"ZONE 29 GALLERY PORTRAIT 180.95 $ 1,606,098.71 CITY OF TEMECULA LIST OF DEMANDS 001 GENERAL FUND $ 257,144.92 135 BUSINESS INCUBATOR RESOURCE 1,614.21 140 COMMUNITY DEV BLOCK GRANT 418.73 165 AFFORDABLE HOUSING 2,919.47 190 TEMECULA COMMUNITY SERVICES DISTRICT 99,235.03 192 TCSD SERVICE LEVEL B STREET LIGHTS 204.47 194 TCSD SERVICE LEVEL D REFUSE RECYCLING 1,993.79 196 TCSD SERVICE LEVEL "L" LAKE PARK MAINT. 234.68 197 TEMECULA LIBRARY FUND 977.46 300 INSURANCE FUND 1,985.53 320 INFORMATION TECHNOLOGY 30,319.58 330 SUPPORT SERVICES 4,982.50 340 FACILITIES 10,847.68 472 CFD 01-2 HARVESTON A&B DEBT SERVICE 66.42 473 CFD 03-1 CROWNE HILL DEBT SERVICE FUND 66.42 474 AD03-4 JOHN WARNER ROAD DEBT SERVICE 66.42 475 CFD03-3 WOLF CREEK DEBT SERVICE FUND 66.42 476 CFD 03-6 HARVESTON 2 DEBT SERVICE FUND 66.42 477 CFD 03-02 RORIPAUGH DEBT SERVICE FUND 398.53 501 SERVICE LEVEL"C"ZONE 1 SADDLEWOOD 80.62 502 SERVICE LEVEL"C"ZONE 2 WINCHESTER CREEK 54.09 503 SERVICE LEVEL"C"ZONE 3 RANCHO HIGHLANDS 64.14 504 SERVICE LEVEL"C"ZONE 4 THE VINEYARDS 11.62 505 SERVICE LEVEL"C"ZONE 5 SIGNET SERIES 129.85 506 SERVICE LEVEL"C"ZONE 6 WOODCREST COUNTRY 23.64 507 SERVICE LEVEL"C"ZONE 7 RIDGEVIEW 33.24 508 SERVICE LEVEL"C"ZONE 8 VILLAGE GROVE 220.79 509 SERVICE LEVEL"C"ZONE 9 RANCHO SOLANA 2.47 510 SERVICE LEVEL"C"ZONE 10 MARTINIQUE 10.11 511 SERVICE LEVEL"C"ZONE 11 MEADOWVIEW 6.67 512 SERVICE LEVEL"C"ZONE 12 VINTAGE HILLS 147.23 513 SERVICE LEVEL"C"ZONE 13 PRESLEY DEVELOP. 31.45 514 SERVICE LEVEL"C"ZONE 14 MORRISON HOMES 18.18 515 SERVICE LEVEL"C"ZONE 15 BARCLAY ESTATES 15.78 516 SERVICE LEVEL"C"ZONE 16 TRADEWINDS 36.82 517 SERVICE LEVEL"C"ZONE 17 MONTE VISTA 3.13 518 SERVICE LEVEL"C"ZONE 18 TEMEKU HILLS 136.51 519 SERVICE LEVEL"C"ZONE 19 CHANTEMAR 72.91 520 SERVICE LEVEL"C"ZONE 20 CROWNE HILL 197.99 521 SERVICE LEVEL"C"ZONE 21 VAIL RANCH 334.90 522 SERVICE LEVEL"C"ZONE 22 SUTTON PLACE 7.95 523 SERVICE LEVEL"C"ZONE 23 PHEASENT RUN 8.77 524 SERVICE LEVEL"C"ZONE 24 HARVESTON 188.33 525 SERVICE LEVEL"C"ZONE 25 SERENA HILLS 60.62 526 SERVICE LEVEL"C"ZONE 26 GALLERYTRADITION 2.55 527 SERVICE LEVEL"C"ZONE 27 AVONDALE 8.77 528 SERVICE LEVEL"C"ZONE 28 WOLF CREEK 277.79 529 SERVICE LEVEL"C"ZONE 29 GALLERY PORTRAIT 3.87 415,799.47 TOTAL BY FUND: $ 2,021,898.18 apChkLst Final Check List Page: 1 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK Check # Date Vendor 3180 12/15/2016 006887 UNION BANK OF CALIFORNIA Description Amount Paid Check Total 019000 OMERTRI LLC, LAURENT'S LE MN MTG FOR INFILL LAND USE WITH 50.00 50.00 COFFEE SHOP 180520 12/21/2016 004858 19TH HOLE GOLF CARTS Cart rental for Code Enforcement 133.00 133.00 180521 12/21/2016 000733 ABBEY PARTY RENTS LINENS FOR SISTER CITY DINNER 446.55 446.55 180522 12/21/2016 016764 ABM BUILDING SERVICES, LLC HVAC PREV MAINT: JRC 213.33 HVAC PREV MAINT: TCC 120.00 HVAC PREV MAINT: FIRE STATION 84 211.00 HVAC PREV MAINT: HARVESTON COMP/ 72.00 HVAC PREV MAINT: MAINTENANCE FAC 262.00 HVAC PREV MAINT: BIRDSALL SPORTS 133.00 HVAC PREV MAINT: FIRE STATION 73 58.00 HVAC PREV MAINT: TEMECULA COMM T 299.00 HVAC PREV MAINT: MPSC 235.00 HVAC PREV MAINT: FOOD PANTRY 29.00 HVAC PREV MAINT: CRC 800.00 HVAC PREV MAINT: TV MUSEUM 150.00 HVAC PREV MAINT: CHILDREN'S MUSED 201.00 HVAC PREV MAINT: TVE2 1,075.00 HVAC PREV MAINT: FIRE STATION - OVE 58.00 HVAC PREV MAINT: FOC 283.00 HVAC PREV MAINT: CHAPEL 50.00 HVAC PREV MAINT: LIBRARY 268.43 HVAC PREV MAINT: PARKING GARAGE 305.00 HVAC PREV MAINT: FIRE STATION 92 292.00 180523 12/21/2016 015217 AIRGAS, INC. Dry ice for experiments:Pennypickle's 10.88 180524 12/21/2016 010905 ALLIED TRAFFIC & EQUIPMENT rental items -various events 180525 12/21/2016 006915 ALLIE'S PARTY EQUIPMENT MISC RENTALS:VAR CSD SPECIAL EVENTS TABLE/CHAIR RENTAL:COLLEGE FAIR 9/ RENT CANOPY & LINENS:POLICE pechanga pueska mountain day: rental 180526 12/21/2016 004422 AMERICAN BATTERY TRAFFIC SIGNAL EQUIPMENT: PW CORPORATION TRAFFIC 180527 12/21/2016 004240 AMERICAN FORENSIC NURSES JAN '17 STAND BY FEE:POLICE (AFN) 5,114.76 10.88 2,450.00 2,450.00 59.50 4,017.99 230.43 1,287.53 5,595.45 573.43 573.43 1,248.00 1,248.00 Pagel apChkLst Final Check List Page: 2 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor Description Amount Paid Check Total 180528 12/21/2016 000101 APPLE ONE INC NOV 16 TEMP STAFF SVCS: CITY 3,911.45 3,911.45 CLERK & HR 180529 12/21/2016 018101 BARN STAGE COMPANY INC, PERFORMANCE:NYE 12/31/16 1,000.00 1,000.00 THE 180530 12/21/2016 015464 BENEVOLENT PROTECTIVE REFUND:SEC DEP:GYM RENTAL:CRC 180531 12/21/2016 004262 BIO-TOX LABORATORIES 180532 12/21/2016 014284 BLAKELY'S TRUCK SERVICE 200.00 200.00 DRUG/ALCOHOL ANALYSIS:POLICE 1,466.50 DRUG/ALCOHOL ANALYSIS:POLICE 987.00 DRUG/ALCOHOL ANALYSIS:POLICE 578.00 VEH & EQUIP MAINT SVCS: PW STREET DIV VEH & EQUIP MAINT SVCS: PW STREET VEH & EQUIP MAINT SVCS: PW STREET VEH & EQUIP MAINT SVCS: PW STREET 180533 12/21/2016 008605 BONTERRA PSOMAS 9/30-10/27 CONSULT SVCS:PECHANGA PKWY 180534 12/21/2016 003138 CAL MAT MISC ASPHALT SUPPLIES:PW STREET MAINT 180535 12/21/2016 016688 CALIFORNIA WATERSHED ENG 8/1-11/30 DSGN SVCS: FLOOD CORP CONTROLCHANN 81.08 92.81 462.80 251.82 3,031.50 888.51 927.64 927.64 92.66 92.66 7,697.00 7,697.00 180536 12/21/2016 004462 CDW, LLC ERGONOMIC KEYBOARD:PW 79.83 79.83 180537 12/21/2016 017414 CHAMBER MARKETING ADVERTISING: TEMECULA PRESENTS 1,200.00 1,200.00 PARTNERS INC 180538 12/21/2016 000137 CHEVRON AND TEXACO NOV 16 CITY VEHICLES FUEL: POLICE 1,349.24 1,349.24 DEPT 180539 12/21/2016 019468 CHS EDUCATION FOUNDATION REFUND:SEC DEP:RM RENTAL:TCC 200.00 200.00 180540 12/21/2016 019372 CITY BEAT PERFORMANCE:NYE 12/31/16 180541 12/21/2016 000442 COMPUTER ALERT SYSTEMS 180542 12/21/2016 004329 COSTCO TEMECULA #491 2,500.00 2,500.00 fire & security monitoring:var sites— 5,775.00 SMOKE DETECTOR REPAIR: THEATER MISC SUPPLIES:MPSC SUPPLIES:SKATE PARK MISC SUPPLIES/EQUIPMENT:LIBRARY SUPPLIES:HUMAN SVCS PRGRMS & EVE SUPPLIES:HIGH HOPES PROGRAM 242.00 6,017.00 218.22 207.36 176.71 38.97 249.82 891.08 Page2 apChkLst Final Check List Page: 3 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor Description 180543 12/21/2016 017542 COX, KRISTI LYN TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS Amount Paid Check Total 873.60 554.40 1,428.00 180544 12/21/2016 018491 CRONBERG PHOTOGRAPHY TCSD INSTRUCTOR EARNINGS 196.00 TCSD INSTRUCTOR EARNINGS 399.00 595.00 180545 12/21/2016 019465 CRUZ, LAURA REFUND:SEC DEP:PICNIC 200.00 200.00 RENTAL:HARVESTON 180546 12/21/2016 012614 DBX, INC. REPAIRS & MAINT OF TRAFFIC SIG EQUIP: PW 180547 12/21/2016 004192 DOWNS ENERGY FUEL & LUBRICANTS FUEL FOR CITY VEHICLES: TRAFFIC DIV FUEL FOR CITY VEHICLES: POLICE DEP FUEL FOR CITY VEHICLES: TCSD FUEL FOR CITY VEHICLES: BLDG INSPE FUEL FOR CITY VEHICLES: CODE ENFOI FUEL FOR CITY VEHICLES: PUBLIC WOF FUEL FOR CITY VEHICLES: PUBLIC WOF 10,000.00 10,000.00 241.91 44.34 430.21 123.34 22.80 676.52 565.04 2,104.16 180548 12/21/2016 002528 EAGLE GRAPHIC CREATIONS misc office supplies: council member 114.48 114.48 INC 180549 12/21/2016 002390 EASTERN MUNICIPAL WATER NOV WATER METER:32131 S LOOP RD 51.56 DIST LDSC NOV WATER METER:32131 S LOOP RD C 48.79 NOV WATER METER:32131 S LOOP RD E 115.70 216.05 180550 12/21/2016 013367 ELECTRO INDUSTRIAL SUPPLY MISC SMALL TOOLS & EQUIP: PW 249.52 249.52 TRAFFIC 180551 12/21/2016 002939 ENVIRONMENTAL SYSTEMS ARCGIS SOFTWARE RENEWAL:GIS 18,300.00 18,300.00 RESEARCH 180552 12/21/2016 015090 EVAPCO PRODUCTS, INC. DEC '16 CONDENSER WATER SYS 566.50 566.50 MAINT: CIV C 180553 12/21/2016 015330 FAIR HOUSING COUNCIL OCT 16 FAIR HOUSING SRVCS:CDBG FUNDING 180554 12/21/2016 011145 FOSTER, JILL CHRISTINE 180555 12/21/2016 018858 FRONTIER CALIFORNIA, INC. TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS NOV INTERNET SVCS:TCC DEC INTERNET SVCS:CITY HALL DEC GENERAL USAGE:SR CTR, SKATE F 1,401.82 1,401.82 1,019.20 705.60 2,054.85 144.99 289.99 129.56 3,779.65 564.54 Page:3 apChkLst Final Check List Page: 4 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor 180556 12/21/2016 000177 GLENNIES OFFICE PRODUCTS INC 180557 12/21/2016 003792 GRAINGER Description Amount Paid Check Total NOV 16 MISC OFFICE SUPPLIES: FOC 81.71 NOV 16 MISC. OFC SUPPLIES: ECON DE 40.42 NOV 16 MISC. OFFICE SUPPLIES: VAR R MISC STAGE SUPPLIES: THEATER RET'D MISC STAGE SUPPLIES: THEATEF MISC STAGE SUPPLIES: THEATER MISC STAGE SUPPLIES: THEATER MISC STAGE SUPPLIES: THEATER MAINTENANCE SUPPLIES: VAR PARKS MISC STAGE SUPPLIES: THEATER 180558 12/21/2016 019456 HARTMAN, EULALIA MICHELE REFUND:SEC DEP:RM RENTAL:TCC 180559 12/21/2016 013749 HELIXSTORM INC. IT INFRASTRUCTURE SUPPORT:INFO TECH 584.92 707.05 207.95 -207.95 100.56 10.33 197.62 73.39 10.33 392.23 150.00 150.00 1,337.50 1,337.50 180560 12/21/2016 019455 HEMETADVISORY COUNCIL REFUND:SEC DEP:RM RENTAL:CRC 200.00 200.00 180561 12/21/2016 010210 HOME DEPOT SUPPLY INC, BUILDING AND REC SUPPLIES:MRC 584.80 584.80 THE 180562 12/21/2016 003198 HOME DEPOT, THE MISC SUPPLIES:SKATE PARK 108.96 108.96 180563 12/21/2016 017334 HOUSE OF AUTOMATION INC. GATE & BAY DOOR MAINT: STA 84 GATE & BAY DOOR MAINT: STA 84 GATE & BAY DOOR MAINT: STA 84 GATE REPAIR: STA95 576.35 546.19 666.42 479.85 2,268.81 180564 12/21/2016 009135 IMPACT MARKETING & DESIGN PROMOTIONAL ITEMS: THEATER 723.73 723.73 INC 180565 12/21/2016 016564 IMPACT TELECOM NOV 800 SERVICES:CIVIC CENTER 55.82 55.82 180566 12/21/2016 015358 KELLY PAPER COMPANY, INC. paper/binding/pckg supp:central services 671.45 671.45 180567 12/21/2016 001091 KEYSER MARSTON P/E 11/30 FSCL IMP ANALYSIS: 3,187.50 3,187.50 ASSOCIATES INC CYPRESS RID 180568 12/21/2016 019466 KINSEY, PATRICE REFUND:SEC DEP:RM RENTAL:TCC 200.00 200.00 180569 12/21/2016 008456 KITZEROW, CHERYL EE COMPTR LOAN PROGRAM: KITZEROW, CHERYL 866.99 866.99 Page:4 apChkLst Final Check List Page: 5 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor Description 180570 12/21/2016 017118 KRACH, BREE B. TROPHIES/AWARDS:MPSC Amount Paid Check Total 8.10 8.10 180571 12/21/2016 004412 LEANDER, KERRY D. TCSD INSTRUCTOR EARNINGS 864.50 TCSD INSTRUCTOR EARNINGS 318.50 TCSD INSTRUCTOR EARNINGS 289.80 180572 12/21/2016 004230 LINCOLN EQUIPMENT INC EQUIPMENT:AQUATICS 364.00 180573 12/21/2016 015953 LLOYD'S DESIGNS GRAPHIC DESIGN SERVICES:TCSD 1,500.00 180574 12/21/2016 019467 LUSPIAN, JOCELYN REFUND: SECURITY DEPOSIT: TCC 200.00 180575 12/21/2016 004141 MAINTEX INC CLEANING SUPPLIES:SENIOR CENTER 60.46 CLEANING SUPPLIES: VARIOUS FACILIT 1,764.51 180576 12/21/2016 000217 MARGARITA OFFICIALS ASSN SPARK OF LOVE 370.00 TOURNMNT:SOFTBALL OFFICIAT 1,472.80 364.00 1,500.00 200.00 1,824.97 370.00 180577 12/21/2016 014392 MC COLLOUGH, JILL DENISE DEC 16 PLANTSCAPE SRVCS:CIV 500.00 CENTER DEC 16 PLANTSCAPE SRVCS: LIBRARY 200.00 700.00 180578 12/21/2016 000944 MCCAIN TRAFFIC SUPPLY INC TRAFFIC SIGNAL EQUIP: PW TRAFFIC 8,505.01 8,505.01 180579 12/21/2016 015959 MEHEULA MUSIC PERFORMANCE:NYE 12/31/16 2,000.00 2,000.00 PRODUCTIONS 180580 12/21/2016 015259 MERCURY DISPOSAL Household battery recycling program. 218.88 218.88 SYSTEMS, INC. 180581 12/21/2016 018314 MICHAEL BAKER INT'L INC. NOV CEQA STUDIES:GENERATIONS 1,050.00 1,050.00 SR HOUSING 180582 12/21/2016 019463 MICHAEL HILL AND THE LAW SETTLEMENT & RELEASE: HILL, 27,500.00 27,500.00 MICHAEL 180583 12/21/2016 013827 MIKO MOUNTAINLION, INC. REPLACE GUARDRAIL: AVE DE MISSIONS EROSION CNTRL: PARK & RIDE SITE ON EROSION CONTROL: TEM PKWY & LA P/ 3,800.00 35,558.22 7,000.00 46,358.22 180584 12/21/2016 012962 MILLER, MISTY TCSD INSTRUCTOR EARNINGS 182.00 182.00 180585 12/21/2016 016445 MKB PRINTING & PROMOTIONAL INC BUSINESS CARDS: DANFORD, ROBERT BUSINESS CARDS: COLE, THOMAS 41.67 41.97 83.64 Page5 apChkLst 12/21/2016 10:11:18AM Final Check List CITY OF TEMECULA Page: 6 Bank : union UNION BANK (Continued) Check # Date Vendor 180586 12/21/2016 017089 MORRIS-HOPKINS, BROOKE 180587 12/21/2016 009443 MUNYON, DENNIS G. 180588 12/21/2016 000845 NATIONAL LEAGUE OF CITIES 180589 12/21/2016 018099 NATIONAL SAFETY COMPLIANCE 180590 12/21/2016 015164 NATURES IMAGE, INC 180591 12/21/2016 018402 NEWSMINDED, INC 180592 12/21/2016 006140 NORTH JEFFERSON BUSINESS PARK 180593 12/21/2016 003964 OFFICE DEPOT BUSINESS SVS DIV 180594 12/21/2016 019454 OLIVAS, LYDIA 180595 12/21/2016 013198 ORTENZO-HAYES, KRISTINE 180596 12/21/2016 019451 PLANTS CHOICE 180597 12/21/2016 019437 PORTICO INSURANCE SERVICES 180598 12/21/2016 005075 PRUDENTIAL OVERALL SUPPLY Description TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS JAN - MAR '17 LIC FEE FOR OLD TOWN PARKI DIRECT MEMBER DUES:JOHL-OLSON, R. DOT TESTING: HR NOV 16 PECHANGA PKWY ENVIRON MITIGATION NOV 16 ENVIRO MITIGATION:FVP OVER( 11/6-12/3/16 NEWSPAPER DELIVERY:MPSC JAN -MAR 17 ASSN DUES 3561 #19: FV JAN -MAR 17 ASSN DUES 8358 #20: FV JAN -MAR 17 ASSN DUES 1810 #16: FV JAN -MAR 17 ASSN DUES 3561 #17: FV OFFICE SUPPLIES:HUMAN RESOURCES OFFICE SUPPLIES:HUMAN RESOURCES REFUND:BALADJ FOR VIOL. TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS REFUND:ENG GRAD DEP:LD15-0946 REFUND:APPL. CANCELLED:PA16-1359 NOV FLR MATS/UNIFORMS/TOWELS:CITY FACS Amount Paid Check Total 280.00 245.00 175.00 245.00 2,875.00 8,743.00 647.60 1,006.60 454.57 112.50 625.21 649.93 514.71 478.36 58.30 18.07 330.00 302.40 604.80 604.80 302.40 907.20 503.44 519.68 30,000.00 3,522.00 945.00 2,875.00 8,743.00 647.60 1,461.17 112.50 2,268.21 76.37 330.00 3,744.72 30,000.00 3,522.00 743.92 743.92 Page:6 apChkLst Final Check List Page: 7 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor 180599 12/21/2016 000262 RANCHO CALIF WATER DISTRICT Description Amount Paid Check Total NOV VAR WATER METERS:PW CIP 465.60 NOV VAR WATER METERS:PW JRC 154.41 NOV VAR WATER METERS:FIRE STNS 644.35 NOV COMM WATER METER:28640 PUJOI 10.46 NOV VAR WATER METERS:TCSD SVC LE 22,417.23 NOV VAR WATER METERS:PW VARIOUS 821.32 NOV VAR WATER METERS:PW FAC 4,030.57 NOV VAR WATER METERS:PW CIP 318.23 NOV VAR WATER METERS:PW OLD TOV), 785.33 NOV VAR WATER METERS:PW MAINT 268.47 29,915.97 180600 12/21/2016 011853 RANCON COMMERCE CNTR JAN -MAR '17 BUS.PRK ASSN 249.03 PH2,3&4 DUES:OVRLND JAN -MAR '17 BUS.PRK ASSN DUES:OVRI 177.27 JAN -MAR '17 BUS.PRK ASSN DUES:OVRI 198.38 JAN -MAR BUS.PRKASSN DUES:STN 73 510.71 1,135.39 180601 12/21/2016 019432 RCC CHAMBER SINGERS CHRISTMAS CAROLERS:TEAM PACE 200.00 200.00 12/14/16 180602 12/21/2016 003591 RENES COMMERCIAL WEED ABATEMENT: RIGHT-OF-WAYS 4,300.00 4,300.00 MANAGEMENT 180603 12/21/2016 000353 RIVERSIDE CO AUDITOR NOV '16 PRKG CITATION 3,142.75 3,142.75 ASSESSMENTS 180604 12/21/2016 000955 RIVERSIDE CO SHERIFF SW EXTRA PATROL SRVCS:CHRISTMAS 24,043.70 24,043.70 STN PARADE 12/2 180605 12/21/2016 000220 ROBINSON PRINTING & PRINTING SRVCS:THTR 16-17 2,315.33 2,315.33 CREATIVE MID-SEASON MAI 180606 12/21/2016 019453 ROCCO, LINDA REFUND:BALADJ FOR 30.00 30.00 OVERPMT:321286 180607 12/21/2016 004274 SAFE & SECURE LOCKSMITH LOCKSMITH SERVICE: CRC 58.32 58.32 180608 12/21/2016 009980 SANBORN, GWYNETH A. COUNTRY LIVE! @ THE MERC 12/17/16 697.50 697.50 180609 12/21/2016 017699 SARNOWSKI, SHAWNA, M Photography Services: Council Member 150.00 PRESTON PHOTOGRAPHY: ADMIN 12/7 150.00 300.00 Page:7 apChkLst Final Check List Page: 8 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor 180610 12/21/2016 018012 SAUNDERS, CATHY Description Amount Paid Check Total TCSD INSTRUCTOR EARNINGS 318.00 TCSD INSTRUCTOR EARNINGS 336.00 TCSD INSTRUCTOR EARNINGS 196.00 TCSD INSTRUCTOR EARNINGS 336.00 TCSD INSTRUCTOR EARNINGS 336.00 TCSD INSTRUCTOR EARNINGS 196.00 1,718.00 180611 12/21/2016 015457 SHAW HR CONSULTING, INC. DEC CONSULTING SRVCS: HR 805.00 SEPT-NOV CONSULTING SRVCS: HR 1,032.50 1,837.50 180612 12/21/2016 009213 SHERRY BERRY MUSIC JAZZ @ THE MERC 12/15/16 346.50 346.50 180613 12/21/2016 019452 SIBLEY, DAVID REFUND:BALADJ FOR 10.00 10.00 OVERPMT:86476 180614 12/21/2016 017594 SIMONE, DEAN PERFORMANCE:NEW YEAR'S EVE 180615 12/21/2016 000645 SMART & FINAL INC SUPPLIES:BREAKFAST W/SANTA 12/10 180616 12/21/2016 000537 SO CALIF EDISON NOV 2-29-223-9571:30395 MURR HOT SPRINGS NOV 2-30-608-9384:28582 HARVESTON C NOV 2-20-798-3248:42081 MAIN ST NOV 2-10-331-2153:28816 PUJOL ST NOV 2-02-351-5281:30875 RANCHO VIST NOV 2-30-066-2889:30051 RANCHO VISTd NOV 2-25-350-5119:45602 REDHAWK PK), NOV 2-36-122-7820:31777 DEPORTOLA R NOV 2-28-171-2620:40820 WINCHESTER OCT-NOV 2-27-560-0625:32380 DEERHOL NOV 2-31-419-2659:26706 YNEZ RD TC1 NOV 2-01-202-7330:VARIOUS LS -1 ALLNI NOV 2-36-171-5626:BUTTERFIELD/LA SEI NOV 2-29-974-7899:26953 YNEZ RD LS3 NOV 2-29-479-2981:31454 TEM PKWY TC NOV 2-05-791-8807:31587 TEM PKWY LS: 180617 12/21/2016 000537 SO CALIF EDISON TRAF SGNL INSTALL:REDHAWK PKWY/V.R.PKWY 180618 12/21/2016 001212 SO CALIF GAS COMPANY NOV 015-575-0195-2:32211 WOLF VLY RD 180619 12/21/2016 000519 SOUTH COUNTY PEST CONTROL INC PEST CONTROL SRVCS: MARG COMMUNITY PARK PEST CONTROL SRVCS: STREET MAINT PEST CONTROL SRVCS: PBSP 2,500.00 756.35 50.72 350.53 1,183.78 758.73 4,160.27 27.05 31.24 26.94 547.60 5,916.52 139.16 72,944.80 24,090.09 155.54 113.39 9,358.48 3,186.66 2,500.00 756.35 119,854.84 3,186.66 282.96 282.96 94.00 59.00 70.00 223.00 Page:8 apChkLst Final Check List Page: 9 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor Description 180620 12/21/2016 000293 STADIUM PIZZA INC REFRESHMENTS:HUMAN SERVICES PRGMS 180621 12/21/2016 016262 STEVE ADAMIAK GOLF INSTRUCTION 180622 12/21/2016 014541 STEVE'S TOWING, INC Amount Paid Check Total 158.57 158.57 TCSD INSTRUCTOR EARNINGS 336.00 TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS towing svcs - police towing svcs - police 630.00 840.00 504.00 225.00 2,310.00 220.00 445.00 180623 12/21/2016 001546 STRAIGHT LINE GLASS INSTALL PANIC HARDWARE 161.34 BOLTS:MUSEUM INSTALL PANIC HARDWARE BOLTS:MUS 156.48 180624 12/21/2016 015088 TANKO STREETLIGHTING, INC. STREET LIGHT MAINT SUPPLIES: PW 3,078.00 180625 12/21/2016 003677 TEMECULA MOTORSPORTS MOTORCYCLE 1,036.25 LLC REPAIR/MAINT:TEM.P.D. MOTORCYCLE REPAIR/MAINT:TEM.P.D. 242.36 180626 12/21/2016 016532 TEMECULAVALLEYALANO REFUND:SEC DEP:RM RENTAL:MPSC 200.00 CLUB 180627 12/21/2016 003849 TERRYBERRY COMPANY SERVICE PIN AWARDS: HR 180628 12/21/2016 010276 TIME WARNER CABLE 180629 12/21/2016 019470 TORRES, LOURDES 317.82 3,078.00 1,278.61 200.00 4,086.62 4,086.62 DEC HIGH SPEED INTERNET:29119 348.08 MARGARITA NOV HIGH SPEED INTERNET:32364 OVE 54.99 REFUND:CANCELLED SHOW:COMEDY 111.00 @ MERC 403.07 111.00 180630 12/21/2016 014866 TWM ROOFING, INC ROOF PREV MAINT SRVCS: VAR 11,380.00 11,380.00 FACILITIES 180631 12/21/2016 008977 VALLEY EVENTS, INC. RENTAL EQUIP: SANTA IN OLD TOWN 4,100.00 4,100.00 180632 12/21/2016 004794 VALLEY WINDS COMMUNITY PERFORMANCE:NEW YEAR'S EVE 750.00 750.00 180633 12/21/2016 014848 VALUTEC CARD SOLUTIONS, NOV TICKETING SRVCS: THEATER 124.00 124.00 LLC 180634 12/21/2016 018147 WADDLETON, JEFFREY L. DJ/ANNOUNCER SRVCS: PARADE 12/2 950.00 950.00 180635 12/21/2016 007987 WALMART SUPPLIES,EXHIBITS/EXPERIMENTS:PP WS SUPPLIES,EXHIBITS/EXPERIMENTS:PPV 145.00 57.76 202.76 Page9 apChkLst Final Check List Page: 10 12/21/2016 10:11:18AM CITY OF TEMECULA Bank : union UNION BANK (Continued) Check # Date Vendor Description Amount Paid Check Total 180636 12/21/2016 003730 WEST COASTARBORISTS INC 11/1-15 TREE TRIMS & 5,799.00 5,799.00 REMOVALS:HARV LAKE 180637 12/21/2016 013286 WEST SAFETY SERVICES, INC. DEC ENTERPRISE 911 SERVICE: IT 300.00 300.00 1001352 12/15/2016 019367 BANDELIN, JESSICA REFUND:SEC DEP:RM RENTAL:TCC 200.00 200.00 1001353 12/15/2016 019457 CROMWELL, JENNA REFUND:SEC DEP:RM RENTAL:CRC 200.00 200.00 1001354 12/15/2016 019458 FLANAGAN-PAULL, MOLLY REFUND:BIGFOOT'S TEEN GRAPHIC 65.00 65.00 2065.101 1001355 12/15/2016 019459 GONZALES, CHRISTINA REFUND:SEC DEP:RM RENTAL:MPSC 200.00 200.00 1001356 12/15/2016 019460 KOSMAL, SHERRY REFUND:BIGFOOT'S TEEN GRAPHIC 65.00 65.00 2065.101 1001357 12/15/2016 019461 LEEDS, SALLY REFUND:TWAS THE LIGHTS BEFORE 16.00 16.00 CHRISTMAS 1001358 12/15/2016 019462 RAVANDE, VIJETA REFUND:SEC DEP:RM RENTAL:MPSC 200.00 200.00 Grand total for UNION BANK: 478,184.87 Pagel 0 apChkLst Final Check List Page: 11 12/21/2016 10:11:18AM CITY OF TEMECULA 126 checks in this report. Grand Total All Checks. 478,184.87 Page:11 apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 1 Bank : union UNION BANK Check # Date Vendor Description Amount Paid Check Total 3181 12/28/2016 010349 CALIF DEPT OF CHILD SUPPORT PAYMENT 1,128.45 1,128.45 SUPPORT 3182 12/28/2016 000444 INSTATAX (EDD) STATE INCOME TAXES PAYMENT 21,335.26 21,335.26 3183 12/28/2016 000283 INSTATAX (IRS) FEDERAL INCOME TAXES PAYMENT 77,670.80 77,670.80 3184 12/28/2016 000389 NATIONWIDE RETIREMENT OBRA- PROJECT RETIREMENT 2,454.08 2,454.08 SOLUTION PAYMENT 3185 12/28/2016 000246 PERS (EMPLOYEES' EMPLOYEE PERS RETIREMENT 38,669.42 38,669.42 RETIREMENT) PAYMENT 180638 12/28/2016 017321 A.M. AIR FREIGHT, INC. EXHIBIT SHIPPING:TVM 1,840.00 1,840.00 180639 12/28/2016 016764 ABM BUILDING SERVICES, LLC PREV MAINT:HVAC UNITS: CIVIC CTR 119.30 119.30 180640 12/28/2016 004802 ADLERHORST INTERNATIONAL DEC TRNG & EQUIP:POLICE K-9 UNIT 175.00 LLC 180641 12/28/2016 014170 AHERN RENTALS INC DEC TRNG & EQUIP:POLICE K-9 UNIT EQUIP RENTAL: LIGHT PARADE EQUIP RENTAL: LIGHT PARADE EQUIP RENTAL: LIGHT PARADE EQUIP RENTAL: LIGHT PARADE EQUIP RENTAL: LIGHT PARADE EQUIP RENTAL: LIGHT PARADE EQUIP RENTAL: LIGHT PARADE 175.00 350.00 2,296.10 2,194.10 2,061.50 1,809.50 1,248.10 1,130.10 914.60 180642 12/28/2016 006915 ALLIE'S PARTY EQUIPMENT PARTY RENTAL EQUIP: CHRISTMAS 431.31 DINNER SUP MISC RENTALS:VAR CSD SPECIAL EVEN 339.66 MISC RENTALS:VAR CSD SPECIAL EVEN 34.00 180643 12/28/2016 007282 AMAZON.COM, INC BOOKS/COLLECTIONS:LIBRARY 1,684.54 180644 12/28/2016 013950 AQUA CHILL OF SAN DIEGO DRINKING WATER SYS MAINT:CIVIC CTR R.O. MAINT SRVCS:MPSC DEC DRINKING WATER SVCS:IT DEC WATER SVCS:POLICE DRINKING WATER SYS SVCS:PW R.O. MAINT SRVCS:JRC 180645 12/28/2016 005946 AYERS DISTRIBUTING Filled plastic Easter eggs:2017 egg COMPANY 184.14 34.83 28.35 28.35 28.35 28.35 11,654.00 804.97 1,684.54 332.37 1,206.00 1,206.00 Pagel apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 2 Bank : union UNION BANK (Continued) Check # Date Vendor Description Amount Paid Check Total 180646 12/28/2016 011954 BAKER & TAYLOR INC BOOK COLLECTIONS:LIBRARY 137.83 137.83 180647 12/28/2016 018101 BARN STAGE COMPANY INC, CABARET @ THE MERC 12/21/16 455.00 455.00 THE 180648 12/28/2016 017532 BUILDERS OF FAITH REFUND:SEC DEP:RM RENTAL:TCC 200.00 200.00 180649 12/28/2016 010939 CALIF DEPT OF INDUSTRIAL ASSMNT REPORT FOR FY 1,502.22 1,502.22 7/1/16-6/30/17 180650 12/28/2016 004248 CALIF DEPT OF NOV 16 DOJ FINGERPRINTING SVC: 4,157.00 JUSTICE-ACCTING VAR DEPTS NOV 16 DOJ ALCOHOL ANALYSIS: POLIC 665.00 180651 12/28/2016 000131 CARL WARREN & COMPANY NOV 16 CLAIM ADJUSTER SERVICES: 3,121.28 INC RISK MGM 180652 12/28/2016 004462 CDW, LLC 180653 12/28/2016 019247 CORTES & LEE 180654 12/28/2016 013379 COSSOU, CELINE MISC SMALL TOOLS & EQUIP:INFO 659.33 TECHNOLOGY PORT WITH REMOTE USB:FIRE PREVEN 36.66 UPGRADE FITNESS STATIONS:VAIL 8,750.00 RANCH PARK TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS 180655 12/28/2016 016724 CRAFT, CHARLENE REIMB:EMPLOYEE RECOGNITION SUPPLIES 180656 12/28/2016 014580 DANCE THEATRE COLLECTIVE DANCEXCHANGE PERFORMANCE 12/20/16 180657 12/28/2016 001393 DATA TICKET, INC. NOV 16 PARKING CITATION PROCESSING:POLIC 180658 12/28/2016 004382 DEKRA LITE INC HOLIDAY LIGHTING:OLD TOWN 2016 SEASON 1,260.00 504.00 448.00 4,822.00 3,121.28 695.99 8,750.00 2,212.00 242.80 242.80 171.50 171.50 920.89 920.89 8,752.40 8,752.40 180659 12/28/2016 017292 DELGADO, CLAUDIA REFUND:CREDIT:RM RENTAL:CRC 42.00 42.00 6/18/16 180660 12/28/2016 004192 DOWNS ENERGY FUEL & LUBRICANTS FUEL FOR CITY VEHICLES: TCSD & 281.18 CLERK FUEL FOR CITY VEHICLES:PW DEPTS 177.08 458.26 Page2 apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 3 Bank : union UNION BANK (Continued) Check # Date Vendor 180661 12/28/2016 002390 EASTERN MUNICIPAL WATER DIST 180663 12/28/2016 001056 EXCEL LANDSCAPE, INC. Description NOV WATER METER:39569 SERAPHINA RD NOV WATER METER:39656 DIEGO DR NOV WATER METER:MURR HOT SPRING NOV WATER METER:MURR HOT SPRING DEC LDSCP MAINT SRVCS: SOUTH SLOPES DEC LDSCP MAINT SRVCS: NORTH SLOT DEC LNDSCP:CITYWIDE MEDIANS DEC LDSCP MAINT SRVCS: VAR FACILIT LNDSCP IMPROVEMENTS:VILLAGES SL( LNDSCP ENHANCEMENT:OLD TOWN IRRIG REPAIRS: VARIOUS PARKS IRRIG REPAIRS:VAIL RANCH SLOPE OVERSEEDING TURF: REDHAWK COMM IRRIG REPAIRS:VAIL RANCH PARK IRRIG REPAIRS:VAIL RANCH SLOPE IRRIG REPAIRS:SERENA PARK IRRIG REPAIRS:HARVESTON IRRIG REPAIRS:REDHAWK MEDIAN DEC LDSCP MAINT SRVCS: VAR PARKS DEC LDSCP MAINT SRVCS: VAR PARKS 180664 12/28/2016 000165 FEDERAL EXPRESS INC DEC EXPRESS MAIL SERVICES:VAR DEPTS. 180665 12/28/2016 016737 FORTRES GRAND SW SUBSCRIPTION RENEWAL:COM CORPORATION DEV KIOSK 180666 12/28/2016 002982 FRANCHISE TAX BOARD SUPPORT PAYMENT 180667 12/28/2016 018858 FRONTIER CALIFORNIA, INC. 180668 12/28/2016 003946 G T ENTERTAINMENT 180669 12/28/2016 013076 GAUDET, YVONNE M. 180670 12/28/2016 014716 GETTLER, RISA 180671 12/28/2016 015451 GREATAMERICA FINANCIAL SVCS Amount Paid Check Total 250.60 73.27 42.25 36.39 34,054.66 402.51 21, 564.33 18,194.00 10,708.73 2,010.00 1,420.00 386.10 355.51 350.50 298.21 236.89 221.72 209.68 147.38 51,727.00 48,665.00 190,549.71 74.22 74.22 153.00 153.00 150.00 150.00 DEC INTERNET SVCS:41000 MAIN ST 4,656.94 DEC INTERNET SVCS:41000 MAIN ST 2,441.67 DEC INTERNET SVCS:LIBRARY 184.99 DEC INTERNET SVCS:SENIOR CENTER 144.99 NOV INTERNET SVCS:27415 ENTERPRIE 100.77 7,529.36 DJ/ANNOUNCING: WINTERFEST 2016 500.00 500.00 TCSD INSTRUCTOR EARNINGS 931.00 931.00 CALLIGRAPHY ACTIVITY:NYE 2016 300.00 300.00 DEC LEASE FOR 16 COPIERS:CITY 520.09 520.09 HALL/OFF-S Page:3 apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 4 Bank : union UNION BANK (Continued) Check # Date Vendor Description Amount Paid Check Total 180672 12/28/2016 013749 HELIXSTORM INC. BACKUP TAPES:INFORMATION 3,920.96 3,920.96 TECHNOLOGY 180673 12/28/2016 001013 HINDERLITER DE LLAMAS & 4TH QTR 2016 CNSLT SVCS: SALES ASSOC TAX 180674 12/28/2016 009135 IMPACT MARKETING & DESIGN THEATER: USHER UNIFORMS INC 180675 12/28/2016 011097 INCENDIO THEATER PERFORMANCE 1/6/17 29,014.59 29,014.59 710.29 710.29 3,000.00 3,000.00 180676 12/28/2016 006914 INNOVATIVE DOCUMENT NOV COPIER 5,319.49 SOLUTIONS MAINT/REPAIR/USAGE:CITY FACS NOV COPIER MAINT/REPAIR/USAGE:CIT 611.22 180677 12/28/2016 001407 INTER VALLEY POOL SUPPLY POOL SANITIZING CHEMICALS: VAR 513.54 INC POOLS 180678 12/28/2016 018352 JAMES ELLIOTT ENTERTAINMENT: THEATER 1/5/17 ENTERTAINMENT, 180679 12/28/2016 015358 KELLY PAPER COMPANY, INC. PAPER/BINDING/PCKG SUPP:CENTRAL SRVCS 180680 12/28/2016 017118 KRACH, BREE B. 180681 12/28/2016 003782 MAIN STREET SIGNS 180682 12/28/2016 017427 MATCHETT, VIVIAN 180683 12/28/2016 013443 MIDWEST TAPE LLC 5,930.71 513.54 2,500.00 2,500.00 177.07 177.07 PLAQUE: IN LOVING MEMORY OF 144.72 LINDA COLE TROPHIES/AWARDS: POOLTOURNAMEP 8.10 SIGNS & SUPPLIES:PW STREET MAINT 68.95 TCSD INSTRUCTOR EARNINGS 354.90 TCSD INSTRUCTOR EARNINGS 152.82 68.95 245.70 600.60 Misc DVD's, books on CD, audio 125.34 Misc DVDs, books on CD, audio 180684 12/28/2016 004951 MIKE'S PRECISION WELDING BASEBALL PEGS: VARIOUS SPORTS INC. PARKS 180685 12/28/2016 015507 MSDSONLINE, INC. MSDS SUPSCRIPTION: RISK MGMT 180686 12/28/2016 019472 NNA SERVICES LLC REFUND:SEC DEP CREDIT:CONF CTR A/B 38.99 164.33 1,500.00 1,500.00 1,679.00 1,679.00 150.00 150.00 Page:4 apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 5 Bank : union UNION BANK (Continued) Check # Date Vendor 180687 12/28/2016 003964 OFFICE DEPOT BUSINESS SVS DIV 180688 12/28/2016 002105 OLD TOWN TIRE & SERVICE 180689 12/28/2016 012948 PAVEMENT COATINGS Description Amount Paid Check Total BUSINESS CARDS: COUNCIL MEMBER 121.29 OFFICE SUPPLIES:HUMAN RESOURCES 97.18 STD BUSINESS CARDS: FIRE PREVENTI 36.37 OFFICE SUPPLIES:HUMAN RESOURCES 35.45 OFFICE SUPPLIES:HUMAN RESOURCES 20.47 OFFICE SUPPLIES:HUMAN RESOURCES 20.03 OFFICE SUPPLIES:HUMAN RESOURCES 12.66 OFFICE SUPPLIES:HUMAN RESOURCES 9.36 352.81 CITY VEHICLE MAINT SVCS:PARK 370.99 370.99 RANGER NOV SRVCS:PAVEMENT REHAB -TEM 217,905.33 217,905.33 COMPANY PKWY 180690 12/28/2016 000249 PETTY CASH 180691 12/28/2016 001999 PITNEY BOWES 180692 12/28/2016 012904 PROACTIVE FIRE DESIGN 180693 12/28/2016 014494 R & R CONTROLS, INC 180694 12/28/2016 011952 RAD HATTER, THE 180695 12/28/2016 000262 RANCHO CALIF WATER DISTRICT PETTY CASH REIMBURSEMENT 999.90 999.90 12/16/16-3/15/17 RENTAL: STN 84 76.77 76.77 NOV PLANCHECK CONSULTANT: 7,874.50 7,874.50 PREVENTION REPLACE HVAC CONTROLLER: 753.82 753.82 THEATER HAT MAKING ACTIVITY: NYE 2016 1,350.00 1,350.00 DEC VAR WATER METERS:TCSD SVC LEV C NOV LNDSCP WATER METER:41951 MOF DEC VAR WATER METERS:PW YMCA NOV LNDSCP WATER METER:CALLE ELE 180696 12/28/2016 006432 RIVERSIDE COMM. COLLEGE ECON DEV FUNDING: ECON DEV DIST. 180697 12/28/2016 007136 RIVERSIDE RUBBER STAMP & RUBBER STAMP FOR POLICE DEPT. 180698 12/28/2016 004822 RIVERSIDE TRANSIT AGENCY NOV TRANSIT AGRMNT:HARVESTON SHUTTLE 180699 12/28/2016 012251 ROTH, DONALD J. TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS 10,138.03 462.63 360.86 52.00 1,250.00 14.04 11,013.52 1,250.00 14.04 1,945.47 1,945.47 567.00 504.00 1,071.00 180700 12/28/2016 004274 SAFE & SECURE LOCKSMITH LOCKSMITH SRVCS:CIVIC CENTER 11.34 LOCKSMITH SRVCS:CIVIC CENTER 11.34 22.68 Page:5 apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 6 Bank : union UNION BANK (Continued) Check # Date Vendor 180701 12/28/2016 015364 SEASIDE ICE, LLC 180702 12/28/2016 008529 SHERIFF'S CIVIL DIV - CENTRAL 180703 12/28/2016 009213 SHERRY BERRY MUSIC 180704 12/28/2016 009746 SIGNS BY TOMORROW 180705 12/28/2016 019493 SMITH, CYNTHIA 180706 12/28/2016 000537 SO CALIF EDISON Description Amount Paid Check Total PARTIAL PMT:ICE SKATING RINK:2016 10,250.00 10,250.00 SEASON SUPPORT PAYMENT 100.00 100.00 JAZZ @ THE MERC 12/22 462.00 462.00 PUBLIC NTC POSTINGS:PLANNING 639.00 639.00 PERMIT TECH 199.00 199.00 TESTI NG:I NV#0037-1529-7764 NOV 2-00-397-5059:33340 CAMINO PIEDRA NOV 2-26-887-0789:40233 VILLAGE RD NOV 2-30-296-9522:46679 PRIMROSE AVI NOV 2-31-693-9784:26036 YNEZ RD TC1 NOV 2-29-974-7568:26953 YNEZ RD TC1 NOV 2-33-237-4818:30499 RANCHO CAL NOV 2-30-099-3847:29721 RYECREST 180707 12/28/2016 001212 SO CALIF GAS COMPANY NOV 055-475-6169-5:32380 DEERHOLLOW WAY 8,641.10 1,490.05 505.81 408.33 155.50 108.14 24.06 11, 332.99 158.09 158.09 180708 12/28/2016 002503 SOUTH COAST AIR QUALITY GENERATORANN'L RENEWAL 354.86 FEES:STN 84 FY 16/17 EMISSIONS FEES/LAST YR: STI 124.35 479.21 180709 12/28/2016 000519 SOUTH COUNTY PEST PEST CONTROL:DUCK POND 49.00 CONTROL INC PEST CONTROL SRVCS: STN 92 42.00 91.00 180710 12/28/2016 011424 STONE CREEK BIBLE CHURCH REFUND:SEC DEP:KITCHEN 200.00 200.00 RENTAL:CRC 180711 12/28/2016 010046 TEMECULA VALLEY OCT '16 BUS. IMPRV DISTRICT 139,038.18 139,038.18 CONVENTION & ASMNTS 180712 12/28/2016 019473 TEMECULA VALLEY WOMAN'S REFUND:SEC DEP CREDIT:CONF CTR 80.00 CLUB A/B REFUND:SEC DEP CREDIT:CONF CTR A/ 70.00 150.00 180713 12/28/2016 003941 TEMECULA WINNELSON PLUMBING SUPPLIES:VAR PARKS 50.11 50.11 COMPANY 180714 12/28/2016 008379 THEATER FOUNDATION, THE 2016 THEATER FOUNDATION GALA 300.00 300.00 4/9/16 Page apChkLst 12/28/2016 4:03:24PM Final Check List CITY OF TEMECULA Page: 7 Bank : union UNION BANK (Continued) Check # Date Vendor 180715 12/28/2016 010276 TIME WARNER CABLE 180716 12/28/2016 019001 ULTRASYSTEMS ENVIRONMENTAL INC 180717 12/28/2016 002110 UNITED RENTALS NORTH AMERICA 180718 12/28/2016 007987 WALMART 180719 12/28/2016 001342 WAXIE SANITARY SUPPLY INC 180720 12/28/2016 003730 WEST COAST ARBORISTS INC 180721 12/28/2016 000230 WILLDAN FINANCIAL SERVICES 180722 12/28/2016 004567 WITCHER ELECTRIC 180723 12/28/2016 018871 WONDER SCIENCE 1001359 12/22/2016 019478 AHRENS, MELISSA 1001360 12/22/2016 019479 ARRIOLA, NICOLE 1001361 12/22/2016 017190 BILBY, KERI 1001362 12/22/2016 019480 CARTWRIGHT, ALISHA 1001363 12/22/2016 013379 COSSOU, CELINE Description DEC HIGH SPEED INTERNET:FIRE STN #92 CONSULT SVCS:GENERATIONS SR HSG EQUIP RENTALS: PW STREET MAINT EQUIP RENTALS: PW STREET MAINT EQUIP RENTALS: PW STREET MAINT PURCH TOYS:FIRE SPARK OF LOVE PGRM CUSTODIAL SUPPLIES:VAR PARKS CUSTODIAL SUPPLIES:CIVIC CTR CUSTODIAL SUPPLIES: CITY FACS 12/1-15 TREE TRIMS & REMOVALS: ROW TREES 12/1-15 EMERG TREE TRIMS & REMOVAI NOV FISCAL IMPACTANALYSIS:TEM CREEK INN ELECTRICAL REPAIRS:HARVESTON COMMUNITY P ELECTRICAL MAINT SRVCS: HARV LAKE ELECTRICAL REPAIRS:CIV CTR TCSD INSTRUCTOR EARNINGS REFUND:BREAKFAST WITH SANTA 9050.102 REFUND:SOCCER SKILLS 2203.101 REFUND:DISNEY MUSICAL THEATRE HOLIDAY REFUND:DISNEY MUSICAL THEATRE HOLIDAY REFUND:HEART SAVER CPR/AED Amount Paid Check Total 180.65 2,210.00 67.46 19.39 18.18 368.49 314.03 260.06 101.89 1,421.00 180.00 5,200.00 465.00 420.00 210.00 2,268.00 28.00 131.20 100.00 200.00 50.00 180.65 2,210.00 105.03 368.49 675.98 1,601.00 5,200.00 1,095.00 2,268.00 28.00 131.20 100.00 200.00 50.00 1001364 12/22/2016 019481 EISENBERG, CAROLINE REFUND:DISNEY MUSICAL THEATRE 10.00 10.00 HOLIDAY Page:7 apChkLst Final Check List 12/28/2016 4:03:24PM CITY OF TEMECULA Page: 8 Bank : union UNION BANK (Continued) Check # Date Vendor 1001365 12/22/2016 019482 GAULT, RICHARD 1001366 12/22/2016 019483 GOYETTE, ERIKA 1001367 12/22/2016 019484 GRAUER, MONIQUE 1001368 12/22/2016 019485 GUIZAR, MERCEDES 1001369 12/22/2016 019486 HICKS, DIANA 1001370 12/22/2016 019487 HOMAN, KIMBERLY Description Amount Paid Check Total REFUND:HEART SAVER CPR/AED 100.00 100.00 REFUND:SEC DEP:RM RENTAL:TCC 100.00 100.00 REFUND:DISNEY MUSICAL THEATRE 100.00 100.00 HOLIDAY REFUND:SEC DEP:PICNIC 200.00 200.00 RENTAL:HARVESTON REFUND:DISNEY MUSICAL THEATRE 100.00 100.00 HOLIDAY REFUND:BIGFOOT'S COMPUTER CLUB 30.00 30.00 1001371 12/22/2016 019488 MACENAS, DONNA REFUND:WONDERS! SUPER CAMP #5 1001372 12/22/2016 019489 MARTIN, CHRISTINA REFUND:DISNEY MUSICAL THEATRE HOLIDAY 135.00 135.00 100.00 100.00 1001373 12/22/2016 019490 NOORZAD, CARRIE REFUND:CREDIT:PICNIC 30.00 30.00 RENTAL:RRSP 1001374 12/22/2016 017531 RANCHO FAMILY MEDICAL REFUND:SEC DEP:RM RENTAL:TCC 200.00 200.00 GROUP 1001375 12/22/2016 016527 ROWE DANCE ACADEMY REFUND:SEC DEP:RM RENTAL:CRC 200.00 200.00 1001376 12/22/2016 019491 SWANSON, MICHAEL REFUND:TEM ROD RUN 7000.381 35.00 35.00 1001377 12/22/2016 019492 TCB LEGACY LEADERSHIP REFUND:SEC DEP:RM RENTAL:CONF 150.00 150.00 CTR A/B Grand total for UNION BANK: 867,079.87 Page:8 apChkLst 12/28/2016 4:03:24PM Final Check List CITY OF TEMECULA Page: 9 109 checks in this report. Grand Total All Checks. 867,079.87 Page apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 1 Bank : union UNION BANK Check # Date Vendor Description Amount Paid Check Total 3186 12/29/2016 000444 INSTATAX (EDD) STATE INCOME TAXES PAYMENT 2,314.77 2,314.77 3187 12/29/2016 000283 INSTATAX (IRS) FEDERAL INCOME TAXES PAYMENT 7,467.37 7,467.37 3188 12/29/2016 001065 NATIONWIDE RETIREMENT DEFERRED COMP CITY MANAGER 500.08 500.08 SOLUTION PAYMENT 180724 01/05/2017 004973 ABACHERLI, LINDI TCSD INSTRUCTOR EARNINGS 350.00 350.00 180725 01/05/2017 014170 AHERN RENTALS INC EQUIP RENTAL: LIGHT PARADE 1,232.10 EQUIP RENTAL: LIGHT PARADE 536.86 1,768.96 180726 01/05/2017 015217 AIRGAS, INC. Dry ice for experiments:Pennypickle's 18.04 18.04 180727 01/05/2017 009374 ALLEGRO MUSICAL VENTURES PIANO MAINT:MPSC 295.00 295.00 180728 01/05/2017 004422 AMERICAN BATTERY SMALL EQUIP BATTERIES: CIV 501.68 501.68 CORPORATION CENTER 180729 01/05/2017 004307 ARCH CHEMICALS, INC. DEC WATER QUALITY MAINT:HARV 3,900.00 3,900.00 LAKE/DUCK 180730 01/05/2017 018101 BARN STAGE COMPANY INC, STTLMNT: TIX: CABARET AT THE 861.00 861.00 THE MERC 12/30 180731 01/05/2017 017973 BUSINESS CENTER CENTRAL, reflective decals -taxi permit 270.00 270.00 LLC 180732 01/05/2017 018828 CASC ENGINEERING AND NOV CONST ENG SVCS: CIP PW06-09 180733 01/05/2017 002945 CONSOLIDATED ELECTRICAL DIST. 2,025.00 2,025.00 RUST BOLLARDS: OLD TOWN 3,726.00 ELECTRICAL SUPPLIES: VARIOUS PARK ELECTRICAL SUPPLIES: LIBRARY ELECTRICAL SUPPLIES: VARIOUS PARK 180734 01/05/2017 002631 COUNTS UNLIMITED INC Traffic count data collection: pw 345.60 140.40 64.80 4,276.80 440.00 440.00 180735 01/05/2017 010650 CRAFTSMEN PLUMBING & PLUMBING SRVCS: TOWN SQUARE 460.00 HVAC INC OLD TOWN PLUMBING SRVC: TCC SAFE BLDG 160.00 180736 01/05/2017 000209 CROP PRODUCTION SERVICES MAINT SUPPLIES: PW STREET MAINT 146.82 DIV MAINT SUPPLIES: PW STREET MAINT DI 26.98 620.00 173.80 Page:1 apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 2 Bank : union UNION BANK (Continued) Check # Date Vendor 180737 01/05/2017 003945 DIAMOND ENVIRONMENTAL SRVCS Description PORTABLE RESTROOMS: LONG CANYON PARK PORTABLE RESTROOMS: RIVERTON PA PORTABLE RESTROOMS: VAIL RANCH P 180738 01/05/2017 019438 DISPEKERARTISTS INT'L INC Theater Performance: Jan 7, 2017 Amount Paid Check Total 55.88 55.88 55.88 167.64 4,650.00 4,650.00 180739 01/05/2017 004829 ELLISON WILSON ADVOCACY JAN 16 STATE LOBBYING SVCS 3,500.00 3,500.00 LLC 180740 01/05/2017 011202 EMH SPORTS USA, INC TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS 379.05 245.00 245.00 869.05 180741 01/05/2017 001056 EXCEL LANDSCAPE, INC. irrig repairs:villages:vail ranch slope 778.47 778.47 180742 01/05/2017 019450 FARO TECHNOLOGIES INC CRASH SCENE MAPPING SOFTWARE UPGRADE 1,596.00 1,596.00 180743 01/05/2017 003747 FINE ARTS NETWORK TIX: "NUTCRACKER BALLET" 49,036.57 49,036.57 12/16-12/23 180744 01/05/2017 002982 FRANCHISE TAX BOARD LEVY C# 546961500 10.73 10.73 180745 01/05/2017 018858 FRONTIER CALIFORNIA, INC. DEC INTERNET SVCS:THEATER 129.99 129.99 180746 01/05/2017 000177 GLENNIES OFFICE PRODUCTS NOV 16 MISC. OFC SUPPLIES: 295.18 295.18 INC PLANNING 180747 01/05/2017 018869 HARWE, PER REFUND:SEC DEP:RM RENTAL:MPSC 200.00 200.00 3/28/14 180748 01/05/2017 002109 HD SUPPLY CONSTR. SUPPLY MISC SUPPLIES:PW STREET MAINT 20.15 20.15 LTD DIV 180749 01/05/2017 001407 INTER VALLEY POOL SUPPLY POOL SANITIZING CHEMICALS: VAR INC POOLS 180750 01/05/2017 019085 INTERPRETERS UNLIMITED, INTERPRETER SERVICE: TEM POLICE INC. 180751 01/05/2017 000820 K R W & ASSOCIATES ENG PLAN CHECK & REVIEW SRVCS: PW 180752 01/05/2017 019122 L.A. TRAFFIC SIGNAL 456.52 456.52 24.00 24.00 2,820.00 2,820.00 Modification of traffic signal: pw cip 42,370.00 CM: CHG ORDER HAS NOT BEEN FULLY -4,761.40 37,608.60 Page2 apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 3 Bank : union UNION BANK (Continued) Check # Date Vendor Description Amount Paid Check Total 180753 01/05/2017 000210 LEAGUE OF CALIF CITIES REGISTRATION: EDWARDS, MARYANN 25.00 25.00 1/9/17 180754 01/05/2017 004905 LIEBERT, CASSIDY & NOV HR LEGAL SVCS FOR 1,591.00 W H ITMORE TE060-#00011 NOV HR LEGAL SVCS FOR TE060-00001 490.00 180755 01/05/2017 004813 M & J PAUL ENTERPRISES INC INFLATABLE RENTALS:VAR SPECIAL 4,670.00 EVENTS 180756 01/05/2017 013982 M C I COMM SERVICE 180757 01/05/2017 018314 MICHAEL BAKER INT'L INC. 180758 01/05/2017 013443 MIDWEST TAPE LLC 2,081.00 4,670.00 DEC XXX -0714 GEN USAGE:PD MALL 34.90 ALARM DEC XXX -0346 GENERAL USAGE 33.18 68.08 OCT 16 DSGN SERVICES: PECHANGA 25,204.25 PKWY NOV DSGN SRVCS: 1-15 / SR 79 SOUTH 7,275.51 32,479.76 Misc DVD's, books on CD, audio 60.59 60.59 180759 01/05/2017 004951 MIKE'S PRECISION WELDING PUMP REPAIR: TOWN SQUARE INC. 180760 01/05/2017 012264 MIRANDA, JULIO C. 180761 01/05/2017 004040 MORAMARCO, ANTHONY J. TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS TCSD INSTRUCTOR EARNINGS 80.00 80.00 764.75 523.25 146.91 2,205.00 1,039.50 269.50 220.50 180762 01/05/2017 001986 MUZAK LLC JAN DISH NETWORK 140.85 PROGRAMING:FOC JAN DISH NETWORK PROGRAMING:FOC 62.01 180763 01/05/2017 003964 OFFICE DEPOT BUSINESS SVS OFFICE SUPPLIES: FINANCE 152.47 DIV OFFICE SUPPLIES: FINANCE 50.41 CREDIT: OFFICE SUPPLIES RETURNED/I -7.29 CREDIT: OFFICE SUPPLIES RETURNED/I -30.77 180764 01/05/2017 019474 OUR NICHOLAS FOUNDATION FY 16/17 COMMUNITY SRVC FUNDING 2,000.00 180765 01/05/2017 010338 POOL & ELECTRICAL CHEMICAL SUPPLIES:SPLASH PARK 177.96 PRODUCTS INC CHEMICAL SUPPLIES:SPLASH PARK 21.02 180766 01/05/2017 000262 RANCHO CALIF WATER DISTRICT DEC VAR WATER METERS:TCSD SVC LEV C DEC VAR WATER METERS:PW VARIOUS DEC LNDSCP WATER METER:RANCHO \ DEC VAR WATER METERS:FIRE STNS 10,237.83 1,546.55 507.95 398.67 1,434.91 3,734.50 202.86 164.82 2,000.00 198.98 12,691.00 Page:3 apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 4 Bank : union UNION BANK (Continued) Check # Date Vendor Description 180767 01/05/2017 001592 RIVERSIDE CO INFO NOV EMERG RADIO RENTAL & TECHNOLOGY REPAIR:PD Amount Paid Check Total 2,839.80 2,839.80 180768 01/05/2017 012251 ROTH, DONALD J. TCSD INSTRUCTOR EARNINGS 224.00 224.00 180769 01/05/2017 004274 SAFE & SECURE LOCKSMITH LOCKSMITH SRVCS:CIVIC CENTER 180770 01/05/2017 017699 SARNOWSKI, SHAWNA, M PRESTON PHOTOGRAPHY:QTRLY LUNCHEON 12/14 PHOTOGRAPHY:COUNCIL MTG 12/13 PHOTOGRAPHY:NYE EVENT 12/31 12.96 12.96 150.00 150.00 150.00 450.00 180771 01/05/2017 017365 SELSTAD, LONNIE DIXIELAND @ THE MERC 12/18/16 32.17 32.17 180772 01/05/2017 009213 SHERRY BERRY MUSIC JAZZ @ THE MERC 12/29/16 2,785.00 2,785.00 180773 01/05/2017 013695 SHRED -IT US JV, LLC 11/16, 12/14 DOC SHRED SRVCS:PD 34.74 34.74 O.T.STN 180774 01/05/2017 014818 SKYFIT TECH, INC. GYM EQUIP PREV MAINT: CIVIC 195.00 195.00 CENTER 180775 01/05/2017 018784 SKYTECH MEDIA SOLUTIONS MOBILE STUDIO EVENT CART:PEG 2,400.00 2,400.00 INC EQUIP Page:4 apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 5 Bank : union UNION BANK (Continued) Check # Date Vendor 180776 01/05/2017 000537 SO CALIF EDISON Description Amount Paid Check Total DEC 2-32-903-8293: 41000 MAIN ST 11,700.87 DEC 2-29-933-3831 43230 BUSINESS PAF 1,516.93 DEC 2-31-912-7494: 28690 MERCEDES S' 1,449.58 DEC 2-29-224-0173:32364 OVERLAND TR 1,379.17 DEC 2-35-403-6337: 41375 MCCABE CT 985.97 DEC 2-02-351-4946: 41845 6TH ST 687.28 DEC 2-19-171-8568: 28300 MERCEDES 626.67 DEC 2-35-664-9053: 29119 MARGARITA R 497.34 DEC 2-18-937-3152 28314 MERCEDES 460.65 DEC 2-25-393-4681: 41951 MORAGA RD 408.59 DEC 2-34-624-4452 32131 S LOOP RD LC 275.97 DEC 2-31-536-3481: 41902 MAIN ST 234.53 DEC 2-31-536-3655: 41904 MAIN ST 177.69 NOV 2-28-904-7706:32329 OVERLAND TR 148.19 NOV 2-28-331-4847:32805 PAUBA RD LS3 100.33 DEC 2-33-357-5785 44747 REDHAWK PK\ 39.80 DEC 2-14-204-1615 30027 FRONT ST 33.83 DEC 2-36-641-3839:27498 ENTERPRISE C 30.94 DEC 2-35-164-3770: 43487 BUTTERFIELD 26.88 DEC 2-36-641-3912:27498 ENTERPRISE ( 26.76 DEC 2-35-164-3242: 44270 MEADOWS PK 26.24 DEC 2-34-333-3589: 41702 MAIN ST 25.44 DEC 2-35-164-3663: 42335 MEADOWS PK 25.36 DEC 2-35-164-3515: 32932 LEENA WAY 25.36 DEC 2-31-031-2616: 27991 DIAZ RD PED 24.93 DEC 2-31-282-0665: 27407 DIAZ RD PED 24.93 DEC 2-29-807-1226: 28077 DIAZ RD PED 24.68 DEC 2-29-807-1093 28079 DIAZ RD PED 24.56 DEC 2-29-657-2787: 41638 WINCHESTER 24.19 DEC 2-31-419-2873: 43000 HWY 395 24.06 DEC 2-21-981-4720:30153 TEM PKWY TPI 21.39 21,079.11 Page:5 apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 6 Bank : union UNION BANK (Continued) Check # Date Vendor 180777 01/05/2017 001212 SO CALIF GAS COMPANY Description DEC 091-024-9300-5:30875 RANCHO VISTA DEC 129-535-4236-7:41000 MAIN ST NOV 125-244-2108-3:30600 PAUBA RD DEC 026-671-2909-8:42051 MAIN ST DEC 101-525-1560-6:27415 ENTERPRISE NOV 095-167-7907-2:30650 PAUBA RD DEC 129-582-9784-3:43230 BUS PARK DF DEC 021-725-0775-4:41845 6TH ST DEC 101-525-0950-0:28816 PUJOL ST DEC 196-025-0344-3:42081 MAIN ST DEC 181-383-8881-6:28314 MERCEDES 8 DEC 028-025-1468-3:41375 MCCABE CT DEC 117-188-6393-6:32131 S LOOP RD DEC 133-040-7373-0:43210 BUS PARK DF DEC 091-085-1632-0:41951 MORAGA RD 180778 01/05/2017 005786 SPRINT 11/20 - 12/19 BUS FUSION M2M:POLICE 180779 01/05/2017 002015 STAR WAY SYSTEMS AUDIO ENG & SRVCS: OT LIGHT CORPORATION PARADE 12/2 180780 01/05/2017 004570 STEPHEN G WHITE, MAI Appraisal srvcs:roripaugh cfd pan area 180781 01/05/2017 007698 SWANK MOTIONS PICTURES, Winterfest Chilled movie INC. 180782 01/05/2017 010276 TIME WARNER CABLE JAN HIGH SPEED INTERNET:41000 MAIN ST JAN HIGH SPEED INTERNET:LIBRARY Amount Paid Check Total 3,113.01 1,991.83 512.52 420.91 328.08 294.17 251.36 232.22 186.51 149.24 116.35 40.87 25.95 20.69 14.79 7,698.50 110.20 110.20 1,190.00 1,190.00 12,000.00 12,000.00 393.00 393.00 3,916.45 592.94 JAN HIGH SPEED INTERNET:40820 WINC 1.60 4,510.99 180783 01/05/2017 000278 TRONC, INC. NOV PUBLIC NTC ADS: CITY 1,838.81 1,838.81 CLERK/PLNG/PW 180784 01/05/2017 017579 U.S. HEALTHWORKS MEDICAL Pre employ drug screenings:HR 563.00 563.00 180785 01/05/2017 008977 VALLEY EVENTS, INC. RENTAL EQUIP:NYE EVENT 435.00 435.00 180786 01/05/2017 014486 VERIZON WIRELESS 11/16-12/15 BROADBAND 2,448.47 2,448.47 SVCS:CITYWIDE 180787 01/05/2017 003730 WEST COASTARBORISTS INC 12/1-15 TREE TRIMS:REMOVALS:PRKS 5,757.00 5,757.00 & MEDIA 180788 01/05/2017 000341 WILLDAN ASSOCIATES INC NOV TRAFFIC ENG SRVCS: PW 5,019.32 5,019.32 TRAFFIC Page apChkLst Final Check List 01/05/2017 3:18:53PM CITY OF TEMECULA Page: 7 Bank : union UNION BANK (Continued) Check # Date Vendor Description 180789 01/05/2017 018871 WONDER SCIENCE TCSD INSTRUCTOR EARNINGS Amount Paid Check Total 980.00 980.00 Grand total for UNION BANK: 260,833.97 Page:7 apChkLst 01/05/2017 3:18:53PM Final Check List CITY OF TEMECULA Page: 8 69 checks in this report. Grand Total All Checks. 260,833.97 Page:8 Item No. 4 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Kevin Hawkins, Director of Community Services DATE: January 24, 2017 SUBJECT: Approve a Cooperative Agreement Between City of Temecula and Nonprofit Senior Golden Years in Support of Various Senior Services Activities PREPARED BY: Yvette Martinez, Community Services Supervisor I RECOMMENDATION: That the City Council approve the Cooperative Agreement between the City of Temecula and nonprofit Senior Golden Years in support of various Senior Services activities. BACKGROUND: The City of Temecula incorporated in 1989 with a population of less than 30,000 residents and a senior population of less than 10%. The City has grown to over three times the size with a population of over 109,000, with a senior population of 25%. The City of Temecula recognizes the need to assist in providing services and amenities to enrich quality of life, provide information and education, and to support the emotional and physical needs of aging adults within our community. For the past 22 years, the Mary Phillips Senior Center (MPSC) has grown along with the community by providing hundreds of programs, activities, and services for aging adults and those with special needs. It is our goal to provide the commitment and leadership to identify their needs, access existing programs, develop tangible solutions and plan for the future. The facility has become a place to socialize and participate, earning a reputation as "The Place Where Friends Meet". The Senior Golden Years (SGY) is a non-profit organization dedicated to the improvement of the lives of Temecula Valley Seniors through social, educational, and nutritional activities. SGY has played a very integral part since the formation of the MPSC in 1989. The Partnership between the City of Temecula and Senior Golden Years exists to leverage resource opportunities; create, expand, and improve activities and services; promote senior support. The City of Temecula and Senior Golden Years have worked cooperatively to host various activities for residents of Temecula and surrounding cities. The City will sponsor the use of space at the Mary Phillips Senior Center in order for the non-profit to conduct their services. This partnership will continue through the following: Board Meetings: The City will sponsor the use of space at the Mary Phillip's Senior Center to conduct the non -profits monthly board meetings. The Board Meetings are closed to the general public and for members of the board to conduct business. Member Meetings: The City will sponsor the use of space at the Mary Phillips Senior Center to conduct the non -profits bi-monthly member meetings. The Member Meetings are open to members of the club or anyone interested in joining. Meetings serve on average 50 — 60 seniors. Bingo Activity: The City will sponsor the use of space at the Mary Phillips Senior Center to conduct a Bingo Activity. The Activity is open to the general public for seniors ages 55 and over. The non-profit is required to obtain a Charitable Organization Bingo License in order to perform this activity. This activity serves on average 50 — 75 seniors. Social Activities: The City will sponsor the use of space at the Mary Phillips Senior Center to hold various social events like Saturday Socials, and Craft Boutique. These activities will be open to the general public for seniors ages 55 and over. This activity serves on average 25-100 people depending on the event. Use of Storage: The City will grant access to utilize closet and cabinet space to store items and materials that are used for activities/events. The amount of space is outlined in the Cooperative Agreement. In order to fulfill the desired outcomes of the Human Services Division to serve seniors and active adults, the City seeks to formalize the cooperative partnership between the City of Temecula and Senior Golden Years, which is essential in continuing to provide these types of activities to the senior population. This entails the use of in-kind Community Services facility and staff support valued at $3,768 and $815 respectively, refreshments costs of $480, and in-kind promotional services valued at $8,300. The non-profit Senior Golden Years shall provide the following benefits and in-kind services for the citizens of Temecula which include City of Temecula logo/name on advertisements, press releases, and all other promotional materials, and coordinate various Senior Social Activities as described above. FISCAL IMPACT: Funds are budgeted in the FY 2016-17 budget. ATTACHMENTS: Cooperative Agreement COOPERATIVE AGREEMENT BETWEEN CITY OF TEMECULA AND SENIOR GOLDEN YEARS THIS AGREEMENT is made and effective as of this 24TH day of January, 2017, by and between the City of Temecula , a municipal corporation (hereinafter referred to as "City"), and Senior Golden Years, a California nonprofit corporation (hereinafter referred to as the "Nonprofit"). In consideration of the mutual covenants, conditions and undertakings set forth herein, the parties agree as follows: 1. RECITALS This Agreement is made with respect to the following facts and purposes which each of the parties acknowledge and agree are true and correct: a.) The Nonprofit shall operate their Board Meetings (hereinafter referred to as the "Event") on 2nd Wednesday of each month from 12:00 — 12:30 pm at the Mary Phillips Senior Center (room based on availability). i. The Board Meetings are closed to the general public for members of the board to conduct business. ii. City Staff will setup and breakdown meetings. iii. The Nonprofit is responsible for clean up. b.) The Nonprofit shall operate their Member Meetings on the 2nd & 4th Wednesday of each month from 12:45 — 2:00 pm at the Mary Phillips Senior Center (room based on availability). i. The Member Meetings are open to members of the Senior Golden Years. ii. The City will sponsor coffee and condiments. iii. City Staff will setup and breakdown meetings. iv. The Nonprofit is responsible for clean up. c.) The Nonprofit shall operate their Bingo Activity on the 2nd & 4th Wednesday of each month from 2:00 — 4:00 pm at the Mary Phillips Senior Center. i. This activity is open to the general public for seniors ages 55 and over. ii. The City will sponsor coffee and condiments. iii. City Staff will setup and breakdown event. iv. The Nonprofit is responsible for clean up. v. The Nonprofit may store their Bingo machine in the Multipurpose Room closet. vi. The Nonprofit is required to obtain a Charitable Organization Bingo License from the City of Temecula. d.) The Nonprofit shall operate their Saturday Socials on the 3rd Satruday of each month from 4:00 — 8:00 pm at the Mary Phillips Senior Center (based on availability). i. The activity is open to the general public for seniors ages 55 and over. ii. The City will sponsor coffee and condiments. iii. City Staff will setup and breakdown activity. iv. The Nonprofit is responsible for clean up. e.) The Nonprofit shall operate a Craft Boutique 1x annually at the availability of the Mary Phillips Senior Center. i. The event is open to the general public. ii. City Staff will setup and breakdown event. iii. Use of Storage will not be provided. f.) The Nonprofit shall have access to the following closets/cabinets for the use of storage at the Mary Phillips Senior Center. i. The City will provide the closet in the Multipurpose Room to store the bingo machine. ii. The City will allow the use of one storage cabinet in the Craft Room to store meeting items and craft items. iii. The City will provide one cabinet in the kitchen pantry to store refreshment items. g.) Alcohol will not be served at any of the above mentioned events/programs. h.) The City desires to be a Co -Sponsor of all the above mentioned activities/events, providing in-kind support including facilities, staff support, refreshments, storage use, and advertising as described in Exhibit B. 2. TERM This Agreement shall commence on January 24, 2017, and shall remain and continue in effect until tasks described herein are completed, but in no event later than June 30, 2018 unless sooner terminated pursuant to the provisions of this Agreement. 3. CONSIDERATION a. As a Co -Sponsor the City shall receive sponsor benefits as listed in Exhbit A. b. WRITTEN REPORT Within ninety (90) days after the conclusion of the Event, the Nonprofit shall prepare and submit to the Assistant City Manager a written report evaluating the Event, its attendance, media coverage, and description of the materials in which the City has listed as a Co -Sponsor. 4. PERMITS The Nonprofit shall file applications for a Charitable Organization Bingo License with the City no later than thirty (30) days prior to the first day of the Event. The City retains its governmental jurisdiction to determine whether to issue the permits and the nature and scope of Conditions of Approval. The Nonprofit shall comply with all conditions of approval for the Charitable Organization Bingo License, or any other City -issued permits. Failure to comply with the Conditions of Approval of such permits shall constitute a default of this Agreement and is grounds for termination of this Agreement. 5. MEETING ATTENDANCE The Nonprofit shall attend all City pre -event planning meetings and event recap meetings if warranted. 6. INDEMNIFICATION The Nonprofit shall indemnify, protect, defend and hold harmless the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency, its elected officials, officers, employees, volunteers, and representatives from any and all suits, claims, demands, losses, defense costs or expenses, actions, liability or damages of whatsoever 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 and employees 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 the Nonprofit's negligent or wrongful acts or omissions arising out of or in any way related to the performance or non-performance of this Agreement. 7. INSURANCE The Nonprofit shall secure and maintain from a State of California admitted insurance company, pay for and maintain in full force and effect for the duration of this Agreement an insurance policy of comprehensive general liability 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 January 24, 2017, 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 Recipient 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 Recipient 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) 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 the Successor Agency to the Temecula Redevelopment Agencythat 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 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 NonProfit; products and completed operations of the Recipient; premises owned, occupied or used by the Nonprofit; or automobiles owned, leased, hired or borrowed by the Nonprofit. 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 Nonprofit'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 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, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers. 4) The Nonprofit'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 Nonprofit 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. Nonproft 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 Nonprofit's insurer may provide complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications. 8. GOVERNING LAW The City and the Nonprofit 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. 9. LEGAL RESPONSIBILITIES The Nonprofit shall keep itself informed of all local, State and Federal ordinances, 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 Nonprofit 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 at law or in equity occasioned by failure of the Nonprofit to comply with this section. 10. ASSIGNMENT The Nonprofit shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City. 11. 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: Mailing Address: To Recipient: City of Temecula Attn: City Manager 41000 Main Street Temecula, CA 92590 Senior Golden Years Attn: Caroline Hoelzle PO BOX 69 Wildomar, CA 92595 15. INDEPENDENT CONTRACTOR a. The Nonprofit shall at all times remain as to the City a wholly independent contractor. The personnel performing the services under this Agreement on behalf of the Nonprofit shall at all times be under the Nonprofit's exclusive direction and control. Neither City nor any of its officers, employees, agents, or volunteers shall have control over the conduct of Recipient or any of the Nonprofit's officers, employees, or agents except as set forth in this Agreement. The Nonprofit 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. The Nonprofit shall not incur or have the power to incur any debt, obligation or liability whatever against City, or bind City in any manner. No employee benefits shall be available to the Nonprofit in connection with the performance of this Agreement. Except for the fees paid to the Nonprofit as provided in the Agreement, City shall not pay salaries, wages, or other compensation to the Nonprofit for performing services hereunder for City. City shall not be liable for compensation or indemnification to the Nonprofit for injury or sickness arising out of performing services hereunder. 16. 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. 17. AUTHORITY TO EXECUTE THIS AGREEMENT The person or persons executing this Agreement on behalf of the Nonprofit warrants and represents that he or she has the authority to execute this Agreement on behalf of the Nonprofit and has the authority to bind the Nonprofit to the performance of its obligations 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. CITY OF TEMECULA By: Maryann Edwards, Mayor ATTEST: By: Randi Johl, City Clerk APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney SENIOR GOLDEN YEARS (Two Signatures of corporate officers required unless corporate documents authorize only one person to sign the agreement on behalf of the corporation.) By: Caroline Hoelzle, President By: Ron Hoelzle , Treasurer NONPROFIT Senior Golden Years Caroline Hoelzle PO Box 69 Wildomar, CA 92595 (951) 244-6409 Sweetcc41@yahoo.com PM Initials: Date: (-- EXHIBIT "A" CITY OF TEMECULA SPONSORSHIP BENEFITS CO-SPONSOR Senior Golden Years shall provide the following benefits and services for the citizens of the City of Temecula: • City of Temecula logo/name on advertisements, press releases, and other promotional materials • Bingo Activity for City of Temecula and patrons of the senior community • Saturday Social events for City of Temecula and patrons of the senior community • Craft Boutique for City of Temecula and its attendees EXHIBIT "B" IN-KIND SERVICES ESTIMATED VALUE OF CITY SUPPORT SERVICES AND COSTS Based on the input from City departments we received estimated cost projections for the Board Meetings, Member Meetings, Bingo Activity, Saturday Socials, and Craft Boutique event. The following expenses can be anticipated for the event: Mary Phillips Senior Center Facility Rental: Community Services Staff Hours: Community Services Refreshments Costs: $ 3,768.00 $ 815.00 $ 480.00 TOTAL: $ 5,063.00 ESTIMATED VALUE OF PROMOTIONAL SERVICES PROVIDED BY THE CITY OF TEMECULA The estimated value for in-kind promotional assistance provided by The City of Temecula for the Senior Golden Years is as follows: Item Value Cable Channel Event slide appears approximately once per hour for 30 seconds City Website Event listing on the City of Temecula's event calendar Promotional Poster 42X66 poster located in the concourse at the Civic Center Guide to Leisure Activities Senior Golden Years information listed $ 5,100.00 $ 2,200.00 $ 1,000.00 TOTAL VALUE: $ 8,300.00 Item No. 5 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Kevin Hawkins, Director of Community Services DATE: January 24, 2017 SUBJECT: Approve a Cooperative Agreement Between City of Temecula and the Temecula Valley Genealogical Society in Support of Facility Use PREPARED BY: Erica Russo, Senior Management Analyst RECOMMENDATION: That the City Council approve the Cooperative Agreement with the Temecula Valley Genealogical Society for in-kind services in support of Facility Use. BACKGROUND: The City has had a long-standing verbal sponsorship of the Temecula Valley Genealogical Society (TVGS), which includes facility and staff support at multiple facilities throughout the year. Currently, TVGS holds four meetings a month at the Ronald H. Roberts Temecula Public Library, with a collective in-kind value of $2,080 annually: 1. Genealogy Class, 10 meetings/year 2. Computer Club, 10 meetings/year 3. Board Meeting, 10 meetings/year 4. DNA Class, 10 meetings/year In addition, TVGS uses the Conference Center for monthly meetings, which have a total in-kind value of $5,500 annually. FISCAL IMPACT: These costs are allocated in the TCSD Annual Operating Budget. ATTACHMENTS: Cooperative Agreement COOPERATIVE AGREEMENT BETWEEN CITY OF TEMECULA AND TEMECULA VALLEY GENEALOGICAL SOCIETY THIS AGREEMENT is made and effective as of this 24TH day of January, 2017, by and between the City of Temecula , a municipal corporation (hereinafter referred to as "City"), and Temecula Valley Genealogical Society, a California nonprofit corporation (hereinafter referred to as the "Nonprofit"). In consideration of the mutual covenants, conditions and undertakings set forth herein, the parties agree as follows: 1. RECITALS This Agreement is made with respect to the following facts and purposes which each of the parties acknowledge and agree are true and correct: a.) The Nonprofit shall hold meetings (hereinafter referred to as the "Event") four times each month at the Ronald H. Roberts Temecula Public Library (room based on availability) as follows, or on alternate dates pending facility availability as determined by Staff : • lst Friday • 2nd Friday • 3rd Friday 3 hours 3 hours 3 hours • 4th Wednesday 3 hours i. The Meetings are closed to the general public for members of the Nonprofit to conduct business. ii. City Staff will setup and breakdown meetings. iii. The Nonprofit is responsible for clean up. b.) The Nonprofit shall hold meetings (hereinafter referred to as the "Event") one time each month at the City of Temecula Conference Center (room based on availability). 01/09/2017 5:30 pm to 9:30 pm 03/13/2017 5:30 pm to 9:30 pm 05/15/2017 5:30 pm to 9:30 pm 07/10/2017 5:30 pm to 9:30 pm 09/11/2017 5:30 pm to 9:30 pm 11/13/2017 5:30 pm to 9:30 pm 02/13/2017 5:30 pm to 9:30 pm 04/10/2017 5:30 pm to 9:30 pm 06/21/2017 5:30 pm to 9:30 pm 08/14/2017 5:30 pm to 9:30 pm 10/09/2017 5:30 pm to 9:30 pm 12/11/2017 5:30 pm to 9:30 pm i. The Meetings are closed to the general public for members of the Nonprofit to conduct business. ii. City Staff will setup and breakdown meetings. iii. The Nonprofit is responsible for clean up. c.) Alcohol will not be served at any of the above mentioned events/programs. d.) The City desires to be a Co -Sponsor of all the above mentioned activities/events, providing in-kind support including facilities, staff support, refreshments, storage use, and advertising as described in Exhibit B. 2. TERM This Agreement shall commence on January 24, 2017, and shall remain and continue in effect until tasks described herein are completed, but in no event later than December 31, 2017 unless sooner terminated pursuant to the provisions of this Agreement. 3. CONSIDERATION a. As a Co -Sponsor the City shall receive sponsor benefits as listed in Exhibit A. 4. WRITTEN REPORT Within thirty (30) days after the conclusion of the year, the Nonprofit shall prepare and submit to the Assistant City Manager a written report evaluating the Event, its attendance, media coverage, and description of the materials in which the City has listed as a Co -Sponsor. 5. MEETING ATTENDANCE The Nonprofit shall attend all City pre -event planning meetings and event recap meetings if warranted. 6. INDEMNIFICATION The Nonprofit shall indemnify, protect, defend and hold harmless the City of Temecula, Temecula Community Services District, and/or the Successor Agency to the Temecula Redevelopment Agency, its elected officials, officers, employees, volunteers, and representatives from any and all suits, claims, demands, losses, defense costs or expenses, actions, liability or damages of whatsoever 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 and employees 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 the Nonprofit's negligent or wrongful acts or omissions arising out of or in any way related to the performance or non-performance of this Agreement. 7. INSURANCE The Nonprofit shall secure and maintain from a State of California admitted insurance company, pay for and maintain in full force and effect for the duration of this Agreement an insurance policy of comprehensive general liability 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 January 24, 2017, 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) Worker's Compensation insurance as required by the State of California and Employer's Liability Insurance. If the Recipient 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) 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 the Successor Agency to the Temecula Redevelopment Agencythat 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 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 NonProfit; products and completed operations of the Recipient; premises owned, occupied or used by the Nonprofit; or automobiles owned, leased, hired or borrowed by the Nonprofit. 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 Nonprofit'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 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, the Temecula Community Services District, the Successor Agency to the Temecula Redevelopment Agency, their officers, officials, employees or volunteers. 4) The Nonprofit'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 Nonprofit 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. Nonproft 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 Nonprofit's insurer may provide complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications. 8. GOVERNING LAW The City and the Nonprofit 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. 9. LEGAL RESPONSIBILITIES The Nonprofit shall keep itself informed of all local, State and Federal ordinances, 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 Nonprofit 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 at law or in equity occasioned by failure of the Nonprofit to comply with this section. 10. ASSIGNMENT The Nonprofit shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City. 11. 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: Mailing Address: To Recipient: City of Temecula Attn: City Manager 41000 Main Street Temecula, CA 92590 Temecula Valley Genealogical Society Attn: Barbara Perez 27475 Ynez Road, #291 Temecula, CA 92591 15. INDEPENDENT CONTRACTOR a. The Nonprofit shall at all times remain as to the City a wholly independent contractor. The personnel performing the services under this Agreement on behalf of the Nonprofit shall at all times be under the Nonprofit's exclusive direction and control. Neither City nor any of its officers, employees, agents, or volunteers shall have control over the conduct of Recipient or any of the Nonprofit's officers, employees, or agents except as set forth in this Agreement. The Nonprofit 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. The Nonprofit shall not incur or have the power to incur any debt, obligation or liability whatever against City, or bind City in any manner. No employee benefits shall be available to the Nonprofit in connection with the performance of this Agreement. Except for the fees paid to the Nonprofit as provided in the Agreement, City shall not pay salaries, wages, or other compensation to the Nonprofit for performing services hereunder for City. City shall not be liable for compensation or indemnification to the Nonprofit for injury or sickness arising out of performing services hereunder. 16. 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. 17. AUTHORITY TO EXECUTE THIS AGREEMENT The person or persons executing this Agreement on behalf of the Nonprofit warrants and represents that he or she has the authority to execute this Agreement on behalf of the Nonprofit and has the authority to bind the Nonprofit to the performance of its obligations 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. CITY OF TEMECULA TEMECULA VALLEY GENEALOGICAL SOCIETY (Two Signatures of corporate officers required unless corporate documents authorize only one person to sign the agreement on behalf of the corporation.) By: By: Maryann Edwards, Mayor Barbara Perez, President ATTEST: By: By: Randi Johl, City Clerk APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney NONPROFIT Pamela Pressney, 1st Vice President Temecula Valley Genealogical Society Attn: Barbara Perez 27475 Ynez Road, #291 Temecula, CA 92591 Barbgma9(yahoo.com PM Initial : Date: EXHIBIT "A" CITY OF TEMECULA SPONSORSHIP BENEFITS CO-SPONSOR Temecula Valley Genealogical Society shall provide the following benefits and services for the citizens of the City of Temecula: • City of Temecula logo/name on advertisements, flyers, press releases, or other promotional material EXHIBIT "B" IN-KIND SERVICES ESTIMATED VALUE OF CITY SUPPORT SERVICES AND COSTS Based on the input from City departments we received estimated cost projections for the Nonprofit meetings. The following expenses can be anticipated for the event: Library Facility Rental Total Costs: Conference Center Facility Rental Total Costs: TOTAL VALUE: $ 2,080.00 $ 5,500.00 $ 7,580.00 Item No. 6 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick A. Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Approve the Agreement for Consultant Services with Stantec Consulting Services Inc. for the Butterfield Stage Road — Phase 111, PW15-11 PREPARED BY: Amer Attar, Principal Engineer Avlin R. Odviar, Senior Engineer RECOMMENDATION: That the City Council: 1. Approve the Agreement for Consultant Services with Stantec Consulting Services Inc., in the amount of $50,000, for professional design and engineering services in support of the Butterfield Stage Road — Phase 111, PW15-11; 2. Authorize the City Manager to approve Extra Work Authorizations not to exceed the contingency amount of $5,000, which is 10% of the Agreement amount. BACKGROUND: On May 13, 2008, City Council directed staff to proceed with completing improvements conditioned upon the Roripaugh Ranch Development. The improvements consisted primarily of arterial roadways: (1) Murrieta Hot Springs Road from Pourroy Road to Butterfield Stage Road and (2) Butterfield Stage Road from Murrieta Hot Springs Road to Rancho California Road. In July of 2009 the City, acting as the Temecula Public Financing Authority, and the Developer of Roripaugh Ranch entered an Agreement allowing the City to take over construction of the aforementioned public improvements and establishing funding of the work through Community Facilities District No. 03-02 bond proceeds. The improvements have been segmented into three phases. Construction of Phase I, consisting Murrieta Hot Springs Road from Pourroy Road to Butterfield Stage Road and Butterfield Stage Road from Murrieta Hot Springs Road to Calle Chapos, was completed in 2012. Construction of Phase 11, consisting of Butterfield Stage Road from Calle Chapos to La Serena Way, was completed in 2014. Design of Phase 111, consisting of Butterfield Stage Road from La Serena Way to Rancho California Road, is nearing completion. Stantec Consulting Services, Inc. (Stantec) is the Engineer of Record for all segments of the Butterfield Stage Road projects. Additional engineering services are necessary to complete the construction plans, specifications, and estimate for Phase III. FISCAL IMPACT: This project is funded with Roripaugh Ranch Community Facility District No. 03-02 bond proceeds. Adequate funds are available in the project accounts to cover the amount of the Agreement $50,000, plus the contingency amount of $5,000. ATTACHMENTS: 1. Agreement 2. Project Description 3. Project Location AGREEMENT FOR CONSULTANT SERVICES BETWEEN CITY OF TEMECULA AND STANTEC CONSULTING SERVICES INC. BUTTERFIELD STAGE ROAD — PHASE III, PW15-11 (CFD 03-02) THIS AGREEMENT is made and effective as of January 24, 2017, between the City of Temecula, a municipal corporation (hereinafter referred to as "City"), and Stantec Consulting Services Inc., a Corporation (hereinafter referred to as "Consultant"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: 1. TERM This Agreement shall commence on January 24, 2017, and shall remain and continue in effect until tasks described herein are completed, but in no event later than June 30, 2018, unless sooner terminated pursuant to the provisions of this Agreement. 2. SERVICES Consultant shall perform the services and tasks described and set forth in Exhibit A, attached hereto and incorporated herein as though set forth in full. Consultant shall complete the tasks according to the schedule of performance which is also set forth in Exhibit A. 3. PERFORMANCE Consultant shall at all time faithfully, competently and to the best of his or her ability, experience, and talent, perform all tasks described herein. Consultant shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of Consultant hereunder in meeting its obligations under this Agreement. 4. PREVAILING WAGES Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of workman needed to execute this Consultant from the Director of the Department of Industrial Relations. Copies may be obtained from the California Department of Industrial Relations Internet website at http://www.dir.ca.gov. Consultant shall provide a copy of prevailing wage rates to any staff or sub -consultant hired, and shall pay the adopted prevailing wage rates as a minimum. Consultant shall comply with the provisions of Sections 1720, 1725.5, 1771.1(a), 1773.8, 1775, 1776, 1777.5, 1777.6, and 1813 of the Labor Code. Pursuant to the provisions of 1775 of the Labor Code, Consultant shall forfeit to the City, as a penalty, the sum of $200.00 for each calendar day, or portion thereof, for each laborer, worker, or mechanic employed, paid less than the stipulated prevailing rates for any work done under this Agreement, by him or by any sub -consultant under him, in violation of the provisions of the Agreement. This project, work, or service will be subject to compliance monitoring and enforcement by the Department of Industrial Relations (DIR) pursuant to Labor Code Section 1771.4. 5. REGISTRATION WITH THE DEPARTMENT OF INDUSTRIAL RELATIONS Registration with the Department of Industrial Relations (DIR) is mandatory as a condition for bidding, providing certain services, and working on a public works project as specified in Labor Code Section 1771.1(a). Contractor and any subcontractors must be registered with the Department of Industrial Relations to be qualified to bid, or provide a proposal and/or time and material quote or be listed in a bid, proposal or quote, subject to the requirements of Public Contract Code Section 4104; or engage in the performance of any contract that is subject to Labor Code Section 1720 et seq., unless currently registered and qualified to perform public work pursuant to Labor Code Section 1725.5. Contractor and subcontractors will be required to provide proof of registration with the DIR. For more information regarding registration with the Department of Industrial Relations, refer to http://www.dir.ca.gov/Public-Works/PublicWorks.html 6. PAYMENT a. The City agrees to pay Consultant monthly, in accordance with the payment rates and terms and the schedule of payment as set forth in Exhibit B, Payment Rates and Schedule, attached hereto and incorporated herein by this reference as though set forth in full, based upon actual time spent on the above tasks. Any terms in Exhibit B, other than the payment rates and schedule of payment, are null and void. This amount shall not exceed Fifty Thousand Dollars ($50,000) for the total term of this agreement unless additional payment is approved as provided in this Agreement. b. Consultant shall not be compensated for any services rendered in connection with its performance of this Agreement which are in addition to those set forth herein, unless such additional services are authorized in advance and in writing by the City Manager . Consultant shall be compensated for any additional services in the amounts and in the manner as agreed to by City Manager and Consultant at the time City's written authorization is given to Consultant for the performance of said services. The City Manager may approve additional work up to ten percent (10%) of the amount of the Agreement as approved by City Council. Any additional work in excess of this amount shall be approved by the City Council. c. Consultant will submit invoices monthly for actual services performed. Invoices shall be submitted between the first and fifteenth business day of each month, for services provided in the previous month. Payment shall be made within thirty (30) days of receipt of each invoice as to all non -disputed fees. If the City disputes any of Consultant's fees, it shall give written notice to Consultant within thirty (30) days of receipt of an invoice of any disputed fees set forth on the invoice. For all reimbursements authorized by this Agreement, Consultant shall provide receipts on all reimbursable expenses in excess of fifty dollars ($50) in such form as approved by the Director of Finance. 7. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE a. The City may at any time, for any reason, with or without cause, suspend or terminate this Agreement, or any portion hereof, by serving upon the Consultant at least ten (10) days prior written notice. Upon receipt of said notice, the Consultant shall immediately cease all work under this Agreement, unless the notice provides otherwise. If the City suspends or terminates a portion of this Agreement such suspension or termination shall not make void or invalidate the remainder of this Agreement. b. In the event this Agreement is terminated pursuant to this Section, the City shall pay to Consultant the actual value of the work performed up to the time of termination, provided that the work performed is in compliance with this Agreement. Upon termination of the Agreement pursuant to this Section, the Consultant will submit an invoice to the City, pursuant to Section entitled "PAYMENT" herein. 8. DEFAULT OF CONSULTANT a. The Consultant's failure to comply with the provisions of this Agreement shall constitute a default. In the event that Consultant is in default for cause under the terms of this Agreement, City shall have no obligation or duty to continue compensating Consultant for any work performed after the date of default and can terminate this Agreement immediately by written notice to the Consultant. If such failure by the Consultant to make progress in the performance of work hereunder arises out of causes beyond the Consultant's control, and without fault or negligence of the Consultant, it shall not be considered a default. b. If the City Manager or his delegate determines that the Consultant is in default in the performance of any of the terms or conditions of this Agreement, it shall serve the Consultant with written notice of the default. The Consultant shall have ten (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 Consultant 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 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. 9. OWNERSHIP OF DOCUMENTS a. Consultant shall maintain complete and accurate records with respect to sales, costs, expenses, receipts and other such information required by City that relate to the performance of services under this Agreement. Consultant shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. Consultant shall provide free access to the representatives of City or its designees at reasonable times to such books and records, shall give City the right to examine and audit said books and records, shall permit City to make transcripts there from as necessary, and shall allow inspection of all work, data, documents, proceedings and activities related to this Agreement. Such records, together with supporting documents, shall be maintained for a period of three (3) years after receipt of final payment. b. Upon completion of, or in the event of termination or suspension of this Agreement, all original documents, designs, drawings, maps, models, computer files containing data generated for the work, surveys, notes, and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall become the sole property of the City and may be used, reused or otherwise disposed of by the City without the permission of the Consultant. With respect to computer files containing data generated for the work, Consultant shall make available to the City, upon reasonable written request by the City, the necessary computer software and hardware for purposes of accessing, compiling, transferring and printing computer files. c. With respect to the design of public improvements, the Consultant shall not be liable for any injuries or property damage resulting from the reuse of the design at a location other than that specified in Exhibit A, without the written consent of the Consultant. 10. INDEMNIFICATION, HOLD HARMLESS, AND DUTY TO DEFEND a. Indemnity for Design Professional Services. In the connection with its design professional services, Consultant shall hold harmless and indemnify City, and its elected officials, officers, employees, servants, designated volunteers, and those City agents serving as independent contractors in the role of City officials (collectively, "Indemnitees"), with respect to any and all claims, demands, damages, liabilities, losses, costs or expenses, including reimbursement of attorneys' fees and costs of defense (collectively, "Claims" hereinafter), including but not limited to Claims relating to death or injury to any person and injury to any property, which arise out of, pertain to, or relate in whole or in part to the negligence, recklessness, or willful misconduct of Consultant or any of its officers, employees, sub - consultants, or agents in the performance of its professional services under this Agreement. b. Other Indemnities. In connection with any and all claims, demands, damages, liabilities, losses, costs or expenses, including attorneys' fees and costs of defense (collectively, "Damages" hereinafter) not covered by Paragraph 9.a. above, Consultant shall defend, hold harmless and indemnify the Indemnitees with respect to any and all Damages, including but not limited to, Damages relating to death or injury to any person and injury to any property, which arise out of, pertain to, or relate to acts or omissions of Consultant or any of its officers, employees, subcontractors, or agents in the performance of this Agreement, except for such loss or damage arising from the sole negligence or willful misconduct of the City, as determined by final arbitration or court decision or by the agreement of the parties. Consultant shall defend Indemnitees in any action or actions filed in connection with any such Damages with counsel of City's choice, and shall pay all costs and expenses, including all attorneys' fees and experts' costs actually incurred in connection with such defense. Consultant's duty to defend pursuant to this Section 9.b. shall apply independent of any prior, concurrent or subsequent misconduct, negligent acts, errors or omissions of Indemnitees." 11. 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: i. Insurance Services Office Commercial General Liability form No. CG 00 01 11 85 or 88. ii. 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. iii. 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. iv. Professional Liability Insurance shall be written on a policy form providing professional liability for the Consultant's profession. 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. 4. Professional Liability Coverage: One million ($1,000,000) per claim and in aggregate. 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 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, 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 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/or 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 insurers 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. 12. INDEPENDENT CONTRACTOR a. Consultant 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 Consultant shall at all times be under Consultant's exclusive direction and control. Neither City nor any of its officers, employees, agents, or volunteers shall have control over the conduct of Consultant or any of Consultant's officers, employees, or agents except as set forth in this Agreement. Consultant 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. Consultant 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 Consultant in connection with the performance of this Agreement. Except for the fees paid to Consultant as provided in the Agreement, City shall not pay salaries, wages, or other compensation to Consultant for performing services hereunder for City. City shall not be liable for compensation or indemnification to Consultant for injury or sickness arising out of performing services hereunder. 13. LEGAL RESPONSIBILITIES The Consultant shall keep itself informed of all local, State and Federal ordinances, 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 Consultant 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 at law or in equity occasioned by failure of the Consultant to comply with this section. 14. RELEASE OF INFORMATION a. All information gained by Consultant in performance of this Agreement shall be considered confidential and shall not be released by Consultant without City's prior written authorization. Consultant, 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 Consultant gives City notice of such court order or subpoena. b. Consultant shall promptly notify City should Consultant, 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, but has no obligation, to represent Consultant and/or be present at any deposition, hearing or similar proceeding. Consultant agrees to cooperate fully with City and to provide City with the opportunity to review any response to discovery requests provided by Consultant. However, City's right to review any such response does not imply or mean the right 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. Mailing Address: To Consultant: 16. ASSIGNMENT City of Temecula Attn: City Manager 41000 Main Street Temecula, CA 92590 Stantec Consulting Services Inc. Attn: Carlos Pineda 46 Discovery Suite 250 Irvine, CA 92618-3133 The Consultant shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City. Upon termination of this Agreement, Consultant's sole compensation shall be payment for actual services performed up to, and including, the date of termination or as may be otherwise agreed to in writing between the City Council and the Consultant. 17. LICENSES At all times during the term of this Agreement, Consultant shall have in full force and effect, all licenses required of it by law for the performance of the services described in this Agreement. 18. GOVERNING LAW The City and Consultant 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. 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 Consultant, or Consultant's sub -contractors for this project, during his/her tenure or for one year thereafter. The Consultant 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 Consultant or Consultant's sub -contractors on this project. Consultant 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 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. 21. AUTHORITY TO EXECUTE THIS AGREEMENT The person or persons executing this Agreement on behalf of Consultant warrants and represents that he or she has the authority to execute this Agreement on behalf of the Consultant and has the authority to bind Consultant to the performance of its obligations 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. CITY OF TEMECULA STANTEC CONSULTING SERVICES INC. (Two Signatures of corporate officers required unless corporate documents authorize only one person to sign the agreement on behalf of the corporation.) By: By: Maryann Edwards, Mayor ATTEST: By: By: RAND! JOHL, CITY CLERK APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney CONSULTANT Mohammad Heiat, Principal Carlos Pineda, Associate Stantec Consulting Services Inc. Attn: Carlos Pineda, PE 46 Discovery Suite 250 Irvine, CA 92618-3133 949-474-1401 ext. 205 Carlos.Pineda@stantec.com PM Initials: Date: EXHIBIT A TASKS TO BE PERFORMED The general elements (scope of work) of this service include: At the direction of the City, the Consultant will perform professional engineering and land surveying services in support of the Butterfield Stage Road — Phase III project. Services may include, but are not limited to: PROJECT MANAGEMENT • Schedule and coordinate all work. • Participate in meetings, teleconferences, etc. DESIGN • Professional engineering (civil, structural, electrical, hydraulic, traffic, wet/dry utilities). • Professional land surveying (field surveys, right of way requirements and mapping). • Preparation of technical reports. • Preparation of estimates of construction costs and scheduling. • Preparation of plans/exhibits, including hardcopy and/or digital, for utility coordination. • Preparation of construction plans and specifications. BIDDING • Answering/addressing questions regarding omissions, errors, and design intent. • Assist in preparation of addenda. Specific work tasks will be identified and scoped between the City and Consultant when needed. The work will be performed and paid for on a Time and Materials (T&M) basis, in accordance with the payment rates shown in Exhibit B. EXHIBIT B PAYMENT RATES AND SCHEDULE Stantec SCHEDULE OF BILLING RATES- 2017 Billing Level Hourly Rate Description Junior Levet position 3 $75 i Independently carries out assignments of limited scope using standard procedures, methods and 4 $83 techniques o Assists senior staff in carrying out more advanced procedures 5 $93 u Completed work is rev iewed for feasibility and soundness ofjudgrnenl ❑ Graduatefrom an appropriate post -secondary program or equivalent ❑ Generally, one to three years' experience Fully Qualified Professional Position 6 $101 o Carries out assignments requiring general familiarity within a broad field of the respectiv e profession la Makes decisions by using a combination of standard mefhodsandtechniques 7 $109 o Activ ely participates in planning to ensure the achievement of objectives R $117 ❑ Works independently to interpret information and resolyedifficulties 0 Graduatefrom an appropriate post -secondary program, with credentials or equivalent 0 Generally, three 10 six years' experience First Level Supervisor orfirstcornplete Level of Specialization 9 $125 o Prov ides applied professional knowledge and initiative in planning and coordinating work programs 10 $135 a Adapts established guidelines as necessary to address unusual issues 11 $144 ❑ Decisions accepted as technically accurate, howevermay on occasion be reviewed for soundnessofjudgment ❑ Graduatefrom an appropriate post -secondary program, with credentials or equivalent 0 Generally, fiv e to nine years' experience Highly Specialized Technical Professional or Supervisor of groups of professionals ❑ Prov ides multi -discipline knowledge to deliver innov ativ e solutions in related field of expertise 12 $154 ❑ Participates in short and long range planning to ensure the achievement of objectives 13 $165 u Makes responsible decisions on all matters, including policy recommendations, work methods, and financial controls associa ted with large expenditures 14 $175 o Rev iews and ev a luates tech nical work o Graduatefrom an appropriate post -secondary program, with credentials or equivalent o Generally, ten to fifteen years' experience with extensive, broad experience Senior Level Consultant or Management J Recognized as an authority in a specific field with qualifications of significant v alue 15 $184 ❑ Prov ides multi -discipline knowledge to deliverinnovativesolutions in related field of expertise ❑ Independently conceives programs and problems for inv estigation 1 b $212 o Participates in discussions to ensure the achievement of program and/or project objectives 17 $242 j Makes responsible decisions on expenditures, including large sums or implementation of major programs and/or projects ❑ Graduatefrom an appropriate post -secondary program, with credentials or equivalent ❑ Generally, more than twelveyears' experience with extensive experience Senior Level Management under review by Vice President or higher 18 $283 ❑ Recognized as an authority in a specific field with qualifications of significant v alue o Responsible for long range planning within a specific area of practice or region 19 $319 ❑ Makes decisions which are far reaching and limited only by objectives and policies of the 20 $354 organization o Plans/approves projects requiring significant human resources or capital investment 21 $390 o Graduatefrom an appropriate post -secondary program, with credentials or equivalent ❑ Generally, fifteen years' experience with extensive professional and management experience Crew Size Regular Rate Overtime Rate Survey Crews 1 -Person $180 $210 2 -Person $255 $355 3 -Person $325 $450 T-2 2017 W11695Iactive19010501rtaster\dee\RATE TAeLESA2017 Rate Tables\Table 2 2017 Rate w Crew Rates.doc 2019-20 $ 20,271 2017-18 $ 19,484 Capital Improvement Program Fiscal Years 2017-21 BUTTERFIELD STAGE ROAD EXTENSION Circulation Project Project Description: This project includes the complete design and construction of four lanes on Butterfield Stage Road (from Rancho California Road to Murrieta Hot Springs Road), four lanes on Murrieta Hot Springs Road (from Butterfield Stage Road to the City limits), and two lanes on Calle Chapos (from Butterfield Stage Road to Walcott Road), totaling approximately 3.2 miles of road. Benefit / Core Value: This project improves traffic circulation by providing a crucial north and south arterial road on the eastern side of the City. In addition, this project satisfies the City's Core Values of Transportation Mobility and Connectivity. Project Status: Phase I and Phase II of this project (Murrieta Hot Springs Road to La Serene) have been completed. Phase III (La Serena to Rancho California Road) is scheduled to be completed during Fiscal Year 2016-17. Department: Public Works - Account No. 210.165.723 PW09-02 Level: I Project Cost: Prior Years Actual Expenditures FYE 2016 Carryover Budget 2016-17 Adopted 2017-18 Appropriation Projected 2018-19 Projected 2019-20 Projected 2020-21 Projected and Future Years Total Project Cost Administration $ 1,963,522 $ 200,000 $ 13,000 $ 2,176,522 Acquisition $15,006,728 $ 2,051,322 $ 17,058,050 Construction $13,027,660 $ 9,871,740 $ 110,200 $ 23, 009, 600 Construction S 590,028 $ 590,028 Engineering $ 409,867 $ 29,132 $ 438,999 Design/Environmental $ 608,379 $ 280,525 $ 888,904 Utilities $ 86 $ 914 $ 1,000 Totals $31,016,242 $12,433,633 $ 123,200 $ - $ - $ - $ - $ 43,573,075 Source of Funds: Prior Years Actual Expenditures FYE 2016 Carryover Budget 2016-17 Adopted 2017-18 2018-19 2019-20 2020-21 Appropriation Projected Projected Projected Projected Total Project Cost CFD (Roripaugh Ranch) Reimbursement/Other r $29,555,616 $11,672,921 $ 41,228,537 (EMWD) $ 10,965 $ 10,965 Reimbursement/Other (RCWD) S 590,028 $ 590,028 Reimbursement/Other (Shea Homes) $ 3,124 $ 170,684 $ 173,808 Reimbursement/Other (SCE) $ 8,537 $ 8,537 Reimbursement/Other (County of Riverside) $ 123,200 $ 123,200 TUMF $ 1,438,000 $ 1,438,000 Total Funding: $31,016,242 $12,433,633 $ 123,200 $ - $ - $ - $ - $ 43,573,075 Future Operation & Maintenance Costs: 2016-17 $ 19,102 2018-19 $ 19,874 2020-21 $ 20,677 Note: Assumes that only minor right-of-way acquisitions would be necessary and that all major right-of-way dedications are voluntary. Fiscal Years 2017-21 Capital Improvement Program 37 BUTTERFIELD STAGE ROAD EXTENSION Circulation Project Location CAMINO CIELO CALLE CHAPOS SOUTH LOOP RD LA SERENA WY Aerial Data - March 2010 0 512.5 1,025 Feet 2,050 36 Item No. 7 Approvals City Attorney Finance Director City Manager Jk-- 6,. CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick A. Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Approve the First Amendment to Utility Agreement with Eastern Municipal Water District for Interstate 15 / State Route 79 South Ultimate Interchange, PW 04-08 PREPARED BY: Amer Attar, Principal Engineer Avlin R. Odviar, Senior Engineer RECOMMENDATION: That the City Council approve the First Amendment to Utility Agreement with Eastern Municipal Water District to relocate utilities for the Interstate 15 / State Route 79 South Ultimate Interchange project (Project). BACKGROUND: On October 13, 2015, the City Council approved Utility Agreement No. 23317 with Eastern Municipal Water District (EMWD) which established the roles, responsibilities, and terms for relocation of sewer and water lines as necessary to accommodate the Project. The Agreement includes the relocation of approximately 1,300 linear feet of 18 -inch and 20 -inch diameter sewer force mains. On September 12, 2016, EMWD requested the opportunity to upsize the relocated lines to dual 24 -inch diameter sewer force mains. EMWD made its request with the understanding that all additional costs associated with the upsizing would be at EMWD's expense. The City has included Additive Bid No. 2 in the construction contract currently being bid for the Project. The additive bid includes all additional work necessitated by upsizing the force mains above and beyond the base bid of relocate and replace in kind. After the bid opening, EMWD will have the opportunity to review the cost of Additive Bid No. 2 submitted by the low bidder. EMWD may elect to move forward with the upsizing of the force mains or default to the replace in kind. The City will award the construction contract with or without the additive bid accordingly. The First Amendment to the Agreement formalizes the roles, responsibilities, and terms associated with the upsizing of the relocated lines. The Amendment was prepared by City staff and has been reviewed by EMWD and Caltrans staff. The estimated cost of upsizing is $270,000. If included in the awarded contract, EMWD will be responsible for all actual costs associated with upsizing. FISCAL IMPACT: There is no fiscal impact as a result of the approval of the First Amendment to the Utility Agreement No. 23317. Any additional costs, if incurred, will be reimbursed by EMWD in accordance with the terms of the Agreement, as amended. ATTACHMENTS: 1. First Amendment to Utility Agreement No. 23317 2. Project Description 3. Project Location Page 1 of 4 UTILITY AGREEMENT — FIRST AMENDMENT CITY Agreement No. DISTRICT 08 COUNTY Riverside ROUTE 115 / SR79 POST MILE RIV 1-15, 3.0/4.0 SR -79, 19.6/19.8 EA 43230 PROJECT ID 08-00000668 FEDERAL AID NUMBER STPHPLULN 5459(025) EMWD'S Work Order No. 12-868 FEDERAL PARTICIPATION On the project ® YES ❑ NO On the Utilities El YES ® NO UTILITY AGREEMENT NO. 23317 DATE FIRST AMENDMENT TO UTILITY AGREEMENT NO. 23317 RECITALS WHEREAS, the City of Temecula ("CITY") and Eastern Municipal Water District ("EMWD") entered into that certain Utility Agreement No. 23317, dated February 3, 2016 ("Utility Agreement"), which sets forth the terms and conditions pursuant to which EMWD owns, operates, and maintains an 18 -inch and 20 -inch force main sewer, along with a 2" domestic water pipeline and related appurtenances ("FACILITIES") requiring relocation to accommodate CITY's construction of improvements to the Interstate 15 / State Route 79S interchange ("PROJECT"); and WHEREAS, by correspondence dated September 12, 2016, EMWD requested an option to upsize the 18 -inch and 20 -inch force main sewers to be relocated, to 24 -inch diameter pipes in lieu of replacement of these FACILITIES in kind, as part of the PROJECT; and WHEREAS, CITY and EMWD agree that the increase in capacity of the relocated force main sewers from the existing 18 -inch and 20 -inch size to the requested 24 -inch size, and any additional work beyond replacement in kind of these FACILITIES, is a betterment for which costs EMWD shall be solely responsible; and WHEREAS, CITY and EMWD agree that the approved relocation plans, EMWD Work Order No. 12-868, do not need revision to accommodate the increase or betterment of the 18 -inch and 20 -inch force main sewers to 24 inches; and WHEREAS, the estimated cost of construction for the betterment requested by EMWD in connection with increasing the 18 -inch and 20 -inch force main sewers to 24 -inch diameter pipes is $270,000.00; and WHEREAS, EMWD understands that the lowest responsible bidder for construction of the PROJECT will be based on the Base Bid price submitted and that EMWD is solely responsible for the costs in connection with the increase or betterment requested by EMWD, which is comprised of upsizing the 18 -inch and 20 -inch force main sewers to 24 - inch diameter pipes and any additional work beyond replacement of these FACILITIES in kind. NOW, THEREFORE, the CITY and EMWD mutually agree to amend the Utility Agreement as follows: 1. The CITY and EMWD incorporate the above RECITALS into the Utility Agreement as if set forth in full therein. 2. The CITY and EMWD hereby amend Section I. WORK TO BE PERFORMED of the Utility Agreement by revising the first and third paragraphs of said Section I. WORK TO BE PERFORMED as follows: In accordance with Notice to Owner No. 23317 dated 01/19/2016, CITY shall relocate FACILITIES as shown on EMWD Work Order No. 12-868 dated 1/28/2016, which plans are included in CITY's Contract Plans for the PROJECT, EA 43230 and included as "EXHIBIT A" in this agreement which, by this reference, are made a part hereof. EMWD hereby UTILITY AGREEMENT — FIRST AMENDMENT (Cont.) Page 2 of 4 UTILITY AGREEMENT NO. 23317 acknowledges review of CITY's plans for work and agrees to the construction in the manner proposed except that EMWD requests a betterment of the FACILITIES to include dual 24 - inch force main sewers in lieu of the existing 18 -inch and 20 -inch force main sewers. There will be no change in the 2" domestic water pipeline and related appurtenances. EMWD shall have the right to inspect the work by CITY's contractor during construction. Upon completion of the work by CITY, EMWD agrees to accept ownership and maintenance of the constructed facilities, which include dual 24" force main sewers betterment in lieu of the of the existing 18 -inch and 20 -inch force main sewers and 2" water line with related appurtenances all located within a 20' non-exclusive easement and relinquishes to CITY ownership of the replaced FACILITIES and easement. No change is made to the second paragraph of Section I. WORK TO BE PERFORMED. 3. The CITY and EMWD hereby amend Section II. LIABILITY FOR WORK by adding a new third paragraph after the existing first two paragraphs that reads as follows: EMWD is solely responsible for the costs relating to the upsizing of the existing 18 -inch and 20 -inch force main sewers to dual 24 -inch diameter force main sewers requested by EMWD by correspondence dated September 12, 2016. The upsizing of the 18 -inch and 20 -inch force main sewers to dual 24 -inch force main sewers constitutes a betterment and increases the existing capacity of said force main sewers and, as such, said costs relating to the upsizing or betterment, are the sole responsibility of EMWD consistent with Section IV. PAYMENT FOR WORK. No changes are made to the first and second paragraphs of Section II. LIABILITY FOR WORK. 4. The CITY and EMWD hereby add a new Section VI. OBLIGATIONS RELATING TO BETTERMENT OF FORCE MAIN SEWERS REQUESTED BY EMWD after Section V. GENERAL CONDITIONS that reads as follows: VI. OBLIGATIONS RELATING TO PROPOSAL AND BIDS IN CONNECTION WITH BETTERMENT OF FORCE MAIN SEWERS REQUESTED BY EMWD CITY will provide to EMWD a copy of the proposal submitted by the lowest responsible bidder. The CITY agrees to provide said copy of the proposal to EMWD by transmitting a copy by electronic mail and by United States first-class mail to the attention of the General Manager of EMWD. EMWD will respond to the CITY, in writing, approving or disapproving the award of the additive bid for the betterment or increase of the existing 18 -inch and 20 -inch force main sewers to dual 24 -inch force main sewers, within 10 business days of the date the CITY transmits said bid to EMWD for review. IF EMWD approves said additive bid for the betterment or increase of the existing 18 -inch and 20 -inch force main sewers to dual 24 -inch force main sewers, the above revisions to Section I. WORK TO BE PERFORMED and SECTION II. LIABILITY FOR WORK will apply. IF EMWD disapproves said additive bid for the betterment or increase of the existing 18 -inch and 20 -inch force main sewers to dual 24 -inch force main sewers, the CITY and EMWD agree that provisions in Section I. WORK TO BE PERFORMED and SECTION II. LIABILITY FOR WORK of the Utility Agreement will apply and the above revisions will have no force and effect. If the CITY awards the additive bid for the betterment or increase of the existing 18 -inch and 20 -inch force main sewers to dual 24 -inch force main sewers after receiving EMWD's notice UTILITY AGREEMENT — FIRST AMENDMENT (Cont.) Page 3 of 4 UTILITY AGREEMENT NO. 23317 of approval, EMWD will reimburse the CITY the actual costs incurred by the CITY in connection with the additive bid and betterment work. 5. All other terms and conditions of the Utility Agreement remain unchanged. Signatures on Following Page UTILITY AGREEMENT — FIRST AMENDMENT (Cont.) Page 4 of 4 UTILITY AGREEMENT NO. 23317 SIGNATURE PAGE TO FIRST AMENDMENT TO UTILITY AGREEMENT NO. 23317 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Utility Agreement No. 23317 on the dates below. Owner: CITY OF TEMECULA EASTERN MUNICIPAL WATER DISTRICT APPROVED APPROVED By: By: Maryann Edwards, Mayor Paul D. Jones II, PE General Manager Date: Date: APPROVED AS TO FORM: By: By: Peter M. Thorson, City Attorney Sheila Zelaya Board Secretary Date: ATTEST: By: Randi Johl, City Clerk 2019-20 $ 153,000 2017-18 Tho Heart of Sou: horn Cabforna Wale Country Capital Improvement Program Fiscal Years 2017-21 INTERSTATE 15 / STATE ROUTE 79 SOUTH ULTIMATE INTERCHANGE Circulation Project Project Description: This project includes right-of-way acquisition, design, and construction of a ramp system that will improve access to Interstatel5 from Temecula Parkway/State Route 79 South. The interchange will accommodate traffic generated by future development of the City's General Plan land use as well as regional traffic volume increases forecasted for the year 2037. This project is crucial, as the projected traffic volume increases currently exceed the capacity of the existing interchange improvements constructed by the Riverside County Transportation Department. Benefit / Core Value: This project will improve circulation, freeway access, and level of service at the Interstate 15 and Temecula Parkway / State Route 79 South intersection. In addition, this project satisfies the City's Core Value of Transportation Mobility and Connectivity. Project Status: The plans, specifications, and estimates package are currently being prepared for review by California Department of Transportation (Caltrans). Acquisition was completed during Fiscal Year 2013-14. Construction is scheduled to start during Fiscal Year 2016-17. Department: Public Works - Account No. 210.165.662 PW04-08 Level: I Project Cost: Prior Years Actual Expenditures FYE 2016 2016-17 Carryover Adopted 2017-18 Budget Appropriation Projected 2018-19 Projected 2019-20 Projected 2020-21 Projected and Future Total Project Years Cost Administration $ 735,019 $ 120,513 $ 216,000 $ 192,356 $ 1,263,888 Acquisition $13,032,381 $ 186,760 $13,219,141 Construction $ 104,088 $14,080,764 $ 13,859,603 $ 39,193 $28,044,455 Construction $ 7,158,741 $ 5,817,359 $12,976,100 Engineering $ 4,452,000 $ 1,750,000 $ 1,875,000 $ 3,625,000 Design $ 3,944,254 $ 148,261 $ 4,092,515 MSHCP r$ 431,480 $ 9,917,244 $ 153,163 $ 431,480 Totals $17,815,742 $16,717,778 $ 15,950,603 $ 192,356 $ - $ - $ - $50,676,479 Source of Funds: Prior Years Actual Expenditures FYE 2016 2016-17 Carryover Adopted 2017-18 Budget Appropriation Projected 2018-19 Projected 2019-20 Projected 2020-21 Total Project Projected Cost CFD (Crowne Hill) Reimbursement/ Other (Morgan Hill) $ 502,211 $ 1,190,582 $ 502,211 $ 1,190,582 SAFETEA-LU $ 1,600,000 $ 1,600,000 Senate Bill 621 $10,270,949 $ 3,959,037 $ 216,000 $ 39,193 $14,485,179 STP(RCTC)( $ 7,158,741 $ 5,817,359 $12,976,100 TUMF (RCTC/CETAP)121 $ 4,452,000 $ 4,452,000 TUMF (RCTC/Region)131 $ 1,400,000 $ 4,000,000 $ 5,400,000 TUMF (WRCOG)141 $ 9,917,244 $ 153,163 $10,070,407 Total Funding: $17,815,742 $16,717,778 $ 15,950,603 $ 192,356 $ - $ - $50,676,479 Future Operation & Maintenance Costs: 2016-17 2018-19 $ 150,000 (1) Surface Transportation Program(STP) per RCTC call for Projects as approwd by the Commission on January 8, 2014($12,976,100.) (2) TUMF (RCTC/Region) - Funding is pursuant to RCTC Agreement No. 06-72-506 ($4,452,000) (3) TUMF (RCTC/CETAP) - Funding is pursuant to RCTC Agreement No. 11-72-041-00 ($5,400,000;$1,400,000 ROW;$4,000,000 CON). (4)TUMF WRCOG 2014 Southwest Zone 5 -Year Transportation Improvement Program (TIP) adopted on January 6, 2014 ($10,157,154). 2020-21 $ 156,060 Fiscal Years 2017-21 Capital Improvement Program 49 INTERSTATE -15 / STATE ROUTE 79 SOUTH ULTIMATE INTERCHANGE Circulation Project Location Aerial Data - March 2012 Feet 0 262.5 525 1,050 48 Item No. 8 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Approve an Appropriation and the Agreement for Consultant Services with Michael Baker International, Inc for Temecula Park and Ride, PW06-09 PREPARED BY: Amer Attar, Principal Engineer Steve Charette, Associate Engineer RECOMMENDATION: That the City Council: 1. Approve an appropriation from the General Fund, in the amount of $330,000 for Temecula Park and Ride, PW06-09, for additional administration, design, environmental, and site maintenance costs; 2. Approve the Agreement for Consultant Services with Michael Baker International, Inc., in an amount not to exceed $57,416, for additional design services; 3. Authorize the City Manager to approve extra work authorizations not to exceed the contingency amount of $5,741.60, which is equal to 10% of the Agreement amount. BACKGROUND: On February 23, 2016, the City Council awarded a Construction Contract to Aghapy Group, Inc. (AGI), in the amount of $1,471,777, to construct the improvements for the Temecula Park and Ride, PW06-09 (Project). Construction began on March 24, 2016 and it was scheduled for completion in October 2016. Four Change Orders were approved, in the amount of $51,147.23, for a total revised Contract amount of $1,522,924.23. On September 26, 2016, the City issued a letter to AGI informing them that the City is terminating the Contract under Section 6-4 of the Specifications "Termination of Contract for Default" due to demonstrated incompetence and failure to perform. All work is currently suspended due to litigation with the Contractor. The Project construction is approximately 40% complete and at final graded stage with a balance of $979,835 available in the Construction Contract. During the Project's suspension period, administration and site maintenance costs continue to accrue. Administration costs include staff costs incurred thus far and anticipated costs for the Project until construction starts again. Site maintenance costs consist of ongoing erosion control measures and securing the site with perimeter fencing. Also, focused environmental studies are needed to address potential traffic, noise, and lighting impacts in response to concerns by the local homeowner's association. Additional administration, environmental, and site maintenance costs needed are estimated to be in the amount of $266,842.40. The plans and specifications of the Project require updating to reflect existing conditions. This is required to rebid the Project and complete the construction with a new contractor. A revised set of plans and specifications will be prepared by Michael Baker International (MBI). MBI has previously provided professional design services for this Project and, therefore, is best qualified to revise the plans and specifications for rebidding. Additional design costs needed are in the amount of $63,157.60 ($57,416.00 for plan and specifications revision, and $5,741.60 for contingency) as shown in Exhibit A and B of the attached Agreement for Consultant Services with MBI. Administration, redesign, environmental, and site maintenance costs are not recoverable from Congestion Mitigation and Air Quality (CMAQ) Program funds. CMAQ funds are programmed for the construction phase only. However, additional construction and construction engineering costs are eligible for CMAQ reimbursement. Staff will request from Riverside County Transportation Commission (RCTC) to program additional CMAQ funds, if deemed necessary by bid results. Staff is requesting the appropriation of the necessary funds from the General Fund for the additional administration, design, environmental, and site maintenance costs, in the amount of $330,000. FISCAL IMPACT: The Temecula Park and Ride is identified in the City's Capital Improvement Program (CIP) Budget for Fiscal Years 2017-21, and is funded with AB 2766 (State funds available for programs that reduce air pollution), federal CMAQ Program funds, and Development Impact Fees (DIF), Police. Staff is requesting an additional $330,000 be appropriated from the General Fund for costs incurred thus far and anticipated for the Project. ATTACHMENTS: 1. Agreement 2. Project Location 3. Project Description AGREEMENT FOR CONSULTANT SERVICES BETWEEN CITY OF TEMECULA AND MICHAEL BAKER INTERNATIONAL, INC. TEMECULA PARK AND RIDE, PW06-09 THIS AGREEMENT is made and effective as of January 24, 2017, between the City of Temecula, a municipal corporation (hereinafter referred to as "City"), and Michael Baker International, Inc., a Pennsylvania corporation (hereinafter referred to as "Consultant"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: 1. TERM This Agreement shall commence on January 24, 2017, and shall remain and continue in effect until tasks described herein are completed, but in no event later than January 24, 2018, unless sooner terminated pursuant to the provisions of this Agreement. 2. SERVICES Consultant shall perform the services and tasks described and set forth in Exhibit A, attached hereto and incorporated herein as though set forth in full. Consultant shall complete the tasks according to the schedule of performance which is also set forth in Exhibit A. 3. PERFORMANCE Consultant shall at all times competently and to the best of his or her ability, experience, and talent, perform all tasks described herein. Consultant shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of Consultant hereunder in meeting its obligations under this Agreement. 4. PREVAILING WAGES Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of workman needed to execute this Agreement from the Director of the Department of Industrial Relations. Copies may be obtained from the California Department of Industrial Relations Internet website at http://www.dir.ca.gov. Consultant shall provide a copy of prevailing wage rates to any staff or sub -consultant hired, and shall pay the adopted prevailing wage rates as a minimum. Consultant shall comply with the provisions of Sections 1720, 1725.5, 1771.1(a), 1773.8, 1775, 1776, 1777.5, 1777.6, and 1813 of the Labor Code. Pursuant to the provisions of 1775 of the Labor Code, Consultant shall forfeit to the City, as a penalty, the sum of $200 for each calendar day, or portion thereof, for each laborer, worker, or mechanic employed, paid less than the stipulated prevailing rates for any work done under this Agreement, by him or by any sub - consultant under him, in violation of the provisions of the Agreement. This project, work, or service will be subject to compliance monitoring and enforcement by the Department of Industrial Relations (DIR) pursuant to Labor Code Section 1771.4. 1 5. REGISTRATION WITH THE DEPARTMENT OF INDUSTRIAL RELATIONS Registration with the Department of Industrial Relations (DIR) is mandatory as a condition for bidding, providing certain services, and working on a public works project as specified in Labor Code Section 1771.1(a). Consultant and any sub -consultants must be registered with the Department of Industrial Relations to be qualified to bid, or provide a proposal and/or time and material quote or be listed in a bid, proposal or quote, subject to the requirements of Public Contract Code Section 4104; or engage in the performance of any contract that is subject to Labor Code Section 1720 et seq., unless currently registered and qualified to perform public work pursuant to Labor Code Section 1725.5. Consultant and sub - consultants will be required to provide proof of registration with the DIR. For more information regarding registration with the Department of Industrial Relations, refer to http://www.dir.ca.gov/Public-Works/PublicWorks.html 6. PAYMENT a. The City agrees to pay Consultant monthly, in accordance with the payment rates and terms and the schedule of payment as set forth in Exhibit B, Payment Rates and Schedule, attached hereto and incorporated herein by this reference as though set forth in full, based upon actual time spent on the above tasks. Any terms in Exhibit B, other than the payment rates and schedule of payment, are null and void. This amount shall not exceed Fifty - Seven Thousand Four Hundred and Sixteen Dollars ($57,416) unless additional payment is approved as provided in this Agreement. b. Consultant shall not be compensated for any services rendered in connection with its performance of this Agreement which are in addition to those set forth herein, unless such additional services are authorized in advance and in writing by the City Manager . Consultant shall be compensated for any additional services in the amounts and in the manner as agreed to by City Manager and Consultant at the time City's written authorization is given to Consultant for the performance of said services. c. Consultant will submit invoices monthly for actual services performed. Invoices shall be submitted between the first and fifteenth business day of each month, for services provided in the previous month. Payment shall be made within thirty (30) days of receipt of each invoice as to all non -disputed fees. If the City disputes any of Consultant's fees, it shall give written notice to Consultant within thirty (30) days of receipt of an invoice of any disputed fees set forth on the invoice. For all reimbursements authorized by this Agreement, Consultant shall provide receipts on all reimbursable expenses in excess of Fifty Dollars ($50) in such form as approved by the Director of Finance. 7. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE a. The City may at any time, for any reason, with or without cause, suspend or terminate this Agreement, or any portion hereof, by serving upon the Consultant at least ten (10) days prior written notice. Upon receipt of said notice, the Consultant shall immediately cease all work under this Agreement, unless the notice provides otherwise. If the City suspends or terminates a portion of this Agreement such suspension or termination shall not make void or invalidate the remainder of this Agreement. 2 b. In the event this Agreement is terminated pursuant to this Section, the City shall pay to Consultant the actual value of the work performed up to the time of termination, provided that the work performed is of value to the City. Upon termination of the Agreement pursuant to this Section, the Consultant will submit an invoice to the City, pursuant to Section entitled "PAYMENT" herein. 8. DEFAULT OF CONSULTANT a. The Consultant's failure to comply with the provisions of this Agreement shall constitute a default. In the event that Consultant is in default for cause under the terms of this Agreement, City shall have no obligation or duty to continue compensating Consultant for any work performed after the date of default and can terminate this Agreement immediately by written notice to the Consultant. If such failure by the Consultant to make progress in the performance of work hereunder arises out of causes beyond the Consultant's control, and without fault or negligence of the Consultant, it shall not be considered a default. b. If the City Manager or his delegate determines that the Consultant is in default in the performance of any of the terms or conditions of this Agreement, it shall serve the Consultant with written notice of the default. The Consultant shall have ten (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 Consultant 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 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. 9. OWNERSHIP OF DOCUMENTS a. Consultant shall maintain complete and accurate records with respect to sales, costs, expenses, receipts and other such information required by City that relate to the performance of services under this Agreement. Consultant shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. Consultant shall provide free access to the representatives of City or its designees at reasonable times to such books and records, shall give City the right to examine and audit said books and records, shall permit City to make transcripts there from as necessary, and shall allow inspection of all work, data, documents, proceedings and activities related to this Agreement. Such records, together with supporting documents, shall be maintained for a period of three (3) years after receipt of final payment. b. Upon completion of, or in the event of termination or suspension of this Agreement, all original documents, designs, drawings, maps, models, computer files containing data generated for the work, surveys, notes, and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall become the sole property of the City and may be used, reused or otherwise disposed of by the City without the permission of the Consultant. With respect to computer files containing data generated for the work, Consultant shall make available to the City, upon reasonable written request by the City, the necessary computer software and hardware for purposes of accessing, compiling, transferring and printing computer files. 3 10. INDEMNIFICATION The Consultant 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, 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 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 the Successor Agency to the Temecula Redevelopment Agency. 11. 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. 4) Professional Liability Insurance shall be written on a policy form providing professional liability for the Consultant's profession. b. Minimum Limits of Insurance. Consultant shall maintain limits no less than: 1) General Liability: One Million Dollars ($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 Dollars ($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. 4) Professional Liability Coverage: One Million Dollars ($1,000,000) per claim and in aggregate. 4 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 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, 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 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 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 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. 5 12. INDEPENDENT CONTRACTOR a. Consultant 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 Consultant shall at all times be under Consultant's exclusive direction and control. Neither City nor any of its officers, employees, agents, or volunteers shall have control over the conduct of Consultant or any of Consultant's officers, employees, or agents except as set forth in this Agreement. Consultant 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. Consultant 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 Consultant in connection with the performance of this Agreement. Except for the fees paid to Consultant as provided in the Agreement, City shall not pay salaries, wages, or other compensation to Consultant for performing services hereunder for City. City shall not be liable for compensation or indemnification to Consultant for injury or sickness arising out of performing services hereunder. 13. LEGAL RESPONSIBILITIES The Consultant shall keep itself informed of all local, State and Federal ordinances, 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 Consultant 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 at law or in equity occasioned by failure of the Consultant to comply with this section. 14. RELEASE OF INFORMATION a. All information gained by Consultant in performance of this Agreement shall be considered confidential and shall not be released by Consultant without City's prior written authorization. Consultant, 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 Consultant gives City notice of such court order or subpoena. b. Consultant shall promptly notify City should Consultant, 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, but has no obligation, to represent Consultant and/or be present at any deposition, hearing or similar proceeding. Consultant agrees to cooperate fully with City and to provide City with the opportunity to review any response to discovery requests provided by Consultant. However, City's right to review any such response does not imply or mean the right by City to control, direct, or rewrite said response. 6 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. Mailing Address: To Consultant: 16. ASSIGNMENT City of Temecula Attn: City Manager 41000 Main Street Temecula, CA 92590 Michael Baker International, Inc. Attn: Steven B. Burick, Vice President 14725 Alton Parkway Irvine, CA 92618 The Consultant shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City. Upon termination of this Agreement, Consultant's sole compensation shall be payment for actual services performed up to, and including, the date of termination or as may be otherwise agreed to in writing between the City Council and the Consultant. 17. LICENSES At all times during the term of this Agreement, Consultant shall have in full force and effect, all licenses required of it by law for the performance of the services described in this Agreement. 18. GOVERNING LAW The City and Consultant 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. 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 Consultant, or Consultant's sub -contractors for this project, during his/her tenure or for one year thereafter. The Consultant 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 - 7 contractual, financial or otherwise, in this transaction, the proceeds thereof, or in the business of the Consultant or Consultant's sub -contractors on this project. Consultant 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 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. 21. AUTHORITY TO EXECUTE THIS AGREEMENT The person or persons executing this Agreement on behalf of Consultant warrants and represents that he or she has the authority to execute this Agreement on behalf of the Consultant and has the authority to bind Consultant to the performance of its obligations 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. 22. MEANS AND METHODS Consultant shall not be responsible for construction means, methods, techniques, sequences, or procedures of construction contractors, or the safety precautions and programs incident thereto, and shall not be responsible for such construction contractor's failure to perform work in accordance with the contract documents. City expressly agrees that Consultant even when providing on-site project representation or reviewing construction as part of the Agreement, is not responsible for and does not guarantee, the performance by the City or any third -party contractor. 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. CITY OF TEMECULA MICHAEL BAKER INTERNATIONAL, INC. (Two Signatures of corporate officers required unless corporate documents authorize only one person to sign the agreement on behalf of the corporation.) By: By: Maryann Edwards, Mayor Michael A. Tylman, Assistant Secretary ATTEST: By: By: Randi Johl, City Clerk APPROVED AS TO FORM: By: Peter M. Thorson, City Attorney CONSULTANT Steven B. Burick, Vice President Michael Baker International, Inc. Attn: Steven B. Burick, Vice President 14725 Alton Parkway Irvine, CA 92618-2027 949.855.5733 BURICK@mbakerintl.com 9 PM Initial C_&. Date: i��' EXHIBIT A TASKS TO BE PERFORMED Michael Baker INTERNATIONAL January 10, 2017 Mr. Steve Charette, P.E City of Temecula 41000 Main Street Temecula, Ca 92590 We Make a Difference Subject: Proposal for Park and Ride Phase I & II — Plan Revisions and Construction Support Services Dear Mr. Charette: In response to your request for proposal, Michael Baker International (Consultant) is pleased to submit an estimate of cost to provide Engineering services required to facilitate the scope as follows on a "not to exceed" basis for the subject project: SCOPE OF WORK: TASK 1 BASE MAP PREPARATION Michael Baker shall utilize the Site Plan line work generated in Autocad format by the Client's previous engineer (by AAE Incorporated) to establish accurate CAD base maps, which shall be used in the preparation of the improvement drawings described within this contract. Scope includes calculation of all line work to assure correct geometry per the agencies' design guidelines. TASK 2 PLAN REVIEW, 3D SURFACE AND DESIGN CROSS SECTIONS Michael Baker shall provide review of the existing City approved improvement plans prepared by AAE Incorporated to verify design accuracy (e.g. elevation callouts vs. design contours), positive drainage, applicable standards, applicable construction notes and ADA compliance. Utilizing the recent field topographic survey by CALVADA Surveying, Inc. and proposed design elevations shown on plans, Michael Baker will prepare a 3D surface to generate street cross sections and verify cross fall and longitudinal slope. A 3D surface will be generated to aid in the development of design contours (at 1 -foot intervals) within the limits of proposed improvements for Vallejo Avenue and the Phase I and Phase II parking lots. After review of street cross sections and design contours, minor adjustments to proposed grades maybe necessary to improve proposed and/or existing conditions and incorporated into the final design. However extensive adjustments to the approved plans are not expected and not included in this task. If it is found that significant redesign is required it shall be performed on an hourly basis for an additional fee and compensation. Street cross sections will be developed for Vallejo Avenue for approximately 800 feet at 25 feet intervals. Note: Cross sections, 3D surface and Pedestrian Modifications (Task 7) will be compiled in an exhibit format and submitted to City for review and approval prior to initiating final engineering plan development. MBAKERINTL.COM 11 40810 County Center, Suite 2001 Temecula, CA 92591 Office: 951 676.8042 1 Fax: 951.676.7240 Mr. Steve Charette, P.E City of Temecula January 10, 2017 Page 2 TASK 3 VALLEJO AVE — HALF WIDTH STREET IMPROVEMENTS (17'133') Utilizing the approved City of Temecula Park & Ride Site Improvement Plan Phase I and Phase II (Temecula Parkway - PW -06-09) dated 4/28/2011 and prepared by AAE Incorporated, Consultant shall modify the approved design and provide new street designs and the appropriate details to construct half -width street improvements for Vallejo Avenue; the limits of street improvements shall be consistent with the approved plans and as described herein, but itis assumed that Consultant will hold and match the existing street centerline elevations and use as limits of street section's AC saw - cut, grind and overlay. Note that a 3D surface will be generated under a separate task, and that City shall provide minimum AC structural sections. For Vallejo Avenue, improvements will include a 17' paved road (centerline to curb face), 6 -inch AC dike, 4' DG sidewalk with 8' wide DG trail and 4' wide transition slope and 2' wide berm (3' high). One commercial driveway with two (2) entry driveway returns with ADA compliant ramps, these ramps will be concrete. The topographic field survey used under task 2 will also be used in the design development of proposed improvements. This scope assumes a plan view only design and part of the Final Grading, Paving and Drainage Plan consistent with previously approved plans, however a profile exhibit will be generated for City's review and reference. Also assumes City will provide any field and/or aerial topography in AutoCAD format. And that new design sheets will replace the previous approved plans unless directed otherwise by client. TASK 4 FINAL GRADING, PAVING AND DRAINAGE PLAN Michael Baker shall prepare a Final Grading, Paving and Drainage Plan for both phases I and II at a scale of 1" = 20' with approximately 1 Title and General notes sheet, 2 plan view sheets and 2 detail sheets. Plans will be developed utilizing the engineered base map prepared under this contract, as well as any modifications made to the original design; and to the extent possible Baker utilize the site design features and controls from the originally approved plans. This scope assumes that all project site design modifications will be performed under separate task within this contract and therefore excluded from this scope. However notes and title sheet will be revised as needed to be consistent with final plans. The final grading, paving and drainage plan will show limits of walls, fencing and identify the cut/fill areas, parking lot grading, street paving, finish surface grades, storm drain system, drainage structures and drainage courses within project limits. Plan Submittal shall be based on 90% and Bid Ready. Note: This task assumes that City will provide a copy of the project specific WQMP, drainage report and site specific geotechnical report and/or preliminary structural pavement sections, and any screen and/or sound walls for the project will be based on/designed by Proto II. City shall provide limits of screen and/or sound wall. This scope excludes structural calculations and designs of retaining structures, and excludes lighting and electrical design. TASK 5 HORIZONTAL CONTROL PLAN Michael Baker shall use the base map prepared under this contract and prepare a horizontal control plan with approximately 2 sheets at a scale of 1" = 20' and in accordance with City requirements. This plan will be for both phases I and II. Plan Submittal shall be based on 90% and Bid Ready. 12 Mr. Steve Charette, P.E City of Temecula January 10, 2017 Page 3 TASK 6 DEMOLITION PLAN Michael Baker shall prepare a Demolition plan, assuming a single sheet to cover both phase I and II at a scale of 1" = 40'. It is understood that Michael Baker shall utilize Dokken Engineering's field data obtained from their field visit and reconnaissance, as well as utilize site survey data developed by Calvada Surveying (City retained survey) and/or contractor as -built provided by City (if available). Demolition items will include defective onsite concrete curbs for parking islands and lighting conduits, and storm drain piping. Michael Baker will perform a site visit (under separate task) to supplement and/or confirm above ground and visible existing conditions. Locating or potholing any underground facilities and/or structures is excluded from this scope. If it is found that drainage or lighting/electrical underground conduits needs to be located, it shall be provided under separate agreement or by others and/or City to retain a utility locator specialist. Plan Submittal shall be based on 90% and Bid Ready. TASK 7 PEDESTRIAN RAMP MODIFICATION Consultant shall prepare two preliminary alternatives for the pedestrian ramp at the intersection of Temecula Parkway and La Paz Road. One alternative will include an 8% ramp and associated handrails and the second alternative will include a ramp at less than 5% (hand rails not required).The preliminary alternatives will be presented to the City for review and selection of the preferred alternative. Consultant will include the design of the preferred ramp in the precise grading plan. TASK 8 FINAL LANDSCAPE AND IRRIGATION PLAN REVISIONS Consultant shall revise/modify the previously approved planting plans prepared by others, and the landscape and irrigation plans prepared by Michael Baker, specifications and estimates to reflect changes to the precise grading plan associated with new access ramp and parkway planter to accommodate new walls, and comply with the latest water conservation and RCWD requirements. It is assumed the City will submit plans to RCWD for review and approval. Plan Submittal shall be based on 90% and Bid Ready. Note: This task assumes that any screen and/or sound walls for the project will be coordinated with but designed by Proto II. Also that City will provide the previously approved Landscape planting and irrigation drawings in AutoCAD format that were developed by others. This drawing will be used to modify the planting plans consistent with the revised plans under this proposal. TASK 9 COST ESTIMATE Michael Baker shall prepare an Opinion of Probable Construction Costs (Engineer's Estimate) at each level of Improvement Plan submittal (90% and Bid Ready). This opinion shall be developed in the form of a Contract Item List (Bid Sheet) using the standard forms provided by the City of Temecula. Development of this opinion shall be accomplished through the use of CADD or other mathematic means and listed in detail for the City of Temecula to use during bidding and construction administration. The level of contingencies shall start at 25% and be adjusted as necessary during the plan development phase. The goal for the final opinion is a contingency of 10%. Michael Baker unit prices for these items shall be developed through judicial use of City of Temecula, Riverside County, and/or Caltrans recent and historical data. At the Michael Bakers option, local materials suppliers and contractors may be used to identify unit prices. 13 Mr. Steve Charette, P.E City of Temecula January 10, 2017 Page 4 Note: This task assumes that City will provide Consultant a copy of the Bid sheet and estimates previously obtained for this project. TASK 10 PROJECT MANAGEMENT, COORDINATION AND MEETING ATTENDANCE Michael Baker shall attend regularly scheduled meetings with City to review the progress of the work included within this contract, schedule updates, site visits and to provide consulting services. A maximum of 20 hours are included within this Scope of Work. Additional meetings and consulting services will be performed, if required, on an hourly basis for an additional fee. TASK 11 FINAL BID PHASE SUPPORT Michael Baker may be required to respond to questions concerning the plans, specifications, and estimates prior to bid opening and prepare contract addendum, if needed. A maximum of 16 hours are included within this Scope of Work. Additional consulting services will be performed, if required, on an hourly basis for an additional fee. TASK 12 CONSTRUCTION ASSISTANCE Baker shall provide construction assistance/support as requested by client: • Provide Field Walks, Inspection and/or Observations • Attend construction coordination meetings as requested by client. • Review and respond to contractor submittals for alternative "or equal" materials. • Review and respond to project related RFIs. It is our understanding that the duration of the construction activity for this project will be approximately 3 months. Therefore a maximum of 20 hours are included within this scope of work. Additional Construction support services will be performed, if required, on an hourly basis for an additional fee. TASK 13 ADDITIONAL DESIGN SERVICES EXPENDED Michael Baker has completed additional design services that City requested to support Dokken Engineering and contractor during construction. Tasks included revising Vallejo Avenue profile and generated street cross sections, revised parking lot access by incorporating an ADA ramp along La Paz and adjusting parking stalls. TASK 14 REIMBURSABLEjsi Consultant has included an allowance (estimated) for reimbursable expenses such as printing, reproductions, messenger services, mileage and other project -specific out-of-pocket expenses necessary to achieve preparation and processing of the tasks under this proposal. 14 Mr. Steve Charette, P.E City of Temecula January 10, 2017 Page 5 ADDITIONAL SERVICES: Services which are not specifically identified herein as services to be performed by Consultant or its consultants are considered "Additional Services" for purposes of this Agreement. City may request that Consultant perform services which are Additional Services. However, Consultant is not obligated to perform such Additional Services unless an amendment to this Agreement has been fully executed setting forth the scope, schedule and fee for such Additional Services. In the event Consultant performs Additional Services before receipt of such executed amendment, City acknowledges its obligation to pay for such services at Consultant's standard rates, within 30 days of receipt of Consultant's invoice. ASSUMPTIONS: • Owner will provide access to the Site. • Consultant can rely on existing plans and documents made available by the City and other agencies and utility companies, without independent verification. • City will provide approved plans, reference drawings and aerial topography in AutoCAD format to be used in design and delta revisions under this proposal. Boundary will be based on CAD base drawings and approved plans • Traffic Control Plans for construction will be submitted by the Contractor. Traffic control plans can be provided upon the City's request for a separate scope and fee. • Sufficient right-of-way exists for the proposed improvements and no additional right-of-way will be required. EXCLUSIONS: Consulting services relating to any of the following tasks may be completed by Consultant if negotiated under a separate contract for an additional fee; but are presently specifically excluded from this agreement: • Right-of-way exhibits, temporary construction easements, acquisition, negotiation and/or processing. • Structural analysis; • Special or non-standard retaining structures; • Parking lot lighting and electrical design; • Traffic Control Plans; • Design for areas outside limit of work; • Field Surveying Services; • Final Survey Monuments; • Construction Staking; • Drainage report(s) 15 Mr. Steve Charette, P.E City of Temecula January 10, 2017 Page 6 • NOI/SWPPP; • WQMP; • Landscaping Plans, only as amended under this agreement; • Environmental documentation/processing; • Hazardous wastes; • Potholing; • QSP Services; • Construction Management; • Geotechnical Services; • Any other services not specifically set forth in the above Scope of Services CLIENT RESPONSIBILITIES: • City shall pay all governmental fees and costs. • City shall provide AutoCAD project files that were previously approved • City to provide any and all indemnification, abatement, disposal or other actions required by local, state or federal law regarding hazardous materials. • City to provide all City record drawings/plans for existing roads within location of new improvement under this proposal. 16 Mr. Steve Charette, P.E City of Temecula January 10, 2017 Page 7 COMPENSATION: Consultant shall complete the work outlined above in accordance with the fee schedule identified below and shall invoice Client on a monthly basis based on the percentage of completion. ITEM WORK TASK FEE Task 1 *Base Map Preparation $2,500 Task 2 *Plan Review, 3D Surface and Design Cross Sections $6,200 Task 3 *Vallejo Ave — Half Width Street Improvements (17/33') $1,600 Task 4 *Final Grading, Paving and Drainage Plan $14,000 Task 5 *Horizontal Control Plan $3,500 Task 6 *Demolition Plan $3,600 Task 7 *Pedestrian Ramp Modification $3,500 Task 8 *Final Landscape and Irrigation Plan Revisions $6,000 Task 9 *Cost Estimate $2,000 Task 10 *Project Management, Coordination and Meeting Attendance $4,000 Task 11 *Final Bid Phase Support $3,200 Task 12 *Construction Assistance $4,000 Task 13 Additional Design Services Expended $2,316 Task 14 *Reimbursable(s) $1,000 GRAND TOTAL: $57,416 * The budget amount shown is for authorization purposes only. Should the total of the monthly billings reach eighty percent (80%) of the budget amount, Client and Consultant will review the status of the work to determine the need for an increase in the budget amount, and whether additional budget authorization to complete the project is appropriate. Progress billings will be forwarded to the Client on a monthly basis. These billings will include the fees earned for the billing period plus all direct costs advanced by Consultant. We appreciate the opportunity to be of service to you, and hope that this proposal meets with your approval. If you have any questions or require additional information please do not hesitate to call. Sincerely, Franci o Martinez Jr. P.E. QSD Department M nager— Land Development Civil Engineering H \pdala\145516Wdmin\Proposal\1 In Progress\Additional ServicesWWR 6 as new proposal 2\FM_Temecula_Park-Ride prp002.doc 17 EXHIBIT B FEE SUMMARY MICHAEL BAKER INTERNATIONAL, INC. HOURLY RATE SCHEDULE Effective January 2016 through December 2016 OFFICE PERSONNEL $/ Hour Senior Principal $285.00 Principal 260.00 Project Director 245.00 Program Manager 235.00 Senior Project Manager 225.00 Project Manager 208.00 Structural Engineer 205.00 Technical Manager 195.00 Senior Engineer 178.00 Senior Planner 175.00 Electrical Engineer 170.00 Biologist 168.00 Landscape Architect 164.00 Senior GIS Analyst 156.00 Project Engineer 155.00 Project Planner 155.00 Environmental Specialist 152.00 Design Engineer/Senior Designer/Survey Analyst 150.00 GIS Analyst 135.00 Designer/Planner 130.00 Project Coordinator 125.00 Graphic Artist 110.00 Environmental Analyst/Staff Planner 112.00 Design Technician 112.00 Assistant Engineer/Planner 104.00 Permit Processor 93.00 Engineering Aid/Planning Aid 84.00 Office Support/ Clerical 70.00 SURVEY PERSONNEL 2 -Person Survey Crew $265.00 1 -Person Survey Crew 170.00 Licensed Surveyor 188.00 Field Supervisor 178.00 CONSTRUCTION MANAGEMENT PERSONNEL Principal Construction Manager $235.00 Construction Manager 215.00 Contract Manager 180.00 Resident Engineer 180.00 Construction Inspector (Prevailing Wage) 175.00 Construction Inspector (Non -Prevailing Wage) 145.00 Field Office Engineer 120.00 Construction Technician 97.00 Contract Support 80.00 Note: Blueprinting, reproduction, messenger service and other direct expenses will be charged as an additional cost plus 15%. A Sub -consultant Management Fee of fifteen -percent (15%) will be added to the direct cost of all sub -consultant services to provide for the cost of administration, sub -consultant consultation and insurance. 12 19 TEMECULA PARK AND RIDE Infrastructure / Other Projects Location Aerial Data - March 2010 0 150 300 Feet 600 116 2018-19 2016-17 Alba (1Tho Heart of Southorn Cak.fwnia Were Country Capital Improvement Program Fiscal Years 2016-20 TEMECULA PARK AND RIDE Infrastructure / Other Project Project Description: This project includes the acquisition of property, design, and construction of a Park and Ride facility in the vicinity of Temecula Parkway and La Paz Street. The Furniture, Fixtures and Equipment (FF&E) covers camera system infrastructure, access control, and other identified Information Technology needs. Benefit / Core Value: This project enables and encourages Temecula residents to carpool when commuting. In addition, this project satisfies the City's Core Value of A Sustainable City. Project Status: The design and environmental document are being updated to accommodate City requests and the use of the federal CMAQ funds. This project has been designated as a Transportation Control Measure (TCM) project pursuant to the Air Quality Management Plan/State Implementation Plan (AQMP/SIP) to meet air quality conformity. The 2012 Regional Transportation Plan (RTP) and the current 2011 Federal Transportation Improvement Program (FTIP) identifies the Temecula Park and Ride as a committed (programmed in the first two years of the FTIP) TCM project. Once a TCM is committed for implementation in the first two years of the FTIP, the committed TCM must be operational by the completion date in the prevailing FTIP or FTIP amendment. The Temecula Park and Ride must be completed by December 31, 2015 in order to fulfill these requirements. Department: Public Works - Account No. 210.165.747 Level: I Project Cost: Prior Years Actual Expenditures FYE 2015 Carryover Budget 2015-16 Adopted Appropriation 2016-17 Projected 2017-18 2018-19 2019-20 Total Project Projected Projected Projected Cost Administration $ 92,465 $ 186,415 $ 25,000 $ 303,880 Acquisition $ 187,530 $ 187,530 Construction $ 319,450 $ 1,578,000 $ 250,000 $ 1,828,000 Construction $ 1,300,750 $ 1,300,750 Engineering $ 64,000 $ 25,000 $ 89,000 Design/Environmental $ 138,683 $ 37,000 $ 300,000 $ - $ - $ - $ - $ 175,683 Fixtures/Furn/Equip $ 100,000 $ 100,000 MSHCP $ 80,000 $ 80,000 Totals $ 418,678 $ 2,045,415 $ 300,000 $ - $ - $ - $ - $ 2,764,093 Source of Funds: Prior Years Actual Expenditures FYE 2015 Carryover Budget 2015-16 Adopted Appropriation 2016-17 Projected 2017-18 2018-19 2019-20 Total Project Projected Projected Projected Cost AB 2766 $ 99,228 $ 644,665 $ 120,322 $ 864,215 General Fund Contributions $ 319,450 $ 179,678 $ 499,128 *CMAQ $ 1,300,750 $ 1,300,750 DIF (Police Facilities) $ 100,000 $ 100,000 Total Funding: $ 418,678 $ 2,045,415 $ 300,000 $ - $ - $ - $ - $ 2,764,093 Future Operation & Maintenance Costs: 2015-16 `Congestion Mitigation and Air Quality (CMAQ) Funds approved by the RCTC on January 8, 2014. 117 2017-18 2019-20 Item No. 9 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Summarily Vacate Restricted Access Along a Portion of Campanula Way at Parcel 1 of Parcel Map 36461 PREPARED BY: Mayra De La Torre, Senior Engineer Steve Charette, Associate Engineer RECOMMENDATION: That the City Council adopt a resolution entitled: RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA TO SUMMARILY VACATE RESTRICTED ACCESS ALONG A PORTION OF CAMPANULA WAY AT PARCEL 1 OF PARCEL MAP 36461 PURSUANT TO THE AUTHORITY PROVIDED BY CHAPTER 4, PART 3, DIVISION 9 OF THE STREETS AND HIGHWAY CODE BACKGROUND: In September 2016, the property owner of Parcel Map No. 36461 filed a Summary Vacation application with the City for the purpose of vacating existing restricted access rights on Campanula Way. Pursuant to Parcel Map No. 36461 recorded on May 7, 2013, the abutter's access rights to Campanula Way were restricted from Parcel 1 of Parcel Map No. 36461 excepting one 40 -foot wide access opening. The subject vacation will remove the restricted access along Campanula Way and thereby allow relocation of the existing access opening to a new location. The new location will accommodate a future onsite building configuration and traffic circulation for a proposed health care center. Final driveway locations shall be pursuant to City standards and approval by the City Engineer. Vacation of the existing restricted access on Campanula Way is permitted since Campanula Way is classified as a non -circulation roadway within the General Plan. The subject vacation will not affect current access rights to the existing Parcel 1 of Parcel Map 36461 abutting Campanula Way nor will any utilities will be affected by this vacation. Staff, therefore, recommends that the City Council adopt a Resolution approving the proposed summary vacation, pursuant to Chapter 4, Part 3, Division 9 of the Streets and Highway Code. FISCAL IMPACT: None ATTACHMENT: Resolution RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA TO SUMMARILY VACATE RESTRICTED ACCESS ALONG A PORTION OF CAMPANULA WAY AT PARCEL 1 OF PARCEL MAP 36461 PURSUANT TO THE AUTHORITY PROVIDED BY CHAPTER 4, PART 3, DIVISION 9 OF THE STREETS AND HIGHWAY CODE THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: Section 1. The City Council of the City of Temecula does hereby find, determine and declares as follows: A. The Owner's Statement of Parcel Map No. 36461 provides that the Owner of Parcel 1 will have no rights of access to Campanula Way, excepting one 40 -foot wide access opening. B. In September 2016, the Owner of Parcel Map No. 36461 (hereinafter "Owner") filed a Summary Vacation application with the City for the purpose of vacating existing restricted access rights on Campanula Way. Pursuant to Parcel Map No. 36461 recorded on May 7, 2013, the abutter's access rights to Campanula Way were restricted from Parcel 1 excepting one 40 -foot wide access opening. C. The Owner now desires to vacate the restricted access along Campanula Way as shown on Parcel Map No. 36461 to allow for relocation of the existing access opening to a new location that accommodates future onsite building configuration and traffic circulation. Final driveway locations shall be pursuant to City standards and approval by the City Engineer. D. The City Council desires to effectuate the intention of the Owner by summarily vacating the existing restricted access along a portion of the westerly side of Campanula Way fronting Parcel 1 of Parcel Map No. 36461 and as described on Exhibits "A" and "B", attached hereto. E. This vacation is made pursuant to Section 8330 to 8336 of the Streets and Highways Code. F. This vacation will not change current access rights to Parcels 1 of Parcel Map No. 36461 abutting Campanula Road. G. There are no public utility easements or facilities which will be affected by this vacation. Section 2. The restricted access along a portion of the westerly side of Campanula Way on Parcels 1 of Parcel Map 36461, as described on Exhibit "A" and "B", is hereby vacated and shall no longer constitute an easement or right of way or other interest in real property of the city of Temecula and shall revert to the Owner. Section 3. The City Clerk shall certify the adoption of this resolution and shall cause a certified copy of the Resolution to be recorded pursuant to Streets and Highway Code Section 8336. PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula this 24th day of January, 2017. Maryann Edwards, Mayor ATTEST: Randi Johl, City Clerk [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing Resolution No. 17- was duly and regularly adopted by the City Council of the City of Temecula at a meeting thereof held on the 24th day of January, 2017, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: Randi Johl, City Clerk EXHIBIT "A" LEGAL DESCRIPTION SUMMARY VACATION OF RESTRICTED ACCESS — CAMPANULA WAY The City of Temecula hereby grants all access rights to grantee, appurtenant to grantee's property, in and to Campanula Way over and across the courses described as follows: That certain strip of land situated in the City of Temecula, County of Riverside, State of California, being Parcel 1 of Parcel Map No. 36461, as shown on the map filed in Book 235, Pages 52 through 54, inclusive, of Parcel Maps in the Office of the County Recorder of said Riverside County, more particularly described as follows: BEGINNING at the northerly terminus of that certain course shown as "N32°34'25"W 39.72" on said map for a portion of the northeasterly line of said Parcel 1; Thence along said northeasterly line South 32°34'25" East 39.72 feet to the beginning of a tangent curve, concave northeasterly and having a radius of 1028.00 feet; Thence along said curve and continuing along said northeasterly line, southeasterly 538.48 feet through a central angle of 30°00'44" to the POINT OF TERMINATION. EXHIBIT "B" attached hereto and by this reference made a part hereof. This description was prepared by me or under my direction. oA3/2c,/ 7 Thomas E. Verloop, 'LS 5348 Date 1 of 1 H:Ipdata11433801Admin\Legals11433801g1004 access vacation.doc EXHIBIT "B" SUMMARY VACATION OF RESTRICTED ACCESS (1) 0 W W CL N - 0 J UNF- v - DE PORTdLA RD Or) (D z uj 41c U W U N 0 M J 0 P.O.B. 53233952 CITY OF TEMECULA PALOMA DEL SOL PARK INST. NO. 119999 O.R. REC. 3-22-1994 G 17 �O 2 C/L 40' ACCESS OPENING TO BE REMOVED PARCEL 1 P.M. NO. 36461 P.M.B. 235/52-54 PM 28384 PMB. 190/43-45 PARCEL 2 Michael Baker 40810 COUNTY CENTER DR., SUITE 200 TEMECULA, CA 92591 PHONE: (951) 676-8042 N TE R N AT I 0 N A L MBAKERINTL.COM O 170 LP PM 29431 PMB. 195/94-99 PARCEL 3 LEGEND P.O.C. - POINT OF COMMENCEMENT P.O.T. - POINT OF TERMINATION P.M.B. - PARCEL MAP BOOK - RESTRICTED ACCESS SHEET 1 OF 1 JANUARY 03, 2017 SCALE 1"=120' JOB NO. 143380 Item No. 10 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Accept the Improvements and File the Notice of Completion for the Main Street Bridge Over Murrieta Creek (Replacement), PW03-05 PREPARED BY: Amer Attar, Principal Engineer RECOMMENDATION: That the City Council: 1. Accept the Improvements for the Main Street Bridge Over Murrieta Creek (Replacement), PW03-05, as complete; 2. Direct the City Clerk to File and Record the Notice of Completion. BACKGROUND: On January 8, 2013, the City Council awarded a construction Contract to Granite Construction Company, in the amount of $4,770,079, and authorized the City Manager to approve change orders not to exceed a 10% contingency of $477,007.90. Granite Construction Company has completed the improvements in accordance with the plans and specifications and to the satisfaction of the Director of Public Works. All improvements were warranted under the maintenance bond until May 8, 2015, which was one year from the date the City received beneficial use of the facility. The retention for this project was released previously pursuant to Public Contract Code Section 7107. As reported by the City Attorney at the open session of the December 13, 2016 City Council meeting, in Closed Session, the City Council approved a settlement with Granite Construction Company in the amount of $395,000 to be reimbursed by the California Department of Transportation (Caltrans), the administrator of the federal HPB funds. Furthermore, the City Council authorized the City Manager to execute the change order associated with the settlement and the agreement that implements this settlement. The Main Street Bridge Over Murrieta Creek (Replacement) Project was identified in the City's Capital Improvement Program, Fiscal Years 2014-18, and was funded with Capital Projects Reserves, Development Impact Fees (DIF), Streets, and Federal Highway Bridge Program (HBP) funds. The original construction contract amount was $4,770,079. The executed change orders for unforseen condition and added work requested by the City, including the settlement amount and contract items over -run totalled $1,299,656.97. This brings the total construction cost to $6,069,735.97 FISCAL IMPACT: There is no fiscal impact as a result of the acceptance of the project and filing the Notice of Completion. ATTACHMENT: Notice of Completion RECORDING REQUESTED BY AND RETURN TO: CITY CLERK CITY OF TEMECULA 41000 Main Street Temecula, CA 92590 EXEMPT FROM RECORDER'S FEES Pursuant to Government Code Sections 6103 and 27383 NOTICE OF COMPLETION NOTICE IS HEREBY GIVEN THAT: 1. The City of Temecula is the owner of the property hereinafter described. 2. The full address of the City of Temecula is 41000 Main Street, Temecula, California 92590. 3. The Nature of Interest is a Contract which was awarded by the City of Temecula to Granite Construction Company, 440 S. Melrose Drive, Suite 200, California 92081 to perform the following work of improvement: MAIN STREET BRIDGE OVER MURRIETA CREEK (REPLACEMENT) PROJECT NO. PW03-05 4. Said work was completed by said company according to plans and specifications and to the satisfaction of the Director of Public Works of the City of Temecula and that said work was accepted by the City Council of the City of Temecula at a regular meeting thereof held on January 24, 2017. 5. The property on which said work of improvement was completed is in the City of Temecula, County of Riverside, State of California, and is described as follows: MAIN STREET BRIDGE OVER MURRIETA CREEK (REPLACEMENT) PROJECT NO. PW03-05 6. The location of said property is: Main Street, Over Murrieta Creek between Old Town Front Street and Pujol Street, Temecula, California. Dated at Temecula, California, this 24th day of January, 2017. City of Temecula Randi Johl, City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, City Clerk of the City of Temecula, California, do hereby certify under penalty of perjury, that the foregoing NOTICE OF COMPLETION is true and correct, and that said NOTICE OF COMPLETION was duly and regularly ordered to be recorded in the Office of the County Recorder of Riverside by said City Council. Dated at Temecula, California, this 24th day of January, 2017. City of Temecula Randi Johl, City Clerk Item No. 11 TO: FROM: DATE: SUBJECT: Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT City Manager/City Council Patrick Thomas, Interim Public Works Director January 24, 2017 Accept the Improvements and File the Notice of Completion for the Old Town Temecula Community Theater Remediation, PW12-04 PREPARED BY: RECOMMENDATION: Amer Attar, Principal Engineer Bill McAteer, Construction Manager That the City Council: 1. Accept the Improvements for the Old Town Temecula Community Theater Remediation, PW12-04, as complete; 2. Direct the City Clerk to File and Record the Notice of Completion. BACKGROUND: On December 9, 2014, the City Council awarded a construction contract to California Averland Construction, Inc., in the amount of $2,349,000, and authorized the City Manager to approve change orders not to exceed the contingency amount of $469,800, which is equal to 20% of the contract amount. California Averland Construction, Inc. has completed the work in accordance with the plans and specifications and to the satisfaction of the Director of Public Works. All improvements were warranted under the Maintenance Bond until September 1, 2016, which was one year from the date the City received beneficial use of the facility. The retention for this project was released previously pursuant to Public Contract Code Section 7107. Old Town Temecula Community Theater Rehabilitation was identified in the City's Capital Improvement Program, Fiscal Years 2015-19, and was funded with Capital Project Reserves (litigation settlement funds) and Development Impact Fees (DIF), Police Facilities. The original construction contract amount was $2,349,000. The City executed numerous change orders for unforeseen conditions and added work requested by the City that totaled $348,791.58. These changes resulted in a total construction cost of $2,697,791.58. FISCAL IMPACT: There is no fiscal impact as a result of the acceptance of the project and filing the Notice of Completion. ATTACHMENTS: 1. Notice of Completion 2. Contractor's Affidavit and Final Release RECORDING REQUESTED BY AND RETURN TO: CITY CLERK CITY OF TEMECULA 41000 Main Street Temecula, CA 92590 EXEMPT FROM RECORDER'S FEES Pursuant to Government Code Sections 6103 and 27383 NOTICE OF COMPLETION NOTICE IS HEREBY GIVEN THAT: 1. The City of Temecula is the owner of the property hereinafter described. 2. The full address of the City of Temecula is 41000 Main Street, Temecula, California 92590. 3. The Nature of Interest is a Contract which was awarded by the City of Temecula to California Averland Construction, Inc., to perform the following work of improvement: Old Town Temecula Theater Remediation Project No. PW12-04 Said work was completed by said company according to plans and specifications and to the satisfaction of the Director of Public Works of the City of Temecula and that said work was accepted by the City Council of the City of Temecula at a regular meeting thereof held on January 24, 2017. 5. The property on which said work of improvement was completed is in the City of Temecula, County of Riverside, State of California, and is described as follows: Old Town Temecula Theater Remediation Project No. PW12-04 The location of said property is: 42501, Main Street, Temecula, California. Dated at Temecula, California, this 24th day of January 2017 City of Temecula Randi Johl, City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, City Clerk of the City of Temecula, California, do hereby certify under penalty of perjury, that the foregoing NOTICE OF COMPLETION is true and correct, and that said NOTICE OF COMPLETION was duly and regularly ordered to be recorded in the Office of the County Recorder of Riverside by said City Council. Dated at Temecula, California, this 24th day of January 2017. City of Temecula Randi Johl, City Clerk CITY OF TEMECULA, DEPARTMENT OF PUBLIC WORKS CONTRACTOR'S AFFIDAVIT AND FINAL RELEASE OLD TOWN TEMECULA COMMUNITY THEATER REMEDIATION PROJECT NO. PW12-04 This is to certify that it ,lFcvi-ti a pvE g o C Q01 �2Uc-k bO ,' (hereinafter the "Contractor") declares to the City of Temecula, under oath, that he/she/it has paid in full for all materials, supplies, labor, services, tools, equipment, and all other bills contracted for by the Contractor or by any of the Contractor's agents, employees or subcontractors used or in contribution to the execution of its contract with the City of Temecula, with regard to the building, erection, construction, or repair of that certain work of improvement known as OLD TOWN COMMUNITY THEATER REMEDIATION, PROJECT NO. PW12-04, situated in the City of Temecula, State of California, more particularly described as follows: 42 QS I M+ tv S (kJ cA 9 2S 9i U ADDRESS OR DESCRIBE LOCATION OWORK The Contractor declares that it knows of no unpaid debts or claims arising out of said Contract which would constitute grounds for any third party to claim a Stop Notice against of any unpaid sums owing to the Contractor. Further, in connection with the final payment of the Contract, the Contractor hereby disputes the following amounts: Description Dollar Amount to Dispute Pursuant to Public Contract Code §7100, the Contractor does hereby fully release and acquit the City of Temecula and all agents and employees of the City, and each of them, from any and all claims, debts, demands, or cause of action which exist or might exist in favor of the Contractor by reason of payment by the City of Temecula of any contract amount which the Contractor has not disputed above. Dated: 6 / 1`4 tZ 01( RELEASE G CA ° ?F c M i fteiretZ Print Name and itle R-1 Item No. 12 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick A. Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Approve Plans and Specifications, and Authorize the Solicitation of Construction Bids for Pavement Rehabilitation Program — Margarita Road (Rancho California Road to Temecula Parkway), PW12-11 PREPARED BY: Amer Attar, Principal Engineer Bill McAteer, Construction Manager RECOMMENDATION: That the City Council: 1. Approve the Plans and Specifications, and authorize the Department of Public Works to solicit construction bids for the Pavement Rehabilitation Program - Margarita Road (Rancho California Road to Temecula Parkway), PW12-11; 2. Make a finding that this project is exempt from CEQA per Section 15301, Class 1(c) of the CEQA Guidelines. BACKGROUND: As part of the Capital Improvement Program and Budget for Fiscal Year 2017-21, the City Council approved appropriations to support a Citywide pavement rehabilitation program that would implement the recommended maintenance activities identified in the previously completed Pavement Management System (PMS). The PMS prioritized the areas in need of repairs and identified the recommended method for these repairs. Using the PMS, staff selected several locations throughout the City based on its ranking on the PMS report, economy of scale, and the available budget. Margarita Road, between Rancho California Road and Temecula Parkway, was selected for rehabilitation at this time. Plans and specifications are complete and the project is ready to be advertised for construction bids. The contract documents are available for review in the office of the Director of Public Works. The Engineer's Construction Estimate is $3,400,000. FISCAL IMPACT: The Pavement Rehabilitation Program - Citywide is identified in the City's Capital Improvement Program (CIP) budget for Fiscal Years 2017-21, and is funded with Measure A and General Fund Contributions. Adequate funds are available in the project accounts to construct the project. ATTACHMENTS: 1. Project Description 2. Project Location tJ;(6141:Mkr1 Capital Improvement Program Fiscal Years 2017-21 PAVEMENT REHABILITATION PROGRAM - CITYWIDE Circulation Project Street Location Old Town Front Street - PW 12-14 (Temecula Parkway to First Street) Overland Drive - PW 12-15 (Commerce Center Drive to Jefferson Avenue) Temecula Parkway - PW 12-13 (Bedford Court to Pechanga Parkway Margarita Road - PW12-11 (Rancho California Road to Temecula Parkway) Anticipated Year of Construction/Estimated Project Cost 2015-16 $790,000 2016-17 $450,000 2016-17 $555,000 2016-17 $4,000,000 $5,005,000 Funding Source General Fund Contributions Measure A General Fund Contributions Measure A General Fund Contributions Measure A General Fund Contributions Measure A To Be Determined To Be Determined 2017-18 $1,000,000 2018-19 2019-20 -201 0 - General Fund Contributions Measure A General Fund Contributions Measure A Fiscal Years 2017-21 Capital Improvement Program 68 Capital improvement Program Fiscal Years 2017-21 PAVEMENT REHABILITATION PROGRAM - CITYWIDE Circulation Project Project Description: This project includes the environmental processing, design, construction of pavement rehabilitation, and reconstruction of major streets as recommended in the Pavement Management System. Benefit / Core Value: This project improves pavement conditions so that the transportation needs of the public, business industry, and government can be met. In addition, this project satisfies the City's Core Value of Transportation Mobility and Connectivity. Project Status: A priority list of rehabilitation projects has been developed. Installations are completed on an ongoing basis. Department: Public Works - Account No. 210.165.655 Level: I Project Cost: Prior Years FYE 2016 2016-17 Actual Carryover Adopted 2017-18 Expenditures Budget Appropriation Projected 2018-19 Projected 2019-20 Projected 2020.21 Projected and Future To1at Project Administration $ 1,838,095 $ 105,863 $ 160,000 $ 160.000 $ 160,000 $ 160000 $ 160,000 $ 2.743.955 Construction Construction $ 12,312,143 $3,654,849 $ 1,256,304 $ 831,219 $ 913,092 $ 998,973 $1,029,038 $ 20,995,618 Engineering $ 150,882 $ 253.877 $ 150,000 $ 150,000 $ 150,000 $ 150.000 $ 150,000 $ 1.154,759 Design $ 628,925 $ 243,263 $ 230,000 51,141,219 $1,223,092 $1.308,973 $1,339,038 $ 1.102,168 Totals $ 14,930,045 $4,257,852 $ 1,796,304 $1.141.219' $1,223,092 $1,305,9733 $1,339.038 $ 25.996,523 Source of Funds: Prior Years FYE 2016 2016-17 Actual Carryover Adopted 2017.18 Expenditures Budget ApproprlatIon Protected 2018-19 Prolecte+ 2019-20 2020-21 Total Project Prole General Fund Contributions $ 4,622,318 $1,050„000 S 5.672,318 Measure A $ 10,307,727 $3,207,852 $ 1,796,304 $1,141.219 $1,223.092 $1.308,973 $1,339,038 S 20,324,205 Total Funding: $ 14.930.045 54,257.852 $ 1,796,304 51,141,219 $1,223,092 $1.308,973 $1,339,038 5 25,996.523 Future Operation & Maintenance Costs: 2016-17 2017-18 2018.19 2019-20 2020-21 NOTE: General Fund Contributions include 1.5 million for Pavement Management Program Approved at Midyear on 2124/2015. Fiscal Years 2017-21 Capital Improvement Program 69 PW 12-11 Pavement Rehabilitation Program - Margarita Road (Rancho California Rd. to Temecula Pky.) 0 625 1,250 2,500 Feet 1 Inch = 1,250 feet Item No. 13 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick A. Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Approve Plans and Specifications, and Authorize the Solicitation of Construction Bids for Butterfield Stage Road at La Serena Way — Traffic Signal Installation, PW 15-11 TS PREPARED BY: Amer Attar, Principal Engineer Avlin R. Odviar, Senior Engineer RECOMMENDATION: That the City Council approve the Plans and Specifications, and authorize the Department of Public Works to solicit Construction Bids for the Butterfield Stage Road at La Serena — Traffic Signal Installation, PW15-11TS (Project). BACKGROUND: On May 13, 2008, City Council directed staff to proceed with completing improvements conditioned upon the Roripaugh Ranch Development. The improvements consisted primarily of arterial roadways: (1) Murrieta Hot Springs Road from Pourroy Road to Butterfield Stage Road and (2) Butterfield Stage Road from Murrieta Hot Springs Road to Rancho California Road. In July of 2009 the City, acting as the Temecula Public Financing Authority, and the Developer of Roripaugh Ranch entered an Agreement allowing the City to take over construction of the aforementioned public improvements and establishing funding of the work through Community Facilities District No. 03-02 bond proceeds. The improvements have been segmented into three phases. Construction of Phase I, consisting Murrieta Hot Springs Road from Pourroy Road to Butterfield Stage Road and Butterfield Stage Road from Murrieta Hot Springs Road to Calle Chapos, was completed in 2012. Construction of Phase 11, consisting of Butterfield Stage Road from Calle Chapos to La Serena Way, was completed in 2014. Design of Phase 111, consisting of Butterfield Stage Road from La Serena Way to Rancho California Road, is nearing completion. The intersection of Butterfield Stage Road at La Serena Way is located at the border of Phases 11 and 111. Installation of traffic signals is readily achievable without necessitating reconstruction of improvements during Phase 111. Installation of the traffic signal will provide safety improvements with independent utility. The plans and specifications for the traffic signal installation at the intersection of Butterfield Stage Road at La Serena Way are complete and the project is ready to be advertised for construction bids. The contract documents are available for review in the office of the Interim Director of Public Works. The estimated construction cost for this project is $315,000 and the number of allowable working days is 45. FISCAL IMPACT: This project is funded with Roripaugh Ranch Community Facility District No. 03-02 bond proceeds. Adequate funds are available in the project accounts. ATTACHMENTS: 1. Project Description 2. Project Location 2019-20 $ 20,271 2017-18 $ 19,484 Capital Improvement Program Fiscal Years 2017-21 BUTTERFIELD STAGE ROAD EXTENSION Circulation Project Project Description: This project includes the complete design and construction of four lanes on Butterfield Stage Road (from Rancho California Road to Murrieta Hot Springs Road), four lanes on Murrieta Hot Springs Road (from Butterfield Stage Road to the City limits), and two lanes on Calle Chapos (from Butterfield Stage Road to Walcott Road), totaling approximately 3.2 miles of road. Benefit / Core Value: This project improves traffic circulation by providing a crucial north and south arterial road on the eastern side of the City. In addition, this project satisfies the City's Core Values of Transportation Mobility and Connectivity. Project Status: Phase I and Phase II of this project (Murrieta Hot Springs Road to La Serene) have been completed. Phase III (La Serena to Rancho California Road) is scheduled to be completed during Fiscal Year 2016-17. Department: Public Works - Account No. 210.165.723 PW09-02 Level: I Project Cost: Prior Years Actual Expenditures FYE 2016 Carryover Budget 2016-17 Adopted 2017-18 Appropriation Projected 2018-19 Projected 2019-20 Projected 2020-21 Projected and Future Years Total Project Cost Administration $ 1,963,522 $ 200,000 $ 13,000 $ 2,176,522 Acquisition $15,006,728 $ 2,051,322 $ 17,058,050 Construction $13,027,660 $ 9,871,740 $ 110,200 $ 23, 009, 600 Construction S 590,028 $ 590,028 Engineering $ 409,867 $ 29,132 $ 438,999 Design/Environmental $ 608,379 $ 280,525 $ 888,904 Utilities $ 86 $ 914 $ 1,000 Totals $31,016,242 $12,433,633 $ 123,200 $ - $ - $ - $ - $ 43,573,075 Source of Funds: Prior Years Actual Expenditures FYE 2016 Carryover Budget 2016-17 Adopted 2017-18 2018-19 2019-20 2020-21 Appropriation Projected Projected Projected Projected Total Project Cost CFD (Roripaugh Ranch) Reimbursement/Other r $29,555,616 $11,672,921 $ 41,228,537 (EMWD) $ 10,965 $ 10,965 Reimbursement/Other (RCWD) S 590,028 $ 590,028 Reimbursement/Other (Shea Homes) $ 3,124 $ 170,684 $ 173,808 Reimbursement/Other (SCE) $ 8,537 $ 8,537 Reimbursement/Other (County of Riverside) $ 123,200 $ 123,200 TUMF $ 1,438,000 $ 1,438,000 Total Funding: $31,016,242 $12,433,633 $ 123,200 $ - $ - $ - $ - $ 43,573,075 Future Operation & Maintenance Costs: 2016-17 $ 19,102 2018-19 $ 19,874 2020-21 $ 20,677 Note: Assumes that only minor right-of-way acquisitions would be necessary and that all major right-of-way dedications are voluntary. Fiscal Years 2017-21 Capital Improvement Program 37 BUTTERFIELD STAGE ROAD EXTENSION Circulation Project Location CAMINO CIELO CALLE CHAPOS SOUTH LOOP RD LA SERENA WY Aerial Data - March 2010 0 512.5 1,025 Feet 2,050 36 TEMECULA COMMUNITY SERVICES DISTRICT CONSENT Item No. 14 ACTION MINUTES January 10, 2017 City Council Chambers, 41000 Main Street, Temecula, California TEMECULA COMMUNITY SERVICES DISTRICT MEETING The Temecula Community Services District meeting convened at 7:36 PM CALL TO ORDER: President Jeff Comerchero ROLL CALL: DIRECTORS: Edwards, Naggar, Rahn, Stewart, Comerchero CSD PUBLIC COMMENTS (None) CSD CONSENT CALENDAR 10 Approve the Action Minutes of December 13, 2016 - Approved Staff Recommendation (5-0) Director Edwards made the motion; it was seconded by Director Rahn; and electronic vote reflected approval by Directors Edwards, Naggar, Rahn, Stewart and Comerchero. RECOMMENDATION: 10.1 Approve the action minutes and of December 13, 2016; 10.2 Approve the Joint Meeting of the City Council/Temecula Community Services District action minutes of December 13, 2016. CSD DIRECTOR OF COMMUNITY SERVICES REPORT CSD GENERAL MANAGER REPORT CSD BOARD OF DIRECTORS REPORTS CSD ADJOURNMENT At 7:40 PM, the Community Services District meeting was formally adjourned to Tuesday, January 24, 2017, 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: Randi Johl, Secretary [SEAL] CSD Action Minutes 011017 1 SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY CONSENT Item No. 15 Approvals City Attorney Finance Director City Manager Mr - THE SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY AGENDA REPORT TO: Executive Director/Board of Directors FROM: Luke Watson, Director of Community Development DATE: January 24, 2017 SUBJECT: Approve Recognized Obligation Payment Schedule for the Period of July 1, 2017 through June 30, 2018 (ROPS 17-18) PREPARED BY: Lynn Kelly -Lehner, Principal Management Analyst RECOMMENDATION: That the Board of Directors adopt a resolution entitled: RESOLUTION NO. SARDA 17- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY APPROVING A RECOGNIZED OBLIGATION PAYMENT SCHEDULE FOR THE PERIOD OF JULY 1, 2017 THROUGH JUNE 30, 2018 PURSUANT TO HEALTH AND SAFETY CODE SECTION 34177 AND TAKING CERTAIN ACTIONS IN CONNECTION THEREWITH BACKGROUND: Pursuant to Health and Safety Code Section 34177(1)(2)(B), successor agencies are required to prepare, in advance, a Recognized Obligation Payment Schedule (ROPS) that is forward looking for twelve months, covering the period of July 1, 2017 through June 30, 2018. The ROPS lists all of the Successor Agency's financial obligations. The Successor Agency is required to submit this ROPS to the State Department of Finance and the County Auditor Controller no later than February 1, 2017. Preparation of a Recognized Obligation Payment Schedule is in furtherance of allowing the Successor Agency to pay enforceable obligations of the former Redevelopment Agency. Recent legislation (SB 107) directed cities to prepare only one ROPS per year, where previously cities prepared two ROPS per budget cycle. FISCAL IMPACT: Adoption of the proposed resolution will enable the Successor Agency to fulfill its enforceable obligations. In accordance with Health and Safety Code Section 34173(e), the liability of the Successor Agency, acting pursuant to the powers granted under Part 1.85, shall be limited to the extent of, and payable solely from, the total sum of property tax revenues it receives pursuant to Part 1.85 and the value of assets transferred to it as a successor agency for a dissolved redevelopment agency. The debts, assets, liabilities, and obligations of the Successor Agency shall be solely the debts, assets, liabilities, and obligations of the Successor Agency and not of the City. ATTACHMENTS: 1. Resolution 2. Exhibit A — Recognized Obligations Payment Schedule for the period of July 1, 2017 through June 30, 2018 (ROPS 17-18) RESOLUTION NO. SARDA 17- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY APPROVING A RECOGNIZED OBLIGATION PAYMENT SCHEDULE FOR THE PERIOD OF JULY 1, 2017 THROUGH JUNE 30, 2018 PURSUANT TO HEALTH AND SAFETY CODE SECTION 34177 AND TAKING CERTAIN ACTIONS IN CONNECTION THEREWITH THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY DOES HEREBY RESOLVE AS FOLLOWS: Section 1. Recitals. The Board of Directors of the Successor Agency to the Temecula Redevelopment Agency does hereby find, determine and declare that: A. The Redevelopment Agency of the City of Temecula was a redevelopment agency in the City of Temecula, duly created pursuant to the Community Redevelopment Law, Part 1, commencing with Section 33000, of Division 24 of the California Health and Safety Code (hereafter the "Temecula Redevelopment Agency"). On June 12, 1988, the Board of Supervisors of the County of Riverside adopted Ordinance No. 658 adopting and approving the "Redevelopment Plan for Riverside County Redevelopment Project No. 1988-1." On December 1, 1989, the City of Temecula was incorporated. The boundaries of the Project Area described in the Plan are entirely within the boundaries of the City of Temecula. On April 9, 1991, the City Council of the City of Temecula adopted Ordinances Nos. 91-08, 91-11, 91-14, and 91- 15 establishing the Redevelopment Agency of the City of Temecula and transferring jurisdiction over the Plan from the County to the City. Pursuant to Ordinance Nos. 91- 11 and 91-15, the City of Temecula and the Redevelopment Agency of the City of Temecula assumed jurisdiction over the Plan as of July 1, 1991. The Plan has been amended by Ordinance Nos. 94-33, 06-11 and 07-20 adopted by the City Council. The Agency duly adopted its Implementation Plan for 2010-2014 on December 8, 2009 in accordance with Health and Safety Code Section 33490. B. The City Council of the City of Temecula adopted Resolution No. 12-02 January 10, 2012, pursuant to Health and Safety Code Section 34173 and applicable law electing for the City to serve as the Successor Agency for the Temecula Redevelopment Agency upon the dissolution of the Redevelopment Agency of the City of Temecula. The City Council of the City of Temecula, Acting as the Governing Body for the Successor Agency to the Temecula Redevelopment Agency, adopted Resolution No. 12-01 on February 28, 2012 declaring the Successor Agency to the Temecula Redevelopment Agency duly constituted pursuant to law and establishing rules and regulations for the operation of the Successor Agency to the Temecula Redevelopment Agency ("Successor Agency"). C. Pursuant to Health and Safety Code Section 34175(b) and the California Supreme Court's decision in California Redevelopment Association, et al. v. Ana Matosantos, et al. (53 Ca1.4th 231(2011)), on February 1, 2012, all assets, properties, contracts, leases, books and records, buildings, and equipment of the former Temecula Redevelopment Agency transferred to the control of the Successor Agency by operation of law. D. Health and Safety Code Section 34177(1), as modified by the California Supreme Court, provides that by March 3, 2015, the Successor Agency must prepare a Recognized Obligation Payment Schedule for the enforceable obligations of the former Redevelopment Agency, in accordance with the requirements of paragraph (1). The draft schedule must be reviewed and certified, as to its accuracy, by an external auditor designated at the county auditor -controller's direction pursuant to Health and Safety Code Section 34182. The certified Recognized Obligation Payment Schedule must be submitted to and approved by the Oversight Board. Finally, after approval by the Oversight Board, a copy of the approved Recognized Obligation Payment Schedule must be submitted to the County Auditor -Controller, the State Controller and the State Department of Finance ("DOF"), and be posted on the Successor Agency's web site. E. Accordingly, the Board desires to adopt this Resolution approving the Recognized Obligation Payment Schedule for the period of July 1, 2017 through June 30, 2018 in accordance with Part 1.85. Section 2. This Resolution is adopted pursuant to Health and Safety Code Section 34177. Section 3. The Board hereby approves the Recognized Obligation Payment Schedule for the period of July 1, 2017 through June 30, 2018 substantially in the form attached as Exhibit A to this Resolution and incorporated herein by reference (the "ROPS"). The Executive Director of the Successor Agency, in consultation with the Successor Agency's legal counsel, may modify the ROPS as the Executive Director or the Successor Agency's legal counsel deems necessary or advisable. Section 4. The Board hereby designates the Finance Director as the official to whom the DOF may make requests for review in connection with the ROPS and who shall provide the DOF with the telephone number and e-mail contact information for the purpose of communicating with the DOF. Section 5. Staff is hereby authorized and directed to post a copy of the Oversight Board -approved ROPS on the Successor Agency's Internet Website (being a page on the Internet website of the City of Temecula). Section 6. The officers and staff of the Successor Agency are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable to effectuate this Resolution, including submitting the Recognized Obligation Payment Schedule to the oversight board for approval and requesting additional review by the DOF and an opportunity to meet and confer on any disputed items, and any such actions previously taken by such officers are hereby ratified and confirmed. Section 7. The Secretary shall certify to the adoption of this Resolution. PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Successor Agency to the Temecula Redevelopment Agency this 24th day of January, 2017. Maryann Edwards, Chair ATTEST: Randi Johl, Secretary [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, Secretary of the Successor Agency to the Temecula Redevelopment Agency, do hereby certify that the foregoing Resolution No. SARDA 17- was duly and regularly adopted by the Board of Directors of the Successor Agency to the Temecula Redevelopment Agency at a meeting thereof held on the 24th day of January, 2017, by the following vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: ABSENT: BOARD MEMBERS: Randi Johl, Secretary EXHIBIT A Recognized Obligations Payment Schedule (ROPS) for the period July 1, 2017 through June 30, 2018 (ROPS 17-18) Successor Agency: County: Recognized Obligation Payment Schedule (ROPS 17-18) - Summary Filed for the July 1, 2017 through June 30, 2018 Period Temecula Riverside 17-18A Total Current Period Requested Funding for Enforceable Obligations (ROPS Detail) (July - December) 17-18B Total (January - June) ROPS 17-18 Total A Enforceable Obligations Funded as Follows (B+C+D): $ 1,219,731 $ - $ 1,219.731 B Bond Proceeds - - C Reserve Balance 1,219,731 1,219.731 D Other Funds - E Redevelopment Property Tax Trust Fund (RPTTF) (F+G): $ 3,907,793 $ 3,951,357 $ 7,859,1.50 F RPTTF 3,782,793 3,826,357 7,609,150 G Administrative RPTTF 125,000 125,000 250,000 H Current Period Enforceable Obligations (A+E): $ 5,127,524 $ 3,951.357 $ 9.078,881 Certification of Oversight Board Chairman: Pursuant to Section 34177 (o) of the Health and Safety code, I hereby certify that the above is a true and accurate Recognized Obligation Payment Schedule for the above named successor agency. Name /s/ Title Signature Date A Temecula 5lecognized Obligation Payma2 Schedule (0 OPS 17.18)- BOPS 0.ta11 July 1, 2017 through Jute 30, 2018 (R.10610PJnollb in Whole Dollars) B C D E F G X 1 J K L M N O P O R 6 T U V 28 Prop. 64.0.81 Obinallmr 02502542 Type Con0394044.11enl Eaw25en Dm Carr.112inomen5 781146.05536.E Pane 71x52 7.16611. 11,AF4 56. 74.1 Ou0len3ln5 091010beeeor Rem 12002 17.1817-111A Teal 17-18A (July - Dscem .r) T. 17.155 (Jantsry • June) 17-188 Teal Fund Sources Fund Sources F �Nn P Bebrwp � Doer Funds RPTTF � rr4n807TF Bond Proceeds Reborn Bans Dant FUMe apn5 min8PTIF 02 I Tn.0,Ad tine 4242002 0002010 LS 280kITrvNw.r 750.1., lees 91158844486an no 1-1860 1 150,10 0.166 18 W3 N $ 50761 05 i 18440 1 i 1017,731 - 2 3,028703 13100 t 120030 5 5127.524 S 18000 1 - i • $ • 3 3529357 $ 126000 i 2851354 2(.8807 .Few CPA 00020084021.89020s 512//002 9/122021 0221 006005.9429 PO615.1674005543454350 W.1-1960 630000 N 5 19000 120000 1 120002 1 - 3 Abbott 03•0 073)20520314.094307 2112,2002 .12/2021 266.80.98./ Pokohunoons Fur054240n521l Lrnarovess 54. 1-1900 750,000 0 1 - 1 1 - 4 8B RAF Paer.n0Saan6w.171 50100/0407 5110/2011 //102416 Lew., H8 88,2 Fund o w 4 21., FUM tar 14 m 253 SEPAFa no. 1.1908 5250.954 N S 5 - 5 - 5 Temecula Garden L.P Loan 00,10014104m18cbo4 .111938 7112027 Tern.. G.. L.P. Linn 81011814114 Xpuen9 No. 1.1901 3255 09 N S 303,000 305,000 5 305,000 i - 82002 end 2802 TAB FY 912113 Debt Sent • eW B031/1srued On or Before 12/11/10 0242002 '7282032 I800enk w Tnaae for Bonds luxes. FON Redw.pmmt 24,174.2 N5. 1.1888 35.510,887 N 5 3,010,473 1.219.711 500731 5 1784,452 1,294111 1 1.2]4611 3 978119. 72008 TAB Belle A FY 2012/13 Debt Seance164468121. Bonds 1118 On or Beal 0 198008 77302035 20NwF.s US BwkaaTwee* br 04,56.208 B 1' R2m'+ioPe+P1 No 1908 25,514.271 N 5 1,0/5,338 388,518 1 388,519 95,09 8200E TAB 641448 FY 2012113 Dein liaanes Bvd4 Weird On or Bebn 1.12008 7202030 US Gunk =TnWs.r 098842.8 153140!0 _ 190140 Ise. to FUM Retle.pmsnt No.1-1905 4,359,420 N 3 188,018 135,114 0 175,114 63.504 3 6399 8:007 TAB FY 2012/13 Wbt Sal. 2072.10 Benda laaued On dr Bebn 193190 101172007 7202037 UBe0n4 w TluameF 958814./0 187+'ew Bonds lessee to Fund Redevelopment 024053 00,1-1985 24,023,438 N 5 5,065,433 719,532 5 719,92 385,901 1 365;801 0 2010 14.19 TAB Series A 6 B FY 001/13 Debt Genies lee)09819 Benda Ise. On 5r Betoe 21242010 7/312040 UB Beat min.* RP Son.485 Bonds !eche. Fund 0140118 Has .e No, 1.1285 25,737.330 N 5 1,243,218 776,218 5 775,215 467,041 s 057.011 112011 it HoB TAB P'ieal Year Ho./ Promenade 12/130b1R54322*/2) Parkins Gael DPA BondeNosed After 12,31/10 0PA2,01864.3.9 (72 11111 9!9201 7012041 7237015 US Bank Tnemab 10400042 Fun. CM D.e Ia. 2 Full 144201. 20unns for Par. Lampe No. 1.1960 20. 1.1960 96007,95 20000 N N 5 1,308,358 1 - 777,079 1 777,878 i - 531879 s men 1 2049enryA15118 don 00.1 Coe. 7/1/2012 6102015 WS Payees ,5424 2270 A1enoy 6.5 Comanubon/Agency 4do, No, 1-1888 250.000 N 1 250,002 125,300 5 125,000 123,000 6 125100 218618ha1 Inerencey NNP 5eartue0 team0e w BMn.4JnI11 3112/1988 1.21114/1/ 067 N 105347 1804.12..4411.13781.111b 1Meem0FV W N5.1-1800 73,92 N _ - 11.IIIIIMIP 1 10000 8 10.200 30TIM.edDO..e aeon loud Ono ease 921110 124110112 1211808 72ffi71136 72N81e US Sank w 8.esb Bmaeielunr V3 amt w TuwP4 .6.1140 BS 8391258 Fhes0.2.26811.1 4443x/ SwF 1®>a ®,e.2 No.t-198 18. 1.16138 404751 100.000 11 N ' 16000 214214+70505116.. Seal* anal Ere. 49211117 -24'Un2nded 0219.5275 eel0ed Aller 12/3110 3/12011 7212033 Trustee /07565145 BondsF,md8J.s4apn,e l� No. 1.1035 10,001 N 0 10006 251n7414e0 0001536. 1,114saional Sena. 3/92011 0/302918 8002018 6n81e3w6e12220e24 4153.01. 58:14 Planning 4 caa.n Jeflenon 027103r 30.050 Pen E1R 100.412 Garrido 5240&Plan Ne. 1.1952 14a1-1820 114,070 13.09 N N 5 114,070 0 16.820 5 8 - 114,070 53529 5 121.070 t 13630 03 2T Un1aWrd 26/1806. 40120e20 0010..18 PrNw6om949,46n 0P54065101na380422 3222611 2/122002 2/12/2021 7282031 05514 58 UB Bank08Trustee for 05r2.,4.n 1164,08181164,0818 Tea .6nene07 Bondele 538 Fund Rem.prrent A1erbas No. 1-1980 No.1.301 255.`598 144,254 N N 1 2 59 $ 114,254 5 - $ - 25536 144,254 1 25.531 s 141264 9 Un.nded Obropeons IJn6.41.9 4s 4124/2002 20 211.8163 Obi.. urn.. Uabbdea 12/12006 7002038 UB Bort w TruNw@r 11199811.8 Bonds!53x10!5 Fund Redevefoprnent No, 1.1988 - N 1 0 • PeXw.wl Sava 10114 00 L.. 12] 312011 11/302016 Enalno r6087dllnce 4453146.1 Jefferson Conpor See. P. EIR No. 81988 - N 1 1 31 N 1 - - s • [ A 1 B C D E F G H I 1 Temecula Recognized Obligation Payment Schedule (ROPS 17-18) - Report of Cash Balances (Report Amounts in Whole Dollars) 2 Pursuant to Health and Safety Code section 34177 (I), Redevelopment Property Tax Trust Fund (RPTTF) may be listed as a source of payment on the ROPS, but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation. Far t ps on how to complete the Report of Cash Balances Form, see Cash Balance Tips Sheet. 3 A B C D E F G H I 4 Cash Balance Information by ROPS Period Fund Sources Comments 5 Bond Proceeds Reserve Balance Other RPTTF Bonds issued on or before 12/31/10 Bonds issued on or after 01/01/11 Prior ROPS period balances and DDR RPTTF !balances retained Prior ROPS RPTTF distributed as reserve for future period(s) Rent, grants, interest, etc. Non -Admin and Admin ROPS 15-16B Actuals (01/01/16 - 06/30116) 1 Beginning Available Cash Balance (Actual 01/01/16) 7,987,054 8;581,604 (489,446) 2 1 Revenue/Income (Actual 06/30/16) RPTTF amounts should tie to the ROPS 15-16B distribution from the County Auditor -Controller during January 2016 168 3.561 _ 161,398 3,071.869 10 3 Expenditures for ROPS 15-16B Enforceable Obligations (Actual 06/30/16) 2 651.026 4 Retention of Available Cash Balance (Actual 06/30/16) RPTTF amount retained should only include the amounts distributed as reserve for future period(s) 1.219.731 12 ROPS 15-16B RPTTF Balances Remaining No entry required 13 6 Ending Actual Available Cash Balance CtoG=(1+2-3-4),H=(1+2-3-4-5) E 7,987.222 $ 8,585.185 $ - $ - $ 161.398 $ (1.288.334) TEMECULA PUBLIC FINANCING AUTHORITY CONSENT Item No. 16 ACTION MINUTES January 10, 2017 City Council Chambers, 41000 Main Street, Temecula, California TEMECULA PUBLIC FINANCING AUTHORITY MEETING The Temecula Public Financing Authority Meeting convened at 7:41 PM CALL TO ORDER: Chairperson Maryann Edwards ROLL CALL: DIRECTORS: Comerchero, Naggar, Rahn, Stewart, Edwards TPFA PUBLIC COMMENTS (None) TPFA BUSINESS 12 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds — Random Selection of Board Member to Achieve a Quorum of Four for Consideration of Approval of Issuance of the 2017 Bonds - The General Counsel presented a report to the Board of Directors outlining the conflicts of interest of Board Members Comerchero and Naggar relating to the approval of the issuance of Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds ("2017 Bonds") due to the ownership of Europa Vineyard Estates being otherwise related business entities to them, describing the legal need for achieving a quorum of four Board members for the approval of the issuance of the 2017 Bonds, and the procedures to be used by the Secretary pursuant to Section 17805 of the Fair Political Practices Commission Regulations for the random selection of one of these Board Members to participate in the approval of the issuance of the 2017 Bonds. Utilizing the procedures of Section 18705, the Secretary randomly selected Board Member Jeff Comerchero and announced that this Board Member will be entitled to participate in all actions of the Authority Board of Directors actions related to the 2017 Bonds or Butterfield Stage Road Phase 3 when four affirmative votes are required in order to Authority Board Actions related thereto. RECOMMENDATION: 12.1 The Secretary of Board shall randomly select either Board Member Comerchero or Board Member Naggar in order to achieve a four -member quorum of the Temecula Public Financing Authority ("Authority") Board of Directors required consider the approval of the issuance of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds ("2017 Bonds") and for all matters relating to approval of the Butterfield Stage Road Phase 3 public improvement project by the Authority Board of Directors that may require a four-fifths vote of the Board. TPFA Action Minutes 011017 1 TPFA EXECUTIVE DIRECTOR REPORT TPFA BOARD OF DIRECTORS REPORTS TPFA ADJOURNMENT At 7:48 PM, the Temecula Public Financing Authority meeting was formally adjourned to Tuesday, January 24, 2017, at 5:30 PM, for a Closed Session, with regular session commencing at 7:00 PM, City Council Chambers, 41000 Main Street, Temecula, California. Maryann Edwards, Chair ATTEST: Randi Johl, Secretary [SEAL] TPFA Action Minutes 011017 2 JOINT CITY COUNCIL/ TEMECULA PUBLIC FINANCING AUTHORITY PUBLIC HEARING Item No. 17 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA/TEMECULA PUBLIC FINANCING AUTHORITY AGENDA REPORT TO: City Council/Board of Directors FROM: Aaron Adams, City Manager/Executive Director DATE: January 24, 2017 SUBJECT: Approve Issuance of Special Tax Bonds for the Temecula Public Financing Authority Community Facilities Districts No. 03-02 (Roripaugh Ranch) and No. 16-01 (Roripaugh Ranch Phase 2) RECOMMENDATION: 1. That the City Council hold a public hearing in accordance with Section 6586.5(a)(2) of the California Government Code with respect to the financing of public improvements by means of the issuance of community facilities district special tax bonds by the Temecula Public Financing Authority for its Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), and adopt by a majority vote the resolution entitled: RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA MAKING FINDINGS WITH RESPECT TO AND APPROVING THE ISSUANCE OF BONDS BY THE TEMECULA PUBLIC FINANCING AUTHORITY 2. That the Temecula Public Financing Authority adopt by a 4/5ths vote the resolution entitled: RESOLUTION NO. TPFA 17- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS FOR COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2), AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS 3. That the Temecula Public Financing Authority adopt by a majority vote the resolution entitled: RESOLUTION NO. TPFA 17- 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. 03-02 (RORIPAUGH RANCH), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL AGENT AGREEMENT AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS BACKGROUND: A. CFD No. 16-01 (Roripaugh Ranch Phase 2) The two current owners of the property in Phase 2 of the Roripaugh Ranch development, consisting of Roripaugh Valley Restoration, LLC and Wingsweep Corporation (collectively referred to below as the "Property Owners"), have requested that the Temecula Public Finance Authority (the "Authority") form a new community facilities district (the "new CFD") and issue special tax bonds of the Authority for the new CFD to provide funds to: (i) Prepay in full, special taxes authorized to be levied for the Temecula Public Finance Authority Community Facilities District No. 03-02 (Roripaugh Ranch) ("CFD No. 03-02") on the property to be included in the new CFD and thereby repay the portion of the outstanding special tax bonds issued by the Authority for CFD No. 03-02 in April of 2006 payable from such special taxes, (ii) Assist in paying the costs of various public improvements necessitated by development to occur in Phase 2 of Roripaugh Ranch, and (iii) Finance costs of issuing the special tax bonds and of providing a reserve fund for the bonds. The Authority will also be empowered to levy special taxes on property in the new CFD to pay the costs of certain municipal services to be provided by the City to the property. The City and the former Redevelopment Agency of the City of Temecula created the Authority in 2001 to provide an independent governmental entity that could consider the formation of community facilities districts for property in the City and act as the issuer of any related community facilities district bonds. Following the dissolution of the former Redevelopment Agency, the Temecula Community Services District and the Temecula Housing Authority were substituted for the former Redevelopment Agency as the parties with the City under the agreement that created the Authority. The new CFD will only include land owned by the Property Owners that submitted petitions requesting formation of the CFD. The Property Owners have agreed to pay all City and Authority costs related to the proposed new CFD formation and bond issue, subject to reimbursement from bond proceeds when and if bonds are issued for the new CFD, and have previously entered into a deposit/reimbursement agreement with the City and the Authority with respect thereto. The bonds, if issued by the Authority for the new CFD, would be payable solely from special taxes levied on land in the area of the new CFD and collected by the Authority. On March 22, 2016, The Authority adopted two resolutions related to the formation of the new CFD. On April 26, 2016, The Authority conducted a public hearing regarding the new CFD, the Property Owners voted to approve the new CFD and the first reading of the ordinance levying special taxes on property in the new CFD occurred. On May 10, 2016, the City Council had the second reading of special tax ordinance and adopted the ordinance, and the ordinance went into effect on June 10, 2016. B. CFD 03-02 (Roripaugh Ranch) In order to implement the prepayment of the special taxes being levied by CFD 03-02 on property in the new CFD, it is necessary to refund the outstanding bonds issued in 2006 for CFD 03-02. The refunding will be accomplished (i) with the special tax prepayment made with proceeds of the special tax bonds issued for the new CFD, and (ii) the issuance of refunding bonds by the Authority for CFD 03-02 to refund the portion of the outstanding 2006 bonds not otherwise paid off with proceeds of the new CFD special tax bonds. The refunding of the 2006 bonds will result in lower annual special taxes for the homeowners in the Panhandle area of Roripaugh Ranch, who will remain subject to CFD 03-02 special tax levies to repay the refunding bonds being issued for CFD 03-02. Unspent 2006 bond proceeds in an improvement fund and a reserve fund will be made available to pay costs of infrastructure improvements for Roripaugh Ranch. SPECIFIC RECOMMENDED ACTIONS: TONIGHT'S SPECIFIC ACTIONS: It is recommended that the Authority adopt the two resolutions authorizing the issuance of the respective CFD No. 16-01 Special Tax Bonds and the CFD No. 03-02 Special Tax Refunding Bonds and approving related documents. These documents include the following: Fiscal Agent Agreements - These are contracts between the Authority and US Bank National Association serving as Fiscal Agent for the respective CFD No. 16-01 Special Tax Bonds and CFD No. 03-02 Special Tax Refunding Bonds and specify the terms of the respective bonds, the accounts to be established by the Fiscal Agent for the respective Bonds, the bond redemption provisions and the certain covenants of the Authority with respect to the bonds. Bond Purchase Agreements — These are contracts between Stifel, Nicolaus & Company ("Stifel") acting as underwriter and the Authority whereby the Authority agrees to sell the bonds to Stifel and Stifel agree to buy the respective CFD No. 16-01 Special Tax Bonds and CFD No. 03-02 Special Tax Refunding Bonds from the Authority and sell them to the public. Preliminary Official Statements — These are disclosure documents that will be used by Stifel to inform investors about the upcoming bond issues and provide all material information for the potential investors to make a decision whether or not to buy the respective CFD No. 16- 01 Special Tax Bonds and CFD No. 03-02 Special Tax Refunding Bonds. The anticipated principal amounts of the two bond issues are shown on the cover pages of the Preliminary Official Statements. Continuing Disclosure Agreements— These agreements specify the Authority's obligation to provide annual disclosure to the municipal bond market related to the respective CFD No. 16-01 Special Tax Bonds and CFD No. 03-02 Special Tax Refunding Bonds by preparing and filing annual disclosure reports and notices of certain material events, if they occur. Escrow Agreement — This agreement between the Authority and US Bank National Association serving as Escrow Agent and specifies the requirements to defease and redeem the outstanding 2006 bonds issued for CFD 03-02. Acquisition Agreement — This agreement between the Authority and Roripaugh Valley Restoration, LLC specifies how unspent 2006 bond proceeds and some of the proceeds of the bonds being issued for the new CFD can be used to pay costs of certain public facilities necessary for the development of the remaining undeveloped land within Roripaugh Ranch. A complete description of facilities eligible to be financed is included on Exhibit A to the Agreement. Adoption by the Authority of the two Resolutions approving the documents listed above and the prior actions related to the CFDs will enable the following items to happen: Separate the Pan portion (totally undeveloped) from the Pan -Handle (almost fully developed) of Roripaugh Ranch into the separate new CFD, Lower CFD 03-02 special taxes for homeowners in the Pan -Handle portion of Roripaugh Ranch starting in FY 2017-18 (estimated to be approximately $800 per year lower for an average household), Generate proceeds to build facilities required to develop the Pan area (estimated to be approximately $7.4M), Allow for a future services special tax to be levied on property in the Pan area POTENTIAL CONFLICTS OF INTEREST OF COUNCIL/BOARD MEMBERS COMERCHERO AND NAGGAR Europa Vineyard Estates is located on approximately 290 acres southesterly of Butterfield Stage Road and La Serena Way in unincorporated Riverside County. Its westerly boarder is adjacent to Butterfield Stage Road south of La Serena Way on the border of the City of Temecula. Europa Vineyard Estates had been owned by Temecula Vineyard Estates, LLC. Europa Vineyard Estates is now owned by an entity related to Temecula Vineyard Estates, LLC, Sirah Vineyard Development Corporation. Council/Board Member Comerchero is the President of Sirah Vineyard Development Corporation. Neither Council/Board Member Comerchero nor Council/Board Member Naggar has any direct investments or ownership interests in the Europa Vineyard Estates Project, Temecula Vineyard Estates, LLC or Sirah Vineyard Development Corporation. The managing member of Temecula Vineyard Estates, LLC, has been Mr. Daniel Stephenson. Council/Board Member Comerchero and Council/Board Member Naggar, however, each have ownership interests and are members of other limited liability companies that are developing property outside of the City of Temecula and in which Mr. Stephenson is also the managing member. The Europa Vineyard Estates Project, Temecula Vineyard Estates, LLC, and Sirah Development Corporation are, therefore, "otherwise related business entities" for Council/Board Member Comerchero and Council/Board Member Naggar within the meaning of § 18700.2 of the FPPC Regulations. The proposed actions needed for approval of the 2017 Bonds for CFD 03-02 and CFD 16-01 will have no material financial effect on the Europa Vineyard Estates Project, or the owners of that Project. Approval of the issuance of these 2017 Bonds will not increase or decrease or otherwise change the Roripaugh Ranch Developers' obligation to construct the Phase 3 Improvements to Butterfield Stage Road from what has been continuously required since approval of the Development Agreement and Specific Plan in December 2002. Additionally, the funding for the Phase 3 Improvements for Butterfield Stage Road adjacent to Europa Vineyard Estates has been in place since the issuance of the 2006 Bonds in April of 2006. The owners of Europa Vineyard Estates Project will, however, need to widen and improve Butterfield Stage Road adjacent to the westerly boundary of Europa Vineyard Estates if Butterfield Stage Road is not otherwise widened by the time certificates of occupancy are to be issued for 80% of the Tots in Europa Vineyard Estates. Council/Board Member Comerchero and Council/Board Member Naggar have not participated in the preliminary actions relating to the 2017 Bonds for CFD 03-02 and CFD 16-01 due to these conflict issues. The approval of the Authority Resolution authorizing the Issuance of Special Tax Bonds For Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) will require an affirmative vote of four-fifths of the members of the Authority Board of Directors as required by Government Code Section 53345.8 (c) because the value of the property in CFD 16-01 that will be subject to the special tax to pay debt service on the 2017 Bonds for CFD 16-01 is not at least three times the expected principal amount of the 2017 Bonds to be sold. In order to achieve a quorum of four Members of the Authority Board of Directors, Section 18705 of the Fair Political Practices Commission Regulations specifically authorizes the random selection either Board Member Comerchero or Board Member Naggar to achieve the required quorum. On January 10, 2017 at a regular public meeting of the Authority Board of Directors, Board Member Comerchero was randomly selected to achieve a quorum of four Board Members for the consideration of the Resolution authorizing the issuance of the 2017 Bonds for CFD 16-01 in accordance with the requirements of Section 18705. Board Member Comerchero is, therefore, legally authorized to participate in the consideration and approval of the Resolution of the Authority Board of Directors authorizing the issuance of the 2017 Bonds for CFD 16-01. Council/Board Member Naggar will not participate in any of the actions of the City Council and Authority Board of Directors with respect to the actions proposed to authorize issuance of the 2017 Bonds for CFD 03-02 and CFD 16-01. Board Member Comerchero may participate in the Authority Board of Directors' consideration and approval of the Resolution to authorize issuance of the 2017 CFD 16-01 Bonds because that Resolution requires a 415th vote. Council/Board Member Comerchero will not participate in any of the actions of the City Council required for issuance of the 2017 Bonds for CFD 03-02 and 16-01 and will not participate in any of the actions of the Authority Board of Directors with respect to the actions proposed to authorize issuance of the 2017 Bonds for CFD 03-02. FISCAL IMPACT: The two Property Owners in the Pan area of Roripaugh Ranch have agreed to pay all out of pocket expenses incurred relative to the proposed formation of the new CFD and the issuance of bonds for the new CFD. Costs of issuance of the proposed bond issues will be paid from the proceeds of the bonds to be issued by the Authority for the new CFD and for CFD 03-02. All annual costs of administering the new CFD and the bonds issued for the new CFD will be paid from special taxes levied on the properties in the new CFD, and annual costs of administering CFD 03-02 and the refunding bonds issued for CFD 03-02 will be paid from special taxes levied on land in CFD 03-02. The bonds will not be obligations of the City, or general obligations of the Authority, but will be limited obligations of the Authority for the respective CFD, payable solely from special taxes levied on land in the respective CFD. CONCLUSION AND NEXT STEPS: It is anticipated that the bond sales will occur in early February, with closings in mid-February, and the 2006 CFD 03-02 bonds will be redeemed on March 1, 2017. ATTACHMENTS: 1. Resolutions (3) 2. Fiscal Agent Agreement (2) 3. Bond Purchase Contract (2) 4. Preliminary Official Statement (2) 5. Continuing Disclosure Agreement (2) 6. Escrow Agreement 7. Acquisition Agreement RESOLUTION NO. 17- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TEMECULA MAKING FINDINGS WITH RESPECT TO AND APPROVING THE ISSUANCE OF BONDS BY THE TEMECULA PUBLIC FINANCING AUTHORITY THE CITY COUNCIL OF THE CITY OF TEMECULA DOES HEREBY RESOLVE AS FOLLOWS: Section 1. The City of Temecula (the "City"), the Temecula Community Services District and the Temecula Housing Authority are parties to a Joint Exercise of Powers Agreement which established the Temecula Public Financing Authority (the "Authority") for the purpose, among others, of issuing bonds to finance public capital improvements. Section 2. The Board of Directors of the Authority has formed the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "CFD"), and the Authority intends to issue bonds of the Authority for the CFD (the "Bonds") to finance various public improvements within the City of Temecula (the "Improvements"). Section 3. The City Council has on this date held a duly noticed public hearing with respect to the financing of the Improvements with the proceeds of the Bonds, as required by Section 6586.5(a) of the California Government Code. Section 4. The City Council hereby finds that significant public benefits will arise from the financing of the Improvements with the proceeds of the Bonds, in accordance with Section 6586 of the California Government Code. Section 5. The City Council hereby approves the financing of the Improvements with the proceeds of the Bonds, and the issuance of the Bonds by the Authority for the CFD. Section 6. This Resolution shall take effect upon adoption. PASSED, APPROVED, AND ADOPTED by the City Council of the City of Temecula this 24th day of January, 2017. Maryann Edwards, Mayor ATTEST: Randi Johl, City Clerk [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, City Clerk of the City of Temecula, do hereby certify that the foregoing Resolution No. 17- was duly and regularly adopted by the City Council of the City of Temecula at a meeting thereof held on the 24th day of January, 2017, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: Randi Johl, City Clerk RESOLUTION NO. TPFA 17- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS FOR COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2), AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS THE BOARD OF DIRECTORS OF THE TEMECULA PUBLIC FINANCING AUTHORITY DOES HEREBY RESOLVE AS FOLLOWS: Section 1. This Board of Directors has conducted proceedings under and pursuant to the Mello -Roos Community Facilities Act of 1982 (the "Law"), to form the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), to authorize the levy of special taxes upon the land 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 (the "Facilities") and the prepayment of certain special taxes, all as described in the Resolutions entitled "A Resolution of the Board of Directors of the Temecula Public Financing Authority of Formation of Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), Authorizing the Levy of a Special Tax Within the District, Preliminarily Establishing an Appropriations Limit for the District and Submitting Levy of the Special Tax and the Establishment of the Appropriations Limit to the Qualified Electors of the District" (the "Resolution of Formation") and "A Resolution of the Board of Directors of the Temecula Public Financing Authority Determining the Necessity to Incur Bonded Indebtedness Within Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) and Submitting Proposition to the Qualified Electors of the District," which Resolutions were adopted by this Board of Directors on April 26, 2016. Section 2. Pursuant to the Resolutions described in Section 1, an election was held within the District on April 26, 2016 and the then two qualified electors of the District approved the propositions of the incurrence of the bonded debt, the establishment of the appropriations limit and the levy of the special tax by more than two-thirds of the votes cast at said special election. Section 3. There have been submitted to this Board of Directors for its approval a Fiscal Agent Agreement (the "Fiscal Agent Agreement") providing for the issuance of the Bonds (as defined in Section 5 below) and the use of the proceeds of the Bonds to finance the Facilities and to prepay certain special taxes, 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") and a Continuing Disclosure Agreement relating to the Bonds (the "Continuing Disclosure Agreement"), and this Board of Directors, with the aid of City of Temecula staff, has reviewed said documents and found them to be in proper order. Section 4. 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 and the levy of said special taxes 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, including the Law. Section 5. Pursuant to the Law, this Resolution and the Fiscal Agent Agreement, special tax bonds of the Temecula Public Financing Authority (the "Authority") for the District in an aggregate principal amount not to exceed $46,000,000 are hereby authorized to be issued, such bonds to be designated the "Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds" (the "Bonds"). The Bonds shall be executed in the form set forth in and otherwise as provided in the Fiscal Agent Agreement. The Board of Directors hereby finds and determines that (a) the issuance of the Bonds should proceed for public policy reasons, including that the issuance of the Bonds at this time is expected to result in lower interest rates on the Bonds than if they were issued at a later time, and the issuance of the Bonds will allow for infrastructure development to continue in the District on a coordinated basis, to the benefit of the future residents of homes to be built in the District, (b) the Bonds, when issued, will be in compliance with the applicable requirements of the Authority's local goals and policies for community facilities districts adopted by the Board of Directors on April 24, 2001, except for the requirement that there be at least a three to one property value to public lien ratio, which requirement is hereby waived so that the Bonds may be issued for the public policy reasons stated in the preceding clause (a), and (c) the District and the Bonds are consistent with the requirements set forth in Section VIII E. of the City of Temecula's Budget and Fiscal Policies as contained in the City's Fiscal Year 2016-17 Annual Operating Budget. The Board of Directors further finds that the sale of the Bonds at negotiated sale as contemplated by the Purchase Contract will result in a lower overall cost. Section 6. The Fiscal Agent Agreement with respect to the Bonds, in the form presented to this Board of Directors at this meeting, is hereby approved. The Executive Director, the Assistant Executive Director and the Treasurer (each, a "Designated Officer"), each acting alone, are hereby authorized to execute and deliver the Fiscal Agent Agreement in said form, with such additions thereto or changes therein as are approved by the Designated Officer executing the Fiscal Agent Agreement 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 a Designated Officer. The Secretary is hereby authorized to countersign the Fiscal Agent Agreement. 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 7. The Purchase Contract between the Authority and Stifel, Nicolaus & Company, Incorporated (the "Underwriter"), in the form presented to the Board of Directors at this meeting, is hereby approved. The Designated Officers, each acting alone, are hereby authorized to accept the offer of the Underwriter to purchase the Bonds contained in the Purchase Contract; provided that the aggregate principal amount of the Bonds sold thereby is not in excess of $46,000,000, the true interest cost of the Bonds is not in excess of 7.25% and the Underwriter's discount is not in excess of 2.00% of the aggregate principal amount of the Bonds. The Designated Officers, each acting alone, are hereby authorized 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 Designated Officer executing the Purchase Contract 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 a Designated Officer. The Secretary does not need to countersign the Purchase Contract. Section 8. The Preliminary Official Statement, in the form presented to the Board of Directors at this meeting, is hereby approved. The Designated Officers are hereby authorized, 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 any such officer upon consultation with 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 Designated Officers, each acting alone, are 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 each Designated Officer is authorized to so deem such statements final. Section 9. The Continuing Disclosure Agreement related to the Bonds, in the form appended as Appendix E to the Preliminary Official Statement, is hereby approved. The Designated Officers, each acting alone, are hereby authorized, 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 Designated Officer executing the Continuing Disclosure Agreement 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 a Designated Officer of the Continuing Disclosure Agreement. The Secretary does not need to countersign the Continuing Disclosure Agreement. Section 10. 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 11. The Bonds, when executed, shall be delivered to the Fiscal Agent for authentication. The Fiscal Agent (as defined in the Fiscal Agent Agreement) 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 a Designated Officer, which instructions each Designated Officer acting alone is hereby authorized, 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 12. The law firm of Quint & Thimmig LLP is hereby designated as Bond Counsel and Disclosure Counsel to the Authority for the Bonds. The Executive Director is hereby authorized to execute an agreement with said firm for its services in connection with the Bonds in a form acceptable to the Authority's General Counsel, provided that the compensation payable to said firm is payable solely from the proceeds, and wholly contingent upon the issuance, of the Bonds. Section 13. All actions heretofore taken by the officers and agents of the Authority with respect to the establishment of the District and the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the proper officers of the Authority (including the Designated Officers and the Secretary) 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, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds in accordance with this Resolution, and any certificate, agreement, and other document described in the documents herein approved. Whenever in this Resolution any officer of the Authority is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable. Section 14. This Resolution shall take effect upon its adoption. PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula Public Financing Authority this 24th day of January, 2017. Maryann Edwards, Chair ATTEST: Randi Johl, Secretary [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, Secretary of the Temecula Public Financing Authority, do hereby certify that the foregoing Resolution No. TPFA 17- was duly and regularly adopted by the Board of Directors of the Temecula Public Financing Authority at a meeting thereof held on the 24th day of January, 2017, by the following vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: ABSENT: BOARD MEMBERS: Randi Johl, Secretary RESOLUTION NO. TPFA 17- 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. 03-02 (RORIPAUGH RANCH), 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 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. 03-02 (Roripaugh Ranch) (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 were to be used to finance certain public improvements, all as described in Resolution No. TPFA 05-01 adopted by the Board of Directors on January 11, 2005. Section 2. On April 27, 2006, the Temecula Public Financing Authority (the "Authority"), for and on behalf of the District, issued $51,250,000 principal amount of Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds (the "Prior Bonds"), with the Prior Bonds having been issued under a Fiscal Agent Agreement, dated as of March 1, 2006 (as amended by a Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of May 1, 2008, 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 a portion of 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 $10,500,000, are hereby authorized to be issued, with the Bonds to be designated the "Temecula Public Financing Authority Community Facilities District No. 03- 02 (Roripaugh Ranch) 2017 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 a portion of the outstanding 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 portion of the Prior Bonds to be refunded with proceeds of the Bonds plus the principal amount of the portion of the Prior Bonds to be refunded with proceeds of the 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 that will be subject to the levy of special taxes to pay debt service on the Bonds 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 February 23, 2017; (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, municipal advisor fees and expenses, rating agency fees, costs of bond insurance and a debt service reserve surety bond, fees of a verification agent, printing costs for the Official Statement, initial fiscal agent fees, and costs of City staff and the City Attorney incurred in connection with the sale and issuance of the Bonds. 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, the Assistant Executive Director and the Treasurer (each a "Designated Officer"), each acting alone, are hereby authorized to execute and deliver the Fiscal Agent Agreement in said form, with such additions thereto or changes therein as are approved by the Designated Officer executing the Fiscal Agent Agreement 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 a Designated Officer. The Secretary is hereby authorized and directed to countersign the Fiscal Agent Agreement. 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 (the "Underwriter"), in the form presented to the Board of Directors at this meeting, is hereby approved. The Designated Officers, each acting alone, are hereby authorized 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 $10,500,000, (b) the true interest cost of the Bonds is not in excess of 5.00%, (c) the Underwriter's discount is not in excess of 1.50% 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 Designated Officers, each acting alone, are hereby authorized 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 Designated 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 a Designated Officer. The Secretary does not need to countersign the Purchase Contract. Section 9. The Preliminary Official Statement, in the form presented to the Board of Directors at this meeting, is hereby approved. The Designated Officers are hereby authorized, 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 any 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 Designated Officers, each acting alone, are 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 each Designated Officer is authorized to so deem such statements final. Section 10. The Continuing Disclosure Agreement related to the Bonds, in the form appended as Appendix E to the Preliminary Official Statement, is hereby approved. The Designated Officers, each acting alone, are hereby authorized, 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 Designated Officer executing the Continuing Disclosure Agreement 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 a Designated Officer of the Continuing Disclosure Agreement. Section 11. The Board of Directors hereby approves the refunding of a portion 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 Designated Officers, each acting alone, are hereby authorized, 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 Designated Officer executing the Escrow Agreement 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 a Designated Officer of the Escrow Agreement. The Secretary is hereby authorized and directed to countersign 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 a Designated Officer, which instructions each Designated Officer, acting alone, is hereby authorized, 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 Designated Officers, each acting alone, are hereby authorized to provide to U.S. Bank National Association, in its capacity as fiscal agent for the Prior Bonds, direction to provide a notice of redemption of the Prior Bonds conditioned upon the issuance of the Bonds and of a series of special tax bonds by the Authority for its Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), with said redemption to occur on March 1, 2017, said conditional notice of redemption to be in a form provided by Bond Counsel. Section 15. The law firm of Quint & Thimmig LLP is hereby designated as Bond Counsel and Disclosure Counsel to the Authority for the Bonds. The Executive Director is hereby authorized to execute an agreement with said firm for its services in connection with the Bonds, provided that the compensation payable to said firm is payable solely from the proceeds, and wholly contingent upon the issuance, of the Bonds. Section 16. 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 (including the Designated Officers and the Secretary) 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 17. This Resolution shall take effect upon its adoption. PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Temecula Public Financing Authority this 24th day of January, 2017. Maryann Edwards, Chair ATTEST: Randi Johl, Secretary [SEAL] STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss CITY OF TEMECULA ) I, Randi Johl, Secretary of the Temecula Public Financing Authority, do hereby certify that the foregoing Resolution No. TPFA 17- was duly and regularly adopted by the Board of Directors of the Temecula Public Financing Authority at a meeting thereof held on the 24th day of January, 2017, by the following vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: ABSENT: BOARD MEMBERS: Randi Johl, Secretary Quint & Thimmig LLP 4/7/16 5/6/16 6/15/16 6/28/16 12/26/16 1/6/17 FISCAL AGENT AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent dated as of February 1, 2017 relating to: $ Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds 20009.13:J13843 TABLE OF CONTENTS ARTICLE 1 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 11 THE BONDS Section 2.01. Principal Amount; Designation 13 Section 2.02. Terms of the 2017 Bonds 13 Section 2.03. Redemption 15 Section 2.04. Form of Bonds 18 Section 2.05. Execution of Bonds 18 Section 2.06. Transfer of Bonds 19 Section 2.07. Exchange of Bonds 20 Section 2.08. Bond Register 20 Section 2.09. Temporary Bonds 20 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen 20 Section 2.11. Limited Obligation 21 Section 2.12. No Acceleration 21 Section 2.13. Book -Entry System 21 Section 2.12. Issuance of Parity Bonds 22 ARTICLE III ISSUANCE OF 2017 BONDS Section 3.01. Issuance and Delivery of 2017 Bonds 25 Section 3.02. Pledge of Special Tax Revenues 25 Section 3.03. Validity of Bonds 25 ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of 2017 Bonds and Other Moneys 26 Section 4.02. Improvement Fund 26 Section 4.03. Costs of Issuance Fund 27 Section 4.04. Reserve Fund 27 Section 4.05. Bond Fund 29 Section 4.06. Special Tax Fund 30 Section 4.07. Administrative Expense Fund 31 ARTICLE V OTHER COVENANTS OF THE AUTHORITY Section 5.01. Punctual Payment 33 Section 5.02. Limited Obligation 33 Section 5.03. Extension of Time for Payment 33 Section 5.04. Against Encumbrances 33 Section 5.05. Books and Records 33 Section 5.06. Protection of Security and Rights of Owners 33 Section 5.07. Compliance with Act 33 Section 5.08. Collection of Special Tax Revenues 33 Section 5.09. Covenant to Foreclose 34 Section 5.10. Further Assurances 35 Section 5.11. Private Activity Bond Limitations 35 Section 5.12. Federal Guarantee Prohibition 35 Section 5.13. Rebate Requirement 35 Section 5.14. No Arbitrage 36 Section 5.15. Yield of the 2017 Bonds 36 Section 5.16. Maintenance of Tax -Exemption 36 Section 5.17. Continuing Disclosure to Owners 36 Section 5.18. Reduction of Special Taxes 36 Section 5.19. Limits on Special Tax Waivers and Bond Tenders 37 Section 5.20. No Additional Bonds 37 -1- Section 5.21. Authority Bid at Foreclosure Sale 37 ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY OF THE AUTHORITY Section 6.01. Deposit and Investment of Moneys in Funds 38 Section 6.02. Limited Obligation 39 Section 6.03. Liability of Authority 39 Section 6.04. Employment of Agents by Authority 40 ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent 41 Section 7.02. Liability of Fiscal Agent 42 Section 7.03. Information 43 Section 7.04. Notice to Fiscal Agent 43 Section 7.05. Compensation, Indemnification 43 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted 45 Section 8.02. Owners' Meetings 46 Section 8.03. Procedure for Amendment with Written Consent of Owners 46 Section 8.04. Disqualified Bonds 46 Section 8.05. Effect of Supplemental Agreement 47 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments 47 Section 8.07. Amendatory Endorsement of Bonds 47 ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties 48 Section 9.02. Successor is Deemed Included in All References to Predecessor 48 Section 9.03. Discharge of Agreement 48 Section 9.04. Execution of Documents and Proof of Ownership by Owners 49 Section 9.05. Waiver of Personal Liability 49 Section 9.06. Notices to and Demands on Authority and Fiscal Agent 49 Section 9.07. State Reporting Requirements 50 Section 9.08. Partial Invalidity 51 Section 9.09. Unclaimed Moneys 51 Section 9.10. Applicable Law 51 Section 9.11. Conflict with Act 52 Section 9.12. Conclusive Evidence of Regularity 52 Section 9.13. Payment on Business Day 52 Section 9.14. Counterparts 52 EXHIBIT A — FORM OF 2017 BOND FISCAL AGENT AGREEMENT Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds THIS FISCAL AGENT AGREEMENT (the "Agreement"), dated as of February 1, 2017, 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. 16-01 (Roripaugh Ranch Phase 2) (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 16- of the Board of Directors of the Authority adopted on April 26, 2016 (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 secured by said special taxes under the Act; WHEREAS, under the provisions of the Act, on January 24, 2017 the Board of Directors of the Authority adopted its Resolution No. TPFA 17- (the "Resolution"), which resolution authorized the issuance and sale of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds (the "2017 Bonds") in an aggregate principal amount of not to exceed $ , and authorized the execution of this Agreement; 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 2017 Bonds that the Authority enter into this Agreement to provide for the issuance of the 2017 Bonds, the disbursement of proceeds of the 2017 Bonds, the disposition of the special taxes securing the 2017 Bonds and the administration and payment of the 2017 Bonds; and WHEREAS, the Authority has determined that all things necessary to cause the 2017 Bonds, when executed by the Authority for and on behalf of the District and issued as in the Act, the Resolution and this Agreement provided, to be legal, valid and binding and special obligations of the Authority for and on behalf of 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 2017 Bonds, subject to the terms hereof, have in all respects been duly authorized. -1- 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 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; 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 Denominations" means with respect to the 2017 Bonds (i) prior to the 2017 Bond Transfer Restriction Release Date, $100,000 and integral multiples of $5,000 in excess of $100,000, provided however that one 2017 Bond may be in a denomination less than $100,000 as a result of any partial redemption of 2017 Bonds prior to the 2017 Bond Transfer Restriction Release Date pursuant to Section 2.03 hereof, and (ii) on and after the 2017 Bond Transfer Restriction Release Date, $5,000 and integral multiples thereof. "Authorized Officer" means the Chairperson, Executive Director, Treasurer or Secretary of the Authority, or any other officer or employee of the Authority or the City 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. "Beneficial Owner" has the meaning given to such term in Section 2.13 hereof. "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, 2017. "Bonds" means the 2017 Bonds, and, if the context requires, any Parity Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement. -4- "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. "Closing Date" means February _, 2017, being the date upon which there is a physical delivery of the 2017 Bonds in exchange for the amount representing the purchase price of the 2017 Bonds by the Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the 2017 Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the 2017 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 2017 Bonds, dated as of February 1, 2017, between the Authority and Albert A. Webb Associates as dissemination agent, 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 2017 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 2017 Bonds, special tax consultant fees and expenses, Bond (underwriter's) discount, legal fees and charges, including bond counsel and disclosure counsel, municipal advisor's fees, appraisal and market consultant fees, charges for execution, transportation and safekeeping of the 2017 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. -5- "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. 16-01 (Roripaugh Ranch Phase 2), formed by the Authority under the Act and the Resolution of Formation. "District Value" means the market value, as of the date of the appraisal described below and/or the date of the most recent County real property tax roll, as applicable, of all parcels of real property in the District subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, including with respect to such nondelinquent parcels the value of the then existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in the Improvement Fund and with the proceeds of any proposed series of Parity Bonds, as determined with respect to any parcel or group of parcels by reference to (i) an appraisal performed within six (6) months of the date of issuance of any proposed Parity Bonds by an MAI appraiser (the "Appraiser") selected by the Authority, or (ii) in the alternative, the assessed value of all such nondelinquent parcels and improvements thereon as shown on the then current County real property tax roll available to the Treasurer. It is expressly acknowledged that, in determining the District Value, the Authority may rely on an appraisal to determine the value of some or all of the parcels in the District and/or the most recent County real property tax roll as to the value of some or all of the parcels in the District. Neither the Authority nor the Treasurer shall be liable to the Owners, the Original Purchaser or any other person or entity in respect of any appraisal provided for purposes of this definition or by reason of any exercise of discretion made by any Appraiser pursuant to this definition. "Escrow Agreement" means the Escrow Agreement, dated as of February 1, 2017, 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. "Escrow Release Test" means, with respect to the release of funds from an escrow fund of the character described in the last sentence of Section 2.14(D), that the provisions of the first sentence of Section 2.14(D) are satisfied, taking into account in respect of the principal amount of the Parity Bonds, the amount then to be released from such escrow fund. "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 -6- 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. "Fitch" means Fitch, Inc. and any successor thereto. "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. "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 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. -7- "Interest Payment Dates" means March 1 and September 1 of each year, commencing September 1, 2017. "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, the first purchaser of the 2017 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 is the registered owner of any particular 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 Tong -term rating categories by either Moody's or S&P, and which have a maximum term to maturity not to exceed three years. (c) Unsecured certificates of deposit, time deposits and bankers' acceptance of any bank the short-term obligations of which are rated on the date of purchase "A-1+" or better by S&P and "P-1" by Moody's and or certificates of deposit (including those of the Fiscal Agent, its parent and its affiliates) secured at all times by collateral that may be used by a national bank for purposes of satisfying its obligations to collateralize pursuant to federal law which are issued by commercial banks, savings and loan associations or -8- mutual savings bank whose short-term obligations are rated on the date of purchase A-1 or better by S&P, Moody's and Fitch. (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 S&P, 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 S&P, 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 S&P 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 S&P from the practice of rating that debt, or reduced below "AA-" by S&P 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 S&P, 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. -9- (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. "Qualified Institutional Buyer" means a "qualified institutional buyer" within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended. "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. "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 then Outstanding principal amount of the Bonds. The Reserve Requirement as of the Closing Date is $ "Resolution" means Resolution No. TPFA 17- , adopted by the Board of Directors of the Authority on January 24, 2017. "Resolution of Formation" means Resolution No. TPFA 16- , adopted by the Board of Directors of the Authority on April 26, 2016. "S&P" means S&P Global Ratings, and any successor thereto. -10- "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, the Rate and Method of Apportionment of Special Taxes 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. "2017 Bonds" means the Bonds so designated and authorized to be issued under Section 2.01 hereof. "2017 Bond Transfer Restriction Release Date" means the date which is five (5) Business Days after the date the Authority posts on the Municipal Securities Rulemaking Board's EMMA website a continuing disclosure notice pursuant to the Continuing Disclosure Agreement to the effect that (a) seventy-five percent (75%) of the Special Tax levied in the then -11- current Fiscal Year was levied on assessor parcels that are owned by individual owners; (b) no property owner owns Taxable Property (as defined in the Rate and Method of Apportionment of Special Taxes) responsible more than fifteen percent (15%) of the Special Tax levy for such Fiscal Year; and (c) the assessed value of Taxable Property in the District is at least four times the principal amount of the Bonds then outstanding. -12- ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation. 2017 Bonds in the aggregate principal amount of Million Thousand Dollars ($ ) are authorized to be issued by the Authority for and on behalf of the District under and subject to the terms of the Resolution and this Agreement, the Act and other applicable laws of the State of California. The 2017 Bonds are hereby designated as the "Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds." Section 2.02. Terms of the 2017 Bonds. (A) Form; Denominations. The 2017 Bonds shall be issued in fully registered form without coupons in Authorized Denominations. (B) Date of 2017 Bonds. The 2017 Bonds shall be dated the Closing Date. (C) CUSIP Identification Numbers. "CUSIP" identification numbers shall be imprinted on the 2017 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2017 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 2017 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 2017 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: -13- Maturity Date (September 1) Principal Amount Interest Rate (E) Interest. The 2017 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 2017 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 Closing Date; provided, however, that if at the time of authentication of a 2017 Bond, interest is in default thereon, such 2017 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 2017 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 2017 Bonds and any premium on the 2017 Bonds are payable by check in lawful money of the United States of America upon surrender of the 2017 Bonds at the Principal Office of the Fiscal Agent. All 2017 Bonds paid by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled 2017 Bonds and issue a certificate of destruction thereof to the Authority upon the Authority's request. -14- Section 2.03. Redemption. (A) Redemption Dates. (i) Optional Redemption. The 2017 Bonds maturing on or after September 1, 2028 are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, 2027, as a whole, or in part in an amount equal to $5,000 or any integral multiple thereof and among maturities so as to maintain substantially level debt service on the Bonds, and by lot within a maturity, at a redemption price equal to the principal amount of the 2017 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. (ii) Mandatory Sinking Payment Redemption. The 2017 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 2017 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 2017 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 1September 1) Sinking Payments -15- The 2017 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 2017 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 2017 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 2017 Bonds, as a result of any prior partial redemption of the 2017 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 2017 Bonds in whole, or in part in an amount equal to $5,000 or any integral multiple thereof, on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), by lot within a maturity and allocated among maturities of the 2017 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 2017 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: -16- Redemption Dates Redemption Prices any Interest Payment Date from September 1, 103% 2017 to and including March 1, September 1, and March 1, 102 September 1, and March 1, 101 September 1, and any Interest Payment 100 Date thereafter (B) Notice to Fiscal Agent. The Authority shall give the Fiscal Agent written notice of its intention to redeem 2017 Bonds pursuant to subsection (A)(i) or (A)(iii) not Tess 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 2017 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of 2017 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 2017 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 2017 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, or by such other means as is acceptable to the recipient thereof, 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 2017 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 2017 Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2017 Bonds are to be called for redemption, shall designate the CUSIP numbers and, if applicable, Bond numbers of the 2017 Bonds to be redeemed by giving the individual CUSIP number and, if applicable, Bond number of each 2017 Bond to be redeemed or if Bond numbers have been assigned by the Fiscal Agent to the 2017 Bonds shall state that all 2017 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2017 Bonds of one or more maturities have been called for redemption, shall state as to any 2017 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2017 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 2017 Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the 2017 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 2017 Bonds on the -17- anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2017 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 2017 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2017 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 2017 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 2017 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, the 2017 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 2017 Bonds (other than a redemption pursuant to Section 2.03(A)(ii)), the Fiscal Agent shall select the 2017 Bonds to be redeemed, from all 2017 Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify 2017 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 2017 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the Owner, at the expense of the Authority, a new 2017 Bond or 2017 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2017 Bond or 2017 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 2017 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2017 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. (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 2017 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. 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. -18- 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. (A) General. 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). 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. (B) Additional Transfer Restrictions Prior to 2017 Bond Transfer Restriction Release Date. Prior to the 2017 Bond Transfer Restriction Release Date, no transfer, sale or other disposition of any 2017 Bond, or any beneficial interest therein, may be made except to an entity that the transferor reasonably believes is a Qualified Institutional Buyer that is purchasing such 2017 Bond for its own account for investment purposes and not with a view to distributing such 2017 Bond. Each transferee of a 2017 Bond, or any beneficial interest therein, transferred prior to the 2017 Bond Transfer Restriction Release Date, by its purchase thereof, shall be deemed to have represented that such transferee is a Qualified Institutional Buyer that is purchasing such 2017 Bond for its own account for investment purposes and not with a view to distributing such 2017 Bond. Each 2017 Bond delivered prior to the 2017 Bond Transfer Restriction Release Date shall bear a legend describing or referencing the foregoing restriction on transferability. Each entity that is or that becomes a Beneficial Owner of a 2017 Bond prior to the 2017 Bond Transfer Restriction Release Date shall be deemed by the acceptance or acquisition of such beneficial ownership interest to have agreed to be bound by the provisions of this subsection 2.06(B). The transferor of a 2017 Bond transferred prior to the 2017 Bond Transfer Restriction Release Date agrees to provide notice to any proposed assignee of a beneficial ownership interest in the purchased 2017 Bond of the restriction on transfer described herein. Any Owner or Beneficial Owner effecting a transfer, sale or other disposition of a 2017 Bond, or beneficial interest therein, prior to the 2017 Bond Transfer Restriction Release Date shall, and does hereby agree to, indemnify the Authority and the Fiscal Agent against any liability that may result if such transfer, sale or other disposition is not made in accordance with this Section 2.06(B). -19- From and after the 2017 Bond Transfer Restriction Release Date, the restrictions on transfer of the 2017 Bonds described in this Section 2.06(B) shall not apply; and, from and after such date, 2017 Bonds may be transferred to any person in accordance with, and upon compliance with the requirements of, the provisions of Section 2.06(A) hereof. 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 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 -20- 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 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 2017 Bonds. One 2017 Bond for each maturity of the 2017 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 2017 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 & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any -21- 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 amounts 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 2017 Bonds that they be able to obtain certificated 2017 Bonds, the 2017 Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names 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 2017 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 2017 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 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 -22- of the Bonds hereunder on a parity with all other Bonds Outstanding hereunder. The Authority may issue Parity Bonds subject to the following specific conditions precedent: (A) Current Compliance. The Authority shall be in compliance in all material respects 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 at least equal to the Reserve Requirement. (D) Value -to -Lien Ratio. The District Value shall be at least three times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in the District subject to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of land within the District (the "Other District Bonds") equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on parcels of land within the District, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year. For purposes of this Section 2.14(D), there shall be excluded from the principal amount of any Parity Bonds the portion thereof (if any) representing amounts on deposit in an escrow fund established by the Authority with the Fiscal Agent that can only be (i) released from such escrow fund to the Improvement Fund if the Escrow Release Test is satisfied in respect of the portion to be so moved to the Improvement Fund, or (ii) used to redeem Bonds on the next available redemption date if the Escrow Release Test is not satisfied with respect to any funds in such escrow fund within no more than three (3) years from the date of deposit of funds into the escrow fund. (E) The Special Tax Coverage. The Authority shall obtain a certificate of a Tax Consultant to the effect that the amount of the maximum Special Taxes that may be levied in each Fiscal Year during the term of the Bonds and the proposed Parity Bonds on Taxable Property (as defined in the Rate and Method of Apportionment of Special -23- Taxes) not then delinquent in the payment of Special Taxes theretofore levied on such property, based upon the status of the land in the District as of the date of issuance of the Parity Bonds, less an amount sufficient to pay annual Administrative Expenses (as determined by the Treasurer), shall be at least one hundred ten percent (110°/x) of the total Annual Debt Service for each such Fiscal Year on the Bonds and the proposed Parity Bonds. (F) Escrow Release. There are no funds in any escrow fund described in the last sentence of subsection (D) above. (G) 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), (D), (E) and (F) 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. Notwithstanding the foregoing, the Authority may issue Refunding Bonds as Parity Bonds without the need to satisfy the requirements of subsections (D), (E) and (F) above, and without limitation on the number of series of such Refunding Bonds; and, in connection therewith, the Officer's Certificate in clause (G) above need not make reference to said subsections (D), (E) and (F). 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. -24- ARTICLE III ISSUANCE OF 2017 BONDS Section 3.01. Issuance and Delivery of 2017 Bonds. At any time after the execution of this Agreement, the Authority may issue the 2017 Bonds for the District in the aggregate principal amount set forth in Section 2.01 and deliver the 2017 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 2017 Bonds in accordance with the provisions of the Act, the Resolution and this Agreement, to complete the prepayment of the special taxes authorized to be levied for the Authority's Community Facilities District No. 03-02 (Roripaugh Ranch) on property in the District, to authorize the payment of Costs of Issuance from the proceeds of the 2017 Bonds, to authorize withdrawals from the Improvement Fund, and to do and cause to be done any and all acts and things necessary or convenient for delivery of the 2017 Bonds to the Original Purchaser. 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. The Project 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. -25- ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of 2017 Bonds and Other Moneys. The proceeds of the purchase of the 2017 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: (A) deposit $ in the Costs of Issuance Fund; (B) deposit $ in the Reserve Fund (being an amount equal to the initial Reserve Requirement); (C) deposit $ to a temporary account on the records of the Fiscal Agent hereby created for such purpose, for immediate transfer to the Treasurer, for deposit by the Treasurer in the Administrative Expense Fund; (D) deposit $ in the Improvement Fund; and (E) transfer $ to the Escrow Bank for deposit in the Refunding Fund established under the Escrow Agreement, said amount representing a prepayment in whole of special taxes authorized to be levied by the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) on property in the District. 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. 16-01 (Roripaugh Ranch Phase 2) 2017 Improvement Fund (the "Improvement Fund"). Deposits shall be made to the Improvement Fund as required by Section 4.01(D) and clause (iv) of the second paragraph of Section 4.06(A). Moneys in the Improvement Fund shall be held 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), 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. In making disbursements from the Improvement Fund, the Fiscal Agent shall use amounts deposited thereto pursuant to Section 4.01(D) and any proceeds of any Parity Bonds deposited thereto, and any investment earnings on such amounts, before using any amounts deposited to the Improvement Fund pursuant to clause (iv) of the second paragraph of Section 4.06(A) and any investment earnings thereon. -26- 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. 16-01 (Roripaugh Ranch Phase 2) 2017 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). Moneys in the Costs of Issuance Fund shall be held 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 2017 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 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. 16-01 (Roripaugh Ranch Phase 2) Reserve Fund (the "Reserve Fund"), to the credit of which a deposit shall be made as required by Section 4.01(B) equal to the Reserve Requirement as of -27- the Closing Date for the 2017 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 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, 2017, 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 "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. -28- (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. 16-01 (Roripaugh Ranch Phase 2) 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 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. Notwithstanding the foregoing, amounts in the Bond Fund may be used for the purposes set forth in Section 2.03(C). (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 Section 4.05(B)(i), the Fiscal Agent shall apply the available funds first to the payment of -29- 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. 16-01 (Roripaugh Ranch Phase 2) 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, 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, $50,000.00), 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; (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 -30- the Treasurer to the Fiscal Agent) directly in the Special Tax Prepayments Account established pursuant to Section 4.05(A); and (iv) any Special Tax Revenues constituting the portion, if any, of the Special Tax A Requirement (as defined in the Rate and Method of Apportionment), that is to pay directly for the acquisition or construction of any portion of the Project shall be separately identified by the Authority and shall be deposited by the Fiscal Agent in the Improvement Fund so long as the Improvement Fund has not theretofore been closed pursuant to Section 4.02(D), and if the Improvement Fund has been closed, then such amount shall be retained by the Authority to be used to pay Project costs. Moneys in the Special Tax Fund shall be held 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 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 (i) to the Administrative Expense Fund, from time to time, if monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund; (ii) to such other fund or account established to pay debt service on or administrative expenses with respect to any bonds or other debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under Section 3.02 of this Agreement; or (iii) to such other fund or account established by the Authority to be used for any lawful purpose under the Act and otherwise in accordance with the provisions of the Rate and Method of Apportionment of Special Taxes. (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. 16-01 (Roripaugh Ranch Phase 2) Administrative Expense Fund (the "Administrative Expense Fund"), to the credit of which deposits shall be made as required by Sections 4.01(C) and 4.03(B), and clause (i) of the second paragraph of Section 4.06(A). -31- Moneys in the Administrative Expense Fund shall be held 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 $30,000.00 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. -32- 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. -33- 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 installments 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 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: -34- (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 payment of Special Taxes in the aggregate amount of $7,500.00 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 (i) the amount in the Reserve Fund is at least equal to the Reserve Requirement, and (ii) the amounts then on deposit in the Special Tax Fund and the Bond Fund are sufficient to pay the scheduled debt service due on the Bonds on the succeeding September 1 and March 1 without the need for any draw on the Reserve Fund. 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 2017 Bonds are not so used as to cause the 2017 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 2017 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 2017 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 -35- 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 2017 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. 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 2017 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 2017 Bonds would have caused the 2017 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Section 5.15. Yield of the 2017 Bonds. In determining the yield of the 2017 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 2017 Bonds redeemed. Section 5.16. Maintenance of Tax -Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the 2017 Bonds from the gross income of the Owners of the 2017 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 2017 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 -36- 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 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. -37- 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; provided, however, that any such investment shall be made by the Fiscal Agent only if, prior to the date on which such investment is to be made, the Fiscal Agent shall have received an Officer's Certificate specifying a specific money market fund into which the funds shall be invested and, if no such Officer's Certificate is so received, the Fiscal Agent shall hold such moneys uninvested. 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 its terms matures 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 -38- 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. 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 -39- 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. 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 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. -40- 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 -41- Fiscal Agent hereunder, in trust for the benefit of the Owners of the Bonds. In 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. -42- 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. 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 -43- 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 obligation of the Authority arising under this Section shall be limited solely to amounts on deposit in the Administrative Expense Fund. -44- 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. -45- 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. 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. -46- 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 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. -47- 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, 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 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 -48- 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 92590 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 -49- 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): U.S. Bank National Association 633 W. Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Reference: Temecula CFD 16-01 (Roripaugh Ranch Phase 2) 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 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, 2018, 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 -50- 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 and 53411 of the California Government Code. (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 Moneys. 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 pledge or lien under this Agreement, 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. -51- 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. 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. -52- IN WITNESS WHEREOF, the Authority caused this Fiscal Agent Agreement to be executed all as of February 1, 2017. Attest: By: Randi Johl, Secretary TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) By: Aaron Adams, Executive Director U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer [Signature page to Fiscal Agent Agreement — CFD 16-01 (Roripaugh Ranch Phase 2)] 20009.13:J13843 S-1 EXHIBIT A FORM OF 2017 BOND PRIOR TO THE "2017 BOND TRANSFER RESTRICTION RELEASE DATE," AS DEFINED IN THE FISCAL AGENT AGREEMENT REFERRED TO BELOW, THIS BOND IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2.06(B) OF THE FISCAL AGENT AGREEMENT. PRIOR TO THE 2017 BOND TRANSFER RESTRICTION RELEASE DATE, NO TRANSFER, SALE OR OTHER DISPOSITION OF THIS BOND, OR ANY BENEFICIAL INTEREST HEREIN, MAY BE MADE EXCEPT TO A PERSON THAT THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT IS PURCHASING THIS BOND FOR ITS OWN ACCOUNT FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTING THIS BOND. EACH ENTITY THAT IS OR THAT BECOMES AN OWNER OR A BENEFICIAL OWNER OF THIS BOND PRIOR TO THE 2017 BOND TRANSFER RESTRICTION RELEASE DATE IS DEEMED BY THE ACCEPTANCE OR ACQUISITION OF THIS BOND OR SUCH BENEFICIAL OWNERSHIP INTEREST TO HAVE AGREED TO BE BOUND BY THE PROVISIONS OF SAID SECTION 2.06(B). ANY OWNER OR BENEFICIAL OWNER OF THIS BOND EFFECTING A TRANSFER, SALE OR OTHER DISPOSITION OF THIS BOND, OR BENEFICIAL INTEREST HEREIN, PRIOR TO THE 2017 BOND TRANSFER RESTRICTION RELEASE DATE AGREES BY ACCEPTANCE OF THIS BOND TO INDEMNIFY THE TEMECULA PUBLIC FINANCING AUTHORITY AND THE FISCAL AGENT AGAINST ANY LIABILITY THAT MAY RESULT IF SUCH TRANSFER, SALE OR OTHER DISPOSITION IS NOT MADE IN ACCORDANCE WITH SECTION 2.06(B) OF THE FISCAL AGENT AGREEMENT. UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE No. $ TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) 2017 SPECIAL TAX BOND INTEREST RATE MATURITY DATE September 1, REGISTERED OWNER: BOND DATE February _, 2017 CUSIP 87972Y PRINCIPAL AMOUNT: DOLLARS The Temecula Public Financing Authority (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (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 A-1 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 September 1, 2017, 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 January 24, 2017 (the "Resolution"), and being issued pursuant to the provisions of Section 53311 et seq. of the California Government Code (the "Act"), for the purpose of financing certain public facilities within and in the vicinity of the District (the "Project") and to prepay certain special taxes so as to eliminate a lien on property in the District, and is one of the first series of such bonds designated "Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax 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 February 1, 2017, 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. A-2 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, 2028 are subject to redemption prior to their stated maturity on any interest payment date occurring on or after September 1, 2027, as a whole or in part in an amount equal to $5,000 or any integral multiple thereof and among maturities as provided in the Agreement, and by lot within a maturity, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium 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 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 1September 1) Sinking Payments A-3 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 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, in whole, or in part in any amount equal to $5,000 or any integral multiple thereof and 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, 2017 103% to and including March 1, 2024 September 1, 2024 and March 1, 2025 102 September 1, 2025 and March 1, 2026 101 September 1,2026 and any Interest Payment 100 A-4 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. No transfer, sale or other disposition of this Bond may be made except in accordance with the restrictions on transfer set forth in Section 2.06(B) of the Fiscal Agent Agreement. Also, 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 A-5 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-6 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. TEMECULA PUBLIC FINANCING AUTHORITY By: Michael S. Naggar, Chairperson ATTEST: By: Randi Johl, Secretary 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 , 2017. A-7 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 guarantor. A-8 Note: The signature(s) on this Assignment must 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. Quint & Thimmig LLP 4/6/16 5/6/16 6/15/16 6/28/16 12/22/16 1/6/17 FISCAL AGENT AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent dated as of February 1, 2017 relating to: $ Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2017 Special Tax Refunding Bonds 20009.14:J13847 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 2017 Bonds 12 Section 2.03. Redemption 14 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 18 Section 2.11. Limited Obligation 18 Section 2.12. No Acceleration 18 Section 2.13. Book -Entry System 18 Section 2.14. Issuance of Parity Bonds 20 ARTICLE III ISSUANCE OF 2017 BONDS Section 3.01. Issuance and Delivery of 2017 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 2017 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 28 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 2017 Bonds 32 Section 5.16. Maintenance of Tax -Exemption 32 -i- 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 33 Section 5.20. No Additional Bonds 33 Section 5.21. Authority Bid at Foreclosure Sale 33 ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY 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 42 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 43 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments 43 Section 8.07. Amendatory Endorsement of Bonds 43 ARTICLE IX 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 48 Section 9.12. Conclusive Evidence of Regularity 48 Section 9.13. Payment on Business Day 48 Section 9.14. Counterparts 48 EXHIBIT A — FORM OF 2017 BOND FISCAL AGENT AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2017 Special Tax Refunding Bonds THIS FISCAL AGENT AGREEMENT (the "Agreement"), dated as of February 1, 2017, 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. 03-02 (Roripaugh Ranch) (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 05-01 of the Board of Directors of the Authority adopted on January 11, 2005 (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 issued by the Authority for the District, secured by said special taxes under the Act; WHEREAS, under the provisions of the Act, on April 27, 2006 the Authority, for and on behalf of the District, issued $51,250,000 initial principal amount of its Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds (the "2006 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 2006 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 January 24, 2017, 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. 03-02 (Roripaugh Ranch) 2017 Special Tax Refunding Bonds (the "2017 Bonds") to provide moneys to defease and currently refund a portion of the outstanding 2006 Bonds and provided that said issuance would be in accordance with this Agreement, and authorized the execution hereof; -1- 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 2017 Bonds that the Authority enter into this Agreement to provide for the issuance of the 2017 Bonds, the disbursement of proceeds of the 2017 Bonds, the disposition of the special taxes securing the 2017 Bonds and the administration and payment of the 2017 Bonds; and WHEREAS, the Authority has determined that all things necessary to cause the 2017 Bonds, when executed by the Authority for and on behalf of 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 and on behalf of 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 2017 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 -3- 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 or Secretary of the Authority, or any other officer or employee of the Authority or the City 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, 2017. "Bonds" means the 2017 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. "Closing Date" means February _, 2017, being the date upon which there is a physical delivery of the 2017 Bonds in exchange for the amount representing the purchase price of the 2017 Bonds by the Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the 2017 Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the 2017 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 2017 Bonds, executed as of the Closing Date by the Authority and Albert A. Webb Associates, as dissemination agent, 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 2017 Bonds and the refunding and defeasance of the 2006 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 2017 Bonds and the refunding and defeasance of the 2006 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, municipal advisor's fees, rating agency fees, costs of bond insurance and any reserve fund surety bond, verification agent fees, charges for execution, transportation and safekeeping of the 2017 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. -5- "District" means the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch), formed by the Authority under the Act and the Resolution of Formation. "Escrow Agreement" means the Escrow Agreement, dated as of February 1, 2017, 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. -6- "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. "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 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. "Interest Payment Dates" means March 1 and September 1 of each year, commencing September 1, 2017. "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, the first purchaser of the 2017 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 is the registered owner of any particular 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. -7- "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 S&P, and which have a maximum term to maturity not to exceed three years. (c) Unsecured certificates of deposit, time deposits and bankers' acceptance of any bank the short-term obligations of which are rated on the date of purchase "A-1+" or better by S&P and "P-1" by Moody's and or certificates of deposit (including those of the Fiscal Agent, its parent and its affiliates) secured at all times by collateral that may be used by a national bank for purposes of satisfying its obligations to collateralize pursuant to federal law which are issued by commercial banks, savings and loan associations or mutual savings bank whose short-term obligations are rated on the date of purchase A-1 or better by S&P and Moody's.(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 S&P, 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 S&P, 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 S&P at the time of initial investment. The investment agreement shall be subject to a downgrade provision with -8- 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 S&P from the practice of rating that debt, or reduced below "AA-" by S&P 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 S&P, 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. -9- "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 initial principal amount of the Bonds. The Reserve Requirement as of the Closing Date is $ "Resolution" means Resolution No. TPFA 17-, adopted by the Board of Directors of the Authority on January 24, 2017. "Resolution of Formation" means Resolution No. TPFA 05-01, adopted by the Board of Directors of the Authority on January 11, 2005. "S&P" means S&P Global Ratings, 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 Fund" means the fund by that name established by Section 4.06(A) hereof. "Special Tax Prepayments" means the proceeds of any prepayments of the Special Tax 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 levied within the District pursuant to the Act, the Ordinance, the Rate and Method of Apportionment of Special Taxes 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. "2006 Bonds" means the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds. "2017 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. 2017 Bonds in the aggregate principal amount of Million Thousand Dollars ($ ) are authorized to be issued by the Authority for and on behalf of 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 2017 Bonds are hereby designated as the "Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2017 Special Tax Refunding Bonds." Section 2.02. Terms of the 2017 Bonds. (A) Form; Denominations. The 2017 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 2017 Bonds. The 2017 Bonds shall be dated the Closing Date. (C) CUSIP Identification Numbers. "CUSIP" identification numbers shall be imprinted on the 2017 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2017 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 2017 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 2017 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: -12- Maturity Date (September 1) Principal Amount Interest Rate (E) Interest. The 2017 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 2017 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 Closing Date; provided, however, that if at the time of authentication of a 2017 Bond, interest is in default thereon, such 2017 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 2017 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 2017 Bonds and any premium on the 2017 Bonds are payable by check in lawful money of the United States of America upon surrender of the 2017 Bonds at the Principal Office of the Fiscal Agent. All 2017 Bonds paid by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled 2017 Bonds and issue a certificate of destruction thereof to the Authority upon the Authority's request. -13- Section 2.03. Redemption. (A) Redemption Dates. (i) Optional Redemption. The 2017 Bonds maturing on or after September 1, 2028 are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, 2027, as a whole, or in part in an amount equal to $5,000 or any integral multiple thereof and among maturities so as to maintain substantially level debt service on the Bonds, and by lot within a maturity, at a redemption price equal to the principal amount of the 2017 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. (ii) Mandatory Sinking Payment Redemption. The 2017 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 table shall be reduced to the extent practicable so as to maintain level debt service on the 2017 Bonds, as a result of any prior partial redemption of the 2017 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 2017 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), in whole, or in part in an amount equal to $5,000 or any integral multiple thereof allocated among maturities of the 2017 Bonds 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 2017 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 September 1, 103% 2017 to and including March 1, September 1, and March 1, 102 September 1, and March 1, 101 September 1, and any Interest Payment 100 Date thereafter -14- (B) Notice to Fiscal Agent. The Authority shall give the Fiscal Agent written notice of its intention to redeem 2017 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 2017 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of 2017 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 2017 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 2017 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, or by such other means as is acceptable to the recipient thereof, 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 Owners of any 2017 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 2017 Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2017 Bonds are to be called for redemption, shall designate the CUSIP numbers and, if applicable, Bond numbers of the 2017 Bonds to be redeemed by giving the individual CUSIP number and, if applicable, Bond number of each 2017 Bond to be redeemed or if Bond numbers have been assigned by the Fiscal Agent to the 2017 Bonds shall state that all 2017 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2017 Bonds of one or more maturities have been called for redemption, shall state as to any 2017 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2017 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 2017 Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the 2017 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 2017 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 2017 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 2017 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2017 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 2017 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 2017 Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the -15- CUSIP number identifying, by issue and maturity, the 2017 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 2017 Bonds (other than a redemption pursuant to Section 2.03(A)(ii)), the Fiscal Agent shall select the 2017 Bonds to be redeemed, from all 2017 Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer (who shall specify 2017 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 2017 Bonds redeemed in part only, the Authority shall execute and the Fiscal Agent shall authenticate and deliver to the Owner, at the expense of the Authority, a new 2017 Bond or 2017 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2017 Bond or 2017 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 2017 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2017 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. (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 2017 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. 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 -16- 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). 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 -17- 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 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. 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 2017 Bonds. One 2017 Bond for each maturity of the 2017 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 2017 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. -18- 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 & 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 amounts 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 2017 Bonds that they be able to obtain certificated 2017 Bonds, the 2017 Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names the Owners shall designate at that time, in accordance with Section 2.06. -19- To the extent that the Beneficial Owners are designated as the transferee by the Owners, in accordance with Section 2.06, the 2017 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 2017 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 in all material respects 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 at least 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 2017 BONDS Section 3.01. Issuance and Delivery of 2017 Bonds. At any time after the execution of this Agreement, the Authority may issue the 2017 Bonds for the District in the aggregate principal amount set forth in Section 2.01 and deliver the 2017 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 2017 Bonds in accordance with the provisions of the Act, the Refunding Law, the Resolution and this Agreement, to redeem the 2006 Bonds with proceeds of the 2017 Bonds, to authorize the payment of Costs of Issuance from the proceeds of the 2017 Bonds, to authorize withdrawals from the Improvement Fund, and to do and cause to be done any and all acts and things necessary or convenient for delivery of the 2017 Bonds to the Original Purchaser and the redemption of the 2006 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. The Project 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 2017 Bonds and Other Moneys. (A) The proceeds of the purchase of the 2017 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 2006 Bonds as follows: (i) transfer from the administrative expense fund held with respect to the 2006 Bonds to the Treasurer for deposit by the Treasurer in the Administrative Expense Fund, the amount on deposit in such administrative expense fund; (ii) transfer from the special tax fund held with respect to the 2006 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, the remaining $ on deposit in such special tax fund; (iii) transfer from the reserve fund held with respect to the 2006 Bonds to the Fiscal Agent for deposit in the Improvement Fund, the amount on deposit in such reserve fund; (iv) transfer from the bond fund held with respect to the 2006 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 accounts within the improvement fund held with respect to the 2006 Bonds to the Fiscal Agent for deposit by the Fiscal Agent to the Improvement Fund, all amounts in such accounts. (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. 03-02 (Roripaugh Ranch) 2017 Improvement Fund (the "Improvement -22- Fund"). A deposit shall be made to the Improvement Fund as required by Sections 4.01(B)(iii) and 4.01(B)(v). Moneys in the Improvement Fund shall be held 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), 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; provided, however, that amounts in the Improvement Fund may only be invested in (i) Federal Securities of the character described in clauses (i) and (ii)(b) and (d) of the definition "Federal Securities" in Section 1.03, and (ii) Permitted Investments of the character described in clauses (b), (d), (e), (g), (h) and (i) of the definition "Permitted Investments" in Section 1.03, but only so long as any such investment is not secured by any federal guarantee, such as a letter of credit or other guarantee of the Federal Home Loan Bank or other federal agency, except that guarantees related to the following obligations are permitted: FNMA and Freddie Mac obligations, Federal Housing Administration (FHA) guarantees, REFCORP obligations and Government National Mortgage Association (GNMA) obligations. 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. 03-02 (Roripaugh Ranch) 2017 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 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 -23- 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 2017 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 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. 03-02 (Roripaugh Ranch) 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 2017 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 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, 2017, 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 -24- 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 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. 03-02 (Roripaugh Ranch) 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 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. Notwithstanding the foregoing, amounts in the Bond Fund may be used for the purposes set forth in Section 2.03(C). -25- (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 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. 03-02 (Roripaugh Ranch) 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 -26- 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, $35,000.00), 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 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 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 (i) to the Administrative Expense Fund, from time to time, if monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund; (ii) to such other fund or account established to pay debt service on or administrative expenses with respect to any bonds or other debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under Section 3.02 of this Agreement; or (iii) to such other fund or account established by the -27- Authority to be used for any lawful purpose under the Act and otherwise in accordance with the provisions of the Rate and Method of Apportionment of Special Taxes. (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. 03-02 (Roripaugh Ranch) 2016 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(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 $20,000.00 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. -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 installments 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 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: -30- (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 payment of Special Taxes in the aggregate amount of $7,500.00 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 (i) the amount in the Reserve Fund is at least equal to the Reserve Requirement, and (ii) the amounts then on deposit in the Special Tax Fund and the Bond Fund are sufficient to pay the scheduled debt service due on the Bonds on the succeeding September 1 and March 1 without the need for any draw on the Reserve Fund. 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 2006 Bonds and of the 2017 Bonds are not so used as to cause the 2017 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 2017 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 2017 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 -31- 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 2017 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. 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 2017 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 2017 Bonds would have caused the 2017 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Section 5.15. Yield of the 2017 Bonds. In determining the yield of the 2017 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 2017 Bonds redeemed. Section 5.16. Maintenance of Tax -Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the 2017 Bonds from the gross income of the Owners of the 2017 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 2017 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 -32- 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 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; provided that investments of amounts in the Improvement Fund shall be restricted as provided in Section 4.02(C). 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; provided, however, that any such investment shall be made by the Fiscal Agent only if, prior to the date on which such investment is to be made, the Fiscal Agent shall have received an Officer's Certificate specifying a specific money market fund into which the funds shall be invested and, if no such Officer's Certificate is so received, the Fiscal Agent shall hold such moneys uninvested. 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 its terms matures 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. -34- 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. 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. -35- 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. 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 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 -37- Fiscal Agent hereunder, in trust for the benefit of the Owners of the Bonds. In 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. -38- 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. 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 -39- 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 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. -41- 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. 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. -42- 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 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, 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 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 -44- 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 92590 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 -45- 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): U.S. Bank National Association 633 W. Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Reference: Temecula CFD 03-02 (Roripaugh Ranch) 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 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, 2018, 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 -46- 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 and 53411 of the California Government Code. (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 Moneys. 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 pledge or lien under this Agreement, 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. -47- 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. 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 February 1, 2017. Attest: By: Randi Johl, Secretary TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03- 02 (RORIPAUGH RANCH) By: Aaron Adams, Executive Director U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer [Signature page to Fiscal Agent Agreement — CFD 03-02 (Roripaugh Ranch)] 20009.14:J13847 S-1 No. EXHIBIT A FORM OF 2017 BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) 2017 SPECIAL TAX REFUNDING BOND $ INTEREST RATE MATURITY DATE BOND DATE CUSIP September 1, February _, 2017 87972Y 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. 03-02 (Roripaugh Ranch) (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 September 1, 2017, 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 A-1 January 24, 2017 (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 portion of the outstanding Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds, and is one of the series of bonds designated "Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2017 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 February 1, 2017, 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, 2028 are subject to redemption prior to their stated maturity on any interest payment date occurring on or after September 1, 2027, as a whole or in part in an amount equal to $5,000 or any integral multiple thereof among maturities as provided in the Agreement, and by lot within a maturity, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. 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 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, in whole, or in part in any amount equal to $5,000 or any integral multiple thereof 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 September 1, 103% 2017 to and including March 1, September 1, and March 1, 102 September 1, and March 1, 101 September 1, and any Interest Payment 100 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. 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. A-3 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. 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: By: Randi Johl Secretary A-4 TEMECULA PUBLIC FINANCING AUTHORITY By: Michael S. Naggar, 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-5 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 guarantor. A-6 Note: The signature(s) on this Assignment must 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. SYCR DRAFT OF 1/3/17 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) 2017 SPECIAL TAX BONDS BOND PURCHASE AGREEMENT February _, 2017 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Temecula, California Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (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 (the "Authority"), acting on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), which, upon acceptance, will be binding upon the Authority and upon the Underwriter. This offer is made subject to its acceptance by the Authority as evidenced by its execution and delivery to the Underwriter prior to 5:00 p.m. PST on the date hereof and, if not accepted prior thereto, 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 (as such term is 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 15B of the Securities Exchange Act of 1934, as amended) to either the Authority or the District; (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); (iv) the Underwriter has financial interests that may differ from, and be adverse to, those of the Authority and the District; and (v) 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. 16-01 (Roripaugh Ranch Phase 2) Special Tax Refunding Bonds, Series 2017 (the "Bonds") in the aggregate principal amount specified in Exhibit A hereto. The Bonds shall be dated the Closing Date (as such term is defined below), shall bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing September 1, 2017) at the 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 February 1, 2017 (the "Fiscal Agent Agreement"), approved by Resolution No. TPFA 17-_ adopted by the Board of Directors of the Authority, (the "Board of Directors"), as the legislative body of the Authority and the District, on January 24, 2017 (the "Resolution of Issuance"). The Bonds and interest thereon will be payable from Special Tax Revenues (as that term is defined in the Fiscal Agent Agreement) derived from a special tax which is referred to in the Fiscal Agent Agreement as "Special Tax A" (the "Special Tax") and which is to be levied and collected on the taxable land within the District in accordance with Resolution No. TPFA 16-04 adopted by the Board of Directors on April 26, 2016 (the "Resolution of Formation") and Ordinance No. TPFA 16-01 (the "Ordinance"). Proceeds of the sale of the Bonds will be used in accordance with the Fiscal Agent Agreement 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 "Act"), to: (i) prepay certain special taxes applicable to property within the District (the "CFD No. 03-02 Special Taxes"), (ii) pay the costs of the acquisition and construction of certain public facilities necessary for the development of the District (the "Facilities"), (iii) fund a reserve fund for the Bonds, (iv) pay certain administrative expenses of the Authority and (v) pay the costs of issuing the Bonds. The Resolution of Formation, the Resolution of Issuance, Resolution Nos. TPFA 16-05 through TPFA 16-07 and the Ordinance are collectively referred to herein as the "District Resolutions." (c) At or prior to the execution of this Bond Purchase Agreement, except to the extent waived by the Underwriter, the District shall have caused to be delivered to the Underwriter a certificate of each of Roripaugh Valley Restoration, LLC and Wingsweep Corporation (each, an "Owner" and, collectively, the "Owners") on its behalf its chief financial officer or, if it does not have a chief financial officer, by the person holding the position with responsibilities most similar to those of a chief financial officer, or by such other officer as may have been approved in writing by the Underwriter, in the form attached hereto as Exhibit B, with only such changes thereto as shall have been accepted by the Underwriter. (d) Subsequent to its receipt of the Authority's 15c2-12 Certificate, in substantially the form attached hereto as Exhibit C, deeming the Preliminary Official Statement for the Bonds, dated , 2017 (the "Preliminary Official Statement"), final for purposes of Rule 15c2-12 ("Rule 15c2-12") of the Securities and Exchange Commission (the "SEC"), 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 from the Preliminary Official Statement 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 Continuing Disclosure Agreement of the Authority (the "Authority Disclosure Agreement"), the Joint Community Facilities Agreement by and between the City of Temecula and the Authority (the "JCFA"), the Acquisition Agreement, dated as of February 1, 2017, by and between Roripaugh Valley Restoration, 2 LLC and the Authority (the "Acquisition 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. (e) Except as otherwise disclosed in writing and agreed to by the Authority, the Underwriter agrees to make a bona fide public offering of the Bonds at the initial public offering price or prices set forth in Exhibit A hereto; provided, however, that the Underwriter reserves the right to: (i) change such prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds, (ii) sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the aforesaid initial offering prices and (iii) 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 discontinue such stabilizing, if commenced, at any time without prior notice. A "bona fide public offering" shall include an offering to institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. (f) At 8:00 a.m., Pacific Standard Time, on February _, 2017, 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 the Fiscal Agent, 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 (as such term is defined below), or at such other place as shall be mutually agreed upon by the Authority and the Underwriter, the other 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 Act. 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. 2016-0180604 (the "Notice of Special Tax Lien"). (The District Resolutions and the 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, modified or supplemented. The District is duly organized and validly existing as a community facilities district under the laws of the State of California (the "State"). The Authority has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to execute, deliver and perform its obligations under this Purchase 3 Agreement, the Fiscal Agent Agreement, the Authority Disclosure Agreement, the JCFA and the Acquisition Agreement (collectively, the "Authority Documents") and to carry out all transactions contemplated by each of the Authority Documents and the Official Statement; and (ii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Fiscal Agent Agreement and as provided herein. (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 Act an election within the District to approve the levy of the Special Tax within the District and to authorize bonded indebtedness of the District, (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 levy 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 and to the limitations on legal remedies against public agencies in the State. (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 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, indenture, 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 blue sky or other states securities law filings, as to which the Authority makes no representations, all approvals, consents, authorizations, elections and orders 4 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 funds for the payment of the Bonds has been duly and lawfully authorized and may be levied under the Act, the State Constitution and the applicable laws of the State; and such Special Tax constitutes a valid and legally binding continuing lien on the properties on which it will be levied (except to the extent that any of such property prepays its Special Tax obligation); 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 Tax 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 will not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without prior written notification of the Underwriter. 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 reasonable 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; and 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. 5 (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) which seeks to restrain or to enjoin (A) the development of any of the land within the District in the manner described in the Preliminary Official Statement and the Official Statement, (B) the issuance, sale or delivery of the Bonds, (C) the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or (D) 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 which in any way contests or affects the validity or enforceability of the Bonds, the Formation Documents, the Authority Documents, or any action contemplated by any of said documents, or (iii) which in any way contests 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 or the District 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 or the District 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 (except the information under the caption ["THE DISTRICT — Property Ownership and Development,"] any information supplied by the Underwriter, any information regarding DTC or its book -entry system, and CUSIP numbers, as to which no view is expressed) was as of the date thereof, and the information contained in the Official Statement (except the information under the caption ["THE DISTRICT — Property Ownership and Development,"] any information supplied by the Underwriter, any information regarding DTC or its book -entry system, and CUSIP numbers, 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 6 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 material breach of any reporting obligation that it has undertaken under Rule 15c2-12. To the best knowledge of the Authority neither the City of Temecula (the "City") nor any public agency for which the City Council of the City serves as the legislative body is, or has been within the last five (5) years, in material breach of any reporting obligation that it has undertaken under Rule 15c2-12. (p) Prior to the end of the underwriting period, 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 (which consent shall not be unreasonably delayed or withheld). (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 with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Quint & Thimmig LLP ("Bond Counsel") 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. 7 (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 (as 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; (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 SEC, 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 State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority or the District, their respective properties, incomes, or securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Authority to provide for the prepayment of the CFD No. 03-02 Special Taxes and/or to finance the acquisition and construction of the Facilities 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 Preliminary Official Statement or the Official Statement, or results in the Preliminary Official Statement or 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 8 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 SEC or any other governmental authority having jurisdiction; (7) the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (8) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; (9) there shall have been any material adverse change in the financial affairs of the Authority or the District; (10) there shall be filed or threatened any litigation described in Section 2(i); (11) 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 (12) 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 Formation Documents and the Authority Documents, together with a certificate dated as of the Closing Date of the Secretary of the Authority to the effect that each such 9 document is a true, correct and complete copy of the one duly approved or adopted by the Board of Directors; (2) The Preliminary Official Statement and the Official Statement; (3) An unqualified approving opinion of Bond Counsel, dated the Closing Date and addressed to the Authority, in the form attached to the Official Statement as [Appendix E], and a letter from Bond 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 of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that (i) the JCFA, the Acquisition 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; (iii) the information contained in the Official Statement on the cover and under the captions ["INTRODUCTION," "PLAN OF FINANCE," "THE 2017 BONDS (excluding the subheading "Debt Service Schedule")," "SECURITY FOR THE 2017 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 Act, the Bonds and the Fiscal Agent Agreement and the exclusion from gross income for federal income tax purposes and exemption from State personal income taxes of interest on the Bonds present a fair and accurate summary of such provisions; and (iv) the Special Taxes have been duly and validly authorized in accordance with the provisions of the Act; (5) An opinion, dated the Closing Date and addressed to the Authority and the Underwriter of Quint & Thimmig LLP, in its capacity as the Authority's disclosure counsel ("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 Special Tax Consultant (as such term is defined below), the Underwriter, the Owners, the Appraiser (as such term is defined below), Empire Economics (as such term is defined below), the Special Tax Consultant (as such term is defined below) 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 10 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 ("Underwriter's Counsel"), 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, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement; (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, in all material respects, 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 development of the land within the District as described in the Official Statement or 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, 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; and (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 11 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; (9) A certificate of each Owner, executed on its behalf by its chief financial officer or, if it does not have a chief financial officer, by the person holding the position with responsibilities most similar to those of a chief financial officer, or by such other officer as may have been approved in writing by the Underwriter, and dated the Closing Date, to the effect that the certifications, representations and warranties set forth in the certificate of such Owner delivered pursuant to Section 1(c) hereof are true and correct in all material respects as of the Closing Date, except that all references in such certificate to the Preliminary Official Statement shall be deemed to be references to the Official Statement; (10) A letter from counsel to each Owner, dated the Closing Date and addressed to the Underwriter and the District, substantially in the form attached hereto as Exhibit D; (11) One or more certificates dated the Closing Date from Albert A. Webb Associates (the "Special Tax Consultant") addressed to the Authority and the Underwriter to the effect that (i) the Special Tax, if collected in the maximum amounts permitted from the properties in the District whose Special Tax will not have been prepaid in full at or before the Closing Date, 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 the Special Tax Consultant 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 the Special Tax Consultant 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 the Special Tax Consultant or have come to its attention that would substantially change such information set forth in the Official Statement; (12) A letter from Stephen G, White, MAI (the "Appraiser"), dated the Closing Date and addressed to the Underwriter and the Authority to the effect that it has prepared the appraisal report with respect to the property located within the District dated December 15, 2016, (the "Appraisal Report"), and that: (a) the Appraisal Report was included in the Preliminary Official Statement and the Official Statement with his permission, (b) neither the Appraisal Report nor the information in the Official Statement referring to it contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (c) no events or occurrences have been ascertained by the Appraiser or have come to the Appraiser's attention that would materially change the opinion set forth in the Appraisal Report; (13) A letter from Empire Economics, Inc. ("Empire") dated the Closing Date and addressed to the Underwriter and the Authority to the effect that it has prepared the report entitled "Market Absorption Study for the City of Temecula CFD No. 16-01 Roripaugh Ranch Pan Area", dated December 2, 2016 (the "Market Absorption Study") and that (a) the Market Absorption Study was included in the Preliminary Official Statement and the Official Statement with 12 its permission, (b) neither the summary of the Market Absorption Study nor the information regarding the Market Absorption Study described in the Preliminary Official Statement and the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (c) no events or occurrences have been ascertained by it or have come to its attention that would materially change any of the conclusions reported in the Market Absorption Study; (14) 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; (15) A certificate of the Fiscal Agent and an opinion of counsel to the Fiscal Agent, each dated the Closing Date and addressed to the Authority and the Underwriter, in form satisfactory to Bond Counsel and Underwriter's Counsel, to the effect that the Fiscal Agent has authorized the execution and delivery of the Fiscal Agent Agreement and that the Fiscal Agent Agreement is a valid and binding obligation of the Fiscal Agent enforceable in accordance with its terms; (16) Written confirmation from the Authority's financial advisor (or an affiliate thereof) 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; (17) Evidence that the federal tax information Form 8038-G has been prepared for filing; and (18) 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 of the representations and warranties of each of the Owners as set forth in the certificates delivered to them pursuant to Section 1(c) hereof, 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. 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. 13 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 Authority or 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 (including any amendment thereof or supplement thereto), 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 Montgomery Street, 35th Floor, San Francisco, CA 94104, Attention: Sara Oberlies Brown, Managing Director. 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. 14 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. PST: TEMECULA PUBLIC FINANCING AUTHORITY FOR AND ON BEHALF OF THE TEMECULA PUBLIC FINANCE AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) By: Treasurer 15 EXHIBIT A MATURITY SCHEDULE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) SPECIAL TAX REFUNDING BONDS, SERIES 2017 Maturity Date Principal (September 1) Amount Interest Rate Yield Price The purchase price of the Bonds shall be $ , which is the principal amount thereof ($ ) plus net original issue premium of $ and less Underwriter's discount of $ The Bonds shall be subject to redemption in accordance with the following: Optional Redemption. The Bonds are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after March 1, 20_, as a whole, or in part in an amount equal to $5,000 or any integral multiple thereof and 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 Bonds to be redeemed) as set forth below together with accrued interest thereon to the date fixed for redemption: [TO COME] Mandatory Sinking Payment Redemption. 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 A-1 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 (maturity) 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 (maturity) The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the Bonds as a result of any prior partial redemption of the 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 Bonds on the next Interest Payment Date for which notice of redemption can timely be given, by lot and allocated among maturities of the 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: [TO COME] A-2 EXHIBIT B TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) SPECIAL TAX REFUNDING BONDS, SERIES 2017 CERTIFICATE OF [NAME OF OWNER] In connection with the issuance and sale of the above -captioned bonds (the "Bonds"), and pursuant to the Bond Purchase Agreement (the "Bond Purchase Agreement") to be executed by and between the Temecula Public Financing Authority (the "Authority"), acting on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), and Stifel, Nicolaus & Company, Incorporated (the "Underwriter"), [Name of Owner] ("Owner") hereby certifies, represents, warrants and covenants that: 1. While the Bonds or any refunding obligations related thereto are outstanding, Owner will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the District, to challenge the adoption of the ordinance levying Special Taxes within the District, to invalidate the District or any of the Bonds or any refunding obligations, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent Owner in any way from bringing any other action, suit, proceeding, inquiry, or investigation at law or in equity relating to the following: (i) that the Special Tax has not been levied in accordance with the methodologies contained in the rate and method of apportionment of special tax (the "Rate and Method of Apportionment") pursuant to which the Special Taxes are levied, (ii) the application or use of the Special Taxes levied and collected, or (iii) the enforcement of the obligations of the Authority under any agreement between and between [Owner's Name] and the Authority or to which Owner is a party or of which it is a beneficiary. 2. All information submitted by Owner directly to, (i) the Underwriter, its counsel (Stradling Yocca Carlson & Rauth, a Professional Corporation), the District's disclosure counsel (Quint & Thimmig LLP), Albert A Webb Associates, the District or the Authority in connection with the preparation of the Preliminary Official Statement, dated , 2017 (the "Preliminary Official Statement"), (ii) Stephen G. White, MAI, in connection with the preparation of the appraisal report appearing in the Preliminary Official Statement including any updates thereto made prior to the date hereof, and (iii) Empire Economics, Inc. in connection with the preparation of the Market Absorption Study summarized in the Preliminary Official Statement, was, to the Actual Knowledge of the Undersigned, when given, true and correct in all material respects and, except for any such information that was modified or supplemented by subsequent information submitted by or on behalf of Owner or the information that is otherwise contained in the Preliminary Official Statement, no material change has occurred with respect to such information as of the date hereof. 3. As of the date hereof and subject to the cautionary statement concerning forward-looking statements on page _ of the Preliminary Official Statement, the information in the Preliminary Official Statement under the captions ["PROPERTY OWNERSHIP AND B-1 DEVELOPMENT" and "CONTINUING DISCLOSURE"], solely as such information pertains to Owner, its Affiliates (as defined herein), the property owned by Owner and/or its Affiliates in the District (the "Property"), Owner's plans for the development of the Property and Owner's contractual arrangements with respect thereto and the Owner's compliance with its undertakings to provide continuing disclosure pursuant to the SEC's Rule 15c2-12 is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4. Except as disclosed in the Preliminary Official Statement, Owner has never been adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay its debts or a reorganization or readjustment of its debts. Except as disclosed in the Preliminary Official Statement, Owner does not have any proceedings pending (with service of process to Owner having been accomplished) or, to the Actual Knowledge of the Undersigned, overtly threatened in which Owner may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its debts or obligations, be granted an extension of time to pay its debts or obligations, or be granted a reorganization or readjustment of its debts or obligations. 5. Except as disclosed in the Preliminary Official Statement, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending, or to the Actual Knowledge of the Undersigned, overtly threatened (a) in any way seeking to restrain or enjoin the development of the Property, or (b) in any way seeking to invalidate or set aside any approval or permit relating to the development of the Property. 6. Except as disclosed in the Preliminary Official Statement, no other public debt secured by a tax or assessment on the Property is in the process of being authorized and no assessment districts or community facilities districts have been or are in the process of being formed which include any portion of the Property. 7. Except as disclosed in the Preliminary Official Statement, there are no events of monetary default or events which with the passage of time would constitute a monetary default under any loan or similar credit arrangement to which Owner is a party the result of which could have a material adverse effect on the development of the Property or Owner's ability to pay Special Taxes prior to delinquency. 8. Except as disclosed in the Preliminary Official Statement, with respect to property owned by Owner or its Affiliates (as defined below) located within the boundaries of a development project, to the Actual Knowledge of the Undersigned (as defined below), within the last five years, neither Owner nor any of its Affiliates has (i) intentionally failed to pay when due any property taxes, special taxes, or assessments levied or assessed against such property, (ii) had any such property become either tax deeded to any governmental agency or the subject of judicial foreclosure proceedings for failure to pay such property taxes, special taxes, or assessments levied or assessed against such property, or (iii) failed to cure such delinquencies within forty-five days of becoming aware of such delinquencies. 9. As used in this Certificate, the term "Actual Knowledge of the Undersigned" means the knowledge that the undersigned currently has as of the date of this Certificate or has obtained through (i) interviews with such officers and responsible employees of the Owner and its Affiliates B-2 (or its members or agents) as the undersigned has reasonably determined are likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Certificate including, if the undersigned is not the chief financial officer of Owner (or, if Owner does not have a chief financial officer, the person who performs the functions usually associated with such officer) the chief financial officer or such person, and (ii) reviews of documents that were reasonably necessary for the undersigned to obtain knowledge of the matters set forth in this Certificate. 10. As used in this Certificate, the term "Affiliate" of Owner means any person directly (or indirectly through one or more intermediaries) that exercises managerial control over Owner or that is under managerial control of Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property, or to Owner's ability to pay the special taxes levied on the Property prior to delinquency). 11. Until the date which is twenty-five days after the "end of the underwriting period" (as defined in Section 2(g) of the Bond Purchase Agreement), if any event shall occur of which Owner becomes 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 under the caption referenced in Section 3 hereof regarding Owner, its Affiliates, the Property, or the development of the Property, in light of the circumstances existing at such time, not misleading in any material respect, Owner shall forthwith give written notice thereof to the Authority and the Underwriter and shall reasonably cooperate with them in furnishing any information available to Owner for any supplement to the Official Statement necessary so that the statements in the Official Statement under the caption referenced in Section 3 hereof, as so supplemented, will not be misleading in any material respect in light of the circumstances existing at such time. 12. All capitalized terms not otherwise defined herein shall have the meaning set forth in the Bond Purchase Agreement. 13. [FOR RORIPAUGH VALLEY RESTORATION, LLC] The Acquisition Agreement, dated as of February 1, 2017, by and between the Owner and the Authority and the Owner's Continuing Disclosure Agreement each constitutes a valid, legal and binding obligation of the Owner and (assuming due authorization, execution and delivery by the respective other party) is enforceable in accordance with its 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. Dated: , 2017 [NAME OF OWNER] By: Name: : Title: : B-3 EXHIBIT C TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) SPECIAL TAX REFUNDING BONDS, SERIES 2017 RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he or she is the Executive Director of the Temecula Public Financing 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. 16-01 (Roripaugh Ranch Phase 2) Special Tax Refunding Bonds, Series 2017 (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 , 2017 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 , 2017. Preliminary, subject to change. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) By: Its: Executive Director C-1 EXHIBIT D NEGATIVE ASSURANCE LETTER FOR [NAME OF OWNER] , 2017 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Temecula, California Stifel, Nicolaus & Company, Incorporated San Francisco, California Re: Temecula Public Financing Authority Community Facilities District No. 16-01(Roripaugh Ranch Phase 2) Special Tax Refunding Bonds, Series 2017 Ladies and Gentlemen: We have acted as [special] counsel to [Name of Owner] (the "Owner"), in connection with the Owner's plans for the development of certain property (the "Property") located within the boundaries of Temecula Public Financing Authority Community Facilities District No. 16- 01(Roripaugh Ranch Phase 2) (the "Community Facilities District") and in connection with the issuance by the Temecula Public Financing Authority (the "Authority") of the above -captioned bonds (the "Bonds") on behalf of the Community Facilities District. The Bonds are described in that certain Official Statement, dated , 2017 (the "Official Statement"). The Bonds are being sold to Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter"), pursuant to that certain Bond Purchase Agreement, dated , 2017 (the "Bond Purchase Agreement"), by and between the Authority and the Underwriter. This letter is provided for the benefit of the Authority and the Underwriter pursuant to Section 3(d)(10) of the Bond Purchase Agreement. [We advise you that we are not general counsel to the Owner and do not represent the Owner on a continuing basis. Rather, we represent the Owner as requested from time to time on specific matters.] The primary purpose of our professional engagement was not to establish or confirm factual matters or quantitative information. We are not passing upon and do not assume any responsibility for the accuracy, completeness, or fairness of any of the statements contained in the Official Statement and make no representation that we have independently verified the accuracy, completeness, or fairness of any such statements. However, in our capacity as [special] counsel to the Owner, we reviewed the Official Statement and we met in person or telephonically with representatives of the Owner, the Underwriter and its counsel, Quint & Thimmig LLP, as Bond Counsel and Disclosure Counsel, and others, during which conferences the contents of the Official Statement and related matters were discussed. We also reviewed certain written statements of D-1 officers and other representatives of the Owner and others as to the existence and consequence of certain factual and other matters. Based on our participation, review, and reliance as described above, we advise you that no information came to the attention of the lawyers in our firm rendering legal services in connection with such representation that caused us to believe that, as of the date of the Official Statement and as of the date hereof, the information in the Official Statement under the captions ["PROPERTY OWNERSHIP AND DEVELOPMENT"], solely as such information pertains to Owner, its Affiliates, the property owned by Owner and/or its Affiliates in the Community Facilities District (the "Property"), Owner's development of the Property and Owner's contractual arrangements with respect thereto contained or contain any untrue statement of a material fact or omitted or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no belief is expressed as to (a) any financial statements and other financial, statistical, economic, or engineering data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions, or expressions of opinion, or (b) any information about valuation, appraisals, market absorption, archaeological, or environmental matters). For purposes of this paragraph, "attention" refers to the conscious awareness of each of the lawyers in our firm who actively participated in rendering legal services in connection with such representation and "believe" refers to the actual, subjective, good faith belief of each of those lawyers. We further advise you that, except as disclosed in the Official Statement, no litigation is pending against the Owner (with service of process to the Owner having been accomplished) or, to our actual knowledge, overtly threatened against the Owner which would materially and adversely affect (a) the ability of the Owner to complete the planned development, and sale of the Property described in the Official Statement, or (b) the ability of the Owner to pay special taxes or ad valorem property taxes prior to delinquency on the Property. We express no opinion or belief as to the applicability or effect on the subject transaction of the securities laws of the State of California or of the United States of America, including but not limited to the Securities Act of 1933, as amended. No attorney-client relationship has existed or exists between our firm and the Authority or the Underwriter in connection with the Bonds or by virtue of this letter. This letter is delivered as of the date hereof and is furnished solely for your benefit in connection with the subject transaction, and may not be relied upon for any other purpose or furnished to, used, circulated, quoted, or referred to by any other person without our prior written consent. This letter is not intended to, and may not, be relied upon by any owners of the Bonds. Our engagement with respect to this matter has terminated as of the date hereof, and we do not undertake to advise you of any matters that may come to our attention subsequent to the date hereof that may affect the statements set forth herein. This letter is limited to the matters expressly set forth herein, and no belief or assurance is implied or may be inferred beyond the matters expressly stated herein. [FOR RORIPAUGH VALLEY RESTORATION, LLC] The Acquisition Agreement, dated as of February 1, 2017, by and between the Owner and the Authority and the Owner's Continuing Disclosure Agreement each constitutes a valid, legal and binding obligation of the Owner and (assuming due authorization, execution and delivery by the respective other party) is enforceable in D-2 accordance with its 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. Respectfully submitted, [NAME OF LAWYER OR LAW FIRM] D-3 SYCR DRAFT OF 1/3/17 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) 2017 SPECIAL TAX REFUNDING BONDS BOND PURCHASE AGREEMENT February _, 2017 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Temecula, California Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (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 (the "Authority"), acting on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), which, upon acceptance, will be binding upon the Authority and upon the Underwriter. This offer is made subject to its acceptance by the Authority as evidenced by its execution and delivery to the Underwriter prior to 5:00 p.m. PST on the date hereof and, if not accepted prior thereto, 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 (as such term is 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 15B of the Securities Exchange Act of 1934, as amended) to either the Authority or the District; (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); (iv) the Underwriter has financial interests that may differ from, and be adverse to, those of the Authority and the District; and (v) 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. 03-02 (Roripaugh Ranch) Special Tax Refunding Bonds, Series 2017 (the "Bonds") in the aggregate principal amount specified in Exhibit A hereto. The Bonds shall be dated the Closing Date (as such term is defined below), shall bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing September 1, 2017) at the 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 February 1, 2017 (the "Fiscal Agent Agreement"), approved by Resolution No. TPFA 17-_ adopted by the Board of Directors of the Authority, (the "Board of Directors"), as the legislative body of the Authority and the District, on January 24, 2017 (the "Resolution of Issuance"). The Bonds and interest thereon will be payable from Special Tax Revenues (as that term is defined in the Fiscal Agent Agreement) derived from a special tax (the "Special Tax") levied and collected on the taxable land within the District in accordance with Resolution No. TPFA 05-01 adopted by the Board of Directors on January 11, 2005 (the "Resolution of Formation") and Ordinance No. TPFA 05-01, (the "Ordinance"). Proceeds of the sale of the Bonds will be used in accordance with the Fiscal Agent Agreement, the Escrow Agreement, dated as of February 1, 2017 (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 "Act"), along with certain other available funds, to: (i) refund the Authority's outstanding Temecula Public Financing Authority Communities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds (the "2006 Bonds"), (ii) fund a reserve fund for the Bonds, and (iii) pay the costs of issuing the Bonds. The Resolution of Formation, the Resolution of Issuance and the Ordinance 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 January , 2017 (the "Preliminary Official Statement"), final for purposes of Rule 15c2-12 ("Rule 15c2-12") of the Securities and Exchange Commission (the "SEC"), 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 from the Preliminary Official Statement 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 "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. 2 (d) Except as otherwise disclosed in writing and agreed to by the Authority, the Underwriter agrees to make a bona fide public offering of the Bonds at the initial public offering price or prices set forth in Exhibit A hereto; provided, however, that the Underwriter reserves the right to: (i) change such prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds, (ii) sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the aforesaid initial offering prices and (iii) 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 discontinue such stabilizing, if commenced, at any time without prior notice. A "bona fide public offering" shall include an offering to institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. (e) At 8:00 a.m., Pacific Standard Time, on February , 2017, 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 (as such term is defined below), or at such other place as shall be mutually agreed upon by the Authority and the Underwriter, the other 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 Act. 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. 2005-0039138 and a First Amendment to Notice of Special Tax Lien as Document No. 2006-0174544 (collectively, the "Notice of Special Tax Lien"). (The 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, modified or supplemented except to the extent that the Rate and Method of Apportionment of Special Tax approved thereby has been clarified by the Authority's Resolution No. TPFA 17- . The District is duly organized and validly existing as a community facilities district under the laws of the State of California (the "State"). The Authority has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to execute, deliver and perform its obligations under this Purchase Agreement, the Fiscal Agent Agreement, the Escrow Agreement and the Disclosure Agreement (collectively, the "Authority Documents)" and to carry out all transactions contemplated by each of the Authority Documents and the Official Statement; and (ii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Fiscal Agent Agreement and as provided herein. 3 (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 Act an election within the District to approve the levy of the Special Tax within the District and to authorize bonded indebtedness of the District, (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 levy 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 and to the limitations on legal remedies against public agencies in the State. (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 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, indenture, 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 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. 4 (f) The Special Tax constituting the source of funds for the payment of the Bonds has been duly and lawfully authorized and may be levied under the Act, the State Constitution and the applicable laws of the State; and such Special Tax constitutes a valid and legally binding continuing lien on the properties on which it has been levied (except to the extent that any of such property has, or at or prior to the Closing Date, will have, prepaid its Special Tax obligation); 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 Tax 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 will not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without prior written notification to the Underwriter. 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 reasonable 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; and 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 5 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) which seeks 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 contests or affects the validity or enforceability of the Bonds, the Formation Documents, the Authority Documents, or any action contemplated by any of said documents, or (iii) which in any way contests 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 or the District 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 or the District 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 any information supplied by the Underwriter, any information regarding DTC or its book -entry system, and CUSIP numbers, as to which no view is expressed) was as of the date thereof, and the information contained in the Official Statement (other than any information supplied by the Underwriter, any information regarding DTC or its book -entry system, and CUSIP numbers, 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 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. 6 (o) Except as disclosed in the Official Statement, the Authority is not, and has not been within the last five (5) years, in material breach of any reporting obligation that it has undertaken under Rule 15c2-12. To the best knowledge of the Authority neither the City of Temecula (the "City") nor any public agency for which the City Council of the City serves as the legislative body is, or has been within the last five (5) years, in material breach of any reporting obligation that it has undertaken under Rule 15c2-12. (p) Prior to the end of the underwriting period, 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 (which consent shall not be unreasonably delayed or withheld). (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 2006 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") 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 (as 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: 7 (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; (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 SEC, 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 State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority or the District, their respective properties, incomes, or securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Authority to refund the 2006 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 Preliminary Official Statement or the Official Statement, or results in the Preliminary Official Statement or 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; 8 (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 SEC or any other governmental authority having jurisdiction; (7) the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (8) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; (9) there shall have been any material adverse change in the financial affairs of the Authority or the District; (10) there shall be filed or threatened any litigation described in Section 2(i); (11) 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 (12) 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 Formation Documents and the Authority Documents, together with a certificate dated as of the Closing Date of the Secretary of the Authority to the effect that each such document is a true, correct and complete copy of the one duly approved or adopted by the Board of Directors; (2) The Preliminary Official Statement and the Official Statement; (3) An unqualified approving opinion of Bond Counsel, dated the Closing Date and addressed to the Authority, in the form attached to the Official Statement as Appendix D, and a letter from Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that 9 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 of Bond Counsel, dated the Closing Date and addressed to the Underwriter, 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; (iii) the information contained in the Official Statement on the cover and under the captions "INTRODUCTION," "PLAN OF REFUNDING," "THE 2017 BONDS (excluding the subheading "Scheduled Debt Service")," "SECURITY FOR THE 2017 BONDS," "TAX MATTERS" and Appendices C and D thereof is accurate, insofar as such information purports to summarize or replicate certain provisions of the Act, 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 personal income taxes of interest on the Bonds present a fair and accurate summary of such provisions; and (iv) the Special Taxes have been duly and validly authorized in accordance with the provisions of the Act; (5) An opinion, dated the Closing Date and addressed to the Authority and the Underwriter of Quint & Thimmig LLP, in its capacity as the Authority's disclosure counsel ("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 Special Tax Consultant (as such term is defined below), 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) Evidence satisfactory to the Underwriter that Bond Counsel or an independent certified public accountant has confirmed that the cash and/or Federal Securities to be deposited with the Escrow Bank, as provided for in the Escrow Agreement, will be fully sufficient, together with the interest to accrue thereon and the moneys then on deposit in the fund and accounts provided for in the fiscal agent agreement under which the 2006 Bonds were issued (the "2006 Fiscal Agent Agreement"), to pay and discharge the indebtedness on the 2006 Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates; 10 (7) A defeasance opinion of Bond Counsel, dated the Closing Date and addressed to the Underwriter and the Fiscal Agent, to the effect that, upon the deposit with the Escrow Bank as provided for in the Escrow Agreement, the 2006 Bonds will no longer be considered outstanding within the meaning of the 2006 Fiscal Agent Agreement and will not have any lien on, or be payable from, the "special tax revenues" as such term is defined in the 2006 Fiscal Agent Agreement; (8) An opinion, dated the Closing Date and addressed to the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation ("Underwriter's Counsel"), in form and substance acceptable to the Underwriter; (9) 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, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement; (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, in all material respects, 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; (10) 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 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; and (iv) to the best of such counsel's knowledge, 11 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; (11) One or more certificates dated the Closing Date from Albert A. Webb Associates (the "Special Tax Consultant") addressed to the Authority and the Underwriter to the effect that (i) the Special Tax, if collected in the maximum amounts permitted from the properties in the District whose Special Tax will not have been prepaid in full at or before the Closing Date, 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 the Special Tax Consultant 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 the Special Tax Consultant 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 the Special Tax Consultant or have come to its attention that would substantially change such information set forth in the Official Statement; (12) 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; (13) A certificate of U.S. Bank National Association and an opinion of counsel to U.S. Bank National Association, each dated the Closing Date and addressed to the Authority and the Underwriter, in form satisfactory to Bond Counsel and Underwriter's Counsel, 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; (14) A certificate from each of KB Home Coastal, Inc. and CalAtlantic Group, Inc., dated the Closing Date and reasonably satisfactory in form and substance to Disclosure Counsel and the Underwriter, certifying that certain specified information contained in the Official Statement under the captions "THE DISTRICT Location and General Description of the District" and "— Major Land Owners," is true and correct in all material respects. (15) Evidence satisfactory to the Underwriter that a rating has been assigned to the Bonds as described in the Official Statement and that such rating has not been revoked or revised; (16) Written confirmation from the Authority's financial advisor (or an affiliate thereof) 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; 12 (17) Evidence that the federal tax information Form 8038-G has been prepared for filing; (18) A verification report, dated the Closing Date, from Grant Thornton LLP, consistent with the description thereof contained in the Official Statement; (19) Evidence that notice of the defeasance of the 2006 Bonds and termination of disclosure obligations relating to the 2006 Bonds has been prepared for filing with the EMMA system of the MSRB; and (20) 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. 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)(9) 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 Authority or 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 (including any amendment thereof or supplement thereto), the reasonable cost of confirming that the Authority has timely filed materially complete disclosure reports in conformance with the Authority's continuing 13 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 Montgomery Street, 35th Floor, San Francisco, CA 94104, Attention: Sara Oberlies Brown, Managing Director. 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. 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. 14 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. PST: TEMECULA PUBLIC FINANCING AUTHORITY FOR AND ON BEHALF OF THE TEMECULA PUBLIC FINANCE AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) By: Treasurer 15 EXHIBIT A MATURITY SCHEDULE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) SPECIAL TAX REFUNDING BONDS, SERIES 2017 Maturity Date Principal (September 1) Amount Interest Rate Yield Price The purchase price of the Bonds shall be $ , which is the principal amount thereof ($ ) plus net original issue premium of $ and less Underwriter's discount of $ The Bonds shall be subject to redemption in accordance with the following: Optional Redemption. The Bonds 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 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption: [TO COME] A-1 Mandatory Sinking Payment Redemption. 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 (maturity) 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 (maturity) The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the Bonds as a result of any prior partial redemption of the 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 Bonds on the next Interest Payment Date for which notice of redemption can timely be given, by lot and allocated among maturities of the 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: [TO COME] A-2 EXHIBIT B TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) SPECIAL TAX REFUNDING BONDS, SERIES 2017 RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he or she is the Executive Director of the Temecula Public Financing 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. 03-02 (Roripaugh Ranch) Special Tax Refunding Bonds, Series 2017 (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 , 2017 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 , 2017. Preliminary, subject to change. TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) By: Its: Executive Director B-1 L_ O -c n� -o a) u) C `O U O O >, CO CD ID a o a) o O N O O o >, O o U coo N 0 u,`o a)— aa) O N c o E � cnc a) a, te• a) . m - v, c w o L a) E a) a) To E 7.5 o0" c L., m o cuc a) Eo U d ocn0 L U " 4) a) To L N vim) O cn 2°)o c coo a) a) V) 'U • Eo _c U N " c.0 m E o c O - U O N O • o `O `- c c m c c a)�o t... O -0 -0 N c m .c • .> a) c >, c E -o c6 C1).E Cu• -,a - ca) ToE� U O U 0 u) w a) N a) .— N O a. y U) a) T Ho :.as PRELIMINARY OFFICIAL STATEMENT DATED AS OF JANUARY 2017 NEW ISSUE - BOOK ENTRY ONLY NOT RATED In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject however, to certain qualifications described in this Official Statement, under existing law, interest on the 2017 Bonds is excludable from gross income of the owners 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 such interest 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, interest on the 2017 Bonds is exempt from personal income taxation imposed by the State of California. See "TAX MATTERS." $44,550,000* TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) 2017 SPECIAL TAX BONDS Dated: Date of Issuance Due: September 1, as shown on inside cover The Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), is issuing the above -captioned bonds (the "2017 Bonds") to (i) prepay a special tax obligation with respect to property in the District, (ii) provide funds to finance public improvements authorized to be funded by the District, (iii) fund a reserve fund for the 2017 Bonds, (iv) pay a portion of the interest due on the 2017 Bonds on September 1, 2017, (v) provide funds for the administration of the District, and (vi) pay costs of issuing the 2017 Bonds. See "PLAN OF FINANCING." The 2017 Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of February 1, 2017 (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"). The 2017 Bonds are payable from the proceeds of an annual Special Tax (as defined in the Fiscal Agent Agreement) to be levied on property located within the District (see "THE DISTRICT") and from certain funds pledged under the Fiscal Agent Agreement. The Special Tax is being levied according to a rate and method of apportionment of Special Taxes approved by the qualified electors of the District. See "SECURITY FOR THE 2017 BONDS—Special Taxes" and Appendix B - "Rate and Method." Interest on the 2017 Bonds is payable on March 1 and September 1 of each year, commencing on September 1, 2017. The 2017 Bonds will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2017 Bonds. Individual purchases of the 2017 Bonds will be made in book -entry form only. Purchasers of the 2017 Bonds will not receive physical certificates representing their ownership interests in the 2017 Bonds purchased. The 2017 Bonds will be issued in the principal amount of $100,000 and any integral multiple thereof. Principal of and interest on the 2017 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the 2017 Bonds. See "THE 2017 BONDS" and Appendix G - "DTC and the Book -Entry Only System." The 2017 Bonds are subject to optional redemption, mandatory sinking payment redemption and redemption from Special Tax Prepayments prior to their respective maturities. See "THE 2017 BONDS—Redemption." The Authority may issue additional bonded indebtedness that is secured by a lien on the Special Tax Revenues (as defined in the Fiscal Agent Agreement) and by funds pledged under the Fiscal Agent Agreement for the payment of the 2017 Bonds on a parity with the 2017 Bonds. See "SECURITY FOR THE 2017 BONDS—Issuance of Additional Bonds." THIS OFFICIAL STATEMENT IS FURNISHED SOLELY FOR THE PURPOSE OF CONSIDERATION OF AN INVESTMENT IN THE 2017 BONDS BY QUALIFIED INSTITUTIONAL BUYERS WITH THE EXPERIENCE AND FINANCIAL EXPERTISE TO UNDERSTAND AND EVALUATE THE HIGH DEGREE OF RISK INHERENT IN THE INVESTMENT. PURCHASE OF THE 2017 BONDS WILL CONSTITUTE AN INVESTMENT SUBJECT TO A HIGH DEGREE OF RISK, INCLUDING THE RISK OF NONPAYMENT OF PRINCIPAL AND INTEREST AND THE LOSS OF ALL OR PART OF THE INVESTMENT. THE DEBT SERVICE ON THE 2017 BONDS IS PAYABLE FROM SPECIAL TAX LEVIES ON PROPERTY IN THE DISTRICT WITH AN APPRAISED VALUE ONLY APPROXIMATELY FIVE PERCENT* IN EXCESS OF THE INITIAL PRINCIPAL AMOUNT OF THE 2017 BONDS. THERE CAN BE NO ASSURANCE THAT THE PROPERTY OWNERS IN THE DISTRICT WILL PAY THE SPECIAL TAXES LEVIED ON SUCH PROPERTY WHEN DUE. SEE "SECURITY FOR THE 2017 BONDS" and "SPECIAL RISK FACTORS" herein. NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE AUTHORITY OR THE STATE OF CALIFORNIA OR OF ANY OF ITS POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2017 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2017 BONDS. THE 2017 BONDS ARE NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE AUTHORITY, NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT, PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. This cover page contains certain information for quick reference only. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the 2017 Bonds. The 2017 Bonds are offered when, as and if issued, subject to approval as to their legality by Quint & Thimmig LLP, Larkspur, California, Bond Counsel, and certain other conditions. Certain legal matters with respect to the 2017 Bonds will be passed upon for the Authority by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, in its capacity as general counsel to the Authority, and by Quint & Thimmig LLP, Larkspur, California, acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. It is anticipated that the 2017 Bonds in definitive form will be available for delivery to DTC on or about February ., 2017. The date of this Official Statement is February , 2017. * Preliminary, subject to change. STIFEL $44,550,000* TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) 2017 SPECIAL TAX BONDS MATURITY SCHEDULE $ % Term Bonds due September 1 $ % Term Bonds due September 1 $ % Term Bonds due September 1 $ % Term Bonds due September 1 $ % Term Bonds due September 1 $ % Term Bonds due September 1 , ; Yield %; Price %; CUSIP 87972 , ; Yield %a; Price %; CUSIP 87972 , ; Yield %; Price %; CUSIP 87972 , ; Yield %O; Price %; CUSIP 87972 , ; Yield %; Price %; CUSIP 87972 , ; Yield %; Price %; CUSIP 87972 * Preliminary, subject to change. t Copyright American Bankers Association. CUSIP data is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Neither the Authority nor the Underwriter assumes any responsibility for the accuracy of the CUSIP data. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT The information contained in this Official Statement has been obtained from sources that are believed to be reliable. No representation, warranty or guarantee, however, is made by the Underwriter as to the accuracy or completeness of any information in this Official Statement, including, without limitation, the information contained in the Appendices, and nothing contained in this Official Statement should be relied upon as a promise or representation by the Underwriter. Neither the Authority nor the Underwriter has authorized any dealer, broker, salesperson or other person to give any information or make any representations with respect to the offer or sale of the 2017 Bonds other than as contained in this Official Statement. If given or made, any such information or representations must not be relied upon as having been authorized by the Authority or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the 2017 Bonds shall under any circumstances create any implication that there has been no change in the affairs of any party described in this Official Statement, or in the status of any property described in this Official Statement, subsequent to the date as of which such information is presented. This Official Statement and the information contained in this Official Statement are subject to amendment without notice. The 2017 Bonds may not be sold, and no offer to buy the 2017 Bonds may be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the 2017 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. When used in this Official Statement, in any continuing disclosure by the Authority, in any press release, or in any oral statement made with the approval of an authorized officer of the Authority or any other entity described or referenced in this Official Statement, 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. 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. All summaries of the documents referred to in this Official Statement are qualified by the provisions of the respective documents summarized and do not purport to be complete statements of any or all of such provisions. The Underwriter has provided the following sentence for inclusion in this Official Statement: "The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or the completeness of such information." In connection with the offering of the 2017 Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market prices of the 2017 Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The 2017 Bonds have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption from the registration requirements contained in the Securities Act. The 2017 Bonds have not been registered or qualified under the securities laws of any state. The City of Temecula maintains an Internet website, but the information on the website is not incorporated in this Official Statement. -i- TEMECULA PUBLIC FINANCING AUTHORITY Board of Directors Maryann Edwards, Chairperson Michael S. Naggar, Member Jeff Comerchero, Member Matt Rahn, Member James Stewart, Member Authority/City of Temecula Officials Aaron Adams, Executive Director and City Manager Greg Butler, Assistant City Manager Jennifer Hennessy, Authority Treasurer and City Director of Finance Patrick Thomas, Interim Director of Public Works and Interim City Engineer Randi Johl, Authority Secretary and City Clerk PROFESSIONAL SERVICES Authority General Counsel and City Attorney Richards, Watson & Gershon, A Professional Corporation Los Angeles, California Municipal Advisor Fieldman, Rolapp & Associates Irvine, California Bond Counsel and Disclosure Counsel Quint & Thimmig LLP Larkspur, California Special Tax Consultant and Dissemination Agent Albert A. Webb Associates Riverside, California Appraiser Stephen G. White, MAI Fullerton, California Market Absorption Consultant Empire Economics, Inc. Capistrano Beach, California Fiscal Agent U.S. Bank National Association Los Angeles, California TABLE OF CONTENTS INTRODUCTION 1 General 1 Authority for Issuance 1 The 2017 Bonds 2 Security for the 2017 Bonds 2 Reserve Fund 3 The Authority 4 The District 4 Land Valuation 5 Limited Obligation 6 Issuance of Parity Bonds 6 Bondowners' Risks 6 Continuing Disclosure 6 Other Information 7 PLAN OF FINANCING 7 Overview 7 Estimated Sources and Uses of Funds 9 THE 2017 BONDS 9 Authority for Issuance 9 General Provisions 10 Redemption 10 Transfer or Exchange of 2017 Bonds 14 Discontinuance of DTC Services 16 Scheduled Debt Service 17 SECURITY FOR THE 2017 BONDS 17 General 17 Limited Obligation 18 Special Taxes 18 Special Tax Fund 19 Summary of Rate and Method 20 Reserve Fund 24 Covenant for Superior Court Foreclosure 25 No Teeter Plan 26 Investment of Moneys 26 Issuance of Additional Bonds 27 THE DISTRICT 29 Location and General Description of the District 29 History of the District 31 The Improvements 32 The Roripaugh Ranch Development 35 The Current Landowners 40 Land Use Distribution 42 Property Values 42 APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F APPENDIX G APPENDIX H APPENDIX I APPENDIX J APPENDIX K Value -to -District Lien Ratios 43 Direct and Overlapping Governmental Obligations45 THE AUTHORITY 47 SPECIAL RISK FACTORS 47 No General Obligation of the City or the District 47 Property Value 47 Concentration of Ownership 48 Failure to Complete Development 49 Failure to Achieve Market Absorption Projections 49 Government Approvals 49 Payment of the Special Tax is not a Personal Obligation 49 FDIC/Federal Government Interests in Properties49 Exempt Properties 52 Parity Taxes and Special Assessments 52 Insufficiency of Special Taxes 52 Tax Delinquencies 53 Bankruptcy Delays 54 Proceeds of Foreclosure Sales 54 Natural Disasters 55 Hazardous Substances 55 Disclosure to Future Purchasers 55 No Acceleration Provision 56 Taxability Risk 56 Enforceability of Remedies 56 No Secondary Market 57 Proposition 218 57 Ballot Initiatives 58 IRS Audit of Tax -Exempt Bond Issues 58 TAX MATTERS 58 LEGAL MATTERS 61 NO RATING 61 NO LITIGATION 61 MUNICIPAL ADVISOR 62 UNDERWRITING 62 CONTINUING DISCLOSURE 62 The Authority 62 The Primary Landowner 63 Remedies for Failures to Comply 63 MISCELLANEOUS 64 GENERAL INFORMATION ABOUT THE CITY OF TEMECULA RATE AND METHOD SUMMARY OF THE FISCAL AGENT AGREEMENT FORM OF OPINION OF BOND COUNSEL FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE AUTHORITY FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE PRIMARY LANDOWNER DTC AND THE BOOK -ENTRY ONLY SYSTEM BUILDING PERMIT THRESHOLDS APPRAISAL REPORT MARKET ABSORPTION STUDY BOUNDARY MAP OF THE DISTRICT NOTICE TO PURCHASERS The Temecula Public Financing Authority and the Underwriter intend that the 2017 Bonds are to be offered and sold only to persons reasonably believed to qualify as Qualified Institutional Buyers that are purchasing the 2017 Bonds for their own account for investment purposes and not with a view to distributing the 2017 Bonds. Purchasers Must Be Qualified Institutional Buyers. As defined in the Fiscal Agent Agreement for the 2017 Bonds described in this Official Statement, "Qualified Institutional Buyer" means a "qualified institutional buyer" within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended. Agreement of Each Purchaser. Each purchaser of any of the 2017 Bonds, by its acceptance of a 2017 Bond or of any interest therein, acknowledges and agrees with the Authority and the Underwriter that: 1. The Purchaser (a) is a Qualified Institutional Buyer and (b) is acquiring the 2017 Bonds for its own account or for the account of an Qualified Institutional Buyer; 2. The Purchaser has sufficient knowledge and experience in financial and business matters with respect to the evaluation of the risk and merits of the investment represented by the 2017 Bonds and is able to bear the economic risks of such investment; 3. The Purchaser agrees to and shall indemnify, hold harmless and defend the Authority and its officers, members, directors, officials and employees, and each of them, against all loss, costs, damages, expenses, suits, judgments, actions and liabilities of whatever nature (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments) directly or indirectly resulting from or arising out of or related to its transfer of the 2017 Bonds in violation of the transfer restrictions set forth in the Fiscal Agent Agreement described below; and 4. The Purchaser understands that the 2017 Bonds are limited obligations of the Authority secured only by a pledge of Special Tax Revenues and amounts in certain funds and accounts established under, and all to the extent and as provided in, the Fiscal Agent Agreement. Resale Restrictions and Limits on Transferability. Prior to the 2017 Bond Transfer Restriction Release Date (defined below), no transfer, sale or other disposition of any 2017 Bond, or any beneficial interest therein, may be made except to transferees that the transferor reasonably believes is a Qualified Institutional Buyer that is purchasing for its own account for investment purposes and not with a view to distributing the Series 2017 Bond. Each transferee of a 2017 Bond, or any beneficial interest therein, by its purchase thereof, will be deemed to have represented that such transferee is a Qualified Institutional Buyer that is purchasing such 2017 Bond for its own account for investment purposes and not with a view to distributing the 2017 Bond. Each entity which is or which becomes a Beneficial Owner of a 2017 Bond prior to the 2017 Bond Transfer Restriction Release Date will be deemed by the acceptance or acquisition of such beneficial ownership interest to have agreed to be bound by the aforementioned transfer restriction provisions of the Fiscal Agent Agreement. The transferor of a 2017 Bond transferred prior to the 2017 Bond Transfer Restriction Release Date will be deemed to have agreed to provide notice to any proposed assignee of a beneficial ownership interest in the purchased 2017 Bond of the restrictions on transfer described herein. Any Owner or Beneficial Owner effecting a transfer, sale or other disposition of a 2017 Bond, or beneficial interest therein, will be deemed to have agreed to indemnify the Authority and the Fiscal Agent against any liability that may result if such transfer, sale or other disposition is not made in accordance with the Fiscal Agent Agreement. The restrictions on transfer of the 2017 Bonds described above will no longer be applicable to transfers of the 2017 Bonds or any beneficial interest therein following the date (the "2017 Bond Transfer Restriction Release Date") which is five business days after the date the Authority posts on the Municipal Securities Rulemaking Board's EMMA website a continuing disclosure notice pursuant to the Continuing Disclosure Agreement for the 2017 Bonds to the effect that (a) at least twenty-five percent (25%) of the Special Tax levied on property in the Community Facilities District in the then current Fiscal Year was levied on assessor parcels that are Developed Property; and (c) the then value of Property in the Community Facilities District, excluding the value of any Undeveloped Property that is then delinquent in the payment of any Special Taxes previously levied, is at least three times the principal amount of the Bonds then outstanding. The terms "Developed Property" and "Undeveloped Property" are as defined in the Rate and Method of Apportionment of Special Taxes for the District. See "THE 2017 BONDS— Transfer or Exchange of 2017 Bonds - Transfers Prior to 2017 Bond Transfer Restriction Release Date" in this Official Statement. The 2017 Bonds will bear a legend describing the restrictions on transferability prior to the 2017 Bond Transfer Restriction Release Date mentioned above, and as required by the Fiscal Agent Agreement. -iv- CITY OF TEMECULA (Riverside County, California) Regional Location Map OFFICIAL STATEMENT $44,550,000* TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) 2017 SPECIAL TAX REFUNDING BONDS INTRODUCTION This introduction is not a summary of this Official Statement and is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement by those interested in purchasing the 2017 Bonds. The sale and delivery of 2017 Bonds to potential investors is made only by means of the entire Official Statement. Certain capitalized terms used in this Official Statement and not defined herein have the meanings set forth in Appendix C — "Summary of the Fiscal Agent Agreement—Definitions" or in Appendix B — "Rate and Method." General The purpose of this Official Statement, which includes the cover page, the inside cover page, the table of contents and the attached appendices (the "Official Statement"), is to provide certain information concerning the issuance of the above -captioned bonds (the "2017 Bonds"). The 2017 Bonds are being issued by the Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), to (i) prepay a special tax obligation with respect to property in the District, (ii) provide funds to finance public improvements authorized to be funded by the District, (iii) fund a reserve fund for the 2017 Bonds, (iv) pay a portion of the interest on the 2017 Bonds due on September 1, 2017, (v) provide funds for the administration of the District, and (vi) pay costs of issuing the 2017 Bonds. See "PLAN OF FINANCING." The public improvements being financed include various public infrastructure improvements (the "Improvements") necessitated by development occurring in the Roripaugh Ranch area of the City of Temecula, California (the "City"). When used in this Official Statement, the term "Bonds" means the 2017 Bonds, and any Parity Bonds that may be issued by the Authority for the District in the future. See "SECURITY FOR THE 2017 BONDS— Issuance of Additional Bonds." Authority for Issuance General. The District was formed on April 26, 2016 under the authority of the Mello - Roos Community Facilities Act of 1982, as amended, commencing at Section 53311, et seq., of the California Government Code (the "Act"), which was enacted by the California Legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of the district. Subject to approval by at least a two-thirds vote of the votes cast by the qualified electors within a district and compliance with the provisions of the Act, the legislative * Preliminary, subject to change. -1- body may issue bonds for the community facilities district established by it and may levy and collect a special tax within such district to repay such bonds. Bond Authority. The 2017 Bonds are authorized to be issued pursuant to the Act, Resolution No. 17-01 adopted on January 24, 2017 by the Board of Directors of the Authority (the "Board of Directors") acting as the legislative body of the District, and the Fiscal Agent Agreement dated as of February 1, 2017 (the "Fiscal Agent Agreement"), between the Authority, for and on behalf of the District, and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"). For more detailed information about the formation of the District and the authority for issuance of the 2017 Bonds, see "THE DISTRICT—History of the District." The 2017 Bonds General. The 2017 Bonds will be issued only as fully registered bonds, in Authorized Denominations (initially $100,000 and integral multiples of $5,000 in excess thereof), and will bear interest at the rates per annum and will mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement. The 2017 Bonds will be dated the date of their issuance and interest on the 2017 Bonds, will be payable on March 1 and September 1 of each year (individually an "Interest Payment Date"), commencing September 1, 2017. See "THE 2017 BONDS." The 2017 Bonds will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2017 Bonds. See "THE 2017 BONDS—General Provisions." Redemption Prior to Maturity. The 2017 Bonds are subject to optional redemption, mandatory sinking payment redemption and mandatory redemption from Special Tax prepayments prior to their respective maturities. See "THE 2017 BONDS—Redemption." Restrictions on Transfer of 2017 Bonds. As described on page -iv- entitled "Notice to Purchasers," until the 2017 Bond Transfer Restriction Release Date, the 2017 Bonds and any beneficial interests therein may only be transferred in denominations of $100,000 and integral multiples of $5,000 in excess thereof, and only to a transferee that the transferor reasonably believes is a Qualified Institutional Buyer that is purchasing for its own account for investment purposes and not with a view to distributing the 2017 Bond. The Fiscal Agent Agreement provides that each transferee of a 2017 Bond, or any beneficial interest therein, by its purchase thereof, will be deemed to have represented that such transferee is a Qualified Institutional Buyer that is purchasing such 2017 Bond for its own account for investment purposes and not with a view to distributing the 2017 Bond. For a more complete description of the 2017 Bond transfer restrictions, and the definitions of the terms "2017 Bond Transfer Restrictions Release Date" and "Qualified Institutional Buyer", see page -iv- entitled "Notice to Purchasers," and "THE 2017 BONDS—General Provisions," and "—Transfer or Exchange of 2017 Bonds." Security for the 2017 Bonds Pledge Under the Fiscal Agent Agreement. Pursuant to the Fiscal Agent Agreement, the 2017 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than, in each Fiscal Year, up to the first $50,000 of Special Tax Revenues that may be deposited into the Administrative Expense Fund) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, in the Special Tax Fund. "Special Tax Revenues," as defined in the Fiscal Agent Agreement, means the proceeds of the Special Taxes (as defined under the subheading "Special Taxes; Rate and Method" below) -2- received by the Authority, including any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, but does not include interest and penalties, if any, collected with the Special Taxes that are in excess of the rate of interest payable on the Bonds. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2017 Bonds in accordance with the Fiscal Agent Agreement until all of the 2017 Bonds have been paid or defeased. See "SECURITY FOR THE 2017 BONDS—Special Taxes" and Appendix B - "Rate and Method." Amounts in the Administrative Expense Fund, the Improvement Fund and the Costs of Issuance Fund, each of which is established under the Fiscal Agent Agreement, are neither pledged to nor available for the repayment of the 2017 Bonds. Special Taxes; Rate and Method. The Special Taxes to be used to pay debt service on the 2017 Bonds will be levied in accordance with the Rate and Method of Apportionment of Special Tax, as described under the heading "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method" (the "Rate and Method"). The term "Special Taxes", when used in this Official Statement, means the Special Tax A levied on the Taxable Property within the District pursuant to the Rate and Method and the Fiscal Agent Agreement to fund the "Special Tax A Requirement," which includes amounts needed to pay the debt service on the 2017 Bonds. The Rate and Method also allows for the levy of a Special Tax B to pay for certain municipal services authorized to be funded by the District, but the Special Tax B is not in any way pledged, and will not be used, to pay debt service on the 2017 Bonds. See "SECURITY FOR THE 2017 BONDS—Special Taxes," and "—Summary of Rate and Method." Limitations. Amounts in the Administrative Expense Fund, the Improvement Fund and the Costs of Issuance Fund, each of which is established under the Fiscal Agent Agreement, are not pledged to the repayment of the 2017 Bonds. A portion of the Special Taxes collected annually and to be deposited on a priority basis to the Administrative Expense Fund (see clause (i) of the second paragraph under "SECURITY FOR THE 2017 BONDS—Special Tax Fund") is not pledged to the repayment of the 2017 Bonds. The Improvements are not pledged as collateral for the 2017 Bonds. The Special Tax B and the proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the debt service on the 2017 Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the 2017 Bonds are amounts held by the Fiscal Agent under the Fiscal Agent Agreement in the Bond Fund and the Reserve Fund, amounts held by the Authority under the Fiscal Agent Agreement in the Special Tax Fund, and the proceeds, if any, from foreclosure sales of parcels with delinquent Special Taxes. See "SECURITY FOR THE 2017 BONDS - General." Reserve Fund The Fiscal Agent Agreement establishes a Reserve Fund to be held by the Fiscal Agent as a reserve for the payment of principal of and interest on the 2017 Bonds. The Reserve Fund is required to be funded in an amount equal to the lesser of (i) Maximum Annual Debt Service, (ii) 125% of average Annual Debt Service, or (iii) 10% of the initial principal amount of the Bonds (the "Reserve Requirement"). The Reserve Fund will be available to pay debt service on the 2017 Bonds and any Parity Bonds (as defined below), in the event that there is a shortfall in the amount in the Bond Fund to pay such debt service. The Reserve Requirement as of the date of -3- issuance of the 2017 Bonds will be $3,151,400*. See "SECURITY FOR THE 2017 BONDS— Reserve Fund." The Authority The Authority was formed on April 10, 2001, pursuant to a Joint Exercise of Powers Agreement (the "JPA Agreement") between the City and the former Redevelopment Agency of the City of Temecula (the "Agency"), 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. The JPA Agreement was amended in May of 2016, to provide for the withdrawal of the Successor Agency to the Agency as a member of the Authority, and to add the Temecula Community Services District and the Temecula Housing Authority as members of the Authority. See "THE AUTHORITY." The District The District was formed by the Board of Directors pursuant to proceedings conducted under the Act on April 26, 2016 and an election held on that date wherein the two owners of the property in the District voted in favor of the formation of the District, the levy of the Special Tax A and the Special Tax B on the property in the District and the issuance of up to $60,000,000 principal amount of special tax bonds payable from the Special Tax A. See "THE DISTRICT— History of the District." The proceeds of the Special Tax B, which will not be available to pay the debt service on the 2017 Bonds, will be used to pay costs of services eligible to be funded by the District, which include a panoply of municipal services ranging from public safety services, to maintenance of landscaping in public areas, maintenance of sidewalks and roadways, signage, storm drains, and street lighting and traffic signals, all related to the property in the District. The District is located in the far northern portion of the City, and includes approximately 645 gross acres of undeveloped property in an area of the City known as "Roripaugh Ranch." Roripaugh Ranch is a master planned community that at build out is expected to include approximately 1,735 single family detached homes, a neighborhood retail center, recreation centers, parks, schools, a fire station and open space areas. Roripaugh Ranch is shaped approximately like the State of Oklahoma. The Roripaugh Ranch development is located in the Authority's Community Facilities District No. 03-02 (Roripaugh Ranch) ("CFD 03- 02"), for which the Authority issued $51,250,000 of special tax bonds in 2006 to finance various infrastructure improvements necessitated by development occurring in Roripaugh Ranch. See "THE DISTRICT—The Roripaugh Ranch Development." The District includes the property in the "Pan Area" of Roripaugh Ranch. Roripaugh Ranch also includes a "Panhandle Area" which includes 509 Riverside County Assessor's parcels on approximately 160 acres, which area is substantially built -out with single family homes and which is not in the District. See "THE DISTRICT—Location and General Description of the District" and "—The Roripaugh Ranch Development." The Special Taxes heretofore levied by the Authority for CFD 03-02 on the Pan Area are being prepaid in full on the date of issuance of the 2017 Bonds with a portion of the proceeds of the 2017 Bonds, so that the Pan Area (and, hence, the property in the District) will no longer be subject to special tax levies for CFD 03-02. See "PLAN OF FINANCING—Overview – Prepayment of CFD 03-02 Special Taxes." Proceeds of the 2017 Bonds will also be deposited in an Improvement Fund established under the Fiscal Agent Agreement to be used to finance costs of the Improvements, some of which must be completed in order for building permits to be * Preliminary, subject to change. -4- issued by the City for parcels in the District. See "PLAN OF FINANCING—Overview – Funding for Improvements" and "THE DISTRICT—The Improvements." The land in the District is planned to include a total of 1,226 separate County Assessor's parcels to be developed with single family residences in fifteen different planning areas, plus a 10.7 net acre commercial site. While the property in the District was mass graded 9 to 10 years ago, it is currently largely undeveloped, with significant backbone infrastructure needed for the development of the parcels in the District yet to be constructed. The land in twelve of the planning areas is currently owned by Roripaugh Valley Restoration, LLC (the "Primary Landowner"), and the land in the other three planning areas as well as the site for commercial development is currently owned by Wingsweep Corporation. While the City and the Primary Landowner have been conducting activities to design, permit and construct necessary infrastructure improvements, the land owned by the Primary Landowner may be sold to another entity, and no assurance can be given that infrastructure development, including construction of the Improvements needed for the issuance of building permits for the property in the District, will continue as expected and as assumed in the Appraisal Report and the Absorption Study referred to under the heading "INTRODUCTION—Land Valuation" below. See "THE DISTRICT—Location and General Description of the District," "—The Roripaugh Ranch Development," and "—The Current Landowners." Land Valuation Stephen G. White, MAI (the "Appraiser") has prepared an Appraisal Report dated December 15, 2016 (the "Appraisal Report") with a valuation date of December 1, 2016, estimating the market value of the parcels within the District that are subject to the Special Tax securing the 2017 Bonds. In providing the Appraisal Report, the Appraiser relied on and utilized the Market Absorption Study (the "Absorption Study") dated December 2, 2016, by Empire Economics. The Appraiser concluded in the Appraisal Report that the market value of the property in the District as of December 1, 2016 was $46,735,000, subject to the extraordinary assumptions, among other assumptions, in the Appraisal Report. The extraordinary assumptions include that 2017 Bond proceeds and other funds totaling $22,000,000 will be available to fund the Improvements required to support the residential and commercial development of the property in the District as planned and that the current or future property owners will complete the approval/permit process for the Nicolaus Road construction project as necessary to allow adequate building permits to be issued in a timely manner as specified in the Development Agreement (described under the heading "THE DISTRICT—The Roripaugh Ranch Development"), so as to support the absorption projections in the Absorption Study. See also "SPECIAL RISK FACTORS—Failure to Achieve Market Absorption Projections." The appraised value of the land in the District, as reflected in the Appraisal Report, is approximately 1.05* times the $44,550,000* initial principal amount of the 2017 Bonds. The Appraisal Report and the Absorption Study, the complete texts of which are set forth in Appendices I and J, respectively, to this Official Statement are subject to various assumptions and limiting conditions, and should be read in their entirety by prospective purchasers of the 2017 Bonds. See "SPECIAL RISK FACTORS—Property Value." The value of individual parcels of the Taxable Property varies significantly, and no assurance can be given that should Special Taxes levied on one or more of the parcels become delinquent, and should the delinquent parcels be offered for sale at a judicial foreclosure sale, that any bid would be received for the property or, if a bid is received, that such bid would be sufficient to pay such parcel's delinquent Special Taxes. See "THE DISTRICT—Value-to-District * Preliminary, subject to change. -5- Lien Ratio - Value to District Lien Ratio Distribution," "SPECIAL RISK FACTORS—Property Value" and "SPECIAL RISK FACTORS—Insufficiency of Special Taxes." Limited Obligation Although the unpaid Special Taxes constitute liens on parcels within the District on which they are levied, they do not constitute a personal indebtedness of the property owners. There is no assurance that the current two owners of the property in the District or subsequent owners of the property will be financially able to pay the Special Taxes levied on their property in the District, or that they will pay the Special Taxes even though financially able to do so. NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE AUTHORITY OR THE STATE OF CALIFORNIA OR OF ANY OF ITS POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2017 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2017 BONDS. THE 2017 BONDS ARE NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE AUTHORITY, NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Issuance of Additional Bonds The Authority may issue additional bonded indebtedness for the District that is secured by a lien on the Special Tax Revenues and on the funds pledged under the Fiscal Agent Agreement for the payment of the 2017 Bonds on a parity with the 2017 Bonds ("Parity Bonds"). See "SECURITY FOR THE 2017 BONDS—Issuance of Additional Bonds." Bondowners' Risks Certain events could affect the ability of the Authority to pay the principal of and interest on the 2017 Bonds when due. Except for the Special Taxes, no other taxes are pledged to the payment of the 2017 Bonds. See "SPECIAL RISK FACTORS" for a discussion of certain factors that should be considered in evaluating an investment in the 2017 Bonds. The purchase of the 2017 Bonds involves significant risk, and until the 2017 Bond Transfer Release Date the 2017 Bonds and any beneficial interests therein may only be transferred in denominations of $100,000 and integral multiples of $5,000 in excess thereof, and only to a transferee that the transferor reasonably believes is a Qualified Institutional Buyer that is purchasing for its own account for investment purposes and not with a view to distributing the 2017 Bond. See "INTRODUCTION—The 2017 Bonds - Restrictions on Transfer of 2017 Bonds." Continuing Disclosure For purposes of complying with Rule 15c2 -12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended (the "Rule"), the Authority and the Primary Landowner have agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board (the "MSRB") certain annual financial information and other information. The Authority and the Primary Landowner each have further agreed to provide notice of certain enumerated events, and the Primary Landowner has agreed to provide mid -year reports with certain limited information. The Primary Landowner's annual, mid -year and enumerated event reporting obligations will terminate if and when the Primary Landowner and any affiliate thereof, or successor thereto, owns parcels in the District that are subject to less than twenty percent (20%) of the annual Special Tax levy. These covenants have been made in order to assist the -6- Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE," and Appendices E and F for a description of the specific nature of the annual reports and notices of significant events, as well as the terms of the Continuing Disclosure Agreements of the Authority and the Primary Landowner, respectively, pursuant to which such reports and notices are to be made. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change without notice. Except where otherwise indicated, all information contained in this Official Statement has been provided by the Authority on behalf of the District. Copies of the Fiscal Agent Agreement and certain other documents referenced in this Official Statement are available for inspection at the office of, and (upon written request and payment to the Authority of a charge for copying, mailing and handling) are available for delivery from, the Director of Finance, City of Temecula, 41000 Main Street, Temecula, California 92590. PLAN OF FINANCING Overview General. The primary purposes of the 2017 Bonds are to fund the prepayment in full of the special taxes levied by the Authority for CFD 03-02 on property in the District, so that the property is no longer subject to special tax levies for CFD 03-02 (see "INTRODUCTION—The District"), and to provide funds to pay costs of Improvements authorized to be funded by the District. Proceeds of the 2017 Bonds will also be used to fund a Reserve Fund for the 2017 Bonds, to pay a portion of the interest due on the 2017 Bonds on September 1, 2017, to pay costs of issuance of the 2017 Bonds, and to pay costs of administration of the District until Special Taxes are collected from properties in the District. As an additional source of funds to pay the interest due on the 2017 Bonds on September 1, 2017, a portion of the special taxes collected for CFD 03-02 attributable to the parcels in the District will be deposited on the date of issuance of the 2017 Bonds to the Capitalized Interest Account held by the Fiscal Agent under the Fiscal Agent Agreement. Such amount, together with the portion of the 2017 Bonds to be deposited to the Capitalized Interest Account, will be equal to the interest due on the 2017 Bonds on September 1, 2017. Prepayment of CFD 03-02 Special Taxes. Proceeds of the 2017 Bonds being used to prepay CFD 03-02 special taxes authorized to be levied on property in the District, along with the proceeds of refunding bonds being issued by the Authority for CFD 03-02 (the "CFD 03-02 Refunding Bonds") concurrently with the issuance of the 2017 Bonds, will be deposited to a refunding fund established under an Escrow Agreement, dated as of February 1, 2017, between the Authority and U.S. Bank, National Association, as escrow bank. Amounts in the refunding fund will be used to redeem in full on March 1, 2017 the bonds issued in 2006 by the Authority for CFD 03-02 (the "CFD 03-02 2006 Bonds"). Funds in the refunding fund are not available to be used for payments on the 2017 Bonds. Following the prepayment of CFD 03-02 special taxes to occur on the date of issuance of the 2017 Bonds, the property in the District will no longer be subject to any lien or other obligation with respect to CFD 03-02, and the CFD 03-02 Refunding Bonds will be payable solely from property in the Panhandle Area of Roripaugh Ranch. Funding for Improvements. The Authority, for and on behalf of the District, has entered into an Acquisition Agreement with the Primary Landowner, dated as of February 1, 2016 (the -7- "Acquisition Agreement"), pursuant to which the Authority has agreed to use amounts in an improvement fund for CFD 03-02 (estimated to total approximately $14,977,000*), as well as proceeds of the 2017 Bonds and of any new -money Parity Bonds (collectively, the "Improvement Funds"), to pay the costs of specified public infrastructure improvements (referred to in this Official Statement as the "Improvements") the construction of which is necessitated by development occurring in the District. While the Acquisition Agreement provides for the Primary Landowner or its successor to construct most of the Improvements, under a Development Agreement between the Primary Landowner and the City governing the development of the property in Roripaugh Ranch, the owners of the land in the District are obligated to complete the Improvements in order to develop the land they own in the District (see "THE DISTRICT—The Roripaugh Ranch Development"). In addition to the Improvements subject to the Acquisition Agreement, some of the Improvements are being constructed by the City and are to be paid for from the Improvement Funds. See "THE DISTRICT – The Improvements." Some of the Improvements have been completed; however additional Improvements need to be completed in order to obtain building permits from the City in respect of the property in the District. See "THE DISTRICT—The Improvements" and Appendix H— "Building Permit Thresholds." The costs of Improvements completed to date have been paid for with proceeds of the CFD 03-02 2006 Bonds or with funds advanced by the owners of land in Roripaugh Ranch. See "THE DISTRICT—The Roripaugh Ranch Development." In accordance with the Acquisition Agreement, proceeds of the Improvement Funds will be used to make payments to the Primary Landowner or its successor under the Acquisition Agreement for costs of those Improvements constructed by the Primary Landowner or its successor. See "PLAN OF FINANCING – Sources and Uses of Funds." The Fiscal Agent Agreement allows for the issuance of Parity Bonds secured on a parity with the 2017 Bonds (see "SECURITY FOR THE 2017 BONDS—Issuance of Additional Bonds," and it is expected that the Authority will issue Parity Bonds for the District in one or more series to fund costs of the Improvements in excess of the Improvement Funds. Parity Bonds are expected to be issued as development of the Taxable Property (as defined in the Rate and Method) in the District occurs, and the aggregate principal amount of any Parity Bonds (other than Parity Bonds that are Refunding Bonds, to which no principal limit applies), plus the initial principal amount of the 2017 Bonds cannot exceed the bonded indebtedness limit of $60,000,000 for the District. Any costs of Improvements in excess of the Improvement Funds and any net proceeds of Parity Bonds are the responsibility of the Primary Landowner or its successor under the Development Agreement. See "THE DISTRICT—The Improvements." The Improvement Funds are not available to make payments on the 2017 Bonds. * Preliminary, subject to change. -8- Estimated Sources and Uses of Funds The sources and uses of funds in connection with the 2017 Bonds are expected to be as follows: Principal amount of 2017 Bonds Less: Underwriter's Discount Plus: Transfer of Funds on Handau Total Sources $ Prepayment of CFD 03-02 Special Taxes(1) $ Deposit to Reserve Fund(2) Deposit to Costs of Issuance Fund( ) Deposit to Improvement Fundc4) Deposit to the Capitalized Interest Account(5) Deposit to Administrative Expense Fund(6) Total Uses $ (1) "PLAN OF FINANCING—Overview - General." (2) See "PLAN OF FINANCING—Overview." (3) Equal to the initial Reserve Requirement. See "SECURITY FOR THE 2017 BONDS—Reserve Fund." (4) Costs of issuance include, without limitation, Fiscal Agent fees and expenses; Municipal Advisor fees and expenses; the fees and expenses of Bond Counsel, Disclosure Counsel, and the City Attorney; printing costs and other costs related to the issuance of the 2017 Bonds. (5) To be used, along with certain funds held in an improvement fund under a fiscal agent agreement for the CFD 03-02 Refunding Bonds, to pay costs of the Improvements. See "PLAN OF FINANCING—Overview - Funds for Improvements" and "THE DISTRICT—The Improvements." (6) To be used to pay interest on the 2017 Bonds due on September 1, 2017. To be funded in part with proceeds of the 2017 Bonds and in part from a transfer of special taxes previously collected. See "PLAN OF FINANCING—Overview - General." (7) To be used to pay costs of administering the District prior to the receipt of Special Tax Revenues. THE 2017 BONDS Authority for Issuance Pursuant to the Act, on April 26, 2016, the Board of Directors adopted Resolution No. TPFA 16-04 establishing the District ("Resolution of Formation"). Also on April 26, 2016, the Board of Directors adopted Resolution No. TPFA 16-06 calling an election to authorize the issuance of bonds and the levying of a special tax within the District. On April 26, 2016, the election was held and the then two owners of property in the District, constituting the qualified electors of the District, cast votes in the election in favor of the issuance of up to $60,000,000 of bonded indebtedness to finance the Improvements, and approved the Rate and Method, a copy of which is attached to this Official Statement as Appendix B. See "THE DISTRICT—History of the District." The 2017 Bonds are authorized to be issued pursuant to the Act, Resolution No. TPFA 17-01 adopted on January 24, 2017, by the Board of Directors, acting as the legislative body of the District, and the Fiscal Agent Agreement. See "THE DISTRICT—History of the District" for information in respect of the adoption by the Board of Directors of such Resolution. The Special Taxes to be used to pay debt service on the 2017 Bonds are being levied in accordance with the Rate and Method. -9- General Provisions The 2017 Bonds will be issued only as fully registered bonds, in Authorized Denominations, and will bear interest at the rates per annum and will mature on the dates set forth on the inside cover page of this Official Statement. The Fiscal Agent Agreement defines "Authorized Denominations" as (i) prior to the 2017 Bond Transfer Restriction Release Date (see "THE 2017 BONDS—Transfer or Exchange of 2017 Bonds"), $100,000 and integral multiples of $5,000 in excess of $100,000, provided however that one 2017 Bond may be in a denomination less than $100,000 as a result of any partial redemption of 2017 Bonds prior to the 2017 Bond Transfer Restriction Release Date, and (ii) on and after the 2017 Bond Transfer Restriction Release Date, $5,000 and integral multiples thereof. See page iv entitled "Notice to Purchasers," and "THE 2017 BONDS—Transfer or Exchange of 2017 Bonds." The 2017 Bonds will be dated the date of their issuance and interest will be payable on each Interest Payment Date, commencing September 1, 2017. Each 2017 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or (b) 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 will bear interest from such Interest Payment Date, or (c) it is authenticated on or before August 15, 2017, in which event it will bear interest from the date of issuance of the 2017 Bonds; provided, however, that if, as of the date of authentication of any 2017 Bond interest thereon is in default, such 2017 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. "Record Date" is defined in the Fiscal Agent Agreement as the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day. The 2017 Bonds will be payable both as to principal and interest, and as to any premium upon the redemption thereof, in lawful money of the United States of America. The principal of the 2017 Bonds and any premium due upon the redemption thereof will be payable upon presentation and surrender at the principal corporate trust office of the Fiscal Agent. Interest on each 2017 Bond will be computed using a year of 360 days comprised of twelve 30 -day months. The 2017 Bonds will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the 2017 Bonds. Individual purchases of the 2017 Bonds will be made in Authorized Denominations in book -entry form only. Purchasers of the 2017 Bonds will not receive physical certificates representing their ownership interests in the 2017 Bonds purchased. Principal and interest payments represented by the 2017 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the 2017 Bonds. See Appendix F - "DTC and the Book -Entry Only System." So long as the 2017 Bonds are registered in the name of Cede & Co., as nominee of DTC, references in this Official Statement to the owners shall mean Cede & Co., and shall not mean the purchasers or Beneficial Owners of the 2017 Bonds. Redemption Optional Redemption.* The 2017 Bonds maturing on or after September 1, 2028 are subject to optional redemption prior to their stated maturities on any Interest Payment Date occurring on or after September 1, 2027, as a whole or in part in an amount equal to $5,000 or Preliminary, subject to change. -10- any integral multiple thereof, upon payment from any source of funds available for that purpose, at a redemption price equal to the principal amount of the 2017 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Payment Redemption. The 2017 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 2017 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 2017 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 2017 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: -11- Redemption Date (September 1) Sinking Payments The 2017 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 2017 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 will be reduced as a result of any prior partial redemption of the 2017 Bonds pursuant to the optional redemption or redemption from special tax prepayments provisions of the Fiscal Agent Agreement, as specified in writing by the Authority's Treasurer to the Fiscal Agent. -12- Mandatory Redemption From Special Tax Prepayments.* The 2017 Bonds are subject to mandatory redemption prior to their stated maturity on any Interest Payment Date, from the proceeds of Special Tax Prepayments and corresponding transfers of funds from the Reserve Fund (as described below under "SECURITY FOR THE 2017 BONDS—Reserve Fund"), as a whole or in part in an amount equal to $5,000 or any integral multiple thereof, at a redemption price (expressed as a percentage of the principal amount of the 2017 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 September 1, 2017 to and including March 1, 103% September 1, and March 1, 102 September 1, and March 1, 101 September 1, and any Interest Payment 100 Date thereafter No assurance can be given that prepayments of Special Taxes levied on the Taxable Property will not occur in the future, which would result in a redemption to 2017 Bonds prior to their maturity. See "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method — Prepayment in Full," and "—Prepayment in Part." Purchase of 2017 Bonds In Lieu of Redemption. In lieu of redemption as described above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2017 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of 2017 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 2017 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 2017 Bonds were redeemed in accordance with the Fiscal Agent Agreement. Selection of 2017 Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the 2017 Bonds (other than pursuant to the mandatory sinking payment redemption provisions of the Fiscal Agent Agreement), the Fiscal Agent will select the 2017 Bonds to be redeemed from among the maturities of the 2017 Bonds or such given portion thereof not previously redeemed as directed by the Treasurer (who shall specify 2017 Bonds to be redeemed so as to maintain substantially level debt service on the Bonds) and within a maturity by lot in any manner which the Fiscal Agent deems appropriate. Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first class mail, postage prepaid, or by such other means as is acceptable to the recipient thereof, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services, and to the respective registered Owners of any 2017 Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent; but such mailing is not a condition precedent to redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such 2017 Bonds. The redemption notice will state the redemption date and the redemption price and, if less than all of the then Outstanding 2017 Bonds are to be called for redemption, will designate the CUSIP numbers and, if applicable, Bond numbers of the 2017 Bonds to be redeemed by giving the individual CUSIP number and, if applicable, Bond number of each Bond to be * Preliminary, subject to change. -13- redeemed or if Bond numbers have been assigned by the Fiscal Agent to the 2017 Bonds will state that all 2017 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2017 Bonds of one or more maturities have been called for redemption, will state as to any Bond called in part the principal amount thereof to be redeemed, and will require that such 2017 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and will state that further interest on such 2017 Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the 2017 Bonds pursuant to the redemption provisions described above under "- Optional Redemption" the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2017 Bonds on the anticipated redemption date, and that the redemption will not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2017 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 2017 Bonds to be redeemed, the Fiscal Agent will send written notice to the owners of the 2017 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 2017 Bonds for which notice of redemption was given will remain Outstanding for all purposes of the Fiscal Agent Agreement. 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 2017 Bonds so called for redemption have been deposited in the Bond Fund, such 2017 Bonds so called will 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 will accrue thereon on or after the redemption date specified in such notice. Tender of 2017 Bonds in Payment of Special Taxes. The Authority has covenanted in the Fiscal Agent Agreement not to permit the tender of 2017 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 2017 Bonds that will remain Outstanding following such tender. Transfer or Exchange of 2017 Bonds General. So long as the 2017 Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of 2017 Bonds shall be made in accordance with DTC procedures. See Appendix G - "DTC and the Book -Entry Only System." If the book -entry only system for the 2017 Bonds is ever discontinued, 2017 Bonds may, in accordance with its terms, be transferred or exchanged in Authorized Denominations by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2017 Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. Whenever any 2017 Bond or 2017 Bonds are surrendered for transfer or exchange, the Authority will execute and the Fiscal Agent will authenticate and deliver a new 2017 Bond or 2017 Bonds, for a like aggregate principal amount of 2017 Bonds of authorized denominations and of the same maturity. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfers or exchanges of 2017 Bonds will be required to be made (i) within the 15 days prior to the date designated by the Fiscal Agent as the date for selecting 2017 Bonds for -14- redemption, (ii) with respect to any 2017 Bond after such 2017 Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Transfers Prior to 2017 Bond Transfer Restriction Release Date. The Fiscal Agent Agreement provides that, prior to the 2017 Bond Transfer Restriction Release Date, no transfer, sale or other disposition of any 2017 Bond, or any beneficial interest therein, may be made except to a transferee that the transferor reasonably believes is a Qualified Institutional Buyer that is purchasing such 2017 Bond for its own account for investment purposes and not with a view to distributing such 2017 Bond. Each transferee of a 2017 Bond, or any beneficial interest therein, transferred prior to the 2017 Bond Transfer Restriction Release Date, by its purchase thereof, will be deemed to have represented that such transferee is a Qualified Institutional Buyer that is purchasing such 2017 Bond for its own account for investment purposes and not with a view to distributing such 2017 Bond. Each 2017 Bond delivered prior to the 2017 Bond Transfer Restriction Release Date will bear a legend describing or referencing the foregoing restriction on transferability. Each entity that is or that becomes a Beneficial Owner of a 2017 Bond prior to the 2017 Bond Transfer Restriction Release Date is deemed by the acceptance or acquisition of such beneficial ownership interest to have agreed to be bound by the above-described provisions of the Fiscal Agent Agreement. The transferor of a 2017 Bond transferred prior to the 2017 Bond Transfer Restriction Release Date agrees to provide notice to any proposed assignee of a beneficial ownership interest in the purchased 2017 Bond of the restriction on transfer described above. The Fiscal Agent Agreement provides that any Owner or Beneficial Owner effecting a transfer, sale or other disposition of a 2017 Bond, or beneficial interest therein, prior to the 2017 Bond Transfer Restriction Release Date shall, and does agree to, indemnify the Authority and the Fiscal Agent against any liability that may result if such transfer, sale or other disposition is not made in accordance with the requirements of the Fiscal Agent Agreement. The term "2017 Bond Transfer Restriction Release Date" is defined in the Fiscal Agent Agreement as the date which is five (5) Business Days after the date the Authority posts on the Municipal Securities Rulemaking Board's EMMA website a continuing disclosure notice pursuant to the Continuing Disclosure Agreement to the effect that (a) at least twenty-five percent (25%) of the Special Tax levied in the then current Fiscal Year was levied on assessor parcels that are classified as Developed Property under the Rate and Method; and (b) the then value of Undeveloped Property (as defined in the Rate and Method) in the District, excluding the value of any Undeveloped Property that is then delinquent in the payment of any Special Taxes previously levied, is at least three times the portion of the principal amount of the Bonds then outstanding allocable to such property. For purposes of the preceding clause (b), the value of the applicable parcels of Undeveloped Property shall be determined either by reference to the assessed value of the property on the most recent County real property tax roll or by reference to an appraisal performed within six (6) months of the release date by an MAI appraiser selected by the Authority. The term "Qualified Institutional Buyer" is defined in the Fiscal Agent Agreement as a "qualified institutional buyer" within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended. From and after the 2017 Bond Transfer Restriction Release Date, the restrictions on transfer of the 2017 Bonds described above will no longer apply; and, from and after such date, 2017 Bonds may be transferred to any person in accordance with, and upon compliance with the requirements of, the provisions of the Fiscal Agent Agreement described under the subheading "General" above. Also, following the 2017 Bonds Transfer Restriction Release Date, the 2017 Bonds may be transferred or exchanged in denominations of $5,000 or integral multiples thereof. -15- Discontinuance of DTC Services DTC may determine to discontinue providing its services with respect to the 2017 Bonds by giving written notice to the Fiscal Agent during any time that the 2017 Bonds are Outstanding, and discharging its responsibilities with respect to the 2017 Bonds under applicable law. The Authority may terminate the services of DTC with respect to the 2017 Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the 2017 Bonds or that continuation of the system of book -entry transfers through DTC is not in the best interest of the Beneficial Owners. The Authority will mail any such notice of 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 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 2017 Bonds that they obtain certificated Bonds, the 2017 Bonds will no longer be restricted to being registered in the Registration Books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names the Owners designate at that time, in accordance with the Fiscal Agent Agreement. To the extent that the Beneficial Owners are designated as the transferees by the Owners, the 2017 Bonds will be delivered to such Beneficial Owners as soon as practicable in accordance with the Fiscal Agent Agreement. -16- Scheduled Debt Service The following table shows the annual scheduled debt service on the 2017 Bonds, assuming no optional redemption of the 2017 Bonds and no redemption of the 2017 Bonds from Special Tax Prepayments: Bond Year ending Annual Debt September 1 Principal Interest Service 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 Totals General SECURITY FOR THE 2017 BONDS Pursuant to the Fiscal Agent Agreement, the 2017 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than, each Fiscal Year, a maximum of $50,000 of Special Tax Revenues that may be deposited to the Administrative Expense Fund on a priority basis), and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, the Special Tax Fund. Special Tax Revenues do not include penalties, if any, collected in respect of delinquent Special Taxes. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of -17- the principal of, and interest and any premium on, the 2017 Bonds in accordance with the Fiscal Agent Agreement until all of the 2017 Bonds have been paid or defeased. Amounts in the Administrative Expense Fund, the Improvement Fund, the Costs of Issuance Fund and the Refunding Fund, and up to $50,000 of the first Special Tax Revenues collected in any Fiscal Year that may be deposited to the Administrative Expense Fund on a priority basis, are not pledged to the repayment of the 2017 Bonds. The Improvements are not pledged as collateral for the 2017 Bonds. The proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the Debt Service on the 2017 Bonds. Limited Obligation The 2017 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 the Special Tax Fund created pursuant to the Fiscal Agent Agreement. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the 2017 Bonds are amounts held by the Fiscal Agent under the Fiscal Agent Agreement in the Bond Fund, the Reserve Fund and the Special Tax Fund, and the proceeds, if any, from foreclosure sales of parcels with delinquent Special Tax levies. Special Taxes In accordance with the provisions of the Act, the Rate and Method was approved in 2016 by the two owners of the property in the District. The Rate and Method is set forth in its entirety in Appendix B. The Rate and Method provides for the levy of a "Special Tax A" in order to fund the annual "Special Tax A Requirement," which includes amounts needed to pay the debt service on the Bonds, to pay costs of administering the Bonds and the District, to replenish any draws on the Reserve Fund and to pay directly for costs of the Improvements; and the levy of a "Special Tax B" in order to fund the annual "Special Tax B Requirement," which includes amounts needed to pay costs of services authorized to be funded by the District, and to pay related administrative expenses. See "INTRODUCTION—The District" and "SECURITY FOR THE 2017 BONDS - Summary of Rate and Method." The Special Tax B to be levied on Taxable Property in the District to satisfy the annual Special Tax B Requirement is not pledged, and will not be used, to pay debt service on the 2017 Bonds; and the term "Special Taxes" when used in this Official Statement includes only the Special Tax A levied to satisfy the annual Special Tax A Requirement. Under the Fiscal Agent Agreement, the Authority is obligated to fix and levy the amount of Special Taxes within the District required for the timely payment of principal of and interest on the outstanding 2017 Bonds becoming due and payable, including any necessary replenishment of the Reserve Fund and an amount estimated to be sufficient to pay the Administrative Expenses, taking into account any prepayments of Special Taxes previously received by the Authority. The Special Taxes levied on any parcel of Taxable Property may not in any event exceed the maximum amount as provided in the Rate and Method and the Act. The Special Taxes are payable and are to be collected in the same manner, at the same time and in the same installment as County ad valorem taxes on property levied on the secured tax roll are payable, and pursuant to the Act 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 taxes levied on the County secured tax roll. Notwithstanding the foregoing, the Special Taxes may be collected in certain circumstances by means of direct billing of the owners of Taxable Property. -18- Although the Special Taxes will constitute a lien on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of the property within the District. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on a parcel of Taxable Property, the Authority may order the institution of a superior court action to foreclose the lien on the parcel of Taxable Property within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. The Act provides that the Special Taxes are secured by a continuing lien that is subject to the same lien priority in the case of delinquency as ad valorem property taxes. See "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method," and "—Covenant for Superior Court Foreclosure" and "SPECIAL RISK FACTORS— Parity Taxes and Special Assessments." The property located within the District is subject to other liens for taxes and assessments, and other such liens could come into existence in the future. See "SPECIAL RISK FACTORS—Parity Taxes and Special Assessments." There is no assurance that any owner of a parcel subject to the Special Tax levy will be financially able to pay the annual Special Taxes or that it will pay such taxes even if financially able to do so. See "SPECIAL RISK FACTORS." While no assurance can be given that the owners of the Taxable Property in the District will pay the Special Taxes levied by the Authority on such property, it should be noted that both of the current owners of the Taxable Property have consistently paid the special taxes levied for CFD 03-02 on their property. As discussed under "PLAN OF FINANCING— Overview – Prepayment of CFD 03-02 Special Taxes," proceeds of the 2017 Bonds will be used to prepay the remaining CFD 03-02 special tax obligation of the property in the District, so no future levies of special taxes for CFD 03-02 will be made on the property in the District. The first levy of the Special Tax A and the Special Tax B for the District will be for fiscal year 2017- 18, with one-half of such Special Tax levy delinquent if not paid by December 10, 2017 and one- half delinquent if not paid by April 10, 2018. Special Tax Fund Deposit of Special Tax Revenues. The Fiscal Agent Agreement establishes a Special Tax Fund to be held by the Fiscal Agent. Under the Fiscal Agent Agreement, the Authority is obligated to transfer or cause to be transferred to the Fiscal Agent, for deposit by the Fiscal Agent in the Special Tax Fund, as soon as practicable following receipt, all Special Tax Revenues received by the Authority. 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, $50,000) will 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 will be separately identified by the Treasurer and will be disposed of by the Fiscal Agent first, by transfer to the Bond Fund to pay any past due debt service on the Bonds; second, by transfer to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund to the then Reserve Requirement; third, by transfer 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 be held in the Special Tax Fund and used for its purposes; -19- (iii) any proceeds of Special Tax Prepayments will be remitted by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account and used to redeem Bonds; and (iv) any Special Tax Revenues constituting the portion, if any, of the Special Tax A Requirement that is to pay directly for the acquisition or construction of any portion of the Improvements shall be separately identified by the Authority and shall be deposited by the Fiscal Agent in the Improvement Fund established under the Fiscal Agent Agreement so long as the Improvement Fund has not theretofore been closed, and if the Improvement Fund has been closed, then such amount shall be retained by the Authority to be used to pay Improvement costs. Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the Authority and the Owners of the Bonds, will be disbursed as provided below and, pending any disbursement, will be subject to a lien in favor of the Owners of the Bonds and the Authority. Disbursements. On each Interest Payment Date, the Fiscal Agent will 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 under the Fiscal Agent Agreement 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. 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 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 (i) to the Administrative Expense Fund, from time to time, if monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund; (ii) to such other fund or account established to pay debt service on or administrative expenses with respect to any bonds or other debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under the Fiscal Agent Agreement; or (iii) to such other fund or account established by the Authority to be used for any lawful purpose under the Act and otherwise in accordance with the provisions of the Rate and Method. Summary of Rate and Method Special Tax Formula - Calculation of Annual Special Taxes. The Rate and Method is used to allocate the amount of the Special Tax A and the Special Tax B that is needed to be collected each fiscal year among the Taxable Properties within the District, based upon the development status of the Taxable Property and its size, subject to a maximum tax rate that may be levied against each class of Taxable Property, and depending upon the "Zone" in which the property is located. The Rate and Method is set forth in full in Appendix B, and the following is -20- a summary of the Rate and Method. Capitalized terms used, but not otherwise defined, in this section have the meanings given to them in the Rate and Method. The Special Tax A will first be levied on property in the District in Fiscal Year 2017-18. The Rate and Method provides that the Annual Special Tax A may be levied only so long as any Bonds are outstanding, provided that levies may continue if there are any delinquent Special Taxes in order to collect those delinquent amounts but not in any event later than Fiscal Year 2061-62. The Annual Special Tax B may only be levied on Developed Property, as described below, and may be levied in perpetuity on Developed Property. Special Tax Requirements. Annually, at the time of levying the Special Tax, the Authority, with the assistance of a special tax administrator (currently Albert A. Webb Associates), determines 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) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses (apportioned between Special Tax A and Special Tax B), (iii) any amount required to establish or replenish any reserve funds established in association with the Bonds, and (iv) the collection or accumulation of funds for the acquisition or construction of Improvements or payment of fees authorized by the District by the levy on Developed Property of the Assigned Annual Special Tax A provided that the inclusion of such amount does not cause an increase in the levy of Special Tax A on Approved Property or Undeveloped Property as set forth in Step Two and Three described under the subheading "Method of Apportionment" below, less (v) any amount available to pay debt service or other periodic costs on the Bonds pursuant to the Fiscal Agent Agreement. The Authority, with the assistance of the special tax administrator, will also determine the amount of money to be collected from Taxable Property in the District (the "Special Tax B Requirement"), which will be the amount required in any Fiscal Year to pay for the municipal services the District is authorized to fund, as well as a share of the costs of administration of the District. See "INTRODUCTION—The District." Classification of Property. The Rate and Method provides that for each Fiscal Year, all Assessor's Parcels of Taxable Property within the District be classified as either Taxable Property or Exempt Property. Taxable Property is further classified as Developed Property, Approved Property, Undeveloped Property, or Provisional Exempt Property. In addition, each Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property and Provisional Exempt Property is classified as being within Zone 1, Zone 2, Zone 3 or Zone 4 of the District, as such "Zones" are identified on the boundary map of the District, a copy of which is included in Appendix K. If an Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property or Provisional Exempt Property is located within more than one Zone, it is deemed to be entirely within the Zone in which the largest portion of its Acreage is located. In addition, each Assessor's Parcel of Developed Property is further classified as Residential Property, Multifamily Residential Property or Non -Residential Property. Assessor's Parcels of Residential Property are further categorized based on the Building Square Footage of each such Assessor's Parcel. Under the Rate and Method, "Developed Property" includes all Assessor's Parcels of Taxable Property for which a Final Map was recorded as of the January 1 preceding the Fiscal Year for which the Special Tax levy is being made and a building permit for new construction was issued as of the April 1 preceding the Fiscal Year for which the Special Tax A and Special Tax B are being levied. "Undeveloped Property" includes all Taxable Property not classified as Developed Property, Approved Property or Provisional Exempt Property. "Approved Property" includes all Assessor's Parcels of Taxable Property other than Provisional Exempt Property: (i) that are included in a Final Map that was recorded prior to the January 1st -21- immediately preceding the Fiscal Year for which the Special Tax A is being levied, and (ii) that have not been issued a building permit on or before the April 1st immediately preceding the Fiscal Year for which the Special Tax A is being levied. "Provisional Exempt Property" includes all Assessor's Parcels of Taxable Property subject to Special Tax A that would otherwise be classified as Exempt Property pursuant to the provisions of the Rate and Method, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property within the applicable Zone below the required minimum Acreage for that Zone set forth in the Exempt Property section (Section M) of the Rate and Method. Maximum Special Taxes. The Maximum Special Tax A for each Assessor's Parcel that is Residential Property, Multifamily Residential Property or Non -Residential Property in any Fiscal Year is the greater of (i) the Assigned Annual Special Tax A, or (ii) the Backup Annual Special Tax A. The Maximum Special Tax A for each Assessor's Parcel of Approved Property, Undeveloped Property or Provisional Exempt Property is the Assigned Annual Special Tax A. The Assigned Annual Special Tax A rates for the four Zones of the District and for the various categories of Taxable Property are set forth in Section D of the Rate and Method in Appendix B, and range from $2,110 annually per dwelling unit to $5,455 annually per dwelling unit depending upon the size of the home, and from $7,783 annually per acre for Multifamily Residential Property to $32,894 annually per acre depending upon the Zone in which such property is located. The Maximum Special Tax B for Fiscal Year 2016-17 for each Assessor's Parcel of Residential Property is $432 per Unit, and for each Assessor's Parcel of Multifamily Residential Property and of Non -Residential Property is $2,766 per Acre. The Maximum Special Tax A is not subject to annual increases; however the Maximum Special Tax B is subject to annual increases, commencing July 1, 2017, by an amount equal to increases in the Consumer Price Index or two percent (2%), whichever is greater, of the amount in effect for the previous Fiscal Year. Method of Apportionment. The Rate and Method provides that for each Fiscal Year, the Board of Directors of the Authority will levy the Annual Special Tax A on all Taxable Property to fund the Special Tax A Requirement as follows: First: The Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property, up to 100% of the applicable Assigned Annual Special Tax A rates in Tables 1, 2, 3 and 4 of Section D of the Rate and Method (which Section sets forth the Assigned Annual Special Tax rates for the four Zones within the District) to satisfy the Special Tax A Requirement; Second: If additional moneys are needed to satisfy the Special Tax A Requirement after the first step, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the applicable Assigned Annual Special Tax A to satisfy the Special Tax A Requirement; Third: If additional moneys are needed to satisfy the Special Tax A Requirement after the first two steps have been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Assigned Annual Special Tax A for Undeveloped Property applicable to each such Assessor's Parcel as needed to satisfy the Special Tax A Requirement; Fourth: If additional moneys are needed to satisfy the Special Tax A Requirement after the first three steps have been completed, the Annual Special Tax A on each Assessor's Parcel of Developed Property for which the Maximum Special Tax A is the Backup Annual Special Tax A (the Backup Annual Special Tax A is computed pursuant to Section E of the Rate and Method) shall be increased Proportionately from the -22- Assigned Annual Special Tax A up to 100% of the Backup Annual Special Tax A as needed to satisfy the Special Tax A Requirement; and Fifth: If additional moneys are needed to satisfy the Special Tax A Requirement after the first four steps have been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Provisional Exempt Property up to 100% of the Assigned Annual Special Tax A applicable to each such Assessor's Parcel as needed to satisfy the Special Tax A Requirement. The Rate and Method provides that for each Fiscal Year, commencing with Fiscal Year 2016-17, the Authority shall levy the Special Tax B at up to 100% of the applicable Maximum Special Tax B Proportionately on each Assessor's Parcel of Developed Property until the amount of Special Tax B equals the Special Tax B Requirement. Notwithstanding the above, the Act effectively provides that under no circumstances will the Special Tax A and the Special Tax B levied against any Assessor's Parcel used as a private residence be increased as a consequence of delinquency or default by the owner of any other Assessor's Parcel or Assessor's Parcels within the District by more than ten percent (10%) per Fiscal Year. Prepayment in Full. The Maximum Special A Tax obligation applicable to an Assessor's Parcel of Developed Property, Approved Property or Undeveloped Property for which a Building Permit has been issued, or Approved or Undeveloped Property for which a Building Permit has not been issued, and Assessor's Parcels of Provisional Exempt Property that are not Exempt Property may be fully prepaid and the obligation of the Assessor's Parcel to pay the Special Tax A permanently satisfied as described in Section G of the Rate and Method, provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to the Assessor's Parcel. The Prepayment Amount for Special Tax A for an applicable Assessor's Parcel is calculated based on Bond Redemption Amounts, the Future Facilities Amounts and other costs, all as specified in Section G of the Rate and Method. Any such prepayment will result in a redemption of Bonds prior to maturity. See "THE 2017 BONDS—Redemption – Mandatory Redemption From Special Tax Prepayments." In addition, the Act authorizes a public agency which acquires property subject to the Special Tax A to prepay the Special Tax A so long as the Authority determines the prepayment arrangement will fully protect the interests of the owners of the Bonds. The Special Tax B is not subject to prepayment. Prepayment in Part. The Maximum Special A Tax on an Assessor's Parcel of Developed Property, Approved Property or Undeveloped Property may be partially prepaid. The amount of any such partial prepayment will be calculated pursuant to Section H of the Rate and Method. The Maximum Special Tax B is not subject to partial prepayment. -23- Projected Fiscal Year 2017-18 Special Tax A Levy. Table 1 below sets forth the Property Owners by Planning Areas of the property in the District and their respective portion of projected Special Tax A levy for Fiscal Year 2017-18. The Table also shows the aggregate Maximum Special Tax A that may be levied under the Rate and Method based on the parcels in each Planning Area, and the projected Fiscal Year 2017-18 Special Tax A levy as a percentage of the Fiscal Year 2017-18 Maximum Special Tax A. Table 1 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Planning Areas and Projected Fiscal Year 2017-18 Special Tax Levy for Taxable Property by Planning Area Projected FY % of Total 2017-18 Expected FY 2017-18 Projected FY Special Tax as Current No. of Projected 2017-18 Maximum Percentage of Planning No. of Unitsat Special Special Special Maximum Property Owner Area Parcels Buildout Acreage Tax A(1) Tax A(2) Tax A(3) Tax(2) Roripaugh Valley Restoration 14 1 77 13.59 $ 166,525 5.21% $ 311,768 53.41% Roripaugh Valley Restoration 15 1 104 14.09 172,651 5.40 323,239 53.41 Roripaugh Valley Restoration 16 1 121 26.42 323,737 10.12 606,101 53.41 Roripaugh Valley Restoration 17 1 147 41.08 503,372 15.74 942,416 53.41 Roripaugh Valley Restoration 18 1 121 30.58 374,711 11.72 701,536 53.41 Roripaugh Valley Restoration 19 1 26 29.98 124,631 3.90 233,334 53.41 Roripaugh Valley Restoration 20 1 29 33.71 140,137 4.38 262,365 53.41 Roripaugh Valley Restoration 21 1 24 23.61 98,150 3.07 183,757 53.41 Roripaugh Valley Restoration 22 1 126 20.99 257,200 8.04 481,532 53.41 Roripaugh Valley Restoration 23 1 51 10.02 122,780 3.84 229,869 53.41 Roripaugh Valley Restoration 24 1 71 12.28 150,473 4.71 281,715 53.41 Roripaugh Valley Restoration 31 1 164 25.19 308,665 9.65 577,884 53.41 Wingsweep Corporation 10 1 14 8.12 39,559 1.24 74,063 53.41 Wingsweep Corporation 11 1 1 15.19 74,003 2.31 138,548 53.41 Wingsweep Corporation 12 1 136 16.01 281,290 8.80 526,633 53.41 Wingsweep Corporation 33A 2 12 10.26 49,985 1.56 93,581 53.41 Wingsweep Corporation 33B 1 3 2.08 10,133 0.32 18,972 53.41 18 1,227 333.20 $3,198,000 100.00% $5,987,312 53.41% (1) Fiscal Year 2017-18 Projected Special Tax A is based upon preliminary 2017 Bond sizing provided by the Underwriter. Amount includes debt service for the 2017 Bonds and $50,000 in District administrative costs. Preliminary, subject to change. (2) Preliminary, subject to change. (3) See "SECURITY FOR THE 2017 BONDS -Summary of Rate and Method -Maximum Special Taxes.". Source: Albert A. Webb Associates. Reserve Fund The Fiscal Agent Agreement establishes a debt service reserve fund (the "Reserve Fund") as a separate fund to be held 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. Moneys in the Reserve Fund are subject to a lien in favor of the Owners of the Bonds. The Reserve Fund is required by the Fiscal Agent Agreement to be maintained in an amount equal to the Reserve Requirement, which is defined in the Fiscal Agent Agreement, as of any date of calculation, as an amount equal to the least of (i) the then Maximum Annual Debt Service, (ii) 125% of the then average Annual Debt Service, or (iii) 10% of the initial principal amount of the Bonds issued under the Fiscal Agent Agreement. The Reserve Requirement as of the date of issuance of the 2017 Bonds will be $3,151,400*. Except as otherwise provided in the Fiscal Agent Agreement (with respect to the use of moneys in the Reserve Fund in connection with prepayments of Special Taxes, for the payment * Preliminary, subject to change. -24- of any rebate liability due to the federal government, and the use of moneys in excess of the Reserve Requirement to pay debt service on the Bonds), all amounts deposited in the Reserve Fund will 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. See Appendix C - "Summary of Fiscal Agent Agreement - Reserve Fund." Whenever the balance in the Reserve Fund equals or exceeds the amount required to redeem or pay all of the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent will transfer the amount in the Reserve Fund to the Bond Fund to be used for the payment and redemption of all of the Outstanding Bonds. In the event that the amount 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 will be retained by the Authority, free of any encumbrance by the Fiscal Agent Agreement, to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts will be transferred from the Reserve Fund until after (i) amounts in the Reserve Fund are withdrawn for purposes of making a rebate payment to the federal government in accordance with the Fiscal Agent Agreement, and (ii) payment of any fees and expenses due to the Fiscal Agent. See Appendix C - "Summary of Fiscal Agent Agreement - Reserve Fund." Covenant for Superior Court Foreclosure Foreclosure Under the Act. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on the taxed parcel, the Authority may order the institution of a superior court action to foreclose the lien on the taxed parcel within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. Authority Foreclosure Covenant. The Authority has covenanted for the benefit of the Bondowners that the Treasurer will determine on or about June 15 of each year whether or not all Special Taxes theretofore levied in the District have been received by the Authority and, consequently, whether any deficiencies in payment of Special Taxes exist. The Fiscal Agent Agreement provides that, following such determination: (A) 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 $7,500 or more, the Treasurer will 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 against the delinquent parcel within 90 days of the sending of such notice; and (B) 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 (i) the amount in the Reserve Fund is at least equal to the Reserve Requirement, and (ii) the amounts then on deposit in the Special Tax Fund and the Bond Fund are sufficient to pay the scheduled debt service due on the Bonds on the succeeding September 1 and March 1 without the need for any draw on the Reserve Fund. See Appendix C - "Summary of the Fiscal Agent Agreement." -25- No assurance can be given as to the time necessary to complete any foreclosure sale or that any foreclosure sale will be successful. The Authority is not required to be a bidder at any foreclosure sale and does not intend to be such a bidder. Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. Subject to the maximum rates, the Rate and Method is designed to generate from all non-exempt property within the District the current year's debt service, administrative expenses, and replenishment of the Reserve Fund to the Reserve Requirement, including an amount reflecting the prior year's delinquencies. However, if foreclosure proceedings are necessary, and the Reserve Fund has been depleted, there could be a delay in payments to owners of the 2017 Bonds pending prosecution of the foreclosure proceedings and receipt by the Authority of the proceeds of the foreclosure sale. See "SPECIAL RISK FACTORS— Bankruptcy Delays" and "—Proceeds of Foreclosure Sales." No assurance can be given that a foreclosure action in respect of delinquent Special Taxes will result in the collection of the Special Taxes, especially given the current appraised values of the parcels of Taxable Property in the District. See "SPECIAL RISK FACTORS—Property Values." Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post- judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.6 of the Act, the Authority, as judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid," where the Authority could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the Authority becomes the purchaser under a credit bid, the Authority must pay the amount of its credit bid into the redemption fund established for the 2017 Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale. Neither the Act nor the Fiscal Agent Agreement requires the Authority to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale, and the Authority has no intent to be such a purchaser. No Teeter Plan Collection of the Special Taxes is not subject to the "Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds," as provided for in Section 4701 et seq. of the California Revenue and Taxation Code (known as the "Teeter Plan"). Accordingly, collections of Special Taxes will reflect actual delinquencies, if any. Investment of Moneys Except as otherwise provided in the Fiscal Agent Agreement, all moneys in any of the funds or accounts established pursuant to the Fiscal Agent Agreement will be invested by the Fiscal Agent solely in Permitted Investments, as directed by the Authority. See Appendix C – "Summary of the Fiscal Agent Agreement" for a definition of "Permitted Investments" and for additional provisions regarding the investment of funds held under the Fiscal Agent Agreement. -26- Issuance of Additional Bonds Parity Bonds. The Fiscal Agent Agreement authorizes the Authority to issue one or more series of "Parity Bonds" secured and payable on a parity under the Fiscal Agent Agreement with the 2017 Bonds. Subject to meeting the conditions summarized below, the Parity Bonds will be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Fiscal Agreement on a parity with all other Bonds Outstanding under the Fiscal Agreement (the Fiscal Agreement defines "Bonds" as the 2017 Bonds and any future Parity Bonds). The Authority may issue the Parity Bonds subject to the following specific conditions precedent, as set forth in the Fiscal Agent Agreement: (A) Current Compliance. The Authority must be in compliance in all material respects on the date of issuance of the Parity Bonds with all covenants set forth in the Fiscal Agent Agreement and all Supplemental Agreements, and the principal amount of the Parity Bonds must not cause the Authority to exceed the maximum authorized indebtedness of the District under the provisions of the Act. (B) Payment Dates. The interest on the Parity Bonds must be payable on March 1 and September 1, and principal of the Parity Bonds must be payable on September 1 in any year in which principal is payable (provided that there is 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 at least equal to the Reserve Requirement. (D) Value -to -Lien Ratio. The District Value shall be at least three times the sum of: (i) the principal amount of all Bonds then Outstanding allocable to such property (based on the percentage of the then fiscal year overall Special Tax levy on such property), plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued allocable to such property, plus (iii) the aggregate principal amount of any fixed assessment liens on such parcels, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of land within the District (the "Other District Bonds") equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on such parcels, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year. For purposes of this paragraph (D), there shall be excluded from the principal amount of any Parity Bonds the portion thereof (if any) representing amounts on deposit in an escrow fund established by the Authority with the Fiscal Agent that can only be (i) released from such escrow fund to the Improvement Fund if the Release Test is satisfied in respect of the portion to be so moved to the Improvement Fund, or (ii) used to redeem Bonds on the next available redemption date if the Release Test is not satisfied with -27- respect to any funds in such escrow fund within no more than three (3) years from the date of deposit of funds into the escrow fund. The term "District Value" in the Fiscal Agent Agreement is defined as the market value, as of the date of the appraisal described below and / or the date of the most recent County real property tax roll, as applicable, of all parcels of Undeveloped Property in the District subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, including with respect to such nondelinquent parcels the value of the then existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in the Improvement Fund and with the proceeds of any proposed series of Parity Bonds, as determined with respect to any parcel or group of parcels of Undeveloped Property by reference to (i) an appraisal performed within six (6) months of the date of issuance of any proposed Parity Bonds by an MAI appraiser selected by the Authority, or (ii) in the alternative, the assessed value of all such nondelinquent parcels and improvements thereon as shown on the then current County real property tax roll available to the Treasurer. It is expressly acknowledged that, in determining the District Value, the Authority may rely on an appraisal to determine the value of some or all of the parcels in the District and / or the most recent County real property tax roll as to the value of some or all of the parcels in the District. Neither the Authority nor the Treasurer shall be liable to the Owners, the Original Purchaser or any other person or entity in respect of any appraisal provided for purposes of this definition or by reason of any exercise of discretion made by any appraiser pursuant to this definition. (E) The Special Tax Coverage. The Authority shall obtain a certificate of a Tax Consultant to the effect that the amount of the maximum Special Tax A that may be levied in each Fiscal Year during the term of the Bonds and the proposed Parity Bonds on Taxable Property (as defined in the Rate and Method of Apportionment of Special Taxes) not then delinquent in the payment of Special Taxes theretofore levied on such property, based upon the status of the land in the District as of the date of issuance of the Parity Bonds, less an amount sufficient to pay annual Administrative Expenses (as determined by the Treasurer), shall be at least one hundred ten percent (110%) of the total Annual Debt Service for each such Fiscal Year on the Bonds and the proposed Parity Bonds. (F) Escrow Release. There are no funds in any escrow fund described in the last sentence of the first paragraph under (D) above. (G) 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 paragraphs (A), (B), (C), (D), (E) and (F) above 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. The maximum principal amount of "new money" Parity Bonds that may be issued is limited to $15,450,000*. Notwithstanding the foregoing, the Authority may issue Refunding Bonds as Parity Bonds without the need to satisfy the requirements of the foregoing paragraphs (D), (E) and (F) above, and without limitation on the number of series of such Refunding Bonds; and, in connection therewith, the Officer's Certificate referred to in paragraph (G) above need not make * Preliminary, subject to change. -28- reference to the foregoing paragraphs (D), (E) and (F). The term "Refunding Bonds" is defined in the Fiscal Agent Agreement as 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. Subordinate Bonds. Nothing in the provisions described above will prohibit the Authority from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge of the Special Tax Revenues under the Fiscal Agent Agreement. THE DISTRICT Location and General Description of the District The District is located in the northern portion of the City, and includes approximately 645 gross acres of land located in the Pan Area of the Roripaugh Ranch development. The City of Murrieta is about one mile to the west, and unincorporated area of Riverside County is located to the north, east and southeast. The French Valley airport is located about a mile northwest of the District, and the Lake Skinner Recreation Area is located within two miles to the northeast. In the area to the north is a relatively new approximately 800 acre master planned community known as Rancho Bella Vista, planned for just over 1,800 dwelling units. Roripaugh Ranch is a master -planned community expected to include up to 1,735 single family detached homes, a neighborhood retail center, two private recreation centers, parks, an elementary school and a middle school, a fire station and 263 acres of open space. See "THE DISTRICT—The Roripaugh Ranch Development." Roripaugh Ranch is shaped approximately like the State of Oklahoma. As discussed under the heading "THE DISTRICT—History of the District," when CFD 03-02 was formed in 2006, it included all of the property then in Roripaugh Ranch, which included the Pan Area of the development (which is primarily undeveloped), but the Special Taxes levied on the Pan Area are being fully prepaid on the date of issuance of the 2017 Bonds, so that the property in the Pan Area will not be subject to future levies of special taxes for CFD 03-02. See "PLAN OF FINANCING—Overview - Prepayment of CFD 03-02 Special Taxes." The portion of the Roripaugh Ranch located in the Panhandle Area is fully entitled for development, but the Pan Area requires the completion of additional infrastructure improvements before homes can be constructed in that portion of Roripaugh Ranch. See "THE DISTRICT—The Improvements" and "—The Roripaugh Ranch Development." The following page contains an aerial photo which shows the location of the District. See "THE DISTRICT—The Roripaugh Ranch Development" for a map showing the several Planning Areas of the land within the District. -29- Man created 07 Tin 2016 G: \ 201 S \ 15-0312\ (:TS \ CF1)16-01.mx3 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) The Heart o1 Southern Calitorrda WireCokmiry 0 4,000 8,000 -30- 1 I Feet LOCATION MAP CFD 16-01 ALBERT A. WEBB ASSOCIATES History of the District The land in the District is located within the boundaries of CFD 03-02, which was formed under the provisions of the Act by the Board of Directors of the Authority, acting as the legislative body of CFD 03-02, on January 11, 2005, in order to finance public infrastructure improvements necessitated by the Roripaugh Ranch development. On April 27, 2006, the Authority issued, for CFD 03-02, $51,250,000 initial principal amount of the CFD 03-02 2006 Bonds. In connection with the issuance of the CFD 03-02 2006 Bonds, the Authority, for and on behalf of the District, entered into on Acquisition Agreement, dated as of March 1, 2006 (the "Ashby Acquisition Agreement") with Ashby USA, LLC ("Ashby"), the then owner of the majority of the property in CFD 03-02, pursuant to which Ashby was to construct the improvements authorized to be funded by CFD 03-02. Shortly after the issuance of the CFD 03-02 2006 Bonds, Ashby encountered financial difficulties. Between June 1, 2006 and May 10, 2011, the Authority posted 41 separate event notices on the Municipal Securities Rulemaking Board's EMMA website setting forth information regarding the status of various matters related to CFD 03-02. During that time period all of Ashby's interests in the property in CFD 03-02 it had not yet sold were transferred to various parties, some of which were subject to bank foreclosures and, ultimately, acquisition by the Federal Deposit Insurance Corporation following bank failures. See "THE DISTRICT— The Roripaugh Ranch Development - History of Roripaugh Ranch." The parcels in the Panhandle portion of Roripaugh Ranch which is also included in CFD 03-02, a total of 509 separate Riverside County Assessor's parcels, were subsequently developed by Standard Pacific Corp. (now CalAtlantic), KB Home Costal and Roripaugh Temecula 113. 480 of those parcels now have completed single family homes, 416 of which have been sold to homeowners. All but 29 of the remaining parcels have completed homes for sale or homes under construction. The land in the District, constituting the Pan portion of Roripaugh Ranch, is currently owned by Roripaugh Valley Restoration, LLC (referred to in this Official Statement as the "Primary Landowner") as a consequence of receivership by the Federal Deposit Insurance Corporation, and by Wingsweep Corporation, and remains undeveloped. See "THE DISTRICT—The Current Landowners" and "—The Roripaugh Ranch Development - History of Roripaugh Ranch." In order to raise additional funds to finance the Improvements needed for the development of the Pan area, the two landowners petitioned the Authority in March of 2016 to form the District. Following the adoption by the Board of Directors of the Authority of resolutions of intention for the District on March 22, 2016, the Authority held a public hearing regarding the formation of, and the issuance of bonds for, the District on April 26, 2016. Following the public hearing, also on April 26, 2016, the Board of Directors of the Authority adopted Resolution No. TPFA 16-04 forming the District, Resolution No. TPFA 16-05 determining the necessity to issue up to $60,000,000 of special tax bonds for the District, and Resolution No. 16-06 calling a special election regarding the formation of the District and the issuance of the special tax bonds for the District. The election was held on April 26, 2016 at which the Primary Landowner and Wingsweep Corporation voted in favor of the formation of the District, the levy of Special Tax A and Special Tax B on property in the District, and the issuance by the Authority of special tax bonds for the District. On May 4, 2016, a Notice of Special Tax Lien was recorded in the Riverside County Recorder's Office against the property in the District, and on May 10, 2016 the -31- Board of Directors of the Authority adopted Ordinance No. TPFA 16-01 levying Special Tax A and Special Tax B on the property in the District. Two of the Boardmembers of the Authority have interests in business entities related to the owners of certain land adjacent to the District. This land is dependent in part on the widening of Butterfield Stage Road (one of the Improvements) for the last twenty percent (20%) of the lots in such other development to obtain building permits. This interest has resulted in the appearance of a potential conflict of interest of such Boardmembers in voting for the Authority Approving Resolution referenced below. In light of the need for a 4/5th vote of the Board of Directors to adopt the Authority Approving Resolution, as described in the next paragraph, the Board of Directors at its regular public meeting of January 10, 2017 followed procedures authorized under Section 18705 of the California Fair Political Practices Commission of the Regulations to randomly select one of the two Boardmembers to achieve a quorum of four Boardmembers and be eligible to vote on the adoption of the Authority Approving Resolution despite the possible conflict of interest. The Authority Secretary randomly selected one of the two Boardmembers by means of a drawing of the name of one of the two Boardmembers from a clear bowl during the January 10th Board of Directors meeting, as authorized by said Section 18705. On January 24, 2017, the City Council held a public hearing regarding the issuance by the Authority of the 2017 Bonds. Following the public hearing, the City Council adopted Resolution No. 17-07 pursuant to which it found that significant public benefits will arise from the use of the proceeds of the 2017 Bonds to finance costs of the Improvements and it approved the issuance of the 2017 Bonds by the Authority. Also on January 24, 2017, the Authority adopted Resolution No. TPFA 17-01 authorizing the issuance of the 2017 Bonds and approving related documents (the "Authority Approving Resolution"). The Act required that the Authority Resolution be approved by a 4/5ths vote of the Board of Directors of the Authority because the value of the Taxable Property in the District estimated in the Appraisal Report is not at least three times the initial principal amount of the 2017 Bonds. The Authority Approving Resolution was approved by the required 4 / 5ths vote, and the Board of Directors found in the Authority Approving Resolution that the issuance of the 2017 Bonds should proceed for public policy reasons, including that the issuance of the 2017 Bonds as currently contemplated is expected to result in lower interest rates on the 2017 Bonds than if they were issued at a later time, and the issuance of the 2017 Bonds will allow for infrastructure development to continue in the District on a coordinated basis, to the benefit of the future residents of homes to be built in the District. See, however, "SPECIAL RISK FACTORS— Property Value." A portion of the proceeds of the 2017 Bonds will be used to prepay, on the closing date for the 2017 Bonds, the special taxes authorized to be levied by the Authority for CFD 03-02 on the land in the District. See "PLAN OF FINANCING—Overview – Prepayment of CFD 03-02 Special Taxes." As a consequence of the prepayment, the property in the District will no longer be subject to any future special tax levies for CFD 03-02. However, the land in the District is subject to certain overlapping indebtedness and governmental levies. See "THE DISTRICT – Direct and Overlapping Government Obligations." The Improvements As previously mentioned under the heading "PLAN OF FINANCING – Overview – Funding for Improvements," the Authority has entered into the Acquisition Agreement with the Primary Landowner pursuant to which the Authority has agreed to use amounts in an -32- improvement fund for CFD 03-02 (estimated to be approximately $14,977,000*) as well as proceeds of the 2017 Bonds and proceeds of any future Parity Bonds to finance costs of Improvements to be constructed by the Primary Landowner or its successor, although certain of the Improvements are being constructed by the City and will be paid for with such funds. The Acquisition Agreement supersedes and replaces an Amended and Restated Acquisition Agreement mentioned under the heading "THE DISTRICT—The Roripaugh Ranch Development - History of Roripaugh Ranch." The City and the Authority are parties to joint community facilities agreements for both the District and CFD 03-02, and the Authority is a party to Joint Community Facilities Agreements with the County of Riverside (two such agreements, one related to street improvements and one related to flood control improvements), the Temecula Community Services District and the Eastern Municipal Water District for CFD 03-02, such that the Authority can expend the available funds for Improvements that will ultimately be owned by those entities. Some of the Improvements have been completed, and others must be completed in order to obtain building permits from the City for parcels in the District. See Exhibit H - "Building Permit Thresholds." See also "THE DISTRICT—Property Values" and "SPECIAL RISK FACTORS—Property Values." Listed below are the Improvements that proceeds of the 2017 Bonds, and amounts in the improvement fund for CFD 03-02, are authorized to fund and the status of their completion as of December 27, 2016. 1. Construction of Murrieta Hot Springs Road from the westerly boundary of Tract 29661 to Butterfield Stage Road. The construction of Murrieta Hot Springs Road (funded by CFD 03-02 funds) commenced in November of 2011 and was completed in September of 2012. 2. Construction of portions of Butterfield Stage Road. The construction of Butterfield Stage Road was sequenced in three phases. • Phase I included the segment of Butterfield Stage Road between Murrieta Hot Springs Road and Calle Chapos; construction commenced in November of 2011 and was completed in September of 2012. • Phase II included the segment of Butterfield Stage Road between Calle Chapos and approximately 700' south of La Serena Road; construction commenced in January of 2013 and was completed in July of 2014. • Phase III includes the segment of Butterfield Stage Road between 700' south of La Serena Road and Rancho California Road in addition to the intersection/transition improvements and traffic signal modifications at Rancho California Road. Construction of Phase III is anticipated to commence in January of 2018 and be completed by January of 2019. 3. Construction of portions of Nicolas Road. The construction of the portion of Nicolas Road in the District (between Butterfield Stage Road and the Metropolitan Water District right-of-way) is anticipated to commence in April 2018 and be completed by January of 2019. The construction of the portion of Nicolas Road outside of the District (west of the Metropolitan Water District * Preliminary, subject to change. -33- right-of-way) is anticipated to commence in the first quarter of 2019 and be completed by the third quarter of 2020. 4. Construction of the Nicolas Road sewer pipeline from Liefer Road to Joseph Road. The Nicolas Road sewer pipeline from Liefer Road to Joseph Road was completed as part of Butterfield Stage Road Phase I construction. 5. Installation of Nicolas Road and North General Kearny Road intersection signalization. The Nicolas Road and North General Kearney Road intersection signalization work commenced in September of 2003 and the traffic signal was activated in May of 2004. 6. Nicolas Road and Winchester Road intersection widening and signal modification improvements. The Nicolas Road and Winchester Road Intersection widening and signal modification work is anticipated to commence in October of 2017 and be completed by January of 2019. 7. Construction of Calle Chapos from Butterfield Stage Road to Walcott Lane. The construction of Calle Chapos was completed as part of Butterfield Stage Road Phase I construction. 8. Construction of portions of the Long Valley Channel. The construction of the Long Valley Channel is anticipated to commence in April of 2018 and be completed by April of 2019. 9. Construction of portions of the Santa Gertrudis Creek. The construction of the Santa Gertrudis Creek is anticipated to commence in October of 2017 and be completed by January of 2019. 10. Construction of a sports park. The sports park is to be constructed at the Southeast corner of the intersection of North Loop Road and Butterfield Stage Road. The construction of the Sports Park is anticipated to commence in April of 2019 and be completed by July of 2020. 11. Roripaugh Ranch Fire Station site grading. The fire station site grading commenced in January of 2005 and was completed in April of 2005. 12. Construction of a North Loop Road. The construction of the North Loop Road is anticipated to commence in April of 2018 and be completed by January of 2020. 13. Construction of a South Loop Road. The construction of the South Loop Road is anticipated to commence in April of 2018 and be completed by January of 2020. 14. Construction of Roripaugh Valley Road Grading and Street Improvements. Construction of this roadway from Murrieta Hot Springs Road to Butterfield Stage Road (A Street) commenced in 2005, but was not then pursued to completion. Construction is anticipated to recommence in October of 2017 and be completed by January of 2018. 15. Construction of Fiesta Ranch Road (B Street). The construction of Fiesta Ranch Road (B Street) commenced in 2005, but was not then pursued to completion. Construction is anticipated to recommence in October of 2017 and be completed by January of 2018. -34- 16. Construction of Fire Station and Fire Truck Purchase. The construction of the fire station and the acquisition of fire apparatus commenced in April of 2005 and was completed in February of 2006. 17. Construction of Neighborhood Park. The construction of a neighborhood park at the SW corner of the intersection of Murrieta Hot Springs Road and Roripaugh Valley Road (A Street) commenced in 2006, but was not then pursued to completion. Construction recommenced in April of 2016 and is anticipated to be completed by April of 2017. 18. Construction of SR -79 Improvements. The construction of the SR -79 improvements commenced in March of 2010 and was completed in December of 2011. The Improvements identified above as #2 (Phase III of Butterfield Stage Road), #3, #6 and #9 are expected to be financed with proceeds of the 2017 Bonds deposited to the Improvement Fund and funds in the improvement fund for CFD 03-02. See "PLAN OF FINANCING—Overview-Funding for Improvements". It is expected that the City will construct the Improvements identified above as #2 (Phase III of Butterfield Stage Road) and certain other public improvements not listed above, and that the Primary Landowner or its successor under the Acquisition Agreement will construct the remaining Improvements not yet completed. The issuance of building permits for property in the District is contingent upon the completion of certain of the Improvements (see Exhibit H – "Building Permit Thresholds"). No assurance can be given the construction of the Improvements not yet completed will commence, continue or be completed as currently anticipated. However, the Primary Landowner and the City continue to conduct activities related to the permitting and construction of the Improvements. See "THE DISTRICT—The Roripaugh Ranch Development – Current Status." The Roripaugh Ranch Development General. The District includes approximately 645 gross acres of undeveloped property in an area of the City known as "Roripaugh Ranch." Roripaugh Ranch is a master planned community that at buildout is expected to include approximately 1,743 single family detached homes, a neighborhood retail center, parks, schools, a fire station, and open space areas. The District includes the property in the Pan Area of the Roripaugh Ranch development, which development also includes a Panhandle Area. The Panhandle Area includes 509 Riverside County Assessor's parcels on approximately 160 acres, which area is substantially built -out with single family homes, and which property is not in the District. See "INTRODUCTION— The District." History of Roripaugh Ranch. In November of 2002, the City adopted the Roripaugh Ranch Specific Plan (the "Specific Plan"). The Specific Plan provides for a mixed-use development of residential, commercial, and public facilities within the framework of a comprehensive master -planned community. In connection with the Specific Plan, the City certified an Environmental Impact Report (the "EIR") for the property encompassed by the Specific Plan. In December of 2002, Ashby USA, LLC, the original expected master developer of Roripaugh Ranch, entered into a Preannexation and Development Agreement (the "Development Agreement") with the City regarding the development of Roripaugh Ranch. The Development Agreement allows for the proposed improvement of the Roripaugh Ranch development site in a manner consistent with the Specific Plan. Under applicable provisions of -35- the California Government Code, the Development Agreement granted Ashby USA, LLC and its successors under the Development Agreement a vested right to develop the property consistent with the provisions of the Development Agreement. Subsequent to the execution of the Development Agreement, Ashby USA, LLC undertook activities to obtain various approvals needed from public agencies other than the City for the development of Roripaugh Ranch, as well as to satisfy certain required mitigation measures incident to the proposed development. These activities included transferring certain land to the City for wildlife mitigation, habitat area grading and planting and the payment of funds for habitat land management, the obtaining of a necessary permit from the U.S. Army Corps of Engineers related to creek and flood wash improvements and maintenance, a permit from the California Department of Fish and Game related to marsh habitat, as well as approval of a Storm Water Pollution Prevention Plan by the California Regional Water Quality Control Board related to the proposed construction activity. During the period between 2003 and 2006, the City and Ashby USA, LLC entered into three operating memorandum with respect to provisions of the Development Agreement and a first amendment to the Development Agreement, as well as a Deferral Agreement related to the proposed development, with the Deferral Agreement allowing for Ashby USA, LLC to record a final map for the Panhandle Area prior to the fulfillment of various requirements of the Development Agreement. Grading and the sales of land in the Panhandle Area to various merchant builders took place during this period, as well as the start of construction of homes in the Panhandle Area. In 2004, the Authority commenced proceedings for the formation of CFD 03-02 which includes all of the area within Roripaugh Ranch, including both the Panhandle Area and the Pan Area. In connection with the formation of CFD 03-02, the Authority entered into several joint community facilities agreements related to some of the Improvements, including such agreements with the City, the Temecula Community Services District, the County of Riverside (two such agreements, one related to street improvements and one related to flood control improvements), and the Eastern Municipal Water District. Those agreements generally provide that the respective public agency counterparties to the agreements will accept public improvements funded by CFD 03-02 upon their completion in accordance with plans and specifications approved by the applicable public agency. On April 27, 2006, the Authority issued $51,250,000 principal amount of the CFD 03-02 2006 Bonds and entered into an acquisition agreement with Ashby USA, LLC whereby proceeds of the CFD 03-02 2006 Bonds would be used to finance various public infrastructure improvements upon their completion by Ashby USA, LLC. Shortly after the issuance of the CFD 03-02 2006 Bonds, Ashby USA, LLC encountered financial difficulties. While it continued to sell property in Roripaugh Ranch, Ashby USA, LLC eventually defaulted on a construction loan made to it by Ohio Savings Bank, as described below. The Authority and Ashby USA, LLC entered into a fourth Operating Memorandum in 2007. During the period from June 1, 2006 through May 10, 2011, the Authority filed forty-one informational releases regarding Roripaugh Ranch and the CFD 03-02 2006 Bonds with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access ("EMMA") repository website, which are included with the Official Statement for the CFD 03-02 2006 Bonds and various annual and semiannual reports filed for the Authority and Ashby USA, LLC and its successors. The EMMA website and can be accessed at the following web address: emma.msrb.org, using CUSIP Number 879724 CN4. The Authority and Ashby USA, LLC subsequently entered into an Amended and Restated Acquisition Agreement, dated as of July 21, 2009, with respect to the use of the then remaining undistributed CFD 03-02 2006 Bond proceeds, allowing for the City to construct and complete some of the infrastructure improvements with CFD 03-02 2006 Bond proceeds that were previously to be constructed by Ashby USA, LLC. -36- In connection with its development activities in Roripaugh Ranch, in 2006 Ashby USA, LLC obtained a loan from Ohio Savings Bank, which was subsequently named AmTrust Bank. In December of 2009, the federal Office of Thrift Supervision closed AmTrust Bank and appointed the Federal Deposit Insurance Corporation (the "FDIC") as receiver for the failed institution. In July of 2010, the FDIC, in its capacity as receiver for AmTrust Bank, formed AMT CADC Venture, LLC ("AMT CADC"), and assigned the Ashby USA, LLC loan to AMT CADC, which subsequently declared the loan to be in default and sought to foreclose on Ashby USA, LLC's then remaining interest in the Roripaugh Ranch development, including the majority of the property in the Pan Area (a portion of which had previously been sold to Wingsweep Corporation in 2008). In May of 2011, AMT CADC, Ashby USA, LLC and certain other parties entered into a Deed -in -Lieu Settlement Agreement whereby Ashby USA, LLC's remaining interests in the Roripaugh Ranch property and related land use entitlements and agreements (including the Development Agreement and the Amended and Restated Acquisition Agreement) were conveyed to the Primary Landowner, and the City subsequently consented to the assignment. Current Status. The map on the following page contains a map showing the land use plan for Roripaugh Ranch, with the Planning Areas identified as 1A, 2, 3, 4A, 4B, 5, 6, 7A, 7B, 7C, 8, and 9A being in the Panhandle Area that is not within the District. While the land use plan remains essentially the same as originally contemplated in 2003, the Development Agreement and the Specific Plan have been amended several times, most recently in the Spring of 2016, and in connection therewith an Addendum No. 2 to the EIR was approved by the City's Planning Commission on February 17, 2016 and subsequently by the City on March 8, 2016. The City Council adopted an Ordinance on March 22, 2016 approving a third amendment to the Development Agreement which modified the schedule and building permit thresholds for the commencement and completion of various public improvements related to the development of the Planning Areas in the Pan Area, which constitutes the property in the District. Those thresholds pertain to improvements needed before building permits may be issued by the City for the various Planning Areas and are described in more detail in Appendix H — "Building Permit Thresholds." -37- 1NY r • !P0 Laail.aai Fri ---1144 - -- aim l ya5ima--m,s J 41a y i 4a_ IWIIM Z •"3a Ilk am .ter.—� S .tea. ram • aLH. YF. 1a WIM I 114:1 r Vie= ] 9► sem _ate—aat-tet a—r aa. F.3—nal -���l®1 maw- . R — - • e._s •df�rYs*---=• .a t e..ss aaca a.aa# r. ea. WRAW • r=ice WW• aa��{ At this time, water and sewer and electric and gas utilities are available to the land in the Pan Area from the Eastern Municipal Water District (with some of the parcels in the District to be served by the Rancho California Water District) and the Southern California Edison Company and Southern California Gas Company, respectively, and are expected to be installed in the roadways in the Pan Area as a part of the land development process. There are two recorded "A" tract maps for the Planning Areas within the Pan Area, and while tentative tract maps have been prepared for most of the Planning Areas, only one that was previously filed with the City remains in effect. Further development will require the filing of additional tentative and final tract maps, as well as design approval by the City of homes and commercial structures to be built, and a development plan for the commercial site in the Pan Area. As indicated in Exhibit H, and as described under the heading "THE DISTRICT – The Improvements," the City has completed certain priority roadway improvements necessary for the development of the Pan Area, including improvements to Butterfield Stage Road and Murrieta Hot Springs Road. In connection with the issuance of the 2017 Bonds, the Authority and the Primary Landowner are entering into an Acquisition Agreement, as described under the heading "PLAN OF FINANCING—Overview - Funding for Improvements" related to the use of certain funds held in an improvement fund for CFD 03-02 and a portion of the proceeds of the 2007 Bonds to be deposited to an Improvement Fund established under the Fiscal Agent Agreement, pursuant to which such funds will be used to finance costs of the Improvements, most of which are to be constructed by the Primary Landowner or its successor and some of which are to be constructed by the City. The owners of the land in the Pan Area, currently the Primary Landowner and Wingsweep Corporation, are obligated to fund the construction of the public improvements required by the Development Agreement as amended that are not financed with such CFD 03-02 and 2017 Bond Proceeds. See "THE DISTRICT—The Current Landowners." -38- The Primary Landowner reports that it has engaged various consultants in connection with overall site engineering, submittal of updated tentative tract maps and other planning tasks, updated infrastructure design, updated grading plans, and other site development activities. The Primary Landowner has advised that it is engaged in peer review of proposed flood control and drainage improvements, as well as activities related to the landscape architecture and master maintenance plan, plans for a sports park, the master plan for community trails, the homeowners' association recreation center, open space and revegetation plans, and certain roadway intersection landscaping. The Primary Landowner has further advised that it has engaged a biological consultant to assist with the construction of mitigation measures, has done engineering and plans for a necessary roadway intersection, as well as storm water design and street construction. The Primary Landowner has stated that work is being finished on certain flood control and creek channel improvements as well as certain offsite improvements. The Primary Landowner has advised that it plans to continue its efforts in respect of the development of the land in the District; however it is expected that the Primary Landowner will dispose of its interest in the property in the District in the near future, and it is unknown what entity will ultimately acquire such interest and such entities financial and managerial abilities to continue to construct the necessary public infrastructure improvements needed for vertical construction, as well as the eventual construction of homes on the subject property. See "THE DISTRICT—The Current Landowners – The Primary Landowner." Wingsweep Corporation has advised that the parcels that it owns in the District have been rough graded, with the land in one of the Planning Areas owned by it rough graded to near blue -topped condition and the commercial site it owns rough graded to near superpad condition. Wingsweep Corporation has also advised that it may request that the Development Agreement be amended to allow an "IT Village" to be constructed on the commercial site in lieu of neighborhood -serving commercial uses, but no such proposed amendment has yet been submitted to the City. The Absorption Study, the complete text of which is included in Appendix J, depends upon an assumption that various infrastructure requirements of the Development Agreement are completed in a timely fashion, including, most significantly, the approval of plans and permitting for Nicolas Road improvements (see page 52 of the Absorption Study in Appendix J). If construction of necessary improvements can be undertaken and completed, model home construction in the District and sales are expected to occur in mid to late 2019. The Appraisal Report explicitly assumes the timely construction of Nicolas Road as described in the Absorption Study. The current construction schedule for Nicolas Road is as follows: obtain necessary permits by the third quarter of 2018, commence construction in the first quarter of 2019, and complete construction in the third quarter of 2020. No assurance can be given as to the commencement or completion of any of the Improvements not yet under construction. The Primary Landowner and Wingsweep Corporation have entered into a Joint Development Agreement (Roripaugh Ranch Specific Plan) (the "Joint Development Agreement") whereby the Primary Landowner and its successors will be responsible for ninety percent (90%) of the costs of the construction of the improvements required by the Development Agreement for development of the Pan Area, and Wingsweep Corporation will be responsible for ten percent (10%) of such costs. The Joint Development Agreement identifies the costs of the Improvements expected to be funded under the Acquisition Agreement, as well as an estimated $20,250,000 of costs of the Improvements not expected to be funded under that agreement (but which may be funded from proceeds of future Parity Bonds, when and if any such Parity Bonds are issued as described under the heading "SECURITY FOR THE 2017 BONDS – Issuance of Additional Bonds"). The Joint Development Agreement further identifies the costs of public improvements required by the Development Agreement but not eligible for funding under the Acquisition Agreement totaling $25,388,500. No assurance can be given that -39- the Primary Landowner or its successor or Wingsweep Corporation will have the funds necessary to pay their respective share of the costs to complete the required improvements. See "THE DISTRICT—The Current Landowners." Both the Primary Landowner and Wingsweep Corporation have expended significant funds in respect of their acquisition and development activities for the property in the District, and they both continue to advance funds for development activities. Both landowners have effectively self -financed their activities to date. See "THE DISTRICT—The Current Landowners." The Current Landowners General. All of the property within the District is currently owned by Roripaugh Valley Restoration, LLC (referred to in this Official Statement as the "Primary Landowner"), and by Wingsweep Corporation. The Primary Landowner owns approximately 290.54 acres of land in twelve of the Planning Areas in the District on which currently planned 1,061 separate single family homes are expected to be constructed each on their own lot, and Wingsweep Corporation owns approximately 42.66 acres of land in three of the Planning Areas in the District on which up to 166 separate single family homes are expected to be constructed each on their own lot, and an approximately 12.34 acre site (10.7 net acres) for commercial development. See "THE DISTRICT—Land Use Distribution." As described below, the Primary Landowner has advised that it may sell its interests in the property it owns in the District later this year, but Wingsweep Corporation has advised that it currently has no plans to sell the property it owns in the District. The Primary Landowner. The Primary Landowner is a California limited liability company whose sole asset is its interests in the property it owns in the District and in related agreements. The sole member of the Primary Landowner is AMT CADC Venture, LLC, a Delaware limited liability company (referred to in this Official Statement as "AMT CADC"). AMT CADC is owned sixty percent (60%) by the Federal Deposit Insurance Corporation (referred to in this Official Statement as the "FDIC"), and forty percent (40%) by PMO Loan Acquisition Venture, LLC, a Delaware limited liability company ("PMO"). The ownership of PMO is comprised of (i) various funds managed by Oaktree Capital Management, (ii) an entity of Gibraltar Capital & Asset Management (a Toll Brothers subsidiary), and (iii) another entity comprised of stakeholders with a small ownership percentage. PMO is the manager of the AMT CADC entity. AMT CADC owns a portfolio of assets that was purchased by the FDIC in April of 2010. The assets that the FDIC contributed to AMT CADC included a total of 279 assets with a nominal value of approximately $1,703,000,000, which included its interests in the loan by AmTrust Bank to Ashby USA, LLC that was secured by property Ashby USA, LLC owned in the District. See "THE DISTRICT—The Roripaugh Ranch Development – History of Roripaugh Ranch." Sabal Financial Group, L.P. is the servicer and asset manager of the portfolio of assets owned by AMT CADC, and pursuant to a written action by AMT CADC on April 25, 2011, Ken Kraemer, an employee of Sabal Financial Group, L.P., was designated to serve as the operating manager of the Primary Landowner. Sabal Financial Group, L.P. is an international diversified financial services firm specializing in real estate, banking and lending, and reports that it has acquired nearly $8.2 billion in assets on behalf of its clients and investors. Sabal Financial Group, L.P. maintains a website at sabalfin.com, but the Authority has no responsibility for the information on such website and the information thereon is not incorporated into this Official Statement. -40- AMT CADC was formed in order to manage and orderly dispose of the assets contributed by the FDIC to it over an expected six to seven year period. To that end, the assets of the Primary Landowner, consisting of its interests in Roripaugh Ranch, were offered for sale in the summer of 2016. No acceptable offers to purchase such assets were submitted. Those assets not liquidated within the six to seven year period may be sold at the direction of the FDIC. The Primary Landowner finances its ongoing activities from advances made from time to time by AMT CADC, which AMT CADC derives from activities related to its assets (sales and dispositions of assets, ongoing payment with respect to other assets, etc.). To date, the Primary Landowner has paid all of the special taxes levied by the Authority for CFD 03-02 on its property, and it has expressed its willingness to pay the Special Taxes to be levied thereon for the repayment of the 2017 Bonds. As described under PLAN OF FINANCING—Overview – Prepayment of CFD 03-02 Special Taxes, no further levies of special taxes will be made for CFD 03-02 on the property in the District. In light of the possible disposition by the Primary Landowner of its interests in the property it owns in the District, and in related agreements including the Development Agreement, the Joint Development Agreement and the Acquisition Agreement, it is unknown at this time what entity may ultimately develop the property currently owned by the Primary Landowner in the District and such entity's ability to finance the needed public infrastructure improvements required to be constructed in order to obtain building permits for such property. The Primary Landowner has entered into a Continuing Disclosure Agreement (see "CONTINUING DISCLOSURE") whereby it is obligated to provide semiannual reports and notices of certain events, including sales by it of its property in the District. See Appendix F – "Form of Continuing Disclosure Agreement of the Primary Landowner." Wingsweep Corporation. Wingsweep Corporation is a California corporation wholly owned by UNICOM Global, Inc., a real estate holding company. UNICOM Global, Inc. is privately held, and is part of an affiliated group that consists of more than 40 corporate entities worldwide, and works in collaboration with its shareholders mergers and acquisition business, financial services business and information technology business. UNICOM Global, Inc. maintains a website at uniglobal.com, with a link to eden.com with regard to its real estate holdings, but the Authority has no responsibility for the information on such websites and the information thereon is not incorporated into this Official Statement. Wingsweep Corporation self funds its activities, and has advised that it expects to eventually sell some or all of the property it owns in the District to a nationally -recognized residential builder and / or commercial builder prior to the commencement of vertical construction on the property (expected in early 2019), or may also partner with such an entity to complete the development of the property. Wingsweep Corporation has advised that it may apply to the City to amend the Development Agreement to allow for the development of all or a portion of the parcel in the District that it owns that is to be developed with neighborhood commercial uses as, instead, an information technology village. However, no such application has been made to date and no assurance can be given that the City would approve any such change in use of the parcel. Wingsweep Corporation is under no obligation to maintain its ownership of property in the District, and could sell or dispose of all or any portion of the property at any time without any requirement for notice to or the consent of the owners of the 2017 Bonds. -41- Land Use Distribution All of the property in the District is currently owned by the Primary Landowner and Wingsweep Corporation. The following table shows the distribution of ownership of the land in the District among the 19 Planning Areas within the District, the expected number of homes (units) for each Planning Area, the values of the parcels in each Planning Area as derived from the Appraisal Report, the allocation of the principal of the 2017 Bonds to each Planning Area, estimated Special Tax levy for fiscal year 2017-18 for the parcel in each Planning Area, as well as the Maximum Special Tax A that could be levied on parcels in each land use class under the Rate and Method and the projected Fiscal Year 2017-18 Special Tax levy as a percentage of the Maximum Special Tax A. Table 2 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Appraised Values and Projected Fiscal Year 2017-18 Special Tax A Levy by Planning Area Projected FY 2017- FY 2017-18 Expected Estimated 18 % of Special Tax as No. of 2017 Value- Maximum Projected Projected Percentage of Planning No. of Units at Appraised Special Tax to -Lien Special Special Special Maximum Property Owner Area Parcels Buildout Acreage Value(1) Bonds((2) Ratio(4) Tax Tax((3) Tax(4) Tax(4) Roripaugh Valley Restoration 14 1 77 13.59 $2,350,952 $ 2,319,784 1.01:1 $ 311,768 $ 166,525 5.21% 53.41% Roripaugh Valley Restoration 15 1 104 14.09 2,747,057 2,405,133 1.14:1 323,239 172,651 5.40 53.41 Roripaugh Valley Restoration 16 1 121 26.42 4,301,671 4,509,838 0.95:1 606,101 323,737 10.12 53.41 Roripaugh Valley Restoration 17 1 147 41.08 5,285,328 7,012,269 0.75:1 942,416 503,372 15.74 53.41 Roripaugh Valley Restoration 18 1 121 30.58 4,350,508 5,219,941 0.83:1 701,536 374,711 11.72 53.41 Roripaugh Valley Restoration 19 1 26 29.98 1,556,214 1,736,179 0.90:1 233,334 124,631 3.90 53.41 Roripaugh Valley Restoration 20 1 29 33.71 1,735,778 1,952,188 0.89:1 262,365 140,137 4.38 53.41 Roripaugh Valley Restoration 21 1 24 23.61 1,436,506 1,367,284 1.05:1 183,757 98,150 3.07 53.41 Roripaugh Valley Restoration 22 1 126 20.99 3,847,012 3,582,949 1.07:1 481,532 257,200 8.04 53.41 Roripaugh Valley Restoration 23 1 51 10.02 1,557,124 1,710,393 0.91:1 229,869 122,780 3.84 53.41 Roripaugh Valley Restoration 24 1 71 12.28 2,334,953 2,096,170 1.11:1 281,715 150,473 4.71 53.41 Roripaugh Valley Restoration 31 1 164 25.19 4,331,897 4,299,880 1.01:1 577,884 308,665 9.65 53.41 Wingsweep Corporation 10 1 14 8.12 1,238,264 551,080 2.25:1 74,063 39,559 1.24 53.41 Wingsweep Corporation 11 1 1 15.19 2,700,993 1,030,899 2.62:1 138,548 74,003 2.31 53.41 Wingsweep Corporation 12 1 136 16.01 5,597,858 3,918,536 1.43:1 526,633 281,290 8.80 53.41 Wingsweep Corporation 33A 2 12 10.26 1,090,308 696,315 1.57:1 93,581 49,985 1.56 53.41 Wingsweep Corporation 33B 1 3 2.08 272,577 141,163 1.93:1 18,972 10,133 0.32 53.41 18 1,227 333.20 $46,735,000 $44,550,000 1.05:1 $5,987,312 $3,198,000 100.00% 53.41% (1) Appraised Value per Planning Area is not provided in the Appraisal. The Appraised Value for each Planning Area has been allocated based upon each Planning Area's Blue -Topped Condition Value (as described in the Appraisal) in relation to the total Blue -Topped Condition Value. Date of value is December 1, 2016. (2) 2017 Bond Allocation based on Fiscal Year 2017-18 Projected Special Tax Levy. Preliminary, subject to change. (3) Projected Fiscal Year 2017-18 Special Tax Requirement based upon preliminary 2017 Bond sizing provided by the Underwriter. Amount includes scheduled debt service for the 2017 Special Tax Bonds and $50,000 in District administrative costs. Preliminary, subject to change. (4) Preliminary, subject to change. Source: Albert A. Webb Associates. Property Values The value of the property in the District is an important factor in determining the investment quality of the 2017 Bonds. If a property owner defaults in the payment of the Special Tax, the Authority's primary remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. The Special Tax is not a personal obligation of the owners of the property. A variety of economic, political, and natural occurrences incapable of being accurately predicted can affect property values. See "SPECIAL RISK FACTORS - Property Value." -42- The Authority has commissioned the Appraisal Report for the property in the District. The Appraisal Report estimates the market value of the property as of December 1, 2016, based upon a hypothetical condition, and the assumptions and limiting conditions, described in the Appraisal Report. The Appraiser relied on the Absorption Study (a copy of which is included in Appendix J to this Official Statement) in determining the value of the property in the District. The Appraisal Report is included in Appendix I to this Official Statement. Both the Appraisal Report and the Absorption Study should be read in their entirety for an explanation of the methodology and the assumptions underlying and the conditions limiting the valuation conclusions contained in the Appraisal Report. Neither the Authority nor the Underwriter makes any representation as to the accuracy or completeness of the Appraisal Report or the Absorption Study. The Appraiser concluded in the Appraisal Report that the market value of the property in the District as of December 1, 2016 was $46,735,000, subject to the extraordinary assumptions, among other assumptions, in the Appraisal Report. The extraordinary assumptions include that 2017 Bond proceeds and other funds totaling $22,000,000 will be available to fund the Improvements required to support the residential and commercial development of the property in the District as planned and that the current or future property owners will complete the approval/permit process for the Nicolas Road construction project as necessary to allow adequate building permits to be issued in a timely manner as specified in the Development Agreement (described under the heading "THE DISTRICT—The Roripaugh Ranch Development – History of Roripaugh Ranch"), so as to support the absorption projections in the Absorption Study. The appraised value of the land in the District, as reflected in the Appraisal Report, is approximately 1.05* times the $44,550,000* initial principal amount of the 2017 Bonds. The Appraisal Report does not take into account possible future liens or indebtedness which may be imposed by the City or by other public entities. As described under the heading "SECURITY FOR THE 2017 BONDS – Issuance of Additional Bonds," if certain requirements for the issuance of Parity Bonds are met (which include a Value -to -Lien Ratio requirement), the Authority anticipates issuing Parity Bonds to finance some of the costs of the Improvements not funded with proceeds of the 2017 Bonds. See "SECURITY FOR THE 2017 BONDS – Issuance of Additional Bonds," and "THE DISTRICT – The Improvements." The Authority has not covenanted, and in many instances does not have the legal ability, to restrict other entities from imposing indebtedness, which may be secured by a lien on the Taxable Property in the District which is on a parity with the Special Tax. See "THE DISTRICT – Direct and Overlapping Governmental Obligations" and "SPECIAL RISK FACTORS – Parity Taxes and Special Assessments." A number of economic, political, and natural occurrences may adversely affect the value of the property as expressed in the Appraisal Report. See "SPECIAL RISK FACTORS." Appraised Value -to -District Lien Ratios General Information Regarding Value -to -District Lien Ratios. The value -to -lien ratio on bonds secured by special taxes will generally vary over the life of those bonds as a result of changes in the value of the property that is security for the special taxes and the principal amount of the bonds. In comparing the appraised value of the real property within the District and the principal amount of the 2017 Bonds, it should be noted that an individual parcel may only be foreclosed upon to pay delinquent installments of the Special Taxes attributable to that parcel. The principal amount of the 2017 Bonds is not allocated among the parcels within the District * Preliminary, subject to change. -43- based on their appraised values; rather, the total Special Taxes will be allocated among the parcels within the District according to the Rate and Method. Economic and other factors beyond the property owners' control, such as economic recession, deflation of land values, financial difficulty or bankruptcy by one or more property owners, or the complete or partial destruction of Taxable Property caused by, among other possibilities, earthquake, flood, fire or other natural disaster, could cause a reduction in the assessed value within the District. See "SPECIAL RISK FACTORS -Property Value" and "Bankruptcy Delays." Appraised Value -to -District Lien Ratio Distribution. The table below shows the projected fiscal year 2017-18 Special Tax levy, the aggregate appraised value derived from the Appraisal Report, the allocation of the principal amount of the 2017 Bonds, and the estimated debt to appraised value ratios for the parcels in the District. See "THE DISTRICT -Major Land Owners" for more information regarding the status of ownership of Parcels in the District. Table 3 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Estimated Value to Lien by Planning Area and Property Owner Expected Value -to - No. of 2017 Bond Planning No. of Units at Appraised Allocation of Principal Property Owner Area Parcels Buildout Acreage Value(1) 2017 Bonds(2) Ratio(3) Roripaugh Valley Restoration 14 1 77 13.59 $ 2,350,952 $ 2,319,784 1.01:1 Roripaugh Valley Restoration 15 1 104 14.09 2,747,057 2,405,133 1.14:1 Roripaugh Valley Restoration 16 1 121 26.42 4,301,671 4,509,838 0.95:1 Roripaugh Valley Restoration 17 1 147 41.08 5,285,328 7,012,269 0.75:1 Roripaugh Valley Restoration 18 1 121 30.58 4,350,508 5,219,941 0.83:1 Roripaugh Valley Restoration 19 1 26 29.98 1,556,214 1,736,179 0.90:1 Roripaugh Valley Restoration 20 1 29 33.71 1,735,778 1,952,188 0.89:1 Roripaugh Valley Restoration 21 1 24 23.61 1,436,506 1,367,284 1.05:1 Roripaugh Valley Restoration 22 1 126 20.99 3,847,012 3,582,949 1.07:1 Roripaugh Valley Restoration 23 1 51 10.02 1,557,124 1,710,393 0.91:1 Roripaugh Valley Restoration 24 1 71 12.28 2,334,953 2,096,170 1.11:1 Roripaugh Valley Restoration 31 1 164 25.19 4,331,897 4,299,880 1.01:1 Wingsweep Corporation 10 1 14 8.12 1,238,264 551,080 2.25:1 Wingsweep Corporation 11 1 1 15.19 2,700,993 1,030,899 2.62:1 Wingsweep Corporation 12 1 136 16.01 5,597,858 3,918,536 1.43:1 Wingsweep Corporation 33A 2 12 10.26 1,090,308 696,315 1.57:1 Wingsweep Corporation 33B 1 3 2.08 272,577 141,163 1.93:1 18 1,227 333.20 $46,735,000 $44,550,000 1.05:1 (1) Appraised Value per Planning Area is not provided in the Appraisal. The Appraised Value for each Planning Area has been allocated based upon each Planning Area's Blue -Topped Condition Value (as described in the Appraisal) in relation to the total Blue -Topped Condition Value. Date of value is December 1, 2016. (2) Allocation of 2017 Bonds based on Fiscal Year 2017-18 Projected Special Tax Levy. Preliminary, subject to change. (3) Preliminary, subject to change. Source: Albert A. Webb Associates. -44- The following table sets forth the distribution of appraised value -to -District 2017 Bond lien ratios among the 18 parcels of land in the District based on the projected fiscal year 2017-18 Special Tax levy and the initial principal amount of the 2017 Bonds. Table 4 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Distribution of Value -to -District Lien Ratios Fiscal Year 2017-18 Percent of Projected Total Total FY 2017-18 Projected Estimated Aggregate No. of % of Total Appraised Special Tax FY 2017-18 2017 Special Value -to - Appraised Value to Lien(1) Parcels Acreage Acreage Value(2) Levy Levy Tax Bonds(5) Lien(5) Less than 1.00:1(3) 6 171.79 51.56% $18,786,623 $1,589,367 49.70% $22,140,808 0.85:1 Between 1.00:1 and 1.99:1 10 138.10 41.45 24,009,121 1,495,071 46.75 20,827,214 1.15:1 Greater than 1.99:1(4) 2 23.31 7.00 3,939,257 113,562 3.55 1,581,978 2.49:1 Total 18 333.20 100.00% $46,735,000 $3,198,000 100.00% $44,550,000 1.05:1 (1) Value -to -Lien Ratios based upon estimated Refunding Par amount and Appraised Value. (2) Appraised Value per parcel is not provided in the Appraisal. The Appraised Value for each parcel had been allocated based upon each parcel's Blue -Topped Condition Value (as described in the Appraisal) in relation to the total Blue -Topped Condition Value. Date of value is December 1, 2016. (3) Lowest estimated Value -to -Lien is 0.75:1. Preliminary, subject to change. (4) Highest estimated Value -to -Lien is 2.62:1. Preliminary, subject to change. (5) Preliminary, subject to change. Source: Albert A. Webb Associates. Direct and Overlapping Governmental Obligations Taxes, Charges and Assessments. The base ad valorem secured property tax rate on property in the District is 1.00% (including ad valorem tax overrides). Property in the District is also subject, or will be subject, to certain annual charges and assessments (which are billed to property owners on a semi-annual basis). See "THE DISTRICT—Sample Tax Bill" below for a list of public agencies that currently levy annual charges and assessments on property in the District. Overlapping Public Debt. The District is located within the boundaries of certain local agencies, other than the Authority, that provide public services and assess property taxes, assessments, special taxes and other charges on the property in the District. Some of these local agencies have outstanding debt. The current and estimated direct and overlapping obligations affecting the property in the District are shown in the following table. The table was prepared by the Special Tax Consultant and is included for general information purposes only. The Authority has not reviewed this report for completeness or accuracy and makes no representation in connection therewith. -45- Table 5 Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) Direct and Overlapping Bonded Debt I. APPRAISED VALUE Appraised Value(1) $46,735,000 II. LAND SECURED BOND INDEBTEDNESS Outstanding Direct and Overlapping Bonded Debt TEMECULA CFD 16-01 RORIPAUGH RANCH PHASE 2 Total Parcels Amount Type Levied Issued Outstanding % Applicable Applicable CFD 18 $44,550,000 $44,550,000(2) 100.000% $44,550,000 TOTAL OUTSTANDING LAND SECURED BONDED DEBT $44,550,000 Total Parcels Amount Authorized and Unissued Direct and Overlapping Bonded Debt Type Levied Authorized Unissued % Applicable Applicable TEMECULA CFD 16-01 RORIPAUGH RANCH PHASE 2 CFD 18 $60,000,000 $15,450,000(3) 100.000% $15,450,000 TOTAL UNISSUED LAND SECURED INDEBTEDNESS $15,450,000 TOTAL OUTSTANDING AND UNISSUED LAND SECURED $60,000,000 INDEBTEDNESS(4) III. GENERAL OBLIGATION BOND INDEBTEDNESS Total Parcels Amount Outstanding Direct and Overlapping Bonded Debt Type Levied Issued Outstanding % Applicable Applicable Temecula Valley Unified School B & I (0.03164%) GO 18 $137,412,035 $82,432,035 0.078592% $64,785 MT San Jacinto Comm (0.0132%) GO 18 $70,000,000 $63,950,000 0.020188% $12,910 Metropolitan Water East (0.00350%) GO 18 $850,000,000 $92,865,000 0.000611% $567 Rancho Water Rancho Division (0.30000%)(5) REV 2 $168,743,865 $119,025,286 0.024219% $28,827 TOTAL OUTSTANDING GENERAL OBLIGATION $107,089 BONDED DEBT Total Parcels Amount Authorized and Unissued Direct and Overlapping Indebtedness Type Levied Authorized Unissued % Applicable Applicable Temecula Valley Unified School B & I (0.03164%) GO 18 $230,000,000 $92,587,965 0.078592% $72,767 MT San Jacinto Comm (0.0132%) GO 18 $295,000,000 $225,000,000 0.020188% $45,423 Metropolitan Water East (0.00350%) GO 18 $850,000,000 $0 0.000611% $0 Rancho Water Rancho Division (0.30000%)(5) REV 2 $168,743,865 $0 0.024219% $0 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS $118,190 TOTAL OUTSTANDING AND UNISSUED GENERAL $225,279 OBLIGATION INDEBTEDNESS(4) TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS IV. RATIOS TO APPRAISED VALUATION Outstanding Land Secured Bonded Debt Outstanding Direct and Overlapping Bonded Debt 1.05:1 1.05:1 $44,657,089 $60,225,279 (1) Reflects appraised value from the Appraisal Report with a date of value of December 1, 2016. (2) Amount outstanding is equal to the initial principal amount of the 2017 Bonds. Preliminary, subject to change. (3) Additional Parity Bonds may be issued with respect to the remaining $15,450,000 in Bond authorization. Preliminary, subject to change. (4) Additional bonded debt or available bond authorization may exist but is not shown because a tax was not levied for Fiscal Year 2016-17. (5) Rancho Water Rancho Division is assessed at 0.30000% of Land Assessed Value only. Source: Albert A. Webb Associates -46- THE AUTHORITY The Temecula Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated April 10, 2001 (the "JPA Agreement"), by and between the City and the Agency. The JPA 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. The Authority was formed for the primary purpose of assisting in the financing and refinancing of public capital improvements in the City. As of May 1, 2016, the JPA Agreement was amended to provide for the withdrawal of the Successor Agency to the Agency as a member of the Authority, and to add the Temecula Community Services District and the Temecula Housing Authority as members of the Authority. 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. SPECIAL RISK FACTORS The following is a description of certain risk factors affecting the District, the property owners in the District, the parcels subject to the levy of Special Taxes and the payment of and security for the 2017 Bonds. The following discussion of risks is not meant to be a complete list of the risks associated with the purchase of the 2017 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the investment quality of the 2017 Bonds. There can be no assurance that other risk factors will not become material in the future. No General Obligation of the Authority or the District The Authority's obligations under the 2017 Bonds and under the Fiscal Agent Agreement 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 amounts in the Special Tax Fund, the Bond Fund and the Reserve Fund. The 2017 Bonds are neither general or special obligations of the Authority nor general obligations of the District, but are limited obligations of the Authority for the District payable solely from the revenues and funds pledged therefor and under the Fiscal Agent Agreement. None of the faith and credit of the District, the Authority or the State of California or of any of their respective political subdivisions is pledged to the payment of the 2017 Bonds. Property Value The value of land within the District is a critical factor in determining the investment quality of the 2017 Bonds. If a landowner defaults in the payment of the Special Tax, the only legal remedy is the institution of a superior court action to foreclose on the delinquent Taxable Property in an attempt to obtain funds with which to pay the Special Tax. The value of the taxable parcels in the District could be adversely affected by economic factors beyond the Authority's control, 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 -47- value of residential property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, wildfire, earthquakes and floods), which may result in uninsured losses. See "SPECIAL TAX FACTORS—Natural Disasters." No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the Authority to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the Authority with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale. The Authority is not obligated and does not expect to be a bidder at any such foreclosure sale. See "SPECIAL TAX FACTORS—Proceeds of Foreclosure Sale." The current appraised value of the property in the District is approximately five percent (5%)* more than the initial principal of the 2017 Bonds. See "THE DISTRICT— Appraised Property Values." Provisions of the Act required that the Board of Directors of the Authority make findings in the Authority Approving Resolution and to adopt the Authority Approving Resolution by a 4/5th vote of the Board of Directors because the value of the Taxable Property in the District as estimated in the Appraisal Report is not at least three times the initial principal amount of the 2017 Bonds. See "THE DISTRICT—History of the District." The District currently includes one parcel in each Planning Area, each of which is expected to be subdivided into multiple parcels on which homes will be constructed and, with respect to one Planning Area, on which commercial development will occur. The current values of the parcels, and their interpreted appraised values, vary significantly (see "THE DISTRICT— Appraised Value -to -District Lien Ratios"), with some of the values being less than their respective allocation of 2017 Bond principal. Moreover, as a consequence of the expected subdivision of the land, the values of individual parcels in the District may vary even more in the future. If an owner of a parcel defaults in the payment of Special Taxes levied in the District, the Authority may commence foreclosure proceedings to collect the delinquent Special Taxes, but any such action may not be successful if the value of the delinquent parcel is less than its allocable share of the 2017 Bond debt. See "SPECIAL RISK FACTORS—Payment of the Special Tax is not a Personal Obligation," "—Tax Delinquencies," and "—Proceeds of Foreclosure Sales." Concentration of Ownership The Primary Landowner and Wingsweep Corporation currently own all of the land in the District. See "THE DISTRICT—The Current Landowners," and "—Land Use Distribution." Moreover, if is expected that the Primary Landowner will dispose of its interests in the land in the District later this year. See "THE DISTRICT—The Current Landowners – The Primary Landowners." The lack of diversity in the obligation to pay the Special Tax represents a significant risk to the owners of the 2017 Bonds in that the two landowners ability to pay the Special Tax will be dependent on the success of the development of the land in the District. Failure of any owner of a significant portion of the land in the District to pay the annual Special Tax when due could result in a default in payments of the principal of, and interest on, the 2017 Bonds. See "SPECIAL RISK FACTORS—Insufficiency of Special Tax Revenues" below. It should be noted, however, that neither the Primary Landowner nor Wingsweep Corporation failed to remit special taxes levied by the Authority for CFD 03-02 on property they own in the District. * Preliminary, subject to change. -48- Failure to Complete Development The development of the property in the District includes the construction of public infrastructure, public facilities and other site work. While construction of some of the needed public infrastructure has been completed, the remainder of the infrastructure is expected to be completed over a multiple year period. Any event that significantly impacts the ability to complete the development of the property in the District on a timely basis (such as strikes or other work stoppages, loan defaults, adverse weather conditions, catastrophic events such as earthquakes or other natural events, or other similar events) could cause the value of the land within the District to be less than that estimated by the Appraiser and could affect the willingness and ability of the landowners in the District to pay the Special Taxes when due. See "THE DISTRICT—The Roripaugh Ranch Development" for information regarding the status of development in the District. Failure to Achieve Market Absorption Projections The Appraisal Report took into consideration the Absorption Study, which assumes construction and absorption schedule for the homes and commercial development for the property in the District to be constructed and sold. See Appendix J — "Market Absorption Study." There can be no assurance that such level of dwelling unit and commercial property absorption can be obtained. Failure to achieve the estimated absorption projections could adversely affect the Appraiser's estimated value of the property in the District, could impair the economic viability of the proposed development and could reduce the ability or desire of the property owners to pay the annual Special Taxes. In that event, there could be a default in the payment of principal of, and interest on, the 2017 Bonds. Prospective purchasers of the 2017 Bonds should not assume that the absorption of dwelling units will occur as estimated and should review the Absorption Study in its entirety in order to make an informed decision whether to purchase the 2017 Bonds. Government Approvals Development within the District is contingent upon the completion, and acceptance by various public agencies, of infrastructure improvements, as well as the issuance by the City of building and other ministerial permits for homes and commercial structures to be constructed in the District. The failure to commence and complete the required infrastructure improvements and to obtain any such permits in a timely manner could adversely affect land development within the District. Payment of the Special Tax is not a Personal Obligation The owners of the parcels in the District are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation that is secured only by a lien against the parcels on which it is levied. If the value of the taxable parcels is not sufficient to secure fully the payment of the Special Tax, the Authority has no recourse against the property owners. FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC"), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. -49- Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. 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." This means that, unless 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 Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("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. FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent 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 -50- 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 rate and method of apportionment which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes levied pursuant to the Act. The Authority is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the District in which the FDIC has or obtains an ownership interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the 2017 Bonds. FDIC Ownership Interest Relative to the Primary Landowner. As described under the heading "THE DISTRICT—The Current Landowners – The Primary Landowner," the Primary Landowner is a limited liability company the sole member of which is AMT CADC Venture, LLC, a Delaware limited liability company in which the FDIC has a sixty percent ownership interest. However, the FDIC does not directly own any of the property in the District, and it is only a partial owner of the sole member of the Primary Landowner. The Policy Statement, in addition to the matters described above, states that: "It generally applies to the [Federal Deposit Insurance] Corporation when it is liquidating assets of an insured depository institution in its corporate or receivership capacities. It applies to any tax, penalty, interest, or other related charge imposed or sought to be imposed on property to whose ownership the FDIC succeeds in such capacities." The Policy Statement is replete with language suggesting that it only applies to property that is owned by the FDIC. None of the language in the Policy Statement suggests that it applies to properties in which the FDIC may have a financial interest but does not own the property directly, such as the property in the District owned by the Primary Landowner. Moreover, the Primary Landowner has paid the special taxes levied by the Authority for CFD 03-02 on the property in the District owned by it ever since it was conveyed to the Primary Landowner in May of 2011. The Primary Landowner submitted a petition to the Authority requesting the issuance of the 2017 Bonds, one of the primary purposes of which is the prepayment of CFD 03-02 special tax levies on the property in the District. Also, as discussed under the heading "THE DISTRICT—The Current Landowners – The Primary Landowner," it is expected that the Primary Landowner will attempt to dispose of all of its interests in the property it owns in the District and related agreements later this year. Notwithstanding the foregoing, the Authority cannot provide any assurance that the FDIC, or a court of competent jurisdiction, may in the future interpret the Policy Statement to apply to property in which the FDIC has a financial interest but not a direct ownership interest. The FDIC is obligated to maximize recoveries from the disposition of financial institutions and their assets, and the property owned by the Primary Landowner was acquired in connection with the FDIC's takeover of AmTrust Bank. However, given the activities of the Primary Landowner to date with respect to the property it owns in the District, including the consistent payment of special taxes levied for CFD 03-02 since May of 2011 and its petition to request formation of the District to prepay such special taxes, it is not expected that the FDIC will take the position that the Policy Statement applies to such property. -51- Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through a negotiated transaction, or by gift or devise, that 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, 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, for outstanding Bonds only, is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested. In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property within the District, it may be unconstitutional (see "SPECIAL RISK FACTORS—FDIC /Federal Government Interests in Properties"). If for any reason property within the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Rate, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax. Moreover, if a substantial portion of land within the District becomes exempt from the Special Tax because of public ownership, or otherwise, the maximum rate that could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Series Prior Bonds when due and a default would occur with respect to the payment of such principal and interest. Parity Taxes and Special Assessments The Special Taxes and any penalties thereon will constitute liens against the taxable parcels in the District until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is coequal to and independent of the lien for general property taxes regardless of when they are imposed upon the taxable parcel. The Special Tax B, not pledged to the payment of the 2017 Bonds, is collected with, and secured by the same lien that secures the payment of, the Special Tax A. The Special Taxes have priority over all existing and future private liens imposed on the property. The Authority, however, has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the taxable parcels within the District subject to the levy of Special Taxes. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes or assessments, and any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes. The imposition of additional indebtedness could reduce the willingness and the ability of the property owners within the District to pay the Special Taxes when due. See "THE DISTRICT—Direct and Overlapping Governmental Obligations." Insufficiency of Special Taxes In order to pay debt service on the 2017 Bonds, it is necessary that the Special Taxes levied against taxable parcels within the District be paid in a timely manner. The Authority has established the Reserve Fund in an amount equal to the Reserve Requirement to pay debt service on the 2017 Bonds and any Parity Bonds to the extent Special Taxes are not paid on time -52- and other funds are not available. See "SECURITY FOR THE 2017 BONDS—Reserve Fund" and Appendix C – "Summary of the Fiscal Agent Agreement—Reserve Fund." Under the Fiscal Agent Agreement, the Authority has covenanted to maintain in the Reserve Fund an amount equal to the Reserve Requirement; subject, however, to the limitations that (i) the Authority may not levy the Special Tax in any fiscal year at a rate in excess of the Maximum Special Tax rates permitted under the Rate and Method and (ii) per the Act, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within the District. See "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method Special Tax Formula – Calculation of Annual Special Tax." Consequently, if a delinquency occurs, the Authority may be unable to replenish the Reserve Fund to the Reserve Requirement due to the limitation of the Maximum Special Tax rates. If such defaults were to continue in successive years, the Reserve Fund could be depleted and a default on the 2017 Bonds would occur if proceeds of a foreclosure sale did not yield a sufficient amount to pay the delinquent Special Taxes. The Authority has made certain covenants regarding the institution of foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the 2017 Bonds. See "SECURITY FOR THE 2017 BONDS—Covenant for Superior Court Foreclosure." If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the 2017 Bonds are derived, are being billed to the taxable parcels within the District on the regular property tax bills sent to owners of the parcels. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See "SECURITY FOR THE 2017 BONDS— Reserve Fund" and "-Covenant for Superior Court Foreclosure" for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquency in the payment of Special Tax installments. See also "THE DISTRICT—Special Tax Delinquencies" for historical Special Tax delinquency history. Also, as noted under "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method," the Act provides that under no circumstances will the Special Taxes levied against any Parcel used as a private residence be increased as a consequence of delinquency or default by the owner of any other Parcel or Parcels within the District by more than ten percent (10%) per Fiscal Year. In addition, the Rate and Method provides that under no circumstances will the Acreage Special Tax be levied against Parcels of Developed Residential Property if the Special Taxes which may be levied pursuant to the first and second steps described under the subheading "Method of Apportionment" in the section entitled "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method," are equal to or greater than the sum of estimated Administrative Expenses and one hundred ten percent (110%) of the then maximum annual debt service for outstanding Bonds. -53- While no assurance can be given that the owners of the Taxable Property in the District will pay the Special Taxes levied by the Authority on such property, it should be noted that both of the current owners of the Taxable Property have consistently paid the special taxes levied on their property for CFD 03-02. As discussed under "PLAN OF FINANCING— Overview – Prepayment of CFD 03-02 Special Taxes, proceeds of the 2017 Bonds will be used to prepay the remaining CFD 03-02 special tax obligation of the property in the District, so no future levies of special taxes for CFD 03-02 will be made on the property in the District. Bankruptcy Delays The payment of the Special Tax and the ability of the Authority to commence a superior court action to foreclose the lien of a delinquent unpaid Special Tax, as discussed in "SECURITY FOR THE 2017 BONDS—Covenant for Superior Court Foreclosure," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. Legal opinions to be delivered concurrently with the delivery of the 2017 Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2017 Bonds. Proceeds of Foreclosure Sales Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax, the Board of Directors, as the legislative body of the District, may order that the Special Taxes be collected by a superior court action to foreclose the lien within specified time limits. The Authority has covenanted in the Fiscal Agent Agreement that it will, under certain circumstances, commence such a foreclosure action. See "SECURITY FOR THE 2017 BONDS— Covenant for Superior Court Foreclosure." No assurances can be given that a taxable parcel in the District that would be subject to a judicial foreclosure sale for delinquent Special Taxes will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the Authority to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the Authority with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale and the Authority has not in any way agreed nor does it expect to be such a bidder. In a foreclosure proceeding, a judgment debtor (i.e., the property owner) has 140 days from the date of service of the notice of levy in which to redeem the property to be sold and may have other redemption rights afforded by law. 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 the purchaser at the sale was the judgment creditor. If a foreclosure sale is thereby 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. -54- If foreclosure proceedings were ever instituted, any holder of a mortgage or deed of trust on the affected property could, but would not be required to, advance the amount of the delinquent Special Tax installment to protect its security interest. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in principal and interest payments to the owners of the 2017 Bonds pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions and other factors beyond the control of the Authority, including delay due to crowded local court calendars or legal tactics and, in any event could take several years to complete. In particular, bankruptcy proceedings involving the Landowner or any other owner of a taxable parcel in the District could cause a delay, reduction or elimination in the flow of Special Tax Revenues to the Fiscal Agent. See "SPECIAL RISK FACTORS—Bankruptcy Delays." Natural Disasters The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. Such occurrences include, without limitation, wildfire, earthquakes and floods. One or more of such natural disasters could occur and could result in damage to improvements of varying seriousness. 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 Taxable Property may well depreciate or disappear. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The Authority has not independently verified, but is not aware of, the presence of any hazardous substances within the District. Disclosure to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the property is sufficient to justify payment, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and, at the time of such a levy, has the ability to pay it as well -55- as pay other expenses and obligations. The Authority has caused a notice of the Special Tax to be recorded in the Office of the Riverside County Recorder against the parcels in the District. Although 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 when purchasing a property within the District or lending money thereon, as applicable. California Civil Code Section 1102.6b requires that, in the case of transfers, 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. No Acceleration Provision The 2017 Bonds and the Fiscal Agent Agreement do not contain a provision allowing for the acceleration of the 2017 Bonds in the event of a payment default or other default under the terms of the 2017 Bonds or the Fiscal Agent Agreement or in the event interest on the 2017 Bonds becomes included in gross income for federal income tax purposes. Taxability Risk As discussed herein under the caption "TAX MATTERS," interest on the 2017 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2017 Bonds were issued, as a result of future acts or omissions of the Authority in violation of its covenants in the Fiscal Agent Agreement. There is no provision in the 2017 Bonds or the Fiscal Agent Agreement for special redemption or acceleration or for the payment of additional interest should such an event of taxability occur, and the 2017 Bonds will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Fiscal Agent Agreement. In addition, as discussed under the caption "TAX MATTERS," Congress has considered in the past, is currently considering and may consider in the future, legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such as the 2017 Bonds. Prospective purchasers of the 2017 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. The Authority can provide no assurance that federal tax law will not change while the 2017 Bonds are outstanding or that any such changes will not adversely affect the exclusion of interest on the 2017 Bonds from gross income for federal income tax purposes. If the exclusion of interest on the 2017 Bonds from gross income for federal income tax purposes were amended or eliminated, it is likely that the market price for the 2017 Bonds would be adversely impacted. Enforceability of Remedies The remedies available to the Fiscal Agent and the registered owners of the 2017 Bonds upon a default under the Fiscal Agent Agreement or any other document described in this Official Statement are in many respects dependent upon regulatory and judicial actions that are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. Any legal opinions to be delivered concurrently with the issuance of the 2017 Bonds will be qualified to the extent that the enforceability of the legal documents with respect to the 2017 Bonds is -56- subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Judicial remedies, such as foreclosure and enforcement of covenants, are subject to exercise of judicial discretion. A California court may not strictly apply certain remedies or enforce certain covenants if it concludes that application or enforcement would be unreasonable under the circumstances and it may delay the application of such remedies and enforcement. No Secondary Market No representation is made concerning any secondary market for the 2017 Bonds. There can be no assurance that any secondary market will develop for the 2017 Bonds. Investors should understand the long-term and economic aspects of an investment in the 2017 Bonds and should assume that they will have to bear the economic risks of their investment to maturity. An investment in the 2017 Bonds may be unsuitable for any investor not able to hold the 2017 Bonds to maturity. Proposition 218 An initiative measure entitled 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 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." Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the 2017 Bonds as described below. Among other things, Section 3 of Article XIIIC states, "...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, the Governor of the State signed a bill into law enacting Government Code Section 5854, which states that: Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC 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 2017 Bonds. -57- It may be possible, however, for voters or the District or the Board of Directors of the Authority acting as the legislative body of the District to reduce the Special Taxes in a manner that does not interfere with the timely repayment of the 2017 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2017 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses (as defined in the Fiscal Agent Agreement). Nevertheless, the Authority has covenanted that it will not consent to, or conduct proceedings with respect to, a reduction in the maximum Special Taxes that may be levied in the District on Developed Property below an amount, for any Bond Year, equal to 110% of the aggregate of the debt service due on the 2017 Bonds in such Bond Year, plus a reasonable estimate of Administrative Expenses for each such Bond Year. However, no assurance can be given as to the enforceability of the foregoing covenant. The interpretation and application of Article XIIIC and Article XIIID will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See "—Enforceability of Remedies." Ballot Initiatives Articles XIIIC and XIIID of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process, and the State Legislature has in the past enacted legislation that has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the Authority, or local districts to increase revenues or to increase appropriations. 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 2017 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2017 Bonds might be affected as a result of such an audit of the 2017 Bonds (or by an audit of similar bonds). See "TAX MATTERS." TAX MATTERS Federal tax law contains a number of requirements and restrictions which apply to the 2017 Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The Authority has covenanted in the Fiscal Agent Agreement to comply with all requirements that must be satisfied in order for the interest on the 2017 Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the 2017 Bonds to become includable in gross income for federal income tax purposes retroactively to the date of issuance of the 2017 Bonds. -58- Subject to the Authority's compliance with the above -referenced covenants, under present law, in the opinion of Quint & Thimmig LLP, Bond Counsel, interest on the 2017 Bonds (i) is excludable from the gross income of the owners thereof for federal income tax purposes, and (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the 2017 Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In rendering its opinion, Bond Counsel will rely upon certifications of the Authority with respect to certain material facts within the Authority's knowledge. Bond Counsel's opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result. The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an alternative minimum tax ("AMT") for corporations in addition to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation's alternative minimum taxable income ("AMTI"), which is the corporation's taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). "Adjusted current earnings" would include certain tax-exempt interest, including interest on the 2017 Bonds. Ownership of the 2017 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax exempt obligations. Prospective purchasers of the 2017 Bonds should consult their tax advisors as to applicability of any such collateral consequences. The issue price (the "Issue Price") for each maturity of the 2017 Bonds is the price at which a substantial amount of such maturity of the 2017 Bonds is first sold to the public. The Issue Price of a maturity of the 2017 Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the inside cover page of this Official Statement. If the Issue Price of a maturity of the 2017 Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of each such maturity, if any, of the 2017 Bonds (the "OID 2017 Bonds") and the principal amount payable at maturity is original issue discount. For an investor who purchases an OID 2017 Bond in the initial public offering at the Issue Price for such maturity and who holds such OID 2017 Bond to its stated maturity, subject to the condition that the Authority comply with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID 2017 Bond constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID 2017 Bond at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code, but is taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code, as described above; and (d) the accretion of original issue discount in each year may result in an alternative minimum tax -59- liability for corporations or certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Owners of OID 2017 Bonds should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID 2017 Bonds. Owners of 2017 Bonds who dispose of 2017 Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase 2017 Bonds in the initial public offering, but at a price different from the Issue Price or purchase 2017 Bonds subsequent to the initial public offering should consult their own tax advisors. If a 2017 Bond is purchased at any time for a price that is less than the 2017 Bond's stated redemption price at maturity or, in the case of an OID 2017 Bond, its Issue Price plus accreted original issue discount reduced by payments of interest included in the computation of original issue discount and previously paid (the "Revised Issue Price"), the purchaser will be treated as having purchased a 2017 Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a 2017 Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser's election, as it accrues. Such treatment would apply to any purchaser who purchases an OID 2017 Bond for a price that is less than its Revised Issue Price even if the purchase price exceeds par. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such 2017 Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the 2017 Bonds. An investor may purchase a 2017 Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as "bond premium" and must be amortized by an investor on a constant yield basis over the remaining term of the 2017 Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the tax-exempt interest received. As bond premium is amortized, it reduces the investor's basis in the 2017 Bond. Investors who purchase a 2017 Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the 2015 Bond's basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the 2017 Bond. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the 2017 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the 2017 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. The Internal Revenue Service (the "Service") has an ongoing program of auditing tax- exempt obligations to determine whether, in the view of the Service, interest on such tax- exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the 2017 Bonds. If an audit is commenced, under current procedures the Service may treat the Authority as a taxpayer and the 2017 Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the 2017 Bonds until the audit is concluded, regardless of the ultimate outcome. -60- Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt obligations, including the 2017 Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any 2017 Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any 2017 Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes. In the further opinion of Bond Counsel, interest on the 2017 Bonds is exempt from California personal income taxes. Ownership of the 2017 Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the 2017 Bonds. Prospective purchasers of the 2017 Bonds should consult their tax advisors regarding the applicability of any such state and local taxes. The complete text of the final opinion that Bond Counsel expects to deliver upon issuance of the 2017 Bonds is set forth in Appendix D. LEGAL MATTERS Concurrent with the issuance of the 2017 Bonds, Quint & Thimmig LLP, Larkspur, California, Bond Counsel, will render its opinion substantially in the form set forth in Appendix D to this Official Statement. Certain legal matters with respect to the 2017 Bonds will be passed upon for the Authority and the District by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, in their capacity as attorneys for the Authority, and for the Authority by Quint & Thimmig LLP, Larkspur, California, acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. Payment of the fees and expenses of Underwriter's Counsel is contingent on the issuance of the 2017 Bonds. At times Quint & Thimmig LLP represents Stifel, Nicolaus & Company, Inc., the Underwriter for the 2017 Bonds, in matters unrelated to the 2017 Bonds. NO RATING The Authority has not made, and does not intend to make, any application to any rating agency for the assignment of a rating to the 2017 Bonds. NO LITIGATION The Authority is not aware of any pending or threatened litigation challenging the validity of the 2017 Bonds, the Special Taxes securing the 2017 Bonds, or any action taken by the Authority in connection with the formation of the District, the levying of the Special Taxes or the issuance of the 2017 Bonds. The Bond Purchase Agreement between the Authority and the Underwriter requires that each of the Primary Landowner and Wingsweep Corporation deliver a certificate on the date of issuance of the 2017 Bonds to the effect that no action, suit, proceeding, inquiry or investigation, at law or in equity, before any court, regulatory agency, public board or body, is -61- pending, or to its actual knowledge is overtly threatened, in any way seeking to restrain such entity's development of the property it owns in the District or in any way seeking to invalidate or set aside any approval or permit relating to the development of such property. MUNICIPAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Irvine, California, as its Municipal Advisor (the "Municipal Advisor") in connection with the authorization and delivery of the 2017 Bonds. The Municipal Advisor has assisted in various matters relating to the planning, structuring and sale of the 2017 Bonds. The Municipal Advisor has not independently verified any of the data contained in the Official Statement or conducted a detailed investigation of the affairs of the Authority or the District to determine the accuracy or completely of this Official Statement. UNDERWRITING The 2017 Bonds are being purchased through negotiation by Stifel, Nicolaus & Company, Incorporated (the "Underwriter"). The Underwriter agreed to purchase the 2017 Bonds at a price of $ (which is equal to the par amount of the 2017 Bonds, less (plus) a net original issue discount (premium) of $ , and less an underwriter's discount of $ ). The initial public offering prices set forth on the inside cover page may be changed by the Underwriter. The Underwriter may offer and sell the 2017 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof. CONTINUING DISCLOSURE The Authority The Authority has covenanted in a Continuing Disclosure Agreement for the benefit of the Owners of the 2017 Bonds to provide Annual Reports that include certain annual financial information and operating data, and to provide notices of the occurrence of certain enumerated events. The Authority has retained Albert A. Webb Associates to act as the Dissemination Agent under the Continuing Disclosure Agreement. The Authority or the Dissemination Agent, on behalf of the Authority, will file the Annual Reports and notices as required by the Continuing Disclosure Agreement with the Municipal Securities Rulemaking Board. See Appendix E — "Form of Continuing Disclosure Agreement of the Authority" for the complete text of the Authority's Continuing Disclosure Agreement. The covenants of the Authority in the Continuing Disclosure Agreement have been made in order to assist the Underwriter in complying with Rule 15c2 -12(b)(5) (the "Rule") promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. During the last five Fiscal Years, the Authority has complied in all material respects with its obligations under several continuing disclosure agreements entered into in connection with various community facilities district special tax bonds that it has issued, except for an annual filing in 2011 for a series of special tax bonds that was filed 105 days after it was required to be filed under the respective continuing disclosure agreement and for which no notice of late filing was provided. -62- The Primary Landowner The Primary Landowner has agreed for the benefit of the owners of the 2017 Bonds in a Continuing Disclosure Agreement of the Primary Landowner to provide certain information on an annual and a semiannual basis, and notice of the occurrence of certain events with respect to it and the property it owns in the District. Nevertheless, the Underwriter does not consider the Primary Landowner to be an "obligated person" for purposes of the Rule. The complete text of the Continuing Disclosure Agreement of the Primary Landowner is set forth in Appendix F. The Primary Landowner's obligation to provide continuing annual, semiannual and event disclosure will terminate if and when the Primary Landowner no longer owns property in the District that is subject to twenty percent (20%) or more of the Special Tax levy for the then current fiscal year. There was a continuing disclosure agreement that was entered into by Ashby USA, LLC in connection with the issuance of the CFD 03-02 2006 Bonds. The Primary Landowner assumed that agreement in connection with the Deed -in -Lieu Settlement Agreement executed in May of 2011 (see "THE DISTRICT—The Roripaugh Ranch Development – History of Roripaugh Ranch"). The Primary Landowner has advised that, since it assumed the obligations under such continuing disclosure agreement, it has not failed to timely comply with its obligations thereunder, and that it is not subject to any other similar continuing disclosure obligation. Remedies for Failures to Comply A failure by the Authority or the Primary Landowner to comply with the provisions of its respective Continuing Disclosure Agreement is not an event of default under the Fiscal Agent Agreement (although the holders and beneficial owners of the 2017 Bonds do have remedies at law and in equity). However, a failure by the Authority to comply with the provisions of its Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the 2017 Bonds. Therefore, a failure by the Authority to comply with the provisions of its Continuing Disclosure Agreement may adversely affect the marketability of the 2017 Bonds on the secondary market. -63- MISCELLANEOUS Included herein are brief summaries of certain documents, which summaries do not purport to be complete or definitive, and reference is made to such documents for full and complete statements 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 representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority or the District and the purchasers or Owners of any of the 2017 Bonds. The execution and delivery of this Official Statement has been duly authorized by the Board of Directors of the Authority, acting as the legislative body of the District. TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) By: Executive Director -64- APPENDIX A GENERAL, ECONOMIC, AND DEMOGRAPHIC INFORMATION RELATING TO 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 2017 Bonds or the Fiscal Agent Agreement. Introduction The City. The City of Temecula (the "City") is located in southwestern Riverside County, California. The City was incorporated on December 1, 1989. Temecula is bordered by the City of Murrieta to the north and the Pechanga Indian Reservation and San Diego County to the south. The City of Temecula forms the southwestern anchor of the Inland Empire region. Temecula is an affluent community. The City is supported by high median and mean income levels as well as the city's favorable tourism and resort industries. The city is a prominent tourist destination, with the Temecula Valley Wine Country, Old Town Temecula, the Temecula Valley Polo Club, the Temecula Valley Balloon & Wine Festival, championship golf courses, and resort accommodations attracting a significant amount of tourists. The City is a general law city, which operates under a council-manager form of government. The City Council consists of five members elected at -large to staggered four-year terms. Each year, the City Council elects a Mayor and a Mayor Pro Tem amongst themselves to serve for one calendar year. The Mayor, who has equal legislative power with fellow members of the City Council, serves as the ceremonial leader of the city and as the presiding officer of the bi-weekly City Council meetings. The County. Riverside County, California (the "County") is the 4th -most populous county in California and the 11th -most populous in the United States. The County name was taken from the City of Riverside, which is the county seat. Roughly rectangle -shaped, Riverside County covers 7,208 square miles (18,670 kmz) in Southern California, spanning from the Greater Los Angeles area to the Arizona border. Geographically, the county is mostly desert in the central and eastern portions of the county and is a Mediterranean climate in the western portion of the county. Most of Joshua Tree National Park is located in the county. The resort cities of Palm Springs, Palm Desert, Indian Wells, La Quinta, Rancho Mirage, and Desert Hot Springs are all located in the Coachella Valley region of Riverside County. Large numbers of Los Angeles area workers have moved to the county to take advantage of its relatively affordable housing. Alongside neighboring San Bernardino County, it was one of the fastest growing regions in the state prior to the recent changes in the regional economy. In addition, smaller, but significant, numbers of people have been moving into Southwest Riverside County from the San Diego -Tijuana metropolitan area. A-1 Population The following table contains the population of the City, the County and the State of California for the last five years. CITY OF TEMECULA, RIVERSIDE COUNTY AND STATE OF CALIFORNIA Population Data City of Riverside State of Year Temecula County California 2012 103,133 2,239,715 37,881,357 2013 104,145 2,266,549 38,239,207 2014 105,368 2,291,093 38,567,459 2015 107,794 2,317,924 38,907,642 2016 109,064 2,347,828 39,255,883 Source: California Department of Finance E-4 Population Estimates for Cities, Counties and State, 2012-2016 with 2010 Benchmark. Employment The County is part of the Riverside -San Bernardino -Ontario MSA, which covers the City and Riverside and San Bernardino Counties. The following table summarizes the historical numbers of workers by industry in the Riverside -San Bernardino -Ontario MSA for the last five years: Total, All Industries RIVERSIDE -SAN BERNARDINO-ONTARIO MSA (RIVERSIDE AND SAN BERNARDINO COUNTIES) Labor Force and Industry Employment Annual Averages by Industry 2011 2012 2013 2014 2015,” 1,169,400 1,200,200 1,247, 800 1,303,700 1,362,400 Total Farm 14,900 15,000 14,500 14,400 15,100 Mining, Logging, and Construction 60,100 63,800 71,200 78,900 86,600 Manufacturing 85,100 86,700 87,300 91,300 95,600 Wholesale Trade 49,200 52,200 56,400 58,900 61,700 Retail Trade 158,500 162,400 164,800 169,400 173,500 Transportation, Warehousing & Utilities 67,900 73,000 78,400 86,600 97,300 Information 12,200 11,700 11,500 11,300 11,300 Financial Activities 39,500 40,200 41,300 42,300 43,200 Professional & Business Services 126,000 127,500 132,400 139,300 144,400 Educational & Health Services 165,400 173,600 187,600 194,800 205,000 Leisure & Hospitality 124,000 129,400 135,900 144,800 151,500 Other Services 39,100 40,100 41,100 43,000 44,000 Government 227,500 224,600 225,200 228,800 233,400 Source: California Employment Development Department, based on March 2015 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. (1) Last available full year data. A-2 The following tables summarize historical employment and unemployment for the County, the State of California and the United States: Year RIVERSIDE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) 2011-2015 Area 2011 Riverside County California United States 2012 Riverside County California United States 2013 Riverside County California United States 2014 Riverside County California United States 2015'=) Riverside County California United States Labor Force Employment 978,500 849,600 18,419,500 16,260,100 153, 617,000 139,869,000 988,600 18,554,800 154,975,000 998,800 18,671,600 155,389,000 1,017,000 18,811,400 155,922,000 1,035,200 18,981,800 157,130,000 873,600 16,630,100 142,469,000 899,900 17,002,900 143,929,000 933,800 17,397,100 146,305,000 965,500 17,798,600 148,834,000 Unemployment Unemployment Rate 128,900 2,159,400 13,747,000 115,100 1,924,700 12,506,000 98,900 1,668,700 11,460,000 83,200 1,414,300 9,617,000 69,600 1,183,200 146,411,000 13.2% 11.7 8.9 11.6 10.4 8.1 9.9 8.9 7.4 8.2 7.5 6.2 6.7 6.2 5.3 Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-2015, and US Department of Labor. (1) The unemployment rate is computed from unrounded data, therefore, it may differ from rates computed from rounded figures available in this table. (2) Latest available full -year data. A-3 Major Employers The table below sets forth the ten principal employers of the County in 2015. RIVERSIDE COUNTY 2015 Major Employers Employer Name County of Riverside March Air Reserve Base Starter Brothers Market Wal-Mart University of California Riverside Kaiser Permanente Corona -Norco Unified School District Temecula Valley Unified School District Riverside Unified School District Hemet Unified School District Total Top 10 Number of Employees 20,684 8,500 6,900 6,550 5,768 5,300 4,932 4,000 3,871 3,400 69,905 % of Total County Employment 2.17% .89 .72 .69 .60 .56 .52 .42 .41 .36 Source: Riverside County CAFR for the Fiscal Year Ended June 30, 2015. Construction Activity The following table reflects the five-year history of building City and the County: CITY OF TEMECULA Building Permits and Valuation (Dollars in Thousands) 7.32 permit valuation for the 2011 2012 2013 2014 2015 Permit Valuation: New Single-family 54,753 58,645 62,540 54,295 34,493 New Multi -family 878 5,901 27,523 38,445 4,527 Res. Alterations / Additions 6,949 4,254 5,638 6,346 5,936 Total Residential 62,581 68,802 95,702 99,087 44,957 Total Nonresidential 15,777 36,241 117,203 34,094 18,206 Total All Building 78,359 105,043 212,906 133,182 63,163 New Dwelling Units: Single Family Multiple Family Total 280 329 316 8 70 348 288 399 664 Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. A-4 234 135 596 38 830 173 RIVERSIDE COUNTY Building Permits and Valuation (Dollars in Thousands) 2011 2012 2013 2014 2015 Permit Valuation: New Single-family 647,070 904,156 1,138,738 1,296,552 1,313,084 New Multi -family 113,170 87,878 138,636 178,116 110,458 Res. Alterations/ Additions 188,468 87,370 98,219 147,081 113,199 Total Residential 878,710 1,079,405 1,375,593 1,621,750 1,536,742 Total Nonresidential 490,647 657,595 2,249,570 814,990 911,464 Total All Building 1,369,357 1,737,000 3,625,163 2,436,740 2,448,207 New Dwelling Units: Single Family 2,659 3,720 4,716 5,007 5,007 Multiple Family 1,061 909 1,427 1,931 1,189 Total 3,720 4,629 6,143 6,938 6,196 Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. Commercial Activity Taxable sales in the City and County are shown below. Beginning in 2009, reports summarize taxable sales and permits using the NAICS codes. As a result of the coding change, however, industry -level data for 2009 are not comparable to that of prior years. CITY OF TEMECULA Taxable Sales, 2009-2013 (dollars in thousands) 2009 2010 2011 2012 20130, Retail and Food Services Motor Vehicles and Parts Dealers 309,649 322,715 385,044 478,293 523,274 Home Furnishings and Appliance Stores 67,336 67,526 72,180 73,234 77,797 Bldg. Matrl. and Garden Equip. and Supplies 97,877 99,657 105,793 106,644 125,463 Food and Beverage Stores 72,796 71,194 74,169 76,374 82,678 Gasoline Stations 173,696 196,542 243,563 250,453 236,279 Clothing and Clothing Accessories Stores 112,400 119,186 133,350 155,124 161,228 General Merchandise Stores 339,035 362,572 378,732 388,833 396,128 Food Services and Drinking Places 225,760 237,997 249,781 261,777 274,558 Other Retail Group 145,770 149,402 156,640 170,559 179,521 Total Retail and Food Services 1,544,319 1,626,792 1,799,253 1,961,289 2,056,926 All Other Outlets 511,527 553,511 565,543 574,091 553,361 Total All Outlets 2,055,847 2,180,304 2,364,795 2,535,380 2,610,286 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add up due to independent rounding. (1) Last available full year data. A-5 RIVERSIDE COUNTY Taxable Sales, 2009-2013 (dollars in thousands) 2009 2010 2011 2012 2013. Retail and Food Services Motor Vehicles and Parts Dealers 2,449,747 2,620,568 3,010,487 3,493,098 3,965,201 Furniture and Home Furnishings Stores 381,643 412,325 436,482 441,649 486,061 Electronics and Appliance Stores 476,455 470,784 478,406 488,419 510,423 Bldg Mtrl. and Garden Equip. and Supplies 1,237,518 1,232,145 1,303,073 1,364,513 1,535,178 Food and Beverage Stores 1,251,220 1,267,758 1,304,731 1,356,148 1,421,590 Health and Personal Care Stores 389,620 400,207 454,268 490,238 523,724 Gasoline Stations 2,300,247 2,685,840 3,300,785 3,516,040 3,456,322 Clothing and Clothing Accessories Stores 1,293,271 1,391,174 1,505,821 1,672,482 1,771,603 Sporting Goods, Hobby, Book and Music Stores 411,301 428,121 454,971 467,536 499,366 General Merchandise Stores 2,855,733 2,947,905 3,051,709 3,174,022 3,298,920 Miscellaneous Store Retailers 641,954 652,273 700,338 742,118 758,664 Nonstore Retailers 101,925 92,916 101,876 142,081 243,334 Food Services and Drinking Places 2,266,853 2,317,486 2,473,339 2,668,324 2,836,388 Total Retail and Food Services 16,057,488 16,919,500 18,576,285 20,016,668 21,306,774 All Other Outlets 6,170,390 6,233,280 7,065,212 8,079,341 8,758,693 Totals All Outlets 22,227,877 23,152,780 25,641,497 28,096,009 30,065,467 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add up due to independent rounding. (1) Last available full year data. A-6 Personal Income The following table sets forth the yearly total effective buying income and the median household effective buying income for the City, the County and the State for the prior five years: Year CITY OF TEMECULA, RIVERSIDE COUNTY AND STATE OF CALIFORNIA Effective Buying Income Area 2011 City of Temecula Riverside County California United States 2012 City of Temecula Riverside County California United States 2013 City of Temecula Riverside County California United States 2014 City of Temecula Riverside County California United States 2015 City of Temecula Riverside County California United States Source: Nielsen Claritas, Inc. Total Effective Buying Income (000's Omitted) 39,981,683 814,578,457 6,438,704,663 2,222,443 40,157,310 864,088,827 6,737,867,730 2,170,910 40,293,518 858,676,636 6,982,757,379 2,336,785 41,199,300 901,189,699 7,357,153,421 2,608,500 45,407,058 981,231,666 7,757,960,399 A-7 Median Household Effective Buying Income 44,116 47,062 41,253 56,305 43,860 47,307 41,358 55,508 44,784 48,340 43,715 60,496 45,576 50,072 45,448 66,028 48,674 53,589 46,738 APPENDIX B TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH PHASE 2) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX The following sets forth the Rate and Method of Apportionment for the levy and collection of an Annual Special Tax A and an Annual Special Tax B in the Temecula Public Financing Authority ("PFA") Community Facilities District No. 16-01 ("CFD No. 16-01"). An Annual Special Tax A and an Annual Special Tax B shall be levied on and collected in CFD No. 16-01 each Fiscal Year, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property within CFD No. 16-01, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. SECTION A DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre" or "Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on the Assessor's Parcel Map, the land area as shown on the applicable Final Map, or if the land area is not shown on the applicable Final Map, the land area as calculated by the CFD Administrator or City Engineer. "Act" means the Mello -Roos Community Facilities Act of 1982 as amended, being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the actual or reasonably estimated costs directly related to the administration of CFD No. 16-01, including but not limited to the following: (i) the costs of computing Special Tax A and Special Tax B (the "Special Taxes") and of preparing the annual Special Tax A and Special Tax B collection schedules (whether by the CFD Administrator or designee thereof, or both); (ii) the costs of collecting the Special Taxes (whether by the Authority, County, City, or otherwise); (iii) the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; (iv) the costs of commencing and pursuing to completion any foreclosure action arising from delinquent Special Tax A; (v) the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; (vi) the costs of the Authority, City, or designee of complying with arbitrage rebate, mandated reporting and disclosure requirements of applicable federal and State of California laws, and responding to property owner or Bond owner inquiries regarding the Special Taxes; (vii) the costs associated with the release of funds from any escrow account; (viii) the costs of the Authority, City, or designee related to any appeal of a Special Tax; and (ix) an allocable share of the salaries of the City staff and City overhead expense directly relating to the foregoing. Administrative Expenses shall also include amounts advanced by the City or the Authority for any administrative purposes of CFD No. 16-01. "Annual Special Tax A" means for each Assessor's Parcel, the Special Tax A actually levied in a given Fiscal Year on any Assessor's Parcel. "Annual Special Tax B" means for each Assessor's Parcel, the Special Tax B actually levied in a given Fiscal Year on any Assessor's Parcel. "Approved Property" means all Assessor's Parcels of Taxable Property other than Provisional Exempt Property: (i) that are included in a Final Map that was recorded prior to the January 1st immediately preceding the Fiscal Year in which the Special Tax A is being levied, and (ii) that have B-1 not been issued a building permit on or before the April 1st immediately preceding the Fiscal Year in which the Special Tax A is being levied. "Assessor" means the County Assessor of the County. "Assessor's Parcel" means a lot or parcel of land designated on an Assessor's Parcel Map with an assigned Assessor's Parcel Number within the boundaries of CFD No. 16-01. "Assessor's Parcel Map" means an official map of the Assessor designating parcels by Assessor's Parcel Number. "Assessor's Parcel Number" means that number assigned to a lot or parcel of land by the Assessor for purposes of identification. "Assigned Annual Special Tax A" means the Special Tax A as described in Section D below. "Backup Annual Special Tax A" means the Special Tax A as described in Section E below. "Board of Directors" means the Board of Directors of the Temecula Public Financing Authority, acting as the legislative body of CFD No. 16-01, or its designee. "Bonds" means any bonds or other indebtedness (as defined in the Act), whether in one or more series, the repayment of which is secured by the levy of Special Tax A on Assessor's Parcels within CFD No. 16-01. "Boundary Map" means a recorded map of the CFD No. 16-01 which indicates the boundaries of CFD No. 16-01. "Building Permit" means the first legal document issued by the City giving official permission for new construction. For purposes of this definition, "Building Permit" may or may not include any subsequent building permits issued or changed after the first issuance, as determined by the CFD Administrator. "Building Square Footage" or "BSF" means the square footage of assessable internal living space, exclusive of garages or other structures not used as living space, as determined by reference to the building permit application for such Assessor's Parcel and subject to verification by the CFD Administrator. "Calendar Year" means the period commencing January 1 of any year and ending the following December 31. "CFD No. 16-01" or "CFD" means Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) established by the Authority under the Act. "CFD Administrator" means the Finance Director of the City, or designee thereof, responsible for, among other things, determining the Special Tax A Requirement for Special Tax A and the Special Tax B Requirement for Special Tax B and providing for the levy and collection of said Special Tax A and Special Tax B. "City" means the City of Temecula, California. "Consumer Price Index" or "CPI" means, for each Fiscal Year, the Consumer Price Index published by the U.S. Bureau of Labor Statistics for "All Urban Consumers: in the Los Angeles — Anaheim — Riverside Area", measured as of the month of December in the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Consumer Price Index shall B-2 be another index as determined by the CFD Administrator that is reasonably comparable to the Consumer Price Index for the City of Los Angeles. "County" means the County of Riverside. "Developed Property" means all Assessor's Parcels of Taxable Property that: (i) are included in a Final Map that was recorded prior to January 1st preceding the Fiscal Year in which Special Tax A and Special Tax B are being levied, and (ii) a building permit was issued on or before April 1st preceding the Fiscal Year in which either or both of the Special Taxes are being levied. "Exempt Property" means all Assessor's Parcels designated as being exempt from the Special Taxes provided for in Section M. "Final Map" means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 4285 that creates individual lots that do not need, and are not expected, to be further subdivided prior to the issue of a building permit. "Fiscal Year" means the period commencing July 1 of any year and ending the following June 30. "Indenture" means the bond indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and / or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Type" means Residential Property, Multifamily Residential Property, or Non -Residential Property. "Maximum Special Tax A" means for each Assessor's Parcel of Taxable Property, the maximum Special Tax A, determined in accordance with Section C that can be levied in any Fiscal Year on such Assessor's Parcel. "Maximum Special Tax B" means for each Assessor's Parcel of Taxable Property, the maximum Special Tax B, determined in accordance with Section I that can be levied in any Fiscal Year on such Assessor's Parcel. "Multifamily Residential Property" means all Assessor's Parcels of Developed Property for which a building permit has been issued for the purpose of constructing a building or buildings comprised of attached Units available for rental by the general public, not for sale to an end user, and under common management, as determined by the CFD Administrator. "Non -Residential Property" means all Assessor's Parcels of Developed Property for which a building permit was issued for any type of non-residential use. "Partial Prepayment Amount" means the amount required to prepay a portion of the Special Tax A obligation for an Assessor's Parcel, as described in Section H. "Prepayment Amount" means the amount required to prepay the Special Tax A obligation in full for an Assessor's Parcel, as described in Section G. "Proportionately" means for Special Tax A that the ratio of the Annual Special Tax A levy to the applicable Assigned Annual Special Tax A is equal for all applicable Assessor's Parcels. In the case of Special Tax B, "Proportionately" means that the ratio of the Annual Special Tax B levy to the applicable Maximum Special Tax B is equal for all applicable Assessor's Parcels. In the case of Developed Property subject to the apportionment of the Annual Special Tax A under Step Four of Section F, "Proportionately" means that the quotient of (a) Annual Special Tax A less the Assigned B-3 Annual Special Tax A divided by (b) the Backup Annual Special Tax A less the Assigned Annual Special Tax A, is equal for all applicable Assessor's Parcels. "Provisional Exempt Property" means all Assessor's Parcels of Taxable Property subject to Special Tax A that would otherwise be classified as Exempt Property pursuant to the provisions of Section M, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property within the applicable Zone below the required minimum Acreage set forth in Section M. "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units, which are not Multifamily Residential Property. "Services" means services authorized to be funded by CFD No. 16-01. "Special Tax A" means any of the Special Taxes authorized to be levied on Taxable Property within and by CFD No. 16-01 pursuant to the Act to fund the Special Tax A Requirement. "Special Tax B" means any of the Special Taxes authorized to be levied on Taxable Property within and by CFD No. 16-01 pursuant to the Act to fund the Special Tax B Requirement. "Special Tax A Requirement" means, subject to the Maximum Special Tax A, the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses (apportioned between Special Tax A and Special Tax B), (iii) any amount required to establish or replenish any reserve funds established in association with the Bonds, and (iv) the collection or accumulation of funds for the acquisition or construction of facilities or payment of fees authorized by CFD No. 16-01 by the levy on Developed Property of the Assigned Annual Special Tax A provided that the inclusion of such amount does not cause an increase in the levy of Special Tax A on Approved Property or Undeveloped Property as set forth in Step Two and Three of Section F., less (v) any amount available to pay debt service or other periodic costs on the Bonds pursuant to any applicable fiscal agent agreement, or trust agreement. "Special Tax B Requirement" means, subject to the Maximum Special Tax B, that amount to be collected in any Fiscal Year to pay for certain Services as required to meet the needs of CFD No. 16- 01. The costs of Services to be covered shall be the direct costs for (i) Services, and (ii) Administrative Expenses (apportioned between Special tax A and Special Tax B); less (iii) a credit for funds available to reduce the Annual Special Tax B levy, if any, as determined by the CFD Administrator. Under no circumstances shall the Special Tax B Requirement include funds for Bonds. "Taxable Property" means all Assessor's Parcels within CFD No. 16-01, which are not Exempt Property. "Temecula Public Financing Authority" or "PFA" or "Authority" means the Temecula Public Financing Authority, or its designee. "Undeveloped Property" means all Assessor's Parcels of Taxable Property which are not Developed Property, Approved Property or Provisional Exempt Property. "Unit" means any residential structure. "Zone(s)" means Zone 1, Zone 2, Zone 3 or Zone 4 as geographically identified on the Boundary Map of CFD No. 16-01. "Zone 1" means the specific area identified on the Boundary Map as Zone 1 of CFD 16-01. B-4 "Zone 2" means the specific area identified on the Boundary Map as Zone 2 of CFD 16-01. "Zone 3" means the specific area identified on the Boundary Map as Zone 3 of CFD 16-01. "Zone 4" means the specific area identified on the Boundary Map as Zone 4 of CFD 16-01. SECTION B CLASSIFICATION OF ASSESSOR'S PARCELS Each Fiscal Year, beginning with Fiscal Year 2016-17, each Assessor's Parcel within CFD No. 16-01 shall be classified as Taxable Property or Exempt Property. In addition, each Assessor's Parcel of Taxable Property shall be further classified as Developed Property, Approved Property, Undeveloped Property, or Provisional Exempt Property. In addition, each Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property and Provisional Exempt Property shall be classified as being within Zone 1, Zone 2, Zone 3 or Zone 4. If an Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property or Provisional Exempt Property is located within more than one Zone, it shall be deemed to be entirely within the Zone in which the largest portion of its Acreage is located. In addition, each Assessor's Parcel of Developed Property shall further be classified as Residential Property, Multifamily Residential Property or Non - Residential Property. Assessor's Parcels of Residential Property shall be further categorized based on the Building Square Footage of each such Assessor's Parcel. SECTION C MAXIMUM SPECIAL TAX A 1. Developed Property The Maximum Special Tax A for each Assessor's Parcel of Residential Property, Multifamily Residential Property or Non -Residential Property in any Fiscal Year shall be the greater of (i) the Assigned Annual Special Tax A or (ii) the Backup Annual Special Tax A. 2. Approved Property, Undeveloped Property, and Provisional Exempt Property The Maximum Special Tax A for each Assessor's Parcel classified as Approved Property, Undeveloped Property, or Provisional Exempt Property in any Fiscal Year shall be the Assigned Annual Special Tax A. SECTION D ASSIGNED ANNUAL SPECIAL TAX A 1. Developed Property Each Fiscal Year, each Assessor's Parcel of Residential Property, Multifamily Residential Property or Non -Residential Property shall be subject to an Assigned Annual Special Tax A. The Assigned Annual Special Tax A applicable to an Assessor's Parcel of Developed Property shall be determined using the Tables below. B-5 TABLE 1 ASSIGNED ANNUAL SPECIAL TAX A RATES FOR DEVELOPED PROPERTY WITHIN ZONE 1 Land Use Type Building Square Footage Rate Residential Property Less than 1,900 $2,110 per Unit Residential Property 1,900 - 2,199 $2,320 per Unit Residential Property 2,200 - 2,499 $2,670 per Unit Residential Property 2,500 - 2,799 $2,860 per Unit Residential Property 2,800 - 3,099 $2,975 per Unit Residential Property 3,100 - 3,399 $3,115 per Unit Residential Property Greater than 3,399 $3,235 per Unit Multifamily Residential Property N /A $22,941 per Acre Non -Residential Property N /A $22,941 per Acre TABLE 2 ASSIGNED ANNUAL SPECIAL TAX A RATES FOR DEVELOPED PROPERTY WITHIN ZONE 2 Land Use Type Building Square Footage Rate Residential Property Less than 4,000 $4,920 per Unit Residential Property 4,000 - 4,299 $5,185 per Unit Residential Property Greater than 4,299 $5,455 per Unit Multifamily Residential Property N /A $7,783 per Acre Non -Residential Property N /A $7,783 per Acre TABLE 3 ASSIGNED ANNUAL SPECIAL TAX A RATES FOR DEVELOPED PROPERTY WITHIN ZONE 3 Land Use Type Building Square Footage Rate Residential Property Less than 1,900 $2,110 per Unit Residential Property 1,900 - 2,199 $2,335 per Unit Residential Property Greater than 2,199 $2,665 per Unit Multifamily Residential Property N /A $32,894 per Acre Non -Residential Property N /A $32,894 per Acre TABLE 4 ASSIGNED ANNUAL SPECIAL TAX A RATES FOR DEVELOPED PROPERTY WITHIN ZONE 4 Land Use Type Building Square Footage Rate Residential Property Less than 4,000 $3,235 per Unit Residential Property 4,000 or Greater $3,890 per Unit Multifamily Residential Property N / A $9,121 per Acre Non -Residential Property N /A $9,121 per Acre 2. Approved Property, Undeveloped Property and Provisional Exempt Property Each Fiscal Year, each Assessor's Parcel of Approved Property, Undeveloped Property and Provisional Exempt Property shall be subject to an Assigned Annual Special Tax A. The Assigned Annual Special Tax A rate for an Assessor's Parcel classified as Approved B-6 Property, Undeveloped Property or Provisional Exempt Property shall be determined pursuant to Table 5 below: TABLE 5 ASSIGNED ANNUAL SPECIAL TAX RATES FOR APPROVED PROPERTY, UNDEVELOPED PROPERTY, AND PROVISIONAL EXEMPT PROPERTY Zone Rate Zone 1 $22,941 per Acre Zone 2 $7,783 per Acre Zone 3 $32,894 per Acre Zone 4 $9,121 per Acre SECTION E BACKUP ANNUAL SPECIAL TAX A At the time a Final Map is recorded, the CFD Administrator shall determine which Zone the Final Map area lies within and the Backup Annual Special Tax A for all Assessor's Parcels classified or reasonably expected to be classified as Residential Property within such Final Map area shall be determined by multiplying the Maximum Special Tax A rate for Undeveloped Property for the applicable Zone by the total Acreage of Taxable Property, excluding the Provisional Exempt Property Acreage, Non -Residential Property Acreage or Multifamily Residential Property Acreage if any, in such Final Map area and any Acreage reasonably expected to be classified as Exempt Property, and dividing such amount by the total number of such Assessor's Parcels of Residential Property. If the Final Map area described in the preceding paragraph lies within more than one Zone, the Backup Annual Special Tax A for Assessor's Parcels of Residential Property or Assessor's Parcels expected to be classified as Residential Property shall be determined by calculating a Backup Special Tax A rate based upon the weighted average of the Maximum Special Tax A rate for Undeveloped Property for the Zones which the Assessor's Parcel overlaps using the acreage of the Assessor's Parcel that lies within each overlapping Zone and multiplying that weighted average Maximum Special Tax A rate by the total Acreage of the subject Assessor's Parcel. The Backup Annual Special Tax A rate for Multifamily Residential Property or Non -Residential Property shall be its Annual Assigned Special Tax A rate. Notwithstanding the foregoing, if Assessor's Parcels which are classified or to be classified as Residential Property, Non -Residential Property or Multifamily Property are subsequently changed by recordation of a lot line adjustment, Final Map amendment, new Final Map or similar instrument, then the Backup Annual Special Tax A shall be recalculated within the area that has been changed to equal the amount of Backup Annual Special Tax A that would have been generated if such change did not take place. SECTION F METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX A Commencing Fiscal Year 2016-17 and for each subsequent Fiscal Year, the Board of Directors shall levy Annual Special Tax A in accordance with the following steps: Step One: The Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Assigned Annual Special Tax A rates in Tables 1, 2, 3 and 4 to satisfy the Special Tax A Requirement. B-7 Step Two: Step Three: Step Four: Step Five: If additional moneys are needed to satisfy the Special Tax A Requirement after the first step has been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the applicable Assigned Annual Special Tax A to satisfy the Special Tax A Requirement. If additional moneys are needed to satisfy the Special Tax A Requirement after the first two steps have been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Assigned Annual Special Tax A for Undeveloped Property applicable to each such Assessor's Parcel as needed to satisfy the Special Tax A Requirement. If additional moneys are needed to satisfy the Special Tax A Requirement after the first three steps have been completed, the Annual Special Tax A on each Assessor's Parcel of Developed Property for which the Maximum Special Tax A is the Backup Annual Special Tax A shall be increased Proportionately from the Assigned Annual Special Tax A up to 100% of the Backup Annual Special Tax A as needed to satisfy the Special Tax A Requirement. If additional moneys are needed to satisfy the Special Tax A Requirement after the first four steps have been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Provisional Exempt Property up to 100% of the Assigned Annual Special Tax A applicable to each such Assessor's Parcel as needed to satisfy the Special Tax A Requirement. SECTION G PREPAYMENT OF ANNUAL SPECIAL TAX A The following definitions apply to this Section G: "CFD Public Facilities Amount" means $13,000,000 expressed in 2016 dollars, which shall increase by the Construction Inflation Index on July 1, 2017, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities under the authorized bonding program, or (ii) shall be determined by the Board of Directors concurrently with a covenant that the CFD will not issue any more Bonds. "Construction Inflation Index" means the annual percentage change in the Engineering News - Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News -Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities Amount minus (i) Bond proceeds deposited in Improvement Funds and accounts and (ii) other amounts (special taxes, interest earnings, etc.) allocated to Improvement Funds and accounts that were available to fund such CFD Public Facilities Amount prior to the date of prepayment. "Improvement Fund" means, collectively, an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct public facilities eligible under the Act and any account established prior to the issuance of Bonds for such purpose. "Outstanding Bonds" means all previously issued Bonds, which will remain outstanding after the payment of principal from the amount of Special Tax A that have been levied, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Maximum Special Tax A. B-8 Prepayment in Full The Maximum Special Tax A obligation may be prepaid and permanently satisfied for (i) Assessor's Parcels of Developed Property, (ii) Assessor's Parcels of Approved Property or Undeveloped Property for which a Building Permit has been issued, (iii) Approved or Undeveloped Property for which a Building Permit has not been issued, and (iv) Assessor's Parcels of Provisional Exempt Property that are not Exempt Property pursuant to Section M. The Maximum Special Tax A obligation applicable to a Assessor's Parcel may be fully prepaid and the obligation to pay the Special Tax A for such Assessor's Parcel permanently satisfied as described herein; provided that a prepayment may be made only if there are no delinquent Special Tax A with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Maximum Special Tax A obligation for such Assessor's Parcel shall provide the CFD Administrator with written notice of intent to prepay, and within 5 business days of receipt of such notice, the CFD Administrator shall notify such owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the Prepayment Amount (as defined below) for the Assessor's Parcel. Within 15 business days of receipt of such non-refundable deposit, the CFD Administrator shall notify such owner of the Prepayment Amount for the Assessor's Parcel. Prepayment must be made not less than 60 days prior to the redemption date for any Bonds to be redeemed with the proceeds of such prepaid Special Taxes. The Prepayment Amount (defined below) shall be calculated as follows (capitalized terms are defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit Equals: Prepayment Amount The Prepayment Amount shall be determined as of the proposed prepayment date as follows: 1. Confirm that no Special Tax A delinquencies apply to such Assessor's Parcel. 2. For an Assessor's Parcel of Developed Property, compute the Maximum Special Tax A for the Assessor's Parcel. For an Assessor's Parcel of Approved Property or Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax A for the Assessor's Parcel as though it was already designated as Developed Property, based upon the Building Permit which has been issued for the Assessor's Parcel. For an Assessor's Parcel of Approved Property or Undeveloped Property for which a Building Permit has not been issued, Provisional Exempt Property, to be prepaid, compute the Maximum Special Tax A for the Assessor's Parcel. 3. Divide the Maximum Special Tax A derived pursuant to paragraph 2 by the total amount of Special Tax A that could be levied at the Maximum Special Tax A for all Assessor's Parcels of Taxable Property based on the applicable Maximum Special Tax A, including for Assessor's Parcels of Approved Property or Undeveloped Property for which a Building Permit has been issued, the Maximum Special Tax A for the Assessor's Parcel as though it was already designated as Developed Property, not including any Assessor's Parcels for which the Special Tax A obligation has been previously prepaid. B-9 4. Multiply the quotient derived pursuant to paragraph 3 by the principal amount of the Outstanding Bonds to determine the amount of Outstanding Bonds to be redeemed with the Prepayment Amount (the "Bond Redemption Amount"). 5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the "Redemption Premium"). 6. Determine the Future Facilities Costs. 7. Multiply the quotient derived pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to determine the amount of Future Facilities Costs for the Assessor's Parcel (the "Future Facilities Amount"). 8. Determine the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and / or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds on which Bonds can be redeemed from Special Tax prepayments. 9. Determine the Special Tax A levied on the Assessor's Parcel in the current Fiscal Year which have not yet been paid. 10. Determine the amount the CFD Administrator reasonably expects to derive from the investment of the Bond Redemption Amount and the Redemption Premium from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the Prepayment Amount. 11. Add the amounts derived pursuant to paragraphs 8 and 9 and subtract the amount derived pursuant to paragraph 10 (the "Defeasance Amount"). 12. Verify the administrative fees and expenses of the CFD, including the cost of computation of the Prepayment Amount, the cost to invest the Prepayment Amount, the cost of redeeming the Outstanding Bonds, and the cost of recording notices to evidence the prepayment of the Maximum Special Tax obligation for the Assessor's Parcel and the redemption of Outstanding Bonds (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. 14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount and the Administrative Fees and Expenses, less the Reserve Fund Credit. 15. From the Prepayment Amount, the Bond Redemption Amount, the Redemption Premium, and Defeasance Amount shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments. The Future Facilities Amount shall be deposited into the Improvement Fund. The Administrative Fees and Expenses shall be retained by the CFD. B-10 The Prepayment Amount may be sufficient to redeem other than a $5,000 increment of Bonds. In such event, the increment above $5,000 or an integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next redemption from other Special Tax A prepayments of Outstanding Bonds or to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tax A levy as determined pursuant to paragraph 9 above, if applicable, the CFD Administrator shall remove the current Fiscal Year's Special Tax A levy for the Assessor's Parcel from the County tax roll. With respect to any Assessor's Parcel for which the Maximum Special Tax A obligation is prepaid, the Board shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Maximum Special Tax A obligation and the release of the Special Tax A lien for the Assessor's Parcel, and the obligation to pay the Special Tax A for such Assessor's Parcel shall cease. Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless the amount of Maximum Special Tax A that may be levied on all Assessor's Parcels of Taxable Property, excluding all Provisional Exempt Property and all Assessor's Parcels with delinquent Special Taxes, after the proposed prepayment will be at least 1.1 times maximum annual debt service on the Bonds that will remain outstanding after the prepayment plus the estimated annual Administrative Expenses. Tenders of Bonds in prepayment of the Maximum Special Tax A obligation may be accepted upon the terms and conditions established by the Board pursuant to the Act. However, the use of Bond tenders shall only be allowed on a case-by-case basis as specifically approved by the Board. SECTION H PARTIAL PREPAYMENT OF ANNUAL SPECIAL TAX A The Maximum Special Tax A obligation for an Assessor's Parcel of Developed Property, Approved Property or Undeveloped Property may be partially prepaid. For purposes of determining the partial prepayment amount, the provisions of Section G shall be modified as provided by the following formula: PP = ((P, —A) x F) +A These terms have the following meaning: PP = Partial Prepayment PE = the Prepayment Amount calculated according to Section G F = the percent by which the owner of the Assessor's Parcel(s) is partially prepaying the Maximum Special Tax A obligation A = the Administrative Fees and Expenses determined pursuant to Section G The owner of an Assessor's Parcel who desires to partially prepay the Maximum Special Tax A obligation for the Assessor's Parcel shall notify the CFD Administrator of (i) such owner's intent to partially prepay the Maximum Special Tax A obligation, (ii) the percentage of the Maximum Special Tax A obligation such owner wishes to prepay, and (iii) the company or agency that will be acting as the escrow agent, if any. Within 5 business days of receipt of such notice, the CFD Administrator shall notify such property owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the amount of a partial prepayment. Within 15 business days of receipt of such non-refundable deposit, the CFD Administrator shall notify such owner of the amount of the Partial Prepayment for the Assessor's Parcel. A Partial Prepayment must be made not less than 60 days prior to the redemption date for the Outstanding Bonds to be redeemed with the proceeds of the Partial Prepayment. With respect to any Assessor's Parcel for which the Maximum Special Tax A obligation is partially prepaid, the CFD Administrator shall (i) distribute the Partial Prepayment as provided in Paragraph 15 of Section G and (ii) indicate in the records of the CFD that there has been a Partial Prepayment B-11 for the Assessor's Parcel and that a portion of the Special Tax A obligation equal to the remaining percentage (1.00 - F) of Special Tax A obligation will continue on the Assessor's Parcel pursuant to Section F. SECTION I MAXIMUM SPECIAL TAX B 1. Developed Property 1) Maximum Special Tax B Each Fiscal Year, each Assessor's Parcel of Residential Property or Multifamily Residential Property shall be subject to a Maximum Annual Special Tax B. The Maximum Annual Special Tax B applicable to an Assessor's Parcel of Developed Property shall be determined using the Table 6 below. TABLE 6 MAXIMUM SPECIAL TAX B RATES FOR DEVELOPED PROPERTY Land Use Type Rate Residential Property $432 per Unit Non -Residential Property $2,766 per Acre Multifamily Residential Property $2,766 per Acre 2. Approved Property, Undeveloped Property and Provisional Exempt Property No Special Tax B shall be levied on Approved Property, Undeveloped Property and Provisional Exempt Property. 3. Increase in the Maximum Special Tax B On each July 1, commencing July 1, 2017, the Maximum Special Tax B shall be increased by an amount equal to CPI or two percent (2%), whichever is greater, of the amount in effect for the previous Fiscal Year. SECTION J METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX B Commencing with Fiscal Year 2016-17 and for each following Fiscal Year, the City shall levy the Special Tax B at up to 100% of the applicable Maximum Special Tax B, Proportionately on each Assessor's Parcel of Developed Property until the amount of Special Tax B equals the Special Tax B Requirement. SECTION K PREPAYMENT OF ANNUAL SPECIAL TAX B No prepayments of Annual Special Tax B are permitted. B-12 SECTION L TERM OF THE SPECIAL TAX A AND SPECIAL TAX B For each Fiscal Year that any Bonds are outstanding the Annual Special Tax A shall be levied on all Assessor's Parcels subject to the Annual Special Tax A. If any delinquent Annual Special Tax A amounts remain uncollected prior to or after all Bonds are retired, the Annual Special Tax A may be levied to the extent necessary to reimburse CFD 16-01 for uncollected Annual Special Tax A amounts associated with the levy of such Annual Special Tax A amounts, but not later than the 2061-62 Fiscal Year. For each Fiscal Year, Special Tax B shall be levied in perpetuity as long as the Services are being provided. SECTION M EXEMPT PROPERTY The CFD Administrator shall classify as Exempt Property within the applicable Zone, (i) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor's Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners' association, (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor's Parcels which are privately owned and are encumbered by or restricted solely for public uses, or (vi) other types of public uses determined by the CFD Administrator. The CFD Administrator shall classify such Assessor's Parcels as Exempt Property in the chronological order in which property becomes Exempt. Notwithstanding the foregoing, the CFD Administrator for purposes of levying the Special Tax shall not classify an Assessor's Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property within the applicable Zone to less than the Acreage amounts listed in Table 7 below. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property within the applicable Zone to less than the Acreage amounts listed in Table 7 will be classified as Provisional Exempt Property, and will be subject to the levy of Special Tax pursuant to Step Five in Section F. TABLE 7 MINIMUM TAXABLE ACRES Zone Acres Zone 1 116.64 Zone 2 52.65 Zone 3 9.65 Zone 4 22.54 SECTION N APPEALS AND INTERPRETATIONS Any property owner claiming that the amount or application of the Annual Special Tax A or Annual Special Tax B is not correct may file a written notice of appeal with the CFD Administrator not later than twelve months after having paid the first installment of the Special Tax A or Annual Special Tax B that is disputed. The CFD Administrator of CFD No. 16-01 shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Annual Special Tax A or Annual Special Tax B, and rule on the appeal. If the CFD B-13 Administrator's decision requires that the Annual Special Tax A or Annual Special Tax B for an Assessor's Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy in the case of the Annual Special Tax A), but an adjustment shall be made to the Annual Special Tax A or Annual Special Tax B on that Assessor's Parcel in the subsequent Fiscal Year(s). The Board of Directors may interpret this Rate and Method of Apportionment of Annual Special Tax A and Annual Special Tax B for purposes of clarifying any ambiguity and make determinations relative to the amount of Administrative Expenses. SECTION 0 MANNER OF COLLECTION The Annual Special Tax A and Annual Special Tax B shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD 16-01 may collect the Annual Special Tax A and Annual Special Tax B at a different time or in a different manner if necessary to meet its financial obligations. B-14 APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT The following is a summary of certain provisions of the Fiscal Agent Agreement not otherwise described in the text of this Official Statement. This summary does not purport to be comprehensive or definitive and is subject to the complete terms and provisions of the Fiscal Agent Agreement, to which reference is hereby made. [to come] C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL February _ 2017 Board of Directors Temecula Public Financing Authority 41000 Main Street Temecula, California 92589-9033 OPINION: $ Temecula Public Financing Authority Community Facilities District 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds Members of the Board of Directors: We have acted as bond counsel in connection with the issuance by the Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), of its $ Temecula Public Financing Authority Community Facilities District 16-01 (Roripaugh Ranch Phase 2) 2017 Special Tax Bonds (the "Bonds") pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq., of the California Government Code) (the "Act"), a Fiscal Agent Agreement, dated as of February 1, 2017 (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, and Resolution No. TPFA 17- adopted by the Board of Directors of the Authority on January 24, 2017 (the "Resolution"). In connection with this opinion, we have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority contained in the Resolution and in the Fiscal Agent Agreement, and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Authority is duly created and validly existing as a joint exercise of powers authority, with the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein and issue the Bonds. 2. The Fiscal Agent Agreement has been duly entered into by the Authority and constitutes a valid and binding obligation of the Authority enforceable upon the Authority. 3. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with the pledge thereof for the security of any Parity Bonds that may be issued under, and as such term is defined in, the Fiscal Agent Agreement. 4. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and binding limited obligations of the Authority for the District, payable solely D-1 from the sources provided therefor in the Fiscal Agent Agreement, on a parity with any Parity Bonds that may be issued under and as such term is defined in the Fiscal Agent Agreement. 5. Subject to the Authority's compliance with certain covenants, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, and (ii) is not included as an item of tax preference in computing the 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. Failure by the Authority to comply with certain of such covenants could cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. 6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds, the Resolution and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. In rendering this opinion, we have relied upon certifications of the Authority and others with respect to certain material facts. Our opinion represents our legal judgment based upon such review of the law and facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, D-2 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE AUTHORITY THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of February 1, 2017, is by and between ALBERT A. WEBB ASSOCIATES, as dissemination agent (the "Dissemination Agent"), and the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"). RECITALS: WHEREAS, the Authority has issued, for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), its Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), 2017 Special Tax Bonds (the "Bonds") in the initial principal amount of $ ; and WHEREAS, the Bonds have been issued pursuant to a Fiscal Agent Agreement, dated as of February 1, 2017 (the "Fiscal Agent Agreement"), by and between U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), and the Authority, for and on behalf of the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2 -12(b)(5). AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following terms shall have the following meanings when used in this Disclosure Agreement: "Annual Report" means any Annual Report provided by the Authority pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. "Disclosure Representative" means the Treasurer, or such person's designee, or such other officer or employee of the Authority as the Authority shall designate as the Disclosure Representative hereunder in writing to the Dissemination Agent from time to time. E-1 "Dissemination Agent" means Albert A. Webb Associates, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority a written acceptance of such designation. "EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Listed Events" means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statement" means the Official Statement, dated February -, 2017, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The Authority shall, or shall cause the Dissemination Agent to, not later than the March 1 occurring after the end of each fiscal year of the Authority, commencing with the report for the 2015-16 fiscal year, which is due not later than March 1, 2017, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that any audited financial statements of the Authority may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. (b) Change of Fiscal Year. 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 5(c), and subsequent Annual Report filings shall be made no later than six months after the end of such new fiscal year end. E-2 (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the Annual Report to EMMA), the Authority shall provide the Annual Report to the Dissemination Agent (if other than the Authority). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Authority. (d) Report of Non -Compliance. If the Authority is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the Authority shall in a timely manner send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the Authority is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in substantially the form attached hereto as Exhibit A in a timely manner. (e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the Authority, file a report with the Authority certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed. Section 4. Content of Annual Reports. It is acknowledged that the Closing Date for the Bonds occurred after the end of the 2015-2016 fiscal year of the Authority. In light of the foregoing, submission of the Official Statement shall satisfy the Authority's obligation to file an Annual Report for fiscal year 2015-2016. The Annual Report for each fiscal year commencing with the Annual Report for the 2016-2017 fiscal year, shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the Authority for the most recently completed fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Other Annual Information. The Annual Report for each fiscal year commencing with fiscal year 2016-2017 shall also include the following information: (i) The principal amount of Bonds Outstanding as of the September 30 next preceding the date of the Annual Report. (ii) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the September 30 next preceding the date of the Annual Report. (iii) The balance in the Improvement Fund, if any, as of the September 30 next preceding the date of the Annual Report. (iv) The total assessed value of all parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the County Assessor last equalized prior to the September 30 next preceding the date of the Annual Report, and a statement of assessed value -to -lien ratios therefor, either by E-3 individual parcel or by categories, in a table similar to Table in the Official Statement. (v) A table similar to Table in the Official Statement (which shows the value -to -lien ratios for parcels in the District) using the most recently available County assessed values. (vi) A table setting forth the annual aggregate Special Tax levy in the District for the most recent five Fiscal Years (or, if shorter, for the Fiscal Years commencing with Fiscal Year 2017-18), and the number of parcels with delinquent Special Taxes, and the amount and percentage of the overall Special Tax levy for the delinquent parcels, and an update of prior years' delinquencies as of a date not more than ninety (90) days prior to the date of the Annual Report. (vii) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary or the results of any foreclosure sales, or other collection efforts with respect to delinquent Special Taxes, as of the September 30 next preceding the date of the Annual Report. (viii) The identity of any property owner representing more than five percent (5%) of the annual Special Tax levy who is delinquent in payment of such Special Taxes, as shown on the assessment roll of the City Assessor last equalized prior to the September 30 next preceding the date of the Annual Report, the number of parcels so delinquent, and the total dollar amount of all such delinquencies. (ix) A land ownership summary listing property owners responsible for more than five percent (5%) of the annual Special Tax levy, as shown on the assessment roll of the County Assessor last equalized prior to the January 1 next preceding the date of the Annual Report. (x) The most recent annual information required to be provided to the California Debt and Investment Advisory Commission pursuant to Section 9.07(A) of the Fiscal Agent Agreement. (c) Cross References. 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 are available to the public on EMMA. The Authority shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the Authority shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. E-4 Section 5. Reporting of Listed Events. (a) Reportable Events. The Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) 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. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee 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 governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Material Reportable Events. The Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. E-5 (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the 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. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Time to Disclose. The Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent Agreement. Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The Authority's obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Albert A. Webb Associates. If the Dissemination Agent is not the Authority, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Authority pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the Authority. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the Authority shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the Authority. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder as agreed to between the Dissemination Agent and the Authority from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, with payment to be made from any lawful funds of the District. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the E-6 Authority, the owners of the Bonds, the Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any written direction from the Authority or a written opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the Authority. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the Authority to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the Authority under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Authority that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), 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 Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. (c) Consent of Holders; Non -impairment Opinion. The amendment or waiver either (i) is approved by the Bond owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bond owners or Beneficial Owners. If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is waived, the Authority shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Authority. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority from disseminating any other information, using the means of E-7 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 future notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Authority to comply with any provision of this Disclosure Agreement, any Bond owner, any Beneficial Owner, the Fiscal Agent or the Participating Underwriter may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the Authority to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and the owners and the Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. TEMECULA PUBLIC FINANCING AUTHORITY By: Aaron Adams, Executive Director ALBERT A. WEBB ASSOCIATES, as Dissemination Agent By: Its: E-8 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Temecula Public Financing Authority Name of Bond Issue: $ Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), 2017 Special Tax Bonds Date of Issuance: February , 2017 NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.17 of the Fiscal Agent Agreement, dated as of February 1, 2017, between the Obligor and U.S. Bank National Association, as fiscal agent. The Obligor anticipates that the Annual Report will be filed by Date: By: Albert A. Webb Associates, as Dissemination Agent E-9 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE PRIMARY LANDOWNER This Continuing Disclosure Agreement — Primary Landowner (the "Disclosure Agreement") dated as of February 1, 2017, is by and between ALBERT A. WEBB ASSOCIATES, as dissemination agent (the "Dissemination Agent"), and RORIPAUGH VALLEY RESTORATION, LLC, a Delaware limited liability company (the "Developer"). RECITALS: WHEREAS, the Temecula Public Financing Authority (the "Authority") has issued, for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16- 01 (Roripaugh Ranch Phase 2) (the "District"), its Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), 2017 Special Tax Bonds (the "Bonds") in the initial principal amount of $ ; and WHEREAS, the Bonds have been issued pursuant to a Fiscal Agent Agreement, dated as of February 1, 2017 (the "Fiscal Agent Agreement"), by and between U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), and the Authority, for and on behalf of the District; and WHEREAS, as of the date of this Disclosure Agreement, the Developer owns a majority of the property in the District. AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following terms shall have the following meanings when used in this Disclosure Agreement: "Affiliate" means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially or as an agent, guardian or other fiduciary, twenty-five percent (25%) or more of any class of Equity Securities of such Person, (b) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person or (c) each of such Person's executive officers, directors, joint venturers and general partners; provided, however, that in no case shall the Authority be deemed to be an Affiliate of the Developer for purposes of this Disclosure Agreement. For the purpose of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "Annual Report" means any Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. F-1 "Beneficial Owner" means any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. "Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day which is a federal or State of California holiday. "Disclosure Representative" means the principal and manager of Sabal Financial Group, L.P., acting for the Developer, or his or her designee, or such other person as the Developer shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" means Albert A. Webb Associates, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Developer and which has filed with the Developer and the Authority a written acceptance of such designation. "EMMA" or "Electronic Municipal Market Access" means the centralized on- line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Equity Securities" of any Person means (a) all common stock, preferred stock, participations, shares, general partnership interests or other equity interests in and of such person (regardless of how designated and whether or not voting or nonvoting) and (b) all warrants, options and other rights to acquire any of the foregoing. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next succeeding June 30. "Government Authority" means any national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Listed Events" means any of the events listed in Section 5(a) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statement" means the Official Statement, dated February , 2017, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. F-2 "Person" means any natural person, corporation, partnership, firm, association, Government Authority or any other Person whether acting in an individual fiduciary, or other capacity. "Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Semiannual Report" means any report to be provided by the Developer on or prior to December 15 of each year pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "State" means the State of California. "Undeveloped Property" has the meaning given to such term in the Rate and Method of Apportionment of Special Tax for the District. Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Developer and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule Section 3. Provision of Annual Reports and Semiannual Reports. (a) The Developer shall, or shall cause the Dissemination Agent to, not later than June 15 of each year, commencing June 15, 2017, provide to EMMA an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. If, in any year, June 15 does not fall on a Business Day, then such deadline shall be extended to the following Business Day. 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 4 of this Disclosure Agreement, provided that the audited financial statements, if any, of the Developer may be submitted separately from the balance of the Annual Report and later than the date required for the filing of the Annual Report if they are not available by that date. In addition, the Developer shall, or shall cause the Dissemination Agent to, not later than December 15 of each year, commencing December 15, 2017, provide to EMMA a Semiannual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. If, in any year, December 15 does not fall on a Business Day, then such deadline shall be extended to the following Business Day. (b) Not later than fifteen (15) calendar days prior to the date specified in subsection (a) for providing the Annual Report and Semiannual Report to EMMA, the Developer shall provide the Annual Report or the Semiannual Report, as applicable, to the Dissemination Agent or shall provide notification to the Dissemination Agent that the Developer is preparing, or causing to be prepared, the Annual Report or the Semiannual Report, as applicable, and the date which the Annual Report or the Semiannual Report, as applicable, is expected to be available. If by such date, the Dissemination Agent has not received a copy of the Annual Report or the Semiannual Report, as applicable, or notification as described in the preceding sentence, the Dissemination Agent shall notify the Developer of such failure to receive the report. F-3 (c) If the Dissemination Agent is unable to provide an Annual Report or Semiannual Report to EMMA by the date required in subsection (a) or to verify that an Annual Report or Semiannual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send in a timely manner a notice to EMMA in a form that is accepted by EMMA. (d) The Developer shall, or shall cause the Dissemination Agent to: (i) determine each year prior to the date for providing the Annual Report and the Semiannual Report the name and address of EMMA; and (ii) promptly file a report with the Developer and the City certifying that the Annual Report or the Semiannual Report, as applicable, has been provided pursuant to this Disclosure Agreement, stating the date it was provided to EMMA. (e) Notwithstanding any other provision of this Disclosure Agreement, any of the required filings hereunder shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. Section 4. Content of Annual Report and Semiannual Report. (a) The Developer's Annual Report and Semiannual Report shall contain or include by reference the information which is available as of the date of the filing of the Annual Report or the Semiannual Report, as applicable, relating to the following: 1. A discussion of the sources of funds to finance development of property owned by the Developer or any Affiliate of the Developer within the District, and whether any material defaults exist under any loan arrangement related to such financing. 2. A summary of development activity conducted by the Developer or any Affiliate within the District, including the number of parcels for which building permits have been issued, and as to property owned by the Developer or any Affiliate of the Developer, the number of parcels for which sales to homebuyers have closed, all since the most recent Annual Report or Semiannual Report. 3. Any sale by the Developer or any Affiliate of the Developer of property in the District to another Person, other than to buyers of completed homes, including a description of the property sold (acreage, number of lots, etc.) and the identity of the Person that so purchased the property, all since the most recent Annual Report or Semiannual Report. 4. Status of completion of the development being undertaken by the Developer or any Affiliate of the Developer with respect to the Undeveloped Property, and any major legislative, administrative and judicial challenges known to the Developer to or affecting the construction of the development or the time for construction of any public or private improvements to be made by the Developer or any Affiliate of the Developer within the District (the "Developer Improvements"). 5. Information regarding any failure by the Developer or any of its Affiliates to pay any real property taxes (including Special Taxes) levied on a parcel of property in the District which is owned by the Developer or any of its Affiliates. F-4 6. For the Annual Reports only, any audited financial statements of the Developer, if such audited financial statements are prepared for the Developer in the ordinary course of business. The Annual Reports shall contain the following statement: "The Financial Statements of Roripaugh Valley Restoration, LLC included with, or referred to in, this Annual Report are for informational purposes only. In the event of a failure to pay an installment of Special Taxes, and after depletion of the Reserve Fund, the real property in the District is the sole security for the Bonds." [7. At the time of execution of this Disclosure Agreement, the Developer does not prepare audited financial statements. However, if in the future the Developer has audited financial statements prepared and the audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements for the preceding year (if available), and the audited financial statements shall be filed in a timely manner in the same manner as the Annual Report when they become available.] (b) In addition to any of the information expressly required to be provided under paragraph (a) above, the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (c) Any and all of the items listed above may be included by specific reference to other documents, including official statements of debt issues which have been submitted to EMMA 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 Developer shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Developer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material under clauses (b) and (c) in a timely manner within 10 Business Days after the occurrence of any of the following events: 1. Failure to pay any real property taxes, special taxes or assessments levied within the District on a parcel owned by the Developer or any Affiliate of the Developer. 2. Damage to or destruction of any of the Developer Improvements which has a material adverse effect on the value of the parcels owned by the Developer or any Affiliate of the Developer within the District. 3. Material default by the Developer or any Affiliate of the Developer on any loan with respect to the construction or permanent financing of the Developer Improvements. 4. Material default by the Developer or any Affiliate of the Developer on any loan secured by property within the District owned by the Developer or any Affiliate of the Developer. F-5 5. Material payment default by the Developer on any loan of the Developer (whether or not such loan is secured by property within the District) which is beyond any applicable cure period in such loan. 6. The filing of any proceedings with respect to the Developer, in which the Developer may be adjudicated as bankrupt or discharged from any or all of their respective debts or obligations or granted an extension of time to pay debts or a reorganization or readjustment of debts. 7. The filing of any proceedings with respect to an Affiliate of the Developer, in which such Affiliate of the Developer may be adjudicated as bankrupt or discharged from any or all of its respective debts or obligations or granted an extension of time to pay debts or a reorganization or readjustment of debts if such adjudication could materially adversely affect the completion of the Developer Improvements or the development of parcels owned by the Developer or its Affiliates within the District (including the payment of special taxes of the District). 8. The filing of any lawsuit against the Developer or any of its Affiliates with service of process on the Developer or its Affiliates having occurred) which, in the reasonable judgment of the Developer, will materially adversely affect the completion of the Developer Improvements or the development of parcels owned by the Developer or its Affiliates within the District, or litigation which if decided against the Developer, or any of its Affiliates, in the reasonable judgment of the Developer, would materially adversely affect the financial condition of the Developer or its Affiliates in a manner that would materially adversely affect the completion of the Developer Improvements or the development of parcels owned by the Developer or its Affiliates within the District. 9. A sale or transfer of all or substantially all of the Developer's assets or a sale of a majority of the partnership interests, membership interests or outstanding stock of the Developer. (b) If a Significant Event occurs under Section 5(a), subsection (2), (3), (4), (5), (7) or (8), the Developer shall as soon as possible determine if such event would be material under applicable federal securities laws. The Dissemination Agent shall have no responsibility to determine the materiality of any of the Significant Events. (c) If an event described in Section 5(a), subsection (1), (6) or (9) occurs, or if the Developer determines that knowledge of the occurrence of an event described in Section 5(a), subsection (2), (3), (4), (5), (7) or (8) would be material under applicable federal securities laws, the Developer shall file in a timely manner within 10 Business Days after the occurrence of the respective event a notice of such occurrence with EMMA or with the Dissemination Agent which shall then distribute such notice to EMMA in a timely manner within 10 Business Days after the occurrence of the respective event, with a copy to the Authority. The Developer shall give notice of the occurrence of any event described in Section 5(a) in any event in a timely fashion by filing a notice thereof with EMMA or with the Dissemination Agent which shall then distribute such notice to EMMA in a timely manner, with a copy to the Authority. Section 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB. F-6 Section 7. Termination of Reporting Obligation. The Developer's obligations under this Disclosure Agreement shall terminate upon the following events: (a) the legal defeasance, prior redemption or payment in full of all of the Bonds, (b) if on any date the Developer and its Affiliates in the aggregate own less than twenty percent (20%) of the property within the District, or (c) upon the delivery by the Developer to the Authority of an opinion of nationally recognized bond counsel to the effect that the information required by this Disclosure Agreement is no longer required. Such opinion shall be based on information publicly provided by the Securities and Exchange Commission or a private letter ruling obtained by the Developer or a private letter ruling obtained by a similar entity to the Developer. If such termination occurs prior to the final maturity of the Bonds, the Developer shall give notice of such termination in the same manner as for an Annual Report hereunder. Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Albert A. Webb Associates. If the Dissemination Agent is not the Developer, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Developer pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the Developer. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the Developer shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the Developer. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the Developer for its services provided hereunder as agreed to between the Dissemination Agent and the Developer from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Developer, the owners of the Bonds, the Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any written direction from the Developer or a written opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the Developer, with a copy to the Authority. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3 and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the Developer to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the F-7 Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the Developer under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Developer may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5, 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 Bonds, or the type of business conducted; (b) The amendment or waiver either (i) is approved by the Bondowners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bondowners, or (ii) does not, in the opinion of nationally recognized bond counsel addressed to the Authority and the Fiscal Agent, materially impair the interests of the Bondowners or Beneficial Owners of the Bonds; and (c) The Developer, or the Dissemination Agent, shall have delivered copies of the amendment and any opinions delivered under (b) and (c) above. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Developer shall describe such amendment in the next Annual Report or Semiannual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Developer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given to EMMA, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison of financial data described in clause (ii) of the preceding sentence shall be provided at the time financial statements, if any, are filed under Section 4(a)(7) hereof. Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report, Semiannual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Developer chooses to include any information in any Annual Report, Semiannual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Developer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Semiannual Report or notice of occurrence of a Listed Event. The Developer acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Developer, and that under some circumstances compliance with this Disclosure Agreement, without additional disclosures or other action, may not fully discharge all duties and obligations of the Developer under such laws. F-8 Section 11. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Agreement, the Participating Underwriter or any Bondowner or Beneficial Owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or the Dissemination Agent 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 Developer to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Reporting Obligation of Developer's Transferees. The Developer shall, in connection with any sale or transfer of ownership of land within the District to a transferee that is not an Affiliate of the Developer which will result in the transferee (which term shall include any successors and assigns of the Developer) becoming responsible for the payment of more than twenty (20) percent of the Special Taxes levied on property within the District in the Fiscal Year following such transfer, cause such transferee to enter into a disclosure agreement with terms substantially similar to the terms of this Disclosure Agreement, whereby such transferee agrees to provide its audited financial statements, if any, and the information of the type described in Sections 4 and 5 of this Disclosure Agreement; provided that such transferee's obligations under such disclosure agreement shall terminate upon the sold or transferred land being improved with structures, or the land owned by the transferee becoming responsible for the payment of less than twenty (20) percent of the annual Special Taxes. Section 13. Developer as Independent Contractor. In performing under this Disclosure Agreement, it is understood that the Developer is an independent contractor and not an agent of the Authority or the District. Section 14. Notices. Notices should be sent in writing to the following addresses. The following information may be conclusively relied upon until changed in writing. Developer and Disclosure Representative: Dissemination Agent: Fiscal Agent: Participating Underwriter: Roripaugh Valley Restoration c/o Sabal Financial Group, L.P. 4675 MacArthur Court, 15th Floor Newport Beach, CA 92660 Attention: Kenneth J. Kraemer, Principal and Manager Albert A. Webb Associates 3788 McCray Street Riverside, CA 92506-3927 Attention: Heidi Schoeppe, Senior Finance Manager U.S. Bank National Association 633 West Fifth Street, 24th Floor LM-CA-T24T Los Angeles, CA 90071 Attention: Corporate Trust Services Reference: Temecula CFD 16-01 (Roripaugh Ranch Phase 2) Stifel, Nicolaus & Company, Inc. One Montgomery Street, 35th Floor San Francisco, CA 94104 Attention: F-9 Authority or District: Temecula Public Financing Authority c/ o City of Temecula 41000 Main Street Temecula, CA 92589-9033 Attention: Finance Director Section 15. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Developer, the Authority, the Dissemination Agent, the Fiscal Agent, the Participating Underwriter and Bondowners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 16. Assignability. The Developer shall not assign this Disclosure Agreement or any right or obligation hereunder except to the extent permitted to do so under the provisions of Section 12 hereof. The Dissemination Agent may, with prior written notice to the Developer and the Authority, assign this Disclosure Agreement and the Dissemination Agent's rights and obligations hereunder to a successor Dissemination Agent. Section 17. 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 18. Governing Law. The validity, interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in California. Section 19. 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. RORIPAUGH VALLEY RESTORATION, LLC, a Delaware limited liability company By: Name: Title: ALBERT A. WEBB ASSOCIATES, as Dissemination Agent By: Its: F-10 APPENDIX G DTC AND THE BOOK -ENTRY ONLY SYSTEM The information in this Appendix F has been provided by The Depository Trust Company ("DTC"), New York, NY, for use in securities offering documents, and the Authority does not take responsibility for the accuracy or completeness thereof. The Authority cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute the Beneficial Owners either (a) payments of interest, principal or premium, if any, with respect to the 2017 Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the 2017 Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants mill act in the manner described in this Official Statement. The following description of DTC, the procedures and record keeping with respect to beneficial ownership interests in the 2017 Bonds, payment of principal, interest and other payments on the 2017 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2017 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC 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. Neither the Authority as the issuer of the 2017 Bonds (the "Issuer") nor the fiscal agent or paying agent appointed with respect to the 2017 Bonds (the "Agent") take any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2017 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2017 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2017 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the 2017 Bonds (the "Securities"). The Securities 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 Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. 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 G-1 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"). On August 8, 2011, Standard & Poor's downgraded its rating of DTC from AAA to 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 and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("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 Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities 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. 5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. G-2 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). S. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or 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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or 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. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. The Issuer may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. G-3 APPENDIX H BUILDING PERMIT THRESHOLDS Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Building Permit Thresholds As of December 2016 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* Prior to the 1st Building Permit a. Initially, prior to issuance of the 1st building permit, complete flow -by detention basins relating to Planning Areas 3, 4A and 4B. Complete Complete b. Submit plans for structural protection from vegetation fires to the Fire Prevention Bureau. Complete (Murrieta Hot Springs Rd serves as fuel buffer) Complete PHASE I (Planning Areas 1-4B, 6 (Neighborhood Park) and 32 (Fire Station)) Prior to the 34th Building Permit a. Provide secondary access for each Planning Area to existing Murrieta Hot Springs Road. Complete Complete Prior to the 100th Building Permit a. Complete 0.3 acre mini -park site to the satisfaction of the Community Services Director, including permanent utilities. Complete Complete Prior to the 108th Building Permit: a. Obtain permission from adjacent affected property owners to allow for grading and any related driveway improvements necessary to continue to allow legal vehicular access on to Nicolas Road. 2 properties need to access Nicolas Road; driveway construction by developer is required. Estimated receipt of permission in the 2nd quarter of 2018. b. Pay $2,000,000 for design and construction of a fire station and complete construction of the fire station and acquire fire truck. City Manager must find that the permanent fire station is substantially under construction and permanent access to the fire station via Butterfield Stage Road, Murrieta Hot Springs Road and via Calle Chapos between the fire stations' eastern most driveway and Walcott lane will be completed concurrent with the opening of the fire station and all other requirements of the Development Agreement and Conditions of Approval of the Land Use Entitlements for the issuance of the building permits have been fulfilled Complete Complete c. Butterfield Stage Road - Construct half -width improvements from Murrieta Hot Springs Road to the south project boundary at Planning Area 32, including construction of two full -width bridges within and over Santa Gertrudis Creek and Long Valley Wash. Complete Complete H-1 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* d. Butterfield Stage Road - Dedicate full -width right -of- way from the northern project boundary to Murrieta Hot Springs Road. Complete Complete e. Butterfield Stage Road - full -width grading from northern project boundary to Murrieta Hot Springs Road. Complete Complete f. Murrieta Hot Springs Road - Construct full -width improvements from east of Pourroy Road at the northern project boundary to the MWD pipeline property. Complete Complete g. Murrieta Hot Springs Road - Construct half -width improvements from the MWD pipeline property to Butterfield Stage Road. Complete Complete h. Nicolas Road (R/ W Dedication) - Offer a dedication for a 110 foot right-of-way from Butterfield Stage Road to the west project boundary. Complete (per TM29353-2); acceptance of dedication upon completion of improvements. Complete i. Nicolas Road - Construct northerly half -width plus 10 feet from Butterfield Stage Road to the western project boundary. Rough grading completed; developer working on improvement plans; required prior to 1st building permit in Phase 2 Estimated completion in 2nd. quarter of 2018; developer -driven j. South Loop Road - Construct southerly half -width in front of fire station (Planning Area 32). Complete Complete k. Construct full width arch culverts for Santa Gertrudis Creek at Butterfield Stage Road and North Loop Road. Complete Complete 1. Construct full width arch culverts for Long Valley Wash at Butterfield Stage Road. Complete Complete m. Nicolas Road - Construct 40' improvements 450' east of existing Nicolas Rd/ Calle Girasol intersection to MWD ROW, including full -width bridge over Santa Gertrudis Creek. Roadway rough grading; substantially complete. EMWD underground utilities complete; developer driven design. Due to regulatory agencies involvement, developer may petition City for additional Building Permits (up to 522) pursuant to Exhibit D of 3rd DA Amendment Estimated completion in 3rd quarter of 2020 (18 months after design is complete) n. Complete secondary access for the Phase I area at one of: Complete H-2 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* (i) Nicolas/Calle Girasol intersection, Coordinating with Flood Control District and the resource agencies (which include Dept of Fish and Wildlife, Army Corp of Engineers and the California Regional Water Quality Control Board). Estimated completion in 3rd quarter of 2020 (18 months after design is complete) (ii) Calle Chapos, and Complete Complete (iii) Butterfield Stage Road to Rancho California Road. BSR from Murrieta Hot Springs Rd to south of La Serena — complete; plans for full -width improvements of BSR (from south of La Serena to Rancho California Rd) are approved; pending SCE coordination for pole relocation Estimated completion in 4th quarter of 2018 Prior to the 250th Building Permit: a. Complete park portion of the private recreation center in Planning Area 5 to the satisfaction of the Community Services Director. Complete Complete Prior to the 350th Building Permit: a. Complete the building and pool portion of the private recreation center in Planning Area 5 to the satisfaction of the Community Services Director. Complete Complete Prior to the 400th Building Permit: a. Complete 5.1 acre neighborhood park (Planning Area 6) including all permanent utilities and the 90 day maintenance period and grant deed accepted by the City. Park is 95% complete. Upon completion, City will accept the facility. Estimated completion in 1st quarter of 2017 b. "A" Street (Roripaugh Valley Road)- Construct full- width improvements from Murietta Hot Springs Road to Butterfield Stage Road. 90% complete; dry utility, sidewalk, final ac cap and striping improvements not complete. Estimated completion in 2nd quarter of 2018 c. "B" Street (Fiesta Ranch Road)- Construct full -width improvements from Nicolas Road to "A" Street (Roripaugh Valley Road). 90% complete; dry utility, sidewalk, final ac cap and striping improvements not complete. Estimated completion in 2nd quarter of 2018 d. North Loop Road - Construct a full -width bridge over and within Santa Gertrudis Creek and connect the bridge to Butterfield Stage Road with full width improvements Full -width bridge has been constructed and accepted by the City for maintenance. Street improvements will be completed with initial construction of Phase 2. Estimated completion in 2nd quarter of 2018 e. Construct the following traffic signals and related intersection improvements: Complete Complete 1. Traffic signal at the intersection of Pourroy Road and Murrieta Hot Springs Road. Complete Complete H-3 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* 2. Traffic signals may be required, as warranted, at the two other project entrances from Murrieta Hot Springs Road located to the east and west of the Pourroy Road main project entrance. The City will install if it determines it is appropriate. To be determined by City f. Complete nature walk and adjacent landscape areas (Lot 36), including all permanent utilities and the 90 day maintenance period and grant deed accepted by the City. Complete the trail in Planning Area 7A and the trail between Planning Areas 4B and 6. Nature walk 90% complete; Planning Area 7A trail 90% complete; trail between Planning Areas 4B and 6 not yet started; revised landscaping plans for the Phase I perimeter slopes are required by the City Planning Dept. Estimated completion in 1st quarter of 2017 PHASE 2 (Planning Areas 10,11,12,14 - 24, 27 - 31, 33A and 33B**) Prior to issuance of any building permit in Phase II, the following improvements must be completed: a. Complete acquisition of right of way for the off-site or County portions of Butterfield Stage Road. Complete Complete b. Construct Santa Gertrudis Creek Channel from the arch culvert/bridge crossing Butterfield Stage Road westerly to the confluence with the existing Santa Gertrudis Creek. Plans complete but undergoing modifications. Developer working on plans with input from Flood Control District and regulatory agencies to address changes to current plans. Due to regulatory agencies involvement, developer may petition City for additional Building Permits (up to 522) pursuant to Exhibit D of 3rd DA Amendment. Estimated completion in 4th quarter of 2019 c. Butterfield Stage Road - Construct remaining half- width improvements from Murrieta Hot Springs Road to the south project boundary at Planning Area 32, including construction of two full -width bridges within and over Santa Gertrudis Creek and Long Valley Wash. Complete Complete d. Murrieta Hot Springs Road - Construct remaining half -width improvements from the MWD pipeline property to Butterfield Stage Road. Complete Complete e. North Loop Road - Construct full -width improvement from the bridge structure at North Loop Road/Santa Gertrudis Creek crossing to the Long Valley Wash Bridge structure at South Loop Road. Mass grading partially complete; road will be public; plans are in final plan check but will be modified. Estimated completion in 2nd quarter of 2018 H-4 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* f. South Loop Road - Construct the full width bridge structure crossing Long Valley Wash and construct full width street improvements from the bridge to gatehouse (private road improvements). Mass grading partially complete; bridge structure completed; road will be public; plans are in final plan check but will be modified. Estimated completion in 2nd quarter of 2019 g. Nicolas Road - Construct remaining improvements from Butterfield Stage Road to western project boundary. See item (i) of 108th Building Permit threshold. h. Construct specified traffic signals and related intersection improvements at Butterfield Stage Road at (i) Murrieta Hot Springs Rd, (ii) Nicolas Rd and (iii) Calle Chapos. Traffic signal plans approved; traffic signal underground interconnect conduit installed As warranted (determined by City) and consistent with Exhibit D of 3rd Amendment to Development Agreement i. Butterfield Stage Road - Construct full width improvement from the southern project boundary at Planning Area 32 to Rancho California Road, excluding any existing improvements. Improvement plans approved; pending SCE coordination due to pole relocation Estimated completion in 4th quarter of 2018 j. Nicolas Road - Construct 40 foot improvement from 450 feet east of the existing Nicolas Road / Calle Girasol intersection to Liefer Road, including the full width bridge structure over Santa Gertrudis Creek. Portions of plans approved; channel and bridge design in process; EIR amendment in process. Developer -driven design Estimated completion in 3rd quarter of 2020; pending to developer's completion of design / improvement plans and acquisition of permits. k. Calle Girasol and the Nicolas Road/Calle Girasol intersection - relating to the ultimate intersection with Nicolas Road, including right-of-way acquisition. Offers of dedication in process; requires payment of acquisition costs; portions of road plans approved and other plan revisions in process; EIR amendment in process. Estimated completion 3rd quarter of 2020 (18 months after design is complete - developer driven). I. Calle Chapos - Construct 38 foot width on center improvements from Butterfield Stage Road to the existing paved terminus at Walcott Lane. Complete Complete m. Winchester Road at Nicolas Road traffic signal with the ultimate lane configurations. Plan approved with minor revisions underway. Intersection shall be operational pursuant to Exh D of 3rd Amendment to DA. Estimated completion in 1st quarter of 2018. n. Butterfield Stage Road at Rancho California Road traffic signal with the ultimate lane configurations. Traffic Signal plans approved; pending SCE coordination due to pole relocation Estimated completion in 4th quarter of 2018 H-5 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* o. Submit plans for structural protection from vegetation fires to the Fire Prevention Bureau. Proposed fuel modification plan is street layout included in a draft Tentative Map for Phase II Planning Areas; proposed plan is subject to review by Fire Prevention Bureau once submitted. p. Complete sewer in Nicolas Road in accordance with Eastern Municipal Water District requirements. Complete Complete q. Complete remaining public improvements and landscaping at major roadways per Exhibit D of 3rd Amendment to Development Agreement. Developer to prepare plans for public improvements. Varies depending on which Planning Area is adjacent to improvements. r. Complete permanent maintenance of parkway landscaping per Exhibit D of 3rd Amendment to Development Agreement. Developer to prepare landscape maintenance master plan. To be determined, but prior to 1st building permit. s. Perform a recreational use analysis to guide development of private recreation center (Planning Area 3) per Exhibit D of 3rd Amendment to Development Agreement. Developer to design development based on recreational use analysis. To be determined, but prior to 1st building permit. Prior to 300th building permit, the schedule for completion of construction of rec center shall be approved. t. Perform design development for a 15' wide multi -use trail intended to provide a trails affecting Planning Areas 19, 20 and 21 and crossing over Long Valley Wash per Exhibit D of 3rd Amendment to Development Agreement. Developer to complete the design development of the multi -use trail and submit for approval. To be determined, but prior to 1st building permit in each planning area. u. Complete design and construction of Park -n -Ride, Equestrian Facilities and trailhead facilities per Exhibit D of 3rd Amendment to Development Agreement. Developer to design and construction of Park -n -Ride, Equestrian Facilities and trailhead facilities, etc. To be determined, but prior to 1st building permit. Prior to the 75th Building Permit (in PA 22, 23 and 24): a. Complete pedestrian bridge over Long Valley Wash. Developer designing pedestrian bridge Developer driven. Estimated completion in 1st quarter of 2019. Prior to the 700th Building Permit: a. Complete the 19.7 acre sports park site (Planning Area 27), satisfy the 90 day maintenance period and grant deed accepted by the City. Note: Revised permit threshold (per 3rd Amendment to Development Agreement) to prior to 1,200th building permit in Phases 1 and 2. Graded to 100% of mass graded condition; park plans submitted; conceptual design approved by TCSD Estimated completion in 3rd quarter of 2020 H-6 Building Permit Threshold/ Requirement Status Developer's Estimated Date of Completion* b. Complete the riverwalk multi -use trails on both sides of Long Valley Wash. Final revisions by City Planning Dept Estimated completion in 3rd quarter of 2019 Prior to the 800th Building Permit: (Revised) a. Complete park portion of the private recreation center in Planning Area 30 and satisfy the 90 day maintenance period and grant deed acceptable to the City. Note: Revised permit threshold (per 3rd Amendment to Development Agreement) to Recreational Use Analysis required prior to 1st building permit in Phase 2. Plans in review by City Planning Dept. See item (s) of 1st building permit threshold in Phase 2 Estimated completion in 2nd quarter of 2020 Prior to the 1,150th Building Permit: (Revised) a. Complete the building and pool portion of the private recreation centers in Planning Areas 27 and 30. Note: Revised permit threshold (per 3rd Amendment to Development Agreement) to: Recreational Use Analysis required prior to 1st building permit and Approved schedule prior to 300th building permit in Phase 2 for Planning Area 30 and construction prior to 1,200th building permit for Planning Area 27. Plans in review by City Planning Dept For PA 30, see item (s) of 1st building permit threshold in Phase 2. For PA 27, see item (a) of 700th Building Permit threshold. Estimated completion in 2nd quarter of 2020 Notes * As provided by Roripaugh Valley Restoration, LLC (RVR). The City has reviewed RVR's schedule and noted that the schedule assumes minimal completion delays and weather delays. The City has indicated a completion range from December 2016 to September 2020. The Absorption Study and Appraisal assume completion of improvements to allow issuance of building permits for Phase 1 by April of 2017 and for Phase 2 by March of 2019. ** A Specific Plan amendment was approved by the City Council in January 2005 increasing the permit threshold from prior to the 510th building permit to prior to the 516th building permit. Also, in April 2016, the 3rd Amendment to the Development Agreement was executed modifying permit thresholds for certain infrastructure obligations. H-7 APPENDIX I APPRAISAL REPORT I-1 APPRAISAL REPORT COVERING Temecula Public Financing Authority Community Facilities district No. 16-01 (Roripaugh Ranch Phase 2) DATE OF VALUE: SUBMITTED TO: December 1, 2016 Temecula Public Financing Authority 41000 Main St. Temecula, CA 92590 Attn: Aaron Adams Executive Director DATE OF REPORT: SUBMITTED BY: December 15, 2016 Stephen G. White, MAI 1370 N. Brea Blvd., Suite 255 Fullerton, CA 92835 Stephen G. White, MAI .11d11111k Appraisal Institute December 15, 2016 Real Estate Appraiser 1370 N. BREA BLVD., SUITE 255 • FULLERTON, CALIFORNIA 92835-4173 (714) 738-1595 • FAX (7141 738-4371 Temecula Public Financing Authority 41000 Main St. Temecula, CA 92590 Attn: Aaron Adams Executive Director Dear Mr. Adams: Re: Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) In accordance with your request and authorization, I have completed an appraisal of the pertinent taxable properties within the above -referenced Community Facilities District (CFD). The taxable properties consist of vacant land within the "Pan" area of Roripaugh Ranch that is currently planned for a total of 1,226 single-family residential lots within 15 Planning Areas and a 10.7 -acre (usable) commercial site. The residential lots within the Planning Areas will include minimum sizes of 3,000 s.f., 3,150 s.f., 4,000 s.f., 5,000 s.f., 6,000 s.f., 10,000 s.f. and 20,000 s.f. The land for 12 of the Planning Areas is owned by Roripaugh Valley Restoration, LLC ("RVR") and the land for the other three planning areas and the commercial site is owned by Wingsweep Corporation ("Wingsweep"). The purpose of this appraisal is to estimate the separate market values of the as is condition of the land by each ownership. This reflects the status of the land being entitled for the planned development and in rough graded condition, but still needing final mapping, completion of grading and construction of backbone or major infrastructure as well as in - tract streets and utilities. In addition, the appraised values reflect the proposed CFD bond financing, as well as the projected effective tax rates at a maximum of 1.8% based on the estimated home pricing and including special taxes for this CFD and other overlapping debt. Based on the inspections of the properties and analysis of matters pertinent to value, the following conclusions of market value for each ownership have been arrived at, subject to the Assumptions and Limiting Conditions, and as of December 1, 2016: Roripaugh Valley Restoration, LLC: $35,835,000 Wingsweep Corporation: $10,900,000 $46,735,000 (FORTY-SIX MILLION SEVEN HUNDRED THIRTY-FIVE THOUSAND DOLLARS) MR. AARON ADAMS DECEMBER 15, 2016 PAGE 2 The following is the balance of this 59 -page Appraisal Report which includes the Certification, Assumptions and Limiting Conditions, definitions, property data, exhibits, valuation and market data from which the value conclusions were derived. Sincerely, Stephen G. White, MAI (State Certified General Real Estate Appraiser No. AG013311) SGW:sw Ref: 16008 TABLE OF CONTENTS PAGES Certification, Assumptions and Limiting Conditions, Purpose and Intended Use/User of the Appraisal, Scope of the Appraisal, Date of Value, Property Rights Appraised, Definitions, Exposure Time 5-9 GENERAL PROPERTY DATA Location Map, Location, General Area Description, Map of Roripaugh Ranch, Description of Roripaugh Ranch, Aerial Photo, Residential Market Overview, Highest & Best Use 10-21 RORIPAUGH VALLEY RESTORATION, LLC OWNERSHIP 22-42 WINGSWEEP CORPORATION OWNERSHIP ... 43-55 ADDENDA Estimated Absorption Schedules (Empire Economics) 56 Qualifications of Appraiser 57-59 CERTIFICATION I certify that, to the best of my knowledge and belief: • The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. • I have no present or prospective interest in the properties that are the subject of this report, and no personal interest with respect to the parties involved. • I have no bias with respect to the properties that are the subject of this report or to the parties involved with this assignment. • My engagement in this assignment was not contingent upon developing or reporting predetermined results. • My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal. • I have made a general inspection of the properties that are the subject of this report. • No one provided significant real property appraisal assistance to the person signing this Certification, other than data research by my associate, Kirsten Patterson. • I have performed an appraisal of the subject properties within the three-year period prior to accepting this assignment. • The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. As of the date of this report, I have completed the requirements of the continuing education program of the Appraisal Institute. Stephen G. White, MAI (State Certified General Real Estate Appraiser No. AG013311) 5 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal has been based upon the following assumptions and limiting conditions: 1. No responsibility is assumed for the legal descriptions provided or for matters pertaining to legal or title considerations. Title to the properties is assumed to be good and marketable unless otherwise stated. 2. The properties are appraised free and clear of any or all liens or encumbrances unless otherwise stated. 3. Responsible ownership and competent property management are assumed. 4. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. 5. All engineering studies, if applicable, are assumed to be correct. Any plot plans or other illustrative material in this report are included only to help the reader visualize the property. 6. It is assumed that there are no hidden or unapparent conditions of the properties, subsoil, or structures that render them more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. 7. It is assumed that the properties are in full compliance with all applicable federal, state and local environmental regulations and laws unless the lack of compliance is stated, described and considered in the appraisal report. 8. It is assumed that the properties conform to all applicable zoning and use regulations and restrictions unless a nonconformity has been identified, described and considered in the appraisal report. 9. It is assumed that all required licenses, certificates of occupancy, consents and other legislative or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in the report are based. 10. It is assumed that the use of the land and improvements is confined within the boundaries or property lines of the properties described and that there are no encroachments or trespasses unless noted in the report. 11. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the properties, was not observed by the appraiser. However, the appraiser is not qualified to detect such substances. The presence of such substances may affect the value of the property, but the values estimated in this 6 ASSUMPTIONS AND LIMITING CONDITIONS, Continuing appraisal are based on the assumption that there is no such material on or in the properties that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. The client should retain an expert in this field, if desired. 12. Possession of this report, or a copy thereof, does not carry with it the right of publication, unless otherwise authorized. It is understood and agreed that this report will be utilized in the Official Statement, as required for the CFD bond issuance. 13. The appraiser, by reason of this appraisal, is not required to give further consultation or testimony or to be in attendance in court with reference to the properties in question unless arrangements have previously been made. EXTRAORDINARY ASSUMPTIONS 1. Estimates of the remaining land development costs and impact fees to get the subject land from as is condition to "finished lot" condition have been obtained from the property owners; these costs are integral to the analysis of the value of the as is condition of the land, and have been relied upon in this appraisal as being reasonably accurate. 2. The Market Absorption Study dated December 2, 2016 by Empire Economics, Inc. has been relied upon and utilized in this appraisal. 3. The valuation has assumed that the CFD bond proceeds will be available to fund the public facilities and infrastructure that is required to support the residential and commercial development of the subject properties as planned. 4. The valuation has assumed that the current or future property owners will complete the approval/permit process for the Nicolas Rd. construction project as necessary, in order to allow adequate building permits to be issued in a timely manner as specified in the Development Agreement, so as to support the absorption projections by Empire Economics, Inc. 7 PURPOSE AND INTENDED USE/USER OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the as is condition of the pertinent taxable properties located within Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), reflecting the proposed CFD bond financing. It is intended that this Appraisal Report is to be used by the client and other appropriate parties as part of the CFD bond issuance. SCOPE OF THE APPRAISAL It is the intent of this appraisal that all appropriate data considered pertinent in the valuation of the subject properties be collected, confirmed and reported in an Appraisal Report, in conformance with the Uniform Standards of Professional Appraisal Practice and the guidelines of the California Debt and Investment Advisory Commission. This has included a general inspection of the subject properties and their surroundings; obtaining of pertinent property data on the subject properties, including review of various maps and documents relating to the properties and the planned development; obtaining of comparable residential and commercial land sales from a variety of sources; analysis of all of the data to the value conclusions; and completion of the appraisal report. DATE OF VALUE The date of value for this appraisal is December 1, 2016. PROPERTY RIGHTS APPRAISED This appraisal is of the fee simple interest in the subject properties, subject to the CFD special tax and assessment liens. DEFINITION OF MARKET VALUE The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress. (The Dictionary of Real Estate Appraisal, 6th Edition) DEFINITION OF FEE SIMPLE INTEREST The absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. (The Dictionary of Real Estate Appraisal, 6th Edition) 8 DEFINITION OF MASS APPRAISAL The process of valuing a universe of properties as of a given date using standard methodology, employing common data, and allowing for statistical testing. (The Dictionary of Real Estate Appraisal, 6th Edition) DEFINITION OF FINISHED LOT This term describes the condition of residential lots in a single-family subdivision for detached homes in which the lots are fully improved and ready for homes to be built. This reflects that the lots have all development entitlements, infrastructure improvements completed, finish grading completed, all in -tract utilities extended to the property line of each lot, street improvements completed, common area improvements/landscaping (associated with the tract) completed, resource agency permits (if necessary), and all development fees paid, exclusive of building permit fees, in accordance with the conditions of approval of the specific tract map. DEFINITION OF BLUE -TOPPED LOT This term describes residential lots in a single-family subdivision for detached homes in which the lots and streets have been rough graded, and the offsite infrastructure of streets and utilities are completed to the tract, but not within the tract. DEFINITION OF MASS GRADED SUPERPAD Also referred to as a sheet graded site or a superpad, it is a parcel of land for detached or attached residential development or commercial development which has been rough graded to a fairly flat condition, with the infrastructure of streets and utilities completed to and along the site. This is similar to a blue -top lot but it typically refers to a larger acreage parcel. DEFINITION OF EXTRAORDINARY ASSUMPTIONS An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property, or about conditions external to the property. (The Dictionary of Real Estate Appraisal, 6th Edition) EXPOSURE TIME This is defined as the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date or date of value of the appraisal. Assuming a reasonable marketing effort and at or reasonably near market value, I have concluded that the exposure time for the subject ownerships would have been within 6 months for a sale to be negotiated. 9 LOCATION MAP DoLams Street Alias USA@ 2015 DIrti L Ritsed lo kerma Ditaimo CS.ceiThA am* ATL$ LA v zoi r•Areekrrna Dom Stak. 1 41 251 1' • I 24 10 GENERAL PROPERTY DATA LOCATION The master -planned community of Roripaugh Ranch, outlined in red on the map on the previous page, is located along Murrieta Hot Springs Rd. westerly from Butterfield Stage Rd., and along Butterfield Stage Rd. southerly from Murrieta Hot Springs Rd., in the City of Temecula. The "Pan" area of Roripaugh Ranch comprises the easterly area of the community which is along and to the east of Butterfield Stage Rd., and the "Panhandle" area comprises the westerly five planning areas along the south side of Murrieta Hot Springs Rd. GENERAL AREA DESCRIPTION Roripaugh Ranch is located at the far north end of the current Temecula City Limits, with the east central part of the City of Murrieta being about a mile to the west and just beyond Winchester Rd., and unincorporated Riverside County area to the north, east and southeast. In addition, the French Valley Airport is located about a mile to the northwest, and the Lake Skinner Recreation Area is located within two miles to the northeast. It is noted that the area to the north and northeast is within the Sphere of Influence Boundary of Temecula, though the area to the north is generally referred to as French Valley and homes just to the north of Murrieta Hot Springs Rd. currently have a Murrieta address. In the area to the north of the "Panhandle" is the relatively new master -planned community of Rancho Bella Vista. This overall community comprises ±800 acres, and was planned for just over 1,800 dwelling units, with large open space/preserve areas at the southwest and southeast portions of the community nearest Roripaugh Ranch. Construction of homes in Rancho Bella Vista began in the early 2000's with the tracts along Murrieta Hot Springs Rd. and up into the center of the community, with many homes and two schools completed by 2006. Development then stalled during the Great Recession until Lennar Homes acquired the remaining land in the central and northerly portions of the community in 2010. Three product types of homes were completed on 249 lots in the west central part of the community from February 2012 to April 2014. Then, grading in the northerly portion of the community began in late 2012, with construction of three product types of homes beginning in mid -2013 and nearing build -out in 2016. To the north and northeast of the "Pan" area is a large area of undeveloped land which is primarily habitat/open space/preserve. This area incorporates the southeast part of the Rancho Bella Vista community and also the 179 -acre portion of Roripaugh Ranch at the north end of the "Pan" area. To the east, southeast and south of the "Pan" area is a semi -rural residential area, also within unincorporated County area, and mostly subdivided into lots of ±2 to 20 acres in size. Some of the lots are improved with custom homes and many of the lots are still vacant. In addition, the Long Valley Creek flows southeasterly through this area. 11 GENERAL AREA DESCRIPTION, Continuing To the southwest and west of the "Pan" area, extending north to just south of the "Panhandle" area is more of the low density, semi -rural residential area that is within the City of Temecula. This area also consists of custom homes on large lots, and much undeveloped land, and also includes the Santa Gertrudis Creek flowing southwesterly through the area. To the west of the "Panhandle" area is a relatively newer 79 -lot neighborhood of homes called Valdemosa that were built by KB Home in the mid -2000's. Farther to the west are various neighborhoods of homes that were built in the late 1990's and early 2000's. The nearest commercial and shopping facilities to Roripaugh Ranch are currently located at the intersection of Murrieta Hot Springs Rd. and Winchester Rd. and along Winchester Rd. Winchester Square is a neighborhood retail center at the southeast corner of the intersection that includes Albertsons/Sav-On, Bank of America, McDonalds, a gas station and many other stores and fast food restaurants. The Plaza at Silverhawk is a neighborhood retail center at the northeast corner of the intersection that includes Vons, Walgreens, Wells Fargo Bank, a gas station and many other stores and fast food restaurants. In summary, the community of Roripaugh Ranch is located in a relatively newer and still developing area at the north end of Temecula, near Murrieta and the French Valley area, and adjacent to much semi -rural low density residential and open space areas. 12 mon' 919:444 FIGURE 2-1 \ on i 13 Com malts 14#41WM a47UF- i111114 JTY A141-3 LISIN 6EMCer PlElallfwtI'L, I, 10.11 1 A 117 44rP lidlIMMei tr'., 1111li 1,% LN 114 0 4,1 074 N EID. Dewy FiEs 1Zgr+r wi} Fal 111 5,P ad M 0617411me0171 dCAan*1'4 1 W• Kg Sid 437 OE10118171 C kOAEFIC Lot 15 4 Ia A'10ca PAA41C XP ¢ 1 '17enwok 3P '37 1P!RIw.4Tt kW PAM NM j FNMA TE iQ042r-A 17 #J Cr 7.171E11 FAL: 92 Euccie oma., isoixii al. 62 3173 faufl_C NMTlrur PCoLod. Irr. tail2,0 sot ht. P aaDQCer0RXOat 5F A Lrl `gyp! C Ft OW al 2 KWIC 15TP+3 MI P'amAlE MAE19 0h dukkinD litrroa 15. 045 Oti Ca nt} B[,rtsrr • �� • . _ 111499r91 WWI I NAP .3301/4 6 rj 7 11 a. U �I iaf� PAar9 •A415'+ 1Y191191*ICic dWPlorr0Mos iRZDyid 21allow idIPrtp+s IxoNdrp Pm -moms= 11.74.7 13A aide 74 +44 Iw'4 1 14p ti#4410E>4+1a BIP snowily blidrOdrii v d Ng OM 1 =Tr tisk DESCRIPTION OF RORIPAUGH RANCH Overview Roripaugh Ranch is a master planned community that originally comprised about 805 acres and was planned to be developed with up to 1,743 single-family detached homes and a neighborhood retail center on a 10.7 -acre (usable) commercial -retail site. In addition, there were to be two private recreation centers, a neighborhood park, a sports park, an elementary school, a middle school, a fire station, and 263 acres of open space. The open space includes 21 acres of landscaped slope along the west and south edges of the "Panhandle" area; 203 acres of habitat area comprising the north part of the "Pan" area and the northeast part of the "Panhandle" area; 39 acres within Long Valley Channel; and a small area within Santa Gertrudis Creek. Phase 1 or the "Panhandle" area of Roripaugh Ranch consists of a total of 509 single-family lots that are ±5,000 s.f. minimum size and were segregated into five separate Planning Areas. Construction of homes by multiple builders commenced in 2013 and there are still three active projects. The five different product types of homes range in size from about 2,100 s.f. to 4,200 s.f., with current pricing ranging from the low $400,000's to the low $500,000's. A summary of these projects is as follows: Plan. Area No. Lots Builder 1A & 2 197 3 99 4A 100 4B 113 KB Home CalAtlantic Homes CalAtlantic Homes Van Daele Homes Product Name Pinnacle/Pinnacle II Montego Cambridge Verona & Sorrento Current Status of Construction Active; ±70% built -out Active; ±75% built -out Active; ±75% built -out Built -out This overall area is gated at various entrances from Murrieta Hot Springs Rd. In the center area is a 4.7 -acre recreation center with clubhouse including full kitchen and fitness facility, large swimming pool, spa, tennis courts, basketball courts, children's play area, walking trails and large open grass areas. There will also be a 5 -acre public neighborhood park on the south side of Murrieta Hot Springs Rd. at the east end of the "Panhandle" area. Construction is currently underway to complete the park improvements which had been partially completed about 9 or 10 years ago. Phase 2 or the "Pan" area of Roripaugh Ranch is planned to comprise a total of 1,225 single-family lots allocated into 15 Planning Areas, plus a 10.7 -acre (usable) commercial site. The land had been rough or mass graded about 9 to 10 years ago, and is still currently vacant with much backbone infrastructure of streets, utilities and drainage facilities yet to be constructed. The currently planned residential product ranges from 2,000 s.f. (average) homes on 3,000 s.f. minimum lots to 4,250 s.f. (average) homes on 20,000 s.f. minimum lots. In between there will be varying product types of homes on 3,150 s.f., 4,000 s.f., 5,000 s.f., 6,000 s.f. and 10,000 s.f. minimum lots. 14 15 DESCRIPTION OF RORIPAUGH RANCH, Continuing The 20 -acre sports park site is at the southeast corner of Butterfield Stage Rd. and North Loop Rd. East of that is the 20 -acre middle school site, then the 12 -acre elementary school site, and then the 4 -acre recreation center site. The fire station has been constructed at the southeast corner of Butterfield Stage Rd. and South Loop Rd. The Long Valley Channel is an open flood control channel that runs east -west between North Loop Rd. and South Loop Rd. and beyond to the east, and the Santa Gertrudis Creek runs southerly from the habitat area at the north to the center of the "Pan" area at the west side, and then westerly. Streets and Access The primary access to Roripaugh Ranch is by Murrieta Hot Springs Rd. and Butterfield Stage Rd., with future secondary access to be by Nicolas Rd. Murrieta Hot Springs Rd. extends to this area from the west, along the north side of the "Panhandle" area and terminating at Butterfield Stage Rd. It is designated as a major arterial in this area, and has been constructed as a four -lane divided street with raised/landscaped center median and left turn lanes. Along both sides are wide landscaped parkways with sidewalks. Butterfield Stage Rd. currently extends only to the south from Murrieta Hot Springs Rd., but is planned for future extension to the north. It is also designated as a major arterial, and has been constructed as a four -lane divided street with raised median and left turn lanes. The westerly side includes sidewalk but no landscaped parkways and the easterly side is not yet improved with sidewalks or landscaped parkways. Nicolas Rd. is planned to be extended from its current terminus at Calle Girasol to Butterfield Stage Rd., opposite future North Loop Road. The existing portion of Nicolas Rd. from Calle Girasol westerly to Winchester Rd. is designated as a major arterial, and the future easterly extension is designated as a limited secondary arterial (two lanes divided). The extension is currently an unimproved dirt roadway. In addition, Roripaugh Valley Rd. has been constructed south from Murrieta Hot Springs Rd. and curving easterly to Butterfield Stage Rd. around Planning Area 11, and Fiesta Ranch Rd. has been constructed south from Roripaugh Valley Rd. to its future intersection with the extension of Nicolas Rd. However, both of these streets are not yet open to the public. Lastly, there will be a loop road that will extend east from Butterfield Stage Rd. and through the southeasterly part of the "Pan" area. North Loop Road will be opposite of Nicolas Rd. and South Loop Road will be opposite of Calle Chapos. This loop road will provide access to all of the residential planning areas in the "Pan" area, as well as to the park site, the school sites and the recreation center site. This loop road 16 DESCRIPTION OF RORIPAUGH RANCH, Continuing was cut in and rough graded 9 to 10 years ago but only the short segment of South Loop Rd. along the frontage of the fire station has been constructed. Utilities All utilities are available to the community, and have been or will be installed in the major streets and in -tract streets as part of the land development and construction of the infrastructure. The utilities are provided as follows: Water: Eastern Municipal Water District Sewer: Eastern Municipal Water District Electric: Southern California Edison Company Gas: Southern California Gas Company Zoning/General Plan/Approvals The overall community of Roripaugh Ranch has specific plan approval by SP -11. For the subject land, the zoning and general plan designations are per the Land Use designations on the Specific Plan, and include Low Density Residential (L), Low Medium Density Residential (LM), Medium Density Residential (M1 & M2), and Neighborhood Commercial (NC). These designations within the Specific Plan also permit a maximum number of dwelling units on each of the Planning Areas. The more specific approvals for the "Pan" area are by the two recorded "A" tract maps. Tract No. 29353-2 recorded in September 2003 and covers Planning Areas 10, 12, 14, 15 and 33, and Tract No. 29353 recorded in May 2006 and covers Planning Areas 16, 17, 18, 19, 20, 21, 22, 23, 24 and 31. Tentative Tract Maps ("B" Maps) had been prepared on most of the Planning Areas, some of which were submitted to the City a number of years ago for approval, though most have expired or are no longer active. These are discussed later in greater detail under the two separate ownerships. Thus, the Planning Areas in the "Pan" area have entitlements by the Specific Plan as well as the Development Agreement. However, prior to development, further approvals that will be required include Tentative Tract Maps, Final Tract Maps, a Home Product Review for single-family residential projects and a Development Plan for commercial projects. Drainage/Flood Hazard Drainage is and will be within master -planned facilities throughout the community, and within each of the individual planning areas. The "Pan" area generally slopes and terraces down from the north and south ends to the Long Valley Channel in the center area, and with a gradual slope down from the east to west. Drainage is ultimately into Long Valley Channel and Santa Gertrudis Creek. 17 DESCRIPTION OF RORIPAUGH RANCH, Continuing Per FEMA Flood Insurance Rate Map Nos. 060742 - 06065C2740G and 060245 - 06065C2740G dated 8/28/08, all of the "Pan" area is located in Zone X, which is outside of the 100 -year floodplain and out of the Special Flood Hazard Area. Furthermore, all of the developable area is above the Santa Gertrudis Creek and Long Valley channels, and improvements to these channels as well as construction of various detention basins throughout the community will handle the projected storm flows. Soil/Geologic Conditions This appraisal has assumed that all necessary grading and compacting has been properly completed thus far; that there are no abnormal soil or geologic conditions that would affect the development of the land as planned; and that all necessary costs to complete the grading and any required mitigation have been spent or are properly reflected in the remaining land development costs as discussed later. It is also noted that prior tentative tract maps for portions of the "Pan" area indicate that special hazard areas (earthquake, subsidence and liquefaction) do not exist on the subject properties. Environmental Conditions It has been assumed that all necessary environmental permits and approvals have been obtained for development of the land as planned; that all costs to complete any necessary mitigation have been spent or are properly reflected in the remaining land development costs, as discussed later; and that there are no other environmental conditions, including endangered species or significant habitat, watercourses or wetlands that would have a negative effect on the planned development. Timing of Development Release of building permits by the City for the "Pan" area is contingent upon various items, including funding of the CFD and completion of certain infrastructure. A significant part of the infrastructure is construction of Nicolas Rd., of which the approximate $8 million cost is to be funded by the CFD bond proceeds, but the subject property owners are responsible to pursue approved plans and permitting for this road. As discussed in the Market Absorption Study by Empire Economics, assuming that the infrastructure requirements are met, it is projected that escrow closings to homeowners could commence in July 2019. This reflects a prior period of 20 to 22 months for grading and construction of infrastructure to be completed, with building permits issued by November 2018, and the first potential move -ins about 6 to 8 months later, or by July 2019. This is indicated in the Market Absorption Study with the first closed sales of completed homes being in the July -December 2019 period. 18 DESCRIPTION OF RORIPAUGH RANCH, Continuing Regarding the commercial site, the Market Absorption Study indicates that its absorption is based upon the occupancy of most of the homes in the "Pan" area along with threshold levels required to support commercial centers. Thus, its absorption (occupancy of completed building space) is expected to occur during 2023. It is again noted that the estimated absorption in the Market Absorption Study is based on the assumption that the property owners will complete the necessary infrastructure items in a timely manner so as to be able to pull the building permits as needed and as permitted by the Development Agreement with the City. Current Condition of Land All of the developable land is vacant, and had been rough or mass graded about 9 to 10 years ago. In addition, some of the backbone infrastructure was completed, including installation of portions of the storm drain, wet utilities and dry utility conduit. However, the land is currently overgrown with native vegetation and will require clearing/grubbing and remedial grading, as well as completion of all backbone and in -tract infrastructure. RESIDENTIAL MARKET OVERVIEW Home prices across Southern California continue to rise, with a year over year increase of 7.0% in October 2016, as competition over limited inventory drives up prices. According to CoreLogic, the median price in the six -county region was $465,000 in October, up from $449,000 in March. The number of home sales, however, increased by only .3% from a year earlier reflecting tight inventory and competition among homebuyers for a smaller supply of homes. Employment gains have increased at a faster pace than housing supply in the past few years, but affordability and loan qualifying still remain as significant hurdles for new home buyers. It is hoped that increased conforming maximum loan limits set by the Federal Housing Finance Agency (up from $356,500 to $379,000 in the Inland Empire) will provide some relief. Home sales data provided by CoreLogic for October 2016 indicates that the gradual upward momentum experienced throughout the Southern California region is mirrored both in Riverside County and the City of Temecula. According to CoreLogic, there were a total of 3,274 home sales in October across the County, including both single family homes and condos, and reflecting new home sales as well as resales. The median price County -wide was $335,000, up from $310,000 the prior year which represents an 8.1% increase. In Temecula, there were a total of 175 sales, with a reported median price of $417,000 which was unchanged from the prior year. Resales (excluding new home sales) within the subject Roripaugh Ranch 19 RESIDENTIAL MARKET OVERVIEW, Continuing community zip code of 92591 in October 2016 indicated a median price of $410,000, up 1.9% from a year prior. The City of Temecula continues to see significant new home construction and sales, with currently active communities including three product types in Roripaugh Ranch by CalAtlantic and KB Home and The Groves by Fleming Communities. Three new communities celebrated grand openings in April including Renaissance at Redhawk by Beazer Homes and Toscana and Marbella at Terracina by CalAtlantic and Lennar Homes. In addition, Cornerstone Communities has recently begun home sales on their first product line, Calistoga, in the master -planned community called The Promontory nearby in Murrieta, with two additional product lines to come. Lastly, per the Market Absorption Study by Empire Economics, pertinent items are noted as follows: • Riverside County's economy has recovered from the Great Recession, and its housing market is in a recovery mode, although the rate of recovery is only moderate. • Employment in Riverside County recovered to hit a new peak in 2015, and it is expected to continue to grow during the foreseeable future. • The City of Temecula has one of the lowest unemployment rates of any city in Riverside County at 4.6%. • While mortgage rates have been at historically low rates of below 5%, rates are expected to increase somewhat in the near future. • Home price appreciation is expected to continue to be low -to -moderate in the near term. • Sales of new and existing homes have remained at relatively low levels since the Housing Bubble, but are expected to increase through 2020. • New building permits have increased only moderately in recent years, for both single-family and multi-family/apartments, but the recovery is expected to strengthen during the foreseeable future. • The Temecula -Murrieta Market Area is regarded as being a strong local economy within Riverside County, based upon its relatively low unemployment rate; additionally, the area benefits from households in San Diego County that seek more moderately priced single- family housing. Due to its strong economic base and the spillover of demand from the San Diego County Core, the Temecula -Murrieta housing market will strengthen its recovery as employment gains generate a stronger demand for new homes, thereby providing support for the residential projects in CFD No. 16-01. HIGHEST AND BEST USE The term highest and best use is defined as the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Furthermore, the highest and best use of land or a site as though vacant is defined as among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. 20 HIGHEST AND BEST USE, Continuing The planned development of the "Pan" area of Roripaugh Ranch, as discussed on previous and following pages, is physically possible with the completion of the grading and infrastructure; it is legally permissible based on the approved Specific Plan and Development Agreement; it is financially feasible as supported by the Market Absorption Study by Empire Economics, Inc., dated December 2, 2016; and the planned homes represent the maximum productivity. Based also on my investigation of recent residential and commercial land sales in the general Temecula and Murrieta areas, there would be good demand for available residential and commercial land in the subject community if it was in buildable condition. This is due to the limited supply of available and buildable land in desirable areas; due to the continuing demand for new homes in this area; and due to the desirability of the subject community by reason of its location and amenities. Thus, I have concluded that the planned development for the subject land is representative of the highest and best use. (Note: The conclusion of highest and best use reflects the assumption that the property owners will complete the necessary infrastructure in a timely manner such that building permits will be available for development to occur as previously discussed and as projected in the Market Absorption Study by Empire Economics, Inc.) 21 ProposedLandU n Ens WAIN • Az a L1iF LiAZ Roripaugh Valley Restoration, LLC '19 VI Ia11 MAI DUI, 23 loic• RIM Er NA t1 trail 4.9. 11 DM i?()? ?1 ,a IL:.1 i'(lI h 2b 11 ELM RORIPAUGH VALLEY RESTORATION, LLC OWNERSHIP PROPERTY DATA Location As indicated by the map on the previous page, this ownership comprises the southeasterly part of the "Pan" area, lying easterly of Butterfield Stage Rd. and around North Loop Rd. and South Loop Rd. Record Owner/Ownership History The current owner of record is Roripaugh Valley Restoration, LLC (later referred to as "RVR"). This entity acquired the property from Ashby USA, LLC by Warranty Deed recorded May 25, 2011. It is noted that this ownership was marketed for sale in May/June 2016, but a sale did not take place. (Note: The overall ownership comprises parcels that are not included in this appraisal, including the two school sites, plus sites for park, recreation center, roads, flood control and open space.) Legal Description The parcels that are included in this appraisal are legally described as follows: Lots 7 & 8 of Tract 29353-2, in the City of Temecula, County of Riverside, State of California, as per map recorded in Book 342 of Maps, Pages 73 through 85, inclusive, Records of said County. Lots 1, 2, 3, 4, 6, 7, 8, 9, 10 & 11 of Tract 29353, in the City of Temecula, County of Riverside, State of California, as per map recorded in Book 401 of Maps, Pages 89 through 96, inclusive, Records of said County. The above -referenced tract maps are the "A" maps, and as previously indicated there were Tentative Tract Maps or "B" maps that had originally been prepared on all but one of the Planning Areas by Ashby USA, LLC a number of years ago. The following table indicates by Planning Area the "A" map description, the Tentative Tract Map (TTM) description with the indicated number of lots at that time, and the current status of the TTM per the City Planning Department: Planning Area 14 & 15 16, 17 & 18 19 20&21 22 23 & 24 Map Lots 7 & 8/Tr. 29353-2 Lots 1, 2 & 4/Tr. 29353 Lot 3/Tr. 29353 Lots 10 & 11/Tr. 29353 Lot 7/Tr. 29353 Lots 8 & 9/Tr. 29353 23 No. TTM Lots TTM Status 32356 181 No application 29368 389 Submitted; file closed 29367 26 Submitted; file closed 29366 53 Submitted; file closed 32358 126 No application 30768 122 Submitted; active file SEC.15 16 21 CITY Of t� 22 T.7S.,R.2W r.R.A'mrlls TEIIECIw A 414-17 \, 11 , 1 964-18 Ase -is 14 I. _ kora ea ASSESSOR MAP y I i ' I • . 11 " .; V f y r4 $ Oa i11 YI a uYm.s y1M 1\ n R' i1 le an 0 ie . 1r gauAaeYn + `. may •r1..' I 6 e I Y... 120112. If r v�� 1 . ` '......,J a.f ]I •: 4 II': F,'+�', nJ+'dY : MIPS 12r w$ m, .r`A 11 a a .{MI 1m ,am r.141 +-_ .- J aY h+sw•- ....m RANCHO is - kp. - ;- 0.41011 NR 342/7345 TRACT NAP NC. 29353-2 _ate 7 ls:�ssi s e W C IA WI/85-96 TRACT IIP NO 29353 Y,Y* I I :aelM, WC kr 7001 '0 -1111:1 .. l',J:1:1=Eil PROPERTY DATA, Continuing Assessor Data -2016/17 The taxable parcels comprising this ownership are Assessor Parcel Nos. 964-180- 004, 005, 017, 018, 019, 020, 022, 023, 024, 025, 026 & 027. The assessed values total $10,664,448 for land and $0 for improvements. The tax rate area is 13-116 with an indicated tax rate of 1.04834%, but the total or effective tax rate to future homeowners, including special taxes for this CFD and other overlapping debt, is projected to be a maximum of 1.8% based on current estimated home pricing. No. of Lots/Lot Sizes/Planned Product The following table correlates the Planning Area with the Assessor Parcel No. and provides the total acreage; and also indicates the planned number of lots, the indicated density, the minimum lot size and the typical lot dimensions based upon information that was provided by the property owner and is also consistent with the data presented in the Market Absorption Study by Empire Economics, Inc.: Planning No. Min. Lot Typ. Lot Area APN Acres Lots Density Size (sf) Dimensions 14 964-180-004 13.59 77 5.7 3,150 50 x 63 15 964-180-005 14.09 104 7.4 3,150 45 x 70 16 964-180-017 26.42 121 4.6 5,000 50 x 100 17 964-180-018 41.08 147 3.6 6,000 60 x 100 18 964-180-020 30.58 121 4.0 6,000 60 x 100 19 964-180-019 29.98 26 .9 20,000 100 x 200 20 964-180-027 33.71 29 .9 20,000 100 x 200 21 964-180-026 23.61 24 1.0 20,000 100 x 200 22 964-180-023 20.99 126 6.0 3,150 50 x 63 23 964-180-024 10.02 51 5.1 3,150 50 x 63 24 964-180-025 12.28 71 5.8 4,000 40 x 100 31 964-180-022 25.19 164 6.5 3,150 45 x 70 1,061 Then, the expected home sizes and pricing for the six product types on the various lot sizes and Planning Areas are shown in the following table: Product Planning Min. Lot Type Area Size (sf) 1A 14,22,23 3,150 1B 15,31 3,150 2 24 4,000 3 16 5,000 4 17,18 6,000 5 19,20,21 20,000 Expected Home Sizes (sf) 1,980 to 2,420; 2,200 avg 1,800 to 2,200; 2,000 avg 2,340 to 2,800; 2,600 avg 2,700 to 3,300; 3,000 avg 2,880 to 3,520; 3,200 avg 3,750 to 4,750; 4,250 avg 25 Expected Home Pricing $366,300 to $423,500; $342,000 to $407,000; $409,500 to $443,300; $432,000 to $463,650; $446,400 to $473,440; $675,000 to $807,500; $407,000 avg $370,000 avg $429,000 avg $456,000 avg $459,200 avg $743,750 avg PROPERTY DATA, Continuing Current Condition of Land As previously indicated, all of the land is currently vacant and had been rough or mass graded about 9 to 10 years ago. This includes grading of some of the individual lots in Planning Areas 16, 17, 18 and 19 to a near blue -topped condition. In addition, some backbone infrastructure was completed, including installation of portions of the storm drain, wet utilities and dry utility conduit. However, the land is currently overgrown with native vegetation and will require clearing/grubbing and remedial grading, as well as construction of all remaining backbone infrastructure and in -tract streets and utilities. Title Report An Interim Binder issued by First American Title Insurance Company and dated May 25, 2011 has been reviewed. Exceptions to title included liens for delinquent property taxes; the lien of special tax for Community Facilities District (CFD) No. 03-02; easements for public utilities; effects of documents including Resolution 92- 169 recorded April 17, 1992, Subdivision Improvement Agreement recorded October 3, 2003, and Development Agreement recorded January 9, 2003 and modified in September 2005, March 2006 and October 2006; and miscellaneous items. It is assumed that all delinquent property taxes and judgments pertaining to the property have been settled, and it is noted that CFD No. 03-02 is to be refunded by the current pending CFD No. 16-01 (Roripaugh Ranch Phase 2). All of the other items are fairly typical in the development of a large master -planned property such as Roripaugh Ranch, and it is assumed that there are no other exceptions to title which would have a negative effect on the planned use and development of the properties. VALUATION Method of Analysis Due to the size of this ownership at 1,061 lots, and since it is estimated later that the lots by Planning Area could be sold off from the second quarter of 2018 to the second quarter of 2021, I have concluded that the appropriate method of analysis is a discounted cash flow analysis. This involves the discounting of the projected net proceeds from assumed sales of the land over the appropriate period of time to a present value indication. The initial step is to estimate the finished lot values for each of the different size categories of lots. The next step is to deduct the estimated costs to get the lots from blue -topped condition to finished lot condition, since it is assumed that the property owner/master developer would sell and deliver the lots in a blue -topped condition. 26 VALUATION, Continuing The bulk values are calculated and allocated to each of the 12 Planning Areas based on the appropriate number of lots and lot size category. The next step is to estimate the timing in which the sales of the Planning Areas would be projected to occur. The following step is to estimate the appropriate expenses to be deducted over time for the remaining land development/infrastructure costs to get the land from as is condition to the deliverable condition, together with overhead and marketing costs, holding costs, and profit. The last step is to estimate an appropriate discount rate or internal rate of return at which to discount the projected net cash flows into a present value indication. This present value indication represents the as is condition of the land as of the date of value for this appraisal. Analysis of Finished Lot Values The Sales Comparison Approach is used to estimate the value of the subject lots, as if in a finished lot condition. This approach considers recent sales of residential land or bulk single-family residential lots from the general area in comparison to each of the subject Planning Areas with different minimum lot sizes. As a result of the widespread search for pertinent land/lot sales, the pertinent data includes four pending escrows and 12 closed sales that have occurred since September 2014, and is shown in the table on the following page. It is noted that the closed sales took place from September 2014 through October 2016, plus the four current escrows. However, it is also noted that the market for residential lots in this area has been fairly stable/flat for the past several years, thus no adjustments for time or date of sale are considered to be necessary. In terms of location, it is concluded that the Temecula and Murrieta locations are fairly similar to the subject other than the benefit of the subject parcels having the desirability and amenities due to being within a master -planned community. The locations in French Valley, Wildomar and Lake Elsinore are considered to be inferior. In terms of the lot sizes, it is evident that the larger lots are generally superior due to the potential for larger and higher -priced homes. Lastly, it is noted that most of the data items have existing CFD's which is a similar factor to the subject properties, but several of the data items do not have CFD's which is a superior factor to the subject properties in terms of the higher indications on a finished lot basis and the lower effective tax rates to homebuyers. The tabulation of the sales data follows: 27 VALUATION, Continuing No. Location (Project Name)/APN 1 NEC Mitchell Rd. & Sierra Ln. Murrieta (Mitchell Crossing) 392-230-034 2 NE/S Washington Ave., opposite Fullerton Rd. Murrieta (Murrieta 64) 906-040-096 3 SEC Pourray Rd. & Thompson Rd. French Valley (Turtle Ranch) 964-010-001 4 SE'ly corner Nicolas Rd. & Via Lobo Rd., Temecula (Arbor Vista) 919-350-017 to 020 5 Both sides Whitewood Rd. S/O Keller Rd., Murrieta (Golden City) 384-260-020,042 & 049 6 NEC Leon Rd. & Benton Rd. French Valley (Tierra Del Rey) 963-100-003 & 004 7 SE'ly corner Winchester Rd. & Skyview Rd., French Valley (BellaSol) 480-621 to 623 -various 8 W/S Diamond Dr., Summerly Pl. to Hidden Trail, Lake Elsinore (Summerly) 371-040-011 9 NE/S Briggs Rd. NW/O Leon Rd., French Valley (Spencer's Crossing) Ptn of 480-090-043&080 10 Adj. N/O Data No. 7, French Valley (Spencer's Crossing) Ptn of 480-090-043,047&049 11 W/S Alberhill Ranch Rd. at Alderwood Cr. & Cypress Cr., Lake Elsinore (Alberhill Ranch) 389-730-ptn/389-731-all 12 SW/S Palomar St., ±140' NW/O Meadow Ridge Ln., Wildomar (The Ranch) 380-080-008,009,014,015 & 380-140-001 13 E/S Whitewood Rd. N/O Baxter Rd., Murrieta (Alderwood/Golden City) Ptn of 384-260-047 14 SE/S Whitewood Rd. SW/O Murrieta Hot Springs Rd., Murrieta (Creekside Terrace) 916-010-026 15 S/S Murrieta Hot Springs Rd. W/O Roripaugh Meadows Rd., Temecula (Roripaugh Ranch) 957-71 & 72 various 16 Ely corner Deer Hollow Way & Peachtree St., Temecula (Renaissance at Redhawk) 962-020-018 Rec. No. Lots Price/Lot Date Min Size Price/Fin Lot Remarks Escrow 80 n/a (paired) $125,000 Escrow 64 n/a 3,200 $145,000 Escrow 51 n/a 7,200 $160,000 Escrow 83 n/a 8,400 $210,000 (avg.) 10/4/16 207 $100,606 6,000 $152,000 9/22/16 84 $35,714 5,000 $146,000 2/16/16 97 $55,155 2,500 $100,000 1/8/16 59 $54,814 5,500 $117,000 12/10/15 55 $90,909 5,000 $146,000 11/13/15 92 $96,082 4,000 $153,000 11/3/15 43 $67,384 5,000 $122,000 7/16/15 157 $66,879 7,200 $160,000 5/26/15 90 $96,683 6,000 $147,700 5/15/15 84 $63,690 3,000 $123,000 10/2/14 99 $130,480 5,000 $168,000 9/25/14 74 $86,486 2,500 $167,000 28 Vacant land; to be delivered in superpad condition with approved TTM; will be in gated community; to be CFD Vacant; rough graded; recorded final map & approved development plan; homes to be 1,545 s.f. to 2,008 s.f.; no CFD Vacant; raw/flat & slightly sloping; will be delivered with a final tract map; buyer plans smaller product of ±2,000 s.f. homes; no CFD Vacant; rough graded; approved TTM with final engin- eering; 39 ac. of open space; to be gated; approved for 2,318-3,717 s.f. homes; CFD formed Lots to be delivered in near finished condition with recorded tract map; existing CFD Vacant; fairly flat & partially graded; approved TTM; was projected for ±2,500 s.f. homes with recommended pricing from high $300's to low $400's; existing CFD Semi -finished condition; needed complex re -mapping; buyer plans ±1,650-2,550 s.f. small -lot detached homes w/ avg. pricing of $350,000; existing CFD Blue -topped lots; approved TTM; master -planned community; buyer plans ±2,200-2,700 s.f. homes; existing CFD Blue -topped lots; rec. tract map; buyer plans 2,800-3,460 s.f. homes priced from low $400,000's; master planned community; existing CFD Blue -topped lots; rec. tract map; buyer plans 2,410-3,199 s.f. homes priced from high $300,000's; master planned community; existing CFD Lots in semi -finished condition; rec. tract map; master - planned community; buyer planned ±1,850-2,900 s.f. Homes, ±$350,000 avg pricing; existing CFD Land in raw condition with final tract maps ready to record; grading permit pulled; buyer planned 2,490- 3,810 s.f. homes; CFD in place Blue -topped lots; rec. tract map; buyer planned 2,806- 3,929 s.f. homes; current pricing from low to high $400,000's; existing CFD Rough graded fairly flat land; approved TTM; buyer planned ±1,800-2,200 s.f. homes and $350,000 average pricing; existing CFD Nearly finished lots in "Panhandle" area; rec. tract map; buyer planned continuation of Pinnacle product; existing CFD Rough graded fairly flat land; approved TTM; buyer plans 2,282-2,554 s.f. homes, pricing from $430,000 to $485,000; 30 lots with golf course frontage; no CFD VALUATION, Continuing Data No. 1 is located nearby to the north of Clinton Keith Rd. and about 1/2 mile west of the 215 Freeway in Murrieta, in a mostly residential area with remaining undeveloped and hilly land. It consists of a 5.99 -acre site that is to be delivered in superpad condition with an approved tentative tract map for 80 paired homes on a small -lot configuration. This project is to be within a gated community and there is to be a CFD with a tax rate of ±1.8%. These lots are currently in escrow at a price reflecting $125,000 per finished lot, and tentatively due to close by year end. Data No. 2 is located at the westerly side of Murrieta, just over 1/2 mile to the southeast of the 15 Freeway. It consists of 5.75 acres with a recorded tract map and approved development plan for 64 lots, 3,200 s.f. minimum, in a condominium plan, and with no CFD. The approved plans are for homes to range in size from 1,545 s.f. to 2,008 s.f. This property is currently in escrow and due to close in the first quarter of 2017 at a price reflecting $145,000 per finished lot. Data No. 3 is located in the unincorporated French Valley area, about a mile to the east of Highway 79 and about 3 miles to the north of Roripaugh Ranch. It consists of 19.34 acres of vacant land that ranges from flat to slightly sloping, and that will be delivered by the seller with an approved final tract map for 51 lots, 7,200 s.f. minimum size and averaging about 10,000 s.f. There is no existing CFD. The property is currently in escrow at a price reflecting $160,000 per finished lot, due to close in about 6 months, and the buyer reportedly plans a smaller product size of about 2,000 s.f. homes. Data No. 4 is located in the northeasterly part of Temecula, just over a mile westerly of the "Pan" area of Roripaugh Ranch. It consists of about 68 acres of vacant land that has been rough graded, and that has final engineering and an approved tentative tract map for 83 lots, 8,400 s.f. average size, including about 39 acres of open space. This is to be a gated neighborhood, and is approved for homes ranging from 2,318 s.f. to 3,717 s.f. There is a CFD that has been formed but not yet funded, with a projected tax rate of ±1.8%. The lots are in escrow at a price reflecting $210,000 per finished lot, and the sale is due to close by the end of the year. Data No. 5 is located along both sides of future Whitewood Rd., ±1/4 mile south of Keller Rd. in the north part of Murrieta. It is part of the Golden City masterplan, and consists of 207 lots, 6,000 s f minimum size that have recorded tract maps and will be delivered in near finished condition. The sale to RSI closed in October 2016 at the price of $100,606 per lot, reflecting $152,000 per finished lot. Data No. 6 is located in the unincorporated French Valley area, about 1/2 mile to the east of Highway 79 and about 21/2 miles northerly of Roripaugh Ranch. It consisted of vacant land that was fairly flat and partially graded, with an approved tentative tract map for 84 lots, 5,000 s.f. minimum size. The sale to Pardee Homes closed in September 2016 at the price of $35,714 per lot, with finished lots estimated at 29 VALUATION, Continuing $146,000 per lot, and with an existing CFD. A study that had been completed on this site recommended an average home size of ±2,500 s.f. with pricing from the high $300,000's to the low $400,000's, and this reflects a finished lot ratio of 37%. Data No. 7 is located in the unincorporated French Valley area, about 31/ miles northerly of Roripaugh Ranch. It consisted of 97 lots in semi -finished condition, 2,500 s.f. minimum size, that were part of a larger project of attached and small -lot detached product of which 10 homes were previously built and sold. The 97 lots required some complicated re -mapping to be accomplished by the buyer. The sale closed in February 2016 at the price of $55,155 per lot, with finished lots at $100,000 per lot and reflecting the existing CFD. Earlier negotiations were at a price reflecting $120,000 per finished lot, but the price was reduced due to the difficulty of the re -mapping process which limited buyer interest. The buyer, Meritage Homes, planned homes of 1,650 s.f. to 2,550 s.f. and average pricing of $350,000, which reflects a finished lot ratio of 29%. Data No. 8 is located in the master -planned community of Summerly in the south part of the City of Lake Elsinore, referred to as Neighborhood 9. It consisted of 59 lots in blue -topped condition, 5,500 s.f. minimum size, with a recorded "A" map and an approved tentative tract map. The sale to Woodside Homes closed in January 2016 at the price of $54,814 per lot, with finished lots at $117,000 per lot, reflecting the existing CFD. The lots were targeted for homes in the size range of 2,200 s.f. to 2,700 s.f., and the probable average pricing of $340,000 to $350,000 reflects a finished lot ratio of 33-34%. Data No. 9 is located in the unincorporated French Valley area, nearby to the north of Murrieta, and within the master -planned community of Spencer's Crossing. It consisted of 55 lots, 5,000 s.f. minimum size, that were in blue -topped condition and with a recorded tract map. The sale to Richmond American Homes closed in December 2015 at the price of $90,909 per lot, with finished lots at $146,000 per lot, reflecting the existing CFD. The buyer planned a neighborhood of homes called Sycamore that were to range in size from about 2,800 s.f. to 3,460 s.f., with pricing from the low $400,000' s. This reflects a finished lot ratio of about 34%. Data No. 10 is located adjacent to the north of Data No. 9, also in Spencer's Crossing. It consisted of 92 lots, 4,000 s f minimum size, that were in blue -topped condition and with a recorded tract map. The sale to Woodside Homes closed in November 2015 at the price of $96,082 per lot, with finished lots at $153,000 per lot, reflecting the existing CFD. The buyer planned a neighborhood of homes called Laurel that were to range in size from 2,410 s.f. to 3,199 s.f., with pricing from the high $300,000's. This reflects a finished lot ratio of about 38%. Data No. 11 is located in the master -planned community of Alberhill Ranch in the northerly part of Lake Elsinore. It consisted of 43 lots, 5,000 s.f. minimum size, that 30 VALUATION, Continuing were in semi -finished condition and with a recorded tract map. The sale to KB Home closed in November 2015 at the price of $67,384 per lot, with finished lots at $122,000 per lot, reflecting the existing CFD. The buyer was targeting an extension of The Terraces product which ranged in size from approximately 1,850 s.f. to 2,900 s.f. and priced from about $330,000 to $365,000, and this reflects a finished lot ratio of about 35%. Data No. 12 is located at the south end of Wildomar, and is an in -fill site nearby to the west of the 15 Freeway. It consisted of vacant land in raw condition with final tract maps ready to record for 157 lots, 7,200 s.f. minimum size. The sale to Richmond American Homes closed in July 2015 at a price of $66,879 per lot, with finished lots at $160,000 per lot, but including costs that will be CFD bond -financed. The buyer planned two product types to be called Chapparal and Creekside at The Ranch, with homes ranging in size from 2,490 s.f. to 3,810 s.f., and pricing to be from the high $300,000's and from the low $400,000's. This reflects a finished lot ratio of 40%, though this would be lower if deducting the CFD bond -financed costs. Data No. 13 is located in the north part of Murrieta and part of a larger project known as Alderwood, also part of the Golden City masterplan. It consisted of 90 lots, 6,000 s f minimum size, that were in blue -topped condition and with a recorded tract map. The sale to D.R. Horton (took title as Western Pacific Housing, Inc.) closed in May 2015 at the price of $96,683 per lot, with finished lots at $147,700 per lot, and reflecting the existing CFD. The buyer planned a neighborhood of homes called Dakota that range in size from 2,806 s.f. to 3,929 s.f. and with pricing from the low to high $400,000's. This reflects a finished lot ratio of about 33%. Data No. 14 is located in the central part of Murrieta, nearby to the east of the 215 Freeway. This is an infill site consisting of 10.7 acres of vacant land in rough graded and fairly flat condition, with an approved tentative tract map for 84 lots, 3,000 s.f. minimum size. The sale to Woodside Homes closed in May 2015 at the price of $63,690 per lot, with finished lots at $123,000 per lot, reflecting the existing CFD. The buyer planned homes of about 1,800 s.f. to 2,200 s.f., with average pricing of about $350,000. This indicates a finished lot ratio of 35%. Data No. 15 is located toward the westerly end of the "Panhandle" area of Roripaugh Ranch. It consisted of 99 lots, 5,000 s f minimum size, that were in nearly finished condition and with a recorded tract map. The sale to KB Home closed in October 2014 at the price of $130,480 per lot, with finished lots at $168,000 per lot, reflecting the existing CFD. The buyer planned a continuation of the Pinnacle neighborhood of homes which range in size from 2,060 s.f. to 4,180 s.f. and current pricing of about $425,000 to $529,000. Considering the average pricing of about $445,000 closer in time to the date of this land sale, the indicated finished lot ratio is about 38%. 31 VALUATION, Continuing Data No. 16 is located in the area known as Redhawk at the south end of Temecula. It consisted of 7.7 acres of rough graded and fairly flat land that had an approved tentative tract map for 74 lots, 2,500 s f minimum size, of which 30 lots have frontage on the Redhawk Golf Course. The sale to Beazer Homes closed in September 2014 at the price of $86,486 per lot, with finished lots at $167,000 per lot, reflecting no CFD. The buyer planned the neighborhood of homes called Renaissance at Redhawk, with the homes ranging in size from 2,282 s.f. to 2,554 s.f., and pricing from about 6 months ago at $430,000 to $485,000. This indicates a finished lot ratio of about 37%. 3,150 s.f. Minimum Lots/Product Type 1A: Planning Areas 14, 22 & 23 are to be subdivided into 3,150 s.f. minimum lots and developed with homes averaging 2,200 s.f. in size and with average pricing of $407,000. Data No. 1 is a similar location but a far inferior paired -home product on likely smaller lots, and supports a far lower limit indication at $125,000 per finished lot. Data No. 2 is a similar minimum lot size at 3,200 s.f., but a slightly inferior location lacking the desirability and amenities of being in a master -planned community, greater risk due to the rough graded condition, and planned for much smaller homes, thus supporting a firm lower limit indication at $145,000 per finished lot. Data No. 7 supports a far lower limit indication at $100,000 per finished lot due to the smaller lots at 2,500 s.f. minimum, the inferior French Valley location, and due to the price discount for the complicated re -mapping that was required of the buyer. Data No. 10 supports a close indication at $153,000 per finished lot with the larger lot sizes of 4,000 s.f. minimum being offset by the inferior French Valley location, and as reflected by the similar projected home pricing. Data No. 14 supports a far lower limit indication at $123,000 per finished lot due to the slightly smaller lots at 3,000 s.f. minimum, and the lack of being in a master -planned community. Lastly, Data No. 16 supports a firm upper limit indication at $167,000 per finished lot due to the superior location with golf course frontage to 41% of the lots and the lack of a CFD, both of which are more than offsetting to the smaller lot sizes of 2,500 s.f. minimum. In summary, on a finished lot basis the data supports far lower limit indications of value from $100,000 to $125,000, a closer but still firm lower limit indication at $145,000, a close indication at $153,000 and a firm upper limit indication at $167,000. Lastly, it is noted that the data indicated finished lot ratios (ratio of finished lot price to average home price) ranging from 29% to 40%, but mostly 33% to 38%. The low end at 29% is from Data No. 7 which reflected a discounted price due to re -mapping complications. Considering the original negotiated price reflecting $120,000 per finished lot, the finished lot ratio would be 34%. The high end of the range at 40% is 32 VALUATION, Continuing indicated by Data No. 12, and the ratio would be lower if deducting the CFD bond - financed costs. It is also noted that for many of the data items, the projected home pricing at the time of the land purchase could not be obtained, but rather is at a point later in time. Thus, the home pricing indication is likely higher than what the original projected or proforma pricing would have been, which results in a lower finished lot ratio indication. The most supportable indication for the subject property, reflecting that this is based on original projected home pricing, is concluded to be the range of 37% to 38%. Applied to the projected average home pricing of $407,000, the following indication results: $407,000 avg home pricing x .37-.38 finished lot ratio = $150,590 to $154,660/finished lot The conclusion for these lots is $154,000 per finished lot. 3,150 s.f. Minimum Lots/Product Type 1B: Planning Areas 15 & 31 are to be subdivided into 3,150 s.f. minimum lots and developed with homes averaging 2,000 s.f. in size and with average pricing of $370,000. The analysis is similar to that for Product Type 1A, though reflecting that these lots are to be developed with slightly smaller and lower priced homes. Thus, the conclusion for Product Type lA at $154,000 per finished lot supports a firm upper limit for Product Type 1B, and a close indication is by the finished lot ratio of 37-38%, as follows: $370,000 avg home pricing x .37-.38 finished lot ratio = $136,900 to $140,600/finished lot The conclusion for these lots is $140,000 per finished lot. 4,000 s.f. Minimum Lots/Product Type 2: Planning Area 24 is to be subdivided into 4,000 s.f. minimum lots and developed with homes averaging 2,600 s.f. in size and with average pricing of $429,000. The previous analysis and conclusion for Product Type lA supports a firm lower limit indication for these lots at $154,000 per finished lot. Data No. 3 consists of much larger lots at 7,200 s.f. minimum and with no CFD, but offset or more by the inferior location and the plan for the lots to be developed with much smaller and likely much lower-priced homes, thus supporting a close indication to close lower limit indication at $160,000 per finished lot. Data No. 5 supports a firm lower limit indication at $152,000 per finished lot due to the location lacking desirability of a master -planned community and also due to the much larger bulk size of 207 lots as more than offsetting to the larger lots at 6,000 s.f. Data Nos. 6 and 9 support firm lower limit indications at $146,000 per finished lot due to the inferior location in French Valley being more than offsetting to the larger lot sizes at 5,000 s.f. minimum. 33 VALUATION, Continuing Data No. 10 supports a firm lower limit indication at $153,000 per finished lot also due to the inferior location in French Valley, and with these lots being similar at 4,000 s.f. minimum. Data No. 12 supports a close indication at $160,000 per finished lot due to the far inferior location in Wildomar and the greater development risk of the land in raw condition being approximately offsetting to the much larger lots sizes of 7,200 s.f. minimum. Data No. 15 supports a firm upper limit indication at $168,000 per finished lot due to being larger lots at 5,000 s.f. minimum, and with a similar location in the "Panhandle" area of Roripaugh Ranch. In summary, on a finished lot basis the data supports firm lower limit indications from $146,000 to $153,000, close indications to close lower limit indication at $160,000, and a firm upper limit indication at $168,000. Considering a finished lot ratio of 37-38% and the projected average home pricing of $429,000, the following indication results: $429,000 avg home pricing x .37-.38 finished lot ratio = $158,730 to $163,020/finished lot The conclusion for these lots is $163,000 per finished lot. 5,000 s.f. Minimum Lots/Product Type 3: Planning Area 16 is to be subdivided into 5,000 s.f. minimum lots and developed with homes averaging 3,000 s.f. in size and with average pricing of $456,000. The previous analysis and conclusion for Product Type 2 supports a firm lower limit indication for these lots at $163,000 per finished lot. In addition, the data supports a firm lower limit indication at $160,000 per finished lot, a close indication at $168,000 per finished lot, and a far upper limit indication at $210,000 per finished lot. Considering a finished lot ratio of 37-38% and the projected average home pricing of $456,000, the following indication results: $456,000 avg home pricing x .37-.38 finished lot ratio = $168,720 to $173,280/finished lot The conclusion for these lots is $173,000 per finished lot. 6,000 s.f. Minimum Lots/Product Type 4: Planning Areas 17 & 18 are to be subdivided into 6,000 s f minimum lots and developed with homes averaging 3,200 s.f. in size and with average pricing of $459,200. The previous analysis and conclusion for Product Type 3 supports a firm lower limit indication for these lots at $173,000 per finished lot. In addition, the data support firm lower limit indications at $160,000 and $168,000 per finished lot and a far upper limit indication at $210,000 per finished lot. Considering a finished lot ratio of 37-38% and the projected average home pricing of $459,200, the following indication results: $459,200 avg home pricing x .37-.38 finished lot ratio = $169,904 to $174,496/finished lot The conclusion for these lots is $175,000 per finished lot. 34 VALUATION, Continuing 20,000 s.f. Minimum Lots/Product Type 5: Planning Areas 19, 20 & 21 are to be subdivided into 20,000 s.f. minimum lots and developed with homes averaging 4,250 s.f. in size and with average pricing of $743,750. Considering the significantly larger lots that are planned for much larger and higher -priced homes, the previous analysis and conclusion for Product Type 4 supports a far lower limit indication for these lots at $175,000 per finished lot. It is noted that no recent sales of similar large lots were found. Thus, Data No. 4 supports a far lower limit indication at $210,000 per finished lot due to being much smaller lots and planned for much smaller and lower-priced homes. In addition, input from several knowledgeable brokers is that the range of $250,000 to $300,000 per finished lot could be supportable, though this product is not active in the current market. In terms of a finished lot ratio, the significantly larger and higher -priced product is typically considered as having greater risk, and thus a lower finished lot ratio is concluded to be supportable. Based on the projected average home pricing of $743,750 and a finished lot ratio of 34-35%, the following indication results: $743,750 avg home pricing x .34-.35 finished lot ratio = $252,875 to $260,313/finished lot The conclusion for these lots is $255,000 per finished lot. Deduction from Finished Lot Condition to Blue -Topped Condition Next, a deduction is made to reflect that the residential lots are assumed to be delivered by the property owner/master developer in a blue -topped condition, and the previous analyses were of the land as if in finished lot condition. Thus, the deduction is for the costs to get from blue -topped condition to finished lots, since the revenues in the discounted cash flow analysis are of the blue -topped condition. The estimated cost deductions were provided by the property owner and are based on an average cost per lot of $32,500 for all Planning Areas/product types that would include items such as construction of streets, utilities, etc. In addition, there are fees that vary with the product type and include items such as school, development impact, water and sewer. The total of the costs and fees are shown as follows: 35 VALUATION, Continuing Product Planning Type Areas Costs/Lot Fees/Lot Total 1A 14,22,23 $32,500 $22,857 $55,357 1B 15,31 $32,500 $22,161 $54,661 2 24 $32,500 $24,249 $56,749 3 16 $32,500 $25,641 $58,141 4 17,18 $32,500 $26,337 $58,837 5 19,20,21 $32,500 $29,121 $61,621 The resulting value of the lots in a blue-topped condition and the total value by each Planning Area are shown in the following table: Total Value Plan. Est. Value/ Deduct./ Value/Blue- No. Blue -Topped Area Fin. Lot Lot Topped Lot Lots Condition 14 $154,000 $55,357 $98,643 77 $7,595,511 15 $140,000 $54,661 $85,339 104 $8,875,256 16 $173,000 $58,141 $114,859 121 $13,897,939 17 $175,000 $58,837 $116,163 147 $17,075,961 18 $175,000 $58,837 $116,163 121 $14,055,723 19 $255,000 $61,621 $193,379 26 $5,027,854 20 $255,000 $61,621 $193,379 29 $5,607,991 21 $255,000 $61,621 $193,379 24 $4,641,096 22 $154,000 $55,357 $98,643 126 $12,429,018 23 $154,000 $55,357 $98,643 51 $5,030,793 24 $163,000 $56,749 $106,251 71 $7,543,821 31 $140,000 $54,661 $85,339 164 $13,995,596 Absorption/Rate of Land Sales For purposes of this valuation, the discounted cash flow analysis considers land sales as they would be projected to occur over time, on a quarterly basis. The projected 36 VALUATION, Continuing timing of the land sales is based on the estimated absorption by Empire Economics which reflects closed home sales, and these are projected to start in July 2019 for each product type in the "Pan" area. This is shown on the "Estimated Absorption Schedules for CFD No. 16-01 (Roripaugh Ranch — Pan Area)" from the Empire Economics report, a copy of which is in the Addenda section of this report. As previously discussed, this is based on the assumption that building permits could not be pulled in the "Pan" area until about November 2018. Then, there is a significant period of time from the closing of the land sale to a builder until the first closed sales of production homes by the builder. At a minimum, this reflects the time necessary to develop the lots from blue -topped to finished condition and complete construction of first the model homes and then the production homes. There usually is also some lag time from when the builder closes on the land sale until the land development work commences. We have researched many sales to builders in recent years in this general area which indicate a period of time of 7.5 months to 32 months or an average of about 13.5 months from closing of the land sale to first closing of home sales. Deleting the high end of the range at 32 months as an anomaly, the average time is closer to 13 months. I have projected that the land sale to a builder would occur just over 12 months prior to the projected first closed sale of a production home based on the Empire Economics report, or in the fifth quarter prior to the home sales. Thus, it is estimated that the first land sales for each product type would close in the second quarter of 2018 in order for the first home sales to close at the beginning of the third quarter of 2019. For the product types that are within multiple Planning Areas, the projected sales of the second or more Planning Area for the product type is spread over time, based on demand for the land resulting from the projected absorption of the homes by Empire Economics. Due to the relatively smaller sizes, Planning Areas 14 and 23 have been combined and Planning Areas 19, 20 & 21 have been combined. Based on the foregoing, the projected absorption or land sale by quarter for each of the Planning Areas is shown as follows: 37 VALUATION, Continuing Plan. No. Timing of Area Lots Land Sale 14 77 2Q-2018 15 104 2Q-2018 16 121 2Q-2018 17 147 2Q-2018 18 121 2Q-2021 19 26 2Q-2018 20 29 2Q-2018 21 24 2Q-2018 22 126 2Q-2021 23 51 2Q-2018 24 71 2Q-2018 31 164 3Q-2020 1,061 Deductions for Costs to get to Blue -Topped Condition A deduction is made for the remaining costs to the property owner/master developer to get the land from as is condition to blue -topped lot condition for the various Planning Areas. These costs include items of entitlements/planning/mapping, grading, construction of backbone improvements such as streets, utilities and flood control channels, and construction of facilities such as the sports park and the private recreation center. The remaining estimated costs to complete, as provided by the property owner, are a total of $53,355,720 that are spread over the time period from the first quarter of 2017 through the fourth quarter of 2020. It is noted that these costs do not include or are net of items that are to be CFD bond -financed in a total amount of $22,000,000. These items include Butterfield Stage road Phase III; Rancho California Road Intersection & Transitions; Nicolas Road from Butterfield Stage Road to Phase 2 Boundary; Nicolas Road from Phase 2 Boundary to Westerly End of Improvement; Nicolas/Calle Girasol Culvert and Channel Improvements (portion); Winchester Road/Nicolas Road Intersection Improvements; and Santa Gertrudis Creek Channel Improvements. It is also noted that the $53,355,720 costs do not include the 10% portion of certain costs that are the responsibility of Wingsweep Corporation. These estimated costs together with the projected timing of the costs as provided by the property owner are shown in the following table: 38 VALUATION, Continuing Quarter Cost Amount 1Q-2017 $2,706,764 2Q-2017 $587,877 3Q-2017 $786,147 4Q-2017 $2,095,851 1Q-2018 $2,371,597 2Q-2018 $2,614,677 3Q-2018 $5,293,984 4Q-2018 $6,818,148 1Q-2019 $6,818,148 2Q-2019 $7,098,678 3Q-2019 $4,115,453 4Q-2019 $3,291,921 1Q-2020 $3,179,421 2Q-2020 $2,390,166 3Q-2020 $2,390,166 4Q-2020 $796,722 Total $53,355,720 A second cost factor in the discounted cash flow analysis is for the estimated property taxes and special taxes. The property taxes are based on the current amounts for the various Planning Areas, and then reduced as the land is sold off. The approximate estimates for the special taxes for this CFD were provided by Albert A. Webb Associates. Lastly, a deduction is made for Sales Costs which includes marketing, legal and closing costs for the sell-off of the land. This cost factor is based on 2.5% of the gross sales revenues. Discount Rate/Internal Rate of Return This rate is inclusive of developer's profit, and also reflects the factors of the time value of money, and the risk of the projected cash flows inherent in this type of overall project. In my experience, this rate can range from near 10% to near 30%, depending on factors such as the size and status of the project, the length of the projected build -out, the location, the perceived risk and market conditions. The PwC (formerly Korpacz) Real Estate Investor Survey for the second quarter of 2016 indicates a range of rates from 10.0% to 20.0% or an average of 15.5%, on an unleveraged basis and inclusive of developer's profit. It is noted that this average is unchanged from the fourth quarter of 2015, slightly lower than the average of 15.9% from a year prior (second quarter 2015) and well below the average of 16.75% as of the fourth quarter of 2014. Additional information obtained from brokers and appraisers familiar with this type of property and analysis indicates supportable rates in the 15% to 22% range. 39 VALUATION, Continuing The subject property, comprising the bulk of the "Pan" area, has the positive factors of the Temecula location, with much nearby recent and ongoing successful development in the "Panhandle" area and in Rancho Bella Vista. There are also the desirable factors of the recreational amenities and open space within Roripaugh Ranch, the potential for gated neighborhoods, the parks and schools within the community, and the significant amount of surrounding and nearby open space/preserve. The desirability of the Temecula location is discussed in the Market Absorption Study by Empire Economics in terms of its strong economic base, the benefit from the spillover of demand from the San Diego County Core, the low crime rate, and the desirable Temecula Valley Unified School District. However, there are also the risk factors that the land development is not yet complete, though a large part of the grading operation was previously completed and part of the infrastructure was completed. There is also the risk factor that timing of building permits being available is tied to completion of certain infrastructure items. However, this has already been reflected by the conservative projection that building permits will not be available until the latter part of 2018. In addition, the property is fairly sizable at 1,061 residential lots, and the length of the absorption for the land sales is a total of 18 quarters or 41/2 years. Lastly, it is noted that the land values are based on current market values, and are not appreciated or adjusted up for time over the 41/2 -year cash flow period. While residential land values have been fairly stable over the past year or two, the Empire Economics study indicates that home price appreciation is expected to continue to be low -to -moderate in the near term. Thus, a lower discount rate could be appropriate to reflect the potential for increasing land values that have not been specifically calculated into the future cash flows. Based on the foregoing, I have concluded on a supportable discount rate at the upper mid-portion of the range of 15-22%, or a concluded discount rate of 20.0%. Conclusion of Value The discounted cash flow analysis is shown on the following pages, which incorporates the foregoing factors. As indicated, this analysis results in a present value indication of $35,835,120 which is rounded to a value conclusion of $35,835,000. 40 0 0 0 0 0 0 0 0 0 0 0 0 ER ER ER ER ER ER ER ER ER ER ER ER 0 0 0 0 0 0 0 0 0 0 0 0 ER ER ER ER ER ER Vy ER ER ER ER ER 0 0 0 0 0 0 0 0 0 0 0 0 ER ER ER ER EA ER ER ER ER ER Efl EA 0 0 0 0 0 O 0 0 0 0 0 0 ER ER ER ER ER ER ER ER ER ER ER ER V (0 0 CO rLO 0 LO N 0) O CCO ER O O O 0) 0) ER 0) W ER Lf) Lf) N. 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O (O CO (� 0 _ O N co O co N CO I� co ER ER ER co © 0 co co N 69- r R O O ER Lf) N ER W ) 0 O O 'I- N- N r ER ER ER V 69- 64 CD co E` ER O O O (b N co © f) V ER To 0 t— PROJECT COSTS ER CO ER (fl O N ER C N 0) X E o o o N 0 0) co m 0 Q 0 0 Sales Costs C.0 CO LO LO N N (D (0 N- N - Lf) Lf) N- r ER t? co co N N N- 6 Lf) N N ER ER 000 W co O M M O O N N 16 6 (R ER O O M N O) (O N O O O O O O 00 O V CO L() C16 C.6 0) CO CO (0 N- CO ERER O I` r .,— co co O O O O N N O O co c O O ER ER (0 0 H NET CASH FLOWS CO CO N Ln O 0 O N DISCOUNT FACTOR O co co O 14) O ER (4 N (_0 O N 47 (0 O (9 M CO CO ER f` O 0) O_ CO E7 PV OF CASH FLOWS PRESENT VALUE LO M CD N LO O) 0) CO 6) N 0) L() N 6) 6) I- CO 6) O O co co L() L() h Ln Ln r r O) O M L() 6) N- 6) N- LO N O V N M 6) L() D) 0) 0 0 0 CO CO 7 O L() O) CqM_ N- L() Ln V N Ln I- M ER ER ER ER ER EA EA ER ER ER ER ER O O O O M O CD0 00 O O O ER ER ER ER N ER ER EA ER ER ER N O LO N O � V N ER fR 000000000000 ER ER ER ER ER ER ER ER ER ER ER 69- 0 R O O 0 0 0 0 0 0 0 0 0 0 Ffl ER ER ER ER ER ER ER ER ER ER ER $115,776,559 ON I- N- O0 co N- N 6) CO co O 6a) LOO (.6., - co M O) CO CO M LC) N N M L() ER ELT CO co 69- o R O O 6) 6) N CD V co O co co CO CO N CO N co N- ID CO CO ER ER ER O N ER ER ER ER ER ER ER O ER N 0 0 L() ER N- CO (fl O 6) N ER ER 0 0 0 0 0 0 0 0 0 0 0 CD CO CO 0 0 ER ER EA ER ER ER EA EA ER ER ER 6) 6) CO ER 6) co co co Ln C() O 6) O O 6) V 6) 6) co co M M N kn. ER 0 0 0 0 0 0 0 0 0 0 0 0 O CO 0 0 ER ER ER ER ER ER ER ER ER ER ER ER ER CO CCO ER O O 0 0 0 0 0 0 0 0 0 0 ER ER ER ER ER ER ER ER ER ER ER 69- 0 R 0 0 0 0 0 0 0 0 0 0 0 0 ER ER ER ER ER ER ER ELT ER ER ER ER 0 0 0 0 0 0 0 0 0 0 0 CO ER ER fR ER ER ER ER ER ER ER ER ER CO v N � EST ER IN ER ER V 6) M ER ER N CO ER 6) LO 0) r- 6) I- N V M ER ER Lf) ER ER L1) fR r r lfi l(i co co - d' N r- 1--: N- N- CO CO CO C N CV - ER ER ER L() O LO In O LO M N CO CO Ln 0 O O CO O CO O CO CO 6?- C6 R Proposed land.Use Plan Wings weep Corporation f..q. dam Ciond.papt* 16 0 i.1 PH !: i) 1 WINGSWEEP CORPORATION OWNERSHIP PROPERTY DATA Location As indicated by the map on the previous page, this ownership comprises the northwesterly part of the "Pan" area, lying westerly of Butterfield Stage Rd. and on both sides of Murrieta Hot Springs Rd. Record Owner/Ownership History The current owner of record is Wingsweep Corporation. This entity acquired the property from Financial Title Company by Trustee's Deed Upon Sale recorded March 5, 2008 at an indicated amount paid by the grantee at the trustee sale of $10,500,000. (Note: The ownership includes several parcels that are not included in this appraisal that are designated for open space or flood control.) Legal Description The parcels that are included in this appraisal are legally described as follows: Lots 1, 3, 4, 5 & 6 of Tract No. 29353-2, in the City of Temecula, County of Riverside, State of California, as per map recorded in Book 342 of Maps, Pages 73 through 85, inclusive, Records of said County. The above -referenced tract map is the "A" map, and as previously indicated there were Tentative Tract Maps or "B" maps that had originally been prepared on all three residential Planning Areas by Ashby USA, LLC a number of years ago. The following table indicates by Planning Area the "A" map description, the Tentative Tract Map (TTM) description with the indicated number of lots at that time, and the current status of the TTM per the City Planning Department: Planning "A" No. Area Map TTM Lots TTM Status 10 Lot 1/Tr. 29353-2 30766 14 No application 12 Lot 4/Tr. 29353-2 32355 112 No application 33 Lots 5 & 6/Tr. 29353-2 30767 14 Submitted; active file Assessor Data -2016/17 This ownership comprises Assessor Parcel Nos. 964-460-003, 007, 008, 009, 017 & 018. The assessed values total $5,126,229 for land and $0 for improvements. The tax rate area is 13-116 with an indicated tax rate of 1.04834%, but the total or effective tax rate to future homeowners, including special taxes for this CFD and other overlapping debt, is projected to be a maximum of 1.8% based on current estimated home pricing. 44 1 I I 11.= T 1 WM IW i• 6 3 - , ........ SECIO 21 1-.7S.,RIN CityiiplEak (":72.) ' • . ' . I '-.:1, g , itli Nen Flaw "1 ... LulD 7 1 I i A I • • . 4 •- -. ' -- .._ „ ili411 PHI 11.14 1 'kr OP 964-46 95R-81 -----------7 §s ASSESSOR MAP I .. W .1 1 _ .."42 •• •. g itiakt .w... ...I 0.7 . 1 ,IP .4"c %._,..... ... ...- rd.4. 4 FS-NH A r..., • . . " mn %,,a,L1 PZI ,_.,A .., - i OEM'S ite 1143i4 FL* 4:,,e.idi ChAlr. raw. . Prill ill."' li a._ _-,, 2 gt •J 2 . IT n"L' _ 4 --'1 •• . As 1.,-_...;* -• 11, , - . 1 ; f. 1-1;1)1 " g- • riji . ....' Wa. 111 Mff3-13 Ilka LA' - 47... R Nel 11 .1! OP PC. ISEI-2 ail (to WMi I NW lual.,, PROPERTY DATA, Continuing No. of Lots/Lot Sizes/Planned Product The following table correlates the Planning Area with the Assessor Parcel No. and provides the total acreage; and also indicates the planned number of lots, the indicated density and the minimum lot size based upon information that was provided by the property owner and is also consistent with the data presented in the Market Absorption Study by Empire Economics, Inc.: Planning No. Min. Lot Area APN Acres Lots Density Size (sf) 10 964-460-007 8.12 14 1.7 10,000 12 964-460-009 16.01 136 8.5 3,000 33 964-460-003,017,018 12.34 15 1.2 20,000 165 Then, the expected home sizes and pricing for the three product types on the various lot sizes and Planning Areas are shown in the following table: Product Planning Min. Lot Type Area Size (sf) Expected Home Sizes (sI) Expected Home Pricing A 12 3,000 1,800 to 2,200; 2,000 avg $340,000 to $405,000; $368,000 avg B 10 10,000 3,500 to 4,500; 4,000 avg $651,000 to $784,000; $720,000 avg C 33 20,000 3,500 to 4,500; 4,000 avg $651,000 to $784,000; $720,000 avg In addition, the commercial site (Planning Area 11) contains an area of 15.188 acres net per the Tract Map. However, prior information as well as confirmation by the current property owner indicates that the usable area is 10.7 acres, excluding the significant slope areas around most of the perimeter of the site. This includes a significant slope down from Murrieta Hot Springs Rd. along most of the frontage though closer to grade at the easterly end; a significant slope down from Roripaugh Valley Rd. along the westerly side; and slopes up from Butterfield Stage Rd. along the easterly side and Roripaugh Valley Rd. along the southerly side. Current Condition of Land As previously indicated, all of the land is currently vacant and had been rough or mass graded about 9 to 10 years ago. This includes grading of the in -tract streets in Planning Area 10 and grading of some of the individual lots in Planning Area 12 to a near blue -topped condition. The commercial site (Planning Area 11) was also rough graded to a superpad condition. In addition, some backbone infrastructure was completed as previously discussed for the RVR ownership. However, the land is currently overgrown with native vegetation and will require clearing/grubbing and remedial grading, as well as construction of all remaining backbone infrastructure and in -tract streets and utilities. 46 PROPERTY DATA, Continuing Title Report Preliminary reports by Orange Coast Title Builder Services dated in September 2004 had previously been reviewed. In general, the exceptions to title included various easements for utilities and documents including a development agreement and subdivision agreement. Similar to the discussion for the previous RVR ownership, it has been assumed that these exceptions are fairly typical in the development of a large master -planned property such as Roripaugh Ranch, and it is assumed that there are no other exceptions to title which would have a negative effect on the planned use and development of the properties. VALUATION Method of Analysis This is similar to the analysis of the previous RVR ownership. While this subject ownership is much smaller at 165 residential lots in three Planning Areas plus the commercial site, there is still the similar time factor for required infrastructure to be completed before development could occur, resulting in a period of time before land sales to builders would be contemplated. Thus, the appropriate method of analysis for this ownership is also concluded to be a discounted cash flow analysis with similar steps as in the analysis of the RVR ownership. Analysis of Finished Lot Values 3,000 s.f. Minimum Lots/Product Type A: Planning Area 12 is to be subdivided into 3,000 s.f. minimum lots and developed with homes averaging 2,000 s.f. in size and with average pricing of $368,000. This is very similar to Product Type 1B in the previous analysis of the RVR ownership, which is also an average home size of 2,000 s.f. and average pricing of $370,000 on 3,150 s.f. minimum lots. Thus, the conclusion is the same as for Product Type 1B, or $140,000 per finished lot. 10,000 s.f. Minimum Lots/Product Type B: Planning Area 10 is to be subdivided into 10,000 s.f. minimum lots and developed with homes averaging 4,000 s.f. in size and with average pricing of $720,000. The previous analysis of Product Type 4 in the RVR ownership supports a firm lower limit indication at the concluded value of $175,000 per finished lot due to the much smaller lots at 6,000 s.f. minimum and targeted for much smaller and lower-priced homes. However, the previous analysis of Product Type 5 in the RVR ownership supports a close upper limit indication at the concluded value of $255,000 per finished lot due to the larger lots at 20,000 s.f. minimum and targeted for slightly larger and higher -priced homes. Considering a finished lot ratio of 34-35%, the following indication results: $720,000 avg home pricing x .34-.35 finished lot ratio = $244,800 to $252,000/finished lot 47 VALUATION, Continuing The conclusion is a value of $245,000 per finished lot. 20,000 s.f. Minimum Lots/Product Type C: Planning Area 33 is to be subdivided into 20,000 s.f. minimum lots and developed with homes averaging 4,000 s.f. in size and with average pricing of $720,000. It is noted that this is the same as Product Type B, and with the same projected average pricing though these are much larger lots at 20,000 s.f. minimum. The conclusion is a value that is slightly higher than for Product Type B but slightly lower than Product Type 5 in the RVR analysis, or a conclusion of $250,000 per finished lot. Deduction from Finished Lot Condition to Blue -Topped Condition Similar to the analysis of the RVR ownership, a deduction is made for the costs to get from blue -topped condition to finished lot condition, with the cost estimates based on the information provided for the RVR ownership. This results in the following: Total Value Plan. Est. Value/ Deduct./ Value/Blue- No. Blue -Topped Area Fin. Lot Lot Topped Lot Lots Condition 10 $245,000 $61,621 $183,379 14 $2,567,306 12 $140,000 $54,661 $85,339 136 $11,606,104 33 $250,000 $61,621 $188,379 15 $2,825,685 Analysis of Commercial Land Value A search was made in the general area for recent sales of reasonably similar commercial land. The pertinent data is shown in the following table, with discussion and analysis of the sales data following thereafter: 48 VALUATION, Continuing No. Location/APN 1 N'ly & W'ly comers Winchester Rd. & Pourroy Rd., French Valley area 476-010-017, 054 & 055 2 NE/S Clinton Keith Rd. (future), NW/O Winchester Rd., Murrieta 963-450-001 3 N'ly comer Winchester Rd. & Clinton Keith Rd. (future), Murrieta 963 -450 -various 4 W'ly corner Winchester Rd. & Clinton Keith Rd. (future), Murrieta 963-060-053 5 NWC Winchester Rd. & La Alba Dr. Murrieta 900-440-002 to 008 6 S/S Rancho California Rd., 2nd parcel W/O Moraga Rd., Temecula 944-290-027 7 N/S Rancho Califomia Rd., 2"d parcel E/O Business Park Dr., Temecula 921-020-041 8 SW/S Jackson Ave., SE/O Elm St., Murrieta 910-100-022 to 024 9 NW/S Guava St., 236' NE/O Madison Ave., along I-15 Fwy., Murrieta 910-020-007 & 910 -140 -various Subject Sale Size Date (Acres) Price/S.F. Remarks Listing/ .79- $13.00- Vacant, fairly flat land; outlying area; retail pads from Offers 7.70 $20.00 .79 ac. to 7.70 ac. or 20.25 ac. total; offers at $20/s.f. for smaller corner parcels; limited interest in larger pcls 1/8/16 11.47 $10.01 Vacant, rough graded site; had been site for Target store; buyer assembled with No. 3 for devel. of large retail center; street construction burden 1/7/16 32.56 $9.40 (usable) Vacant, rough graded land; assembled with No. 2 for development of large retail center; street construction Burden 10/28/15 6.53 $12.74 Vacant, fairly flat land; buyer is same as Nos. 2 & 3; prior entitlements for retail center and auto service Offers 9.28 ±$10.00- Vacant, fairly flat, rough graded land; prior approvals $11.00 for 72,409 s.f. retail center now expired; interest mostly from investors 8/5/16 1.75 $13.45 Vacant, fairly flat site; separate commercial parcel not part of larger center; buyer plans Aldi supermarket; signal entrance at Rancho California Rd. 11/2/16 2.66 $13.81 Vacant, fairly flat finished site; business park area; buyer plans 120 -room hotel 2/5/16 10.58 $11.93 Vacant, rough graded land; 3 parcels; prior plans for 3 office buildings; 15 Freeway visibility; buyer's plans unknown 9/11/15 38.605 $10.76 Mostly vacant, gently undulating raw land; assembly of 5 ownerships; buyer plans CarMax Auto Superstore; much street construction burden 10.7 (usable) Data No. 1 is located at the northerly and westerly corners of Winchester Rd. and Pourroy Rd., in the northerly part of the French Valley area. This is vacant and gently undulating land that is to be a retail site called Pinnacle Plaza. It consists of a total of 20.25 acres that is mapped into parcels ranging from .79 acre to 7.70 acres. The asking prices are $13.00 per s.f. for the 3.81 -acre, 5.10 -acre and 7.70 -acre parcels that are identified for a large single -tenant building, large multi -tenant building or multiple free-standing buildings, and $20.00 per s.f. for the smaller hard corner parcels. There has been limited interest in the larger parcels, but there have been multiple offers at full price for the hard corners for gas station use. The indication at $13.00 per s.f. is a closer upper limit for the subject due to being only an asking price but for an inferior far outlying location, and the indication at $20.00 per s.f. is a far upper limit due to the much smaller and superior hard corner parcels. Data Nos. 2 and 3 are located at the northerly corner of Winchester Rd. and future Clinton Keith Rd. in the northeasterly part of Murrieta. This was an assembly of two ownerships by the same buyer of a total of 44.03 acres (usable) of vacant land that 49 VALUATION, Continuing had been rough graded some years ago. Data No. 2 was a site that had been planned for a Target store and Data No. 3 comprised the land for the balance of the large retail center. The sales of the two sites closed in January 2016 at the combined price of $18,336,000 or $9.56 per s.f. The buyer plans a large retail center, and this includes the cost burden of constructing the full width of Clinton Keith Rd. from Winchester Rd. and beyond this property frontage. This sale supports a firm lower limit indication for the subject at $9.56 per s.f. due to the much larger size and street construction burden being far more than offsetting to the superior location. Data No. 4 is located at the westerly corner of Winchester Rd. and future Clinton Keith Rd., just to the southwest of Data No. 2. It consisted of 6.53 acres of vacant and fairly flat land that had prior entitlements for a retail center and auto service facility. The sale closed in October 2015 at the price of $3,625,000 or $12.74 per s.f., and the buyer (same entity as for Data Nos. 2 and 3) plans retail development on the site. This sale supports a close upper limit indication for the subject at $12.74 per s.f. due to the slightly smaller size and superior location but inferior shape and with some street construction cost burden. Data No. 5 is located at the northwest corner of Winchester Rd. and La Alba Dr. in Murrieta, surrounded by residential neighborhoods to the north, west and south, but with much open space and the French Valley Airport across Winchester Rd. to the east. It consists of a 9.28 -acre site that is vacant, rough graded land which had previously been approved for a 72,409 s.f. retail center to be called Airport Village. The site is being marketed at an asking price of $5,225,078 or $12.93 per s.f., and the interest has been in the $4,000,000 to $4,500,000 range or ±$10.00 to $11.00 per s.f. However, most interest has been from speculative investors who would entitle the site and not from near-term developers. The indication at $10.00 to $11.00 per s.f. supports a close but firm lower limit indication for the subject due to the slightly inferior location in terms of readiness/demand at this location for large commercial development at current date. Data No. 6 is located on the south side of Rancho California Rd., the second parcel west of Moraga Rd. and backing to Via Las Colinas Rd., in the central part of Temecula. The signal at Lyndie Ln. is opposite this site. This is an individual 1.75 - acre commercial parcel that is not part of a larger center, and is vacant and mostly flat, rough graded land. The sale closed in August 2016 at the price of $1,025,000 or $13.45 per s.f., and the buyer plans an 18,000 s.f. Aldi supermarket. This sale supports a firm upper limit indication for the subject at $13.45 per s.f. due to being much smaller, though lacking being part of a larger center and being a use that is similar to what would be on a larger parcel within the subject site. Data No. 7 is located on the north side of Rancho California Rd., the second parcel east of Business Park Dr. at the west side of Temecula and in a mostly business park type of area. It is a 2.66 -acre parcel consisting of vacant and fairly flat, rough graded 50 VALUATION, Continuing land. The sale closed in November 2016 at the price of $1,600,000 or $13.81 per s.f., and the buyer plans a 120 -room hotel. This sale supports a firm upper limit indication for the subject at $13.81 per s.f. due to the much smaller size being more than offsetting to the inferior location and more limited development potential. Data No. 8 is located on the southwest side of Jackson Ave. (becomes Ynez Rd. in Temecula), nearby to the southeast of Elm St. in Murrieta, and with some frontage along the 15 Freeway. This site is adjacent to the northwest of the Temecula city limits and in that area is much vacant land other than the Mercedes-Benz dealership. The sale consists of 10.58 acres of vacant and rough graded land comprising three contiguous parcels in an irregular shape that had previously been planned for three office buildings. The sale closed in February 2016 at the price of $5,500,000 or $11.93 per s.f., and the buyer's plans are not known. This sale supports a close indication for the subject at $11.93 per s.f. due to the similar size, and similar location with inferior street exposure offset by the limited freeway visibility. Data No. 9 is located on the northwest side of Guava St., nearby to the northeast of Madison Ave. and with partial frontage along the 15 Freeway, in Murrieta. This is a still -developing commercial area but with a Wal-Mart store adjacent to the northwest. This was an assembly of five ownerships comprising a total of 38.605 acres of vacant and gently undulating land in raw condition, and development will require much street construction. The sales closed in September 2015 at the combined price of $18,100,000 or $10.76 per s.f., and the buyer plans a CarMax Auto Superstore. This sale supports a close but firm lower limit indication for the subject at $10.76 per s.f. due to the much larger size, the need to assemble five ownerships, and the raw condition requiring grading and street construction but partially offset by the superior freeway visibility. In summary, the sales support a firm lower limit indication at $9.56 per s.f., close but firm lower limit indications from $10.00 to $11.00 per s.f., a close indication at $11.93 per s.f., close upper limit indications at $12.74 and $13.00 per s.f., firm upper limit indications at $13.45 and $13.81 per s.f., and a far upper limit indication at $20.00 per s.f. Considering the subject site as being rough graded with perimeter streets and utilities mostly completed, and considering the desirable location with the future development of over 1,200 dwelling units in the nearby "Pan" areas, the conclusion for the subject site is $12.00 per s.f. which results in the following: 10.7 usable acres or 466,092 s.f. @ $12.00/s.f. = $5,593,104 Rd. $5,600,000 Absorption/Rate of Land Sales This is similar to the analysis of the RVR ownership. It is noted that the Market Absorption Study by Empire Economics projects that the first closed homes sales for 51 VALUATION, Continuing each of the three product types would be at the beginning of the second half of 2019 or in July 2019. Thus, it is estimated that the land sales for each of the three product types would close in the second quarter of 2018. Regarding the commercial site, the Empire Economics report estimates that its absorption is based upon the occupancy of most of the homes in the "Pan" area along with threshold levels required to support commercial centers, and its absorption is expected to occur during 2023. It is noted that this absorption reflects occupancy of completed building space. Considering the relatively large size of this potential commercial development, the sale of the commercial land would take place well before the completed space was available for occupancy. There is typically a long lag time after the land purchase for plans to be prepared and permits to be obtained, and then construction would likely take at least a year or more before occupancy could occur. In addition, this would likely be a desirable commercial site by that point in time due to the significant amount of new nearby development, which could result in an earlier acquisition of the site. Thus, I have concluded that the land sale would occur at the end of 2020 for occupancy to begin in early 2023. Deductions for Costs to get to Blue-Topped/Mass-Graded Condition Similar to the analysis of the RVR ownership, a deduction is made for the remaining costs to the property owner/master developer to get the land from as is condition to blue -topped lot condition for the residential Planning Areas, with the commercial site in its existing mass graded superpad condition. As previously indicated in the analysis of the RVR ownership, the Wingsweep ownership is responsible for 10% of certain of the land development costs. In addition, based on the indicated costs for the RVR ownership for items including entitlement/planning/mapping, grading, etc., I have included estimated cost amounts. The total estimated costs together with the projected timing of the costs are shown in the following table: Quarter Cost Amount 1Q-2017 $386,552 2Q-2017 $107,730 3Q-2017 $139,784 4Q-2017 $465,078 1Q-2018 $451,799 2Q-2018 $434,205 3Q-2018 $423,074 4Q-2018 $573,120 1Q-2019 $573,120 2Q-2019 $625,124 52 VALUATION, Continuing Quarter Cost Amount 3Q-2019 $330,083 4Q-2019 $278,075 1Q-2020 $265,575 2Q-2020 $265,575 3Q-2020 $265,575 4Q-2020 $88525 Total $5,672,994 Similar to the analysis of the RVR ownership, deductions are made for the estimated property taxes and special taxes, and lastly the deduction is made for the sales costs based on 2.5% of the gross sales revenues. Discount Rate/Internal Rate of Return The conclusion is the same as in the analysis of the RVR ownership, or a discount rate of 20%. Conclusion of Value The discounted cash flow analysis is shown on the following page, which incorporates the foregoing factors. As indicated, this analysis results in a present value indication of $10,898,404, which is rounded to $10,900,000. 53 O ("1 0 O O O O EA 69 EFT ER O O O 0 ER ER ER ER 0 0 O 0 ER (R ER ER 0 0 0 0 69 ER 69 E9 0 0 0 0 ER ER EA EFT 0 CO O 0 ECJ CO EFT ER O O co EFT 0 0 0 EfT N Eft r ▪ O co CCOO ER EiT 0 0 0 0 ER N ER ER M 10 10 EFT 0 0 0 0 ER N LO ER ✓ CO COW LO ER EFT O O O ER- 0 ER ER 0 N EF ER CO LO 0 LO LON- 0 0 CO ER 6) O OM N- CO r CO O N 6) (0 O N 6) 0M CONCV LO CO CO 6) ER 69 r (!) (!-T N r N C.669 69 ER 00EFT 69- 69 ER 69 0 0 0 0 0 ER 99 ER ER 0 0 0 0 (A ER EFT EFT 0 0 0 0 EFT EFT ER ER 0 0 0 0 69 ER ER ER - CO @ @ @ ;.12 Q @ O co a) v C C C C C C W c co c Z • d d d > W Tu CC (.0 Commercial Site ER O W 0 0 ER N LO ER LO LO M CO LO V EA EFT O 0 0 Esi CO EFT ER 6) CO 69 0 0 0 0 ER CO LO EFT N- LO 0 O LO - N 69 69 O N 0 0 ER LO ER 69 LO CO CO ER PROJECT COSTS LO N Sales Costs co M (0 co co O O O czi LO op co ▪ co (RER O t▪ r • N- C h N- (DD LO LO O 0 CO O N- N - ER ER O O O N N M M L0 LO En 67 LO LO (O 6) CO co O 0 o co N- co c- N- (N V' LO LO r CO CD ERER O 0 O O 6) ▪ 6) ▪ 0 1� N- 0 0 V ▪ V 0 CO ERER O CO CO CO N N CO CO CO co (6(6M -,— _ M co (A6 O V • co co 00 (0 N- N- (0 co co 67 • co - W Era -ER O 6) O 6) O 6) O N N LO LO 00 LO U) co O W CVcrp M M 6) ER ER O O H NET CASH FLOWS O N DISCOUNT FACTOR 10 CO CO CO M 'TY CO M (0 M ER LO CO CO LO LO LO LO CV ER LO V V O R M cc (0 6) O CO C O (A PV OF CASH FLOWS PRESENT VALUE O 1- O N 0 O N O N O N 0 N 0 0) O 0J 00 co O co 0)) (0 N- M • - (D M r (D0)0) O 0) N 0) I- M N: (D Ln 0 O) N O O O co o LO CO(00 CO 0 (O() N COCO CV a— N 10 N L() ER N (() ER a- ER ER C\1 ER ER ER 69- ER 0 0 0 0 ER ER ER 0 O O O (0 ER 0 0 © 0 ER ER ER ER 0 0 0 0 ER 69 ER ER O 0 0 0 ER ER ER ER O O 0 0 64 69 69 64 O LO O O O N Cr) O O LO M O O coO (0 E9 ER L!7 69 ER O ER O ER O ER Efl Lf) O 0 h L() ER LO (D (D co c.1 to - ER Lf) 0 O ER ER L0 Ln CO N fR O LO O O LER O (00 • co N ER fR LO L0 0) N. r- N LO LO 7r (9 ▪ (0 1 -- co CV CV E'?- O L0 LO LO N N M N N N (0 (0 (b M co M 69- co R co co r N- 1.0 L( 16 LO CO CO ER CO O (0 O CO O co LO O N N 0 I'— 0 c6 o5 O co co CV CO M N 69ER (fl 6 N CO (0 M 0 N Efl L0 LO O O CO fR ADDENDA ESTIMATED ABSORPTION SCHEDULES FOR CFD NO. 15-01 (RORIPAUGH RANCH - PAN AREA) EMPIRE ECONOMICS - SUBJECT TO REVISION CRITICAL ASSUMPTIONS; SALE OF PROPERTIES TO BUILDERS AND COMPLETION OF THE CONDITIONS OF DEVELOPMENT IN A TIMELY MANNER 51C4119,a4..4 9.0mt,3 0..04r73. Lrvl ■i. 63p4ds6 Mousing Prka4: 44.:.c4- 4rpposy QTRs 2x66‘1.42 Limp dPreps :, saws.: propin r0.4+*nr L6wer Artrear UQper -.. 04.4.. trrwaih° 2914 04+1 ,►#rrdMc 1429 ..InAks. – 21441 Jm,IIeo. 7472 .1246.4346. 7447 Aa541a%. 7904 J041ac. finis 0wrv1. *mum Lowar Paps[♦, 41petr i 21210,'. iymrnl41: Swam 4utLa11: 3.1,14 quo - 124 _ ?44'14". krUay 24N4an16n .._ 0174 3044744 1.440 . 0204 0 ,7,0 79 4S product IA. $*07.004 1425 S00 14 0 43 00 84 Plaala l# 244 Rem.* 43Yy 114465rt'a6 L 160 0742449 21770.200 1407, 020 1.400 2,090 3.220 40 30 44 44 00 61 10 4'mYa[72 01 Pmppusp. .4141 2.us4lorl 4,049 142154604 4479.900 3444400 3.540 3.104 Y.441 t >o 10 37'17 6 0 4 ProductA 184 'A.2.7 4440 3340.020 2344.030 1404,000 4,00) 2,470 2.240 40 24 44 44 24 a 1 — *44444 0 0 3: 44,0.44 44444 Lep: 7,4414,4821 w+4 0 *21 R:.14uiti'AN}' 94vd'Y44 2.,6464^ *`rlsy 1.10001.00 IS 400 4.+000 3432.0 0 0444.190 5454.20a 2442, 5443,454 0470449 22. AD 3p=5 3]417 0030 02 40 14 54 00 42 a 0 4gaWg4 740 2.040 8290 24 /4 49 12 41 42 *wawa ■ 1 Imam 4144,1 La. 214401. 44011092 70 Rciip041140 15404541 11T 311.920 3471.000 0343.74 5407,500 3450 4210 4,740 12 t r 19 11 12 17 14 _fib Si _ 417494.41. 03,000 5464004 1)714,000 5704000 440 4,1014 4404 6 3 d 0 0 0 5 14441444E 41 Y9«1g4.449- 39444 5481.900 $729.9:6 5741,000 5.500 AM *144 a 2 4 1 * 4 9 Y4NILIe11 lima Er 400 it 4. Wei IOW i4114Lm: 3.115,149 *4Wl ■ 2; 2%441.! 44.20 1.401; 5.4491.494 722 41.6% 11 71. 1744160 14101703 5440404 5447.033 06116700 1,40 22110 0,414 04 144 104 121) 101 101 314 34411844 - 2.712 74144 3.410 32 71 04. 41 616 44 /rwentP3:4spar 114742 Lob MOW 404 40'4 1481000 7117147 3791437 31214 .IL144 4843 1.1 23 a 20 07 13 7.044 3403 0004 tiY 127 051 744 227 111 146 ansral 1.074 $l0$340 58.0.317 3584,894 33 QUALIFICATIONS OF STEPHEN G. WHITE, MAI PROFESSIONAL EXPERIENCE Real Estate Appraiser since 1976. 1983 through current date: Self-employed; office located at 1370 N. Brea Blvd., Suite 255, Fullerton, CA 92835 (Phone: 714-738-1595) 1976-1982: Employed by Cedric A. White, Jr., MAI, independent appraiser located in Anaheim. Real estate appraisals have been completed on most types of properties for purposes of fair market value, leased fee value, leasehold value, easement value, partial acquisitions and severance damages. PROFESSIONAL ORGANIZATIONS Member, Appraisal Institute; MAI designation obtained 1985 Affiliate Member, Pacific West Association of Realtors LICENSES Licensed by the State of California as a Certified General Real Estate Appraiser; BREA ID No. AG013311; valid through September 22, 2018. EDUCATION B.A. Economics & Business, Westmont College, Santa Barbara (1976) Appraisal Institute Courses: Basic Appraisal Principles, Methods and Techniques Capitalization Theory and Techniques Urban Properties Litigation Valuation Standards of Professional Appraisal Practice Numerous seminars and continuing education on various appraisal subjects, including valuation of easements and leased fee interests, litigation, the money market and its impact on real estate, and standards of professional appraisal practice. COURT/TESTIMONY EXPERIENCE Qualified as an expert witness in the Superior Courts of Orange, Los Angeles, Riverside and San Bernardino Counties; also for the Assessment Appeals Board of Orange and Los Angeles Counties. TYPES OF PROPERTY APPRAISED Residential: vacant lots, acreage and subdivisions; single family residences, condominiums, townhomes and apartment complexes. Commercial: vacant lots/acreage; office buildings, retail/shopping centers, restaurants, hotels/motels. Industrial: vacant lots and acreage; warehouses, manufacturing buildings, R&D buildings, industrial parks, mini -warehouses. Special Purpose: mobilehome parks, churches, automobile agencies, medical buildings, convalescent hospitals, easements, leased fee and leasehold interests. 57 QUALIFICATIONS, Page 2 CLIENT LIST Corporations: Aera Energy British Pacific Properties BSI Consultants Crown Central Petroleum Firestone Building Materials Foodmaker Realty Corp. Greyhound Lines Holiday Rambler Corp. International Baking Co. Johnson Controls Kampgrounds of America Knowlwood Restaurants La Habra Products, Inc. Developers: Brighton Homes Brookfield Citation Builders Davison -Ferguson Investment Devel. D.T. Smith Homes Irvine Company Kathryn Thompson Developers Law Firms: Baldikoski, Klotz & Dragonette Best, Best & Krieger LLP Bowie, Arneson, Wiles & Giannone Bradshaw, John Bye, Hatcher & Piggott Callahan, McCune & Willis Cooksey, Coleman & Howard Hamilton & Samuels Horgan, Rosen, Beckham & Coren Kent, John Kirkland & Ellis Latham & Watkins LLP McKee, Charles C. Mosich, Nicholas J. Long, David M. Nossaman, Guthner, Knox & Elliott, LLP Financial Institutions: Ahmanson Trust Company Barclays Bank Chino Valley Bank Continental Bank First Interstate Mortgage First Niagara Bank First Wisconsin Bank 58 MCP Foods Merrill Lynch Relocation Orangeland RV Park Pacific Scientific Penhall International Pic 'N Save Stores Sargent -Fletcher Co. Shell -Western E&P Southern Distributors Corp. Southern California Edison The Home Depot Tooley and Company Wastewater Disposal Co. Mark Taylor, Inc. Mission Viejo Co. Premier Homes Presley Homes Rockefeller & Associates Taylor Woodrow Homes Unocal Land & Development Oliver, Barr & Vose 011estad, Freedman & Taylor Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP Paul, Hastings, Jonofsky & Walker LLP Piggott, George B. Pothier, Rose Rosenthal & Zimmerman Rutan & Tucker, LLP Sikora & Price, Inc. Smith & Politiski Williams, Gerold G. Woodruff, Spradlin & Smart, P.C. Yates, Sealy M. NorthMarq Pacific Western Bank San Clemente Savings & Loan Security Pacific Bank Sunwest Bank United Calif. Savings Bank Washington Square Capital QUALIFICATIONS, Page 3 Cities: Anaheim Baldwin Park Buena Park City of Industry Cypress Dana Point Duarte Fontana Fullerton Counties: County of Orange Other Governmental: La Habra Laguna Beach Long Beach Mission Viejo Orange Placentia Riverside Seal Beach San Clemente Agua Mansa Industrial Growth Association El Toro Water District Federal Deposit Insurance Corporation (FDIC) Kern County Employees Retirement Association Lee Lake Water Dist. School Districts: Alvord Unified School Dist. Anaheim Union High School Dist. Anaheim City School Dist. Banning Unified School Dist. Beaumont Unified School Dist. Capistrano Unified School Dist. Castaic Union School Dist. Cypress School Dist. Etiwanda School Dist. Fullerton College Fullerton Joint Union High School Dist. Fullerton School Dist. Garden Grove Unified School Dist. Irvine Unified School Dist. Lake Elsinore Unified School Dist. Moreno Valley Unified School Dist. Churches/Church Organizations: Calvary Church, Santa Ana Central Baptist Church, Pomona Christian & Missionary Alliance Church, Santa Ana Christian Church Foundation Congregational Church, Fullerton First Church of the Nazarene Other: Biola University Cedars -Sinai Medical Center 59 San Diego San Marino Santa Ana Santa Fe Springs Stanton Temecula Tustin Yorba Linda County of Riverside Metropolitan Water District Orange County Water District Trabuco Canyon Water District U.S. Postal Service Newhall School Dist. Newport -Mesa Unified School Dist. Orange Unified School Dist. Palm Springs Unified School Dist. Placentia-Yorba Linda Unified Dist. Poway Unified School Dist. Rialto Unified School Dist. Romoland School Dist. Saddleback Valley Unif. School Dist. San Jacinto Unified School Dist. Santa Ana Unified School Dist. Saugus Union School Dist. So. Orange Cnty. Comm. College Dist. Westside Union School Dist. William S. Hart Union High Schl. Dist. Victor Elementary School Dist. Lutheran Church, Missouri Synod Presbytery of Los Rancho St. Mark's Lutheran Church, Hac. Hts. United Methodist Church Vineyard Christian Fellowship Yorba Linda United Methodist Church Garden Grove Boys' Club The Sheepfold APPENDIX J MARKET ABSORPTION STUDY J-1 MARKET ABSORPTION STUDY COMMUNITY FACILITIES DISTRICT NO. 16-01 (RORIPAUGH RANCH - PAN AREA) PREPARED FOR: CITY OF TEMECULA RIVERSIDE COUNTY, CALIFORNIA PREPARED BY: EMPIRE ECONOMICS, INC. JOSEPH T JANCZYK Ph.D. DECEMBER 2, 2016 CERTIFICATION OF INDEPENDENCE EMPIRE ECONOMICS PROVIDES CONSULTING SERVICES ONLY FOR PUBLIC ENTITIES The Securities & Exchange Commission has taken action against firms that have utilized their research analysts to promote companies with whom they conduct business, citing this as a potential conflict of interest. Accordingly, Empire Economics (Empire), in order to ensure that its clients, including the City of Temecula are not placed in a situation that could cause such conflicts of interest, provides a Certification of Independence. This Certificate states that Empire performs consulting services only for public entities such as the City of Temecula, in order to avoid potential conflicts of interest that could occur if it also provided consulting services for developers/builders. For example, if a research firm for a specific Community Facilities District were to provide consulting services to both the public entity as well as the property owner/developer/builder, then a potential conflict of interest could be created, given the different objectives of the public entity versus the property owner/developer. Accordingly, Empire Economics certifies that the Market Absorption Study for CFD No. 16-01 of the City of Temecula was performed in an independent professional manner, as represented by the following statements: ➢ Empire was retained to perform the Market Absorption Study by the City of Temecula, not the District's property owners, Roripaugh Valley Restoration or Wingsweep Corporation. ➢ Empire has not performed any consulting services for the District's property owners during the past twenty years. ➢ Empire will not perform any consulting services for the District's property owners nor the property owners/builders during at least the next five years. ➢ Empire's compensation for performing the Market Absorption Study for the District is not contingent upon the issuance of Bonds; Empire's fees are paid on a non -contingency basis. Therefore, based upon the statements set -forth above, Empire hereby certifies that the Market Absorption Study for CFD No. 16-01 of the City of Temecula was performed in an independent professional manner. Oosepk T, av�czjk Empire Economics, Inc. Joseph T. Janczyk, President 1 TABLE OF CONTENTS (Revised January 18, 2017; Grammatical Changes Only — No Substantive Changes) INTRODUCTION A. Introduction to the Bond Financing Program .3 B. Southern California Market Region .4 C. CFD No. 16-01 Competitive Market Area .5 D. Role of the Market Study in the Bond Financing 6 E. Methodology Underlying the Market Study 7 SECTION I: EXPECTED PRODUCT MIX CHARACTERISTICS A. Characteristics of the Expected Product Mix for the Projects/Products in CFD No. 16- 01 ....8 SECTION II: MACROECONOMIC ANALYSIS DESIGNATED ECONOMIC AND REAL ESTATE FORECASTING SCENARIO A. Methodology Underlying the Macroeconomic Analysis for Forthcoming Homes in CFD No. 16-01 11 B. Summary of the Market Conditions in Riverside County and the City of Temecula 12 C. Overview of the Recent/Expected Housing Market Conditions for Riverside County and Temecula. 13 D. Critical Components of the Economic and Real Estate Forecasting Model ..14 E. Economic and Real Estate Conditions in California, Southern California, and Riverside County ..18 F. Employment by Firms Located in the City of Temecula .29 G. Conclusions on Recent/Future Housing Market Conditions for Riverside County and the Temecula Market Area31 SECTION III: MICROECONOMIC ANALYSIS A. Methodology Underlying the Microeconomic Analysis of the Residential Projects in CFD No. 16- 01 32 B. Competitiveness of CFD No.16-01 from a Regional Perspective .33 C. Recent Construction Activity Trends /Patterns in the City of Temecula 36 D. Socioeconomic Characteristics: Crime Levels and Quality of Schools 37 E. Competitive Market Analysis of the Projects in CFD No. 16-01 Competitive Housing Market Area 39 Comparison of Prices and Sales Rates: November 2016 vs. April 2016 44 F. Competitive Market Analysis for Homes with Large Lot Sizes .46 SECTION IV: ESTIMATED ABSORPTION SCHEDULES FOR THE PROJECTS IN CFD NO. 16-01 A. Estimated Absorption Schedules for the Projects/Products in CFD No.16- 01 50 SECTION V: SENSITIVITY ANALYSIS: HIGHER MORTGAGE RATES 2 A. Analysis of Employment Changes and Mortgage Rate Levels on Housing Demand 54 SECTION VI: ASSUMPTIONS AND LIMITING CONDITIONS Assumptions and Limiting Conditions .56 Appendix A: Credentials / Qualifications of Economics 59 3 Empire INTRODUCTION A. INTRODUCTION TO THE BOND FINANCING PROGRAM Community Facilities District (CFD) 16-01, also referred to as the Roripaugh Ranch Pan Area, encompasses a Planned Community of single-family homes and also a commercial -retail center that is being developed by Roripaugh Valley Restoration and Wingsweep Corporation. CFD No. 16-01 is located in the northeasterly portion of the City of Temecula, southerly of Murrieta Hot Springs Road and easterly as well as westerly of Butterfield Stage Road. Specifically, CFD No. 16-01 is expected to have some 1,226 single-family detached homes; this consists of 1,061 homes by Roripaugh Valley Restoration and another 165 homes in by Wingsweep Corporation area. CFD No. 16-01 is also expected to have some 15.4 acres for commercial -retail projects that are expected to be oriented primarily towards the households in its vicinity, the Roripaugh Ranch Pan Area. The City of Temecula along with the Property Owners, Roripaugh Valley Restoration (RVR) and Wingsweep Corporation, have formed Community Facilities District No. 16-01 to assist with the financing of the infrastructure that is required to support the development of the forthcoming residential and commercial -retail products in the District. Specifically, the Bond Issue would be utilized to provide funds for various items, including roadways, drainage and park improvements, among others. The specific size of the Bond Issue and the particular improvements included will depend upon various factors which will be finalized when these bonds are sold. The purpose of the Market Absorption Study for the City of Temecula's Bond Financing for CFD No. 16-01 is to provide an estimate of the probable absorption schedules for the forthcoming residential and commercial properties. The absorption schedules for CFD No. 16-01 take into consideration the expected time for Roripaugh Valley Restoration and Wingsweep Corp. to accomplish the following: ➢ First, the property owners' expected time schedules for marketing the parcels to builders. ➢ Secondly, the property owners' expected time schedules for fulfilling various development conditions so that the builders can secure building permits. Accordingly, these factors will influence the absorption schedules for the forthcoming residential and commercial -retail projects in CFD No. 16-01. 4 B. SOUTHERN CALIFORNIA MARKET REGION APPROXIMATE LOCATION OF CFD NO. 16-01 "STAR" r .1• At* bog Iii W �.1 rl r • ,ram .,+ire rir 1' .1111cr ti II.-r7'1•1i� ■ Via-,. >�- ®•t,. 1411 11.■— WAIT _t` s1ler■ 'rte 44. Orr • jbOa.i r -i 1, 1 9 VI FEW} I mar 1• . 1-• ■ o l a.ar r a. • • It i. 311-11•11311-11•11 LLi 1 1 1 1 1 1 1J" 9.1- 9 .1• .LE lissom= LI .._ . _ r 91i • ®•� 1'4 11 WWI tgi 1 r}. li a> PIMA.. I" . -11 °Mir It i AmailiEll 5 C. CFD NO. 16-01: COMPETITIVE HOUSING MARKET AREA APPROXIMATE LOCATION OF CFD NO. 16-01 "STAR" 6 D. ROLE OF THE MARKET STUDY IN THE BOND FINANCING The Market Absorption Study for CFD No. 16-01 has a multiplicity of roles with regards to the Bond Financing; accordingly, these are now discussed. Marketing Prospects for the Residential and Commercial -Retail Product Types Market Study included in Official Statement for Prospective Bond Purchasers Aggregate Levels of Special Tax Revenues Maximum Special Taxes for the Residential Products Conforming to the Issuer's Policies Share of Payments: Developers/Builders vs. Final -Users Determined by the Absorption Schedule Appraisal of Property Discounted Cash Flow — Present Value Absorption Schedules The Issuing Agency for the Bond Issue, the City of Temecula, along with the Municipal Advisor can utilize the Market Absorption Study, Appraisal, and Special Tax Revenue to structure the Bond Issue for CFD No. 16-01. 7 E. METHODOLOGY UNDERLYING THE MARKET STUDY To perform a comprehensive analysis of the macroeconomic and microeconomic factors that are expected to influence the absorption of the residential single-family detached and commercial -retail products in CFD No. 16-01, Empire's Market Absorption Study conducts a systematic analysis of the following factors: MACROECONOMIC FACTORS FOR CFD NO. 16-01 Critical: Employment Changes and Mortgage Rates Other Significant: Expected Housing Price Appreciation Gas Prices and Notices of Default Secondary: Home Ownership Trends, Housing Resales Extraordinary: Shifts in Geographical Development Patterns for Single -Family and Apartment Products MICROECONOMIC FACTORS FOR CFD NO. 16-01 Regional Development Patterns Socioeconomic: School Quality and Neighborhood Safety Competitive Market Analysis *Location *Product Type *Housing Prices *Living Areas *Special Taxes *Features/Amenities ABSORPTION SCHEDULES Product Types *Residential Single -Family Detached Commercial -Retail Center *Market Entry to Build -Out Therefore, the Market Absorption Study systematically proceeds from the macroeconomic analysis of the Market Region's future housing, industrial and commercial growth to the microeconomic analysis of the estimated absorption schedules for the residential single-family detached and commercial -retail products in CFD No. 16-01. 8 SECTION I: EXPECTED PRODUCT MIX CHARACTERISTICS A. CHARACTERISTICS OF THE EXPECTED PRODUCT MIX FOR THE PROJECTS/PRODUCTS IN CFD NO. 16-01 For purposes of the Market Absorption Study for the CFD No. 16-01 Mello -Roos Bond Financing, Empire Economics has compiled information on the planning approvals that Roripaugh Ranch - Pan Area has received as well as the development strategy of the property owners, Roripaugh Valley Restoration and Wingsweep Corporation. Roripaugh Valley Restoration Sabal Financial Group, L.P. 1,061 Homes (Source: Mr. Kenneth Kramer, Principal and Manager) ➢ Product 1A: 254 Single-family Detached Homes: Lot Size: 3,150 sq.ft. o Developer estimates: Prices of $407,000 and living areas of 2,200 sq.ft., on the average. ➢ Product 1B: 268 Single-family Detached Homes: Lot Size: 3,150 sq.ft. o Developer estimates: Prices of $370,000 and living areas of 2,000 sq.ft., on the average. ➢ Product 2: 71 Single-family Detached Homes: Lot Size: 4,000 sq.ft. o Developer estimates: Prices of $429,000 and living areas of 2,600 sq.ft., on the average. ➢ Product 3: 121 Single-family Detached Homes: Lot Size: 5,000 sq.ft. o Developer estimates: Prices of $456,000 and living areas of 3,000 sq.ft., on the average. ➢ Product 4: 268 Single-family Detached Homes: Lot Size: 6,000 sq.ft. o Developer estimates: Prices of $459,200 and living areas of 3,200 sq.ft., on the average. ➢ Product 5: 79 Single-family Detached Homes: Large Lots: 20,000 sq.ft. o Developer estimates: Prices of $743,750 and living areas of 4,250 sq.ft., on the average. Wingsweep Corporation: 165 Homes (Source: Mr. Corry Hong, President and CEO; provided by Mr. Joseph Gauthier, legal counsel) ➢ Product A: 136 Single-family Detached Homes: Lot Size: 3,000 sq.ft. o Developer estimates: Prices of $368,000 and living areas of 2,000 sq.ft., on the average. ➢ Product B: 14 Single-family Detached Homes: Large Lots: 10,000 sq.ft. o Developer estimates: Prices of $720,000 and living areas of 4,000 sq.ft., on the average. ➢ Product C: 15 Single-family Detached Homes: Large Lots: 20,000 sq.ft. o Developer estimates: Prices of $720,000 and living areas of 4,000 sq.ft., on the average. Therefore, CFD No. 16-01 is expected to have 1,226 single-family detached homes with a broad price range, from $340,000 to $807,500 and so the product mix is regarded as being diversified. CFD No. 16- 9 01 is also expected to have some 15.4 acres for commercial -retail projects that are expected to be oriented primarily towards the households in its vicinity. For additional information on the expected characteristics of the forthcoming residential products in CFD No. 16-01, please refer to the following graphs and table. 300 250 200 150 - 100 50 0 CFD NO.16-01 (RORIPAUGH RANCH PAN AREA) EXPECTED HOMES BY PROPERTY OWNERS AND PRODUCT TYPES 268 254 136 121 71 O 268 79 1 14 15 1 O �P �0 ,�`L ,�P p0 ti"' ,��' 0 ,\5 ,`0 w0 OJ ,� G G O c, G O G G ° op• 6, .§-' aJ° `°aJ `O63 OOH `e `°aJ ^JO i°aJ `OaJ `°aJ ^� Qc° Qk° e e y0 e e °tis e e e -IF' c #`'' Ae ■ Roripaugh Valley Restoration Wingsweep Corp. 10 CFD NO. 16-01 (RORIPAUGH RANCH PAN AREA) EXPECTED PRICES OF HOMES BY PROPERTY OWNERS AND PRICES -AVERAGE $800,000 $743,750 $720,000 $720,000 $700,000 $600,000 $500,000 $456,000 $459,200 $407,000 $429,000 $400,000 $300,000 $370,000 $368,000 $200,000 $100,000 $0 q o b x h q G b, ,. a.. ' `` ,`;\' yuw'� b�0 3.0.° Oo0 /Jc� °9' Jti ygyp 4.'`''4 Q ho 4• 4 ptie 4 ¢t Rt J . Ve ■ Roripaugh Valley Restoration ■ Wingsweep Corp. 11 CFD NO. 16-01 EXPECTED RESIDENTIAL PRODUCT MIX CHARACTERISTICS BY PROPERTY OWNERS AND MARKET SEGMENTS Planning Area Estimated Property Lot Size Expec ed Housing Prices; Source: Property Owners Expected Living Areas; Source: Property Owners Units Owner Minimum Lower Average Upper Lower Average Upper Segment # 1: Smaller Size Lots: 3,150-4,000 Product I-A 254 Roripaugh Valley Restoration 3,150 $366,300 $407,000 $423,500 1,980 2,200 2,420 Product I-13 268 Roripaugh Valley Restoration 3,150 $342,000 $370,000 $407,000 1,800 2,000 2,200 Product 2 71 Roripaugh Valley Restoration 4,000 $409,500 $429,000 $443,300 2,340 2,600 2,800 Product A 136 Wingsweep 3,000 $340,000 $368,000 $405,000 1,800 2,000 2,200 Segment # 2: Medium Sized Lots: 5,000-6,000 Product 3 121 Roripaugh Valley Restoration 5,000 $432,000 $456,000 $463,650 2,700 3,000 3,300 Product 4 268 Roripaugh Valley Restoration 6,000 $446,400 $459,200 $473,440 2,880 3,200 3,520 Segment # 3: Larger Sized Lots 10,000+ Product 5 79 Roripaugh Valley Restoration 20,000 $675,000 $743,750 $807,500 3,750 4,250 4,750 Product B 14 Wingsweep 10,000 $651,000 $720,000 $784,000 3,500 4,000 4,500 Product C 15 Wingsweep 20,000 $651,000 $720,000 $784,000 3,500 4,000 4,500 Statsltical Summary: Segment# 1: Smaller Size Lots: 3,150-4,000 729 59.5% $364,450 $393,500 $419,700 1,980 2,200 2,405 Segment# 2: Medium Sized Lots: 5,000-6,000 389 31.7% $439,200 $457,600 $468,545 2,790 3,100 3,410 Segment# 3: Larger Sized Lots 10,000+ 108 8.8% $659,000 $727,917 $791,833 3,583 4,083 4,583 Overall 1,226 $479,244 $519,217 $554,599 2,694 3,028 3,354 12 SECTION II: MACROECONOMIC ANALYSIS DESIGNATED ECONOMIC AND REAL ESTATE FORECASTING SCENARIO A. METHODOLOGY UNDERLYING THE MACROECONOMIC ANALYSIS FOR FORTHCOMING HOMES IN CFD NO. 16-01 This section describes the Economic and Real Estate Model underlying the forecasts for the absorption of the forthcoming residential projects in CFD No. 16-01 during the foreseeable future; according this involves a systematic analysis of the following: B. Summary of the Market Conditions in Riverside County and the City of Temecula C. Overview of the Recent/Expected Housing Market Conditions for Riverside County and the Temecula Market Area D. Critical Components of the Economic and Real Estate Forecasting Model: Critical Drivers: Employment as the Primary Economic Driver Mortgage Rates as a Secondary Economic Driver Other Related Drivers Price Appreciation Expectations Recent Gas Prices Notices of Default E. Economic and Real Estate Conditions in California, Southern California and Riverside County Secondary Factors: Homeownership Rates and Shadow Inventory Sales of New and Existing Homes New Building Permits Unemployment Rates by Cities in Riverside County Extraordinary Market Factors: Typical Geographical Development Patterns Characteristics of Millennials New Building Permits by Area - Urbanized vs. Rural Areas New Building Permits by Types - Single -Family vs. Apartment Recent Shifts in Development Patterns F. Employment by Firms Located in the City of Temecula G. Conclusions on Recent/Future Housing Market Conditions for Riverside County and the Temecula -Murrieta Market Area 13 B. SUMMARY OF THE MARKET CONDITIONS IN RIVERSIDE COUNTY AND THE CITY OF TEMECULA Based upon a comprehensive of the macroeconomic factors underling the recent/future demand for housing in and around Riverside County and the City of Temecula; the primary findings are as follows: 1. Riverside County's economy has recovered from the Great Recession, and its housing market is in a recovery mode, although the rate of recovery is only moderate. (see page 13) 2. Due to the Great Recession, Riverside County employment in 2010 fell to its lowest level since 2003 but it recovered to hit a new peak in 2015; employment is expected to continue to grow during the foreseeable future. (see page 14) 3. Since 2009, mortgage rates have been at historically low levels of below 5% but rates are expected to increase somewhat in the near future. (see page 15) 4. While some higher price appreciation occurred in Riverside County in 2013-2014, price appreciation is expected to continue to be low -to -moderate in the near term. (see page 15) 5. Notices of Default peaked during 2007-12 but their foreclosures/short sales created a significant shadow inventory: renter -occupied single-family homes in Riverside County rose by 58,000. (see page 16) 6. Gas prices in California peaked in 2012 and have since declined, thereby reducing commuting costs. (see page 17) 7. Since the peak of the Housing Bubble, California homeownership rates have declined from —60% to —54%; Riverside County rates have also declined, resulting in a shadow inventory. (see page 18) 8. Sales of new homes and existing homes have remained at relatively low levels since the end of the Housing Bubble, but are expected to increase through 2020. (see page 19) 9. New building permits have increased only moderately in recent years, for both single-family and multi- family/apartments, but the recovery is expected to strengthen during the foreseeable future (see page 20) 10. The City of Temecula has one of the lowest unemployment rates of any city in Riverside County, less than 5%. (see page 21) 11. Extraordinary special factors are causing market product type shifts towards apartments and geographical shifts to urbanized areas. (see page 22-26) 12. New single-family homes in the Inland Areas had a much higher peak level during the Housing Bubble but are now recovering at a slower pace than in the Urbanized Areas (see page 27-28) 13. New apartments in the Inland Areas peaked in 2004 and have lagged since while recently apartments in the Urbanized Areas have recently attained a new peak levels (see pages 27-28) 14. Firms in Temecula have about 50,362 employees; sectors with the highest shares of employees are public administration, retail trade and accommodation/food. Firms in Temecula have an average payroll per employee that amounts to $38,000, for full and part-time employees. (see pages 29 & 30) Please refer to the following pages for additional information, followed by a synopsis (see page 31). 14 C. OVERVIEW OF THE RECENT/EXPECTED HOUSING MARKET CONDITIONS FOR RIVERSIDE COUNTY AND TEMECULA RECENT/EXPECTED REAL ESTATE MARKET TRENDS/PATTERNS IN RIVERSIDE COUNTY AND TEMECULA IMPACT OF EMPLOYMENT: PRIMARY DRIVER STRONGER THAN' ANTI CIPATEL EMPLOYMENT GROWTH ACCELERATES THE REAL ESTATE RECOVERY EMPLOYMENT CHANGES, WHICH DEPEND UPON THE OVERALL ECONOMY, MAY SHIFT THIS PARADIGM LOWER THAN ANTICIPATED EMPLOYMENT GROWTH ELONGATES THE REAL ESTATE RECOVERY PHASE 1: PRICE DECLINES 2007 TO 2009 HOUSING PRICES ADJUST FROM PEAK LEVELS BACK TO EQUILIBRIUM, BASED UPON HOUSEHOLD INCOMES AND CONVENTIONAL FINANCING TECHNIQUES PRICES DECLINE SIGNIFICANTLY DUE INITIALLY TO MORTGAGE RESETS AND THEN PRICE DECLINES CONTINUE DUE TO NEGATIVE EQUITY FOR HOMEOWNERS PHASE 2: PRICES STABILIZE 2010 TO 2012 FORECLOSURE AND SHORT -SALES DOMINATE THE MARKET FORECLOSURE/SHORT SALES ARE A SIGNIFICANT COMPONENT OF THE MARKET MARKET SALES OF EXISTING HOMES ARE MODERATE SALES OF NEW HOMES ARE MINIMAL - DISPLACED BY FORECLOSURE SALES MOST OF THE HOMES THAT HAVE SIGNIFICANT LEVELS OF NEGATIVE EQUITY ARE CLEARED IN THE MARKETPLACE PHASE 3: HOUSING MARKET RECOVERY 2013-2016+ STRONG EMPLOYMENT GROWTH DRIVES HOUSING DEMAND/PRICES INCREASES THIS SUPPORTS NEW DEVELOPMENT IN THE CITY OF TEMECULA'S PLANNED COMMUNITIES AND ALSO BUSINESS PARKS, POTENTIAL MACRO CHALLENGES: FEDERAL DEFICIT REDUCTION AND THE FEDERAL RESERVE BOARD REBALANCING ITS FINANCIAL ACCOUNTS 15 IMPACT OF MORTGAGE RATES: SECONDARY DRIVER LOWER THAN ANTICIPATED MORTGAGE RATES CCELERATE THE REAL ESTATE RECOVERY THE LEVEL OF MORTGAGE RATES, WHICH DEPEND UPON THE RATE OF INFLATION, MAY SHIFT THIS PARADIGM a HIGHER THAN ANTICIPATED MORTGAGE RATES ELONGATE THE REAL ESTATE RECOVERY D. CRITICAL COMPONENTS OF THE ECONOMIC AND REAL ESTATE FORECASTING MODEL LEVEL OF EMPLOYMENT 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 RIVERSIDE COUNTY: AGGREGATE EMPLOYMENT ATTAINS A NEW PEAK LEVEL IN 2015 EMPLOYMENT LOSSES FROM THE RECENT RECESSION HAVE BEEN RECOUPED Due to the Great Recession, in 2010, employment fell to its lowest level since 2003 Employment recovered and then set a new peak in 2015 I From 2003-2007, employment increased to new highs Ni N N Ni Ni N N) Ni Ni Ni Ni N) Ni N N) Ni N) Ni Ni Ni N N.) N N CO CO CO CD CD CD CO CD CD CD CD CD CD CO CO CO 0 0 CD CD 0 0 0 0 0 0 CD CD 0 0 0 0 0 0 0 0 CD 0 0 CD CO CO CO CO CD CD CO CD CD CO CO CO CO CO CO CD O O O O O O O O O O O O O O N CO CO CO O N CA -P A CA CT �I v CO CD O O N CO CO al CA O) �l CO CO CO O N ro CO p! (n -.I O (�.) N— IP 0) N— IP W Ni -� IP. 'CO N 1� W N— IP W N— A 0.) N— IP 0) N—� W N 1 A Emp: New High OEMP: Losses • EMP: Recovering 16 n EI HOUSING PRICE CHANGES -ANNUALLY 40% — 30% 20% 10% 0% -10% -20% -30% RIVERSIDE COUNTY: HOUSING PRICE CHANGES AND MORTGAGE RATES Prior Real Estate Cycle • uuumi lip Price Bubble Correction Stabilize Recovery 11 Ore Economics N N N) N N N) N N N) N N N N N N N) co - m - co co - m c0 co m co co co - m 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 2016 co co co co co cfl c0 c0 cfl (0 c0 c0 0 0 0 0 0 0 0 0 0 0 CO 0 o - N Co v, rn • oo c0 o - N ca u, CD CO o o - N w- 9) -2020 PRICE CHANGES -ANNUALIZED MORTGAGE RATE -LOW: Lower RATES -AVERAGE RATES -HIGH 14% 12% 10% 8% 6% 4% 2% 0% FIXED 30 YEAR MORTGAGE RATE 17 HOUSING PRICE CHANGES -ANNUALLY 40% 30 20% 10% 0% - 10% - 20% -30% -40% RIVERSIDE COUNTY: HOUSING PRICE CHANGES & MORTGAGE DEFAULTS N C0 C0 CO c0 CO c0 C0 C0 C0 CO C0 CO O CO CO (0 C0 (0 CO CO (0 CO CO (0 CO O 00 C0 O - N w (71 (3) �I OD CO O N N N N N N N N) Ni N Ni Ni N 0 0 0 0 0 0 0 0 0 0 0 0 0 N «rn o N w cn 2020 N 0 O 2016 PRICE CHANGES -ANNUALIZED NOTICES OF DEFAULTS 20,000 16,000 12,000 8,000 4,000 0 NOTICES OF MORTGAGE DEFAULTS - QUARTERLY 18 Prior Real Estate Cycle Price Bubble Correction Stabilize Recovery As nods rose, the number of single-family renter -occupied homes in Riverside County increased ^58,000 from 2007-2012 SII n r4), AlICIr - :101111.,, �i 4, 0,11 JOwII�`� 1�� �IIII� X11� , � ILL Empre Economics N C0 C0 CO c0 CO c0 C0 C0 C0 CO C0 CO O CO CO (0 C0 (0 CO CO (0 CO CO (0 CO O 00 C0 O - N w (71 (3) �I OD CO O N N N N N N N N) Ni N Ni Ni N 0 0 0 0 0 0 0 0 0 0 0 0 0 N «rn o N w cn 2020 N 0 O 2016 PRICE CHANGES -ANNUALIZED NOTICES OF DEFAULTS 20,000 16,000 12,000 8,000 4,000 0 NOTICES OF MORTGAGE DEFAULTS - QUARTERLY 18 AVERAGE REGULAR GAS PRICES (IN $2010 DOLLARS) $5.00- $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 CALIFORNIA: AVERAGE GAS PRICES 1.67 ,ir $3.88 N N N N N N N N N N N N N N N N N CO CO CO CO CO CO CO CO CO CO CO CO O O O O O O O O O O O O O O O O O 00 00 CO CO CD CO CD CO CO CO CO CO O O O O O O O O O O 00 CCD O — N) Ca) 4 Cal 0) -.I 00 CO O — N CA) 4 Cal 0) v 00 CCD O — N) Cs) 4 CS O 19 E ECONOMIC AND REAL ESTATE CONDITIONS IN CALIFORNIA, SOUTHERN CALIFORNIA AND RIVERSIDE COUNTY Homeownership reached a peak level during the recent 2005-2007 housing price bubble. Then the implosion of housing prices resulted in numerous foreclosures and short sales. Many of these single-family homes became rentals, resulting in a significant "shadow" inventory. 20 CALIFORNIA HOMEOWNERSHIP RATES 80% 70% 60% 50% CA HOMEOWNERSHIP RATES FOR ALL HOME TYPES Declines in homeownership rates reflect stagnant median income, rising student debt, and stringent lending standards. 40% - 30% 20% 10% 0% As California home ownership rates rose from 54% to 60% from 1989 to 2004, driven by employment growth andfalling mortgage rates Homeownership dropped significantly from 2006-2014 to its lowest level si nce 1990. In Riverside County, homeownership rate declined from 69% in 2007-2009 to 66% in 2010-2012. 59.7% 53.6% 56.0% 1 1 O ■ rnpr( 54..%1 i N NJ Ni Ni Ni Ni N N 0) N 0) 03 N 0) 0) (D (D (D CO (0 (O O (O 0 (0 CO (0 0 0 0 0 0 O O 0 0 0 0 0 O 0 O_ CO CO CO CO (O (D (D (D (D (O (O CO 0 0 0 0 0 0 O O 0 O CO O O N W A cn m r CO O O N W A (n 0) v 01 (D O -. N W A SOUTHERN CALIFORNIA COUNTIES: CHANGE IN MARKET SHARE OF SINGLE- FAMILY RENTER -OCCUPIED HOUSING FROM 2007-2012 129E j M I; 1o�c ur A -1 0 0 " :ng1r tar• , ref.v, aL.u.ce NI: ning r(ra.oa no xar+r•rn[ndor rodnur. from 2007102012 •SR 00(1 The largnt rr:rease was e, Rrversde Coue1v —. 8.5% tKET SHARE OF SII IPIEO HOMES FROP +31,000 .2 4.1".i+ .5,400 1,U00 a. 8% 1 2 4i et O LU W .42000 •11,000 2 4.>,a 2 1°: 0— Z 2% 1.5% _� V 0% J ,...1.4.1...1.0.... V) r— < O to A cot Cir° J t — 0 3 -Z - 0 20 CALIFORNIA HOMEOWNERSHIP RATES 80% 70% 60% 50% CA HOMEOWNERSHIP RATES FOR ALL HOME TYPES Declines in homeownership rates reflect stagnant median income, rising student debt, and stringent lending standards. 40% - 30% 20% 10% 0% As California home ownership rates rose from 54% to 60% from 1989 to 2004, driven by employment growth andfalling mortgage rates Homeownership dropped significantly from 2006-2014 to its lowest level si nce 1990. In Riverside County, homeownership rate declined from 69% in 2007-2009 to 66% in 2010-2012. 59.7% 53.6% 56.0% 1 1 O ■ rnpr( 54..%1 i N NJ Ni Ni Ni Ni N N 0) N 0) 03 N 0) 0) (D (D (D CO (0 (O O (O 0 (0 CO (0 0 0 0 0 0 O O 0 0 0 0 0 O 0 O_ CO CO CO CO (O (D (D (D (D (O (O CO 0 0 0 0 0 0 O O 0 O CO O O N W A cn m r CO O O N W A (n 0) v 01 (D O -. N W A HOUSING PRICE CHANGES -ANNUALLY 40 30 20 10% 0% - 10% - 20% - 30% - 40% RIVERSIDE COUNTY: HOUSING PRICES AND EXISTING/NEW HOME SALES N) N N CO CO CO CO CO CO CO CO CO CO CO CO O 0 0 CO CO Co (0 CO CO CO (0 CO (0 Co co 0 0 0 CO CO O C31 Cr) CO CO 'PRICE CHANGES -ANNUALIZED N.) 0 O N 0 O N 0 N 0 0 CS) N 0 0 N 0 0 CO N 0 0 N o_ 0 HOUSING SALES: NEW/EXISTING N 0 0_ N N CD_ CA) N o_ -2020 2016 30,000 25,000 20,000 15,000 10,000 5,000 0 HOUSING SALES - QUARTERLY 21 Prior Real Estate Cycle Price Bubble Correction Stabilize Recovery • t n q - H ] Pr - Ifnilir " En pire Economics N) N N CO CO CO CO CO CO CO CO CO CO CO CO O 0 0 CO CO Co (0 CO CO CO (0 CO (0 Co co 0 0 0 CO CO O C31 Cr) CO CO 'PRICE CHANGES -ANNUALIZED N.) 0 O N 0 O N 0 N 0 0 CS) N 0 0 N 0 0 CO N 0 0 N o_ 0 HOUSING SALES: NEW/EXISTING N 0 0_ N N CD_ CA) N o_ -2020 2016 30,000 25,000 20,000 15,000 10,000 5,000 0 HOUSING SALES - QUARTERLY 21 En 40% 20 0% - -20% -40% 1 RIVERSIDE COUNTY: HOUSING PRICE CHANGES AND BUILDING PERMITS Prior Real Estate Cycle Price Bubble —n11ll puuUijuu-- Correction i Stabilize Recovery MIDI [1 MOD Aire Economics N N N N N N N) N) N N N N N N N N 2016 CO CO CO CO (O CO 0 CO CO 0 (O 0 O O 0 O 0 O 0 O 0 0 O 0 O 0 O O COCCD O (fl CO CO - C07i - CO CO0CD 0 -. 0 OW -OCD P ai a> O-4 0 (OO o —, N W - of - 2020 • PRICE CHANGES -ANNUALIZED SINGLE-FAMILY HOMES ATTACHED/APARTMENTS 15,000 12,500 10,000 7,500 5,000 2,500 NUMBER OF NEW HOMES - QUARTERLY 22 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% RIVERSIDE COUNTY UNEMPLOYMENT RATES BY CITIES CITY OF TEMECULA MUCH LOWER THAN RIVERSIDE COUNTY 6.5% 4.6% Riverside County Beaumont city La Quinta city U f0 E U Eastvale City city Palm Desert city Temecula city Indian Wells city Canyon Lake city Idyllwild Pine Cove CDP Thousand Palms CDP Winchester CDP Palm Springs city Rancho Mirage city Home Gardens CDP Nuevo CDP Cherry Valley CDP Woodcrest CDP Highgrove CDP Valle Vista CDP Wildomar CDP Bermuda Dunes CDP Lake Elsinore city Moreno Valley city East Hemet CDP Desert Hot Springs city EI Cerrito CDP Jurupa Valley city Romoland CDP > 0 0 N E E N 2 d San Jacinto city Homeland CDP Lakeview CDP March AFB CDP Cabazon CDP Mecca CDP 23 ALTHOUGH EMPLOYMENT GROWTH IS STRONG, EXTRAORDINARY SPECIAL FACTORS ARE CAUSING MAJOR MARKET SHIFTS Min as T:dMHl 're ON 1.1. 1.41 w:. . ti 14aihb �• �2i Vr !d iklfj¢. • 7011 oiod 111.0 .'iM4,11.1b+ Moira PM.. :r• aau ae, , ►�� PFJ` l 51(1.1 riberP ham Sam maw him keic" vac oa $.i4 I - Rom 6.kw 1�4w I hnnAng CANA L1 ,i r ,yLdd l'Fiui impen {-'4'l nNm Punk •n YY*jmt9" NNW wr Lei F�Pi iimi1 c �" ii C "L L.,._ !Wel ,10 Nam Pmt Nrm. WW1 ImImINAmmirn ram 11.4 Earl?' hnreiri i. p'.w tiles [.w Pr r ,1 + i r C . i■ IMAM I i.1 • 1`�M•-Y� `5i#114W 11-4MIP w is iltilt*Pa d Ficizyikri He•hr•RRf11 I.aeY `w War, Tidal n i-•• {N'i LP14i CUR ).XPi. '. .. Lamar acme, }d71 r'ffill WM 54. ClErmIN 1 - .j.1- drama no iprp rr „wu ti ... •d " 1' d dd. :lamS�i 24 25 MILLENNIALS' PREFERENCES AND FINANCES 3 HIGHER -DENSITY / URBANIZED HOUSING PARENTS: GENERATION X (AGES 35-54) IMPACTED BY IMPLOSION OF HOUSING PRICE BUBBLE CULTURAL PREFERENCES ➢ PROXIMITY TO COMMUNITY AND URBAN ACTIVITIES ➢ PROXIMITY TO OFFICE - MINIMIZES COMMUTING TIME ➢ RESORT -LIKE AMENITY PACKAGES: CONCIERGE SERVICE, GYM AND SWIMMING POOL ➢ CONVENIENCE: NO YARD WORK OR MAINTENANCE OR REPAIRS ➢ WAITING LONGER TO GET MARRIED AND STARTING A FAMILY FINANCIAL FACTORS ➢ SIGNIFICANT STUDENT DEBT: ADVERSELY IMPACTS DOWN PAYMENT AND MORTGAGE QUALIFICATION ➢ RENTING PROVIDES MORE JOB FLEXIBILITY (CHANGE JOBS/FIRMS MORE FREQUENTLY) ➢ SOME EVEN PAY VERY HIGH RENTS, RATHER THAN PURCHASE A HOME 26 OTHER FACTORS POTENTIALLY RESTRAINING THE DEMAND FOR SINGLE-FAMILY HOMES 1. HOMEOWNERSHIP HAS DECLINED FROM REDUCED DEMAND FOR NEW SINGLE - 60% -2005 TO 54%-2014 FAMILY HOMES 2. INCREASES IN SINGLE FAMILY RENTALS REFLECT A TRANSFORMATION OF THE EXCESS HOUSING MARKET BUBBLE SINGLE-FAMILY OWNERSHIP TO RENTALS 3. MODERATE FUTURE PRICE EXPECTATIONS RESTRAINED BUYER CONFIDENCE 4. SIGNIFICANT SUPPLY OF NEW APARTMENT WILL CONTINUE TO PROVIDE COMPETITIVE PROJECTS IN THE PIPELINE ALTERNATIVE TO HOME OWNERSHIP 27 1-4,10t11.1.'E LtA LLN. \I- 0.0. %INLALt 4.300 II V HL ..111.L.21)116, THE SERLFIEW41111.101., 1 l'AT ILO DENIESSIEFLWEL <if A elL9.Trt iiw.r301:0143012 .CVcINUED, ro EVE DEPREISETkricaN6 ms-.20itei gi• • • -- • 28 IKELATIVE LIFVFIS Of NEW APARTWNT UNITS :131 .L.!116 THE LltliAN OLF_AS !AVE !IAD vEEVC I. LIG Fl LEvEL 1. OF Nru; APAR T'AD:71 12415 134.11.M5 2 t°1 rg 1 I '1 :111 12_NNL41.5 FREI FRRIN:1:1 1111.1136 L?". i 1: van" i'11.11'clLPJLiI2 1 1-11 {.7.r..„! 4. r A I, DI SAM 1/4 SOUTHERN CALIFORNIA - TYPES OF NEW HOUSING PRODUCTS BY GEOGRAPHIC AREAS kLIL LEvEl.% *- wt.h-FANIIij.j°uj kPILLONE,11 FRO. "niEsA2.4 F RANCIS,CiD AND, ,LOS ANIMUS Rai I CA tallir14:111:1tEAN'Rl-FLAIL AFMAS du. ' 1111. iL" "- 29 KELATIvE LEVEL. %1 , *L.. odES AkiA4,11111ised1103,. %1 14131.1iN 1.1 I Lk IA 4.14P AS111 1"4okr1 111 FPRIT.Auri • 1.11,L 1Pie -2— ill A A . • 'Iltr4. •• n :04 . .1111L. NEW FOR -SALE HOMES NEW FOR -SALE HOME ACTIVITY RECOVERY: * MODERATE PACE IN THE URBANIZED AREAS * BUT AT A SLOW PACE IN THE INLAND AREAS 50,000 SOUTHERN CALIFORNIA: NEW SINGLE-FAMILY HOMES BY GEOGRAPHIC AREAS New single-family homes in 45,000 the Inland Areas hada much higher peak level during the 40,000 Housing Bubble 35,000 30,000 25,000 New single-family homes are recovering at a faster pace in the coastal vs. the 20,000 inland areas 15,000 10,000 1 5,000 0 GI m v Oi ICI"; oo m o m m m m m m m m o 0 0 m 0 a 0 0 2 a 0 n 8 m o ry m e 0 0 0 °1 m m .9 N .9 9 .9 9 N N N N N N N N N N N N N N N N Urbanized/Coastal Suburban/Inland 30 APARTMENT RENTALS NEW APARTMENT ACTIVITY RECOVERY: * STRONG PACE IN THE URBANIZED AREAS, * BUT MINIMAL LEVELS IN THE INLAND AREAS 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 SOUTHERN CALIFORNIA: NEW APARTMENTS BY GEOGRAPHIC AREAS New apartments in the Coastal Area have attained a new peak level New apartments in the Inland Area peaked in 2004 01 mc .m m n 0 2-2 O m a O Urbanized/Coastal Suburban/Inland THE CURRENT HOUSING MARKET RECOVERY DIFFERS SIGNIFICANTLY FROM PRIOR RECOVERIES: • MUCH HIGHER LEVELS OF APARTMENTS IN URBANIZED AREAS • MUCH LOWER LEVELS OF SINGLE-FAMILY HOMES IN THE INLAND AREAS F"i W 114•41, gveirril .4•11 ._ . _ i 1'I `I lain. �1171'm, ... �� 1— t."1 it l y; F. EMPLOYMENT BY FIRMS LOCATED IN THE CITY OF TEMECULA Information was compiled from the Employment Development Department (EDD) specifically for firms located in the City of Temecula, including the number of employees and the payroll amounts. Note: Employment represents personnel on the payroll, and as such includes both full-time as well as part-time employees. Composition of Employment by Sectors: The firms in Temecula have about 51,960 employees as compared to 50,362 employees in the prior year, an increase of some 1,597 or +3.2%; the sectors with the highest shares of employees are as follows: Public administration: 19.2% Retail trade: 16.3% Accommodation and Food: 14.0% Administrative and Support: 8.3% CITY OF TEMECULA - LEVELS OF EMPLOYMENT BY ECONOMIC SECTORS (INCLUDES FULL-TIME AND PART TIME POSITIONS) Public Administration Retail Trade Accommodation and Food Services Administrative and Support Health Care and Social Manufacturing Construction Wholesale Trade Professional, Scientific, Technical Other Services Finance and Insurance Information Educational Services Real Estate, Rental,Leasing Agriculture, Forestry Transportation & Warehousing Arts, Entertainment Management 0% 5% 10% 15% 20% 25% 32 19.2% 16.3% 14.0% 8.3% 8.0% 6.7% 6.7% 5.0% 4.0% 2.4% 1.9% 1.3% 1.3% — 1.2% — 1.2% 1.1% 11 1.1% i 0.1% 32 Payroll by Employment Sectors: For the firms in the City of Temecula, the average payroll per employee amounts to some $39,002, an increase from the prior year of $38,000, on the average, for full and part-time employees. This represents an increase of some $1,000 or 2.62%. The sectors with the highest payrolls per employee (full & part-time), according to EDD, are as follows: Management: $72,184 Professional: $69,131 Finance & Insurance: $63,857 CITY OF TEMECULA: AVERAGE PAYROLL PER EMPLOYEE BY ECONOMIC SECTORS (SALARIES REFLECT FULL AND PART TIME POSITIONS) Public Administration Retail Trade Accommodation and Food Services Health Care and Social Administrative and Support Manufacturing Construction Wholesale Trade Professional, Scientific, Technical Other Services Finance and Insurance Information Arts, Entertainment Real Estate, Rental,Leasing Educational Services Agriculture, Forestry Transportation & Warehousing Management $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 33 $48,510 $69,131 ,18,876 $33,033 $42,179 $28,730 $41,527 $48,043 $51,564 $29,653 $63,857 $17,952 $31,460 $48,345 $30,364 $35 687 $43,425 $72,184 33 G. CONCLUSIONS ON RECENT / FUTURE HOUSING MARKET CONDITIONS FOR RIVERSIDE COUNTY AND THE TEMECULA MARKET AREA The recent trends / patterns for the economy and housing market in Riverside County and the CFD No. 16-01 Temecula -Murrieta Market Area, along with Empire's forecast for economic growth and housing demand based upon its Designated Economic and Real Estate Scenario, are now discussed. Price Appreciation: Starting in 2002, housing prices began to appreciate as mortgage rates declined, and then the rate of appreciation accelerated during 2004 to 2006 due to the pervasive use of non -conventional (creative) financing structures. During this time period, these financing structures and related financing factors, rather than employment growth, were the primary driving forces underlying the extraordinary rate of housing price appreciation for California, and also for Riverside County. Price Declines — Negative Equity: During 2007 to 2009, housing prices decreased significantly, pushing a substantial proportion of homeowners who purchased their homes during the price bubble into a position of negative equity, especially those that had high loan to value ratios. The enormous number of homeowners under duress caused an over -supply of homes which, in turn, severely depressed new development activity. Foundation for Recovery: Starting in 2010, and continuing through 2012, housing prices were relatively stable, and this enabled the housing market to go through a consolidation phase: ➢ Many homeowners with negative equity went through the foreclosure and short sales process. ➢ These homes, in turn, were purchased by new bona -fide homeowners as well as investors that benefited from lower prices. Although mortgage rates were very favorable, mortgage lending criteria were tighter for households and many investors were cash buyers. Market Recovery During 2013-2014: The housing market moved into a recovery phase, with the return of employment growth, and housing prices increased by some 20% during 2013. Normal Market Conditions During 2015-2016+: Employment, the traditional driver of housing price appreciation, has reached a new peak level, thereby recovering the jobs that were lost during the Great Recession. During the foreseeable future, employment is expected to increase at a moderate rate, and this will enable the housing market to return to its "historical" rate of price appreciation. However, the near-term recovery is not expected to be as robust as the typical recovery, due to the following macroeconomic conditions: ➢ Millennials have a preference to reside in urbanized areas and rent apartments, rather than commute to the suburban/rural areas to purchase moderately priced single-family homes. ➢ Reducing the Federal Deficit through higher tax rates, reduced deductions and lower spending. ➢ Federal Reserve Board re -balancing its accounts by selling recently purchased securities. Economic Strength of the CFD Market Area — Cities of Temecula and Murrieta: The Temecula -Murrieta Market Area is regarded as being a strong local economy within Riverside County (firms in Temecula have 50,000 employees), based upon its relatively low unemployment rate. Additionally, the area also benefits from some households in San Diego County that seek more moderately priced single-family housing (40,000 commuters into Riverside County from San Diego County). Due to its strong economic base and the spillover of demand from the San Diego County Core, the Temecula -Murrieta housing market will strengthen its recovery as employment 34 gains generate a stronger demand for new homes, thereby providing support for the residential projects in CFD No. 16-01. SECTION III: MICROECONOMIC ANALYSIS A. METHODOLOGY UNDERLYING THE MICROECONOMIC ANALYSIS OF THE RESIDENTIAL PROJECTS IN CFD NO. 16-01 The microeconomic analysis focuses upon the competitiveness of the forthcoming residential projects in CFD No. 16-01 with regards to the regional geographic development patterns within Riverside County and also the currently active comparable projects within the Temecula/Murrieta Market Area. B. Competitiveness from a Geographical Regional Perspective * Location of CFD No. 16-01: Relative to Employment Centers, and Business Parks Commuting Patterns: Employment Centers to Residential Areas - Location Relative to Urbanized, Suburban, and Rural Areas C. Recent Construction Activity/Trends in the City of Temecula - Residential: Single-family and Multiple -family - Industrial, Office and Retail D. Socioeconomic Characteristics - Crime Levels and Safety in the Market Area - Quality of Schools and Education E. Competitive Market Analysis of Projects in CFD No. 16-01 - Identification of the Currently Active Residential Projects in the Temecula -Murrieta Market Area and Selection of the Comparable Projects Approximate Locations of CFD No.16-01 and Market Comparables - Recent Housing Sale Trends and Price Patterns for Homes in the Competitive Housing Market Area - Competitive Market Analysis of the Projects in the CFD: Statistical Analysis of the Prices, Living Area and Special Taxes F. Competitive Market Analysis for Products with Large Lot Sizes Price Premiums for Homes on Large Lots Recent Sales Trends for Homes on Large Lots 35 B. COMPETITIVENESS OF CFD NO. 16-01 FROM A REGIONAL PERSPECTIVE From a regional perspective, the competitiveness of CFD No. 16-01's forthcoming residential and commercial -retail projects/products are influenced by the development patterns for employment and housing within the Southern California Market Region (MR), and their interrelationships with the CFD No. 16-01 Market Area. Specifically, Business Parks generate industrial -office development while Planned Communities generate residential and commercial -retail development; additionally, the flow of traffic between them is facilitated by the freeways and highways. ➢ Expansion of Employment Centers and Business Parks The currently established major employment centers are Orange, San Diego and Los Angeles (OC/SD/LA) counties as well as the western portions of Riverside and San Bernardino counties. Furthermore, there has been some expansion from these into various Business Parks located in the CFD No. 16-01 Market Area, the southwestern portion of Riverside County. Specifically, these Business Parks are situated primarily along Interstates 15 and 215, major north -south freeways that link the western portions of Riverside and San Bernardino counties. The potential for the future expansion of Business Parks depends, to a significant degree, upon their freeway accessibility. ➢ Commuting Patterns: Employment Centers to Residential Areas Some of the households employed in the OC/SD/LA and western Riverside County employment centers reside in the CFD No. 16-01 Market Area, since it offers moderately priced housing; these commuting patterns are based upon the freeways/highways that link the employment centers to the Market Area. The expansion of the residential centers depends upon accessibility, whether by freeway or secondary roads. * There is strong spillover of housing demand from San Diego County into southwestern Riverside County along Interstates 15 and 215, major north -south freeways that link Riverside and San Diego counties. 36 RIVERSIDE COUNTY COMMUTING PATTERNS HOUSEHOLDS RESIDING IN RIVERSIDE COUNTY BUT EMPLOYED IN OTHER COUNTIES During 2006-2010, over 35,000 workers, on average, commuted into each of the four major nearby counties. Specifically, during this time period, some 38,830 people that resided in Riverside County, on average, commuted from their homes in Riverside County to their employers in San Diego County. This reflects the strong spillover in demand from San Diego County into southwestern Riverside County and the Temecula -Murrieta Market Area. 2006-2010 County -to -County Commuting Flows Munlvruy 006 Ring, 141 _ 1d 4▪ 1 &Ma Beam 210 Wariicrs Commuting From Riverside To Other Counties u-100 101 . 50111 CM 561.tow *,061 - su.000 - soon - 40.700 No Comm Wars To Thrs Cnuniy TOW ANC0(.48 ceermuMi11g 0500 255255 Ventura - ▪ 575 &mpgr 67.19 Total Workers That Live And Work in Riverside: 586.285 Additionally, for each major neighboring county, the number of people commuting from Riverside County into that county exceeds the number of people commuting into Riverside County. So, although Riverside has seen employment growth and has a substantial employment base, many residents commute to other counties for work. 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 RIVERSIDE COUNTY: COMMUTING LEVELS FROM AND INTO COUNTY (2006-2010) 89,709 65,136 50 5 0 m 0 0 ■ Commuting from Riverside County ❑ Commuting Into Riverside County 0 CFD NO. 16-01 - AN "INFILL" DEVELOPMENT: THE CFD IS SITUATED WELL WITHIN TNF RFCTTIFNTTAT TIFVFT (IPMFNT ARF A 50,901 38 830 5,242 15,228 .. 8 636 5,036 on li 0 m 0 0 ■ Commuting from Riverside County ❑ Commuting Into Riverside County 0 CFD NO. 16-01 - AN "INFILL" DEVELOPMENT: THE CFD IS SITUATED WELL WITHIN TNF RFCTTIFNTTAT TIFVFT (IPMFNT ARF A C. RECENT CONSTRUCTION ACTIVITY TRENDS/PATTERNS IN THE CITY OF TEMECULA SINCE 2009 ONLY MODERATE LEVELS OF NEW SINGLE-FAMILY DEVELOPMENT BUT HIGH LEVELS OF APARTMENTS ACTIVITY IN 2013-2014 CITY OF TEMECULA: NEW RESIDENTIAL HOMES 1,600 1,400 ROBUST/BUBBLE RECESSION/DEPRESSION RECENT RECOVERY 1,200 1,000 800 600 400 200 0 00 01l' Ol' 3 O� OA ,y0 y'L 13 le ,ti0 ,y0 ,,ti0O'P°''',ti0Oh -1°°c',y001 P - - 19'C'' - ,P - 1§'''''1�F. ,LO Temecula Single Family Permits 14 Temecula Attached Permits • Temecula Apartments SINCE 2009, MINIMAL INDUSTRIAL -OFFICE -RETAIL DEVELOPMENT ACTIVITY $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 CITY OF TEMECULA: NEW INDUSTRIAL - OFFICE - RETAIL • 1 o,, do ,yo ,yo do ,y,yo ,yo ,yo ,yo ,yo ,yo ,yo do do ,yo ,yo y�� ,yo • Temecula Industrial ■Temecula Offices Temecula Retail 39 D. SOCIOECONOMIC CHARACTERISTICS: CRIME LEVELS AND THE QUALITY OF SCHOOLS When households consider the purchase of a home, the primary factors are the location of the residence relative to their place of employment and also the prices that they can afford; furthermore, secondary socioeconomic factors that are significant include neighborhood / personal safety as well as the quality of the schools; accordingly, these are now discussed. 1. Crime Levels and Safety in the Market Area To gauge the safety of the CFD No. 16-01 Market Area, information on crime levels was obtained utilizing the most recent data available from the Federal Bureau of Investigation (FBI) Index which covers 2014, with a focus on "Violent Crimes". ➢ California — Statewide: The violent crime rate is 3.93 per 1,000 people per year. ➢ County of Riverside: The violent crime rate is somewhat lower, about 2.73 per 1,000 people per year. ➢ City of Temecula: The violent crime rate is significantly lower, approximately 0.93 per 1,000 people per year. 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 SOCIOECONOMIC CHARACTERISTICS: PERSONAL SAFETY VIOLENT CRIMES 1,000 RESIDENTS; FBI DATA 0.93 3.93 0.64 2.73 Temecula Murrieta Riverside California So the City of Temecula has a relatively low crime rate, as compared to California and Riverside County, and so this is beneficial to the demand for homes in CFD No. 16-01. 40 2. Quality of Schools and Education To gauge the quality of schools in the CFD No. 16-01 Market Area and its vicinity, information was compiled on educational achievement, utilizing the Academic Performance Index Scores (API), published by the California Department of Education, reflecting the most recent report available. 1200 1000 800 600 400 200 0 SOCIOECONOMIC CHARACTERISTICS: EDUCATIONAL QUALITY RECENT API SCORES 790 792 866 852 853 California 1 Riverside County Temecula Valley Murrieta Valley Menifee Union Unified Unified Elementary Accordingly, the Temecula Valley Unified School District has an API of 866, as a whole, much higher than that of California which is 790 and also higher than Riverside County, as a whole, which is 792. Furthermore, the Temecula Valley Unified School District has a higher API than the nearby school districts of Murrieta Valley Unified, 852, and also Menifee Union Elementary, 853. Conclusions From a socioeconomic perspective, the City of Temecula has a significantly lower crime rate than Riverside County and the Temecula Valley Unified School District has a significantly higher educational achievement level than Riverside County. Accordingly, these positive socioeconomic factors are favorable to the demand for homes in CFD No. 16-01. 41 E. COMPETITIVE MARKET ANALYSIS OF THE PROJECTS IN THE CFD NO. 16-01 COMPETITIVE HOUSING MARKET AREA The purpose of this section is to provide an overview of the currently active Planned Communities (PCs') and other residential projects in the CFD No. 16-01 Competitive Housing Market Area, and then to compare these to the expected characteristics of the forthcoming residential projects/products in CFD No. 16-01. The CFD No. 16-01 Competitive Housing Market Area currently has several Major Planned Communities or project groupings with single-family detached homes that are located in the cities of Temecula and Murrieta and their vicinity. The eight currently active projects, along with the estimated nine forthcoming projects in CFD No. 16- 01, have a total of 2,052 housing units 1,226 forthcoming homes in CFD No. 16-01 and 826 homes in the currently active projects. Of the 826 homes in the currently active projects, 497 have closed their escrow and so they are considered to be occupied. ➢ CFD No. 16-01: expected to have 9 forthcoming projects with 1,226 homes. ➢ Roripaugh Ranch -Panhandle: 3 active projects with 396 homes of which 285 have closed escrow. ➢ Temecula-Redhawk: 1 active project with 74 homes of which 15 have closed escrow. ➢ Murrieta Area -Various Projects: 4 active projects with 356 homes of which 197 have closed escrow. Of these three are in Planned Communities (Rancho Bella Vista -2 and Promotory-1), and the other is stand-alone project. 42 CFD N0.16-01 COMPETITIVE HOUSING MARKET AREA: CHARACTERISTICS OF ACTIVE PROJECTS DEVELOPMENT STATUS 1 800 700 600 500 400 300 200 100 0 CFD 16-01 Smaller Size Lots CFD 16-01: Medium Sized Lots CFD 16-01: Larger Sized Lots Roripaugh Ranch - Panhandle Temecula - Redhawk Murrieta Area - Various Projects ® Escrows Closed 0 0 0 285 15 197 ■ Future Units 729 389 108 111 59 159 42 CFD NO.16-01 AND THE MARKET COMPARABLES: APPROXIMATE LOCATIONS 43 City of Temecula * CFD. No.16-01 Roripaugh Ranch - Panhandle QA Pinnacle II © Cambridge © Montego Temecula D Renaissance Murrieta Area 0 Calistoga OAlicante © Cambria OSeneca The prices of homes in these projects, including the currently active comparable projects and also the forthcoming projects in the CFD, are some $477,287 for some 2,776 sq.ft., on the average, and the prices for the projects in the various categories are as follows: ➢ CFD No. 16-01: $393,500 to $727,917 for some 2,200 to 4,083 sq.ft. of living area. ➢ Roripaugh Ranch -Panhandle: $465,480 for some 2,929 sq.ft. of living area. ➢ Temecula-Redhawk: $444,990 for some 2,418 sq.ft. of living area. ➢ Murrieta Area -Various Projects: $399,875 for some 2,186 sq.ft. of living area. CFD NO.16-01 COMPETITIVE HOUSING MARKET AREA: HOUSING PRICES AND LIVING AREAS $ 9 uu,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 1 $200,000 $100,000 $0 • rt • • - ill CFD 16- 01 Smaller Size Lots CFD 16- 01: Medium Sized Lots CFD 16- 01: Larger Sized Lots Roripaugh Ranch - Panhandle Temecula Redhawk Murrieta Area - Various Projects Totals/ Averages E LEFT: Price $393,500 $457,600 $727,917 $465,480 $444,990 $399,875 $477,287 ♦ RIGHT: Living Area 2,200 3,100 4,083 2,929 2,418 2,186 2,776 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 44 To compare the prices of the homes in these projects, their value ratios are utilized, the price per sq. ft. of living area, since this effectively makes adjustments for differences in their sizes of living areas. Accordingly, the value ratios for all of the projects amount to $174 per sq. ft. of living area and their Special Taxes/Assessments amount to some $3,711/yr. (0.76% as a ratio to the housing prices); accordingly, the value ratios and Special Tax/Assessment characteristics for the forthcoming product types in CFD No. 16-01 and the currently active comparable projects are as follows: ➢ CFD No. 16-01 has an expected value ratios of $148-$180, similar to the overall average and the expected Special Taxes amount to $3,581/yr. (0.91%) to $6,624 (0.91%), significantly above the overall average/ratio. ➢ Roripaugh Ranch -Panhandle has a value ratio of $159, significantly below the overall average and their Special Taxes/Assessments amount to $3,165/yr. (0.68%), somewhat below the overall average/ratio. ➢ Temecula-Redhawk has a value ratio of $184, somewhat above the overall average and their Special Taxes/Assessments amount to $1,780/yr. (0.40%), significantly below the overall average/ratio. ➢ Murrieta Area - Various Projects have a value ratio of $187, somewhat above the overall average and their Special Taxes/Assessments amount to $2,322/yr. (0.58%), significantly below the overall ratio. 45 CFD MARKET AREA NO. 16-01 COMPETITIVE HOUSING VALUE RATIOS AND SPECIAL TAXES $200 $180 $180 S178 $184 $187 $174 $9,000 $8,000 1-1 — $7,000 — $6,000 H z $5,000 W - $4,000 S3,58 $159 -- $160 $148 S 4 • ffi3,165 $3,71 S4,164 • E $140 $120 a U $100 a" C F $80 • $2,322 — $3,000 $60 $40 $1,7ffi $2,000 U $1,000 z $20 ill $o CFD 16-01 Smaller Size Lots CFD 16- 01: Medium Sized Lots CFD 16- 01: Larger Sized Lots Roripaugh Ranch - Panhandle Temecula - Redhawk Murrie a Area - Various Projects Totals/ Averages so ©LEFT: Value Ratio $180 $148 $178 $159 $184 $187 $174 ♦RIGHT: Special Assmt/Tax $3,581 $4,164 $6,624 $3,165 $1,780 $2,322 $3,711 45 The currently active residential projects have experienced sales rates of some 256 homes per year, for an average of some 32 units per project per year; the distribution of these sales is as follows: ➢ The three projects in Roripaugh Ranch -Panhandle have an overall sales rate of 101 homes annually, some 34 per project, on the average. ➢ The project in Temecula-Redhawk has an overall sales rate of 30 homes annually. ➢ The four projects Murrieta Area - Various Projects have an overall sales rate of 125 homes annually, some 31 per project, on the average. t 120 6 100 80 60 F 40 20 0 CFD NO. 16-01 COMPETITIVE HOUSING MARKET AREA RECENT SALES RATES 34 • 30 • 31 • 101 30 125 Roripaugh Ranch - Panhandle Temecula - Redhawk Murrieta Area - Various Projects 60 a 40 U 20 A4 0 w A a Furthermore, projects that have prices that are similar/below the recent/prior FHA/VA mortgage loan limit of $356,500 for Riverside County have more favorable sales rates as compared to the projects with relatively higher prices. The recent increase of the FHA/VA mortgage loan limit to $424,100 for Riverside County will be beneficial to the forthcoming projects in CFD No. 16-01. 46 The culmination of the Competitive Market Analysis involves a statistical comparison of the currently active project in CFD No. 16-01, using their total housing prices (base price less incentives plus special tax liens), and their sizes of living area. The blue line in the graph represents the best fit for the currently active comparable projects between total housing prices (base prices less incentives and the special tax lien) and size of living area; each comparable project is represented by a blue dot. The forthcoming projects in CFD No. 16-01 are represented by a green triangles. For the smaller to medium sized lots, the CFD 16-01 projects are similar to the currently active comparable projects. Since the forthcoming projects in CFD No. 06-1 (green triangles) are similar to the trendline (based on the blue dots), they are regarded as being competitively prices in the marketplace. While for the CFD 16-01 large lot projects, they are above the trendline of the market comparables, since they have premiums for their large lot sizes; these are discussed further in the next section. TOTAL HOUSING PRICES CFD NO. 16-01 COMPETITIVE MARKET ANALYSIS TOTAL PRICE = HOUSING PRICE + PRESENT VALUE OF SPECIAL TAXES $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 50 1,500 2,000 2,500 3,000 3,500 4,000 4.600 LIVING AREA ♦ PROJECTS WITH LARGE SIZED LOTS: PRICE PREMIUMS • • • A CFD No. 16-01 • Comparables Comparison of Prices and Sales Rates: November 2016 vs. April 2016 (Seven projects were on the market during this entire time period) Since Empire previously surveyed the comparable projects in April 2016, they prices and sales rates can be compared to the November 2016 surveys, to identify the changes that have occurred, and these are as follows: ➢ Housing prices increased at an annualized rate of 4.0% which is similar to the general housing prices trends for Southern California, as a whole. However, there were significant variation among the various projects, from a decline of -4.1% to an increase of +10.8%. ➢ Sales rates for these projects increased slightly, but not significantly, from April 2016 to November 2016. Therefore, based upon an analysis of the comparable projects, the market has experienced a moderate increase in prices and somewhat higher sales rates. 47 CHARACTERISTICS OF THE *COMPARABLE* ACTIVE PROJECTS IN THE COMPETITIVE HOUSING MARKET AREA BY GEOGRAPHICAL LOCATIONS Project Project Builder Product Type Project Size and Sales Housing Prices. Size of Living Area Value Special Assessments/Tares Locations Total Escrows Future Sales Lower Average Upper Builder Incentives Lower Average Upper Ratio Amount/ Ratio/ Closed Rate/Yr. Year Price CFD 16-01 Smaller Size Lots Product I -A Roripaugh Valley Restoration Single-family Detached 254 0 254 N/A $366,300 $407,000 $423,500 WA 1,980 2,200 2,420 $185 $3.,704 0.91% CFD 16-01 Smaller Size Lots Product I -B Roripaugh Valley Restoration Single-family Detached 268 0 268 N/A $342,000 $370,000 $407,000 N/A 1,800 2,000 2,200 $185 $3,367 0.91% CFD 16-01 Smaller Size Lots Product 2 Roripaugh Valley Restoration Single-family Detached 71 0 71 N/A $409,500 $429,000 $443,300 N/A 2,340 2,600 2,800 $165 $3,904 0.91% CFD 16-01 Smaller Size Lots Product A Wingsweep Single-family Detached 136 0 136 N/A $340,000 $368,000 $405,000 N/A 1,800 2,000 2,200 $184 $3,349 0.91% CFD 16-01: Medium Sized Lots Product 3 Roripaugh Valley Restoration Single-family Detached 121 0 121 N/A $432,000 $456,000 $463,650 N/A 2,700 3,000 3,300 $152 $4,150 0.91 CFD 16-01: Medium Sized Lots Product 5 Roripaugh Valley Restoration Single-family Detached 268 0 268 N/A $446,400 $459,200 $473,440 N/A 2,880 3,200 3,520 $144 $4,179 0.91% CFD 16-01: Larger Sized Lots Product 5 Roripaugh Valley Restoration Single-family Detached 79 0 79 N/A $675,000 $743,750 $807,500 WA 3,750 4,250 4,750 $175 $6,768 0.91% CFD 16-01: Larger Sized Lots Product B Wingsweep Single-family Detached 14 0 14 N/A $651,000 $720,000 $784,000 N/A 3,500 4,000 4,500 $180 $6,552 0.91% CFD 16-01: Larger Sized Lots Product C Wingsweep Single-family Detached 15 0 15 N/A $651,000 $720,000 $784,000 N/A 3,500 4,000 4,500 $180 $6,552 0.91% Roripaugh Ranch - Panhandle Pinnacle I & II KB Home Single-family Detached 197 135 62 47 $424,990 $476,990 $528,990 $0 2,060 3,120 4,180 $153 $3,244 0.68% Roripaugh Ranch - Panhandle Cambridge CalAtlantic Homes Single-family Detached 100 76 24 27 $456,412 $461,049 $465,685 $5,000 2,399 2,729 3,059 $169 $3,181 0.69% Roripaugh Ranch - Panhandle Montego CalAtlantic Homes Single-family Detached 99 74 25 27 $439,900 $458,400 $476,900 $5,000 2,399 2,939 3,479 $156 $3,071 0.67% Temecula - Redhawk Renaissance Beazer Homes Single-family Detached 74 15 59 30 $442,990 $444,990 $446,990 $0 2,282 2,418 2,554 $184 $1,780 0.40% Murrieta - Rancho Bella Vista Alicante Lennar Single-family Detached 161 149 12 50 $383,290 $405,769 $428,247 $0 1,672 1,975 2,277 $206 $2,313 0.57% Murrieta - Rancho Bella Vista Cambria Lennar Single-family Detached 77 35 42 34 $403,206 $441,751 $480,295 $0 1,940 2,882 3,823 $153 $2,518 0.57% Murrieta - Promotory Calistoga Comerstone Communities Single-family Detached 64 0 64 30 $379,990 $393,490 $406,990 $0 1,771 1,902 2,032 $207 $2,164 0.55% Murrieta - Stand Alone Seneca KB Home Single-family Detached 54 13 41 11 $337,990 $358,490 $378,990 $0 1,649 1,985 2,321 $181 $2,294 0.64% Statistical Summary Sales / Year CFD 16-01 Smaller Size Lots N/A4 729 0 729 N/A $364,450 $393,500 $419,700 N/A 1,980 2,200 2,405 $180 $3,581 0.91 CFD 16-01: Medium Sized Lots N/A2 389 0 389 N/A $439,200 $457,600 5468,545 N/A 2,790 3,100 3,410 $148 $4,164 0.91 CFD 16-01: Larger Sized Lots N/A3 108 0 108 N/A $659,000 $727,917 $791,833 N/A 3,583 4,083 4,583 $178 66,624 0.91% Roripaugh Ranch -Panhandle 34 3 396 285 111 101 $440,434 $465,480 $490,525 $3,333 2,286 2,9293,573 8159 63,165 0.68% Temecula-Redhawk 30 r 1 r 74 15 59 r 30 $442,990 $444,990 $446,990 r $0 2,282 2,418 r 2,554 6184 $1.,780 r 0.40% Murrieta Area- Various Projects 31 4 356 197 159 125 $376,119 $399,875 $423,631 SO 1,758 2,186 2,613 $187 $2,322 0.58% Totals/Averages 32 17 2,052 497 1,555 256 $445,998 $477,287 $506,146 $1,250 2,378 2,776 3,171 $174 $3,711 0.76% 48 F. COMPETITIVE MARKET ANALYSIS FOR HOMES WITH LARGE LOTS The Competitive Market Analysis revealed that the currently active projects in the market area generally have smaller to medium size lots and so they are directly comparable to similar size lot products for this CFD No. 16-01, those homes that are on lots that range between 3,150 to 6,000 sq.ft. However, the CFD No. 16-01 also has several housing products which have significantly larger lot sizes, ranging from 10,000 to 20,000+ sq.ft.; the specific projects are as follows Roripaugh Valley Restoration: Product Five: 79 homes Wingsweep: 29 homes Price Premiums for Homes on Large Lots: (Sample of Sales: Six Months) To identify the premium for larger size lots in the City of Temecula, Empire conducted market research on the price differentials for homes on typical size lots versus large lots, using the following information: ➢ Sales of single-family homes during a recent six month period 312 such homes with sufficient data. ➢ The sales prices of these homes: median of $460,000, with the range of $285,000 to $2,100,000. ➢ The square footages of living areas of these homes: median of 3,001 sq.ft. with the range of 2,004 to 6,750 sq.ft. ➢ The lot sizes of these homes: median of 7,405 sq.ft. with the range of 4,356 to 225,641 sq.ft. Based upon a statistical regression / correlation analysis, all of these metrics were statistically significant factors that influence the sales prices of the homes. Specifically, for a home with a similar size of living area, such a home on a larger sized lot (vs. a smaller sized lot) had the following price premiums: Home Price Premium for 10,000 sq.ft. Lots: +11.0% above typical size lots Home Price Premium for 20,000 sq.ft. Lots: +38.5% above typical size lots The Competitive Market Analysis of the products with relatively large lot sizes revealed that once the appropriate adjustment was made for the larger lot sizes, the housing prices for these projects were found to still be somewhat above the competitively priced homes in the marketplace: Roripaugh Valley Restoration by about +5% and Wingsweep by about +14%. 49 Sales Trends/Price Patterns for Homes on Large Lots: (Refer to the graphs on the following pages) (Sample of Sales: Past Twelve Months) Empire compiled information on the sale of EXISTING homes that had lot sizes of 10,000+ square feet in the City of Temecula during a recent twelve month time period; the findings are as follows: ➢ There were a total of 442 such housing sales; this represents a substantial number of sales of homes with large lot sizes; approximately 37 home sales per month, on the average. ➢ The square footage of living area of the homes amounted to 3,723, on the average; the sizes of homes sold varies monthly, and has a range of 3,278 to 3,960 sq.ft. ➢ The prices of the homes sold amounted to some $636,418 on the average; the sale prices vary monthly, from $593,724 to $713,151. ➢ A more accurate / reliable gauge of housing price trends would be the value ratio which represents the price per square foot of living area. The value ratio amounted to $211, on the average; this has a range of $203 to $242. Therefore, the City of Temecula has had a significant level of activity for a homes on larger lot sizes, as reflected by the level of sales as well as the slightly increasing trends for housing prices, living areas and value ratios. However, since the expected property owners / developers' prices for the large lot products are somewhat above the current competitive market prices, their absorption schedules take this into consideration. 51 0 CITY OF TEMECULA: LARGE LOT MARKET SEGMENT RECENT SALES TRENDS: SALES MONTHLY 48 38 40 41 40 25 7 23 34 pS OQ 05 O6p1 O~ 0-)\0 \\ \% 0\ pL bO,S LO,S LOSS '1,05 105 10� 0�� 1O�S 1,0\ • '1,0\� 30\0. p\b. YEAR AND MONTH 1 5O( 4,(08) 3,500 3,000 2,500 2,(100 1,500 1,000 500 (l CITY OF TEMECULA: LARGE LOT MARKET SEGMENT RECENT SALES TRENDS: LIVING AREA - SQ.FT. PATTERNS 3.579 .695 537 3,746 3,624 3,557 7,960 3,920 2,914 50' S0� 505 506 50� 2,781 ,,OSS S0� 5\2 5\\ 5\2 b0\ 0\ tion tion tion tion tion tion tion tion tion tion YEAR AND MONTH 52 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 SO CITY OF TEMECULA: LARGE LOT MARKET SEGMENT RECENT SALES TRENDS: PRICE PATTERNS 56 70_- 66 $595,256 $629,9 06 $623,550 $593,724 _ $6 05,8 $6 05 32,5 25 $6 66,9 1 87 $6 08. $7 13,1 1 51 $6 40,5 11 65 $671,7 35 YEAR AND MONTH 00 $150 $100 50 CITY OF TEMECULA: LARGE LOT MARKET SEGMENT RECENT SALES TRENDS: VALUE RATIO PATTERNS 5200 $204 $204 6210 6209 6203 $219 $208 $242 $226 6203 S21') 50� ,)05 X01 fptio vv \,. boy b0ti YEAR AND MONTH 53 SECTION IV: ESTIMATED ABSORPTION SCHEDULES FOR THE PROJECTS IN CFD NO. 16-01 The purpose of this section is to estimate the absorption schedules for the forthcoming residential and commercial retail projects/products in CFD No. 16-01; accordingly, this is based upon a consideration of the following: First, the potential demand schedules for the residential and commercial -retail projects/products for CFD No. 16-01 were derived, based upon a consideration of the following: ➢ The growth prospects for the Southern California Market Region, in general, and Riverside County as well as the Temecula -Murrieta Market Area, in particular. ➢ The proportion of the Market Area demand that is expected to be captured by the projects/products in CFD No. 16-01, based upon an evaluation of their competitiveness in the marketplace. Thus, the result of this analysis is the POTENTIAL demand for the residential and commercial -retail projects/products in CFD No. 16-01. Next, the ability of the residential and commercial -retail projects/products in CFD No. 16-01 to respond to this demand is estimated. Specifically, this represents, from a time perspective, when the products will have the infrastructure in place that is required to support their development. So, the result of this analysis is the INFRASTRUCTURE DEVELOPMENT of the projects/products in CFD No. 16-01, and this reflects their ability to respond to the demand in the marketplace. The following absorption schedules are based upon the critical assumption that the property owners, Roripaugh Valley Restoration (RVR) and Wingsweep Corporation, will be able to fulfill the following requirements: 1. Complete various infrastructure requirements related to the development of the parcels, with the most significant being the approved plans and permitting for Nicolas Road, an $8 million project. ✓ The Development Agreement allows for 200 permits to be issued, without conditions. ✓ If progress is made in securing Nicolas Road approvals/permits, another 322 permits may be issued, for a total of 522 permits. ✓ For any additional permits beyond the 522, the approval/permitting process for Nicolas Road needs to be in place. ✓ Finally, the City of Temecula will construct Nicolas Road using proceeds from the CFD No. 16-01 bond issue. 2. Current Property Owners market their parcels to builders in a timely manner: ✓ RVR expects that builder(s) would start construction of the models about 20 to 22 months after the completion of the sale of the property. ✓ Wingsweep Corp. is expected to follow a similar pattern, with escrow closings to homeowners by July 2019. 54 Considering the factors discussed above, Empire's absorption schedules are based upon the ASSUMPTION that escrows will commence closings to homeowners by July 2019 for Roripaugh Valley Restoration and Wingsweep. However, to the extent that delivery of the parcels to the various builders does not occur according to the schedules set -forth by Roripaugh Valley Restoration and Wingsweep Corporation OR the development conditions for Nicolas Road are not fulfilled in a timely manner, then the estimated absorption for the forthcoming projects in CFD No. 16-01 could be substantially delayed. Therefore, based upon a consideration of the POTENTIAL demand and the ASSUMED MARKET - ENTRY OF THE PROJECTS, the absorption rate for the residential projects/products in the various market segments are calculated, from the year in which the projects/products are expected to enter the marketplace and commence escrow closings and continuing thereafter on an annualized basis, until all of the units are occupied. Accordingly, based upon an analysis of the economic and real estate conditions along with the characteristics of the forthcoming residential product types/projects in CFD No. 16-01, the estimated absorption schedules are as follows: * Segment #1: Homes on Smaller Sized Lots: Expected 729 homes July -2019 to 2024: about 122 homes per year, on the average, with the projects closing out by December 2024. Roripaugh Valley Restoration: 592 homes Wingsweep Corp: 136 homes * Segment #2: Homes on Medium Sized Lots: Expected 389 homes July -2019 to 2024: about 65 homes per year, on the average, with the projects closing out by December 2024. Roripaugh Valley Restoration: 389 homes Wingsweep Corp: no homes * Segment #3: Homes on Larger Sized Lots: Expected 108 homes (Note: As discussed above, absorption rates consider relatively high prices.) July 2019 to 2024: about 18 homes per year, on the average with the projects closing out by December 2024. Roripaugh Valley Restoration: 79 homes Wingsweep Corp: 29 homes Based upon Empire's estimated absorption schedules for the forthcoming projects in CFD No. 16-01, the projects are expected to attain a level of around 522 escrow closings around June 2021. As discussed above, the approval/permitting of Nicolas Road needs to be completed for additional building permits beyond the 522 threshold level. With regards to the various commercial -retail project, 15.4 acres, its absorption is based upon the occupancy of most of the homes in CFD No. 16-01 along with threshold levels required to support commercial centers, and its absorption is expected to occur during 2023. For additional information on the estimated absorption schedules for the residential products in the CFD No. 16-01, please refer to the following table and graphs. 55 ESTIMATED ABSORPTION SCHEDULES FOR CFD NO. 16-01 (RORIPAUGH RANCH - PAN AREA) EMPIRE ECONOMICS - SUBJECT TO REVISION CRITICAL ASSUMPTIONS: SALE OF PROPERTIES TO BUILDERS AND COMPLETION OF THE CONDITIONS OF DEVELOPMENT IN A TIMELY MANNER Planning Area Estimated Property Lot Size Expected Housing Prices; Source: Property Owners Expected Living Areas; Source: Property Owners 1 Sale Rates Annually- 2019 2019 .July -Dec 2020 Jan. -Dec. 2021 Jan. -Dec. 2022 Jan. -Dec. 2023 Jan. -Dec. 2024 Jan. -Dec. Units Owner Minimum Lower Average Upper Lower Average Upper 50% Segment # 1: Smaller Size Lots: 3,150-4,000 Product I -A 254 Roripaugh Valley Restoration 3,150 $366,300 $407,000 $423,500 1,980 2,200 2,420 36 18 40 43 47 50 56 Product I -B 268 Roripaugh Valley Restoration 3,150 $342,000 $370,000 $407,000 1;800 2,000 2,200 40 20 44 48 52 56 48 Product2 71 Roripaugh Valley Restoration 4,000 $409,500 $429,000 $443,300 2,340 2,600 2,800 34 17 37 17 0 0 0 ProductA 136 Wingsweep 3,000 $340,000 $368,000 5405,000 1,800 2,000 2,200 40 20 44 48 24 0 0 Segment # 2: Medium Sized Lots: 5,000-6,000 Product 3 121 Roripaugh Valley Restoration 5,000 $432,000 $456,000 $463,650 2,700 3,000 3,300 32 16 35 38 32 0 0 Product 4 288 Roripaugh Valley Restoration 6,000 $446,400 $459,200 $473,440 2,880 3,200 3,520 40 20 44 48 52 56 48 Two Projects Segment # 3:. Larger Sized Lots 10,000+ Product 5 79 Roripaugh Valley Restoration 20,000 $675,000 $743,750 $807,500 3,750 4,250 4,750 12 6 13 14 16 17 13 Product 13 14 Wingsweep 10,000 $651,000 $720,000 5784,000 3,500 4,000 4,500 5 3 6 5 0 0 0 ProductC 15 Wingsweep 20,000 $651,000 $720,000 $784,000 3.500 4,000 4,500 4 2 4 5 4 0 0 Statsitical Summary: Segment# 1: Smaller Size Lots: 3,1504000 729 59.5% $364,450 $393,500 $419,700 1,980 2,200 2,405 I 75 165 156 123 106 104 Segment # 2: Medium Sized Lots: 5,000-6,000 389 31.7% $439,200 $457,600 $468,545 2,790 3,100 3,410 36 79 86 84 56 48 Segment # 3: Larger Sized Lots 10,000+ 108 8.8% $659,000 $727,917 $791,833 3,583 4,083 4,583 11 23 24 20 17 13 Overall 1,226 $479,244 $519,217 5554,599 2,694 3,028 3,354 122 267 266 227 179 165 56 NUMBER OF ESCROW CLOSINGS: ANNUALLY 300 250 200 150 100 50 0 CITY OF TEMECULA CFD NO. 16-01 (RORIPAUGH RANCH -PAN AREA) ESTIMATED RESIDENTIAL ABSORPTION SCHEDULES 2019: July -Dec. No' 2020 2021 Absorption for first 522 homes projected for June 2021. Absorption after first 522 homes is contingent on plans and permits for Nicolas Road being in place. • 2022 2023 2024 Segment # 3: Larger Sized Lots 10,000+ Segment # 2: Medium Sized Lots: 5,000-6,000 ■ Segment # 1: Smaller Size Lots: 3,150-4,000 57 NUMBER OF ESCROW CLOSINGS: ANNUALLY 300 250 200 150 100 50 0 CITY OF TEMECULA CFD NO. 16-01 (RORIPAUGH RANCH -PAN AREA) ESTIMATED RESIDENTIAL ABSORPTION SCHEDULES Absorption for first 522 homes projected for June 2021. Absorption after first 522 homes is contingent on plans and permits for Nicolas Road being in place. 2019: July -Dec. 2020 2021 2022 2023 2024 ■ Roripaugh Valley Restoration Wingsweep Corp. 58 SECTION V: SENSITIVITY ANALYSIS: RELATIONSHIP OF RECENT HOUSING SALES TO EMPLOYMENT CHANGES AND LEVELS OF MORTGAGE RATES The purpose of this section is to perform an analysis of the impacts that employment changes and levels of mortgage rates had on sales for homes. To analyze this, he Planned Community of The Villages of Valencia in the Santa Clarita area is utilized, since this has a significant amount of data on market conditions during the 2007-2015 time period. ➢ Sales of homes for the projects in The Villages of Valencia were relatively low during 2007 to 2011, but then increased dramatically during 2012 through 2015. ➢ Employment changes were negative / minimal during 2007 to 2011, ranging from -5.6% to +0.8%. But then starting in 2012 and continuing thereafter, employment rose by 1.8% to 3.0% per year. ➢ Mortgage rates started at a level of 6.4% in 2007 and declined to 4.5% in 2011, a decrease of - 1.9%. By comparison, from 2011 to 2015, mortgage rates declined from 4.5% to 3.9%, a change of -0.6%. Therefore, the increases in home sales during 2012 and 2015 was driven primarily by strong employment growth; additionally, mortgage rates were favorable as well, resulting in lower monthly payment levels. Conversely, during 2007 to 2011, when mortgage rates declined to low levels but employment was decreasing, housing sales did not rise substantially, and so mortgage rates are regarded as a secondary factor. LEVEL OF HOUSING SALES 400 300 200 100 0 MORTGAGE RATE SENSITIVITY ANALYSIS LEVEL OF HOME SALES VS. EMPLOYMENT CHANGES AND MORTGAGE RATES 6.4% 0.80 6.1% 5.1% 4.8% 4.5% 4.2% 3.9% -1.5% ■ HOME SALES ■ EMPLOYMENT -CHANGE ■ MORTGAGE RATES 411 405 -5.6% 77R 354 111 125 94 152 123 2007 2008 2009 2010 2011 2012 2013 2014 2015 -Est EMPLOYMENT CHANGES AND MORTGAGE RATES This relationship has parallels to what occurred in Los Angeles County during 1988 and 1989: housing prices rose by about 20% per year, despite mortgage rate levels of some 10.5% because employment was increasing at a strong rate of more than 5% per year. SECTION VI: ASSUMPTIONS AND LIMITING CONDITIONS The Market Absorption Study for CFD No.16-01 is based upon various assumptions and limiting conditions; accordingly, these are as follows: Title to Property No opinion as to title is rendered. Data related to ownership and legal description, obtained from governmental records related to the formation of the District that forms the basis for identifying the boundaries of CFD No.16-01 are considered reliable. Title is assumed to be marketable and free and clear of all liens, encumbrances, easements and restrictions except those specifically discussed in the report. The property is evaluated assuming to be under responsible ownership and competent management and available for development to highest and best use. Property Boundaries No survey or engineering analysis of CFD No.16-01 property has been made by the market analyst; the District Engineer's report utilized for the Bond is deemed to be reliable. The market analyst assumes the existing boundaries to be correct, that no encroachments exist and assumes no responsibility for any condition not readily observable from customary investigation and inspection of the premises, which might affect the valuation, excepting those items which were specifically mentioned in the report. Accuracy of Information from Others In preparing this report, the market analyst was required to rely on information furnished by other individuals or found in previously existing records and/or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either expressed or implied, is given by the market analyst for the accuracy of such information and the market analyst assumes no responsibility for information relied upon and later found to have been inaccurate. The market analyst reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. Date of Study The date to which the conclusions and opinions expressed in this report apply as set forth in the study. Furthermore, the dollar amount of any price/value opinion rendered was based upon the purchasing power of the American dollar existing on that date. Hidden or Unapparent Conditions The market analyst assumes no responsibility for hidden or unapparent conditions of the property, subsoil, groundwater or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Opinions of a Legal/Specialized Nature No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by the market analyst. Right of Publication of Report Possession of this report, or a copy of it, does not carry with it the right of publication except for the party to whom it is addressed. Without the written consent of the market analyst, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with properly written qualification and only in its entirety for its stated purpose. Soil and Geological Studies No detailed soil studies or geological studies or reports were made available to the market analyst. Assumptions employed in this report regarding soils and geologic qualities of the subject property have been provided to the client. However, such assumptions are not conclusive and the market analyst assumes no responsibility for soils or geologic conditions discovered to be different from the conditions assumed unless otherwise stated in this report. 60 Earthquakes and Seismic Hazards The property which is the subject of this market analysis is within a geographic area prone to earthquakes and seismic disturbances. Except as specifically indicated in the report, no seismic or geologic studies have been provided to the market analyst concerning the geologic and/or seismic condition of the subject property. The market analyst assumes no responsibility for the possible effect on the subject property of seismic activity and/or earthquakes. Testimony or Court Attendance Testimony or attendance in court or at any other hearing is not required by reason of rendering this market analysis, unless such arrangements are made a reasonable time in advance of said hearing. Separate arrangements would need to be made concerning compensation for the market analyst's time to prepare for and attend any such hearing. Maps and Exhibits Maps, plat and exhibits included in this report are for illustration only as an aid in visualizing matters discussed within the report. They should not be considered as surveys, or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from the report. Environmental and Other Regulations The property is evaluated assuming it to be in full compliance with all applicable federal, state and local environmental regulations and laws, unless otherwise stated. Required Permits and Other Governmental Authority Unless otherwise stated, the property evaluated is assumed to have all required licenses, permits, certificates, consents or other legislative and/or administrative authority from any local, state or national government or private entity or organization that have been or can be obtained or renewed for any use on which the evaluation analysis contained in this report is based upon. Liability of Market Analyst The liability of Empire Economics, the market analyst responsible for this report, is limited to the client only and to the fee actually received by the market analyst. Further, there is no accountability, obligation or liability to any third party. If this report is placed in the hands of anyone other than the client, the client shall make such party aware of all limiting conditions and assumptions of the assignment and related discussion. The market analyst is in no way to be responsible for any costs incurred to discover or correct any deficiencies or any type present in the property --physical, financial, and/or legal. Presence and Impact of Hazardous Material Unless otherwise stated in the report, the market analyst did not become aware of the presence of any hazardous material or substance during the market analyst's general inspection of the subject property. However, the market analyst is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the evaluation of the subject property. The evaluation in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such proximity thereto that it would cause a change in the evaluation analysis. The market analyst assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes that subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Structural Deficiencies of Improvements The market analyst has not performed a thorough inspection of the subject property, and except as noted in this report has not found obvious evidence of structural deficiencies in any improvements located on the subject property. Consequently, the market analyst assumes no responsibility for hidden defects or nonconformity with specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes, unless inspections by qualified independent professions or governmental agencies were provided to the market analyst. Further, the market analyst is not a licensed engineer or architect and assumes no responsibility for structural deficiencies not apparent to the market analyst at the time of their inspection. 61 Presence of Asbestos The market analyst is not aware of the existence of asbestos in any existing improvements on the subject property. However, the market analyst is not trained to discover the presence of asbestos and assumes no responsibility should asbestos be found in or at the subject property. For the purposes of this report, the market analyst assumes the subject property is free of asbestos and the subject property meets all federal, state and local laws regarding asbestos abatement. Acreage of Property The acreage has been abstracted from the documents relating to the District which is assumed to be accurate. If the Assessor's map or legal description is subsequently found to be in error, we reserve the right to amend the market analysis. Designated Economic Scenario The Market Absorption Study focuses upon the expected absorption schedules for the products in CFD No.16-01 according to the designated economic scenario. Specifically, this scenario represents the economic and real estate conditions for the Market Region and also the Market Area during the foreseeable future according to the most probable conditions, and this is regarded as being appropriate for the Bond Financing. However, the economic and market conditions which actually materialize on a year by year basis may differ from those presented according to the designated economic scenario, as a result of exogenous factors which are difficult to forecast/quantify. Accordingly, the designated scenario should be utilized as an economic framework for evaluating the marketing prospects of the properties within CFD No.16-01 rather than a "literal" representation of what is expected to occur on a year/year basis during the foreseeable future. Provision of the Infrastructure; Role of Coordinator The Market Absorption Study assumes that the governmental agencies that supply public facilities and services, including water, provide these in a timely manner so that the proposed projects/products in CFD No.16-01 can respond to the expected market demand for their products. Otherwise, if the required infrastructure is not available in a timely manner, then the absorption of the projects/products could be adversely impacted. Property Owners/Builders Responsiveness to Market Conditions The Market Absorption Study assumes that the property owners/builders in CFD No.16-01 respond to the market conditions with products that are competitively priced and have the features/amenities that are desired by the purchasers. This is an especially critical assumption since the projects/products in CFD No.16-01 have not yet entered the marketplace, and so the specific characteristics of their product types cannot be identified until they actually offer products on the marketplace. Consequently, to the extent that future projects/products have prices/features that differ from the competitive market standards, then their absorption schedules would need to be modified from those presented according to the designated economic scenario. Financial Strength of the Project Property Owners/Builders The Market Absorption Study assumes that Project property owners/builders in CFD No.16-01 (and also their lenders) have sufficient financial strength to adequately fund their projects, including paying their Special Taxes/Assessments, and that they have sufficient financial reserves which could be utilized to supplement their cash flow positions, in the event that adverse economic or market conditions occur. Market Absorption Study Timeliness of Results The Market Absorption Study performs a comprehensive analysis of the relevant land -use, economic and residential market conditions that are expected to influence the marketing success of the projects/products in CFD No.16-01. Nevertheless, the Study should be updated on a six-month basis, or even sooner, should these land -use and/or economic market conditions change significantly. 62 Education: Analysis APPENDIX A CREDENTIALS/QUALIFICATIONS OF EMPIRE ECONOMICS RESUME: JOSEPH T. JANCZYK, Ph.D. University of California, Riverside, Ph.D. in Economics, Completed in 1976 Specializations in Urban Economics, Mathematical Modeling and Econometric State University of New York at Buffalo, Bachelors, Completed in 1970 Dual Majors: Economics and Psychology Prior Employment: California State University, Tenured Economics Professor: 1976-1985 Courses Taught: Microeconomics, Macroeconomics, Urban Economics, Computer Modeling, Econometrics, among others Empire Economics: Chairman and President: 1986 -Present • Perform Independent Real Estate Consulting Services Primarily for Land Secured Financings • Work for Public Entities including Counties, Cities, School Districts and Water Districts • Long-term Relationships with Many Clients, Including Orange and Riverside Counties, 25+ years • Well Established Relationships with Numerous Professionals in the Municipal Finance Industry • Performed 500+ Studies on behalf of Public Entities for approximately $14B in municipal financing o Land Secured Financings for Planned Communities, Business Parks and Retail Centers for 400+ CFDs/ADs for $8.5B+ bonds ■ Price Point Studies — Establish special taxes that conform to public entities' policies ■ Market Absorption Studies: Provide timelines for phasing infrastructure ■ Homeowner Equity Studies: Current Equity levels for homeowners o Economic Forecasting Studies: Forecast Employment and Housing Demand • Socioeconomic Studies Orange County Transportation Corridors: 2 studies $2.75B bonds o Designated as Municipal Bond Issue of the Year for 1999 o Rating Agency and Bond Insurer Presentations — Trips to New York City • Mortgage Revenue Bond Issues: Lower Mortgage Rates 50+ studies for $1.7B bonds • Other Municipal Bond Issues: 35+ studies $2B+ bonds; Certificates of Participation, others • Forthcoming Bond Issues: 20+ studies for $500M+ future bond sales Industry Contributions — Regular Speaker/Panelist at Following Events: • California Treasurer Mr. John Chiang, Council of Economic Advisors; Since Jan. 2015 • UCLA / CDIAC Municipal Bond Financing Seminars (10+ times, as Featured Speaker) • Bond Buyer Conference • League of Cities • Municipal Bond Industry Association • Best Practices for Continuing Disclosure • Appraisal Standards for Land Secured Financing by CDIAC • Meetings with Municipal Bond Funds • California State Treasurer, Mr. John Chiang - Council of Economic Advisors Dedicated to Public Sector: Certifications Provided in each Study: 63 • Empire has not performed any consulting services for CFD / AD property owners nor developers/builders, during the past twenty years. • Empire will not perform any consulting services for CFD / AD property owners nor developers/builders, during the next five years. 64 EMPIRE'S CONFORMANCE WITH CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION RECOMMENDATIONS The California Debt and Investment Advisory Commission (CDIAC), of which the State Treasurer serves as chair, published the Appraisal Standards for Land -Secured Financings (CDIAC Standards), with the input of municipal finance professionals. Many California issuers have recognized the CDIAC Standards as a basis for appraisals under the Mello -Roos Act, as well as providing standards for market absorption studies. Empire Economics surpasses the minimum recommended qualifications as proposed by CDIAC for market absorption studies, with respect to independence as well as qualifications and experience. CDIAC Recommendations Empire Economics 1. Avoid Conflicts of Interest: Knowing that developers and builders may influence the outcome of a market absorption study, market absorption analysts should describe their business relations with developers and builders during the past three years in the market absorption study. Independence 1. Empire Economics conducts market absorption studies only for governmental entities, and this has provided numerous public entities with a high level of comfort. By comparison, other firms that provide services to developers/builders may encounter "conflicts of interest" in trying to represent both the private and public sectors. 2. Empire Economics, as part of the Market Study, signs a Certification of Independence which includes the following: * Empire Economics has not performed any consulting services for the District's property owners nor the developers/builders during at least the past twenty+ years. * Empire Economics will not perform any consulting services for the District's property owners nor developers/builders during at least the next five years. Qualifications and Experience 1. Educational Qualifications: The market absorption analysts should possess at least a Bachelor's degree but preferably an advanced degree with courses in real estate and economics. 2. Experience with Land -Secured Financings: The market absorption analysts should possess a minimum of five years of experience in performing market studies for land -secured financings. Additionally, they should be well versed in analyzing economic and real estate data that relates to the pricing and absorption of properties contained within a CFD and through this experience be capable of addressing issues unique to land -secured financing, including the use of Price Points in the Rate and Method of Apportionment. 65 1. Dr. Janczyk received his Doctorate in Economics from the University of California. As a tenured Economics Professor at California State University, he taught courses in microeconomics, macroeconomics, regional economics, and computer modeling. Dr. Janczyk has been a featured speaker at numerous seminars including the California Debt Advisory Commission, Bond Buyer Conference, League of Cities, Municipal Bond Analysts, California Association of Realtors, and Moody's Investor Services, among others. 2. During the past thirty years, Dr. Joseph T. Janczyk, president of Empire Economics, has prepared market absorption studies for more than five hundred land -secured Bond Issues, providing the comfort level required for numerous California counties, cities, school districts, water districts and other special districts to finance approximately $14 billion worth of capital improvement projects. 66 Empire Economics has participated in numerous land secured financings throughout Southern California counties; the distribution of these by counties has been as follows: EMPIRE ECONOMICS: LAND -SECURED FINANCINGS VENTURA COUNTY 6 ISSUES FOR $93M 1:14,11 4 !wand, 51 Waal. r-amz LOS ANGELES COUNTY 38 ISSUES FOR $650M • OUTSIDE SOUTHERN CA. 5 ISSUES FOR $85M SAN BERNARDINO COUNTY 49 ISSUES FOR $787M k..k. 14..4 t21' ORANGE COUNTY 97 ISSUES FOR $4,106M RIVERSIDE COUNTY 225 ISSUES FOR $3,323M .413 ,Ze 1•44.6•1,111iie SAN DIEGO COUNTY 38 ISSUES FOR $1,076M II ,N rihmita , - The following graph provides an overview of the number of land secured financings that Empire has been involved with (the left axis) and also the value of these land secured financings (right axis, in $Millions), during 1983 to 2015. 67 NUMBER OF LAND- SECURED FINANCINGS 40 30 20 10 0 EMPIRE ECONOMICS LAND -SECURED FINANCINGS (NEW BOND ISSUES AND ALSO REFUNDINGS) 35 28 • 29 23 2322 22 • 25 25 • 20 • • •••• 18 18- • 14 13 12 15 13 • 13 13 • 9 • • • 10 9 • 11 9 • • 10 • - • 4 4 • • 5 • • • 3 • .1 • • • • • F ■ J 1 uW. J wL. 111 n n - ii -- 00 01 to 10 N 00 01 001 V 01 00 00 CO 01 0 01 CO CO CO CO CO CO CO 01 01 N 01 01 01 01 01 01 01 01 0 0 0 00 0 0 0 01 01 CI1 01 01 01 01 O1°fO1r 01 01 01 01 0 0 0 N0 01 01 N ri 0 0 0 0 0 0 0 01 0 '+ N m v to 0 0 0 0 0 0 0 • VALUE OF LAND SECURED FINANCINGS • NUMBER OF LAND SECURED FINANCINGS $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 VALUE OF LAND -SECURED FINANCINGS ($ MILLIONS) 68 APPENDIX K BOUNDARY MAP OF THE DISTRICT 11 MN ''!ritiiiiiiI1111 n d;iila ;1! I 5M !Rh1 1 K-1 s PRELIMINARY OFFICIAL STATEMENT DATED AS OF JANUARY 2017 o m NEW ISSUE - BOOK ENTRY ONLY RATING: S&P: `o_ Y (See "Rating" herein) n rTo In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject however, to certain qualifications described in aai ,n this Official Statement, under existing law, interest on the 2017 Bonds is excludable from gross income of the owners thereof for federal n $ income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and aT corporations under the Internal Revenue Code of 1986, as amended, but such interest is taken into account in computing an adjustment mi used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, interest on the a 0 2017 Bonds is exempt from personal income taxation imposed by the State of California. See "TAX MATTERS." o $9,815,000* o c TEMECULA PUBLIC FINANCING AUTHORITY cn o COMMUNITY FACILITIES DISTRICT NO. 03-02 ° s.o (RORIPAUGH RANCH) E 2 2017 SPECIAL TAX REFUNDING BONDS 8 U °c N Dated: Date of Issuance Due: September 1, as shown on inside cover was uo ) t, The Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community (• 7)Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), is issuing the above -captioned bonds (the "2017 Bonds") to (i) refund a portion of the outstanding Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special '5 u) c o Tax Bonds (the "Prior Bonds"), (ii) fund a reserve fund for the 2017 Bonds, and (iii) pay costs of issuing the 2017 Bonds. See "PLAN OF ,- REFUNDING." The Prior Bonds were issued by the Authority, for and on behalf of the District, to finance various public infrastructure E o improvements within the Roripaugh Ranch area of the City of Temecula. The 2017 Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of February 1, 2017 (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"). • c N •N The 2017 Bonds are payable from the proceeds of an annual Special Tax (as defined in the Fiscal Agent Agreement) being levied on o certain property located within the District (see "THE DISTRICT"), and from certain funds pledged under the Fiscal Agent Agreement. The aa) U Special Tax is being levied according to a rate and method of apportionment of Special Taxes approved in 2005. See "SECURITY FOR THE j .E• 2017 BONDS - Special Taxes" and Appendix B - "Rate and Method." atci ,T, The Authority has applied for a municipal bond insurance policy for the 2017 Bonds, and will decide whether to purchase any such E m municipal bond insurance policy insuring the payments when due of the scheduled principal and interest on all or on selected maturities ° of the 2017 Bonds in connection with the pricing of the 2017 Bonds. a) To E' Interest on the 2017 Bonds is payable on March 1 and September 1 of each year, commencing on September 1, 2017. The 2017 Bonds CD o O , will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of the Depository c as Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2017 Bonds. Individual purchases of the 2017 ° c = Bonds will be made in book -entry form only. Purchasers of the 2017 Bonds will not receive physical certificates representing their ownership interests in the 2017 Bondspurchased. The 2017 Bonds will be issued in the principal amount of $5,000 and anyintegral multiple thereof. o..� � P P• g p E T a Principal of and interest on the 2017 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and o 0- 3 interest, DTC will in turn distribute such payments to the beneficial owners of the 2017 Bonds. See "THE 2017 BONDS" and Appendix F - o ▪ r 3 "DTC and the Book -Entry Only System." The 2017 Bonds are subject to optional redemption, mandatory sinking payment redemption and redemption from Special Tax wy o • Prepayments prior to their respective maturities. See "THE 2017 BONDS—Redemption." u) 02 c o The Authority may issue additional bonded indebtedness that is secured by a lien on the Special Tax Revenues (as defined in the Fiscal cm .� Agent Agreement) and by funds pledged under the Fiscal Agent Agreement for the payment of the 2017 Bonds on a parity with the 2017 15 y'5 Bonds ("Parity Bonds"), but only for the purpose of refunding the 2017 Bonds or refunding any outstanding Parity Bonds. See "SECURITY r g •y FOR THE 2017 BONDS - Issuance of Additional Bonds." U a)s m NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE AUTHORITY OR THE STATE OF CALIFORNIA OR OF ANY OF ITS m cc o POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2017 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER o )6c. TAXES ARE PLEDGED TO THE PAYMENT OF THE 2017 BONDS. THE 2017 BONDS ARE NEITHER GENERAL NOR SPECIAL o -ac OBLIGATIONS OF THE AUTHORITY, NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE oD L AUTHORITY FOR THE DISTRICT, PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL .t 3 AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. o ° .c This cover page contains certain information for quick reference only. Investors should read the entire Official Statement to obtain c c o information essential to the making of an informed investment decision with respect to the 2017 Bonds. The purchase of the 2017 Bonds L c U involves significant risks, and the 2017 Bonds are not appropriate investments for all types of investors. See "SPECIAL RISK FACTORS" in • this Official Statement for a discussion of certain risk factors that should be considered, in addition to the other matters set forth in this co cB .- Official Statement, in evaluating the investment quality of the 2017 Bonds. a) ci .D c aThe 2017 Bonds are offered when, as and if issued, subject to approval as to their legality by Quint & Thimmig LLP, Larkspur, E-0 c California, Bond Counsel, and certain other conditions. Certain legal matters with respect to the 2017 Bonds will be passed upon for the CD • CD ; Authority by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, in its capacity as general counsel to the co -E. m Authority, and by Quint & Thimmig LLP, Larkspur, California, acting as Disclosure Counsel. Certain legal matters will be passed upon for •m E ',5 the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. It is anticipated that the 2017 m a) asBonds in definitive form will be available for delivery to DTC on or about February , 2017. O(� L') o = STIFEL a5 a� a) a) The date of this Official Statement is February , 2017. dYN� lc E c * Preliminary, subject to change. H r. as $9,815,000* TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) 2017 SPECIAL TAX REFUNDING BONDS MATURITY SCHEDULE $ Serial Bonds; CUSIP Prefix 87972 t Maturity Date Principal Interest CUSIP (September 1) Amount Rate Yield Price Suffixt $ % Term Bonds due September 1, 2036; Yield %; Price %; CUSIP 87972 * Preliminary, subject to change. t Copyright American Bankers Association. CUSIP data is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Neither the Authority nor the Underwriter assumes any responsibility for the accuracy of the CUSIP data. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT The information contained in this Official Statement has been obtained from sources that are believed to be reliable. No representation, warranty or guarantee, however, is made by the Underwriter as to the accuracy or completeness of any information in this Official Statement, including, without limitation, the information contained in the Appendices, and nothing contained in this Official Statement should be relied upon as a promise or representation by the Underwriter. Neither the Authority nor the Underwriter has authorized any dealer, broker, salesperson or other person to give any information or make any representations with respect to the offer or sale of the 2017 Bonds other than as contained in this Official Statement. If given or made, any such information or representations must not be relied upon as having been authorized by the Authority or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the 2017 Bonds shall under any circumstances create any implication that there has been no change in the affairs of any party described in this Official Statement, or in the status of any property described in this Official Statement, subsequent to the date as of which such information is presented. This Official Statement and the information contained in this Official Statement are subject to amendment without notice. The 2017 Bonds may not be sold, and no offer to buy the 2017 Bonds may be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the 2017 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. When used in this Official Statement, in any continuing disclosure by the Authority, in any press release, or in any oral statement made with the approval of an authorized officer of the Authority or any other entity described or referenced in this Official Statement, 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. 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. All summaries of the documents referred to in this Official Statement are qualified by the provisions of the respective documents summarized and do not purport to be complete statements of any or all of such provisions. The Underwriter has provided the following sentence for inclusion in this Official Statement: "The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or the completeness of such information." In connection with the offering of the 2017 Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market prices of the 2017 Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The 2017 Bonds have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption from the registration requirements contained in the Securities Act. The 2017 Bonds have not been registered or qualified under the securities laws of any state. The City of Temecula maintains an Internet website, but the information on the website is not incorporated in this Official Statement. -i- TEMECULA PUBLIC FINANCING AUTHORITY Board of Directors Maryann Edwards, Chairperson Michael S. Naggar, Member Jeff Comerchero, Member Matt Rahn, Member James Stewart, Member Authority/City of Temecula Officials Aaron Adams, Executive Director and City Manager Greg Butler, Assistant City Manager Jennifer Hennessy, Authority Treasurer and City Director of Finance Patrick Thomas, Interim Director of Public Works and Interim City Engineer Randi Johl, Authority Secretary and City Clerk PROFESSIONAL SERVICES Authority General Counsel and City Attorney Richards, Watson & Gershon, A Professional Corporation Los Angeles, California Municipal Advisor Fieldman, Rolapp & Associates Irvine, California Bond Counsel and Disclosure Counsel Quint & Thimmig LLP Larkspur, California Special Tax Consultant and Dissemination Agent Albert A. Webb Associates Riverside, California Fiscal Agent and Escrow Bank U.S. Bank National Association Los Angeles, California Verification Agent Grant Thornton LLP Minneapolis, Minnesota TABLE OF CONTENTS INTRODUCTION 1 General 1 Authority for Issuance 1 The 2017 Bonds 2 Security for the 2017 Bonds 2 Reserve Fund 3 The Authority 3 The District 3 Limited Obligation 4 Issuance of Parity Bonds Only For Refunding Purposes 4 Bondowners' Risks 4 Continuing Disclosure 5 Application for Municipal Bond Insurance 5 Other Information 5 PLAN OF REFUNDING 5 Redemption of Prior Bonds 5 Funds for Improvements 6 Estimated Sources and Uses of Funds 6 THE 2017 BONDS 7 Authority for Issuance 7 General Provisions 7 Redemption 8 Transfer or Exchange of 2017 Bonds 10 Discontinuance of DTC Services 10 Scheduled Debt Service 11 SECURITY FOR THE 2017 BONDS 11 General 11 Limited Obligation 12 Special Taxes 12 Special Tax Fund 13 Summary of Rate and Method 14 Reserve Fund 17 Covenant for Superior Court Foreclosure 18 No Teeter Plan 19 Investment of Moneys 19 Issuance of Additional Bonds 19 THE DISTRICT 20 Location and General Description of the District 20 History of the District 24 The Improvements 25 Land Use Distribution 25 Assessed Property Values 26 APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F Value -to -District Lien Ratio 27 Major Land Owners 29 Special Tax Delinquencies 31 Direct and Overlapping Governmental Obligations 31 Sample Tax Bill 33 THE AUTHORITY 33 SPECIAL RISK FACTORS 34 Payment of the Special Tax is not a Personal Obligation 34 No General Obligation of the City or the District34 Property Value 34 Exempt Properties 35 Parity Taxes and Special Assessments 35 Insufficiency of Special Taxes 36 Tax Delinquencies 36 Bankruptcy Delays 37 Proceeds of Foreclosure Sales 37 Natural Disasters 38 Hazardous Substances 38 Disclosure to Future Purchasers 38 FDIC / Federal Government Interests in Properties 39 No Acceleration Provision 40 Taxability Risk 40 Enforceability of Remedies 41 No Secondary Market 41 Proposition 218 41 Ballot Initiatives 42 IRS Audit of Tax -Exempt Bond Issues 43 TAX MATTERS 43 LEGAL MATTERS 45 RATING 46 VERIFICATION OF MATHEMATICAL ACCURACY 46 NO LITIGATION 46 MUNICIPAL ADVISOR 46 UNDERWRITING 47 CONTINUING DISCLOSURE 47 MISCELLANEOUS 48 GENERAL INFORMATION ABOUT THE CITY OF TEMECULA RATE AND METHOD SUMMARY OF THE FISCAL AGENT AGREEMENT FORM OF OPINION OF BOND COUNSEL FORM OF CONTINUING DISCLOSURE AGREEMENT DTC AND THE BOOK -ENTRY ONLY SYSTEM CITY OF TEMECULA (Riverside County, California) Regional Location Map RIVERSIDE COUNT A A 1(UE COUNTY L .O 4 lath i1 J Mlrr cla Ce' k Clue Faro* r S +r+ N DIE G COUNT, OFFICIAL STATEMENT $9,815,000* TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) 2017 SPECIAL TAX REFUNDING BONDS INTRODUCTION This introduction is not a summary of this Official Statement and is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement by those interested in purchasing the 2017 Bonds. The sale and delivery of 2017 Bonds to potential investors is made only by means of the entire Official Statement. Certain capitalized terms used in this Official Statement and not defined herein have the meanings set forth in Appendix C – "Summary of the Fiscal Agent Agreement—Definitions" or in Appendix B – "Rate and Method." General The purpose of this Official Statement, which includes the cover page, the inside cover page, the table of contents and the attached appendices (the "Official Statement"), is to provide certain information concerning the issuance of the above -captioned bonds (the "2017 Bonds"). The 2017 Bonds are being issued by the Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), to (i) refund a portion of the outstanding Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds currently outstanding in the aggregate principal amount of $41,880,000 (the "Prior Bonds"), (ii) fund a reserve fund for the 2017 Bonds, and (iii) pay costs of issuing the 2017 Bonds. The portion of the Prior Bonds not being redeemed with proceeds of the 2017 Bonds will be redeemed with proceeds of the prepayment of Special Taxes levied on certain property in the District, thereby resulting in the redemption of all of the outstanding Prior Bonds and the property for which the Special Taxes are being prepaid no longer being subject to future Special Tax levies. See "PLAN OF REFUNDING -Redemption of Prior Bonds." The Prior Bonds were issued to finance various public infrastructure improvements (the "Improvements") necessitated by development occurring in the Roripaugh Ranch area of the City of Temecula, California (the Authority for Issuance General. The District was formed on January 11, 2005 under the authority of the Mello - Roos Community Facilities Act of 1982, as amended, commencing at Section 53311, et seq., of the California Government Code (the "Act"), which was enacted by the California Legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of the district. Subject to approval by at least a two-thirds vote of the votes cast by the qualified electors within a district and compliance with the provisions of the Act, the legislative body may * Preliminary, subject to change. -1- issue bonds for the community facilities district established by it and may levy and collect a special tax within such district to repay such bonds. Bond Authority. The 2017 Bonds are authorized to be issued pursuant to the Act, Article 11 of Chapter 3 of Part 1 of Division 2 of the Government Code of the State of California (the "Refunding Law"), Resolution No. adopted on January 24, 2017 by the Board of Directors of the Authority (the "Board of Directors") acting as the legislative body of the District, and the Fiscal Agent Agreement dated as of February 1, 2017 (the "Fiscal Agent Agreement"), between the Authority, for and on behalf of the District, and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"). For more detailed information about the formation of the District, the authority for issuance of the Prior Bonds and the authority for issuance of the 2017 Bonds, see "THE DISTRICT – History of the District." The 2017 Bonds General. The 2017 Bonds will be issued only as fully registered bonds, in denominations of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement. The 2017 Bonds will be dated the date of their issuance and interest on the 2017 Bonds, will be payable on March 1 and September 1 of each year (individually an "Interest Payment Date"), commencing September 1, 2017. See "THE 2017 BONDS." The 2017 Bonds will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2017 Bonds. See "THE 2017 BONDS—General Provisions." Redemption Prior to Maturity. The 2017 Bonds are subject to optional redemption, mandatory sinking payment redemption and mandatory redemption from Special Tax prepayments prior to their respective maturities. See "THE 2017 BONDS – Redemption." Security for the 2017 Bonds Pledge Under the Fiscal Agent Agreement. Pursuant to the Fiscal Agent Agreement, the 2017 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than, in each Fiscal Year, up to the first $35,000 of Special Tax Revenues that may be deposited into the Administrative Expense Fund) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, in the Special Tax Fund. "Special Tax Revenues," as defined in the Fiscal Agent Agreement, means the proceeds of the Special Taxes (as defined below) received by the Authority, including any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, but does not include interest and penalties, if any, collected with the Special Taxes that are in excess of the rate of interest payable on the Bonds. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2017 Bonds in accordance with the Fiscal Agent Agreement until all of the 2017 Bonds have been paid or defeased. See "SECURITY FOR THE 2017 BONDS—Special Taxes" and Appendix B – "Rate and Method." Amounts in the Administrative Expense Fund, the Improvement Fund and the Costs of Issuance Fund, each of which is established under the Fiscal Agent Agreement, are neither pledged to nor available for the repayment of the 2017 Bonds. Proceeds of the 2017 Bonds and -2- other amounts deposited to the Refunding Fund under the Escrow Agreement (see "PLAN OF REFUNDING – Redemption of Prior Bonds") are not pledged to, and will not be available for, the payment of the 2017 Bonds. Special Taxes; Rate and Method. The Special Taxes to be used to pay debt service on the 2017 Bonds will continue to be levied in accordance with the Rate and Method of Apportionment of Special Tax, as described under the heading "SECURITY FOR THE 2017 BONDS – Summary of Rate and Method" (the "Rate and Method"). "Special Taxes" are those taxes levied on the Taxable Property within the District pursuant to the Rate and Method and the Fiscal Agent Agreement. Limitations. The Improvements are not pledged as collateral for the 2017 Bonds. The proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the debt service on the 2017 Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the 2017 Bonds are amounts held by the Fiscal Agent under the Fiscal Agent Agreement in the Bond Fund and the Reserve Fund, amounts held by the Authority under the Fiscal Agent Agreement in the Special Tax Fund, and the proceeds, if any, from foreclosure sales of parcels with delinquent Special Taxes. See "SECURITY FOR THE 2017 BONDS -General." Reserve Fund The Fiscal Agent Agreement establishes a Reserve Fund to be held by the Fiscal Agent as a reserve for the payment of principal of and interest on the 2017 Bonds. The Reserve Fund is required to be funded in an amount equal to the lesser of (i) Maximum Annual Debt Service, (ii) 125% of average Annual Debt Service, or (iii) 10% of the initial principal amount of the Bonds (the "Reserve Requirement"). The Reserve Fund will be available to pay debt service on the 2017 Bonds and any Parity Bonds (as defined below), in the event that there is a shortfall in the amount in the Bond Fund to pay such debt service. The Reserve Requirement as of the date of issuance of the 2017 Bonds will be $ . See "SECURITY FOR THE 2017 BONDS—Reserve Fund." The Authority The Authority was formed on April 10, 2001, pursuant to a Joint Exercise of Powers Agreement (the "JPA Agreement") between the City and the former Redevelopment Agency of the City of Temecula (the "Agency"), 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. The JPA Agreement was amended in May of 2016, to provide for the withdrawal of the Successor Agency to the Agency as a member of the Authority, and to add the Temecula Community Services District and the Temecula Housing Authority as members of the Authority. See "THE AUTHORITY." The District The District is located in the far northern portion of the City, and when formed in 2005 included approximately 805 gross acres of undeveloped property in an area of the City known as "Roripaugh Ranch." Roripaugh Ranch is a master planned community that at build out is expected to include approximately 1,743 single family detached homes, a retail center, recreation centers, parks, schools, a fire station and open space areas. Following the issuance of the Prior Bonds, a portion of the property in the District underwent development consisting of approximately 160 acres (generally referred to as the "Panhandle Area") and the remaining approximately 645 acres (generally referred to as the "Pan Area") remains primarily undeveloped. -3- The Special Taxes heretofore levied for the District on the Pan Area are being prepaid in full on the date of issuance of the 2017 Bonds, so that the Pan Area will no longer be subject to Special Tax levies. The property in the Panhandle Area will remain subject to the levy of the Special Taxes and currently includes 509 separate Riverside County Assessor's parcels (the "Taxable Property"). As of December 29, 2016, 416 of the parcels of Taxable Property were improved with a detached single-family home and have been sold to homeowners, 64 parcels of Taxable Property had a building permit issued for a single-family home, and there were 29 parcels of Taxable Property for which building permits had not yet been issued. The construction and sale of homes in the District is ongoing. See "THE DISTRICT—Location and General Description of the District," "—Value -to -District Lien Ratio" and "—Major Land Owners" for additional information regarding the status of development of the Taxable Property in the District. On the 2016-17 County property tax roll, the County Assessor valued the land and improvements comprising the Taxable Property in the District at $186,500,506. See "THE DISTRICT—Assessed Property Values." The value of individual parcels of the Taxable Property varies significantly. In addition, County assessed values may not reflect current market values. No recent independent appraisal of the Taxable Property has been conducted in connection with the 2017 Bonds, and no assurance can be given that should Special Taxes levied on one or more of the parcels become delinquent, and should the delinquent parcels be offered for sale at a judicial foreclosure sale, that any bid would be received for the property or, if a bid is received, that such bid would be sufficient to pay such parcel's delinquent Special Taxes. See "THE DISTRICT—Value-to-District Lien Ratio – Value to District Lien Ratio Distribution," "SPECIAL RISK FACTORS—Property Value" and "SPECIAL RISK FACTORS—Insufficiency of Special Taxes." Limited Obligation NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE AUTHORITY OR THE STATE OF CALIFORNIA OR OF ANY OF ITS POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2017 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2017 BONDS. THE 2017 BONDS ARE NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE AUTHORITY, NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Issuance of Parity Bonds Only For Refunding Purposes The Authority may issue additional bonded indebtedness for the District that is secured by a lien on the Special Tax Revenues and on the funds pledged under the Fiscal Agent Agreement for the payment of the 2017 Bonds on a parity with the 2017 Bonds ("Parity Bonds"), but only for the purpose of refunding the 2017 Bonds or refunding any outstanding Parity Bonds. See "SECURITY FOR THE 2017 BONDS – Issuance of Additional Bonds." Bondowners' Risks Certain events could affect the ability of the Authority to pay the principal of and interest on the 2017 Bonds when due. Except for the Special Taxes, no other taxes are pledged to the payment of the 2017 Bonds. See "SPECIAL RISK FACTORS" for a discussion of certain factors that should be considered in evaluating an investment in the 2017 Bonds. The purchase of the -4- 2017 Bonds involves significant risks, and the 2017 Bonds are not appropriate investments for all types of investors. Continuing Disclosure For purposes of complying with Rule 15c2 -12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended (the "Rule"), the Authority has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board (the "MSRB") certain annual financial information and operating data and notice of certain significant events. These covenants have been made in order to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" and Appendix E for a description of the specific nature of the annual reports and notices of significant events, as well as the terms of the Continuing Disclosure Agreement pursuant to which such reports and notices are to be made. Application for Municipal Bond Insurance The Authority has made application for bond insurance for all or selected maturities of the 2017 Bonds. Should the Authority select a bond insurer, then the Authority will release such information prior to the initial sale of the 2017 Bonds, and this Official Statement, including the text hereof and the summary of principal legal documents appended hereto, will be revised to reflect the terms of the commitment to issue any such policy. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change without notice. Except where otherwise indicated, all information contained in this Official Statement has been provided by the Authority on behalf of the District. Copies of the Fiscal Agent Agreement and certain other documents referenced in this Official Statement are available for inspection at the office of, and (upon written request and payment to the Authority of a charge for copying, mailing and handling) are available for delivery from, the Director of Finance, City of Temecula, 41000 Main Street, Temecula, California 92589- 9033. PLAN OF REFUNDING Redemption of Prior Bonds Proceeds from the sale of the 2017 Bonds, together with certain funds ("Prior Funds") held under the Fiscal Agent Agreement, dated as of March 1, 2006, pursuant to which the Prior Bonds were issued (as amended, the "2006 Prior Agreement"), and funds representing a prepayment of Special Taxes (the "2017 Special Tax Prepayment") for property in the Pan Area originally included in the District (and by reason of such prepayment such property will no longer be subject to the levy of the Special Taxes), will be deposited in an escrow account (the "Refunding Fund") held by U.S. Bank National Association, as escrow bank (the "Escrow Bank") pursuant to an Escrow Agreement dated as of February 1, 2017, between the Authority, for and on behalf of the District, and the Escrow Bank. Amounts in the Refunding Fund will be sufficient, without reinvestment, to redeem the Prior Bonds on March 1, 2017, at a redemption price of 100% of the principal amount thereof plus accrued interest to the redemption date. -5- Upon the deposit of proceeds of the 2017 Bonds, the Prior Funds and the proceeds of the 2017 Special Tax Prepayment with the Escrow Bank in accordance with the Escrow Agreement, the Prior Bonds will be legally defeased and will no longer be entitled to the benefits of, or be secured by, the 2006 Prior Agreement or any pledge of, or lien on, the Special Taxes levied on the Taxable Property in the District. Amounts deposited in the Refunding Fund are not in any way available to pay debt service on the 2017 Bonds. Funds for Improvements Amounts on deposit in the accounts within the improvement fund and in the reserve fund established under the 2006 Prior Agreement will be transferred, on the date of issuance of the 2017 Bonds, to the Improvement Fund to be held by the Fiscal Agent under the Fiscal Agent Agreement. Amounts in the Improvement Fund, together with amounts held in an improvement fund established under a separate fiscal agent agreement constituting proceeds of special tax bonds secured by special tax levies of a separate and distinct new community facilities district which includes the property in the Pan Area, will be used to finance some of the Improvements authorized to be funded by the District but not yet completed. Those Improvements, consisting generally of roadway and drainage channel improvements, will allow for development of the property in the Pan Area; however, the Improvements not yet completed are not needed for the full buildout of the Panhandle Area that is subject to the levy of Special Taxes to repay the 2017 Bonds. See "THE DISTRICT—Location and Description of the District," "—History of the District" and "—The Improvements." Amounts in the Improvement Fund and such other improvement fund are not pledged, and will not be available, to pay the debt service on the 2017 Bonds. Estimated Sources and Uses of Funds The sources and uses of funds in connection with the 2017 Bonds are expected to be as follows: Principal amount of 2017 Bonds Plus: Amounts relating to the Prior Bonds Less: Underwriter's Discount Total Sources $ Deposit to Refunding Fund(1) Deposit to Reserve Fundc2) Deposit to Costs of Issuance Fund( ) Deposit to Improvement Fund( ) Total Uses $ (1) To be used, together with the 2017 Special Tax Prepayments, to defease and redeem the Prior Bonds in whole on March 1, 2017. See "PLAN OF REFUNDING—Redemption of Prior Bonds." (2) Equal to the initial Reserve Requirement. See "SECURITY FOR THE 2017 BONDS—Reserve Fund." (3) Costs of issuance include, without limitation, Fiscal Agent fees and expenses; Municipal Advisor fees and expenses; Bond Counsel, Disclosure Counsel, City Attorney and other legal fees; Escrow Bank fees and expenses; verification agent fees; rating agency fees; printing costs and other costs related to the issuance of the 2017 Bonds and the redemption of the Prior Bonds. (4) See "PLAN OF REFUNDING—Funds for Improvements" and "THE DISTRICT—The Improvements." -6- THE 2017 BONDS Authority for Issuance Pursuant to the Act, on January 11, 2005, the Board of Directors adopted Resolution No. TPFA 05-01 establishing the District ("Resolution of Formation"). Also on January 11, 2005, the Board of Directors adopted Resolution No. TPFA 05-03 calling an election to authorize the issuance of bonds and the levying of a special tax within the District. On January 11, 2005, the election was held and over two-thirds of the votes cast in the election were in favor of the issuance of up to $50,000,000 of bonded indebtedness to finance the Improvements, and approved the Rate and Method, a copy of which as currently in effect is attached to this Official Statement as Appendix B. See "THE DISTRICT—History of the District." The 2017 Bonds are authorized to be issued pursuant to the Act, the Refunding Law, Resolution No. TPFA 17- adopted on January 24, 2017, by the Board of Directors, acting as the legislative body of the District, and the Fiscal Agent Agreement. The Special Taxes to be used to pay debt service on the 2017 Bonds are being levied in accordance with the Rate and Method. General Provisions The 2017 Bonds will be issued only as fully registered bonds, in the denomination of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will mature on the dates set forth on the inside cover page of this Official Statement. The 2017 Bonds will be dated the date of their issuance and interest will be payable on each Interest Payment Date, commencing September 1, 2017. Each 2017 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or (b) 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 will bear interest from such Interest Payment Date, or (c) it is authenticated on or before August 15, 2017, in which event it will bear interest from the date of issuance of the 2017 Bonds; provided, however, that if, as of the date of authentication of any 2017 Bond interest thereon is in default, such 2017 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. "Record Date" is defined in the Fiscal Agent Agreement as the fifteenth day of the month next preceding the month of the applicable Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day. The 2017 Bonds will be payable both as to principal and interest, and as to any premium upon the redemption thereof, in lawful money of the United States of America. The principal of the 2017 Bonds and any premium due upon the redemption thereof will be payable upon presentation and surrender at the principal corporate trust office of the Fiscal Agent. Interest on each 2017 Bond will be computed using a year of 360 days comprised of twelve 30 -day months. The 2017 Bonds will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the 2017 Bonds. Individual purchases of the 2017 Bonds will be made in book -entry form only. Purchasers of the 2017 Bonds will not receive physical certificates representing their ownership interests in the 2017 Bonds purchased. Principal and interest payments represented by the 2017 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the 2017 Bonds. See Appendix F – "DTC and the Book -Entry Only System." So long as the 2017 Bonds -7- are registered in the name of Cede & Co., as nominee of DTC, references in this Official Statement to the owners shall mean Cede & Co., and shall not mean the purchasers or Beneficial Owners of the 2017 Bonds. Redemption Optional Redemption.' The 2017 Bonds maturing on or after September 1, 2028 are subject to optional redemption prior to their stated maturities on any Interest Payment Date occurring on or after September 1, 2027, as a whole or in part in an amount equal to $5,000 or any integral multiple thereof, upon payment from any source of funds available for that purpose, at a redemption price equal to the principal amount of the 2017 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Payment Redemption. The 2017 Bonds maturing on September 1, 2036, 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 table will be reduced as a result of any prior partial redemption of the 2017 Bonds pursuant to the optional redemption or redemption from special tax prepayments provisions of the Fiscal Agent Agreement, as specified in writing by the Authority's Treasurer to the Fiscal Agent. Mandatory Redemption From Special Tax Prepayments.* The 2017 Bonds are subject to mandatory redemption prior to their stated maturity on any Interest Payment Date, from the proceeds of Special Tax Prepayments and corresponding transfers of funds from the Reserve Fund (as described below under "SECURITY FOR THE 2017 BONDS - Reserve Fund"), as a whole or in part in an amount equal to $5,000 or any integral multiple thereof, at a redemption price (expressed as a percentage of the principal amount of the 2017 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 September 1, 2017 to and including March 1, 103% September 1, and March 1, 102 September 1, and March 1, 101 September 1, and any Interest Payment Date 100 thereafter Since the formation of the District, other than the prepayment in full of the Special Taxes on all of the property in the Pan Area to occur on the date of issuance of the 2017 Bonds (see * Preliminary, subject to change. * Preliminary, subject to change. -8- "PLAN OF REFUNDING - Redemption of Prior Bonds" and "THE DISTRICT—History of the District"), none of the parcels in the District have had their Special Tax levies prepaid. No assurance can be given, however, that other prepayments of Special Taxes levied on the Taxable Property will not occur in the future, which would result in a redemption to 2017 Bonds prior to their maturity. See "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method - Prepayment in Full," and "—Prepayment in Part." Purchase of 2017 Bonds In Lieu of Redemption. In lieu of redemption as described above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2017 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of 2017 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 2017 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 2017 Bonds were redeemed in accordance with the Fiscal Agent Agreement. Selection of 2017 Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the 2017 Bonds (other than pursuant to the mandatory sinking payment redemption provisions of the Fiscal Agent Agreement), the Fiscal Agent will select the 2017 Bonds to be redeemed, from among the maturities of the 2017 Bonds or such given portion thereof not previously redeemed as directed by the Treasurer (who shall specify 2017 Bonds to be redeemed so as to maintain substantially level debt service on the Bonds), and within a maturity by lot in any manner which the Fiscal Agent deems appropriate. Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first class mail, postage prepaid, or by such other means as is acceptable to the recipient thereof, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services, and to the respective registered Owners of any 2017 Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent; but such mailing is not a condition precedent to redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such 2017 Bonds. The redemption notice will state the redemption date and the redemption price and, if less than all of the then Outstanding 2017 Bonds are to be called for redemption, will designate the CUSIP numbers and, if applicable, Bond numbers of the 2017 Bonds to be redeemed by giving the individual CUSIP number and, if applicable, Bond number of each Bond to be redeemed or if Bond numbers have been assigned by the Fiscal Agent to the 2017 Bonds will state that all 2017 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2017 Bonds of one or more maturities have been called for redemption, will state as to any Bond called in part the principal amount thereof to be redeemed, and will require that such 2017 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and will state that further interest on such 2017 Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the 2017 Bonds pursuant to the redemption provisions described above under "- Optional Redemption" the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2017 Bonds on the anticipated redemption date, and that the redemption will not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2017 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 2017 Bonds to be redeemed, the Fiscal Agent will send written notice to the owners of the 2017 Bonds, -9- 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 2017 Bonds for which notice of redemption was given will remain Outstanding for all purposes of the Fiscal Agent Agreement. 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 2017 Bonds so called for redemption have been deposited in the Bond Fund, such 2017 Bonds so called will 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 will accrue thereon on or after the redemption date specified in such notice. Tender of 2017 Bonds in Payment of Special Taxes. The Authority has covenanted in the Fiscal Agent Agreement not to permit the tender of 2017 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 2017 Bonds that will remain Outstanding following such tender. Transfer or Exchange of 2017 Bonds So long as the 2017 Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of 2017 Bonds shall be made in accordance with DTC procedures. See Appendix F - "DTC and the Book -Entry Only System." If the book -entry only system for the 2017 Bonds is ever discontinued, any 2017 Bond may, in accordance with its terms, be transferred or exchanged by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2017 Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. Whenever any 2017 Bond or 2017 Bonds are surrendered for transfer or exchange, the Authority will execute and the Fiscal Agent will authenticate and deliver a new 2017 Bond or 2017 Bonds, for a like aggregate principal amount of 2017 Bonds of authorized denominations and of the same maturity. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfers or exchanges of 2017 Bonds will be required to be made (i) within the 15 days prior to the date designated by the Fiscal Agent as the date for selecting 2017 Bonds for redemption, (ii) with respect to any 2017 Bond after such 2017 Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Discontinuance of DTC Services DTC may determine to discontinue providing its services with respect to the 2017 Bonds by giving written notice to the Fiscal Agent during any time that the 2017 Bonds are Outstanding, and discharging its responsibilities with respect to the 2017 Bonds under applicable law. The Authority may terminate the services of DTC with respect to the 2017 Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the 2017 Bonds or that continuation of the system of book -entry transfers through DTC is not in the best interest of the Beneficial Owners. The Authority will mail any such notice of 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 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 2017 Bonds that they obtain certificated Bonds, the 2017 Bonds will no longer be restricted to being registered in the Registration Books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may -10- be registered in whatever name or names the Owners designate at that time, in accordance with the Fiscal Agent Agreement. To the extent that the Beneficial Owners are designated as the transferees by the Owners, the 2017 Bonds will be delivered to such Beneficial Owners as soon as practicable in accordance with the Fiscal Agent Agreement. Scheduled Debt Service The following table shows the annual scheduled debt service on the 2017 Bonds, assuming no optional redemption of the 2017 Bonds and no redemption of the 2017 Bonds from Special Tax Prepayments: Bond Year ending Annual Debt September 1 Principal Interest Service 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Totals General SECURITY FOR THE 2017 BONDS Pursuant to the Fiscal Agent Agreement, the 2017 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than, each Fiscal Year, a maximum of $35,000 of Special Tax Revenues that may be deposited to the Administrative Expense Fund on a priority basis), and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, the Special Tax Fund. Special Tax Revenues do not include penalties, if any, collected in respect of delinquent Special Taxes. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2017 Bonds in accordance with the Fiscal Agent Agreement until all of the 2017 Bonds have been paid or defeased. -11- Amounts in the Administrative Expense Fund, the Improvement Fund, the Costs of Issuance Fund and the Refunding Fund, and up to $35,000 of the first Special Tax Revenues collected in any Fiscal Year that may be deposited to the Administrative Expense Fund on a priority basis, are not pledged to the repayment of the 2017 Bonds. The Improvements are not pledged as collateral for the 2017 Bonds. The proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the Debt Service on the 2017 Bonds. Limited Obligation The 2017 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 the Special Tax Fund created pursuant to the Fiscal Agent Agreement. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the 2017 Bonds are amounts held by the Fiscal Agent under the Fiscal Agent Agreement in the Bond Fund, the Reserve Fund and the Special Tax Fund, and the proceeds, if any, from foreclosure sales of parcels with delinquent Special Tax levies. Special Taxes In accordance with the provisions of the Act, the Rate and Method was approved in 2005 by the then owner of a majority of the property in the District. The Rate and Method is set forth in its entirety in Appendix B. Under the Fiscal Agent Agreement, the Authority is obligated to fix and levy the amount of Special Taxes within the District required for the timely payment of principal of and interest on the outstanding 2017 Bonds becoming due and payable, including any necessary replenishment of the Reserve Fund and an amount estimated to be sufficient to pay the Administrative Expenses, taking into account any prepayments of Special Taxes previously received by the Authority. The Special Taxes levied on any parcel of Taxable Property may not in any event exceed the maximum amount as provided in the Rate and Method and the Act. The Special Taxes are payable and are to be collected in the same manner, at the same time and in the same installment as County ad valorem taxes on property levied on the secured tax roll are payable, and pursuant to the Act 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 taxes levied on the County secured tax roll. Notwithstanding the foregoing, the Special Taxes may be collected in certain circumstances by means of direct billing of the owners of Taxable Property. Although the Special Taxes will constitute a lien on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of the property within the District. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on a parcel of Taxable Property, the Authority may order the institution of a superior court action to foreclose the lien on the parcel of Taxable Property within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. The Act provides that the Special Taxes are secured by a continuing lien that is subject to the same lien priority in the case of delinquency as ad valorem property taxes. See "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method," and "—Covenant for Superior Court Foreclosure" and "SPECIAL RISK FACTORS—Parity Taxes and Special Assessments." The property located within the District is subject to other liens for taxes and assessments, and other such liens could come into existence in the future. See "SPECIAL RISK FACTORS- -12- Parity Taxes and Special Assessments." There is no assurance that any owner of a parcel subject to the Special Tax levy will be financially able to pay the annual Special Taxes or that it will pay such taxes even if financially able to do so. See "SPECIAL RISK FACTORS." For historic information regarding assessed valuations and the payment of, and delinquencies with respect to, Special Taxes in the District, see "THE DISTRICT -Assessed Property Values," and "-Special Tax Delinquencies." Special Tax Fund Deposit of Special Tax Revenues. The Fiscal Agent Agreement establishes a Special Tax Fund to be held by the Fiscal Agent. Under the Fiscal Agent Agreement, the Authority is obligated to transfer or cause to be transferred to the Fiscal Agent, for deposit by the Fiscal Agent in the Special Tax Fund, as soon as practicable following receipt, all Special Tax Revenues received by the Authority. 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) will 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 will be separately identified by the Treasurer and will be disposed of by the Fiscal Agent first, by transfer to the Bond Fund to pay any past due debt service on the Bonds; second, by transfer to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund to the then Reserve Requirement; third, by transfer 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 be held in the Special Tax Fund and used for its purposes; and (iii) any proceeds of Special Tax Prepayments will be remitted by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account and used to redeem Bonds. Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the Authority and the Owners of the Bonds, will be disbursed as provided below and, pending any disbursement, will be subject to a lien in favor of the Owners of the Bonds and the Authority. Disbursements. On each Interest Payment Date, the Fiscal Agent will 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 under the Fiscal Agent Agreement 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. -13- 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 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 (i) to the Administrative Expense Fund, from time to time, if monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund; (ii) to such other fund or account established to pay debt service on or administrative expenses with respect to any bonds or other debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under the Fiscal Agent Agreement; or (iii) to such other fund or account established by the Authority to be used for any lawful purpose under the Act and otherwise in accordance with the provisions of the Rate and Method. Summary of Rate and Method Special Tax Formula - Calculation of Annual Special Tax. The Rate and Method is used to allocate the amount of the Special Tax that is needed to be collected each fiscal year among the Taxable Properties within the District, based upon the development status of the Taxable Property and its size, subject to a maximum tax rate that may be levied against each class of Taxable Property. The Rate and Method is set forth in full in Appendix B, and the following is a summary of the Rate and Method. Capitalized terms used, but not otherwise defined, in this section have the meanings given to them in the Rate and Method. The Special Taxes were first levied on property in the District in Fiscal Year 2006-07, and have been so levied each Fiscal Year since then. See "THE DISTRICT—Special Tax Delinquencies" for a history of Special Tax levies and collections. The Rate and Method provides that the Annual Special Tax may continue to be levied for a period not to exceed fifty Fiscal Years, commencing with Fiscal Year 2005-06. Upon prepayment of the Special Taxes by parcels in the Pan Area of Roripaugh Ranch, to happen concurrently with the issuance of the 2017 Bonds (see "PLAN OF REFUNDING – Redemption of Prior Bonds"), only the 509 parcels of property in the Panhandle Area of Roripaugh Ranch will be subject to the levy of the Special Taxes securing the payment of the 2017 Bonds. See "THE DISTRICT -History of the District." Special Tax Requirement. Annually, at the time of levying the Special Tax, the Authority, with the assistance of a special tax administrator (currently Albert A. Webb Associates), determines 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) 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, the costs of remarketing, credit enhancement and liquidity facility fees (including such fees for instruments that serve as the basis of a reserve fund in lieu of cash related to any such Bonds) and rebate payments; (iii) the Administrative Expenses; (iv) any reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year or otherwise reasonably expected; (v) any amount required to establish or replenish any reserve funds for the Bonds; and less (vi) available funds as directed under the Fiscal Agent Agreement. Developed and Undeveloped Property. The Rate and Method provides that for each Fiscal Year, all Parcels of Taxable Property within the District be classified as either Taxable Property or Exempt Property. Taxable Property is further classified as Residential Property, Non- Residential Property, Taxable Property Owner's Association Property, or Taxable Public Property. Residential Property and Non -Residential Property are further classified as Developed Property and Undeveloped Property. "Developed Property" means all Parcels of Taxable Property for -14- which a Final Map was recorded as of the January 1 and a building permit for new construction was issued as of the April 1 preceding the Fiscal Year in which the Special Tax is being levied, exclusive of Property Owner's Association Property and Public Property. "Undeveloped Property" means all Taxable Property not classified as Developed Property, exclusive of Property Owner's Association Property and Public Property. For Fiscal Year 2017-18, there will be 509 Parcels of Residential Property in the District subject to the levy of the Special Tax, and as of December 29, 2016 480 of those parcels were classified as Developed Property and 29 of those parcels were classified as Undeveloped Property. Following the issuance of the 2017 Bonds, there is not expected to be any Non - Residential Property, Taxable Property Owner's Association Property or Taxable Public Property in the District. Maximum Special Tax. The Maximum Special Tax for each Parcel of Developed Residential Property is the greater of the applicable Dwelling Unit Special Tax or Acreage Special Tax. The Maximum Special Tax for each Parcel of Undeveloped Residential Property is the applicable Acreage Special Tax. The Dwelling Unit Special Tax for Developed Residential Property ranges from $1,586 to $4,230 per residential dwelling unit based on the Residential Floor Area of the Residential Property. The Acreage Special Tax rates range from $5,620 per acre to $17,665 per Acre depending on the property classification or land use as low density, low -estate density, low medium density, medium density standard, or medium density cluster. The Maximum Special Tax is not subject to any annual escalation. See "Projected Fiscal Year 2017-18 Special Tax Levy" below for the current classification of the Taxable Parcels in the District (based on their status as of November 16, 2016), and APPENDIX B - "Rate and Method" for a listing of the tax classifications and tax rates in the District. Method of Apportionment. The Rate and Method provides that for each Fiscal Year the CFD Administrator shall levy the Special Tax on all Taxable Property to fund the Special Tax Requirement as follows: First: The Special Tax shall be levied Proportionately on each Parcel of Developed Property, up to 100% of the applicable Dwelling Unit Special Tax in the case of Developed Residential Property; Second: If additional Special Taxes are needed after the first step, the Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property, up to 100% of the applicable Acreage Special Tax; Third: If additional Special Taxes are needed after the second step, the Special Tax for parcels of Developed Property for which the Maximum Special Tax is derived from the applicable Acreage Special Tax shall be increased equally, measured on a percentage basis, from the amounts levied under the preceding Step 1 up to 100% of the applicable Acreage Special Tax (i.e., the percentage increase shall be equal for all applicable Parcels, until the Maximum Special Tax is reached); and Fourth: If additional Special Taxes are needed after the third step, the Special Tax shall be levied Proportionately on each Parcel of Taxable Property Owner's Association Property and Taxable Public Property up to the applicable Maximum Special Tax; however, following the issuance of the 2017 Bonds there will be no such property in the District. Notwithstanding the above, both the Act and the Rate and Method provide that under no circumstances will the Special Taxes levied against any Parcel used as a private residence be -15- increased as a consequence of delinquency or default by the owner of any other Parcel or Parcels within the District by more than ten percent (10%) per Fiscal Year. In addition, the Rate and Method provides that under no circumstances will the Acreage Special Tax be levied against Parcels of Developed Residential Property if the Special Taxes which may be levied pursuant to the first and second steps above are equal to or greater than the sum of estimated Administrative Expenses and one hundred ten percent (110%) of the then maximum annual debt service for outstanding Bonds. As previously stated, all of the Taxable Property in the District consist solely of Residential Property that is either Developed Property or Undeveloped Property (see Table 1 below), and Special Tax levies are not expected to go beyond the Second step above. Prepayment in Full. The Maximum Special Tax obligation applicable to a Parcel may be fully prepaid and the obligation of the Parcel to pay the Special Tax 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 and all other parcels which are under the same ownership and located within the District. The Full Prepayment Amount for an applicable Parcel is calculated based on Bond Redemption Amounts and other costs, all as specified in Section H of the Rate and Method. Any such prepayment after the issuance of the 2017 Bonds will result in a redemption of 2017 Bonds prior to maturity. See "THE 2017 BONDS—Redemption – Mandatory Redemption From Special Tax Prepayments." In addition, the Act authorizes a public agency which acquires property subject to the Special Tax to prepay the Special Tax so long as the Authority determines the prepayment arrangement will fully protect the interests of the owners of the Bonds. While the Rate and Method allows for the prepayment of Special Taxes for Parcels of Developed Property, Non -Residential Property and Taxable Property Owner's Association Property, the Rate and Method does not expressly prohibit the prepayment of Special Taxes on Undeveloped Property, and the Board of Directors of the Authority has interpreted the Rate and Method to so allow owners of Undeveloped Property to prepay their Maximum Special Tax obligation. As described under the heading "PLAN OF REFUNDING -Redemption of Prior Bonds," the owners of the Parcels in the Pan Area will fully prepay their Maximum Special Tax obligation on the date of issuance of the 2017 Bonds, and the property in the Pan Area will no longer be Taxable Property. Prepayment in Part. The Maximum Special Tax on a Parcel of Developed Residential Property, Non -Residential Property, or Taxable Property Owner's Association Property may be partially prepaid to allow redemption of Bonds in increments of $5,000. The amount of any such partial prepayment will be calculated pursuant to the Rate and Method. Since the formation of the District, there have been no partial prepayments of the Maximum Special Tax for Parcels in the District. -16- Projected Fiscal Year 2017-18 Special Tax Levy. Table 1 below sets forth the Land Use classifications of the Parcels in the District that are Taxable Property for Fiscal Year 2017-18 (based on their status as of December 29, 2016), and their respective portion of projected Special Tax levy for Fiscal Year 2017-18. Table 1 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Land Use Classifications and Projected Fiscal Year 2017-18 Special Tax Levy for Taxable Property Projected Assigned Fiscal Year Projected Special 2017-18 Total Fiscal Tax per Special Tax Year 2017-18 Tax No. of Unit/ per Unit/ Special Tax Percent Land Use Class Residential Floor Area Parcels Acre(1) Acre(1) Levy(2) of Total(2) Residential D1 Greater than 5,000 sq. ft. 0 $4,230 $0 $0 0.00% Residential D2 4,401 sq. ft. to 5,000 sq. ft. 20 3,995 2,629 52,588 6.45 Residential D3 4,201 sq. ft. to 4,400 sq. ft. 24 3,520 2,317 55,602 6.82 Residential D4 4,001 sq. ft. to 4,200 sq. ft. 2 3,356 2,209 4,418 0.54 Residential D5 3,801 sq. ft. to 4,000 sq. ft. 19 3,192 2,101 39,917 4.89 Residential D6 3,601 sq. ft. to 3,800 sq. ft. 55 3,028 1,993 109,611 13.44 Residential D7 3,401 sq. ft. to 3,600 sq. ft. 42 2,865 1,886 79,197 9.71 Residential D8 3,201 sq. ft. to 3,400 sq. ft. 54 2,701 1,778 95,997 11.77 Residential D9 3,001 sq. ft. to 3,200 sq. ft. 69 2,537 1,670 115,214 14.12 Residential D10 2,801 sq. ft. to 3,000 sq. ft. 57 2,374 1,562 89,062 10.92 Residential D11 2,601 sq. ft. to 2,800 sq. ft. 34 2,210 1,455 49,455 6.06 Residential D12 2,401 sq. ft. to 2,600 sq. ft. 0 2,046 0 0 0.00 Residential D13 2,201 sq. ft. to 2,400 sq. ft. 66 1,883 1,239 81,796 10.03 Residential D14 2,001 sq. ft. to 2,200 sq. ft. 38 1,719 1,131 42,993 5.27 Residential D15 Less than 2,001 sq. ft. 0 1,586 0 0 0.00 Undeveloped LM N/A 29 0 0 0 0.00 Totals 509 $815,850 100.00% (1) Per unit for Residential Property; per acre for Undeveloped Property. (2) Based on the expected annual debt service for the 2017 Bonds, as projected by Stifel, Nicolaus & Company Incorporated, allocated among land use classes based on their respective Assigned Special Taxes. Includes, in addition to the estimated scheduled debt service on the 2017 Bonds during calendar year 2018, $35,000 for Administrative Expenses. Preliminary, subject to change. Source: Albert A. Webb Associates. Reserve Fund The Fiscal Agent Agreement establishes a debt service reserve fund (the "Reserve Fund") as a separate fund to be held 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. Moneys in the Reserve Fund are subject to a lien in favor of the Owners of the Bonds. The Reserve Fund is required by the Fiscal Agent Agreement to be maintained in an amount equal to the Reserve Requirement, which is defined in the Fiscal Agent Agreement, as of any date of calculation, as an amount equal to the lesser of (i) the then Maximum Annual Debt Service, (ii) 125% of the then average Annual Debt Service, or (iii) 10% of the initial principal amount of the Bonds issued under the Fiscal Agent Agreement. The Reserve Requirement as of the date of issuance of the 2017 Bonds will be $ Except as otherwise provided in the Fiscal Agent Agreement (with respect to the use of moneys in the Reserve Fund in connection with prepayments of Special Taxes, for the payment of any rebate liability due to the federal government, and the use of moneys in excess of the Reserve Requirement to pay debt service on the Bonds), all amounts deposited in the Reserve -17- Fund will 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. See Appendix C - "Summary of Fiscal Agent Agreement - Reserve Fund." Whenever the balance in the Reserve Fund equals or exceeds the amount required to redeem or pay all of the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent will transfer the amount in the Reserve Fund to the Bond Fund to be used for the payment and redemption of all of the Outstanding Bonds. In the event that the amount 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 will be retained by the Authority, free of any encumbrance by the Fiscal Agent Agreement, to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts will be transferred from the Reserve Fund until after (i) amounts in the Reserve Fund are withdrawn for purposes of making payment to the federal government in accordance with the Fiscal Agent Agreement, and (ii) payment of any fees and expenses due to the Fiscal Agent. See Appendix C - "Summary of Fiscal Agent Agreement - Reserve Fund." Covenant for Superior Court Foreclosure Foreclosure Under the Act. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on the taxed parcel, the Authority may order the institution of a superior court action to foreclose the lien on the taxed parcel within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. Authority Foreclosure Covenant. The Authority has covenanted for the benefit of the Bondowners that the Treasurer will determine on or about June 15 of each year whether or not all Special Taxes theretofore levied in the District have been received by the Authority and, consequently, whether any deficiencies in payment of Special Taxes exist. The Fiscal Agent Agreement provides that, following such determination: (A) 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 $7,500 or more, the Treasurer will 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 against the delinquent parcel within 90 days of the sending of such notice; and (B) 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 (i) the amount in the Reserve Fund is at least equal to the Reserve Requirement, and (ii) the amounts then on deposit in the Special Tax Fund and the Bond Fund are sufficient to pay the scheduled debt service due on the Bonds on the succeeding September 1 and March 1 without the need for any draw on the Reserve Fund. See Appendix C - "Summary of the Fiscal Agent Agreement." -18- No assurance can be given as to the time necessary to complete any foreclosure sale or that any foreclosure sale will be successful. The Authority is not required to be a bidder at any foreclosure sale and does not intend to be such a bidder. Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. Subject to the maximum rates, the Rate and Method is designed to generate from all non-exempt property within the District the current year's debt service, administrative expenses, and replenishment of the Reserve Fund to the Reserve Requirement, including an amount reflecting the prior year's delinquencies. However, if foreclosure proceedings are necessary, and the Reserve Fund has been depleted, there could be a delay in payments to owners of the 2017 Bonds pending prosecution of the foreclosure proceedings and receipt by the Authority of the proceeds of the foreclosure sale. See "SPECIAL RISK FACTORS—Bankruptcy Delays" and "—Proceeds of Foreclosure Sales." Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post -judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.6 of the Act, the Authority, as judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid," where the Authority could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the Authority becomes the purchaser under a credit bid, the Authority must pay the amount of its credit bid into the redemption fund established for the 2017 Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale. Neither the Act nor the Fiscal Agent Agreement requires the Authority to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale, and the Authority has no intent to be such a purchaser. No Teeter Plan Collection of the Special Taxes is not subject to the "Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds," as provided for in Section 4701 et seq. of the California Revenue and Taxation Code (known as the "Teeter Plan"). Accordingly, collections of Special Taxes will reflect actual delinquencies, if any. Investment of Moneys Except as otherwise provided in the Fiscal Agent Agreement, all moneys in any of the funds or accounts established pursuant to the Fiscal Agent Agreement will be invested by the Fiscal Agent solely in Permitted Investments, as directed by the Authority. See Appendix C – "Summary of the Fiscal Agent Agreement" for a definition of "Permitted Investments" and for additional provisions regarding the investment of funds held under the Fiscal Agent Agreement. Issuance of Additional Bonds Parity Bonds. The Fiscal Agent Agreement does not authorize the Authority to issue any additional "new money" bonds for the District on a parity with the 2017 Bonds, but it does authorize the Authority to issue one or more series of "Refunding Bonds" secured and payable on a parity under the Fiscal Agent Agreement with the 2017 Bonds. The Fiscal Agent Agreement defines Refunding Bonds as 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 -19- being refunded, and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. Subject to meeting the conditions summarized below, Refunding Bonds will be "Parity Bonds" that will be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Fiscal Agreement on a parity with all other Bonds Outstanding under the Fiscal Agreement; the Fiscal Agreement defines "Bonds" as the 2017 Bonds and any Parity Bonds. The Authority may issue the Parity Bonds subject to the following specific conditions precedent, among others set forth in the Fiscal Agent Agreement: (A) Current Compliance; Refunding Bonds. The Authority must be in compliance in all material respects on the date of issuance of the Parity Bonds with all covenants set forth in the Fiscal Agent Agreement and all Supplemental Agreements, and the principal amount of the Parity Bonds must not cause the Authority to exceed the maximum authorized indebtedness of the District under the provisions of the Act. The Parity Bonds must in any event be Refunding Bonds. (B) Payment Dates. The interest on the Parity Bonds must be payable on March 1 and September 1, and principal of the Parity Bonds must be payable on September 1 in any year in which principal is payable (provided that there is no requirement that any Parity Bonds pay interest on a current basis). (C) Reserve Fund Deposit. There must be 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 at least equal to the Reserve Requirement. (D) Officer's Certificate. The Authority must certify to the Fiscal Agent that the proposed issue of Parity Bonds constitutes Refunding Bonds, and that the conditions for the issuance of Parity Bonds in the Fiscal Agent Agreement have been met. Subordinate Bonds. Nothing in the provisions described above will prohibit the Authority from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge of the Special Tax Revenues under the Fiscal Agent Agreement. THE DISTRICT Location and General Description of the District The District is located in the northern portion of the City, and following the issuance of the 2017 Bonds will include approximately 160 gross acres of land located in the Panhandle Area of the Roripaugh Ranch development. The City of Murrieta is about one mile to the west, and unincorporated area of Riverside County is located to the north, east and southeast. The French Valley airport is located about a mile northwest of the District, and the Lake Skinner Recreation Area is located within two miles to the northeast. In the area to the north is a relatively new approximately 800 acre master planned community known as Rancho Bella Vista, planned for just over 1,800 dwelling units. -20- Roripaugh Ranch is a master -planned community expected to include up to 1,743 single family detached homes, a neighborhood retail center, two private recreation centers, parks, an elementary school and a middle school, a fire station and 263 acres of open space. When originally formed, the District also included the Pan Area of the Roripaugh Ranch development (which is primarily undeveloped), but the the Special Taxes levied on the Pan Area are being fully prepaid on the date of issuance of the 2017 Bonds, so that the property in the Pan Area will not be subject to the levy of Special Taxes securing the payment of the 2017 Bonds. See "PLAN OF REFUNDING - Redemption of Prior Bonds." The portion of the Roripaugh Ranch located in the Panhandle Area is fully entitled for development, but the Pan Area requires the completion of additional infrastructure improvements before homes can be constructed in that portion of Roripaugh Ranch. The District, following the issuance of the 2017 Bonds, includes 509 Riverside County Assessors Parcels that will be subject to the levy of the Special Taxes, each of which at build -out are expected to be improved with a detached single family home. As of December 29, 2016, 416 of the parcels of the Taxable Property have been improved with a detached single family home that had been sold to homeowners, an additional 64 parcels of Taxable Property had a building permit issued for a single family home, and there were 29 parcels of Taxable Property for which building permits had not been issued. As of December 29, 2016, KB Home Coastal, Inc. ("KB Home Costal") owned 51 parcels of Taxable Property, 24 of which had building permits issued as of December 29, 2016 and 27 of which were not yet subject to a building permit, and CalAtlantic Group, Inc. ("CalAtlantic"), owned 39 of the parcels of Taxable Property, 37of which had building permits issued and 2 of which were not yet subject to a building permit. See Table 4 under the heading "THE DISTRICT—Value-to-District Lien Ratio—Value-to-District Lien Ratio Distribution." See also "Major Land Owners" below for a description of the current status of the parcels of Taxable Property owned by KB Home Costal and CalAtlantic. Construction and sales of homes in the District is ongoing. The Taxable Property in the District includes lots in five "planning areas" with five different neighborhoods, all in a gated community. The neighborhoods identified as "Verano" and "Sorrento", consisting of 113 lots, are built out, CalAtlantic is developing 99 lots in a neighborhood known as "Montego" (75 of which have been improved with single family homes sold to homeowners) and 100 lots in neighborhood known as "Cambridge" (85 of which have been improved with single family homes sold to homeowners), and KB Home Costal is developing 197 lots in a neighborhood known as "Pinnacle" (146 of which have been improved with single family homes sold to homeowners). See "Major Land Owners" below. The following pages contain aerial photos of the Panhandle Area of the District. -21- Map created 07 1 G: \ 2015 \ 15-0292\ GIS \ CFD2003-0 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) LOCATION MAP (including only the Panhandle Area) Source: Airviews. The Hean of Southernvi California 0 4,000 8,000 J Feet -22- LOCATION MAP CFD 03-02 ALBERT A. e WEBB ASSOCIATES TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) (including only the Panhandle Area) Source: Albert A. Webb Associates. -23- History of the District The District was formed under the provisions of the Act by the Board of Directors of the Authority, acting as the legislative body of the District, on January 11, 2005, in order to finance public infrastructure improvements necessitated by the Roripaugh Ranch development. See "The Improvements" below. On April 27, 2006, the Authority issued, for the District, $51,250,000 initial principal amount of the Prior Bonds. In connection with the issuance of the Prior Bonds, the Authority, for and on behalf of the District, entered into on Acquisition Agreement, dated as of March 1, 2006 (the "Original Acquisition Agreement") with Ashby USA, LLC ("Ashby") the then owner of the majority of the property in the District, pursuant to which Ashby was to construct most of the Improvements authorized to be funded by the District. The City was expected to construct the remainder of the Improvements to be funded with proceeds of the Prior Bonds. In connection with the formation of the District, the Authority entered into several joint community facilities agreements related to some of the Improvements, including such agreements with the City, the Temecula Community Services District, the County of Riverside (two such agreements, one related to street improvements and one related to flood control improvements), and the Eastern Municipal Water District. Those agreements generally provide that the respective public agency counter parties to the agreements will accept public improvements funded by the District upon their completion in accordance with plans and specifications approved by the applicable public agency. Shortly after the issuance or the Prior Bonds, Ashby encountered financial difficulties and the Authority renegotiated with Ashby various terms of the Original Acquisition Agreement, resulting in first, a Supplemental to Acquisition Agreement, dated as of December 1, 2006 with Ashby and amendments to some of the joint community facilities agreements; and, ultimately, an Amended and Restated Acquisition Agreement, dated as of July 21, 2009 with Ashby. Between June 1, 2006 and May 10, 2011, the Authority posted 41 separate event notices on the Municipal Securities Rulemaking Board's EMMA website setting forth information regarding the status of various matters related to the District. During that time period all of Ashby's interests in the property in the District in respect of property it had not yet sold were transferred to various parties, some of which were subject to bank foreclosures and, ultimately, sales by the Federal Deposit Insurance Corporation following bank failures. The parcels in the Panhandle Area had been sold, prior to such actions, to Standard Pacific Corp. (predecessor to CalAtlantic — See "THE DISTRICT—Major Land Owners—CalAtlantic") and to KB Home Costal, along with an entity identified as Roripaugh Temecula 113. Construction of infrastructure improvements began in the District following the issuance of the Prior Bonds, with the improvements needed for the development of the parcels in the Panhandle Area completed in 2012. Improvements needed for the development of the Pan Area have not yet been completed. See "THE DISTRICT—The Improvements." The first building permit for construction of a home in the Panhandle Area of the District was issued by the City in June 28, 2013. Following that, construction activity in the District has continued with the issuance of additional building permits, the installation and activation of the traffic signal at Pourroy Road and Murrieta Hot Springs Road, construction of Murrieta Hot Springs Road from the westerly tract boundary to Butterfield Stage Road, construction of the Panhandle Area's recreation center, its trail system and its private streets. In addition, the two major landowners in the Panhandle Area are currently in the process of completing a 5.1 acre neighborhood park, known as Skyview Park, serving the Panhandle Area. Construction of the -24- park began in April of 2016 and is anticipated to be completed by the date of issuance of the 2017 Bonds. The Improvements The District is authorized to fund various roadway, flood channel and creek improvements, as well as the construction of a neighborhood park, a sports park and a fire station, and the purchase of a fire truck. Most of the Improvements have been completed, and the buildout of the Pan Area on which Special Taxes will be levied to repay the 2017 Bonds is not dependent upon the completion of any of the Improvements not yet done. Monies in the Improvement Fund, together with amounts held in a separate improvement fund funded with proceeds of special tax bonds being issued concurrently with the issuance of the 2017 Bonds for a separate and distinct community facilities district that includes property in the Pan Area, will be used to pay costs of most of the Improvements not yet completed. See "PLAN OF REFUNDING—Funds for Improvements." Any remaining costs of Improvements are expected to be paid for by the owners of land in the Pan Area. The issuance of building permits for property in the Pan Area is contingent upon the completion of certain of the Improvements, but as previously mentioned there is no such impediment on the issuance of building permits for the remaining unimproved parcels in the District subject to the levy of the Special Taxes. Land Use Distribution All of the property in the District has been developed, or is expected to be developed, for residential use. The District includes 509 separate County Assessor's parcels, 416 of which have been improved with a single-family detached home and have been sold to homeowners. The following table shows the distribution of land use classes of the Taxable Property within the District based on the Rate and Method, the County Fiscal Year 2016-17 assessed values of the parcels, the estimated Special Tax levy for fiscal year 2017-18 for each land use class, the percentage of the overall Special Tax levy by land use class, as well as the share of the principal of the 2017 Bonds allocable to each land use class and the aggregate assessed value to allocable 2017 Bond principal amount for each land use. -25- Table 2 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Distribution of Land Use Classes Under the Rate and Method; Assessed Values and Projected Fiscal Year 2017-18 Special Tax Levy Percent of Projected Total Total Fiscal Projected Share of Aggregate FY 2016-17 Year 2017- FY 2017-18 2017 Value -to - Tax No. of Assessed 18 Special Special Bond Bond Land Use(1) Class Residential Floor Area Parcels Value(2) Tax Levy(3) Taxes(3) Debt(4) Principal(4) Residential D1 Greater than 5,000 sq. ft. 0 $0 $0 0.00% $0 N/A Residential D2 4,401 sq. ft. to 5,000 sq. ft. 20 7,051,386 2,629 6.45 632,651 11.15:1 Residential D3 4,201 sq. ft. to 4,400 sq. ft. 24 12,651,232 2,317 6.82 668,916 18.91:1 Residential D4 4,001 sq. ft. to 4,200 sq. ft. 2 589,278 2,209 0.54 53,146 11.09:1 Residential D5 3,801 sq. ft. to 4,000 sq. ft. 19 4,472,290 2,101 4.89 480,213 9.31:1 Residential D6 3,601 sq. ft. to 3,800 sq. ft. 55 27,332,026 1,993 13.44 1,318,670 20.73:1 Residential D7 3,401 sq. ft. to 3,600 sq. ft. 42 18,351,372 1,886 9.71 952,777 19.26:1 Residential D8 3,201 sq. ft. to 3,400 sq. ft. 54 20,477,185 1,778 11.77 1,154,877 17.73:1 Residential D9 3,001 sq. ft. to 3,200 sq. ft. 69 25,806,552 1,670 14.12 1,386,076 18.62:1 Residential D10 2,801 sq. ft. to 3,000 sq. ft. 57 20,888,667 1,562 10.92 1,071,453 19.50:1 Residential D11 2,601 sq. ft. to 2,800 sq. ft. 34 10,788,965 1,455 6.06 594,961 18.13:1 Residential D12 2,401 sq. ft. to 2,600 sq. ft. 0 0 0 0.00 0 N/A Residential D13 2,201 sq. ft. to 2,400 sq. ft. 66 22,799,099 1,239 10.03 984,038 23.17:1 Residential D14 2,001 sq. ft. to 2,200 sq. ft. 38 12,030,462 1,131 5.27 517,222 23.26:1 Residential D15 Less than 2,001 sq. ft. 0 0 0 0.00 0 N /A Undeveloped LM N/A 29 3,261,992 0 0.00 0 N/A Totals 509 $186,500,506 100.00% $9,815,000 19.00:1 (1) Based on building permit status as of December 29, 2016. See "SECURITY FOR THE 2017 BONDS -Summary of Rate and Method - Maximum Special Tax." (2) See "THE DISTRICT -Assessed Property Value." (3) Based on the expected annual debt service for the 2017 Bonds, as projected by Stifel, Nicolaus & Company Incorporated, allocated among land use classes based on their respective Assigned Special Taxes. Includes, in addition to the estimated scheduled debt service on the 2017 Bonds during calendar year 2017, $35,000 for Administrative Expenses. Preliminary, subject to change. (4) Allocated according to percent of Percent of Total Project Fiscal Year 2017-18 Special Taxes. Preliminary, subject to change. Source: Albert A. Webb Associates. Assessed Property Values No Appraisal of Property in the District. The Authority has not commissioned an appraisal of the Taxable Property in the District in connection with the issuance of the 2017 Bonds. Therefore, the valuation of the Taxable Property in the District has been estimated for purposes of the Act, and as set forth in this Official Statement, based on the County Assessor's values for Fiscal Year 2016-17. Assessed Valuation. The valuation of real property in the Authority for ad valorem tax purposes is established by the County Assessor. Assessed valuations are reported at 100% of the full value of the property, as defined in Article XIIIA of the California Constitution. Article XIIIA of the California Constitution defines "full cash value" as the appraised value as of March 1, 1975, plus adjustments not to exceed 2% per year to reflect inflation, and requires assessment of "full cash value" upon change of ownership or new construction. Accordingly, the assessed valuations presented in this Official Statement may not necessarily be representative of the actual market value of the property in the District. According to the County Assessor's records, as reported by the Special Tax Administrator, the fiscal year 2016-17 total assessed value of 509 parcels of Taxable Property in the District is $186,500,506. -26- Historical Assessed Values. The table below shows annual changes in assessed valuations between fiscal years 2011-12 and 2016-17 with respect to the parcels of Taxable Property in the Panhandle Area of the District that are subject to the levy of Special Taxes securing the repayment of the 2017 Bonds. Fiscal Year Total Parcels Table 3 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Historical Assessed Values Fiscal Years 2011-12 through 2016-17 Parcels with Improvement Land Improvement Annual Assessed Assessed Assessed Total Assessed Percent Value Value Value Valuation(1) Change 2011-12 300 0 $24,440,996 $0 $24,440,996 N/A 2012-13 300 0 24,929,715 0 24,929,715 2.00% 2013-14 300 0 38,599,549 0 38,599,549 54.83 2014-15 509(2) 84 41,721,471 17,853,233 59,574,704 54.34 2015-16 509 255 54,972,504 80,396,406 135,368,910 127.23 2016-17 509 354 56,578,875 129,921,631 186,500,506 37.77 (1) As of January 1 of each year as shown on the County Assessor's Rolls. Total Assessed Valuation is calculated as the sum of Land Assessed Value and Improvement Assessed Value. (2) Parcel count increase due to parcel splits. Source: Albert A. Webb Associates. Value -to -District Lien Ratio General Information Regarding Value -to -District Lien Ratios. The value -to -District lien ratio on bonds secured by special taxes will generally vary over the life of those bonds as a result of changes in the value of the property that is security for the special taxes and the principal amount of the bonds. In comparing the aggregate assessed value of the real property within the District and the principal amount of the 2017 Bonds, it should be noted that an individual parcel may only be foreclosed upon to pay delinquent installments of the Special Taxes attributable to that parcel. The principal amount of the 2017 Bonds is not allocated among the parcels within the District based on their respective assessed values; rather, the total Special Taxes have been allocated among the parcels within the District according to the Rate and Method. Economic and other factors beyond the property owners' control, such as economic recession, deflation of land values, financial difficulty or bankruptcy by one or more property owners, or the complete or partial destruction of Taxable Property caused by, among other possibilities, earthquake, flood, fire or other natural disaster, could cause a reduction in the assessed value within the District. See "SPECIAL RISK FACTORS—Property Value" and "Bankruptcy Delays." Aggregate Value -to -District Lien Ratio. The aggregate value -to -District lien ratio of Taxable Property in the District, based on fiscal year 2016-17 County assessed values ($186,500,506) and the initial principal amount of the 2017 Bonds ($9,815,000*) is 19:1*. There is, however, overlapping debt, and the properties in the District are subject to a number of taxes, * Preliminary, subject to change. -27- direct charges and assessments. See "THE DISTRICT—Direct and Overlapping Governmental Obligations" below. Value -to -District Lien Ratio Distribution. The table below shows the projected fiscal year 2017-18 Special Tax levy, the fiscal year 2016-17 County assessed value, the allocation of the principal amount of the 2017 Bonds, and the estimated value to debt ratios for the 509 Parcels of Taxable Property in the District, classified by ownership of the respective Parcels as of December 29, 2016. See "THE DISTRICT—Major Land Owners" for more information regarding the status of ownership of Parcels in the District. Table 4 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Estimated Value to Lien by Development Status and Property Owner(l) Classification(1) Developed Individual Owner Developed CalAtlantic Developed KB Home Coastal Developed Roripaugh Temecula 113 Undeveloped CalAtlantic Undeveloped KB Home Coastal Projected FY 2017-18 Parcels Special Tax(2) 416 $707,167 37 59,314 24 43,714 3 5,656 2 0 27 0 509 $815,850 Classification's Percentage of Total Projected FY 2017-18 Special Tax(2) 2017 Bond Fiscal Year Debt 2016-17 Value -to - Assessed 2017 Bond Lien Value Debt(3)(4) Ratio(4) 86.68% $171,992,472 $8,507,503 20.22:1 7.27 5,915,154 713,566 8.29:1 5.36 4,687,084 525,892 8.91:1 0.69 643,804 68,040 9.46:1 0.00 224,724 0 N/A 0.00 3,037,268 0 N/A $186,500,506 $9,815,000 19.00:1 (1) Ownership as of December 29, 2016. (2) Based on the expected annual debt service for the 2017 Bonds, as projected by Stifel, Nicolaus & Company Incorporated, allocated among land use classes based on their respective Assigned Special Taxes. Includes, in addition to the estimated scheduled debt service on the 2017 Bonds during calendar year 2017, $35,000 for Administrative Expenses. Preliminary, subject to change. (3) Based on principal of 2017 Bonds allocated according to Percentage of Total Projected Fiscal Year 2017-18 Special Tax, and excludes general obligation bonded indebtedness applicable to Parcels in the District. Preliminary, subject to change. (4) Preliminary, subject to change. Source: Albert A. Webb Associates. The following table sets forth the distribution of assessed value -to -District lien ratios among the 480 parcels of Taxable Property that is Developed Property based on the projected fiscal year 2017-18 Special Tax levy and the initial principal amount of the 2017 Bonds. -28- Assessed Value to Lien Table 5 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Distribution of Value -to -District Lien Ratios For Parcels of Developed Property Fiscal Year 2017-18 Percent of Total Total FY 2016- Projected FY Projected FY Allocation Aggregate No. of 17 Assessed 2017-18 2017-18 of Proposed Value -to - Parcels Value Levy(1) Levy(1) Debt(2) Lien(5) Less than 10.00:1(3) 128 $15,185,911 $215,290 26.39% $2,590,021 5.86:1 Between 10.00:1 and 14.99:1 4 1,550,755 9,127 1.12 109,807 14.12:1 Between 15.00:1 and 19.99:1 42 19,560,444 88,816 10.89 1,068,492 18.31:1 Between 20.00:1 and 24.99:1 187 90,945,121 336,945 41.30 4,053,583 22.44:1 Greater than 24.99:1(4) 119 55,996,283 165,672 20.31 1,993,096 28.10:1 Totals 480 $183,238,514 $815,850 100.00% $9,815,000 18.67:1 (1) Allocation is based upon the projected FY 2017-18 Special Tax Levy and development status as of December 29, 2016, and includes $35,000 in administrative expenses. Preliminary, subject to change. (2) Allocated based on Percent of Total Projected FY 2017-18 Levy. Preliminary, subject to change. (3) Lowest estimated Value -to -Lien is 3.19:1. 126 parcels in this category did not have an improvement Assessed Value for FY 2016-17, but have been issued building permits as of December 6, 2016. (4) Highest estimated Value -to -Lien is 37.37:1. (5) Preliminary, subject to change. Source: Albert A. Webb Associates. Major Land Owners The information under this subheading "THE DISTRICT—Major Land -Owners" has been obtained from CalAtlantic and KB Home Costal but has not been independently verified by the Authority or the Underwriter, and neither the Authority nor the Underwriter can ensure, and they do not ensure, its completeness or accuracy. CalAtlantic originally owned 199 of the parcels of Taxable Property in the District and KB Home Costal originally owned 197 of the parcels of Taxable Property in the District. CalAtlantic has reported, as of December 29, 2016, that of the 99 parcels of Taxable Property originally owned by CalAtlantic in the Montego neighborhood of the Panhandle Area, 75 had completed homes sold to home buyers, 7 had completed homes not yet sold, and it had 17 homes under construction. CalAtlantic indicated that deliveries of the 17 homes under construction in the Montego neighborhood to homebuyers were expected to begin to occur in January of 2017. CalAtlantic has also reported that as of December 29, 2016, of the 100 parcels of Taxable Property that it originally owned in the Cambridge neighborhood of the Panhandle Area, 85 had completed homes sold to homebuyers, 4 have completed homes not yet sold, and 11 had homes under construction. CalAtlantic indicated that deliveries to homebuyers of the 11 homes under construction were expected to start in January, of 2017. KB Home Costal has reported, as of December 29, 2016, that of the 197 parcels of Taxable Property originally owned by KB Home Costal in the Panhandle Area, 146 had completed homes with closed sales to homebuyers, 11 had completed homes with sales pending and 13 had completed homes available for sale, 4 had model homes and one had a parking lot for the model homes, and 26 were lots with homes not yet under construction. -29- No assurance can be given that home construction and sales will occur as currently anticipated by CalAtlantic and KB Home Costal. CalAtlantic. CalAtlantic Group is a homebuilder incorporated in Delaware in 1991 with principal executive offices located in Irvine, California. CalAtlantic is a publicly traded company with its stock listed on the New York Stock Exchange under the symbol "CAA." On October 1, 2015, Standard Pacific Corp. and The Ryland Group, Inc. completed their merger of equals transaction and launched their combined consumer brand, CalAtlantic Homes, through the merger of The Ryland Group, Inc., a Maryland corporation with and into Standard Pacific Corp., a Delaware corporation. Immediately following the aforementioned merger, the surviving entity changed its name to CalAtlantic Group, Inc. CalAtlantic has operations in 41 major markets in 17 states from coast to coast. CalAtlantic is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of CalAtlantic and its subsidiaries as of the dates described therein. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including CalAtlantic. The address of such Internet web site is www.sec.gov. All documents subsequently filed by CalAtlantic pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of CalAtlantic's annual report, quarterly reports and current reports, including any amendments, will be available from CalAtlantic's website at www.calatlantichomes.com. These Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. KB Homes Costal. As previously defined in this Official Statement, "KB Home Costal" refers to KB Home Coastal, Inc., a California corporation, which is based in Aliso Viejo, California, and has been in the business of developing residential real estate communities in California since 1995. KB Home Costal, Inc. is a wholly owned subsidiary of KB Home, a Delaware corporation ("KB Home Parent Company"), which is an entity engaged primarily in the construction and development of residential communities. KB Home Parent Company is a publicly traded company listed on the New York Stock Exchange (the "NYSE") under the ticker symbol "KBH." KB Home Parent Company is subject to the informational requirements of the Exchange Act, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of KB Home Parent Company and its subsidiaries (e.g. See KB Home Parent Company's Annual Report on Form 10- K for the fiscal year ended November 30, 2015, as filed with the SEC on January 25, 2016 and Quarterly Report on Form 10-Q for the quarter ended , 2016 as filed with the SEC on 2016) as of the dates described therein. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including KB Home Parent Company. The address of such Internet web site is www.sec.gov. All documents subsequently filed by KB Home Parent Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of KB Home Parent Company's annual report, quarterly reports and current reports, including any -30- amendments, will be available from KB Home Parent Company's website at www.kbhomes.com. The above Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. Special Tax Delinquencies The following table is a summary of Special Tax levies, collections and delinquency rates on taxable properties in the District for fiscal years 2011-12 through the first installment of Special Taxes levied for fiscal year 2016-17 based on amounts levied and outstanding delinquencies as of the respective Fiscal Year end, and as of December 10, 2016. Fiscal Year 2011-12(2) 2012-13(2) 2013-14 2014-15(3) 2015-16(4) 2016-17(5) Table 6 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Special Tax Levies, Collections and Delinquencies Fiscal Years 2011-12 through First Installment of Fiscal Year 2016-17 Special Tax Amount Levied $3,565,382.92 3,540,491.32 3,527,066.22 3,532,092.48 3,531,689.34 1,766,710.96 Total Number of Parcels Levied(1) 318 318 318 531 530 527 Delinquencies Following FY End As of December 10, 2016 Number of Delinquent Parcels(6) 0 0 1 4 2 N/A Amount Delinquent $0.00 0.00 1,364.08 3,795.84 3,969.50 N/A Percent Delinquent 0.00% 0.00 0.04 0.11 0.11 N/A Remaining Remaining Remaining Parcels Amount Percent Delinquent(6) Delinquent Delinquent 0 $0.00 0.00% 0 0.00 0.00 0 0.00 0.00 1 508.96 0.01 1 2,701.00 0.08 7 8,011.37 0.45 (1) Includes 21 parcels within the Pan Area of the District for which the Special Taxes will be prepaid in full on the date of issuance of the Bonds, so that they will no longer be Taxable Property. See "PLAN OF REFUNDING— Redemption of Prior Bonds." (2) Data sourced from Disseminated Annual Continuing Disclosure Report for Fiscal Years 2011-12 and 2012-13. (3) Parcel count increase due to parcel splits. (4) Parcel count decrease due to one parcel classified as exempt from the Special Tax levy. (5) Includes only Fiscal Year 2016-17 special taxes delinquent if not paid by December 10, 2016. Parcel count decrease from Fiscal Year 2015-16 is due to three parcels subsequently classified as exempt from the Special Tax levy. (6) All delinquent parcels are located in the Panhandle Area, subject to the levy of Special Taxes securing the payment of the 2017 Bonds. Source: Albert A. Webb Associates. Direct and Overlapping Governmental Obligations Taxes, Charges and Assessments. The base ad valorem secured property tax rate on property in the District is 1.00% (including ad valorem tax overrides). Property in the District is also subject, or will be subject, to certain annual charges and assessments (which are billed to property owners on a semi-annual basis). See "THE DISTRICT—Sample Tax Bill" below for a list of public agencies that currently levy annual charges and assessments on property in the District. Overlapping Public Debt. The District is located within the boundaries of certain local agencies, other than the Authority, that provide public services and assess property taxes, assessments, special taxes and other charges on the property in the District. Some of these local agencies have outstanding debt. The current and estimated direct and overlapping obligations affecting the property in the District are shown in the following table. The table was prepared by the Special Tax -31- Consultant and is included for general information purposes only. The Authority has not reviewed this report for completeness or accuracy and makes no representation in connection therewith. Table 7 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Direct and Overlapping Bonded Debt I. ASSESSED VALUE 2016-17 Equalized Roll Assessed Valuation(1) $186,500,506 II. LAND SECURED BOND INDEBTEDNESS Outstanding Direct and Overlapping Bonded Debt TEMECULA CFD 03-02 RORIPAUGH RANCH Total Parcels Amount Type Levied Issued Outstanding % Applicable Applicable CFD 509 $51,250,000 $9,815,000(2) 100.000% $9,815,000 TOTAL OUTSTANDING LAND SECURED BONDED DEBT $9,815,000 Total Parcels Amount Authorized and Unissued Direct and Overlapping Bonded Debt Type Levied Authorized Unissued % Applicable Applicable TEMECULA CFD 03-02 RORIPAUGH RANCH CFD 509 $55,000,000 $3,750,000(3) 100.000% $3,750,000 TOTAL UNISSUED LAND SECURED INDEBTEDNESS $3,750,000 TOTAL OUTSTANDING AND UNISSUED LAND SECURED $13,565,000 INDEBTEDNESS(4) III. GENERAL OBLIGATION BOND INDEBTEDNESS Total Parcels Amount Outstanding Direct and Overlapping Bonded Debt Type Levied Issued Outstanding % Applicable Applicable Temecula Valley Unified School B & I (0.03164%) GO 509 $137,412,035 $82,432,035 0.928235% $765,163 MT San Jacinto Comm (0.01320%) GO 509 $70,000,000 $63,950,000 0.238434% $152,479 Metropolitan Water East (0.00350%) GO 509 $850,000,000 $92,865,000 0.007219% $6,704 TOTAL OUTSTANDING GENERAL OBLIGATION $924,346 BONDED DEBT Total Parcels Amount Authorized and Unissued Direct and Overlapping Bonded Type Levied Authorized Unissued % Applicable Applicable Temecula Valley Unified School B & I (0.03164%) GO 509 $230,000,000 $92,587,965 0.928235% $859,434 MT San Jacinto Comm (0.01320%) GO 509 $295,000,000 $225,000,000 0.238434% $536,477 Metropolitan Water East (0.00350%) GO 509 $850,000,000 $0 0.007219% $0 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS $1,395,911 TOTAL OUTSTANDING AND UNISSUED GENERAL $2,320,257 OBLIGATION INDEBTEDNESS(4) TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS(4) IV. RATIOS TO 2016-2017 ASSESSED VALUATION Outstanding Land Secured Bonded Debt Outstanding Direct and Overlapping Bonded Debt 19.00:1 17.37:1 $10,739,346 $15,885,257 (1) Fiscal Year 2016-2017 Equalized Roll Assessed Valuation data as of January 1, 2016, Riverside County Assessor's Office. Exempt Property is not included in the Assessed Valuation of CFD No. 03-02. (2) Amount outstanding is equal to the initial principal amount of the 2017 Bonds (see "PLAN OF REFUNDING— Redemption of Prior Bonds"). Preliminary, subject to change. (3) Additional subordinate bonds may be issued with respect to the remaining $3,750,000 in bond authorization. See "SECURITY FOR THE 2017 BONDS—Issuance of Additional Bonds -Subordinate Bonds." (4) Additional bonded debt or available bond authorization may exist but is not shown because a tax was not levied for Fiscal Year 2016-17. Source: Albert A. Webb Associates -32- Sample Tax Bill Table 8 below provides, for an average parcel of Taxable Property under the Rate and Method, the expected property tax bill that would be received by an owner of the property for fiscal year 2017-18, based on the projected Special Tax levy for that fiscal year. Table 8 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Average Fiscal Year 2017-2018 Tax Obligation() For Parcels of Developed Property Average Projected Home Value(2) $477,422 Ad Valorem Property Taxes: Basic Levy (1.0000%) Temecula Valley Unified School B & I (0.03164%) MT San Jacinto Comm (0.01320%) Metropolitan Water East (0.0035%) Total General Property Taxes Assessment, Special Taxes & Parcel Charges: Flood Control Stormwater / Cleanwater Temecula Parks/Lighting Services Temecula Trash/Recycling MWD Standby East EMWD Standby Combined Charge Temecula CFD No. 03-02 (Roripaugh Ranch)(3) $4,774.22 151.06 63.02 16.71 $5,005.01 $3.47 74.44 269.60 6.94 40.00 1,706.14 Total Assessment Charges $2,100.59 Average Total Property Tax Average Effective Tax Rate $7,105.60 1.49% (1) Average Fiscal Year 2017-18 tax rates based upon Fiscal Year 2016-17 Overlapping Taxes and Assessment Rates. (2) Average Projected Home Value is based upon average Assessed Values for parcels with an improved assessed value for Fiscal Year 2016-17 per Riverside County Equalized Property Tax Roll data. (3) Reflects average Fiscal Year 2017-18 Special Tax for parcels of developed property with improved assessed value for Fiscal Year 2016-17 per Riverside County Equalized Property Tax Roll data. Source: Albert A. Webb Associates. THE AUTHORITY The Temecula Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated April 10, 2001 (the "JPA Agreement"), by and between the City and the Agency. The JPA 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. The Authority was formed for the primary purpose of assisting in the financing and refinancing of public capital improvements in the City. As of May 1, 2016, the JPA Agreement was amended to provide for the withdrawal of the Successor Agency to the Agency as a member of the Authority, and to add the Temecula Community Services District and the Temecula Housing Authority as members of the Authority. 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 -33- affairs of the Authority, and the Treasurer has custody of all money of the Authority from whatever source. SPECIAL RISK FACTORS The following is a description of certain risk factors affecting the District, the property owners in the District, the parcels subject to the levy of Special Taxes and the payment of and security for the 2017 Bonds. The following discussion of risks is not meant to be a complete list of the risks associated with the purchase of the 2017 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the investment quality of the 2017 Bonds. There can be no assurance that other risk factors will not become material in the future. Payment of the Special Tax is not a Personal Obligation The owners of the parcels in the District are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation that is secured only by a lien against the parcels on which it is levied. If the value of the taxable parcels is not sufficient to secure fully the payment of the Special Tax, the Authority has no recourse against the property owners. No General Obligation of the Authority or the District The Authority's obligations under the 2017 Bonds and under the Fiscal Agent Agreement 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 amounts in the Special Tax Fund, the Bond Fund and the Reserve Fund. The 2017 Bonds are neither general or special obligations of the Authority nor general obligations of the District, but are limited obligations of the Authority for the District payable solely from the revenues and funds pledged therefor and under the Fiscal Agent Agreement. None of the faith and credit of the District, the Authority or the State of California or of any of their respective political subdivisions is pledged to the payment of the 2017 Bonds. As described under the heading "THE DISTRICT—Major Land Owners," as of December 29, 2016 CalAtlantic owned 39 of the parcels of Taxable Property in the District, and KB Home Costal owned 51 of the parcels of Taxable Property in the District. Until homes on such parcels are constructed and sold to homebuyers, the timely payment of debt service on the 2017 Bonds will depend on the willingness and ability of CalAtlantic and KB Home Costal to continue to pay Special Taxes levied on the Taxable Property they own in the District. See "SPECIAL RISK FACTORS—Insufficiency of Special Taxes." Property Value If a landowner defaults in the payment of the Special Tax, the only legal remedy is the institution of a superior court action to foreclose on the delinquent taxable parcel in an attempt to obtain funds with which to pay the Special Tax. The value of the taxable parcels in the District could be adversely affected by economic factors beyond the Authority's control, 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 in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, wildfire, earthquakes and floods), which may result in uninsured losses. See "SPECIAL TAX FACTORS—Natural Disasters." -34- No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the Authority to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the Authority with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale. The Authority is not obligated and does not expect to be a bidder at any such foreclosure sale. See "SPECIAL TAX FACTORS—Proceeds of Foreclosure Sale." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through a negotiated transaction, or by gift or devise, that 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, 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, for outstanding Bonds only, is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested. In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property within the District, it may be unconstitutional (see "SPECIAL RISK FACTORS—FDIC /Federal Government Interests in Properties"). If for any reason property within the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Rate, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax. Moreover, if a substantial portion of land within the District becomes exempt from the Special Tax because of public ownership, or otherwise, the maximum rate that could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Series Prior Bonds when due and a default would occur with respect to the payment of such principal and interest. Parity Taxes and Special Assessments The Special Taxes and any penalties thereon will constitute liens against the taxable parcels in the District until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is coequal to and independent of the lien for general property taxes regardless of when they are imposed upon the taxable parcel. The Special Taxes have priority over all existing and future private liens imposed on the property. The Authority, however, has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the taxable parcels within the District subject to the levy of Special Taxes. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes or assessments, and any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes. The imposition of additional indebtedness could reduce the willingness and the ability of the property owners within the District to pay the Special Taxes when due. See "THE DISTRICT—Direct and Overlapping Governmental Obligations." -35- Insufficiency of Special Taxes In order to pay debt service on the 2017 Bonds, it is necessary that the Special Taxes levied against taxable parcels within the District be paid in a timely manner. The Authority has established the Reserve Fund in an amount equal to the Reserve Requirement to pay debt service on the 2017 Bonds and any Parity Bonds to the extent Special Taxes are not paid on time and other funds are not available. See "SECURITY FOR THE 2017 BONDS—Reserve Fund" and Appendix C – "Summary of the Fiscal Agent Agreement—Reserve Fund." Under the Fiscal Agent Agreement, the Authority has covenanted to maintain in the Reserve Fund an amount equal to the Reserve Requirement; subject, however, to the limitations that (i) the Authority may not levy the Special Tax in any fiscal year at a rate in excess of the Maximum Special Tax rates permitted under the Rate and Method and (ii) per the Rate and Method, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within the District. See "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method Special Tax Formula – Calculation of Annual Special Tax." Consequently, if a delinquency occurs, the Authority may be unable to replenish the Reserve Fund to the Reserve Requirement due to the limitation of the Maximum Special Tax rates. If such defaults were to continue in successive years, the Reserve Fund could be depleted and a default on the 2017 Bonds would occur if proceeds of a foreclosure sale did not yield a sufficient amount to pay the delinquent Special Taxes. The Authority has made certain covenants regarding the institution of foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the 2017 Bonds. See "SECURITY FOR THE 2017 BONDS—Covenant for Superior Court Foreclosure." If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the 2017 Bonds are derived, are being billed to the taxable parcels within the District on the regular property tax bills sent to owners of the parcels. Such Special Tax installments are due and payable, and bear the same penalties and interest for non- payment, as do regular property tax installments. Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See "SECURITY FOR THE 2017 BONDS—Reserve Fund" and "-Covenant for Superior Court Foreclosure" for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquency in the payment of Special Tax installments. See also "THE DISTRICT— Special Tax Delinquencies" for historical Special Tax delinquency history. Also, as noted under "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method," both the Act and the Rate and Method provide that under no circumstances will the Special Taxes levied against any Parcel used as a private residence be increased as a consequence of delinquency or default by the owner of any other Parcel or Parcels within the District by more than ten percent (10%) per Fiscal Year. In addition, the Rate and Method provides that under no circumstances will the Acreage Special Tax be levied against Parcels of Developed Residential Property if the Special Taxes which may be levied pursuant to the first and second steps described -36- under the subheading "Method of Apportionment" in the section entitled "SECURITY FOR THE 2017 BONDS—Summary of Rate and Method," are equal to or greater than the sum of estimated Administrative Expenses and one hundred ten percent (110%) of the then maximum annual debt service for outstanding Bonds. Bankruptcy Delays The payment of the Special Tax and the ability of the Authority to commence a superior court action to foreclose the lien of a delinquent unpaid Special Tax, as discussed in "SECURITY FOR THE 2017 BONDS—Covenant for Superior Court Foreclosure," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. Legal opinions to be delivered concurrently with the delivery of the 2017 Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2017 Bonds. Proceeds of Foreclosure Sales Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax, the Authority Board of Directors, as the legislative body of the District, may order that the Special Taxes be collected by a superior court action to foreclose the lien within specified time limits. The Authority has covenanted in the Fiscal Agent Agreement that it will, under certain circumstances, commence such a foreclosure action. See "SECURITY FOR THE 2017 BONDS—Covenant for Superior Court Foreclosure." No assurances can be given that a taxable parcel in the District that would be subject to a judicial foreclosure sale for delinquent Special Taxes will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the Authority to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the Authority with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale and the Authority has not in any way agreed nor does it expect to be such a bidder. In a foreclosure proceeding, a judgment debtor (i.e., the property owner) has 140 days from the date of service of the notice of levy in which to redeem the property to be sold and may have other redemption rights afforded by law. 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 the purchaser at the sale was the judgment creditor. If a foreclosure sale is thereby 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. If foreclosure proceedings were ever instituted, any holder of a mortgage or deed of trust on the affected property could, but would not be required to, advance the amount of the delinquent Special Tax installment to protect its security interest. -37- In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in principal and interest payments to the owners of the 2017 Bonds pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions and other factors beyond the control of the Authority, including delay due to crowded local court calendars or legal tactics and, in any event could take several years to complete. In particular, bankruptcy proceedings involving the Landowner or any other owner of a taxable parcel in the District could cause a delay, reduction or elimination in the flow of Special Tax Revenues to the Fiscal Agent. See "SPECIAL RISK FACTORS—Bankruptcy Delays." Natural Disasters The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. Such occurrences include, without limitation, wildfire, earthquakes and floods. One or more of such natural disasters could occur and could result in damage to improvements of varying seriousness. 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 Taxable Property may well depreciate or disappear. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The Authority has not independently verified, but is not aware of, the presence of any hazardous substances within the District. Disclosure to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the property is sufficient to justify payment, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The Authority has caused notices of the Special Tax to be recorded in the Office of the Riverside County Recorder against each parcel in the District. Although title companies normally refer to such notices in title reports, there can be no guarantee that such -38- reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation when purchasing a property within the District or lending money thereon, as applicable. California Civil Code Section 1102.6b requires that, in the case of transfers, 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. FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC"), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. 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." This means that, unless 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 Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("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. 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 2017 Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the -39- District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent 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 Mello -Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello - Roos special taxes. The Authority is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the 2017 Bonds. No Acceleration Provision The 2017 Bonds and the Fiscal Agent Agreement do not contain a provision allowing for the acceleration of the 2017 Bonds in the event of a payment default or other default under the terms of the 2017 Bonds or the Fiscal Agent Agreement or in the event interest on the 2017 Bonds becomes included in gross income for federal income tax purposes. Taxability Risk As discussed herein under the caption "TAX MATTERS," interest on the 2017 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2017 Bonds were issued, as a result of future acts or omissions of the Authority in violation of its covenants in the Fiscal Agent Agreement. There is no provision in the 2017 Bonds or the Fiscal Agent Agreement for special redemption or acceleration or for the payment of additional interest -40- should such an event of taxability occur, and the 2017 Bonds will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Fiscal Agent Agreement. In addition, as discussed under the caption "TAX MATTERS," Congress has considered in the past, is currently considering and may consider in the future, legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such as the 2017 Bonds. Prospective purchasers of the 2017 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. The Authority can provide no assurance that federal tax law will not change while the 2017 Bonds are outstanding or that any such changes will not adversely affect the exclusion of interest on the 2017 Bonds from gross income for federal income tax purposes. If the exclusion of interest on the 2017 Bonds from gross income for federal income tax purposes were amended or eliminated, it is likely that the market price for the 2017 Bonds would be adversely impacted. Enforceability of Remedies The remedies available to the Fiscal Agent and the registered owners of the 2017 Bonds upon a default under the Fiscal Agent Agreement or any other document described in this Official Statement are in many respects dependent upon regulatory and judicial actions that are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. Any legal opinions to be delivered concurrently with the issuance of the 2017 Bonds will be qualified to the extent that the enforceability of the legal documents with respect to the 2017 Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Judicial remedies, such as foreclosure and enforcement of covenants, are subject to exercise of judicial discretion. A California court may not strictly apply certain remedies or enforce certain covenants if it concludes that application or enforcement would be unreasonable under the circumstances and it may delay the application of such remedies and enforcement. No Secondary Market No representation is made concerning any secondary market for the 2017 Bonds. There can be no assurance that any secondary market will develop for the 2017 Bonds. Investors should understand the long-term and economic aspects of an investment in the 2017 Bonds and should assume that they will have to bear the economic risks of their investment to maturity. An investment in the 2017 Bonds may be unsuitable for any investor not able to hold the 2017 Bonds to maturity. Proposition 218 An initiative measure entitled 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 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." Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the 2017 Bonds as described below. -41- Among other things, Section 3 of Article XIIIC states, "...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, the Governor of the State signed a bill into law enacting Government Code Section 5854, which states that: Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC 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 2017 Bonds. It may be possible, however, for voters or the District or the Authority Council acting as the legislative body of the District to reduce the Special Taxes in a manner that does not interfere with the timely repayment of the 2017 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2017 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses (as defined in the Fiscal Agent Agreement). Nevertheless, the Authority has covenanted that it will not consent to, or conduct proceedings with respect to, a reduction in the maximum Special Taxes that may be levied in the District on Developed Property below an amount, for any Bond Year, equal to 110% of the aggregate of the debt service due on the 2017 Bonds in such Bond Year, plus a reasonable estimate of Administrative Expenses for each such Bond Year. However, no assurance can be given as to the enforceability of the foregoing covenant. The interpretation and application of Article XIIIC and Article XIIID will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See "—Enforceability of Remedies." Ballot Initiatives Articles XIIIC and XIIID of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process, and the State Legislature has in the past enacted legislation that has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the Authority, or local districts to increase revenues or to increase appropriations. -42- 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 2017 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2017 Bonds might be affected as a result of such an audit of the 2017 Bonds (or by an audit of similar bonds). See "TAX MATTERS." TAX MATTERS Federal tax law contains a number of requirements and restrictions which apply to the 2017 Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The Authority has covenanted in the Fiscal Agent Agreement to comply with all requirements that must be satisfied in order for the interest on the 2017 Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the 2017 Bonds to become includable in gross income for federal income tax purposes retroactively to the date of issuance of the 2017 Bonds. Subject to the Authority's compliance with the above -referenced covenants, under present law, in the opinion of Quint & Thimmig LLP, Bond Counsel, interest on the 2017 Bonds (i) is excludable from the gross income of the owners thereof for federal income tax purposes, and (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the 2017 Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In rendering its opinion, Bond Counsel will rely upon certifications of the Authority with respect to certain material facts within the Authority's knowledge. Bond Counsel's opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result. The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an alternative minimum tax ("AMT") for corporations in addition to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation's alternative minimum taxable income ("AMTI"), which is the corporation's taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). "Adjusted current earnings" would include certain tax-exempt interest, including interest on the 2017 Bonds. Ownership of the 2017 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax exempt obligations. Prospective purchasers of the 2017 Bonds should consult their tax advisors as to applicability of any such collateral consequences. -43- The issue price (the "Issue Price") for each maturity of the 2017 Bonds is the price at which a substantial amount of such maturity of the 2017 Bonds is first sold to the public. The Issue Price of a maturity of the 2017 Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the inside cover page of this Official Statement. If the Issue Price of a maturity of the 2017 Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of each such maturity, if any, of the 2017 Bonds (the "OID 2017 Bonds") and the principal amount payable at maturity is original issue discount. For an investor who purchases an OID 2017 Bond in the initial public offering at the Issue Price for such maturity and who holds such OID 2017 Bond to its stated maturity, subject to the condition that the Authority comply with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID 2017 Bond constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID 2017 Bond at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code, but is taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code, as described above; and (d) the accretion of original issue discount in each year may result in an alternative minimum tax liability for corporations or certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Owners of OID 2017 Bonds should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID 2017 Bonds. Owners of 2017 Bonds who dispose of 2017 Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase 2017 Bonds in the initial public offering, but at a price different from the Issue Price or purchase 2017 Bonds subsequent to the initial public offering should consult their own tax advisors. If a 2017 Bond is purchased at any time for a price that is less than the 2017 Bond's stated redemption price at maturity or, in the case of an OID 2017 Bond, its Issue Price plus accreted original issue discount reduced by payments of interest included in the computation of original issue discount and previously paid (the "Revised Issue Price"), the purchaser will be treated as having purchased a 2017 Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a 2017 Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser's election, as it accrues. Such treatment would apply to any purchaser who purchases an OID 2017 Bond for a price that is less than its Revised Issue Price even if the purchase price exceeds par. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such 2017 Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the 2017 Bonds. An investor may purchase a 2017 Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as "bond premium" and must be amortized by an investor on a constant yield basis over the remaining term of the 2017 Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the tax-exempt interest received. As bond premium is amortized, it reduces the investor's basis in the 2017 Bond. Investors who purchase a 2017 Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the -44- 2015 Bond's basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the 2017 Bond. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the 2017 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the 2017 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. The Internal Revenue Service (the "Service") has an ongoing program of auditing tax- exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the 2017 Bonds. If an audit is commenced, under current procedures the Service may treat the Authority as a taxpayer and the 2015 Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the 2017 Bonds until the audit is concluded, regardless of the ultimate outcome. Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt obligations, including the 2017 Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any 2017 Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any 2017 Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes. In the further opinion of Bond Counsel, interest on the 2017 Bonds is exempt from California personal income taxes. Ownership of the 2017 Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the 2017 Bonds. Prospective purchasers of the 2017 Bonds should consult their tax advisors regarding the applicability of any such state and local taxes. The complete text of the final opinion that Bond Counsel expects to deliver upon issuance of the 2017 Bonds is set forth in Appendix D. LEGAL MATTERS Concurrent with the issuance of the 2017 Bonds, Quint & Thimmig LLP, Larkspur, California, Bond Counsel, will render its opinion substantially in the form set forth in Appendix D to this Official Statement. Certain legal matters with respect to the 2017 Bonds will be passed upon for the Authority and the District by Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, in their capacity as attorneys for the Authority, and for the Authority by Quint & Thimmig LLP, Larkspur, California, acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. Payment of the fees and expenses of Underwriter's Counsel is contingent on the issuance of the 2017 Bonds. At times Quint & -45- Thimmig LLP represents Stifel, Nicolaus & Company, Inc., the Underwriter for the 2017 Bonds, in matters unrelated to the 2017 Bonds. RATING S&P Global Ratings has assigned its municipal bond rating of " " to the 2017 Bonds. Such rating reflects only the views of S&P Global Ratings, and any desired explanation of the significance of such rating may be obtained from S&P Global Ratings at the following web address: ratings_request@spglobal.com. 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 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 the rating agency, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the 2017 Bonds. Except as otherwise required in the Continuing Disclosure Agreement, the Authority has not undertaken any responsibility either to bring to the attention of the owners of any 2017 Bonds any downward revision or withdrawal of the rating or to oppose any such revision or withdrawal. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. VERIFICATION OF MATHEMATICAL ACCURACY Grant Thornton, LLP, independent accountants, upon delivery of the 2017 Bonds, will deliver a report on the mathematical accuracy of certain computations, contained in schedules provided to them which were prepared for the Authority, relating to the sufficiency of moneys and securities deposited into the Refunding Fund to pay, when due, the redemption price of the Prior Bonds. See "PLAN OF REFUNDING—Redemption of Prior Bonds." The report of Grant Thornton, LLP, will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it, and that it has no obligation to update its report because of events occurring, or data or information coming to its attention, subsequent to the date of its report. NO LITIGATION The Authority is not aware of any pending or threatened litigation challenging the validity of the 2017 Bonds, the Special Taxes securing the 2017 Bonds, or any action taken by the Authority in connection with the formation of the District, the levying of the Special Taxes or the issuance of the 2017 Bonds. MUNICIPAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Irvine, California, as its Municipal Advisor (the "Municipal Advisor") in connection with the authorization and delivery of the 2017 Bonds. The Municipal Advisor has assisted in various matters relating to the planning, structuring and sale of the 2017 Bonds. The Municipal Advisor has not independently verified any of the data contained in the Official Statement or conducted a detailed investigation of the -46- affairs of the Authority or the District to determine the accuracy or completely of this Official Statement. UNDERWRITING The 2017 Bonds are being purchased through negotiation by Stifel, Nicolaus & Company, Incorporated (the "Underwriter"). The Underwriter agreed to purchase the 2017 Bonds at a price of $ (which is equal to the par amount of the 2017 Bonds, less (plus) a net original issue discount (premium) of $ , and less an underwriter's discount of $ ). The initial public offering prices set forth on the inside cover page may be changed by the Underwriter. The Underwriter may offer and sell the 2017 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof. CONTINUING DISCLOSURE The Authority has covenanted in a Continuing Disclosure Agreement for the benefit of the Owners of the 2017 Bonds to provide Annual Reports that include certain annual financial information and operating data, and to provide notices of the occurrence of certain enumerated events. The Authority has retained Albert A. Webb Associates to act as the Dissemination Agent under the Continuing Disclosure Agreement. The Authority or the Dissemination Agent, on behalf of the Authority, will file the Annual Reports and notices as required by the Continuing Disclosure Agreement with the Municipal Securities Rulemaking Board. See Appendix E — "Form of Continuing Disclosure Agreement" for the complete text of the Authority's Continuing Disclosure Agreement. The covenants of the Authority in the Continuing Disclosure Agreement have been made in order to assist the Underwriter in complying with Rule 15c2 -12(b)(5) (the "Rule") promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. A failure by the Authority to comply with the provisions of the Continuing Disclosure Agreement is not an event of default under the Fiscal Agent Agreement (although the holders and beneficial owners of the 2017 Bonds do have remedies at law and in equity). However, a failure to comply with the provisions of the Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the 2017 Bonds. Therefore, a failure by the Authority to comply with the provisions of the Continuing Disclosure Agreement may adversely affect the marketability of the 2017 Bonds on the secondary market. During the last five Fiscal Years, the Authority has complied in all material respects with its obligations under several continuing disclosure agreements entered into in connection with various community facilities district special tax bonds that it has issued, except for an annual filing in 2011 for a series of special tax bonds that was filed 105 days after it was required to be filed under the respective continuing disclosure agreement and for which no notice of late filing was provided. -47- MISCELLANEOUS Included herein are brief summaries of certain documents, which summaries do not purport to be complete or definitive, and reference is made to such documents for full and complete statements 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 representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority or the District and the purchasers or Owners of any of the 2017 Bonds. The execution and delivery of this Official Statement has been duly authorized by the Board of Directors of the Authority, acting as the legislative body of the District. TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) By: Executive Director -48- APPENDIX A GENERAL, ECONOMIC, AND DEMOGRAPHIC INFORMATION RELATING TO 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 2017 Bonds or the Fiscal Agent Agreement. Introduction The City. The City of Temecula (the "City") is located in southwestern Riverside County, California. The City was incorporated on December 1, 1989. Temecula is bordered by the City of Murrieta to the north and the Pechanga Indian Reservation and San Diego County to the south. The City of Temecula forms the southwestern anchor of the Inland Empire region. Temecula is an affluent community. The City is supported by high median and mean income levels as well as the city's favorable tourism and resort industries. The city is a prominent tourist destination, with the Temecula Valley Wine Country, Old Town Temecula, the Temecula Valley Polo Club, the Temecula Valley Balloon & Wine Festival, the Temecula Valley International Film Festival, championship golf courses, and resort accommodations attracting a significant amount of tourists. The City is a general law city, which operates under a council-manager form of government. The City Council consists of five members elected at -large to staggered four-year terms. Each year, the City Council elects a Mayor and a Mayor Pro Tem amongst themselves to serve for one calendar year. The Mayor, who has equal legislative power with fellow members of the City Council, serves as the ceremonial leader of the city and as the presiding officer of the bi- weekly City Council meetings. The County. Riverside County, California (the "County") is the 4th -most populous county in California and the 11th -most populous in the United States. The County name was taken from the city of Riverside, which is the county seat. Roughly rectangle -shaped, Riverside County covers 7,208 square miles (18,670 km) in Southern California, spanning from the Greater Los Angeles area to the Arizona border. Geographically, the county is mostly desert in the central and eastern portions of the county and is a Mediterranean climate in the western portion of the county. Most of Joshua Tree National Park is located in the county. The resort cities of Palm Springs, Palm Desert, Indian Wells, La Quinta, Rancho Mirage, and Desert Hot Springs are all located in the Coachella Valley region of Riverside County. Large numbers of Los Angeles area workers have moved to the county to take advantage of its relatively affordable housing. Alongside neighboring San Bernardino County, it was one of the fastest growing regions in the state prior to the recent changes in the regional economy. In addition, smaller, but significant, numbers of people have been moving into Southwest Riverside County from the San Diego -Tijuana metropolitan area. A-1 Population The following table contains the population of the City, the County and the State of California for the last five years. CITY OF TEMECULA, RIVERSIDE COUNTY AND STATE OF CALIFORNIA Population Data City of Riverside State of Year Temecula County California 2012 103,133 2,239,715 37,881,357 2013 104,145 2,266,549 38,239,207 2014 105,368 2,291,093 38,567,459 2015 107,794 2,317,924 38,907,642 2016 109,064 2,347,828 39,255,883 Source: California Department of Finance E-4 Population Estimates for Cities, Counties and State, 2012-2016 with 2010 Benchmark. Employment The County is part of the Riverside -San Bernardino -Ontario MSA, which covers the City and Riverside and San Bernardino Counties. The following table summarizes the historical numbers of workers by industry in the Riverside -San Bernardino -Ontario MSA for the last five years: RIVERSIDE -SAN BERNARDINO-ONTARIO MSA (RIVERSIDE AND SAN BERNARDINO COUNTIES) Labor Force and Industry Employment Annual Averages by Industry 2011 2012 2013 2014 2015 - Total, All Industries 1,169,400 1,200,200 1,247,800 1,303,700 1,362,400 Total Farm 14,900 15,000 14,500 14,400 15,100 Mining, Logging, and Construction 60,100 63,800 71,200 78,900 86,600 Manufacturing 85,100 86,700 87,300 91,300 95,600 Wholesale Trade 49,200 52,200 56,400 58,900 61,700 Retail Trade 158,500 162,400 164,800 169,400 173,500 Transportation, Warehousing & Utilities 67,900 73,000 78,400 86,600 97,300 Information 12,200 11,700 11,500 11,300 11,300 Financial Activities 39,500 40,200 41,300 42,300 43,200 Professional & Business Services 126,000 127,500 132,400 139,300 144,400 Educational & Health Services 165,400 173,600 187,600 194,800 205,000 Leisure & Hospitality 124,000 129,400 135,900 144,800 151,500 Other Services 39,100 40,100 41,100 43,000 44,000 Government 227,500 224,600 225,200 228,800 233,400 Source: California Employment Development Department, based on March 2015 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. (1) Last available full year data. A-2 The following tables summarize historical employment and unemployment for the County, the State of California and the United States: Year RIVERSIDE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) 2011-2015 Area 2011 Riverside County California United States 2012 Riverside County California United States 2013 Riverside County California United States 2014 Riverside County California United States 2015'=) Riverside County California United States Labor Force Employment 978,500 849,600 18,419,500 16,260,100 153, 617,000 139,869,000 988,600 18,554,800 154,975,000 998,800 18,671,600 155,389,000 1,017,000 18,811,400 155,922,000 1,035,200 18,981,800 157,130,000 873,600 16,630,100 142,469,000 899,900 17,002,900 143,929,000 933,800 17,397,100 146,305,000 965,500 17,798,600 148,834,000 Unemployment Unemployment Rate 128,900 2,159,400 13,747,000 115,100 1,924,700 12,506,000 98,900 1,668,700 11,460,000 83,200 1,414,300 9,617,000 69,600 1,183,200 146,411,000 13.2% 11.7 8.9 11.6 10.4 8.1 9.9 8.9 7.4 8.2 7.5 6.2 6.7 6.2 5.3 Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-2015, and US Department of Labor. (1) The unemployment rate is computed from unrounded data, therefore, it may differ from rates computed from rounded figures available in this table. (2) Latest available full -year data. A-3 Major Employers The table below sets forth the ten principal employers of the County in 2015. RIVERSIDE COUNTY 2015 Major Employers Employer Name County of Riverside March Air Reserve Base Starter Brothers Market Wal-Mart University of California Riverside Kaiser Permanente Corona -Norco Unified School District Temecula Valley Unified School District Riverside Unified School District Hemet Unified School District Total Top 10 Number of Employees 20,684 8,500 6,900 6,550 5,768 5,300 4,932 4,000 3,871 3,400 69,905 % of Total County Employment 2.17% .89 .72 .69 .60 .56 .52 .42 .41 .36 7.32 Source: Riverside County CAFR for the Fiscal Year Ended June 30, 2015. Construction Activity The following table reflects the five-year history of building permit valuation for the City and the County: CITY OF TEMECULA Building Permits and Valuation (Dollars in Thousands) Permit Valuation: New Single-family New Multi -family Res. Alterations / Additions Total Residential Total Nonresidential Total All Building New Dwelling Units: Single Family Multiple Family Total 2011 2012 2013 2014 2015 54,753 58,645 62,540 54,295 34,493 878 5,901 27,523 38,445 4,527 6,949 4,254 5,638 6,346 5,936 62,581 68,802 95,702 99,087 44,957 15,777 36,241 117,203 34,094 18,206 78,359 105,043 212,906 133,182 63,163 280 329 316 8 70 348 288 399 664 Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. A-4 234 135 596 38 830 173 RIVERSIDE COUNTY Building Permits and Valuation (Dollars in Thousands) 2011 2012 2013 2014 2015 Permit Valuation: New Single-family 647,070 904,156 1,138,738 1,296,552 1,313,084 New Multi -family 113,170 87,878 138,636 178,116 110,458 Res. Alterations/ Additions 188,468 87,370 98,219 147,081 113,199 Total Residential 878,710 1,079,405 1,375,593 1,621,750 1,536,742 Total Nonresidential 490,647 657,595 2,249,570 814,990 911,464 Total All Building 1,369,357 1,737,000 3,625,163 2,436,740 2,448,207 New Dwelling Units: Single Family 2,659 3,720 4,716 5,007 5,007 Multiple Family 1,061 909 1,427 1,931 1,189 Total 3,720 4,629 6,143 6,938 6,196 Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. Commercial Activity Taxable sales in the City and County are shown below. Beginning in 2009, reports summarize taxable sales and permits using the NAICS codes. As a result of the coding change, however, industry -level data for 2009 are not comparable to that of prior years. CITY OF TEMECULA Taxable Sales, 2009-2013 (dollars in thousands) 2009 2010 2011 2012 20130, Retail and Food Services Motor Vehicles and Parts Dealers 309,649 322,715 385,044 478,293 523,274 Home Furnishings and Appliance Stores 67,336 67,526 72,180 73,234 77,797 Bldg. Matrl. and Garden Equip. and Supplies 97,877 99,657 105,793 106,644 125,463 Food and Beverage Stores 72,796 71,194 74,169 76,374 82,678 Gasoline Stations 173,696 196,542 243,563 250,453 236,279 Clothing and Clothing Accessories Stores 112,400 119,186 133,350 155,124 161,228 General Merchandise Stores 339,035 362,572 378,732 388,833 396,128 Food Services and Drinking Places 225,760 237,997 249,781 261,777 274,558 Other Retail Group 145,770 149,402 156,640 170,559 179,521 Total Retail and Food Services 1,544,319 1,626,792 1,799,253 1,961,289 2,056,926 All Other Outlets 511,527 553,511 565,543 574,091 553,361 Total All Outlets 2,055,847 2,180,304 2,364,795 2,535,380 2,610,286 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add up due to independent rounding. (1) Last available full year data. A-5 RIVERSIDE COUNTY Taxable Sales, 2009-2013 (dollars in thousands) 2009 2010 2011 2012 2013. Retail and Food Services Motor Vehicles and Parts Dealers 2,449,747 2,620,568 3,010,487 3,493,098 3,965,201 Furniture and Home Furnishings Stores 381,643 412,325 436,482 441,649 486,061 Electronics and Appliance Stores 476,455 470,784 478,406 488,419 510,423 Bldg Mtrl. and Garden Equip. and Supplies 1,237,518 1,232,145 1,303,073 1,364,513 1,535,178 Food and Beverage Stores 1,251,220 1,267,758 1,304,731 1,356,148 1,421,590 Health and Personal Care Stores 389,620 400,207 454,268 490,238 523,724 Gasoline Stations 2,300,247 2,685,840 3,300,785 3,516,040 3,456,322 Clothing and Clothing Accessories Stores 1,293,271 1,391,174 1,505,821 1,672,482 1,771,603 Sporting Goods, Hobby, Book and Music Stores 411,301 428,121 454,971 467,536 499,366 General Merchandise Stores 2,855,733 2,947,905 3,051,709 3,174,022 3,298,920 Miscellaneous Store Retailers 641,954 652,273 700,338 742,118 758,664 Nonstore Retailers 101,925 92,916 101,876 142,081 243,334 Food Services and Drinking Places 2,266,853 2,317,486 2,473,339 2,668,324 2,836,388 Total Retail and Food Services 16,057,488 16,919,500 18,576,285 20,016,668 21,306,774 All Other Outlets 6,170,390 6,233,280 7,065,212 8,079,341 8,758,693 Totals All Outlets 22,227,877 23,152,780 25,641,497 28,096,009 30,065,467 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add up due to independent rounding. (1) Last available full year data. A-6 Personal Income The following table sets forth the yearly total effective buying income and the median household effective buying income for the City, the County and the State for the prior five years: CITY OF TEMECULA, RIVERSIDE COUNTY AND STATE OF CALIFORNIA Effective Buying Income Year Area 2011 City of Temecula Riverside County California United States 2012 City of Temecula Riverside County California United States 2013 City of Temecula Riverside County California United States 2014 City of Temecula Riverside County California United States 2015 City of Temecula Riverside County California United States Source: Nielsen Claritas, Inc. Total Effective Buying Income (000's Omitted) 39,981,683 814,578,457 6,438,704,663 2,222,443 40,157,310 864,088,827 6,737,867,730 2,170,910 40,293,518 858,676,636 6,982,757,379 2,336,785 41,199,300 901,189,699 7,357,153,421 2,608,500 45,407,058 981,231,666 7,757,960,399 A-7 Median Household Effective Buying Income 44,116 47,062 41,253 56,305 43,860 47,307 41,358 55,508 44,784 48,340 43,715 60,496 45,576 50,072 45,448 66,028 48,674 53,589 46,738 APPENDIX B TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX TEMECULA PUBLIC FINANCING AUTHORITY A Special Tax shall be levied and collected on all Taxable Property located within the boundaries of CFD No. 03-02 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) ("CFD No. 03-02"). The amount of Special Tax to be levied in each Fiscal Year on a Parcel in CFD No. 03-02, commencing with Fiscal Year 2005-2006, shall be determined by the CFD Administrator through the application of the procedures described below. All of the real property in CFD No. 03-02, unless exempted by law or the provisions herein, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS In addition to the capitalized terms set forth in the preceding paragraph, capitalized terms used in this Section A shall have the following meanings: "Acre" means 43,560 square feet of land. The Acres for a Parcel means the land area of the Parcel as shown on or determined from the applicable Assessor's Parcel Map. Notwithstanding the foregoing, the Acres attributable to each Parcel of Residential Property that is (i) located in a Final Map and (ii) an individual single-family home lot or Condominium shall be computed by the CFD Administrator by dividing the sum of the land area for all such Parcels of Residential Property in the Final Map by the number of such Parcels. The Acres for any leasehold or possessory interest shall be the Acres for the Parcel which corresponds to such leasehold or possessory interest. "Acreage Special Tax" means the special tax set forth in Section C.2 below. "Act" means the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the actual or reasonably estimated costs directly related to the administration of CFD No. 03-02, including but not limited to the following: (i) the costs of computing the Special Taxes and of preparing the annual Special Tax collection schedules (whether by the CFD Administrator or designee thereof, or both); (ii) the costs of collecting the Special Taxes (whether by the Authority, County, City, or otherwise); (iii) the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; (iv) the costs of commencing and pursuing to completion any foreclosure action arising from delinquent Special Taxes; (v) the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; (vi) the costs of the Authority, City, or designee of complying with arbitrage rebate and disclosure requirements of applicable federal and State of California securities laws, the Act, and the California Government Code, including property owner or Bond owner inquiries regarding the Special Taxes; (vii) the costs associated with the release of funds from any escrow account; (viii) the costs of the Authority, City, or designee related to any appeal of a Special Tax; and (ix) an allocable share of the salaries of the City staff and City overhead expense directly relating to the foregoing. Administrative Expenses B-1 shall also include amounts advanced by the City or the Authority for any administrative purposes of CFD No. 03-02. "Assessor" means the County Assessor of the County of Riverside. "Assessor's Parcel Map" means an official map of the Assessor designating parcels of land or Condominium units by number. "Authority" means the Temecula Public Financing Authority. "Board of Directors" means Board of Directors of the Authority, acting as the legislative body of CFD No. 03-02. "Bonds" means any bonds or other indebtedness (as defined in the Act), whether in one or more series, the repayment of which is secured by the levy of Special Taxes on Parcels within CFD No. 03-02. "CFD Administrator" means the Finance Director of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of Special Taxes. "City" means the City of Temecula, California. "Condominium" means a residential dwelling unit meeting the statutory definition of a condominium contained in the California Civil Code, Section 1351, and for which a condominium plan has been recorded pursuant to California Civil Code, Section 1352. "County" means the County of Riverside, California. "Developed Property" means all Parcels of Taxable Property, for which a Final Map was recorded as of the January 1 and a building permit for new construction was issued as of the April 1 preceding the Fiscal Year in which the Special Tax is being levied, exclusive of Property Owner's Association Property and Public Property. "Dwelling Unit Special Tax" means the special tax set forth in Section C.1 below. "Exempt Property" means any Parcel located within the boundaries of CFD No. 03-02 which is exempt from the Special Tax pursuant to law or Section E below. "Final Map" means a subdivision of property by recordation of a (i) final map or parcel map approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.), (ii) lot line adjustment approved by the City, or (iii) condominium plan pursuant to California Civil Code 1352. "Fiscal Year" means the period starting on each July 1 and ending on the following June 30. "Indenture" means the indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and / or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use " means the land use set forth in the Land Use Plan. B-2 "Land Use Plan" means the approved land use plan for the Specific Plan. "Lot" means (i) any lot within a Final Map that is located at least partially within the boundaries of CFD No. 03-02 or (ii) any land within the boundaries of CFD No. 03-02 that is conveyed, dedicated, or otherwise acquired by or irrevocably offered to the federal government, the State of California, the County, the City, or any local government or other governmental agency. "Maximum Special Tax" means the maximum special tax, determined in accordance with Section C, that can be levied in any Fiscal Year on any Parcel. "Non -Residential Property" means all Parcels of Taxable Property which are not classified as Residential Property, Property Owner's Association Property, or Public Property. "Parcel" means a parcel (i) which is located at least partially within the boundaries of CFD No. 03-02 and (ii) to which an Assessor's parcel number is assigned as shown on an Assessor's Parcel Map. "Planning Area" means those planning areas designated by number on the Land Use Plan. "Property Owner's Association Property" means (i) any Parcel for which the owner of record, as determined from the County Assessor's secured tax roll for the Fiscal Year in which the Special Tax is being levied, is a property owner's association, including any master or sub -association, (ii) any Lot located in a Final Map that was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Map, is or will be open space, a private park or recreation facility, or a private street owned by a property owner's association, (iii) any Lot within a Final Map that is located within the boundaries of CFD No. 03-02 and was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and for which the Land Use is private mini park or private recreation center, or (iv) any Lot or Parcel which, as of the April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated, or irrevocably offered to a property owner's association, including any master or sub -association, provided such conveyance, dedication, or offer is submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which the Special Tax is being levied. "Proportionately" means that with respect to a given classification of property the ratio of the Special Tax to the Dwelling Unit Special Tax or Acreage Special Tax, as applicable, is the same for all Parcels assigned to such classification. For example, levying the Special Tax Proportionately on Parcels of Developed Residential Property means that for all such Parcels the ratio of the Special Tax to the Dwelling Unit Special Tax is the same. "Public Property" means (i) any Parcel for which the owner of record, as determined from the County Assessor's secured tax roll for the Fiscal Year in which the Special Tax is being levied, is the federal government, the State of California, the County, the City, or any local government or other governmental agency, (ii) any property within a Final Map that is located within the boundaries of CFD No. 03-02 and was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Map, is or will be a public street, (iii) any Lot within a Final Map that is located within the boundaries of CFD No. 03-02 and was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and for which B-3 the Land Use is neighborhood park, sports park, educational, public institutional, habitat, flood control, or landscape slope, unless such Lot has an underlying residential land use and the applicable public entity has provided notice to the City that it will not acquire or otherwise take ownership of such Lot, or (iv) any Lot or Parcel which, as of the April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated to, or irrevocably offered to the federal government, the State of California, the County, the City, or any local government or other governmental agency, provided such conveyance, dedication, or offer is submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which the Special Tax is being levied. "Residential Floor Area" means all of the square footage within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area as determined from the applicable building permit(s) issued for such structure as of the April 1 preceding the Fiscal Year in which the Special Tax is being levied. Such determination shall be final following the final inspection or certification of occupancy for the dwelling unit(s). "Residential Property" means all Parcels of Taxable Property, exclusive of Property Owner's Association Property and Public Property, designated with a residential Land Use. "Special Tax" means the Special Tax levied in each Fiscal Year on each Parcel. "Special Tax Requirement" means (a) that amount with respect to CFD No. 03-02 required in any Fiscal Year to pay (i) for annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) periodic costs on the Bonds, including, but not limited to, the costs of remarketing, credit enhancement, and liquidity facility fees (including such fees for instruments that serve as the basis of a reserve fund in lieu of cash related to any such Bonds) and rebate payments; (iii) the Administrative Expenses; (iv) any reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year or otherwise reasonably expected; (v) any amounts required to establish or replenish any reserve funds established for the Bonds, and less (b) available funds as directed under the Indenture. "Specific Plan" means the Roripaugh Ranch Specific Plan (City of Temecula Resolution 02-112, Ordinance 02-13), as amended. "Taxable Property" means all Parcels which are not exempt from the Special Tax pursuant to law or Section E below. "Taxable Property Owner's Association Property" means all Parcels of Property Owner's Association Property which are not exempt from the Special Tax pursuant to law or Section E below. "Taxable Public Property" means all Parcels of Public Property which are not exempt from the Special Tax pursuant to law or Section E below. "Undeveloped Property" means all Parcels of Taxable Property which are not classified as Developed Property, exclusive of Property Owner's Association Property and Public Property. B-4 B. ASSIGNMENT TO LAND USE CATEGORY Each Fiscal Year, commencing with Fiscal Year 2005-2006, all Parcels shall be classified as either Taxable Property or Exempt Property. Taxable Property shall be further classified as Residential Property, Non -Residential Property, Taxable Property Owner's Association Property, or Taxable Public Property. Residential Property and Non -Residential Property shall be further classified as Developed Property and Undeveloped Property (hereinafter referred to as "Developed Residential Property," "Developed Non -Residential Property," "Undeveloped Residential Property," or "Undeveloped Non -Residential Property"). For purposes of determining the applicable Dwelling Unit Special Tax, Developed Residential Property shall be assigned to classifications one through fifteen in Table 1 below based on Residential Floor Area. If a Parcel consists of two or more Lots located in a Final Map that was recorded as of the January 1 preceding the Fiscal Year for which the Special Tax is being levied, each such Lot shall be treated as a Parcel and classified independently of the other; however, the aggregate Special Tax for the Lots will be levied on the Parcel. C. MAXIMUM SPECIAL TAX RATE The Maximum Special Tax for each Parcel of Developed Residential Property shall be the greater of the applicable Dwelling Unit Special Tax or Acreage Special Tax. If there are two or more residential dwelling units located on a Parcel, the applicable Dwelling Unit Special Tax for such Parcel shall be the sum of the Dwelling Unit Special Tax for each such residential dwelling unit. The Maximum Special Tax for each Parcel of Undeveloped Residential Property, Non -Residential Property, Taxable Property Owner's Association Property, and Taxable Public Property shall be the applicable Acreage Special Tax. B-5 1. Dwelling Unit Special Tax The Dwelling Unit Special Tax rates are shown in Table 1 below. TABLE 1 DWELLING UNIT SPECIAL TAX RATES FOR DEVELOPED RESIDENTIAL PROPERTY PROPERTY CLASSIFICATION/LAND USE SPECIAL TAX CLASSIFICATION RESIDENTIAL FLOOR AREA DWELLING UNIT SPECIAL TAX 1 Residential >5,000 $17,665 Per Acre $4,230 2 Residential >4,400 and <=5,000 Developed and Undeveloped Non -Residential Property (NC) $3,995 3 Residential >4,200 and <=4,400 $17,665 Per Acre $3,520 4 Residential >4,000 and <=4,200 $3,356 5 Residential >3,800 and <=4,000 $3,192 6 Residential >3,600 and <=3,800 $3,028 7 Residential >3,400 and <=3,600 $2,865, 8 Residential >3,200 and <=3,400 $2,701, 9 Residential >3,000 and <=3,200 $2,537, 10 Residential >2,800 and <=3,000 $2,374, 11 Residential >2,600 and <=2,800 $2,210 12 Residential >2,400 and <=2,600 $2,046, 13 Residential >2,200 and <=2,400 $1,883, 14 Residential >2,000 and <=2,200 $1,719, 15 Residential <=2,000 $1,586, ,Per residential dwelling unit 2. Acreage Special Tax The Acreage Special Tax rates are shown in Table 2 below. TABLE 2 ACREAGE SPECIAL TAX RATES PROPERTY CLASSIFICATION/LAND USE ACREAGE SPECIAL TAX Developed and Undeveloped Residential Property Low Density (L) or Low -Estate Density (L -E) $5,620 Per Acre Low Medium Density (LM) $17,665 Per Acre Medium Density Standard (M1) $17,665 Per Acre Medium Density Clustered (M2) $17,665 Per Acre Developed and Undeveloped Non -Residential Property (NC) $8,247 Per Acre Taxable Property Owner's Association Property $17,665 Per Acre Taxable Public Property $17,665 Per Acre Notwithstanding the above, if the Land Use Plan is amended or the zoning of the Planning Areas is otherwise amended resulting in a Land Use which is not shown in Table 2 above, then the Acreage Special Tax rate applicable to each Parcel to which the new Land Use applies shall be $17,665. In addition, if at any time subsequent to the issuance of Bonds the Land Use Plan is amended or the zoning or configuration of the Planning Areas is otherwise amended, the CFD Administrator shall determine if the Acreage Special Taxes that may thereafter be levied are less B-6 than the sum of estimated Administrative Expenses and one hundred ten percent (110%) of the maximum annual debt service for outstanding Bonds. If the amended Land Use Plan, zoning, and / or Planning Area configuration has resulted in such a reduction, then the Acreage Special Tax for each Parcel to which such amendments apply shall be computed using the Acreage Special Tax rate(s) previously applicable to such Parcel. If the previous Land Use for any portion of a Parcel to which the amended Land Use Plan, zoning, and / or Planning Area configuration applies was not low density (L), low -estate density (L -E), low medium density (LM), medium density standard (M1), medium density clustered (M2), or neighborhood commercial (NC) then the applicable Acreage Special Tax rate shall be $17,665. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2005-2006 and for each following Fiscal Year, the CFD Administrator shall levy the Special Tax on all Taxable Property to fund the Special Tax Requirement as follows: First: The Special Tax shall be levied Proportionately on each Parcel of Developed Property, up to 100% of the applicable Dwelling Unit Special Tax in the case of Developed Residential Property and up to 100% of the applicable Acreage Special Tax in the case of Developed Non -Residential Property; Second: If additional Special Taxes are needed after the first step, the Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property, up to 100% of the applicable Acreage Special Tax; Third: If additional Special Taxes are needed after the second step, the Special Tax for Parcels of Developed Property for which the Maximum Special Tax is derived from the applicable Acreage Special Tax shall be increased equally, measured on a percentage basis, from the amounts levied under the preceding Step 1 up to 100% of the applicable Acreage Special Tax (i.e., the percentage increase shall be equal for all applicable Parcels, until the Maximum Special Tax is reached); and Fourth: If additional Special Taxes are needed after the third step, the Special Tax shall be levied Proportionately on each Parcel of Taxable Property Owner's Association Property and Taxable Public Property up to the applicable Maximum Special Tax. Notwithstanding the above, under no circumstances will the Special Taxes levied against any Parcel used as a private residence be increased as a consequence of delinquency or default by the owner of any other Parcel or Parcels within CFD No. 03-02 by more than ten percent (10%) per Fiscal Year. In addition, under no circumstances will the Acreage Special Tax be levied against Parcels of Developed Residential Property if the Special Taxes which may be levied pursuant to the first and second steps above are equal to or greater than sum of estimated Administrative Expenses and one hundred ten percent (110%) of the then maximum annual debt service for outstanding Bonds. E. EXEMPTIONS The Board of Directors shall not levy a Special Tax on up to 511.11 Acres of Property Owner's Association Property and Public Property. If the total number of Acres of Property Owner's Association Property and Public Property exceeds 511.11, the chronological order in which such property is classified will determine which Parcels are classified as Exempt Property and which are classified as Taxable Property. If a Lot or B-7 Parcel is no longer classified as Property Owner's Association Property or Public Property, its status as Exempt Property will be revoked. The following property shall be classified as Property Owner's Association Property or Public Property, as applicable, at the time CFD No. 03-02 is established and shall count toward the limitation of 511.11 Acres of Property Owner's Association Property and Public Property set forth in the preceding paragraph: • Property Owner's Association Property and Public Property: Lots A and B (portion of Murrieta Hot Springs Road), Lot 2 (private mini park), Lot 5 (private recreation center), and Lot 8 (open space) of Tract 29353-1; Lots H and 5 (open space), Lots A through G and M through 0 (streets), Lots I, J, and K (flood control), Lot L (equestrian trail), Lots 2 and 9 (parks), Lots 10 and 11 (school sites), and Lot 12 (fire station) of Tract 29353-2; and the property described in and conveyed to the City pursuant to a grant deed dated May 21, 2003 and recorded with the County as Document Number 2003-371374. Subject to Section 53317.5 of the Act, if a Lot or Parcel classified as Developed Residential Property is acquired by a public entity by any means, including by negotiated transaction, gift, devise, or foreclosure, such Lot or Parcel will notwithstanding anything else herein be subject to the Special Tax in accordance with the terms for Developed Residential Property. In addition, if a Parcel of Public Property is leased to a non-governmental entity, then the leasehold or possessory interest, in accordance with Section 53340.1 of the Act, shall be subject to the applicable Acreage Special Tax. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the Special Tax may be billed directly and / or may be collected at a different time or in a different manner if necessary or convenient to meet the financial obligations of CFD No. 03-02, or as otherwise determined by the CFD Administrator. The foreclosure remedies provided for in the Indenture shall apply upon the nonpayment of the Special Tax. G. REVIEW AND APPEALS Any taxpayer may file a written appeal of the Special Tax levied on his/her property with the CFD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, the CFD Administrator shall grant a credit to eliminate or reduce future Special Taxes on the appellant's property. No refunds of previously paid Special Taxes shall be made. B-8 H. PREPAYMENT OF SPECIAL TAX 1. Full Prepayment- Developed Residential Property, Non -Residential Property, and Taxable Property Owner's Association Property The Maximum Special Tax for any Parcel of Developed Residential Property, Non - Residential Property, or Taxable Property Owner's Association Property may be prepaid and permanently satisfied as described herein, provided that a prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Parcel and all other Parcels which are under the same ownership and located within CFD No. 03-02. An owner of a Parcel intending to prepay the Maximum Special Tax shall provide the CFD Administrator with written notice of intent to prepay, and within 10 business days of receipt of such written notice, the CFD Administrator shall notify such owner of the non-refundable deposit determined to cover the cost to be incurred by the CFD No. 03-02 in calculating the prepayment amount. Within 10 business days of receipt of such non-refundable deposit, the CFD Administrator shall notify such owner of the prepayment amount. Prepayment must be made not less than 60 days prior to any redemption date, unless otherwise authorized by the CFD Administrator, for any Bonds to be redeemed with the prepayment proceeds. The "Full Prepayment Amount" means an amount equal to the sum of (1) Bond Redemption Amount, (2) Redemption Premium, (3) Defeasance Amount, and (4) Fees, less the Reserve Fund Credit, where the terms "Bond Redemption Amount," "Redemption Premium," "Defeasance Amount," "Fees," and "Reserve Fund Credit" have the following meanings: "Bond Redemption Amount" means the principal amount of Bonds to be redeemed and equals the greater of (a) the quotient derived by dividing (i) the applicable Dwelling Unit Special Tax, in the case of Residential Property, or Acreage Special Tax, in the case of Non -Residential Property or Taxable Property Owner's Association Property by (ii) the sum of the aggregate Dwelling Unit Special Taxes (for Residential Property) and Acreage Special Taxes (for Non -Residential Property) for CFD No. 03-02 (and excluding from (ii) any Special Taxes which have been prepaid) or (b) the quotient derived by dividing (iii) the applicable Acreage Special Tax by (iv) the sum of the aggregate Acreage Special Taxes (for Residential Property and Non -Residential Property) for CFD No. 03-02 (and excluding from (iv) any Special Taxes which have been prepaid) in each case multiplied by the principal amount of outstanding Bonds rounded up to the nearest $5,000. The aggregate special taxes under (a) and (b) above means the aggregate special taxes upon completion of the development of CFD No. 03-02. Prior to the completion of the development of CFD No. 03- 02, the aggregate special taxes under (a) and (b) above shall be as projected by the CFD Administrator. "Redemption Premium" means the Bond Redemption Amount multiplied by the applicable redemption premium, if any, for the Bonds to be redeemed. "Defeasance Amount" means the amount needed to pay interest on the Bond Redemption Amount until the earliest redemption date for the outstanding Bonds. Credit shall be given for any portion of the Special Tax B-9 heretofore paid by the Parcel for which the Full Prepayment Amount is being calculated and which will be, but has not yet been, utilized to pay interest and principal on the Bonds. "Fees" equal the fees and expenses of CFD No. 03-02 related to the Full Prepayment Amount, including, but not limited to, the costs of computing the Full Prepayment Amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence that the Maximum Special Tax has been prepaid. "Reserve Fund Credit" shall equal the lesser of (i) the reduction in the applicable "Reserve Requirement," as such term is defined in the Indenture, if any, following the redemption of Bonds from proceeds of the Prepayment Amount or (ii) the amount derived by subtracting the new Reserve Requirement in effect after the redemption of Bonds from proceeds of the Full Prepayment Amount from the balance in the "Reserve Fund," as such term is defined in the Indenture, on the prepayment date, but in no event shall such amount be less than zero. The CFD Administrator shall remove any portion of the Special Tax which has been enrolled but not paid. With respect to any Parcel that has prepaid the Maximum Special Tax, the Board of Directors shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Maximum Special Tax and the release of the Special Tax lien on such Parcel, and the obligation of such Parcel to pay the Special Tax shall cease. 2. Partial Prepayment — Developed Property, Non -Residential Property, and Taxable Property Owner's Association Property The Maximum Special Tax for any Parcel of Developed Residential Property, Non - Residential Property, or Taxable Property Owner's Association Property may be prepaid in part as described herein, provided that (i) the Bond Redemption Amount must be an integral multiple of $5,000 and (ii) at the time of the prepayment there are no delinquent Special Taxes with respect to such Parcel and all other Parcels which are under the same ownership and located within CFD No. 03-02. The "Partial Prepayment Amount" shall be computed using the methodology in Section H.1 and substituting the portion of the Maximum Special Tax to be prepaid by the Parcel for its Dwelling Unit Special Tax and Acreage Special Tax when determining the Bond Redemption Amount. The owner intending to prepay a portion of the Maximum Special Tax shall notify the CFD Administrator in writing of (i) such owner's intent to partially prepay the Maximum Special Tax, (ii) the percentage by which the Maximum Special Tax shall be prepaid, and (iii) the company or agency that will be acting as the escrow agent, if applicable, and within 10 business days of receipt of such written notice, the CFD Administrator shall notify such owner of the non-refundable deposit determined to cover the cost to be incurred by CFD No. 03-02 in calculating the amount of the partial prepayment. Within 10 business days of receipt of such non- refundable deposit, the CFD Administrator shall notify such owner of the Partial Prepayment Amount. Prepayment must be made not less than 60 days prior to any redemption date, unless authorized by the CFD Administrator, for any Bonds to be redeemed with the prepayment proceeds. B-10 With respect to any Parcel that has prepaid a portion of the Maximum Special Tax, the CFD Administrator shall indicate in the records of CFD No. 03-02 that there has been a partial prepayment of the Maximum Special Tax, the amount of the Maximum Special Tax which has been prepaid, and the amount of the Maximum Special Tax which continue to be levied on such Parcel. The Bond Redemption Amount, Redemption Premium, Defeasance Amount, and Reserve Fund Credit shall be used to pay interest on and redeem Bonds in accordance with the Indenture. Notwithstanding the foregoing, no prepayment shall be allowed unless the amount of Maximum Special Taxes that may be levied in CFD No. 03-02 after the proposed prepayment is at least the sum of (i) the estimated Administrative Expenses and (ii) one hundred ten percent (110%) of the annual debt service on the Bonds, taking into account the amount of Bonds to remain outstanding after such prepayment. I. TERM The Maximum Special Tax shall be levied for a period not to exceed 50 Fiscal Years, commencing with Fiscal Year 2005-2006. B-11 APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT The following is a summary of certain provisions of the Fiscal Agent Agreement not otherwise described in the text of this Official Statement. This summary does not purport to be comprehensive or definitive and is subject to the complete terms and provisions of the Fiscal Agent Agreement, to which reference is hereby made. [to come] C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL February _ 2017 Board of Directors Temecula Public Financing Authority 41000 Main Street Temecula, California 92589-9033 OPINION: $ Temecula Public Financing Authority Community Facilities District 03-02 (Roripaugh Ranch) 2017 Special Tax Refunding Bonds Members of the Board of Directors: We have acted as bond counsel in connection with the issuance by the Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), of its $ Temecula Public Financing Authority Community Facilities District 03-02 (Roripaugh Ranch) 2017 Special Tax Refunding Bonds (the "Bonds") pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq., of the California Government Code) (the "Act"), Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, a Fiscal Agent Agreement, dated as of February 1, 2017 (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, and Resolution No. TPFA 17- adopted by the Board of Directors of the Authority on January 24, 2017 (the "Resolution"). In connection with this opinion, we have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority contained in the Resolution and in the Fiscal Agent Agreement, and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Authority is duly created and validly existing as a joint exercise of powers authority, with the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein and issue the Bonds. 2. The Fiscal Agent Agreement has been duly entered into by the Authority and constitutes a valid and binding obligation of the Authority enforceable upon the Authority. 3. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with the pledge thereof for the security of any Parity Bonds that may be issued under, and as such term is defined in, the Fiscal Agent Agreement. D-1 4. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and binding limited obligations of the Authority for the District, payable solely from the sources provided therefor in the Fiscal Agent Agreement, on a parity with any Parity Bonds that may be issued under and as such term is defined in the Fiscal Agent Agreement. 5. Subject to the Authority's compliance with certain covenants, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, and (ii) is not included as an item of tax preference in computing the 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. Failure by the Authority to comply with certain of such covenants could cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. 6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds, the Resolution and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. In rendering this opinion, we have relied upon certifications of the Authority and others with respect to certain material facts. Our opinion represents our legal judgment based upon such review of the law and facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, D-2 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT [to come] E-1 APPENDIX F DTC AND THE BOOK -ENTRY ONLY SYSTEM The information in this Appendix F has been provided by The Depository Trust Company ("DTC"), New York, NY, for use in securities offering documents, and the Authority does not take responsibility for the accuracy or completeness thereof. The Authority cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute the Beneficial Owners either (a) payments of interest, principal or premium, if any, with respect to the 2017 Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the 2017 Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants mill act in the manner described in this Official Statement. The following description of DTC, the procedures and record keeping with respect to beneficial ownership interests in the 2017 Bonds, payment of principal, interest and other payments on the 2017 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2017 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC 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. Neither the Authority as the issuer of the 2017 Bonds (the "Issuer") nor the fiscal agent or paying agent appointed with respect to the 2017 Bonds (the "Agent") take any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2017 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2017 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2017 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the 2017 Bonds (the "Securities"). The Securities 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 Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. 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) F-1 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"). On August 8, 2011, Standard & Poor's downgraded its rating of DTC from AAA to 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 and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("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 Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities 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. 5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. F-2 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or 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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or 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. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. The Issuer may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. F-3 Quint & Thimmig LLP 12/26/16 1/6/17 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of February 1, 2017, is by and between ALBERT A. WEBB ASSOCIATES, as dissemination agent (the "Dissemination Agent"), and the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"). RECITALS: WHEREAS, the Authority has issued, for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "District"), its Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), 2017 Special Tax Bonds (the "Bonds") in the initial principal amount of $ ; and WHEREAS, the Bonds have been issued pursuant to a Fiscal Agent Agreement, dated as of February 1, 2017 (the "Fiscal Agent Agreement"), by and between U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), and the Authority, for and on behalf of the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2 -12(b)(5). AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following terms shall have the following meanings when used in this Disclosure Agreement: "Annual Report" means any Annual Report provided by the Authority pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. "Disclosure Representative" means the Treasurer, or such person's designee, or such other officer or employee of the Authority as the Authority shall designate as the Disclosure Representative hereunder in writing to the Dissemination Agent from time to time. 20009.14:J14010 "Dissemination Agent" means Albert A. Webb Associates, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority a written acceptance of such designation. "EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Listed Events" means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statemenr means the Official Statement, dated February _, 2017, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The Authority shall, or shall cause the Dissemination Agent to, not later than the March 1 occurring after the end of each fiscal year of the Authority, commencing with the report for the 2015-16 fiscal year, which is due not later than March 1, 2017, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that any audited financial statements of the Authority may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. (b) Change of Fiscal Year. 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 5(c), and subsequent Annual Report filings shall be made no later than six months after the end of such new fiscal year end. -2- (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the Annual Report to EMMA), the Authority shall provide the Annual Report to the Dissemination Agent (if other than the Authority). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Authority. (d) Report of Non -Compliance. If the Authority is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the Authority shall in a timely manner send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the Authority is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in substantially the form attached hereto as Exhibit A in a timely manner. (e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the Authority, file a report with the Authority certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed. Section 4. Content of Annual Reports. It is acknowledged that the Closing Date for the Bonds occurred after the end of the 2015-2016 fiscal year of the Authority. In light of the foregoing, submission of the Official Statement shall satisfy the Authority's obligation to file an Annual Report for fiscal year 2015-2016. The Annual Report for each fiscal year commencing with the Annual Report for the 2016-2017 fiscal year, shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the Authority for the most recently completed fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Other Annual Information. The Annual Report for each fiscal year commencing with fiscal year 2016-2017 shall also include the following information: (i) The principal amount of Bonds Outstanding as of the September 30 next preceding the date of the Annual Report. (ii) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the September 30 next preceding the date of the Annual Report. (iii) The balance in the Improvement Fund, if any, as of the September 30 next preceding the date of the Annual Report. -3- (iv) The total assessed value of all parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the County Assessor last equalized prior to the September 30 next preceding the date of the Annual Report, and a statement of assessed value -to -lien ratios therefor, either by individual parcel or by categories, in a table similar to Table in the Official Statement. (v) A table similar to Table in the Official Statement (which shows the value -to -lien ratios for parcels in the District) using the most recently available County assessed values. (vi) A table setting forth the annual aggregate Special Tax levy in the District for the most recent five Fiscal Years (or, if shorter, for the Fiscal Years commencing with Fiscal Year 2017-18), and the number of parcels with delinquent Special Taxes, and the amount and percentage of the overall Special Tax levy for the delinquent parcels, and an update of prior years' delinquencies as of a date not more than ninety (90) days prior to the date of the Annual Report. (vii) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary or the results of any foreclosure sales, or other collection efforts with respect to delinquent Special Taxes, as of the September 30 next preceding the date of the Annual Report. (viii) The identity of any property owner representing more than five percent (5%) of the annual Special Tax levy who is delinquent in payment of such Special Taxes, as shown on the assessment roll of the City Assessor last equalized prior to the September 30 next preceding the date of the Annual Report, the number of parcels so delinquent, and the total dollar amount of all such delinquencies. (ix) A land ownership summary listing property owners responsible for more than five percent (5%) of the annual Special Tax levy, as shown on the assessment roll of the County Assessor last equalized prior to the January 1 next preceding the date of the Annual Report. (x) The most recent annual information required to be provided to the California Debt and Investment Advisory Commission pursuant to Section 9.07(A) of the Fiscal Agent Agreement. (c) Cross References. 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 are available to the public on EMMA. The Authority shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the Authority shall provide such -4- further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Listed Events. (a) Reportable Events. The Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) 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. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee 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 governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Material Reportable Events. The Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. -5- (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the 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. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Time to Disclose. The Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent Agreement. Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The Authority's obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Albert A. Webb Associates. If the Dissemination Agent is not the Authority, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Authority pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the Authority. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the Authority shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the Authority. -6- (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder as agreed to between the Dissemination Agent and the Authority from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, with payment to be made from any lawful funds of the District. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Authority, the owners of the Bonds, the Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any written direction from the Authority or a written opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the Authority. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the Authority to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the Authority under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Authority that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), 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 Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. (c) Consent of Holders; Non -impairment Opinion. The amendment or waiver either (i) is approved by the Bond owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bond owners or Beneficial Owners. If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is waived, the Authority shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the -7- Authority. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. 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 future notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Authority to comply with any provision of this Disclosure Agreement, any Bond owner, any Beneficial Owner, the Fiscal Agent or the Participating Underwriter may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the Authority to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and the owners and the Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. 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. -8- IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. 20009.14:J14010 -9- TEMECULA PUBLIC FINANCING AUTHORITY By: Aaron Adams, Executive Director ALBERT A. WEBB ASSOCIATES, as Dissemination Agent By: Its: EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Temecula Public Financing Authority Name of Bond Issue: $ Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), 2017 Special Tax Bonds Date of Issuance: February _, 2017 NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.17 of the Fiscal Agent Agreement, dated as of February 1, 2017, between the Obligor and U.S. Bank National Association, as fiscal agent. The Obligor anticipates that the Annual Report will be filed by Date: By: Albert A. Webb Associates, as Dissemination Agent A-1 Quint & Thimmig LLP CONTINUING DISCLOSURE AGREEMENT 6/15/16 6/28/16 12/22/16 1/6/17 THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of February 1, 2017, is by and between ALBERT A. WEBB ASSOCIATES, as dissemination agent (the "Dissemination Agent"), and the TEMECULA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"). RECITALS: WHEREAS, the Authority has issued, for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), its Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch), 2017 Special Tax Refunding Bonds (the "Bonds") in the initial principal amount of $ ; and WHEREAS, the Bonds have been issued pursuant to a Fiscal Agent Agreement, dated as of February 1, 2017 (the "Fiscal Agent Agreement"), by and between U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), and the Authority, for and on behalf of the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2 -12(b)(5). AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following terms shall have the following meanings when used in this Disclosure Agreement: "Annual Report" means any Annual Report provided by the Authority pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. "Disclosure Representative" means the Treasurer, or such person's designee, or such other officer or employee of the Authority as the Authority shall designate as the Disclosure Representative hereunder in writing to the Dissemination Agent from time to time. 20009.14:J14010 "Dissemination Agent" means Albert A. Webb Associates, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority a written acceptance of such designation. "EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Listed Events" means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statemenr means the Official Statement, dated February _, 2017, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The Authority shall, or shall cause the Dissemination Agent to, not later than the March 1 occurring after the end of each fiscal year of the Authority, commencing with the report for the 2015-16 fiscal year, which is due not later than March 1, 2017, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that any audited financial statements of the Authority may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. (b) Change of Fiscal Year. 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 5(c), and subsequent Annual Report filings shall be made no later than six months after the end of such new fiscal year end. -2- (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the Annual Report to EMMA), the Authority shall provide the Annual Report to the Dissemination Agent (if other than the Authority). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Authority. (d) Report of Non -Compliance. If the Authority is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the Authority shall in a timely manner send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the Authority is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in substantially the form attached hereto as Exhibit A in a timely manner. (e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the Authority, file a report with the Authority certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed. Section 4. Content of Annual Reports. It is acknowledged that the Closing Date for the Bonds occurred after the end of the 2015-2016 fiscal year of the Authority. In light of the foregoing, submission of the Official Statement shall satisfy the Authority's obligation to file an Annual Report for fiscal year 2015-2016. The Annual Report for each fiscal year commencing with the Annual Report for the 2016-2017 fiscal year, shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the Authority for the most recently completed fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Other Annual Information. The Annual Report for each fiscal year commencing with fiscal year 2016-2017 shall also include the following information: (i) The principal amount of Bonds Outstanding as of the September 30 next preceding the date of the Annual Report. (ii) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the September 30 next preceding the date of the Annual Report. (iii) The total assessed value of all parcels within the District on which the Special Taxes are levied, as shown on the assessment roll of the County Assessor last equalized prior to the September 30 next preceding the date of the Annual Report, and a statement of assessed value -to -Bond lien ratios therefor, -3- either by individual parcel or by categories, in a table similar to Table 4 in the Official Statement. (iv) An update to Table 5 in the Official Statement using the most recently available County assessed values. (v) An update to Table 7 in the Official Statement for the most recently completed fiscal year, and an update of prior years' delinquencies as of a date not more than ninety (90) days prior to the date of the Annual Report. (vi) The status of foreclosure proceedings for any parcels within the District on which the Special Taxes are levied and a summary or the results of any foreclosure sales, or other collection efforts with respect to delinquent Special Taxes, as of the September 30 next preceding the date of the Annual Report. (vii) The most recent annual information required to be provided to the California Debt and Investment Advisory Commission pursuant to Section 9.07(A) of the Fiscal Agent Agreement. (c) Cross References. 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 are available to the public on EMMA. The Authority shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the Authority shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Listed Events. (a) Reportable Events. The Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. -4- (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) 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. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee 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 governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Material Reportable Events. The Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the 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. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Time to Disclose. The Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any -5- earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent Agreement. Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The Authority's obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Albert A. Webb Associates. If the Dissemination Agent is not the Authority, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Authority pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the Authority. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the Authority shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the Authority. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder as agreed to between the Dissemination Agent and the Authority from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, with payment to be made from any lawful funds of the District. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Authority, the owners of the Bonds, the Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any written direction from the Authority or a written opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the Authority. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the Authority to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to -6- provide or receive any such request shall not affect the obligations of the Authority under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Authority that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), 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 Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. (c) Consent of Holders; Non -impairment Opinion. The amendment or waiver either (i) is approved by the Bond owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bond owners or Beneficial Owners. If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is waived, the Authority shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Authority. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. 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 future notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Authority to comply with any provision of this Disclosure Agreement, any Bond owner, any Beneficial Owner, the Fiscal Agent or the -7- Participating Underwriter may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the Authority to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and the owners and the Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. 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. -8- IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. 20009.14:J14010 -9- TEMECULA PUBLIC FINANCING AUTHORITY By: Aaron Adams, Executive Director ALBERT A. WEBB ASSOCIATES, as Dissemination Agent By: Its: EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Temecula Public Financing Authority Name of Bond Issue: $ Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch), 2017 Special Tax Refunding Bonds Date of Issuance: February _, 2017 NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.17 of the Fiscal Agent Agreement, dated as of February 1, 2017, between the Obligor and U.S. Bank National Association, as fiscal agent. The Obligor anticipates that the Annual Report will be filed by Date: By: Albert A. Webb Associates, as Dissemination Agent A-1 Quint & Thimmig LLP 4/6/16 6/15/16 6/28/16 12/22/16 ESCROW AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank dated as of February 1, 2017 relating to: Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds 20009.14:J13846 TABLE OF CONTENTS Section 1. Establishment of Refunding Fund 2 Section 2. Deposit into Refunding Fund; Investment of Amounts 2 Section 3. Instructions as to Application of Refunding Fund 2 Section 4. Application of Proceeds from Prior Bond Funds 3 Section 5. Application of Certain Terms of Prior Fiscal Agent Agreement 3 Section 6. Proceedings for Redemption of Prior Bonds 3 Section 7. Compensation to Escrow Bank 3 Section 8. Liabilities and Obligations of Escrow Bank 3 Section 9. Resignation of Escrow Bank 5 Section 10. Amendment 5 Section 11. Unclaimed Moneys 5 Section 12. Execution in Counterparts 5 Section 13. Applicable Law 6 EXHIBIT A: SCHEDULE OF PAYMENTS ON PRIOR BONDS EXHIBIT B: NOTICE OF DEFEASANCE ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement"), dated as of February 1, 2017, 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. 03-02 (RORIPAUGH RANCH) (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 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 March 1, 2006, between U.S. Bank National Association, as fiscal agent (the "Fiscal Agent") and the Authority (as amended by Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of May 1, 2008, between the Authority and the Fiscal Agent, the "Prior Fiscal Agent Agreement"), the Authority has issued its Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 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 February 1, 2017 (the "2017 CFD 03-02 Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent (the "2017 Fiscal Agent"), special tax refunding bonds (the "Refunding Bonds") for the purpose of providing funds to currently refund and defease a portion of the Prior Bonds; and WHEREAS, the Authority has also determined to issue, for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), pursuant to a separate fiscal agent agreement, dated as of February 1, 2017, between the Authority and U.S. Bank National Association, as fiscal agent (the "2017 CFD 16- 01 Agreement"), special tax bonds (the "2017 Bonds") for the purpose, among others, of providing funds to prepay in full the special taxes authorized to be levied by the Authority for the District on parcels located in a portion of the District generally referred to as the "pan area;" 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: -1- Section 1. Establishment of Refunding Fund. There is hereby created an escrow fund (the "Refunding Fund") to be held 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 on, and the redemption price of, as applicable, 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 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 below, moneys held in the special tax fund established under the Prior Fiscal Agent Agreement (the "Special Tax Fund") in the amount of $ , and (c) from proceeds of the 2017 Bonds remitted to the Escrow Bank, $ . 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 Special Tax Fund under the Prior Fiscal Agent Agreement to the Refunding Fund as described in clause (b) 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 on, and the redemption price of, the Prior Bonds in accordance with Sections 2.02 and 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 on the Prior Bonds, any remaining amount on deposit in the Refunding Fund shall be transferred by the Escrow Bank on March 2, 2017 to the 2017 Fiscal Agent, for deposit by the 2017 Fiscal Agent in the Special Tax Fund established pursuant to Section 4.06 of the 2017 CFD 03-02 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. The Escrow Bank hereby acknowledges that the Authority has herefore directed it, in its capacity as Fiscal Agent under the Prior Fiscal Agent Agreement, to provide notice of redemption (at the expense of the District), as required under Section 2.03(D) of the Prior Fiscal Agent Agreement to effect such redemption, and that it has so given such notice of redemption. -2- The Escrow Bank, in its capacity as Fiscal Agent, is hereby requested by the Authority, and the Escrow Bank, in its capacity as Fiscal Agent, hereby agrees to promptly give notice of the defeasance of the Prior Bonds in the form of defeasance notice attached hereto as Exhibit B. Section 4. Application of Proceeds from Prior Bond Funds. Upon receipt by the Escrow Bank from the Authority or the Fiscal Agent under the Prior Fiscal Agent Agreement of certain amounts on deposit in the Special Tax Fund established under the Prior Fiscal Agent Agreement the Escrow Bank shall deposit such amount in the Refunding Fund. After making the foregoing deposit, 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 2017 CFD 03-02 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, and redeeming, 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 March 1, 2017 pursuant to the provisions of Sections 2.03(A)(i) of the Prior Fiscal Agent Agreement. It is hereby acknowledged that notice of such redemption has been given by the Escrow Bank as described in the second paragraph of Section 3 above, at the expense of the District. 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. -3- 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. The Escrow Bank shall have no liability or obligation to the holders of the Prior Bonds, the 2017 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, the 2017 CFD 03-02 Agreement or the 2017 CFD 16-01 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 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. -4- 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. 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, the 2017 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 for the payment and discharge of the principal of, and the interest 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 pledge or lien under this Agreement, 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 on, the 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. -5- 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. -6- 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. Attest: By: Randi Johl, Secretary TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) By: Aaron Adams, Executive Director U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By: John Axt, Vice President [Signature page to Escrow Agreement — CFD 03-02 (Roripaugh Ranch)] 20009.14:J13846 S-1 EXHIBIT A SCHEDULE OF PAYMENTS ON PRIOR BONDS Payment Date Interest Called Principal Total Due March 1, 2017 $ $41,880,000.00 $ Exhibit A EXHIBIT B NOTICE OF DEFEASANCE Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds Maturity Amount CUSIP Date Defeased Number September 1, 2026 September 1, 2036 $15,490,000 26,390,000 87972Y CM6 87972Y CN4 NOTICE IS HEREBY GIVEN, on behalf of the Temecula Public Financing Authority (the "Authority") to the owners of the outstanding Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds described above (the "Bonds"), that pursuant to the Fiscal Agent Agreement pursuant to which the Bonds were issued (the "Fiscal Agent Agreement") the lien of the Fiscal Agent Agreement with respect to the Bonds has been discharged through the irrevocable deposit of cash in an escrow fund (the "Refunding Fund"). The Refunding Fund has been established and is being maintained pursuant to that certain Escrow Agreement, dated as of July 1, 2016, by and between the Authority, for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), and U.S. Bank National Association, as escrow bank. As a result of such deposit, the Bonds are deemed to have been paid and defeased in accordance with the Fiscal Agent Agreement. The pledge of the funds provided for under the Fiscal Agent Agreement and all other obligations of the Authority and the District to the owners of the Bonds shall hereafter be limited to the application of moneys in the Refunding Fund for the payment of the principal and interest on the Bonds as the same become due and payable as described below. The cash deposited in the Refunding Fund is calculated to provide sufficient moneys to redeem the Bonds in full on March 1, 2017 at a redemption price equal to 100% of the principal thereof plus accrued interest to such date. DATED this day of , 2017 U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank Exhibit B Page 1 Quint & Thimmig LLP 3/23/16 6/1/16 6/14/16 6/29/16 12/26/16 ACQUISITION AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and RORIPAUGH VALLEY RESTORATION, LLC dated as of February 1, 2017 relating to: Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) and Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) 20009.13:J13931 TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.01. Definitions 1 ARTICLE II RECITALS Section 2.01. The CFDs 5 Section 2.02. The Development 5 Section 2.03. The Facilities 5 Section 2.04. The Financing 5 Section 2.05. The Bonds 5 Section 2.06. No Advantage to Authority Construction 5 Section 2.07. Agreements 6 Section 2.08. Modifications to Conditions to Approval 6 ARTICLE III FUNDING Section 3.01. Authority Proceedings 6 Section 3.02. Bonds 6 Section 3.03. Bond Proceeds 6 Section 3.04. City Election to Construct Facilities 7 Section 3.05. Refunding Bonds 9 ARTICLE IV CONSTRUCTION OF FACILITIES Section 4.01. Plans 9 Section 4.02. Construction of Facilities 9 Section 4.03. Relationship to Public Works; Bidding Requirements 10 Section 4.04. Independent Contractor; No Joint Venture 11 Section 4.05. Performance and Payment Bonds 12 Section 4.06. Contracts and Change Orders 12 Section 4.07. Time for Completion 12 ARTICLE V ACQUISITION AND PAYMENT Section 5.01. Inspection 13 Section 5.02. Agreement to Sell and Purchase Facilities 13 Section 5.03. Payment Requests 13 Section 5.04. Processing Payment Requests 14 Section 5.05. Payment 14 Section 5.06. Restrictions on Payments 15 Section 5.07. Acquisition of Additional Facilities 18 Section 5.08. Defective or Nonconforming Work 18 Section 5.09. Modification of Discrete Components 19 Section 5.10. Right of City to Make Withdrawals From Improvement Funds 19 ARTICLE VI OWNERSHIP AND TRANSFER OF FACILITIES Section 6.01. Facilities to be Owned by the City — Conveyance of Land and Easements to City 20 Section 6.02. Facilities to be Owned by the City — Title Evidence 20 Section 6.03. Facilities Constructed on Private Lands 20 Section 6.04. Facilities Constructed on City Land 20 Section 6.05. Facilities to be Acquired by Other Public Agencies 21 Section 6.06. Maintenance and Warranties 21 ARTICLE VII INSURANCE; RESPONSIBILITY FOR DAMAGE Section 7.01. Liability Insurance Requirements 21 -i- Section 7.02. Responsibility for Damage 24 Section 7.03. Insurance Requirements of Joint Community Facilities Agreements 24 ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS Section 8.01. Representations, Covenants and Warranties of RVR 25 Section 8.02. Indemnification and Hold Harmless 26 ARTICLE IX TERMINATION Section 9.01. Termination of Funding Obligations 27 Section 9.02. Mutual Consent 27 Section 9.03. Authority Election for Cause 28 Section 9.04. Force Majeure 29 Section 9.05. Survival of Certain Provisions 29 ARTICLE X MISCELLANEOUS Section 10.01. Limited Liability of Authority 29 Section 10.02. Excess Costs 29 Section 10.03. Audit 29 Section 10.04. Attorney's Fees 30 Section 10.05. Notices 30 Section 10.06. Severability 30 Section 10.07. Successors and Assigns 30 Section 10.08. Other Agreements 31 Section 10.09. Waiver 31 Section 10.10. Merger 31 Section 10.11. Parties in Interest 31 Section 10.12. Amendment 31 Section 10.13. Counterparts 31 Section 10.14. Governing Law 31 Section 10.15. Termination of Prior Acquisition Agreement 31 EXHIBIT A DESCRIPTION OF FACILITIES ELIGIBLE FOR ACQUISITION FROM RVR EXHIBIT B DISCRETE COMPONENTS OF FACILITIES AND RELATED BUDGETED COSTS EXHIBIT C FORM OF PAYMENT REQUEST EXHIBIT D PRIORITY FOR FUNDING OF FACILITIES EXHIBIT E CITY IMPROVEMENTS EXHIBIT F SCHEDULE FOR COMPLETION OF CERTAIN FACILITIES THIS ACQUISITION AGREEMENT (the "Acquisition Agreement"), dated as of February 1, 2017, is by and between (i) the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"), for and on behalf of the Authority's Community Facilities District No. 03-02 (Roripaugh Ranch) (the "2005 CFD") and the Authority's Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2) (the "2016 CFD"), and (ii) Roripaugh Valley Restoration, LLC, a Delaware limited liability company ("RVR"). ARTICLE I DEFINITIONS Section 1.01. Definitions. The following terms shall have the meanings ascribed to them in this Section 1.01 for purposes of this Acquisition Agreement. Unless otherwise indicated, any other terms, capitalized or not, when used herein shall have the meanings ascribed to them in the Fiscal Agent Agreement (as hereinafter defined). "Acceptable Title" means title to land or interest therein, in form acceptable to the Director of Public Works, which title or interest is free and clear of all liens, taxes, assessments, leases, easements and encumbrances, whether or not recorded, but subject to any exceptions determined by the Director of Public Works as not interfering with the actual or intended use of the land or interest therein. Notwithstanding the foregoing, an irrevocable offer of dedication may constitute land with an "Acceptable Title" if: (i) such offer is necessary to satisfy a condition to a tentative or final parcel map, (ii) such offer is in a form acceptable to the Director of Public Works, (iii) the Director of Public Works has no reason to believe that such offer of dedication will not be accepted by the applicable public agency, and (iv) RVR commits in writing not to allow any liens to be imposed on such property prior to its formal acceptance by the applicable public agency. "Acceptance Date" means the date the City Council of the City (or other public entity which is to own a Facility) takes final action to accept dedication of or transfer of title to a Facility. "Acquisition Agreement" means this Acquisition Agreement, together with any Supplement hereto. "Act" means the Mello -Roos Community Facilities Act of 1982, Section 53311 et seq. of the California Government Code, as amended. "Actual Cost" means the substantiated cost of a Facility or a Discrete Component, which costs may include: (i) the costs (evidenced by payments to parties unrelated to RVR, or, in the event that RVR avails itself of the provisions of Section 4.03(C), determined by reference to the written contract to be entered into with RVR as referenced in said Section) incurred by RVR for the construction of such Facility or Discrete Component, (ii) the reasonable costs incurred by RVR in preparing the Plans for such Facility or Discrete Component and the related costs of design, engineering and environmental evaluations of the Facility or Discrete Component, (iii) the fees paid to governmental agencies for obtaining permits, licenses or other governmental approvals for such Facility or Discrete Component, (iv) professional costs incurred by RVR associated with such Facility or Discrete Component, such as engineering, architecture, landscape architecture, legal, accounting, inspection, construction staking, materials testing and -1- similar professional services; (v) costs directly related to the construction and/or acquisition of a Facility or Discrete Component, such as costs of payment, performance and/or maintenance bonds, and insurance costs related to Facilities (including costs of any title insurance required hereunder, but not including the cost of any insurance described in Section 7.01 of this Acquisition Agreement); and (vi) the out-of-pocket cost to RVR of any real property or interest therein that RVR must acquire from one or more entities that are not Affiliates of RVR and which acquisition is required for the construction of a Facility and which real property or interest therein is required to be conveyed to the public entity that will own or operate such Facility. Actual Cost may include an amount not in excess of five percent (5%) of the cost described in clause (i) of the preceding sentence in respect of any construction, project management or other similar fee payable to RVR or any party related thereto. Actual Cost shall not include any financing fees, costs or charges, or any interest, cost of carry or other similar charges. "Affiliate" means any entity with respect to which fifty percent (50%) or more of the ownership or voting power is held individually or collectively by RVR and any other entity owned, controlled or under common ownership or control by or with, as applicable, RVR, and includes the managing member of any entity that is a limited liability company, and includes all general partners of any entity which is a partnership. Control shall mean ownership of fifty percent (50%) or more of the voting power of or ownership interest in the respective entity. "Authority" means the Temecula Public Financing Authority, a joint exercise of powers agency duly created and existing under the laws of the State. "Bonds" means, collectively, any bonds issued by the Authority under the Act for the 2005 CFD or for the 2016 CFD, proceeds of which are deposited to an Improvement Fund to be used to pay costs of the Facilities or Discrete Components thereof. "Budgeted Cost" means the estimated cost of a Facility or Discrete Component as shown on Exhibit B hereto. "CFDs" means, collectively, the 2005 CFD and the 2016 CFD. "City" means the City of Temecula, California. "City Attorney" means the attorney, or firm of attorneys, serving in the capacity of City Attorney for the City. "City Improvements" shall mean those Facilities identified in Exhibit E hereto, and any additional Facilities designated in a notice to the Authority and RVR as described in Section 3.04A. of this Acquisition Agreement. "City Manager" means the person acting in the capacity as City Manager of the City. "Conditions of Approval" means the conditions of approvals and mitigation measures imposed in connection with the Development Plan Approval(s) as defined in Section 1 of the Development Agreement, as amended, including, but not limited, to the Pre -Annexation and Development Agreement dated as of December 17, 2002 (the "Development Agreement") by and between the City and Ashby USA, LLC, as amended, including by the Third Amendment to the Development Agreement, the Roripaugh Specific Plan (the "Specific Plan") as amended, including by Amendment 2 to the Specific Plan the Roripaugh Ranch Final Environmental -2- Impact Report ("EIR") as amended, including by Addendum No. 2 approved by the City on February 17, 2016. "County" means the County of Riverside, California. "Director of Public Works" means the Director of Public Works of the City, or his written designee acting as such under this Acquisition Agreement. "Discrete Component" means a functional segment or major component of a Facility that the Director of Public Works has agreed can be separately identified, inspected and completed, and be the subject of a Payment Request hereunder. The Discrete Components of the Initial Facilities are shown on Exhibit B hereto. For Discrete Components of any Facility the purchase value of which is $1,000,000 or less, the Discrete Component must be a portion or phase of a Facility that is capable of serviceable use, as determined by the Director of Public Works, as required by Section 53313.51(a) of the Act. Notwithstanding the foregoing, the Discrete Components shall include work done or costs expended by RVR relative to a City Improvement for which the Director of Public Works has approved payment, as described in Section 3.04B. "Facilities" means the public facilities described in Exhibit A hereto which are eligible to be financed by either or both of the CFDs. "Fiscal Agent" means an entity acting as fiscal agent under a Fiscal Agent Agreement, or any successor thereto acting as fiscal agent under a Fiscal Agent Agreement. "Fiscal Agent Agreement" means, collectively (i) the Fiscal Agent Agreement, dated as of February 1, 2017, between the Authority for the 2005 CFD and the Fiscal Agent, as executed and as it may thereafter amended and supplemented in accordance with its terms; (ii) the Fiscal Agent Agreement, dated as of February 1, 2017, between the Authority for the 2016 CFD and the Fiscal Agent, as executed and as it may thereafter amended and supplemented in accordance with its terms; and (iii) any other agreement by the Authority for a CFD pursuant to which bonds are issued by the Authority for a CFD under the Act proceeds of which are to be deposited to an Improvement Fund. "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. "Improvement Fund" or "Improvement Funds" means, as applicable, one or more of (i) Improvement Fund created under the Fiscal Agent Agreement described in clause (i) of the definition of Fiscal Agent Agreement above; (ii) the Improvement Fund created under the Fiscal Agent Agreement described in clause (ii) of the definition of Fiscal Agent Agreement above; and (iii) any fund established pursuant to a Fiscal Agent Agreement of the character described in clause (iii) of the definition of Fiscal Agent Agreement above into which proceeds of Bonds are deposited for use to pay costs of the Facilities. It is hereby acknowledged that on the date of issuance of the 2017 Special Tax Refunding Bonds for the 2005 CFD, $ and $ will be deposited to the Improvement Fund referred to in the preceding clause (i), from the accounts within the improvement fund and from the reserve fund established under the fiscal agent agreement for the 2005 CFD 2006 Special Tax Bonds. "Initial Facilities" means the Facilities shown in Exhibit B hereto proposed to be acquired with all or a portion of the proceeds of an initial series of the Bonds being issued by the -3- Authority for the 2016 CFD, as well as from funds transferred to an Improvement Fund as referred to in the last sentence of the definition of Improvement Fund in this Section 1.01. "Joint Community Facilities Agreement — County" means the Joint Community Facilities Agreement (Street Improvements), dated as of November 1, 2004, initially among the County, the City, the Authority and Ashby USA, LLC. "Joint Community Facilities Agreement — Flood Control" means the Joint Community Facilities District (Flood Control Improvements) dated as of November 1, 2004, initially among the Riverside County Flood Control and Water Conservation District, the County, the City, the Authority and Ashby USA, LLC. "Joint Community Facilities Agreements" means, collectively, the Joint Community Facilities Agreement — County and the Joint Community Facilities Agreement — Flood Control. "Payment Request" means a document, substantially in the form of Exhibit C hereto, to be used by RVR in requesting payment of a Purchase Price. "Plans" means the plans, specifications, schedules and related construction contracts for the Facilities and/or any Discrete Components thereof approved pursuant to the applicable standards of the City or other entity that will own, operate or maintain the Facilities when completed and acquired. As of the date of this Acquisition Agreement, the City standards for construction incorporate those set forth in the Green Book, Standard Specifications for Public Works Construction (SSPWC), adopted by Public Works Standards, Inc., as modified by any applicable City Special Provisions. "Purchase Price" means the amount paid by the Authority for a Facility and/or any Discrete Components thereof determined in accordance with Article V hereof, being an amount equal to the Actual Cost of such Facility or Discrete Component, but subject to the limitations and reductions provided for in Article V. "Risk Manager" shall mean the person acting in the capacity of Risk Manager for the City. "RVR" means Roripaugh Valley Restoration, LLC, a Delaware limited liability company, and its successors and assigns to the extent permitted under Section 10.07 hereof. "State" means the State of California. "Supplement" means a written document amending, supplementing or otherwise modifying this Acquisition Agreement and any exhibit hereto, including any amendments to the list of Facilities and Discrete Components in Exhibit B, and/or the addition to Exhibit B of additional Facilities (and Discrete Components) to be financed with the proceeds of the Bonds deposited in the Improvement Fund. "2005 CFD" means the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch), created by the Board of Directors of the Authority under the Act. -4- "2016 CFD" means the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), created by the Board of Directors of the Authority under the Act. ARTICLE II RECITALS Section 2.01. The CFDs. The Board of Directors of the Authority has established the CFDs under the Act for the financing of, among other things, the acquisition, construction and installation of public facilities identified in the proceedings to form the respective CFDs, which include the Facilities listed in Exhibit A hereto. Section 2.02. The Development. RVR, together with other entities, is developing land located within the 2016 CFD. Section 2.03. The Facilities. The Facilities are within or in the vicinity of the 2016 CFD, and the Authority and RVR will benefit from a coordinated plan of design, engineering and construction of the Facilities and the development of the land that is located within the 2016 CFD. RVR acknowledges that the inclusion of Facilities in Exhibit A hereto in no way, in itself, obligates the Authority to use any funds in the respective Improvement Funds to finance the Facilities or implies that the Authority has in any way engaged RVR to construct the Facilities, except as specifically provided in this Acquisition Agreement. The Facilities which are the subject of acquisition from RVR under this Acquisition Agreement are only the Facilities listed in Exhibit B hereto, as such Exhibit may be amended and/or supplemented by any Supplement; however, this Acquisition Agreement shall in no way, by itself, obligate RVR to construct any of the Facilities. Section 2.04. The Financing. RVR and the Authority wish to finance the acquisition, construction and installation of some of the Facilities and the payment therefor by entering into this Acquisition Agreement for the acquisition of the Facilities and payment for Discrete Components thereof as shown in Exhibit B hereto (as it may be amended and supplemented) with funds deposited to the Improvement Funds. Section 2.05. The Bonds. The Authority is proceeding with the authorization and issuance of the first series of the Bonds for the 2016 CFD under the Act and the Fiscal Agent Agreement for the 2016 CFD, the proceeds of which Bonds shall be used, in part, to finance the acquisition of all or a portion of the Facilities. The execution by the Authority of this Acquisition Agreement in no way obligates the Authority to issue any Bonds, or the City to acquire any Facilities financed with proceeds of any Bonds issued, except the Facilities listed in Exhibit B hereto which are to be acquired subject to the terms and conditions set forth in this Agreement. Section 2.06. No Advantage to Authority Construction. The Authority, by its approval of this Acquisition Agreement, has determined that it will obtain no advantage from undertaking the construction by the Authority directly of the Facilities (other than the completion or construction, as applicable, of the City Improvements), and that the provisions of this Acquisition Agreement require that any Facilities or Discrete Components thereof to be constructed by RVR be so constructed by RVR as if they had been constructed under the direction and supervision of the Authority. RVR hereby represents that it has experience in the supervision of the construction of public facilities of the character of the Facilities. -5- Section 2.07. Agreements. In consideration of the mutual promises and covenants set forth herein, and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Authority and RVR agree that the foregoing recitals, as applicable to each, are true and correct and further make the agreements set forth herein. Section 2.08. Modifications to Conditions to Approval. The Development Agreement and the Specific Plan referred to in the definition Conditions of Approval in Section 1.01 provide that the issuance of building permits for the land located within the 2016 CFD are conditioned upon the completion of design and construction of certain public improvements, some of which are included as part of the Facilities. The Third Amendment to the Development Agreement and Amendment No. 2 to the Specific Plan referred to in the definition Conditions of Approval in Section 2.08 modified the schedule and building permit "trigger points" or "building permit thresholds" for various public improvements related to development of the land in the 2016 CFD (the "Amendments"). It is hereby acknowledged that the Amendments were adopted by the City to modify the infrastructure implementation schedule to create a more cost effective and efficient construction schedule based on current market conditions. ARTICLE III FUNDING Section 3.01. Authority Proceedings. The Authority shall conduct all necessary proceedings under the Act for the issuance, sale and delivery of the Bonds for the 2016 CFD; provided, however, that nothing herein shall be construed as requiring the Authority to issue any of the Bonds for the 2016 CFD. Upon the written request of RVR, RVR and the Authority staff shall meet regarding the amount, timing and other material aspects of the Bonds for the 2016 CFD, but the legal proceedings and the principal amount, interest rates, terms and conditions and timing of the sale of the Bonds for the 2016 CFD shall be in all respects subject to the approval of the Board of Directors of the Authority. Section 3.02. Bonds. The Authority, in connection with this Acquisition Agreement, is proceeding with the issuance and delivery of the Bonds for the 2016 CFD. The Authority shall not be obligated to pay the Purchase Price of the Facilities or any Discrete Components thereof except from amounts on deposit in the Improvement Funds for the CFDs on or after the closing date for the first series of the Bonds for the 2016 CFD. The Authority makes no warranty, express or implied, that the proceeds of the Bonds deposited and held in the Improvement Fund, and any investment earnings thereon deposited to the Improvement Fund, will be sufficient for payment of the Purchase Price of all of the Facilities. RVR agrees to assist the Authority in the preparation of any disclosure document or continuing disclosure agreement deemed necessary by the Authority to issue the Bonds, including but not limited to the submission of information reasonably requested by the Authority's disclosure counsel, any appraiser or any market absorption consultant in connection with the preparation of disclosure materials for the sale of the Bonds, and the provision of such continuing disclosure obligations, certifications and legal opinions as may be reasonably required by the underwriter of the Bonds. Section 3.03. Bond Proceeds. The proceeds of each series of the Bonds shall be deposited, held, invested, reinvested and disbursed as provided in the Fiscal Agent Agreement -6- for the respective series of the Bonds. A portion of the proceeds of the Bonds for the 2016 CFD and amounts transferred from the improvement fund and the reserve fund established with proceeds of the 2005 CFD 2006 Special Tax Bonds will be set aside under the Fiscal Agent Agreements in the Improvement Fund established under the related Fiscal Agent Agreement. Moneys in the Improvement Funds shall be withdrawn therefrom in accordance with the provisions of the applicable Fiscal Agent Agreement and the provisions hereof for payment of all or a portion of the costs of construction and/or acquisition of the Facilities (including payment of the Purchase Price of Discrete Components thereof), all as herein provided. It is hereby acknowledged that the proceeds of the sale of the first series of the Bonds for the 2016 CFD and amounts transferred from the improvement fund and the reserve fund established with proceeds of the 2005 CFD 2006 Special Tax Bonds are not expected to be sufficient to fund all of the uncompleted improvements that the CFDs are authorized to finance. Accordingly, available 2016 CFD Bond proceeds and amounts transferred from the improvement fund and the reserve fund established with proceeds of the 2005 CFD 2006 Special Tax Bonds will be used by the Authority as necessary to fund the following facilities (as identified by reference to the first column in Exhibit D hereto) in the following order, with each facility of a higher order to be fully funded before such amounts are used to fund a facility lower in the order hereafter expressed: (i) 1 a and 1 b, (ii) 4, (iii) 2a, 2b, 2c, and (iv) 3. Notwithstanding the foregoing, however, amounts in the Improvement Fund established under the Fiscal Agent Agreement for the 2005 CFD shall in any event first be used to finance Facilities 1 a, 1 b and 4, which are subject to the Joint Community Facilities Agreements. RVR agrees that the Authority alone shall direct the investment of the funds on deposit in the funds and accounts established by or pursuant to the Fiscal Agent Agreements, including the respective Improvement Funds, and that RVR has no right whatsoever to direct investments under the Fiscal Agent Agreements. The Authority shall have no responsibility whatsoever to RVR with respect to any investment of funds made by the Fiscal Agent under the Fiscal Agent Agreements, including any loss of all or a portion of the principal invested or any penalty for liquidation of an investment. Any such loss may diminish the amounts available in the Improvement Funds to pay the Purchase Price of Facilities and Discrete Components hereunder. RVR further acknowledges that the obligation of any owner of real property in either of the CFDs, including RVR to the extent it owns any real property in the 2016 CFD, to pay special taxes levied in the respective CFD is not in any way dependent on: (i) the availability of amounts in the Improvement Funds to pay for all or any portion of the Facilities or Discrete Components thereof hereunder, or (ii) the alleged or actual misconduct of the Authority in the performance of its obligations under this Acquisition Agreement, the Fiscal Agent Agreements, any developer agreement or amendment thereto or any other agreement to which RVR and the City or the Authority are signatories. RVR acknowledges that any lack of availability of amounts in the Improvement Funds to pay the Purchase Price of Facilities or any Discrete Components thereof shall in no way diminish any obligation of RVR with respect to the construction of or contributions for public facilities required by this Acquisition Agreement or any development or other agreement to which RVR is a party, or any governmental approval to which RVR or any land within the CFDs is subject. Section 3.04. City Election to Construct Facilities. A. City Option to Construct. Notwithstanding any provision of this Acquisition Agreement to the contrary, the City has advised the Authority that it will construct, or finish the construction of, the Facilities described in Exhibit E, and referred to in this Acquisition Agreement as the "City Improvements." In the -7- event that RVR falls more than 90 days behind the schedule for the construction of the Facilities that are not City Improvements set forth in Exhibit F, other than by reason of the occurrence of one or more of the events described in Section 9.04, the City may, in its sole and absolute discretion, by written notice to the Authority and RVR, determine that it will construct, or finish the construction of, any of the other Facilities (not presently included on Exhibit E) authorized to be funded by the CFDs. Any Facilities described in any such notice shall constitute additional City Improvements under this Acquisition Agreement. The City has represented that it will use reasonable diligence to complete all of the City Improvements, so long as there are sufficient funds available in the Improvement Funds to pay the costs thereof. B. No Further RVR Activities; Payments to RVR. As soon as practicable following receipt of any written notice from the City described in the second sentence of Section 3.04A, RVR shall cease any further acquisition or construction activities related to any Facilities in any such notice that the City has determined to construct or complete, except that RVR shall promptly complete any work in progress subject to any contracts theretofore awarded for work related to such Facilities and RVR shall complete any other tasks necessary for the City to obtain the value of the work performed (as directed by the Director of Public Works in writing to RVR). The Authority shall process Payment Requests related to any City Improvements submitted by RVR under the provisions of this Acquisition Agreement, for work completed prior to the effective date of this Acquisition Agreement (with respect to City Improvements described in Exhibit E) or prior to the termination of work as described in the preceding sentence (with respect to any City Improvements designated by the City following the effective date of this Acquisition Agreement). The Authority will pay the Purchase Price of any Facilities (and any related Discrete Components) that have become City Improvements in accordance with the provisions of this Acquisition Agreement, but payment will be made for any partially completed Facility or Discrete Component only to the extent that the Director of Public Works determines that the work done by RVR provided value (or, with respect to grading work, the grading work has been returned to an acceptable condition), and RVR cooperates with the City as reasonably requested in connection with the construction of such City Improvement. For example, it is not expected that the Authority will pay for a "rough grading" Discrete Component if the work done has eroded to the point where significant remedial grading is necessary to place the land in the same condition as it was when the rough grading had initially been completed, unless such remedial grading has been completed by RVR to the satisfaction of the Director of Public Works. RVR agrees to cooperate with the City in connection with the completion of the City Improvements, as reasonably requested by the City; and, at its own expense, to bring the Facilities or Discrete Components which it has previously completed (including grading) into a condition acceptable for acquisition as determined by the Director of Public Works. The City shall be entitled to use amounts in the Improvement Funds to bring any such Facilities and Discrete Components into an acceptable condition if RVR fails to do so. C. Reservation of Funds; Agreement for City Improvements. The Authority shall withhold in the Improvement Funds sufficient funds to pay the estimated costs of the City Improvements, as determined by the City from time to time. The City has determined, as of the effective date of this Acquisition Agreement, that the amounts shown in Exhibit E hereto are the estimated costs for the City Improvements listed in Exhibit E. The City, by written notice to the Authority and RVR, may increase or decrease the amount to be withheld in the Improvement Funds for such City Improvements if it determines, in its sole and absolute judgment, that the costs of the City Improvements have changed, and the City may from time to time designate additional funds to be withheld in the Improvement Funds in connection with the designation of additional City Improvements as described in Section 3.04A. Any amounts in the Improvement Funds to be withheld as described in this Section 3.04C shall not be available to pay the Purchase Price of -8- Facilities or Discrete Components under the provisions of Article V of this Acquisition Agreement. Upon receipt of a written request of the Director of Public Works requesting payment for costs related to a City Improvement, the Authority shall cause funds to be withdrawn from the Improvement Funds to satisfy such request, and the amount so withdrawn shall reduce any related funds withheld for the related City Improvement described in the preceding paragraph. D. No Liability for City Improvements. While the City has advised the Authority that it expects to use reasonable diligence to complete the City Improvements, the City shall have no liability or obligation whatsoever to RVR or any other person or entity with respect to the City Improvements or the construction thereof. Section 3.05. Refunding Bonds. The Authority may, in its sole and absolute discretion, determine at any time to issue bonds the net proceeds of which are used to refund any outstanding Bonds (the term "refund" as used in this sentence, and the term "refunding" as used in the next sentence, includes any purchase in lieu of redemption of any Bonds). RVR shall have no right whatsoever in connection with any such refunding bond issue, including but not limited to any right to any reduction in special taxes levied or to be levied by the CFD, or to any additional funds whether pursuant to this Acquisition Agreement or otherwise as a consequence of any such refunding. ARTICLE IV CONSTRUCTION OF FACILITIES Section 4.01. Plans. RVR shall obtain the written approval of the Plans to be prepared for the Facilities listed in Exhibit B in accordance with applicable ordinances and regulations of the City and/or the public entity that will own and operate the Facilities. Copies of all Plans shall be provided by RVR to the Director of Public Works upon request therefor, and, in any event, as built drawings and a written assignment of the Plans for any Facility listed in Exhibit B shall be provided to the City prior to its acceptance of the Facility. Section 4.02. Construction of Facilities. All Facilities to be acquired hereunder specified in Exhibit B hereto, as amended from time to time, shall be constructed by or at the direction of RVR in accordance with the approved Plans and the Conditions of Approval. RVR shall perform all of its obligations hereunder and shall conduct all operations with respect to the construction of Facilities in a good, workmanlike and commercially reasonable manner, with the standard of diligence and care normally employed by duly qualified persons utilizing their best efforts in the performance of comparable work and in accordance with generally accepted practices appropriate to the activities undertaken. RVR shall require that each general contractor performing work in connection with the Facilities (and any Discrete Components thereof) employ at all times adequate staff or consultants with the requisite experience necessary to administer and coordinate all work related to the design, engineering, acquisition, construction and installation of the Facilities to be acquired from RVR hereunder. RVR shall at all times have adequate staff or consultants with the requisite experience and licenses to discharge its obligations under this Acquisition Agreement. As a condition to the acquisition of the Facilities to be completed by RVR, RVR shall: (i) construct and cause conveyance to the City (or other applicable governmental agency) all -9- Facilities and Discrete Components thereof listed in Exhibit B hereto in accordance with the provisions of this Acquisition Agreement and the Conditions of Approval, and (ii) use its own funds to pay all costs thereof in excess of the Purchase Prices thereof to be paid therefor hereunder, except as may otherwise expressly provided in the Conditions of Approval. RVR hereby acknowledges that (i) because of the limitations imposed by Section 5.06 hereof, the Purchase Price for any Discrete Component or Facility may be Tess than the Actual Cost, or cost to RVR, of such Discrete Component or Facility, and (ii) there may be insufficient funds in the Improvement Funds to pay the Purchase Prices of all of the City Improvements and the Facilities listed in Exhibit B, and, in any event, this Acquisition Agreement shall not affect any obligation of any owner of land in the CFD under the Conditions of Approval with respect to the public improvements required in connection with the development of the land within the 2016 CFD. Section 4.03. Relationship to Public Works; Bidding Requirements. The following shall apply to all contracts applicable to the Facilities and any Discrete Components thereof acquired with funds withdrawn from the Improvement Fund: A. General. This Acquisition Agreement is for the acquisition of the Facilities and payment for Discrete Components thereof listed in Exhibit B hereto from moneys in the Improvement Funds and is not intended to be a public works contract. The Authority and RVR agree that the Facilities are of local, and not state-wide concern, and that the provisions of the California Public Contract Code shall not apply to the construction of the Facilities. The Authority and RVR agree that RVR shall award all contracts for the construction of the Facilities and the Discrete Components thereof listed in Exhibit B hereto and that this Acquisition Agreement is necessary to assure the timely and satisfactory completion of such Facilities and that compliance with the Public Contract Code with respect to such Facilities would work an incongruity and would not produce an advantage to the Authority or the CFD. RVR acknowledges that State prevailing wage laws apply to any contracts and any subcontracts for the construction of the Facilities, and that it shall at all times assure compliance with Section 8.01 G. hereof. B. Bidding Procedures. Notwithstanding the foregoing, RVR shall award all contracts for construction of the Facilities and any Discrete Components thereof listed in Exhibit B, and materials related thereto, by means of a bid process consistent with this Section 4.03 B. or otherwise acceptable to the Director of Public Works, in each case consistent with applicable City regulations. RVR shall establish a list of written criteria acceptable to the Director of Public Works (including experience, ability to perform on schedule and financial ability) to determine qualified contractors for any contract. Such general contractors shall comply with any applicable City regulations. Formal bids shall be requested from those entities on the list of qualified contractors. RVR shall prepare bid packages, including engineering reports and estimates, for each of the Facilities (or any specific Discrete Components thereof to be separately bid), and shall submit such packages to the Director of Public Works, reasonably in advance of the anticipated bid, for review. Upon agreement by the Director of Public Works and RVR on the content of such bid packages and a schedule of bid prices, plus an acceptable margin of variance, RVR may proceed to take bids on the applicable Facilities (or Discrete Components). At the reasonable request of RVR, the Director of Public Works shall also meet with the qualified general contractors to discuss the requirements of the particular contract to be bid. -10- Bids for each Facility or Discrete Component shall be submitted to the Director of Public Works prior to the time and date prescribed for bid opening. If a bid is within the constraints of the approved bid package, RVR shall award the applicable contract to the lowest responsible bidder; provided, however, that RVR shall have the right to reject all bids and to rebid the work for any Facility or Discrete Component. If all bids are in excess of the bid parameters, RVR shall obtain the consent of the Director of Public Works prior to awarding the contract. Upon written request of the Director of Public Works, RVR shall provide an analysis of bids for construction and materials for the Facilities or applicable Discrete Components, indicating how the winning bid was determined and how it was consistent with the applicable bid package. RVR shall promptly publish notice of the award of any contract in such paper as the Director of Public Works shall specify. C. Facilities Subject to Joint Community Facilities Agreement. RVR acknowledges that the construction of the Facilities identified as items 1 a, 1 b and 4 in the first column of Exhibit D hereto are subject to, in addition to any applicable requirements of this Acquisition Agreement, the provisions of the applicable Joint Community Facilities Agreement, and RVR agrees to comply with all applicable provisions of the Joint Community Facilities Agreements in connection with such construction. The Authority and the City acknowledge that funds in the Improvement Fund established under the Fiscal Agent Agreement for the 2005 CFD are to be used for payment of the costs of such Facilities in accordance with this Acquisition Agreement and the Joint Community Facilities Agreements. D. Scheduling. RVR has provided the pro forma schedule set forth in Exhibit E for the construction of the Facilities described in Exhibit B to be acquired hereunder. RVR shall provide the Director of Public Works with any updates or revisions to the schedule for the Director's review and approval. Neither the City nor the Developer shall incur any liability for such parties failure to achieve the completion of the Facilities as shown in such schedule and any updates or revisions thereto and, as provided in Section 4.07, such failure shall not in itself constitute a breach by RVR of the terms of this Acquisition Agreement; however, the foregoing shall in no way abrogate the City's rights under Section 3.04. E. Periodic Meetings. From time to time (expected to be at least every two weeks) at the request of the Director of Public Works, representatives of RVR shall meet and confer with City staff, consultants and contractors regarding matters arising hereunder with respect to the Facilities, Discrete Components and the progress in constructing and acquiring the same, and as to any other matter related to the Facilities or this Acquisition Agreement. RVR shall advise the Director of Public Works in advance of any coordination and scheduling meetings to be held with contractors relating to the Facilities, in the ordinary course of performance of an individual contract. The Director of Public Works or the Director of Public Work's designated representative shall have the right to be present at such meetings, and to meet and confer with individual contractors if deemed advisable by the Director of Public Works to resolve disputes and/or ensure the proper completion of the Facilities. Section 4.04. Independent Contractor; No Joint Venture. In performing this Acquisition Agreement, RVR is an independent contractor and not the agent or employee of the Authority, the City or the CFD. None of the Authority, the City or the CFD shall be responsible -11- for making any payments directly or otherwise to any contractor, subcontractor, agent, consultant, employee or supplier of RVR. RVR hereby acknowledges and agrees that the City, the Authority and the CFD, on the one hand, and RVR, on the other, are not joint venturers or partners in the construction, acquisition, and/or installation of the Facilities or the Discrete Components, and nothing in this Acquisition Agreement shall be construed as implying any sort of joint venture or partnership relationship between the City, Authority and/or the CFD, and RVR or any other entity involved in the construction, acquisition and/or installation of any of the Facilities of Discrete Components. Section 4.05. Performance and Payment Bonds. RVR agrees to comply with all applicable performance and payment bonding requirements of the Authority (and other applicable public entities and/or public utilities) with respect to the construction of the Facilities listed in Exhibit B hereto. Performance and payment bonds shall not be required of RVR to the extent moneys are available in the Improvement Fund to pay the Purchase Price of a Facility (and consistent with the Budgeted Costs therefore shown in Exhibit B and the limitations expressed in Section 5.06 hereof); provided that all contractors and/or subcontractors employed by RVR in connection with the construction of Facilities shall provide a labor and materials and performance bonds which name the Authority and the City as additional insureds. The Authority acknowledges that the City has separately agreed in certain of the Conditions of Approval that amounts in the Improvement Funds, to the extent of such amounts, may be used to satisfy requirements to post letters of credit to secure payment of the costs of construction of certain of the Facilities. Section 4.06. Contracts and Change Orders. RVR shall be responsible for entering into all contracts and any supplemental agreements (commonly referred to as "change orders") required for the construction of the Facilities listed in Exhibit B hereto, as amended from time to time, and all such contracts and supplemental agreements shall be submitted to the Director of Public Works. Prior approval of supplemental agreements by the Director of Public Works shall only be required for such change orders which in any way materially alter the quality or character of the subject Facilities, or which involve an amount greater than $25,000.00. The Authority expects that such contracts and supplemental agreements needing prior approval by the Director of Public Works will be approved or denied (any such denial to be in writing, stating the reasons for denial and the actions, if any, that can be taken to obtain later approval) within ten (10) business days of receipt by the Director of Public Works thereof. Any approval by the Director of Public Works of a supplemental agreement shall in no way affect the Budgeted Costs listed in Exhibit B for any related Facility or Discrete Component, but to the extent that it increases the Actual Cost of a Facility or Discrete Component, such increased cost may be payable as part of the Purchase Price of the related Facility or Discrete Component as provided in Section 5.06A. hereof. Section 4.07. Time for Completion. RVR agrees that this Acquisition Agreement is for the benefit of the Authority and RVR and, therefore, RVR represents that it expects to complete the Facilities and to have requested payment for the Facilities (other than the City Improvements) under this Acquisition Agreement in accordance with the schedule in Exhibit E. Any failure to complete the Facilities consistent with such schedule shall not, however, in itself, constitute a breach by RVR of the terms of this Acquisition Agreement, but may give rise to rights of the City described in Section 3.04 and shall not in any event relieve RVR from complying with the Conditions of Approval. -12- ARTICLE V ACQUISITION AND PAYMENT Section 5.01. Inspection. No payment hereunder shall be made by the Authority to RVR for a Facility or Discrete Component thereof until the Facility or Discrete Component thereof has been inspected and found to be completed in accordance with the approved Plans by the City or other applicable public entity or utility. The Authority shall cause the City to make periodic site inspections of the Facilities to be acquired hereunder; provided that in no event shall the Authority incur any liability for any delay in the inspection of any Facilities or Discrete Components. For Facilities to be acquired by other public entities or utilities, RVR shall be responsible for obtaining such inspections and providing written evidence thereof to the Director of Public Works. RVR agrees to pay all inspection, permit and other similar fees of the City applicable to construction of the Facilities and any Discrete Components thereof, subject to reimbursement therefor as an Actual Cost of the related Facility or Discrete Component. Section 5.02. Agreement to Sell and Purchase Facilities. RVR hereby agrees to sell the Facilities listed in Exhibit B hereto to the City (or other applicable public agency that will own a Facility), and the Authority hereby agrees to use amounts in the Improvement Funds to pay the Purchase Prices thereof to RVR, subject to the terms and conditions hereof. The Authority shall not be obligated to finance the purchase of any Facility until the Facility is completed and the Acceptance Date for such Facility has occurred; provided that the Authority has agreed hereunder to make payments to RVR for certain Discrete Components of Facilities expressly shown in Exhibit B hereto, as it may be supplemented by any Supplement. RVR acknowledges that the Discrete Components have been identified for payment purposes only, and that the City (or other applicable public agency that will own a Facility) shall not accept a Facility of which a Discrete Component is a part until the entire Facility has been completed. The Authority acknowledges that the Discrete Components do not have to be accepted by the City (or other applicable public agency that will own a Facility) as a condition precedent to the payment of the Purchase Price therefor, but any such payment shall not be made until the Discrete Component has been completed in accordance with the Plans therefor, as determined by the Director of Public Works. In any event, the Authority shall not be obligated to pay the Purchase Price for any Facility or Discrete Component except from the moneys in the Improvement Fund. Section 5.03. Payment Requests. In order to receive the Purchase Price for a completed Facility or Discrete Component, inspection thereof under Section 5.01 shall have been made and RVR shall deliver to the Director of Public Works: (i) a Payment Request in the form of Exhibit C hereto for such Facility or Discrete Component, together with all attachments and exhibits required by Exhibit C and this Section 5.03 to be included therewith (including, but not limited to Attachments 1 and 2 to Exhibit C), and (ii) if payment is requested for a completed Facility, (a) if the property on which the Facility is located is not owned by the City (or other applicable public agency that will own the Facility) at the time of the request, a copy of the recorded documents conveying to the City (or other applicable public agency that will own the Facility) Acceptable Title to the real property on, in or over which such Facility is located, as described in Section 6.01 hereof, (b) a copy of the recorded notice of completion of such Facility (if applicable), (c) to the extent paid for with the proceeds of the Bonds, an assignment to the CFD of any reimbursements that may be payable with respect to the Facility, such as public or private utility reimbursements, and (d) an assignment of the warranties and guaranties for such Facility, as described in Section 6.05 hereof, in a form acceptable to the Authority. -13- Section 5.04. Processing Payment Requests. Upon receipt of a Payment Request (and all accompanying documentation), the Director of Public Works shall conduct a review in order to confirm that such request is complete, that such Discrete Component or Facility identified therein was constructed in accordance with the Plans therefor, and to verify and approve the Actual Cost of such Discrete Component or Facility specified in such Payment Request. The Director of Public Works shall also conduct such review as is required in his discretion to confirm the matters certified in the Payment Request. RVR agrees to cooperate with the Director of Public Works in conducting each such review and to provide the Director of Public Works with such additional information and documentation as is reasonably necessary for the Director of Public Works to conclude each such review. For any Facilities to be acquired by another public entity or utility, RVR shall provide evidence acceptable to the Director of Public Works that such Facilities are acceptable to such entity or utility. Within ten (10) business days of receipt of any Payment Request, the Director of Public Works expects to review the request for completeness and notify RVR whether such Payment Request is complete, and, if not, what additional documentation must be provided. If such Payment Request is complete, the Director of Public Works expects to provide a written approval or denial (specifying the reason for any denial) of the request within 30 days of its submittal. If a Payment Request seeking reimbursement for more than one Facility or Discrete Component is denied, the Director of Public Works shall state whether the Payment Request is nevertheless approved and complete for any one or more Facilities or Discrete Components and any such Facilities or Discrete Components shall be processed for payment under Section 5.05 notwithstanding such partial denial. If multiple payment requests are submitted simultaneously, RVR shall designate the order in which they are to be reviewed. Section 5.05. Payment. Upon approval of the Payment Request by the Director of Public Works, the Director of Public Works shall sign the Payment Request and forward the same to the City's Director of Finance. Upon receipt of the reviewed and fully signed Payment Request, the City's Director of Finance shall, within the then current City financial accounting payment cycle but in any event within thirty (30) days of receipt of the approved Payment Request, cause the same to be paid by the Fiscal Agent to the extent of funds then on deposit in the Improvement Funds. Any approved Payment Request not paid due to an insufficiency of funds in the Improvement Funds, shall be paid promptly following the deposit into an Improvement Fund of proceeds of any investment earnings or other amounts transferred to an Improvement Fund under the terms of the applicable Fiscal Agent Agreement. The parties hereto acknowledge that (i) RVR may be constructing Facilities and Discrete Components prior to the issuance of Bonds for the 2016 CFD, (ii) RVR may be submitting Payment Requests to the City in advance of such an issuance of Bonds for the 2016 CFD, with knowledge that there will not be funds available in the Improvement Funds for reimbursement until the Bonds for the 2016 CFD are issued, (iii) the Facilities and Discrete Components that are the subject of the Payment Requests submitted when there are no funds or insufficient funds in the Improvement Funds will be inspected and reviewed by the Director of Public Works as set forth in this Article V and that such Payment Requests will be reviewed by the Director of Public Works and, if appropriate, submitted in the manner set forth in Sections 5.03, 5.04 and 5.05, and (iv) the payment for any Payment Requests approved in the preceding manner will be deferred until the date, if any, on which there are sufficient amounts in the Improvement Funds to make such payment, at which time the Director of Public Works will forward the approved Payment Requests to the City's Director of Finance, who will then arrange for payment from the Fiscal Agent in the manner set forth above. -14- The Purchase Price paid hereunder for any Facility or Discrete Component shall constitute payment in full for such Facility or Discrete Component, including, without limitation, payment for all labor, materials, equipment, tools and services used or incorporated in the work, supervision, administration, overhead, expenses and any and all other things required, furnished or incurred for completion of such Facility or Discrete Component, as specified in the Plans. Section 5.06. Restrictions on Payments. Notwithstanding any other provisions of this Acquisition Agreement, the following restrictions shall apply to any payments made to RVR under Sections 5.02 and 5.05 hereof: A. Amounts of Payments. Subject to the following paragraphs of this Section 5.06, payments for each Discrete Component or Facility will be made only in the amount of the Purchase Price for the respective Discrete Component or Facility; however, if the Actual Cost exceeds the Budgeted Cost for a Discrete Component or a Facility, the excess shall be borne by RVR until such time as a Budgeted Cost for another Discrete Component or Facility is greater than the Actual Cost therefore, in which event the savings shall be applied to reduce any excess of Actual Cost over Budgeted Cost previously paid for any Facility or Discrete Component by RVR. Any savings attributable to the Actual Cost being less than Budgeted Cost which are not disbursed under the previous sentence to cover unreimbursed Actual Costs or as otherwise consented to by RVR shall be carried forward to be credited against future cost overruns, or costs related to supplemental agreements (change orders), or if not needed for either of the foregoing purposes, to be disposed of as provided in the applicable Fiscal Agent Agreement for excess monies in the related Improvement Fund. Nothing herein shall require the Authority in any event (i) to pay more than the Actual Cost of a Facility or Discrete Component, (ii) to make any payment beyond the available funds in the Improvement Funds, or (iii) to pay for any roadway improvements that are not generally accessible to the public (i.e. behind gates that impede the free flow of traffic). The parties hereto acknowledge and agree that all payments to RVR for the Purchase Prices of Facilities or Discrete Components are intended to be reimbursements to RVR for monies already expended or for immediate payment by RVR (or directly by the Authority) to third parties in respect of such Facilities and/or Discrete Components. No payment shall be made for the Purchase Price of any Discrete Component if (i) RVR fails to fully provide any information requested pursuant to the second sentence of Section 8.01G. related thereto, or (ii) if the Authority or the City determines that the provisions of Section 8.01G. hereof were violated in connection with the work related to such Discrete Component and such violation has not been remedied to the satisfaction of the City Attorney. B. Joint or Third Party Payments. The Authority may make any payment jointly to RVR and any mortgagee or trust deed beneficiary, contractor or supplier of materials, as their interests may appear, or solely to any such third party, if RVR so requests the same in writing (including, but not limited to, any financial institution providing financing to RVR or any Affiliate thereof) or as the Authority otherwise determines such joint or third party payment is necessary to obtain lien releases. -15- Notwithstanding the foregoing, in the event that the City, the CFD and/or the Authority has been in any way threatened with legal action or named in any legal action by any contractor, subcontractor, supplier or other entity that has, or allegedly has, provided any labor or materials for any Facility or Discrete Component for which RVR has submitted a payment request, unless and until RVR provides an unqualified lien release from each such entity in a form acceptable to the City Attorney, the Authority, at its sole and exclusive option, may either: (i) require the filing of an interpleader or similar action in Superior Court with respect to payments for such Facility or Discrete Component and make payment to an escrow subject to approval of disbursement by the Court; or (ii) make payments directly to the entity or entities that have filed liens or as otherwise demonstrated to the reasonable satisfaction of the City Attorney that they are owed amounts in respect of the respective Facility or District Components, up to the amount of such lien or amount owed. The provisions of this Section 5.06C. shall prevail over any assignment, or purported assignment, by RVR of its rights to payment under this Acquisition Agreement. C. Withholding Payments. The Authority shall be entitled, but shall not be required, to withhold any payment hereunder for a Discrete Component or a Facility if RVR or any Affiliate is delinquent in the payment of ad valorem real property taxes, special assessments or taxes, or special taxes in each case as levied on property located in the 2016 CFD. In the event of any such delinquency, the Authority shall only make payments hereunder, should any be made at the Authority's sole discretion, directly to contractors or other third parties employed in connection with the construction of the Facilities or to any assignee of RVR's interests in this Acquisition Agreement (and not to RVR or any Affiliate), until such time as RVR provides the Director of Public Works with evidence that all such delinquent taxes and assessments have been paid. The Authority shall withhold payment for any Discrete Component or Facility (i) constituting land or an interest in land, or (ii) constructed on land not previously dedicated or otherwise conveyed to the City, until Acceptable Title to such land is conveyed to the City or other public entity that will own the respective Facility, as described in Article VI hereof. The Authority shall withhold payment for any Facility or Discrete Component identified as a Priority B item in Exhibit D hereto until the Director of Public Works has determined that all costs of (i) the City Improvements, and (ii) items identified as Priority A in Exhibit D, in each case have been paid in full. The Authority shall be entitled to withhold any payment hereunder for a Discrete Component that is the subject of a Payment Request until it is satisfied that any and all claims for labor and materials have been paid by RVR for the Discrete Component that is the subject of a Payment Request, or conditional lien releases have been provided by RVR for such Discrete Component. The Authority, in its discretion, may waive this limitation upon the provision by RVR of sureties, undertakings, securities and/or bonds of RVR or appropriate contractors or subcontractors and deemed satisfactory by the Director of Public Works to assure payment of such claims. The Authority shall be entitled to withhold payment for any Facility hereunder to be owned by the City (or the final Discrete Component of any such Facility) until: (i) the Director of Public Works determines that the Facility is ready for its intended use, (ii) the -16- Acceptance Date for the Facility has occurred and the requirements of Section 6.01, if applicable to such Facility, have been satisfied, and (iii) a Notice of Completion executed by RVR, in a form acceptable to the Director of Public Works, has been recorded for the Facility and general lien releases conditioned solely upon payment from the proceeds of the Bonds to be used to acquire such Facility (or final Discrete Component) have been submitted to the Director of Public Works for the Facility. The Authority hereby agrees that RVR shall have the right to post or cause the appropriate contractor or subcontractor to post a bond with the City to indemnify it for any losses sustained by the City or the Authority because of any liens that may exist at the time of acceptance of such a Facility, so long as such bond is drawn on an obligor and is otherwise in a form acceptable to the Director of Public Works. The Authority shall be entitled to withhold payment for any Facility (or the final Discrete Component of any such Facility) to be owned by other governmental entities, until RVR provides the Director of Public Works with evidence that the governmental entity has accepted dedication of and/or title to the Facility. If the Director of Public Works determines that a Facility is not ready for intended use under (i) above, the Director of Public Works shall so notify RVR as soon as reasonably practicable in writing specifying the reason(s) therefor. Nothing in this Acquisition Agreement shall be deemed to prohibit RVR from contesting in good faith the validity or amount of any mechanics or materialmans lien nor limit the remedies available to RVR with respect thereto so long as such delay in performance shall not subject the Facilities or any Discrete Component thereof to foreclosure, forfeiture or sale. In the event that any such lien is contested, RVR shall only be required to post or cause the delivery of a bond in an amount equal to twice the amount in dispute with respect to any such contested lien, so long as such bond is drawn on an obligor and is otherwise in a form acceptable to the Director of Public Works. D. Retention. The Authority shall withhold in the Improvement Funds: (i) the amount determined by the Director of Public Works as necessary to complete any City Improvements, which amount, as of the date of execution of this Acquisition Agreement, is as shown in Exhibit E hereto, but may be adjusted from time to time by the Director of Public Works upon written notice to RVR to the effect that the costs of the City Improvements have increased or decreased, as applicable, from what had previously been estimated by the Director of Public Works, and the amount of any such increase or decrease; or additional Facilities or Discrete Components have become City Improvements as described in Section 3.03, and the estimated costs of any such additional City Improvements; (ii) as reasonably determined by the City to be necessary to assure compliance with the provisions of the second paragraph of Section 3.03; and (iii) an amount equal to ten percent (10%) of the Purchase Price of each Facility or Discrete Component (not constituting City Improvements) to be paid hereunder. Any such retention described in clause (i) of the preceding sentence with respect to a specific City Improvement will be released, and the amount released will be available to make payments for Facilities and Discrete Components under this Acquisition Agreement, upon a determination by the Director of Public Works that all costs related to the respective City Improvement have been paid in full, with the amount so released to be the amount of the applicable retention less all costs related to the respective City Improvements. Any such retention described in clause (iii) of the first sentence of this Section 5.06D will be released to RVR upon final completion and acceptance of the related Facility and the expiration of a maintenance period consistent -17- with applicable City policy thereafter (currently a one year warranty period for any landscaping, and upon receipt of a maintenance bond acceptable to the Director of Public Works to remain in effect for one year as to other Facilities). Notwithstanding the foregoing, RVR shall be entitled to payment of any such retention described in clause (iii) of the first sentence of this Section 5.06D upon the completion and acceptance of a Facility or Discrete Component, if a maintenance or warranty bond is posted in lieu thereof in accordance with Section 6.06 hereof. Also, no retention described in clause (iii) of the first sentence of this Section 5.06D shall apply if RVR proves to the Director of Public Work's satisfaction that RVR's contracts for the Facilities (or Discrete Components) provide for the same ten percent (10%) retention as herein provided, so that the Purchase Price paid for the Facility or Discrete Component is at all times net of the required retention. Payment or release of any retention described in this Section 5.06D, in any event, shall also be contingent upon the availability of monies in the Improvement Funds therefor. E. Frequency. Unless otherwise agreed to by the Director of Public Works, no more than one Payment Request shall be submitted by RVR in any calendar month. F. Right -of -Way. Payments for any right-of-way described in Exhibit B hereto shall be based upon appraisals of the respective land to be acquired in a form acceptable to the Director of Public Works, or upon such other basis as the Director of Public Works shall, in his sole and absolute discretion, determine is appropriate in the circumstances. Section 5.07. Acquisition of Additional Facilities. If the construction and acquisition of all the Facilities theretofore listed in Exhibit B have been completed and the Purchase Prices (including any retentions described in 5.06D. above) with respect thereto have been paid, and funds remain on deposit in any of the Improvement Funds, the Authority shall notify RVR in writing of the amount of funds remaining in the Improvement Funds and shall allow RVR thirty (30) calendar days to submit a proposed amendment to Exhibit B to this Acquisition Agreement to include Facilities not theretofore funded by the CFDs. If such amendment is approved by the Board of Directors of the Authority, the Authority shall retain the excess funds in the Improvement Funds as necessary to pay the Purchase Prices of the Facilities so added to Exhibit B, subject to the provisions of this Acquisition Agreement. If such proposed amendment is not so approved, or if the remaining funds are in excess of what is needed to pay the Actual Costs of such Facilities added to Exhibit B, such excess funds will be disposed of as provided in the Fiscal Agent Agreement pursuant to which the applicable Improvement Fund was established. Section 5.08. Defective or Nonconforming Work. If any of the work done or materials furnished for a Facility or Discrete Component listed in Exhibit B are found by the Director of Public Works to be defective or not in accordance with the applicable Plans: (i) and such finding is made prior to payment for the Purchase Price of such Facility or Discrete Component hereunder, the Authority may withhold payment therefor until such defect or nonconformance is corrected to the satisfaction of the Director of Public Works, or (ii) and such finding is made after payment of the Purchase Price of such Facility or Discrete Component, the Authority and RVR shall act in accordance with the City's standard specification for public works construction (which are set forth in the Green Book, Standard Specifications for Public Works -18- Construction (SSPWC), by Public Works Standards, Inc., as modified by applicable City Special Provisions. Section 5.09. Modification of Discrete Components. Upon written request of RVR, the Director of Public Works shall consider modification of the description of any Discrete Component. Any such modification shall be subject to the written approval of the Director of Public Works, and shall not diminish the overall Facilities listed in Exhibit B to be provided by RVR hereunder (in a material way such that the change invalidates any of the assumptions used in the appraisal conducted to sell Bonds for the 2005 CFD). It is expected that any such modification will be solely for purposes of dividing up the work included in any Discrete Component for purposes of acceptance and payment, for example: (i) separation of irrigation and landscaping from other components of a Discrete Component, (ii) modifications to allow for payment for roadway improvements prior to completion of the top course of paving, or (iii) division of utility construction by utility work orders. In most instances, the Director of Public Works will only approve modifications for payment purposes when there will be an unusual period of time between the completion and acceptance of such divided work or to better implement the phasing of the overall construction of the Facilities; but no such circumstances shall this Section in any way obligate the Director of Public Works to approve such modification. Section 5.10. Right of City to Make Withdrawals From Improvement Funds. RVR acknowledges that the City may withdraw or cause to be withdrawn amounts from the Improvement Funds for payment to the City as necessary to pay costs of the City, the Authority or the CFDs (i) for any City Improvement consistent with the provisions of Section 3.04, (ii) in the event that the construction of the Facilities is substantially delayed, (iii) in the event that the plans for or any other aspect of such construction are substantially altered without the consent of the City, or (iv) otherwise in the amount of any costs that the Director of Public Works determines that the City has incurred or reasonably expects to incur in connection with the performance of the obligations of the City (including the Director of Public Works) under this Acquisition Agreement. The City shall give written notice of the amount of any such expected withdrawal from the Improvement Funds for a purpose described in any of clauses (ii), (iii) or (iv) of the preceding sentence and the purpose(s) thereof to RVR, prior to implementing a withdrawal from the Improvement Funds for such a purpose. RVR acknowledges that any transfer described in the first sentence of this Section 5.10 will reduce the amount available to pay the Purchase Prices of the Facilities and Discrete Components thereof hereunder. -19- ARTICLE VI OWNERSHIP AND TRANSFER OF FACILITIES Section 6.01. Facilities to be Owned by the City — Conveyance of Land and Easements to City. Acceptable Title to all property on, in or over which each Facility to be acquired by the City will be located, shall be deeded over to the City by way of grant deed, quitclaim, or dedication of such property, or easement thereon, if such conveyance of interest is approved by the City as being a sufficient interest therein to permit the City to properly own, operate and maintain such Facility located therein, thereon or thereover, and to permit RVR to perform its obligations as set forth in this Acquisition Agreement. RVR agrees to assist the City in obtaining such documents as are required to obtain Acceptable Title. Completion of the transfer of title to land shall be accomplished prior to the payment of the Purchase Price for a Facility (or the last Discrete Component thereof) and shall be evidenced by recordation of the acceptance thereof by the City Council or the designee thereof. Section 6.02. Facilities to be Owned by the City — Title Evidence. Upon the request of the City, RVR shall furnish to the City, with respect to Facilities to be acquired by the City and not previously dedicated or otherwise conveyed to the City: (i) a preliminary title report for land for review and approval at least fifteen (15) calendar days prior to the transfer of Acceptable Title to a Facility to the City, and (ii) a written certification to the effect that RVR is not aware of any promises or other arrangements with or for the benefit of the owner or any previous owner of the respective land to be conveyed, and there are no known impediments to the conveyance of such land to the City. The Director of Public Works shall approve the preliminary title report unless it reveals a matter which, in the judgment of the City, could materially affect the City's use and enjoyment of any part of the property or easement covered by the preliminary title report. In the event the City does not approve the preliminary title report, the City shall not be obligated to accept title to such Facility and the Authority shall not be obligated to pay the Purchase Price for such Facility (or the last Discrete Component thereof) until RVR has cured such objections to title to the satisfaction of the City. Section 6.03. Facilities Constructed on Private Lands. If any Facilities to be acquired are located on privately -owned land, the owner thereof shall retain title to the land and the completed Facilities until acquisition of the Facilities under Article V hereof. Pending the completion of such transfer, RVR shall not be entitled to receive any payment for any such Facility or the last Discrete Component thereof. RVR shall, however, be entitled to receive payment for Discrete Components (other than the last Discrete Component) upon making an irrevocable offer of dedication of such land in form and substance acceptable to the Director of Public Works. Notwithstanding the foregoing, upon written request of the Director of Public Works before payment for any Discrete Component of such a Facility, RVR shall convey or cause to be conveyed Acceptable Title thereto in the manner described in Sections 6.01 and 6.02 hereof. Section 6.04. Facilities Constructed on City Land. If the Facilities to be acquired are on land owned by the Authority, the Authority shall cause the City to grant to RVR a license to enter upon such land for purposes related to the construction (and maintenance pending acquisition) of the Facilities. The provisions for inspection and acceptance of such Facilities otherwise provided herein shall apply. -20- Section 6.05. Facilities to be Acquired by Other Public Agencies. With respect to any Facility to be acquired by a public entity other than the City, RVR shall comply with such entities rules and regulations regarding title and conveyance of property, and provide the Director of Public Works with evidence of such compliance, prior to the payment of the Purchase Price for any such Facility (or the last Discrete Component thereof). Section 6.06. Maintenance and Warranties. RVR shall maintain each Discrete Component in good and safe condition until the Acceptance Date of the Facility of which such Discrete Component is a part. Prior to the Acceptance Date, RVR shall be responsible for performing any required maintenance on any completed Discrete Component or Facility. On or before the Acceptance Date of the Facility, RVR shall assign to the Authority all of RVR's rights in any warranties, guarantees, maintenance obligations or other evidence of contingent obligations of third persons with respect to such Facility. RVR shall maintain or cause to be maintained each Facility to be owned by the City (including the repair or replacement thereof) for a period of one year from the Acceptance Date thereof, or, alternatively, shall provide a bond reasonably acceptable in form and substance to the Director of Public Works for such period and for such purpose (specifically, a one-year maintenance period for landscaping improvements, and for the posting of a warranty bond to remain in effect for one year as to other Facilities), to insure that defects, which appear within said period will be repaired, replaced, or corrected by RVR, at its own cost and expense, to the satisfaction of the Director of Public Works. During any such one-year period, RVR shall commence to repair, replace or correct any such defects within thirty (30) days after written notice thereof by the Authority, the City or other public entity that took ownership of the respective Facility to RVR, and shall complete such repairs, replacement or correction as soon as practicable. After such one-year period, the City (or other public entity that has accepted title to the Facility) shall be responsible for maintaining such Facility. Any warranties, guarantees or other evidences of contingent obligations of third persons with respect to the Facilities to be acquired by the City shall be delivered to the Director of Public Works as part of the transfer of title. ARTICLE VII INSURANCE; RESPONSIBILITY FOR DAMAGE Section 7.01. Liability Insurance Requirements. RVR shall provide to the Director of Public Works evidence of insurance and endorsements thereto on forms acceptable to the Risk Manager within 10 working days of execution by it of this Acquisition Agreement. RVR shall procure and maintain for the duration of this Acquisition Agreement the following minimum insurance coverage and limits against claims for injuries to persons or damage to property which may arise from or in connection with the performance of the work covered by this Acquisition Agreement by RVR, its agents, representatives, employees or subcontractors: (a) Premises, operation and mobile equipment. (b) Products and completed operations. (c) Explosion, collapse and underground hazards. (d) Personal injury. (e) Contractual liability. (f) Errors and omissions for work performed by design professionals. -21- COVERAGE PER OCCURRENCE Commercial General Liability (Primary) Umbrella Liability (Over Primary, if required) Business Auto Workers' Compensation/ Employers' Liability Errors and Omissions ISO FORM CG 00 0111 85 or 88 Rev. $2,000,000 GL 00 0111 85 or 88 Rev. $1,000,000 CA 00 01 06 92 $1,000,000 Statutory $1,000,000 $1,000,000 Combined single limit per occurrence shall include coverage for bodily injury, personal injury, and property damage for each accident and a five million dollar ($5,000,000) general aggregate. Insurance shall be placed with insurers that are admitted to the State of California and with an AM Best's Rating of no less than A:VII. RVR shall furnish to the Risk Manager certificates of insurance and endorsements on forms specified by the Risk Manager, duly authenticated, giving evidence of the insurance coverage required in this contract and other evidence of coverage or copies of policies as may be reasonably required by the Risk Manager from time to time. Each required insurance policy coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after fifteen (15) days written notice by certified mail, return receipt requested, has been given to the Risk Manager. Liability coverage shall not be limited to the vicarious liability or supervising role of any additional insured nor shall there be any limitation with the severability clause. Coverage shall contain no limitation endorsements and there shall be no endorsement or modification limiting the scope of coverage for liability arising from pollution, explosion, collapse, underground property damage or employment related practices. Any umbrella liability coverage shall apply to bodily injury/property damage, personal injury/advertising injury, at a minimum, and shall include a "drop down" provision providing primary coverage above a maximum $25,000.00 self-insured retention for liability not covered by primary polices not covered by the umbrella policy. Coverage shall be following form to any other underlying coverage. Coverage shall be on a "pay on behalf" basis, with defense costs payable in addition to policy limits. There shall be no cross policy exclusion and no limitation endorsement. The policy shall have starting and ending dates concurrent with the underlying coverage. All liability insurance shall be on an occurrence basis. Insurance on a claims made basis will be rejected. Any deductibles or self-insured retentions shall be declared to and approved by the Risk Manager. The insurer shall provide an endorsement to the City eliminating such deductibles or self-insured retentions as respects the Authority, and its consultants, and each of its Boardmembers, officials, employees and volunteers. All subcontractors employed on the work referred to in this Acquisition Agreement shall meet the insurance requirements set forth in this Section 7.01 for RVR. RVR shall furnish certificates of insurance and endorsements for each subcontractor at least five days prior to the subcontractor entering the job site, or RVR shall furnish the Risk Manager an endorsement including all subcontractors as insureds under its policies. -22- Neither the City nor the Authority shall be liable for any accident, loss, or damage to the work prior to its completion and acceptance, and RVR shall save, keep and hold harmless the Authority, the City and their consultants, and each of their Boardmembers, Councilmembers, officers, officials, employees, agents and volunteers from all damages, costs or expenses in law or equity that may at any time arise or be claimed because of damages to property, or personal injury received by reason of or in the course of performing work, which may be caused by any willful or negligent act or omission by RVR or any of RVR's employees, or any subcontractor. The cost of insurance required by this subsection shall be born by RVR and its subcontractors and no compensation for purchasing insurance or additional coverage needed to meet these requirements will be paid for by the Authority. In the event that any required insurance is reduced in coverage, canceled for any reason, voided or suspended, RVR agrees that the Authority may arrange for insurance coverage as specified, and RVR further agrees that administrative and premium costs may be deducted from any deposits or bonds the Authority may have, or from the Improvement Fund. A reduction or cancellation will be grounds for termination of this Acquisition Agreement and will cause a halt to payment for any work on the Facilities until the insurance is reestablished. Liability policies shall contain, or be endorsed to contain the following provisions: (a) General Liability and Automobile Liability: The Authority, the City and their respective consultants, and each of their Boardmembers, Councilmembers, officers, officials, employees and volunteers shall be covered as additional insureds using ISO form CG 00 01 11 85 or 88 as it respects: liability arising out of activities performed by or on behalf of RVR; products and completed operations of RVR' premises owned, occupied or used by RVR; or automobiles owned, leased, hired or borrowed by RVR. The coverage shall contain no special limitations on the scope or protection afforded to the Authority, the City and their respective consultants, and each of their respective Boardmembers, Councilmembers, officers, officials, employees, or volunteers. RVR's insurance coverage shall be primary insurance with respect to the Authority, the City and their respective consultants, and each of their respective Boardmembers, Councilmembers, officers, officials, employees and volunteers. Any insurance or self-insurance maintained by the Authority, the City and their respective consultants, and each of their respective Boardmembers, Councilmembers, officers, officials, employees and volunteers shall be excess of RVR's insurance and shall not contribute with it. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the Authority, the City, and their respective consultants, and each of their respective Boardmembers, Councilmembers, officers, officials, employees, and volunteers. RVR'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. (b) Workers' Compensation and Employer's Liability: RVR and all subcontractors shall have workers' compensation for all employees in conformance with the requirements in Section 3700 of the Labor Code. -23- (c) Error and Omissions Liability: RVR and all subcontractors who are design professionals shall have and maintain errors and omissions insurance. Section 7.02. Responsibility for Damage. RVR shall take and assume all responsibility for the work performed as part of the Facilities constructed pursuant to this Acquisition Agreement. RVR shall bear all losses and damages directly or indirectly resulting to it, to the Authority, to the City, and their respective consultants, and their respective Boardmembers, Councilmembers, officers, employees and agents, or to others on account of the performance or character of the work, unforeseen difficulties, accidents of any other causes whatsoever. RVR shall assume the defense of and indemnify and save harmless the Authority, the City, and their respective consultants, their respective Boardmembers, Councilmembers, officers, employees, and agents, from and against any and all claims, losses, damage, expenses and liability of every kind, nature, and description, directly or indirectly arising from the performance of the work, and from any and all claims, losses, damage, expenses, and liability, howsoever the same may be caused, resulting directly, or indirectly from the nature of the work covered by this Acquisition Agreement, to the fullest extent permitted by law and regardless (except as provided in the next sentence) of responsibility for any negligence. In accordance with Civil Code section 2782, nothing in this Section 7.02 shall require defense or indemnification for death, bodily injury, injury to property, or any other loss, damage or expense arising from the sole negligence or willful misconduct of the Authority, the City, and their respective consultants, and their respective Boardmembers, Councilmembers, agents, servants or independent contractors who are directly responsible to the Authority or the City, or for defects in design furnished by such persons. Moreover, nothing in this Section 7.02 shall apply to impose on RVR, or to relieve the Authority or the City from, liability for active negligence of the Authority, the City, or their respective consultants or their respective Boardmembers, Councilmembers, officers, employees or agents as delineated in Civil Code Section 2782. Any relief for determining the Authority's or the City's sole or active negligence shall be determined by a court of law. The Authority does not, and shall not, waive any rights against RVR which it may have by reason of the aforesaid hold harmless agreements because of the acceptance by the Authority or the City, or deposit with the Authority by RVR of any insurance policies described in Section 7.01. The aforesaid hold harmless agreement by RVR shall apply to all damages and claims for damages of every kind suffered, or alleged to have been suffered by reasons of any of the aforesaid operations of RVR, or any subcontractor, regardless of whether or not such insurance policies are determined to be applicable to any of such damages or claims for damages. No act by the City, or its representatives in processing or accepting any plans, in releasing any bond, in inspecting or accepting any work, or of any other nature, shall in any respect relieve RVR or anyone else from any legal responsibility, obligation or liability it might otherwise have. Section 7.03. Insurance Requirements of Joint Community Facilities Agreements. RVR acknowledges that the Joint Community Facilities Agreements include provisions related to insurance that are applicable to RVR, and RVR agrees to comply with all such provisions. -24- ARTICLE VIII REPRESENTATIONS, WARRANTIES AND COVENANTS Section 8.01. Representations, Covenants and Warranties of RVR. RVR represents and warrants for the benefit of the Authority as follows: A. Organization. RVR is a limited liability company duly organized and validly existing under the laws of the State of Delaware, is in compliance with all applicable laws of the State, and has the power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in this Acquisition Agreement. B. Authority. RVR has the power and authority to enter into this Acquisition Agreement, and has taken all action necessary to cause this Acquisition Agreement to be executed and delivered, and this Acquisition Agreement has been duly and validly executed and delivered by RVR. C. Binding Obligation. This Acquisition Agreement is a legal, valid and binding obligation of RVR, enforceable against RVR in accordance with its terms, subject to bankruptcy and other equitable principles. D. Compliance with Laws. RVR shall not with knowledge commit, suffer or permit any act to be done in, upon or to the lands of RVR in the 2016 CFD or the Facilities in violation of any law, ordinance, rule, regulation or order of any governmental authority or any covenant, condition or restriction now or hereafter affecting the lands in the 2016 CFD or the Facilities. E. Requests for Payment. RVR represents and warrants that (i) it will not request payment from the Authority for the acquisition of any improvements that are not part of the Facilities, and (ii) it will diligently follow all procedures set forth in this Acquisition Agreement with respect to the Payment Requests. F. Financial Records. Until the date which is one year following the date of the final acceptance of the Facilities, RVR covenants to maintain proper books of record and account for the construction of the Facilities and all costs related thereto. Such accounting books shall be maintained in accordance with generally accepted accounting principles, and shall be available for inspection by the Authority or its agent at any reasonable time during regular business hours on reasonable notice. G. Prevailing Wages. RVR covenants that, with respect to any contracts or subcontracts for the construction of the Facilities listed in Exhibit B to be acquired from RVR hereunder, it will assure complete compliance with any applicable law or regulation for the payment of prevailing wages. RVR shall provide, at the written request of the Director of Public Works, evidence satisfactory to the Director of Public Works that RVR has complied with the provisions of this Section 8.01G. with respect to any Facilities or Discrete Components thereof to be funded under this Acquisition Agreement. H. Plans. RVR represents that it has obtained or will obtain approval of the Plans for the Facilities listed in Exhibit B to be acquired from RVR hereunder from all appropriate departments of the City and from any other public entity or public utility from -25- which such approval must be obtained. RVR further agrees that the Facilities listed in Exhibit B to be acquired from RVR hereunder have been or will be constructed in full compliance with such approved plans and specifications and any supplemental agreements (change orders) thereto, as approved in the same manner. I. Land Owners. RVR agrees that in the event that it sells any land owned by it within the boundaries of the 2016 CFD other than to an individual prospective homeowner, RVR will (i) notify the Authority within 30 days of the sale, in writing, identifying the legal name of and mailing address for the purchaser, the applicable County Assessor's parcel number or numbers for the land sold and the acreage of the land sold, (ii) notify the purchaser in writing prior to the closing of any such sale of the existence of this Acquisition Agreement and, in general, RVR's rights and obligations hereunder with respect to the construction of and payment for the Facilities, and (iii) notify the purchaser (including for purposes of this clause (iii) any prospective homeowner buying property from RVR) in writing of the existence of the 2016 CFD and the special tax lien in connection therewith, and otherwise comply with any applicable provision of Section 53341.5 of the Act. J. Additional Information. RVR agrees to cooperate with all reasonable written requests for nonproprietary information by the original purchasers of the Bonds or the Authority related to the status of construction of improvements required by the Conditions of Approval, the anticipated completion dates for future improvements, and any other matter material to the investment quality of the Bonds. K. Continuing Disclosure. RVR agrees to comply with all of its obligations under any continuing disclosure agreement executed by it in connection with the offering and sale of any of the Bonds for the 2016 CFD. L. Ownership By Affiliates. RVR agrees to provide to the City's Finance Director on the date of issuance of the Bonds, on (or within five (5) business days of) July 1 of each year so long as the Bonds are outstanding and RVR or any Affiliate thereof owns property in the 2016 CFD, and on any other date upon three business days notice from the City's Finance Director, a written list of all Affiliates of RVR which own or control the ownership of land located within the 2016 CFD, or which have options on land within the 2016 CFD, indicating the parcels of land by County Assessor's Parcel number of all such land so owned or optioned. M. Allocation of Sales Taxes to Authority. RVR shall use reasonable efforts, with respect to any construction contract for a contract price of $5,000,000 or more and related to any construction by RVR within the geographical boundaries of the City, to have the installing contractor obtain a sub -permit from the California Board of Equalization under the Bradley -Burns Uniform Local Sales and Use Tax law for the job site on which the work is to be performed. Section 8.02. Indemnification and Hold Harmless. RVR shall assume the defense of, indemnify and save harmless the Authority, the City and the CFDs, members of the governing board of the Authority and of the City Council of the City, their officers, officials, employees and agents and each of them, from and against all actions, damages, claims, losses or expense of every type and description to which they may be subjected or put, by reason of, or resulting from (i) the breach of any provision of this Acquisition Agreement by RVR; (ii) RVR's or any other entity's negligent design, engineering and/or construction of any of the Facilities -26- acquired from RVR hereunder; (iii) RVR's non-payment under contracts between RVR and its consultants, engineer's, advisors, contractors, subcontractors and suppliers in the provision of the Facilities, including but not limited to any claim, lien or action by any such entity against the City, the Authority or a CFD for money or damages; (iv) any claims of persons employed by RVR or its agents to construct the Facilities; or (v) RVR's breach of any provisions of the Joint Community Facilities Agreements applicable to RVR. Notwithstanding the foregoing, no indemnification is given hereunder for any action, damage, claim, Toss or expense directly attributable to the intentional acts or negligence of the Authority, a CFD or the City, or their respective Boardmembers, Councilmembers, officers, officials, directors, employees or agents hereunder. No provision of this Acquisition Agreement shall in any way limit RVR's responsibility for payment of damages resulting from the operations of RVR, its agents, employees or its contractors. RVR shall assume the defense of (with counsel satisfactory to the Authority), indemnify and save harmless the Authority, the City and the CFDs, members of the governing board of the Authority and of the City Council of the City, their officers, officials, employees and agents and each of them, from and against all actions, damages, claims, losses or expense of every type and description to which they may be subjected or put, by reason of, or resulting from, any alleged or actual material misstatements or omissions of facts necessary to make the statements with respect to the development by RVR of the land in the 2016 CFD, or RVR, not misleading under the circumstances made in any disclosure materials published in connection with the Bonds. Notwithstanding the foregoing, no indemnification is given hereunder for any action, damage, claim, loss or expense directly attributable to the intentional misstatements of material facts or material omissions in any such disclosure materials with respect to the Authority or the City. In the event that RVR fails to discharge its obligations under any of the foregoing provisions of this Section 8.02, the Authority shall be entitled, following prior written notice of such failure to RVR, to draw upon funds in the Improvement Funds as it deems necessary for the defense, indemnity or hold harmless otherwise to be provided by RVR hereunder. ARTICLE IX TERMINATION Section 9.01. Termination of Funding Obligations. Unless otherwise agreed to in writing by the parties hereto, the provisions of Articles IV and V of this Acquisition Agreement shall terminate on February 1, 2024; and, from and after such date, the Authority shall have no further obligation to pay the Purchase Price of any Facilities or Discrete Components thereof hereunder. Section 9.02. Mutual Consent. This Acquisition Agreement may be terminated by the mutual, written consent of the Authority and RVR, in which event the Authority may let contracts for any remaining work related to the Facilities not theretofore acquired from RVR hereunder, and use all or any portion of the monies in the Improvement Fund to pay for same, and RVR shall have no claim or right to any further payments for the Purchase Price of Facilities or Discrete Components hereunder, except as otherwise may be provided in such written consent. -27- Section 9.03. Authority Election for Cause. The following events shall constitute grounds for the Authority, at its option, to suspend payments to RVR hereunder as provided in the second succeeding paragraph, or terminate this Acquisition Agreement as described in the succeeding paragraph, in each case without the consent of RVR: (a) RVR shall voluntarily file for reorganization or other relief under any Federal or State bankruptcy or insolvency law. (b) RVR shall have any involuntary bankruptcy or insolvency action filed against it, or shall suffer a trustee in bankruptcy or insolvency or receiver to take possession of the assets of RVR, or shall suffer an attachment or levy of execution made against the property it owns within the 2016 CFD unless, in any of such cases, such circumstance shall have been terminated or released within thirty (30) days thereafter. (c) RVR shall abandon construction of the Facilities. Failure for a period of ninety (90) consecutive days to undertake substantial work related to the construction of the Facilities, other than for a reason specified in Section 9.04 hereof, shall constitute a noninclusive example of such abandonment. (d) RVR shall breach any material covenant or default in the performance of any material obligation hereunder. (e) RVR shall transfer any of its rights or obligations under this Acquisition Agreement without the prior written consent of the Authority. (f) RVR shall have made any material misrepresentation or omission in any written materials furnished in connection with any preliminary official statement, official statement or bond purchase contract used in connection with the sale of the Bonds for the 2016 CFD. (g) RVR or any of its Affiliates shall at any time challenge the validity of the 2016 CFD, or any of the Bonds issued for the 2016 CFD, or the levy of special taxes within the 2016 CFD, other than on the grounds that such levy was not made in accordance with the terms of the Rate and Method of Apportionment of the Special Taxes for the 2016 CFD. If any such event occurs, the Authority shall give written notice of its knowledge thereof to RVR, and RVR agrees to meet and confer with the Director of Public Works and other appropriate City staff and consultants within thirty (30) days of receipt of such notice as to options available to assure timely completion of the Facilities listed in Exhibit B. Such options may include, but not be limited to the termination of this Acquisition Agreement by the Authority. If the Authority elects to terminate this Acquisition Agreement, the Authority shall first notify RVR (and any mortgagee or trust deed beneficiary specified in writing by RVR to the Authority to receive such notice) of the grounds for such termination and allow RVR a minimum of thirty (30) days to eliminate or mitigate to the satisfaction of the Director of Public Works the grounds for such termination. Such period may be extended, at the sole discretion of the Authority, if RVR, to the satisfaction of the Authority, is proceeding with diligence to eliminate or mitigate such grounds for termination. If at the end of such period (and any extension thereof), as determined solely by the Authority, RVR has not eliminated or completely mitigated such grounds, to the satisfaction of the Authority, the Authority may then terminate this Acquisition Agreement. Notwithstanding the foregoing provisions of this paragraph, if an event described in clause (a) or -28- (b) of the preceding paragraph occurs, the Authority need not comply with any of the foregoing provisions of this paragraph and may, in its sole and absolute discretion, terminate this Acquisition Agreement upon twenty (20) days prior written notice to RVR of such termination. Notwithstanding the foregoing paragraph, so long as any event listed in any of clauses (a) through and including (g) above has occurred, notice of which has been given by the Authority to RVR, and such event has not been cured or otherwise eliminated by RVR, the Authority may in its discretion cease making payments for the Purchase Price of Facilities or Discrete Components under Article V hereof. Nothing in this Section 9.03 shall in any way prohibit the Authority, the City or the CFDs from drawing funds from the Improvement Funds for any of the purposes described in Section 5.10 or in the last paragraph of Section 8.02. Section 9.04. Force Majeure. Whenever performance is required of a party hereunder, that party shall use all due diligence and take all necessary measures in good faith to perform, but if completion of performance is delayed by reasons of floods, earthquakes or other acts of God, war, terrorist attacks, civil commotion, riots, strikes, picketing, or other labor disputes, damage to work in progress by casualty, or by other cause beyond the reasonable control of the party (financial inability excepted), then the specified time for performance shall be extended by the amount of the delay actually so caused. Section 9.05. Survival of Certain Provisions. The provisions of Sections 7.02, 8.02 and 10.01 of this Acquisition Agreement shall survive the termination of this Acquisition Agreement, and the obligations of RVR under said Sections shall remain in effect following any such termination. ARTICLE X MISCELLANEOUS Section 10.01. Limited Liability of Authority. RVR agrees that any and all obligations of the Authority arising out of or related to this Acquisition Agreement are special and limited obligations of the Authority and the Authority's obligations to make any payments hereunder are restricted entirely to the moneys, if any, in the Improvement Funds and from no other source. No member of the Authority's Board of Directors, or Authority staff member, employee or agent shall incur any liability hereunder to RVR or any other party in their individual capacities by reason of their actions hereunder or execution hereof. Section 10.02. Excess Costs. RVR will be responsible for any and all costs of the Facilities that it is obligated to construct pursuant to the Conditions of Approval in excess of the moneys available therefor in the Improvement Funds. Section 10.03. Audit. The Director of Public Works and/or the City's Director of Finance shall have the right, during normal business hours and upon the giving of two (2) business days prior written notice to RVR, to review all books and records of RVR pertaining to costs and expenses incurred by RVR in to any of the Facilities, and any bids taken or received for the construction thereof or materials therefor. -29- Section 10.04. Attorney's Fees. In the event that any action or suit is instituted by either party against the other arising out of this Acquisition 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 10.05. Notices. Any notice, payment or instrument required or permitted by this Acquisition 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 or CFD: RVR: Temecula Public Financing Authority 41000 Main Street Temecula, California 92589-9033 Attention: Director of Public Works Roripaugh Valley Restoration, LLC c/o Sabal Financial Group, L.P. 4675 MacArthur Court, 15th Floor Newport Beach, California 92660 Attention: Ken Kraemer Each 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 10.06. Severability. If any part of this Acquisition Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Acquisition Agreement shall be given effect to the fullest extent possible. Section 10.07. Successors and Assigns. This Acquisition Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. This Acquisition Agreement shall not be assigned by RVR without the prior written consent of the Authority, which consent shall not be unreasonably withheld or delayed provided that: (i) the proposed assignee has specifically assumed in writing the obligations of RVR, or a portion of the obligations of the RVR, to design, construct, install and finally complete the public and private improvements required by the Conditions of Approval and this Agreement in a form reasonable acceptable to the Authority; (ii) the proposed assignee has the experience and financial capacity to complete the public and private improvement that have been assigned to it within the time and in the manner required by the Conditions of Approval and this Agreement; (iii) the proposed assignee has obtained replacement bonds or letters of credit, accepted by the Authority, as required by the Conditions of Approval and this Agreement for the public and private improvements it will construct; and (iv) the Authority finds that the design, construction, installation and completion of the public and private improvements required by the Conditions of Approval and this Agreement will not be materially impaired by the assignment. Any assignment consented to by the Authority shall release RVR from its obligations and liabilities under this Acquisition Agreement to the extent so assigned. -30- Notwithstanding the foregoing, RVR may assign its rights to payment hereunder, without the prior consent of the Authority, to any financial institution providing financing to RVR or an Affiliate of RVR. Section 10.08. Other Agreements. The obligations of RVR hereunder shall be those of a party hereto and not as an owner of property in the 2016 CFD. Nothing herein shall be construed as affecting the Authority's or RVR's rights, or duties to perform their respective obligations, under other agreements, use regulations or subdivision requirements relating to the development of the lands in the 2016 CFD. This Acquisition 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 10.09. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Acquisition 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 Acquisition Agreement thereafter. Section 10.10. 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 Acquisition Agreement shall be binding. Section 10.11. Parties in Interest. Nothing in this Acquisition 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 CFDs, the City, and RVR any rights, remedies or claims under or by reason of this Acquisition Agreement or any covenants, conditions or stipulations hereof; and all covenants, conditions, promises, and agreements in this Acquisition Agreement contained by or on behalf of the Authority or RVR shall be for the sole and exclusive benefit of the Authority, the CFDs, the City, and RVR. The City is an intended third party beneficiary of this Agreement. No provision of this Acquisition Agreement shall in any way be construed to provide any right whatsoever to any contractor, subcontractor, supplier or other party involved in the acquisition, construction or maintenance of any of the Facilities or Discrete Components thereof, against the Authority, the City or either of the CFDs, including but not limited to any right to payment or damages of any nature, in law or in equity. Section 10.12. Amendment. This Acquisition Agreement may be amended, from time to time, by written Supplement hereto and executed by both the Authority and RVR. Section 10.13. Counterparts. This Acquisition Agreement may be executed in counterparts, each of which shall be deemed an original. Section 10.14. Governing Law. The provisions of this Acquisition Agreement shall be governed by the laws of the State applicable to contracts made and performed in the State. Section 10.15. Termination of Prior Acquisition Agreement. This Acquisition Agreement supersedes in its entirety the Amended and Restated Acquisition Agreement, dated as of July 21, 2009 (the "Prior Acquisition Agreement") originally between the Authority and Ashby USA, LLC, as amended and in effect prior to the execution by the Authority and RVR of this Acquisition Agreement. Accordingly, the Prior Acquisition Agreement shall no longer be in effect upon such execution of this Acquisition Agreement by the Authority and RVR. -31- IN WITNESS WHEREOF, the parties hereto have executed this Acquisition Agreement as of the day and year first -above written. 20009.13:J13931 TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of the TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 16- 01 (RORIPAUGH RANCH PHASE 2) By: Executive Director RORIPAUGH VALLEY RESTORATION, LLC, a Delaware limited liability company By: Kenneth J. Kraemer, Operating Manager S-1 EXHIBIT A DESCRIPTION OF FACILITIES ELIGIBLE FOR ACQUISITION FROM RVR USING FUNDS IN THE IMPROVEMENT FUND FOR THE 2005 CFD Nicolas Road a) Nicolas Road BSR to the Easterly Metropolitan Water District (MWD) R/W: Improvements include grading right-of-way with 2:1 slopes, paving, asphalt berms, curb and gutter, sidewalk, asphalt path, split rail fence, street lights, landscaping, irrigation, storm drain, underground sewer and water pipelines, and other appurtenant improvements necessary to complete Nicolas Road. b) Nicolas Road from the Easterly MWD R/W to Liefer Road including construction of Calle Garisol realignment to Nicolas Road: Improvements include grading partial right-of-way (40' travel way) with 2:1 slopes, paving, asphalt berms, curb and gutter, sidewalk, asphalt path, utility relocations, traffic detour, split rail fence, street lights, signing and striping, landscaping, irrigation, sewer, storm drain, bridge over Santa Gertrudis Creek (including channel lining and transition structure to bridge), access road, exit structure and other appurtenant improvements necessary to complete Nicolas Road. c) Nicolas Road and Winchester Road intersection widening and signal modification: Improvements include modifications to existing traffic signal, storm drain, paving, curb and gutter, median curb, bus turn -out, striping, traffic control and other appurtenant improvements necessary to complete the intersection and signal modifications. Santa Gertrudis Creek Santa Gertrudis Creek from the PA -13 to the exit channel at MWD R/W: Improvements include a flow -by detention basin, headwalls, trapezoidal channel lining and transition structures; grading, fencing and paving for access roads; desilting and detention basins, rip -rap protection, rip -rap dissipaters, berms, grading of exit structure and other appurtenant improvements necessary to complete Santa Gertrudis Creek. Exhibit A Page 1 Roripaugh Valley Road (A Street) Roripaugh Valley Road Grading and Street Improvements from Murrieta Hot Springs Road to Butterfield Stage Road: Improvements include grading full right-of-way with 2:1 slopes, paving, curb and gutter, median curb, sidewalk, street lights, signing and striping, landscaping, irrigation, storm drain, sewer and water pipelines, and other appurtenant improvements necessary to complete Roripaugh Valley Road between Murrieta Hot Springs Road and Butterfield Stage Road. Fiesta Ranch Road (B Street) Fiesta Ranch Road Grading and Street Improvements from Roripaugh Valley Road to Nicolas Road: Improvements include grading full right-of-way with 2:1 slopes, paving, curb and gutter, median curb, sidewalk, street lights, signing and striping, landscaping, irrigation, storm drain, sewer and water pipelines, and other appurtenant improvements necessary to complete Fiesta Ranch Road between Roripaugh Valley Road and Nicolas Road. Neighborhood Park Neighborhood Park at the SW corner of the intersection of Murrieta Hot Springs Road and Roripaugh Valley Road (A Street): Construct 5.1 -acre Neighborhood Park including grading, parking, restroom building, lighting, landscaping, irrigation, open grass area, basketball court, children's play area, equipment with a useful life of five (5) years or more and other appurtenant improvements necessary to complete the Neighborhood Park. Exhibit A Page 2 DESCRIPTION OF FACILITIES ELIGIBLE FOR ACQUISITION FROM RVR USING FUNDS IN THE IMPROVEMENT FUND FOR THE 2016 CFD Nicolas Road Nicolas Road Butterfield Stage Road to the Easterly Metropolitan Water District (MWD) RAN: Improvements include grading right-of-way with 2:1 slopes, paving, asphalt berms, curb and gutter, sidewalk, asphalt path, split rail fence, street lights, landscaping, irrigation, storm drain, underground sewer and water pipelines, and other appurtenant improvements necessary to complete Nicolas Road. Sports Park(1) Sports Park at the SE corner of the intersection of Loop Road and BSR: Construct 19.7 -acre Sports Park including grading, parking, building, lighting landscaping, irrigation, playing fields, basketball courts, children's play area, equipment with a useful life of five (5) years or more and other appurtenant improvements necessary to complete the Sports Park. Loop Road(1) Loop Road from North BSR intersection to South BSR intersection (public section only): Improvements include grading full right-of-way with 2:1 slopes, paving, curb and gutter, median curb, sidewalk, street lights, signing and striping, landscaping, irrigation, storm drain, sewer and water pipelines, and other appurtenant improvements necessary to complete the public segment of the Loop Road East of BSR. (1) These Facilities may also be funded from funds in the Improvement Fund for the 2005 CFD; however there are not expected to be any 2005 CFD Improvement Funds following the payment of the costs of the Facilities that may only be funded from amounts in the 2005 CFD Improvement Fund as listed on pages A-1 and A-2. Exhibit A Page 3 EXHIBIT B DISCRETE COMPONENTS OF INITIAL FACILITIES ELIGIBLE FOR ACQUISITION FROM RVR AND RELATED BUDGETED COSTS Facilit Discrete Funding Funding y Component From From No. Description Discrete Component Budget 2005 CFD(.0 2016 CFD 2a Nicolas Road from Butterfield Stage Road Grading $ 273,878 to Phase 2 Boundary - 1,200' Storm Drain 192,444 Sewer 83,288 Water 37,726 Street Improvements 440,343 Landscaping 120,000 Dry Utilities 81,000 Segment Total: $ 1,228,678 3 Nicholas Road/Winchester Road Intersection Grading 178,970 Improvements $ 1,228,678 Storm Drain 436,371 Street Improvements 1,711,600 Retaining Walls 492,593 Landscaping 232,515 Dry Utilities 367,536 Facility Total: $ 3,419,584 $ 3,419,584 4 Santa Gertrudis Creek Channel Improvements Grading 249,668 Channel lmprovements 2,883,548 Landscaping 399,770 RCFC & WCD Easement 388,445 Costs Facility Total: $ 3,921,430 $ 3,921,430 5 Community Sports Park Grading 258,365 Storm Drain 170,297 Sewer 9,104 Water 207,965 Street Improvements 722,021 (asphalt, concrete) Walls & Fencing 87,420 Bldgs, courts, fields, equipment 2,860,792 Landscaping 3,513,670 Dry Utilities 104,810 Facility Total: $ 7,934,444 $ 7,934,444 6 Loop Road Grading 292,986 Storm Drain 884,099 Sewer 97,394 Water 1,259,110 Street Improvements 4,318,630 Walls & Fencing - Landscaping 864,872 Dry Utilities 1,516,508 Facility Total: $ 9,233,598 9,233,598 Totals $ 7,341,014 $ 18,396,720 (1) Costs of Facilities 3 and 4 may only be paid from the Improvement Fund established under the Fiscal Agent Agreement for the 2005 CFD. See Section 3.03 of the Acquisition Agreement. Exhibit B Page 1 EXHIBIT C FORM OF PAYMENT REQUEST PAYMENT REQUEST NO. The undersigned ("RVR"), hereby requests payment in the total amount of $ for the Facilities (as defined in the Acquisition Agreement, dated as of February 1, 2017, between (a) the Temecula Public Financing Authority (the "Authority"), for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) and the Temecula Public Financing Authority Community Facilities District No. 16-01 (Roripaugh Ranch Phase 2), and (b) RVR), or Discrete Components thereof (as described in Exhibit B to that Agreement), all as more fully described in Attachment 1 hereto. In connection with this Payment Request, the undersigned hereby represents and warrants to the Authority as follows: 1. He(she) is a duly authorized officer of RVR, qualified to execute this Payment Request for payment on behalf of RVR and is knowledgeable as to the matters set forth herein. 2. To the extent that this payment request is with respect to a completed Facility, RVR has submitted or submits herewith to the City of Temecula (the "City") as -built drawings or similar plans and specifications for the items to be paid for as listed in Attachment 1 hereto with respect to any such completed Facility, and such drawings or plans and specifications, as applicable, are true, correct and complete. To the extent that this payment request is for a Discrete Component, RVR has in its construction office a marked set of drawings or similar plans and specifications for the Discrete Components to be acquired as listed in Attachment 1 hereto, which drawings or plans and specifications, as applicable, are current and show all changes or modifications which have been made to date. 3. All costs of the Facilities or Discrete Components thereof for which payment is requested hereby are Actual Costs (as defined in the Agreement referenced above) and have not been inflated in any respect. The items for which payment is requested have not been the subject of any prior payment request submitted to the Authority. 4. Supporting documentation (such as third party invoices) is attached with respect to each cost for which payment is requested. 5. There has been compliance with applicable laws relating to prevailing wages for the work to construct the Facilities or Discrete Components thereof for which payment is requested. 6. The Facilities or Discrete Components thereof for which payment is requested were constructed in accordance with all applicable City or other governmental standards, and in accordance with the as -built drawings or plans and specifications, as applicable, referenced in paragraph 2 above. 7. RVR is in compliance with the terms and provisions of the Acquisition Agreement and no portion of the amount being requested to be paid was previously paid. Exhibit C Page 1 8. The Purchase Price for each Facility or Discrete Component (a detailed calculation of which is shown in an Attachment 2 hereto for each such Facility or Discrete Component), has been calculated in conformance with the terms of Section 5.06 of the Acquisition Agreement. 9. Neither RVR nor any Affiliate (as defined in the Acquisition Agreement) is in default in the payment of ad valorem real property taxes or special taxes or special assessments levied in the CFD (as defined in the Acquisition Agreement), except as follows: I hereby declare under penalty of perjury that the above representations and warranties are true and correct. RVR: RORIPAUGH VALLEY RESTORATION, LLC By: Authorized Representative of RVR Date: AUTHORITY: Payment Request Approved for Submission to the Director of Finance of the City of Temecula By: Director of Public Works Date: Exhibit C Page 2 ATTACHMENT 1 EXHIBIT C [list here all Facilities or Discrete Components thereof for which payment is requested, and attach support documentation] Exhibit C-1 Page 3 ATTACHMENT 2 EXHIBIT C CALCULATION OF PURCHASE PRICE [Use a separate sheet for each Facility or Discrete Component for which payment is being requested] 1. Description (by reference to Exhibit B to the Acquisition Agreement) of the Facility or Discrete Component 2. Actual Cost (list here total of supporting invoices and/or other documentation supporting determination of Actual Cost): 3. Budgeted Cost: 4. Permitted Addition to Budgeted Cost (to the extent, and only to the extent, that Actual Cost exceeds Budgeted Cost), consisting of Savings (Actual Costs less than Budgeted Cost) carried forward from prior acquired Facilities/Discrete Components (see first paragraph of Section 5.06A) and not previously applied to cover cost overruns (Actual Costs greater than Budgeted Cost) on previously acquired Facilities: 5. Subtractions from Purchase Price: $ $ $ A. Holdback for Lien releases (see Section 5.06(C) of the Acquisition Agreement) $ B. Retention (see Section 5.06(D) of the Acquisition Agreement) $ 6. Total disbursement requested (amount listed in 3, plus amount, if any, listed in 4 (total of amounts in 3 and 4 not to exceed amount listed in 2), less amounts, if any, listed in 5) $ Exhibit C-2 Page 4 EXHIBIT D PRIORITY FOR FUNDING OF FACILITIES ELIGIBLE FOR ACQUISITION FROM RVR (EXHIBIT A) AND OF CITY IMPROVEMENTS (EXHIBIT E) Priority A - funded by amounts in the Improvement Funds, subject to the priorities of Section 3.03 of the Acquisition Agreement. Priority B - Bond funding only available after all Priority A facilities complete. Facility B — No. Description Priority A - Budget Budget 1 a Butterfield Stage Road Improvements — See Exhibit E A $6,814,297 1b Rancho California Road Intersection and Transitions— See Exhibit E A $1,643,735 2a Nicolas Road from Butterfield Stage Road to Phase 2 Boundary 1,200' A $1,228,678 — See Exhibit B 2b Nicolas Road form Phase 2 Boundary to Westerly End of A $1,921,040 Improvements Near Leifer Road — See Exhibit E 2c Nicolas/Calle Girasol Culvert and Channel Improvements — See Exhibit A $5,482,030 E 3 Winchester Road/Nicolas Road Intersection Improvements — See A $3,419,584 Exhibit B 4 Santa Gertrudis Creek Channel Improvements — See Exhibit B A $3,921,430 5 Community Sports Park — See Exhibit B B $7,934,444 6 Loop Road — See Exhibit B B $9,233,598 OVERALL TOTAL: $41,598,836 $24,430,79 $17,168,04 4 2 Exhibit D Page 1 EXHIBIT E CITY IMPROVEMENTS Description Funding Funding Facility Estimated Cost From From No. to Complete 2005 CFD(1) 2016 CFD 1 a Butterfield Stage Road Phase III City Grading $1,160,949 Storm Drain 42,835 Street Improvements 1,913,743 La Serena Traffic Signal 125,000 Retaining Walls Landscaping 399,042 Dry Utilities 128 729 Subtotals: $3,770,297 $3,770,297 County Grading $224,561 Storm Drain 199,994 Street Improvements 671,175 La Serena Traffic Signal 125,000 Retaining Walls 708,721 Landscaping 385,084 Dry Utilities 729,465 Subtotals: $3,044,000 $3,044,000 Segment Total: $6,814,297 Rancho California Road 1 b Intersection & Transitions City Grading $- Storm Drain Street Improvements (includes Traffic Signals) 168,560 Retaining Walls Landscaping Dry Utilities 76,049 Subtotals: $244,609 County Grading $72,497 Storm Drain 108,675 Street Improvements (includes Traffic Signals) 612,434 Retaining Walls 18,958 Landscaping 155,618 Dry Utilities 430 944 Subtotals: $1,399,126 $1,399,126 Segment Total: $1,643,735 Exhibit E Page 1 $244,609 Nicolas Road from Phase 2 Boundary to Westerly End of 2b Improvements Near Leifer Road City Street Improvements $1,921,040 Landscaping Dry Utilities Segment Total: $1,921,040 Nicolas/Calle Girasol Culvert and 2c Channel Improvements City Culvert and Channel Facilities $4,982,030 Landscaping - Easement Costs 500,000 Segment Total: $5,482,030 Total estimated cost to complete the above -listed City Improvements $1,921,040 $5,482,030 $15,861,102 $8,213,423 $7,647,679 (1) Costs of Facilities la, and 1 b under the subheading "County," may only be paid from the Improvement Fund established under the Fiscal Agent Agreement for the 2005 CFD. See Section 3.03 of the Acquisition Agreement. Exhibit E Page 2 CFD Facility EXHIBIT F SCHEDULE FOR COMPLETION OF FACILITIES ELIGIBLE FOR ACQUISITION FROM RVR Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul - Start Length 17 18 18 18 18 19 19 19 19 20 20 20 (Qtr) (Qtrs) 1 2 3 4 5 6 7 8 9 10 11 12 3 - Winchester Road/Nicolas Road Intersection Improvements 6 6 4 - Santa Gertrudis Creek Channel Improvements (Option 1) 6 6 4 - Santa Gertrudis Creek Channel Improvements (Option 2) 12 6 2a - Nicolas Road from Butterfield Stage Road to Phase 2 Boundary 8 4 5 - Community Sports Park 12 6 6 - Loop Road 8 8 Exhibit E Page 1 CITY COUNCIL BUSINESS Item No. 18 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Jennifer Hennessy, Finance Director DATE: January 24, 2017 SUBJECT: Approve the CAFR Report for the Year Ended June 30, 2016 PREPARED BY: Rudy J. Graciano, Revenue Manager RECOMMENDATION: That the City Council receive and file the City Comprehensive Annual Financial Report (CAFR) as June 30, 2016. BACKGROUND: As required by the Municipal Code and State Law, an independent audit is annually conducted on the City's financial statements. This annual financial report, known as the Comprehensive Annual Financial Report (CAFR), communicates the City's financial condition and activities for the year ended. The City's current independent auditors, Vavrinek, Trine, Day & Co., LLP (VTD) performed the audit for the most recent year ended. This audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The independent auditors unmodified (clean) report provides assurance that the CAFR, and audited information within, fairly presents the City's financial position for the year ending June 30, 2016. This audit is performed in compliance with the City's Municipal Code and General Law requirements. A Letter from the independent auditors regarding their professional responsibilities and an Internal Control Report are also submitted along with this report. The City of Temecula's FY2014-15 CAFR was awarded the Certificate of Achievement in Excellence in Financial Reporting by the Government Finance Officers' Association of the United States and Canada (GFOA) for its CAFR. The City has received this award annually since 1991. Staff anticipates the current CAFR also conforms to the Certificate of Achievement program requirements. FISCAL IMPACT: None ATTACHMENTS: 1. City of Temecula Comprehensive Annual Financial Report for the Year Ended June 30, 2016. 2. City of Temecula Communication with Those Charged with Governance Letter for the Year Ended June 30, 2016. 3. City of Temecula Internal Control Report for the Year Ended June 30, 2016. The Heart of Southern California Wine Country FOR FISCAL YEAR ENDED JUNE 30, 2016 7.7COMPREHENSIVE ANNUAL FINANCIAL REPORT CITY OF TEMECUL Cai+f6inia COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2016 Prepared by: Finance Director 41000 Main Street Temecula, CA 92590 (951) 694-6430 www.cityoftemecula.org Has Heart ...Because Nice Matters "It's clear that kindness is prevalent throughout the Temecula community —it's an attribute that makes our City so very special" and in strong support of Temecula Valley Unified School District's ongoing campaign, "Because Nice Matters" the City of Temecula is expanding the message community- wide in a 2015 initiative entitled "Temecula Has Heart." TS'e Flea' Auk Sout,lern Cafifnrn;a 'NJyny_ Country Fiscal Year 2015-16 Comprehensive Annual Financial Report TABLE OF CONTENTS INTRODUCTION AND OVERVIEW Letter of Transmittal Government Finance Officers Association Award City Organizational Chart Staff Directory FINANCIAL SECTION 9 23 24 25 INDEPENDENT AUDITOR'S REPORT 28 MANAGEMENT'S DISCUSSION AND ANALYSIS 30 BASIC FINANCIAL STATEMENTS Government -Wide Financial Statements: Statement of Net Position 44 Statement of Activities 45 Fund Financial Statements: Balance Sheet — Governmental Funds 46 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 48 Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds 50 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 52 Budgetary Comparison Statement - General Fund 54 Budgetary Comparison Statement - Community Services District 55 Budgetary Comparison Statement — City Housing 56 Budgetary Comparison Statement — Measure A 57 Statement of Fund Net Position — Proprietary Funds 58 Statement of Revenues, Expenses and Changes in Fund Net Position — Proprietary Funds 59 Statement of Cash Flows — Proprietary Funds 60 Statement of Fiduciary Net Position — Fiduciary Funds 61 Statement of Changes in Fiduciary Net Position — Fiduciary Funds 62 Notes to Financial Statements 64 Fiscal Year 2015-16 Comprehensive Annual Financial Report 5 Auk Fiscal Year 2015-16 Comprehensive Annual Financial Report TABLE OF CONTENTS (continued) SUPPLEMENTAL SCHEDULES REQUIRED SUPPLEMENTAL INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios 108 Schedule of Contributions 109 110 Schedule of Funding Progress COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES: Non -Major Funds: Definitions of Non -Major Governmental Funds 113 Combining Balance Sheet 116 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 122 Special Revenue Funds - Budgetary Comparison Schedules: Gas Tax 128 Development Impact 129 CDBG 130 AB 2766 131 AB 3229 COPS 132 Temecula Major Crimes Reward Fund 133 Business Incubator Resource 134 Temecula Energy Efficiency and Asset Management 135 Public, Education & Government Fees (PEG) Fund 136 Capital Projects Funds - Budgetary Comparison Schedule: Capital Outlay 137 Debt Service Funds - Budgetary Comparison Schedule: Financing Lease 138 Internal Service Funds: Definitions of Internal Service Funds 139 Combining Statement of Net Position 140 Combining Statement of Revenues, Expenses and Changes In Fund Net Position 142 Combining Statement of Cash Flows 144 Agency Funds: Definition of Agency Funds 147 Combining Balance Sheet 148 Combining Statement of Changes in Assets and Liabilities 149 Fiscal Year 2015-16 Comprehensive Annual Financial Report 6 Auk T}.e klHs�i i:t •:ani Fiscal Year 2015-16 Comprehensive Annual Financial Report TABLE OF CONTENTS (continued) STATISTICAL SECTION Contents of Statistical Section 151 Locator Map 152 Financial Trends: Net Position by Component — Last Ten Fiscal Years 154 Changes in Net Position — Last Ten Fiscal years 156 Fund Balances of Governmental Funds — Last Ten Fiscal Years 158 Changes in Fund Balances of Governmental Funds — Last Ten Fiscal Years 160 Government -Wide Revenues — Last Ten Fiscal Years 162 Government -Wide Expenses by Program — Last Ten Fiscal Years 163 General Governmental Revenues by Source — Last Ten Fiscal Years 164 General Governmental Expenditures by Function — Last Ten Fiscal Years 165 Revenue Capacity: Principal Secured Property Owners — Last Ten Fiscal Years 168 Property Tax Rates — Direct and Overlapping Governments — Last Ten Fiscal Years 170 Property Tax Levies and Collections — Last Ten Fiscal Years 171 Assessed and Estimated Actual Value of Taxable Property — Last Ten Fiscal Years 172 Debt Capacity: Computation of Direct and Overlapping Bonded Debt 174 Ratio of Outstanding Debt by Type — Last Ten Fiscal Years 176 Ratio of General Bonded Debt — Last Ten Fiscal Years 177 Legal Debt Margin — Last Ten Fiscal Years 178 Pledged Revenue Coverage — Last Ten Fiscal Years 180 Demographic and Economic Information: Demographic and Economic Statistics — Last Ten Calendar Years 182 Largest Employers by Number of Employees 183 Operating Information: Operating Indicators by Function — Last Ten Fiscal Years 186 Full -Time City Employees — Last Ten Fiscal Years 187 Capital Asset Statistics by Function — Last Ten Fiscal Years 188 Comparative City Information —Last Five Fiscal Years 189 Miscellaneous Statistics 190 Fiscal Year 2015-16 Comprehensive Annual Financial Report 7 L�] Fiscal Year 2015-16 Comprehensive Annual Financial Report TRANSMITTAL MESSAGE December 22, 2016 Honorable Mayor, Members of the City Council, and City Manager: Enclosed is the Comprehensive Annual Financial Report of the City of Temecula for the Fiscal Year ended June 30, 2016, which has been prepared by the Finance Department. The responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. The enclosed data is accurate in all material respects and is reported in a manner designed to fairly present the financial position and results of operations of the various major funds and fund types of the City. This report includes all City funds and disclosures necessary to enable the reader to gain an understanding of the City's financial activities. Management of the City is responsible for establishing and maintaining an internal control structure designed to ensure the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data is compiled to allow the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of the control should not exceed the benefits likely to be derived; and, (2) the valuation of costs and benefits requires management estimates and judgment. Budgets are adopted annually by the City Council through resolution. As provided by City ordinance, the Finance Director is responsible for preparing the budget and for its implementation after adoption. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the annual budget adopted by the City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the department level. All appropriations lapse at year-end, except those approved for carryover through encumbrances. The City Manager has the legal authority to transfer operating budget appropriations within a department. Changes to total departmental appropriations require the majority approval of City Council. It is the policy of the City of Temecula to have an audit performed annually by an independent certified public accountant. Vavrinek, Trine, Day & Co., LLP, performed the independent audit of the June 30, 2016 financial statements. Their opinion is included with the basic financial statements. The Management's Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this Letter of Transmittal and should be read in conjunction with it. 9 Fiscal Year 2015-16 Comprehensive Annual Financial Report PROFILE OF THE CITY 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. Temecula is located approximately 55 miles northeast of San Diego and approximately 80 miles southeast of Los Angeles in southwestern Riverside County. Currently, the population is 109,064 and the city limits cover 37.19 square miles. Temecula is a General Law City and five Temecula citizens make up the Temecula City Council with each member elected at large to a four year term of office. The Mayor is appointed annually by and from the City Council. The Temecula Community Services District (TCSD), which was also established in 1989, is responsible for providing parks, recreation, and library services to the citizens of Temecula. The activities of the TCSD are included with the activities of the City for financial reporting purposes because the City Council, serving as the Board of Directors, has full accountability for the TCSD's fiscal matters. The County of Riverside transferred responsibility for the Temecula Redevelopment Agency (RDA) to the City on July 1, 1991. The County established the Redevelopment project area in 1988. In June 2011, the Governor of California signed ABx1 26, which dissolved redevelopment agencies, including the Temecula Redevelopment Agency, effective February 1, 2012, and provided for the designation of successor agencies to oversee the completion of previously obligated redevelopment activities. As a result, all assets of the Redevelopment Agency were transferred to the Successor Agency of the former Redevelopment Agency of the City of Temecula (SARDA) on February 1, 2012, and the City Council began serving as the Successor Agency. The Temecula Public Financing Authority (TPFA) was established pursuant to a Joint Exercise of Powers Agreement, dated April 24, 2001, by and between the City and the former Redevelopment Agency. The City and the former Redevelopment Agency formed the TPFA for the primary purpose of assisting in the financing and refinancing of a community facilities district and the issuance of bonds necessary to finance the public improvements. The TPFA may establish other community facilities districts in the future in connection with the financing of public improvements in the City and could also be used in connection with other City and Agency financings. Council recently approved an amendment to the TPFA to provide for the withdrawal of SARDA as a member and add both TCSD and Temecula Housing Authority as new members. The Temecula Housing Authority (THA) was established on February 22, 2011. The THA was activated pursuant to State law Section 34240 of the California Health and Safety Code, which allows for every City to establish a housing authority. The THA is designed to help protect local housing funds and programs, provide new revenue opportunities for affordable housing programs, serve the public interest, promote public safety and welfare, and ensure decent, safe, sanitary and affordable housing accommodations to persons with low income. The City of Temecula City Council serves as the THA's Commissioners. 10 Fiscal Year 2015-16 Comprehensive Annual Financial Report LOCAL ECONOMY As San Diego County has become increasingly built out, the inland migration of families and enterprises has made Temecula a prosperous City. Based on the latest available information from HDL Companies, for Fiscal Year 2016-17, it is expected that City net taxable values of real property will increase 5.0% from the prior year, while Countywide net taxable values are expected to increase 5.2%. In calendar year 2015, the number of single family residential sales totaled 1,983, an increase of approximately 11.6% compared to the prior year, while the median price of a single family residence was $380,000, an increase of 5.6% compared to the prior year. According to data from the Employment Development Department (EDD), the City's unemployment rate as of September 2016 has improved at 4.6% compared to 4.7% from the same time prior year. This current rate compares favorably to the County and State Unemployment rates of 6.5% and 5.3%, respectively. According to the most recently received report by the Nielsen Company, the City's 2016 average household income is estimated at $94,001, which is 9.5% higher than the prior year. The average household income for the City is expected to rise to $102,777 over the next five years. For Fiscal Year 2015-16, the City issued 275 new construction dwelling units as compared to 256 dwelling permits in Fiscal Year 2014-15. For commercial development, the City issued 17 new building permits for Fiscal Year 2015-16 as compared to 10 permits in Fiscal Year 2014-15. The City continues to maintain a strong and diverse sales tax base by promoting economic development in areas such as advanced manufacturing, light industrial, biotech/bioscience and retail businesses. Sales tax is the single largest General Fund revenue source for the City, comprising approximately 50% of total revenue, including transfers in, for Fiscal Year ended June 30, 2016. Total sales tax revenue for Fiscal Year 2015-16 was approximately $36.2 million, an increase of approximately 14.5% from the previous year. This increase is primarily due to a one time receipt of sales tax as a result of the end of the State of California's "Triple Flip" financing mechanism that began in 2004. Under the Triple Flip, 25% of the City's sales tax revenue was diverted to the State to be used to pay debt service on a $15 billion Economic Recovery Bond, issued under Proposition 57, to close the State's budget deficit. The diverted sales tax was backfilled with a like amount from the County -held ERAF (Educational Revenue Augmentation Fund) account. Temecula continues to exceed the State, County, and surrounding areas with respect to sales per capita. 11 10.71.7 The Heart of Southern CaMifc, .: Wne Country Fiscal Year 2015-16 Comprehensive Annual Financial Report Temecula Riverside County Southern California California QUARTERLY SALES TAX PER CAPITA $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 Q2 03 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 02 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 Source: HDL Companies Total transient occupancy tax revenue in Fiscal Year 2015-16 was approximately 5.9% higher than the previous year. Also, based on data provided by the Temecula Valley Convention and Visitors Bureau, 2015 hotel occupancy and average daily room rates increased 2.0% and 3.7%, respectively, over the prior year. 12 Fiscal Year 2015-16 Comprehensive Annual Financial Report ECONOMIC DEVELOPMENT Temecula's slogan of "Old Traditions and New Opportunities" is alive and well and has been a top priority since incorporation. Temecula has strived to create a future enriched with higher education opportunities, maintaining the highest levels of public safety, expanded job growth, a wide variety of retail, food and entertainment opportunities, and keeping well maintained roads, landscaped medians and beautiful parks at the forefront of our efforts. Community special events have become long time traditions that help define who we are as a City and are important contributors to the high quality of life that our residents have come to know and love. With 50,493 jobs within the city limits, Temecula is the job center for southwest Riverside County. Within the past 24 months, the Office of Economic Development has assisted with half a dozen business expansions and relocations resulting in the job creation of over 400 direct new jobs within the city limits. Our strong industry clusters include: • Biomedical/Biotech/Life Science • Technology • Advanced Manufacturing Technology • Tourism • Retail As one of the top 10% of America's Safest Cities, per FBI statistics, as well as Temecula Unified School District's students' test scores ranking #1 in Riverside County, Temecula is the ideal place for families to relocate and raise their children. Families have room to explore with 40 public parks and over 7,000 acres of open space, which encompasses 29% of the city. Nearly 98% of housing stock in Temecula is within 1/2 mile or closer to a public park. A mountain gap that allows ocean breezes to flow into the City provides a moderate climate, by inland standards, has led to the development of sophisticated wineries. The City continues its efforts to grow and sustain the economy of Temecula through business attraction, retention, workforce development, higher education, tourism, and film. The City partners with the Temecula Valley Chamber of Commerce, Temecula Valley Convention and Visitors Bureau (Visit Temecula Valley), Small Business Development Center, Riverside County Economic Development Agency, Riverside County Workforce Development Agency, and the Economic Development Coalition of Southwest California. These alliances leverage the assets and resources necessary to reinforce our market. Some of the more favorable attributes of Temecula includes a business friendly atmosphere, a high standard of living and high quality of life, a well-educated workforce, competitive housing prices, access to the major ports of Southern California, convenient freeway access, and centralized location between Los Angeles, San Diego, and Orange counties. 13 Fiscal Year 2015-16 Comprehensive Annual Financial Report A Senior/Assisted Living project, with a proposed 1,000 total units, is currently under construction. The addition of these units will double the number of existing units for the City's aging population. For the first time since 2006, the City has received applications for new industrial development totaling approximately 280,000 square feet. The City has also experienced an increase in hotel applications/pre-applications for a total of 650 proposed rooms. Also, on the horizon is a proposed 1,500 unit Specific Plan by Ambient Communities, referred to as the "Altair Project" to be constructed on 270 acres west of Old Town. Business activity within the City of Temecula is also on the rise, with an addition of 768 new business licenses issued, so far, in calendar year 2016. Companies continue to relocate and expand in Temecula. Glasswerks, a large commercial glass manufacturing/distributor recently closed escrow on a 220,000 square foot building in Temecula's Business Park. Also, Hoehn Motors Audi is currently under construction and is on schedule to open in Spring 2017. U.S. Milk Nutrition Inc., a manufacturer who produces and packages store branded infant formula and powdered based nutritional drink mixes to be sold domestically and for export, recently closed escrow on a 108,927 square foot building on Vincent Moraga Road, within Temecula's established business park. The City of Temecula also serves as the retail hub for southwest Riverside County and home to the Promenade Mall, a regional mall featuring over 1 million square feet of eating, dining and entertainment opportunities. In Spring of 2016, the Promenade Mall received Planning Commission approval for a major renovation which includes removing the roof off an entire wing and adding new retailers and restaurants, including upscale tenants. The Promenade Mall plans to start construction in Spring 2017. The City remains engaged in business retention and expansion efforts and actively supports the Temecula Valley Chamber of Commerce's "Shop Temecula First" campaign. The City, in partnership with the Chamber of Commerce and Convention and Visitor's Bureau has recently partnered with our local craft breweries to establish a Brewer's Guild. The Brewer's Guild consists of the City's 9 craft breweries. The goal is to foster and grow this industry- both by growing our existing breweries as well as attracting new ones. The City of Temecula continues to grow and expand in order to provide even more services to its community. The City continues to work with colleges and universities to develop multiple higher education opportunities. For the past few years, California State University San Marcos at Temecula (CSUSM) has offered degrees, classes and certificates at its satellite campus on Margarita Road in Temecula. CSUSM at Temecula is the only public higher education beyond community college in Southwest Riverside County. CSUSM at Temecula has recently entered into an agreement with Mt. San Jacinto Community College (MSJC) and the City to establish 14 33 r e wF, oP P,a0n11er-:, Fiscal Year 2015-16 Comprehensive Annual Financial Report the Temecula Higher Education Center (THE Center) at the City's former City Hall location on Business Park Drive. Students attending THE Center can earn an associate degree in two years from MSJC and a bachelor's degree in Business Administration in two years from CSUSM. The tuition rate is locked in for all four years, with a guaranteed degree in four years, if all program requirements are met successfully. LONG TERM FINANCIAL PLANNING The City's continued control over expenditure growth has been and will continue to be a key factor in maintaining the City's strong financial position. The City continues to search for opportunities to streamline its workload and operations, while ensuring adequate staffing levels to maintain service levels without reducing essential public services. Through its budget process, the City has also maintained its policy of designating 25% of General Fund appropriations as reserves for economic uncertainties and contingencies. Pursuant to City policy, the five-year financial projection is developed as part of the budget process. This five-year financial forecast was developed to assist in long range planning and policy development. The five-year forecast provides a tool to evaluate the ability of the City to fund proposed programs, operating and maintenance costs, capital expenditures, as well as operating costs related to future capital improvement projects. The Five Year Financial Projection indicates a looming structural deficit, beginning in FY2017- 18, which annual revenues are not adequate to cover annual operating expenditures. Rising costs of Public Safety contracts, combined with rising CaIPERS rates are the primary cause of the budget imbalance. Authorized staff positions have been held steady since 2012 and several Public Safety positions have been held vacant to contain cost escalation and remain balanced through the current fiscal year. The Executive Staff is working diligently to identify reduction measures necessary to balance the remainder of the Five Year and ensure long-term solvency for the City's General Fund. The value of long-range fiscal planning is to proactively alert decision makers early enough to course -correct, and implement the necessary measures to ensure long-term fiscal solvency. The City of Temecula is fortunate to have a strong revenue base, however the City is no longer in its expansion phase and future revenue growth is limited. 15 Fiscal Year 2015-16 Comprehensive Annual Financial Report FY 2016-17 FIVE YEAR FINANCIAL PROJECTION 84,000,000 80,000,000 76,000,000 72,000,000 68,000,000 64,000,000 60,000,000 56,000,000 General Fund 5 -Year Projections Revenues over Expenditures $4.3M Gap Actuals Beginning of Structural Deficit Projected 1 FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 Expenditures —Revenues FY20-21 Revenues were projected using a conservative approach, and are based on historical trends, stable residential development projections, and commercial growth that incorporates known development projects. Separate sets of assumptions were developed for major revenue types such as sales tax, property tax, community development fees, transient occupancy taxes, and investment income. Departmental expenditure projections are developed using anticipated cost of living increases for general and administrative operating costs. Additional assumptions were incorporated for major expenditure categories such as public safety to ensure that commercial and residential growth projections were addressed to maintain current service levels. The five-year capital improvement program was also reviewed with the annual operating and maintenance costs of each proposed project identified and included in the forecast. The following is an illustration of the projected Fund Balance, compared to the required 25% Reserves. Beginning in Fiscal Year 2019-20, due to the structural imbalance, the City would fall short of meeting the required reserve. By Fiscal Year 2020-21, the shortfall is projected to total $7.9 million if expenditure reduction measures or revenue enhancements are not implemented. 16 Fiscal Year 2015-16 Comprehensive Annual Financial Report 30,000,000 26,000,000 22,000,000 18,000,000 14,000,000 10,000,000 General Fund 5 -Year Projections Fund Balance Trend Actuals Projected 0 FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21 Fund Balance —Funded Reserve Desired Reserve As mentioned previously, the primary cause of the looming deficit is that revenues are not increasing at the same level as Public Safety costs. Below is a chart illustrating the rising cost of Police and Fire Services. From 2009-10, the actual cost of Police Services have increased by 17%, or $3.5 million. Fire Services over the same period have increased by 21%, or $885k. Projections over the next five year for Police reflect an increase of 51%, or $12.1 million. Fire Services costs are projected to increase 77%, or $4 million, which includes the staffing of a new Fire Station in Fiscal Year 2020-21. In order to remain fiscally solvent, the City must address these rising public safety costs to ensure ongoing revenues are adequate to cover ongoing expenditures. As such, the City has joined other Riverside County cities that contract for Police Services to study alternative, more cost effective law enforcement delivery models. Additionally, City management staff has created several possible scenarios comprising expenditure reduction measures that will be necessary to balance the General Fund and ensure long-term fiscal solvency. 17 Fiscal Year 2015-16 Comprehensive Annual Financial Report 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 City of Temecula Public Safety Expenditure Trends a--- Actual Expenditures ----> <--- Projected Expenditures ----> 24,333,713 FI 44,806,373 1 532p12'13 „i2g13.14 0,02415 Fy1p1S-16 p,o1 Public Safety Total 5- Even with the City's responsible fiscal management and cost containment efforts, added public safety responsibilities and rising costs coupled with State takeaways and other external challenges, continue to place a heavy burden on the City's budget and resources. In order to balance the five-year financial forecast, the City can only reduce expenditures, increase revenues, or do a combination of both. Expenditure reductions and cost containment efforts have been ongoing for the last decade. Vacancies in positions, reductions in non -personnel related costs, and continued deferral of maintenance and contributions to asset management programs are now starting to impact service delivery to a community that values and deserves a high quality of life in its services and programs. As such, new revenue generation is also being recommended as an option. Last year, the City Council formed an ad hoc subcommittee to address the City's fiscal challenges and focus on strategic fiscal planning in order to provide for the ongoing needs of the City as it evolves into its next stage. City Council requested staff develop an action plan to initiate a community outreach program to discuss the City's future budgetary challenges. Working with a consultant, the City conducted community -wide focus group discussions. These results demonstrated that the Temecula community values its high quality of life and wishes to maintain and prevent cuts to its essential services. 18 Fiscal Year 2015-16 Comprehensive Annual Financial Report On July 26, 2016, the Temecula City Council voted unanimously to place the City of Temecula Emergency Response, Public Safety, and Vital City Services Measure, or Measure S, on the November 2016 ballot. Measure S will add 1 cent per dollar to be spent locally in Temecula only, without being subject to State takeaways, increasing the current sales tax rate from 8% to 9%. A one cent increase is expected to generate an estimated $23 million annually and approximately 50% of this amount is expected to be paid by nonresidents through imported sales transactions. On December 6, 2016, the Riverside County Registrar of Voters certified the passage of Measure S. The additional one cent sales tax increase is expected to go in effect beginning April 1, 2017. The City Council annually adopts the five-year Capital Improvement Program (CIP) budget, which serves as a planning tool to coordinate the financing and scheduling of major projects undertaken by the City. The Capital Improvement Program budget is revised each year to address changing needs, priorities, and financial conditions. The budget is developed based on community comments and feedback, availability of funding, and priority ranking guidelines set by City Council. Through workshops, proposed projects are defined by category, i.e., Circulation Projects, Infrastructure/Other Projects, Parks/Recreation Projects, and Successor Agency to the Temecula Redevelopment Agency (SARDA) Projects. Overall, Fiscal Years 2017-21 total projected cost to complete is $352,896,719. A total of forty nine (49) projects are included in the program, consisting of nineteen (19) Circulation projects, twenty three (23) Infrastructure projects, six (6) Parks and Recreation projects, and one (1) Housing project. The following illustrates the associated costs for each project classification and total cost: Type of Project Number of Projects Cost of Projects Circulation 19 $299,177,754 Infrastructure / Other 23 35,031,390 Parks and Recreation 6 6,206,943 SARDA / Housing 1 12,480,632 TOTAL 49 $352,896.719 19 Fiscal Year 2015-16 Comprehensive Annual Financial Report Revenue from various identified sources for the Five -Year Capital Improvement Program is projected to be $196,274,691. The City of Temecula five-year CIP is a project planning and delivery document which includes several projects with unidentified funding sources in the third, fourth, and fifth years of the five-year program, totaling $158,100,478. The City is continually exploring and applying for federal, state and regional funding opportunities to enable the delivery of these currently unfunded projects. The five-year CIP is updated annually and newly secured revenues are programmed toward prioritized projects that may be shown as unfunded at this time. Although total project costs for the entire five-year CIP is $352,896,719, there is sufficient revenue secured to fund the estimated project cost through the first two years of the five-year program, with over $98,962,523 in funded projects in Fiscal Year 2016-17. Some of the notable CIP projects include: • French Valley Parkway/Interstate-15 Over -Crossing and Interchange Improvements • Interstate -15 / State Route 79 South Ultimate Interchange • Murrieta Creek Bridge and Overland Drive Extension • Pechanga Parkway Widening • City Facilities Enhancement • Citywide Sidewalks • Bike Lanes and Trail Program • Library Parking - Phase II • Temecula Park and Ride • Evaluation of Disabled Access To City Facilities • Children's Museum Enhancement Project • Flood Control Channel Reconstruction and Repair • Playground Equipment Enhancement and Safety Surfacing • Sam Hicks Monument Park Playground Enhancement RELEVANT FINANCIAL POLICIES The Fund Balance Policy pursuant to Governmental Accounting Standards Board (GASB) Statement No. 54, authorizes the Finance Director to work with the City Manager to assign fund balance classifications for the purpose of annual financial reporting. The Interfund Transfers and Loans Policy distinguishes between Interfund Transfers and Interfund Loans and allows for loans within appropriate funds whenever repayment is expected within the immediate future. Restricted fund balance should be spent first when an expenditure is incurred for which both restricted and unrestricted fund balance is available. When an expenditure is incurred for purposes where amounts in any of the unrestricted classifications of fund balance could be used, committed amounts are considered to be spent first, followed by assigned amounts and then unassigned amounts. 20 Fiscal Year 2015-16 Comprehensive Annual Financial Report It is City policy to maintain total reserves of 25% of Annual General Fund appropriations. This reserve would be used to finance any significant unanticipated revenue shortfalls, significant unanticipated expenditures, negative State budget impacts, impacts from natural disasters or other catastrophic events, significant payouts of Comprehensive Annual Leave, or making one- time investments in infrastructure that will create financial benefit to the City. The City's fiscal policies define a balanced budget as one where operating revenues are equal to or greater than operating expenditures. Ending fund balance in the General Fund for Fiscal Year 2015-16 meets the minimum policy level of 25% of operating expenditures. It is allowable for total expenditures to exceed revenues in a given year, but beginning fund balance can only be used to finance expenditures such as Capital Improvement Plan projects or one-time expenditure projects. The City has established a policy of annually focusing on reorganizing department structures in an effort to streamline processes and enhance efficiencies without reducing essential public services to the community. The City Manager's Office annually reviews the organizational structure of each department to ensure that employees are effectively functioning to address the level of service needs of the department and are in accordance with the City's classification plan. In the Fiscal Year 2016-17 Adopted Budget, the authorized Full Time Equivalent (FTE) positions remained unchanged from Fiscal Year 2015-16, totaling 158.2 authorized positions. MAJOR INITIATIVES In September 2016, the City launched a redesigned website in an effort to enhance on-line transparency and create a more user-friendly site for its residents, businesses, and visitors. The website has a fresh look and feel, while providing a citizen -centric navigation platform to easily and quickly access popular services, certain permits to Community Development, as well as track the status of these submittals electronically through the permit process. In December 2015, the City Council finalized its Uptown Temecula Specific Plan. Formerly known as the Jefferson Avenue area, Uptown Temecula is located just north of Old Town in Temecula and encompasses approximately 560 acres north of Rancho California Road and west of Interstate 15, with Jefferson Avenue being the primary corridor. The future vision of Uptown Temecula is a vibrant, pedestrian -friendly, urban area within the City that allows for mix of uses ranging from eight story full service hotels to multi-level residential, mixed use, and commercial uses; depending on the designated zoning district. In February 2016, the City hosted the First G.O.A.L. (Giving Opportunities to ALL...The Temecula Way) Luncheon with the Mayor This event provided unique opportunities for the business community to partner with the City in order to improve employment outcomes for individuals with disabilities. The objective of the luncheon was for businesses to learn about the benefits of hiring, retaining, and advancing people with disabilities. 21 Fiscal Year 2015-16 Comprehensive Annual Financial Report Recently, the City, along with the cities of Murrieta, Wildomar, and Lake Elsinore, received a merit award for their joint effort on the Murrieta Creek Regional Trail Plan. This project focuses on the development of a multi -use trail along the Murrieta Creek corridor that will connect the four cities. This is a long term project to be funded and developed by the Riverside County Flood Control District and U.S. Army Corps of Engineers. The City of Temecula was recently recognized by SmartTravel.Tips as the #3 Best Places to Live in California. Criteria for recognition was based on a number of different factors: weather, average income per household, house prices, quality of living which include air quality, unemployment and crime rates, services and facilities like hospitals, restaurants, shopping, businesses, sporting facilities, entertainment; and commuter times. The City's most recent Community Opinion Survey Research Report, an integral part of the Quality of Life Master Plan process to help ensure the City's priorities and goals remain aligned with citizen input, found that 95% of residents rated the quality of life in Temecula as excellent or good. The most common response for what residents liked most about living in Temecula was its small town feel and community involvement, followed by low crime rate and cleanliness. Also, 93% of residents indicated they were satisfied with the City's performance of municipal services, while 78% reported being satisfied with the City's efforts to communicate with them. According to the Survey, traffic congestion is the primary concern, and the priority for future City spending should be for infrastructure improvements to improve traffic circulation, followed by providing incentives to attract new employers and jobs to the City. ACKNOWLEDGMENTS Preparation of the City's Comprehensive Annual Financial Report is an undertaking of the Finance Department. Special credit is due to Rudy J. Graciano CPA, Revenue Manager, Pascale Brown, Accounting Manager, Jada Shafe, Accountant Technician II, and Shirley Robinson, Administrative Assistant, as well as the entire Finance Department staff. Their year- long hard work and dedication have made this report possible. I would like to express my appreciation to the City Manager, City Council, and the Finance Committee for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Sincerely, Peaget gegwedde, Jennifer Hennessy Finance Director 22 The Heart of Southern Caliiornra Wine Cov,try GOVERNMENT FINANCE OFFICERS ASSOCIATION AWARD Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Temecula California For its Comprehensive Annual Financial Report for the Fiscal Year Eroded June 30, 2015 Executive Director{ EO 4 Fiscal Year 2015-16 Comprehensive Annual Financial Report 23 CITY ORGANIZATIONAL CHART Citizens of Temecula City Attorney City Clerk City Council City Manager Commissions i Finance Public Works Human Resources Economic Development Community Development Information Technology/Support Services Community Services Police / Fire Emergency Management Fiscal Year 2015-16 Comprehensive Annual Financial Report 24 The Heart of Southern Californra Wine Country DIRECTORY EXECUTIVE MANAGEMENT: City Manager Aaron Adams Assistant City Manager Greg Butler City Clerk Randi Johl-Olson City Attorney Peter M. Thorson Finance Director Jennifer Hennessy Community Development Director Luke Watson City Engineer Tom Garcia Community Services Director Kevin Hawkins Information Systems Director Michael Heslin Human Resources Manager Isaac Garibay Chief of Police Jeff Kubel Fire Chief Charlie DeHart CITY OF TEMECULA CAFR TEAM: Finance Director Jennifer Hennessy Revenue Manager Rudy Graciano Accounting Manager Pascale Brown Accountant Technician II Lada Shafe Administrative Assistant Shirley Robinson Fiscal Year 2015-16 Comprehensive Annual Financial Report 25 a The Heart of Southern California Wine Country INDEPENDENT AUDITOR'S REPORT 27 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants INDEPENDENT AUDITORS' REPORT To the City Council City of Temecula, California Report on the Financial Statements VALUE THE DIFFERENCE We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Temecula, California (City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof and the respective budgetary comparison statements for the General Fund and each of the major special revenue funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. 28 19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.3010 Emphasis of Matter As described in Note 1 to the financial statements, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, effective July 1, 2015. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 30-42, schedule of changes in the net pension liability and related ratios, schedule of contributions, and other post -employment benefits schedule of funding progress on pages 108-110, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2016, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Riverside, California December 22, 2016 29 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS (See Independent Auditor's Report) As management of the City of Temecula, we offer readers of the City of Temecula's financial statements this narrative overview and analysis of the financial activities of the City of Temecula for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the Introductory Section of this report, and with the City's financial statements which follow this discussion. FINANCIAL HIGHLIGHTS Government Wide Financial Highlights • The assets of the City of Temecula exceeded its liabilities at June 30, 2016, by $732 million (net position). • Temecula's total net position decreased by approximately $395,000. This decrease was the result of total revenues of governmental activities of $93.5 million ($36.1 million in program revenues and $57.4 million in general revenues) offset by $93.9 million in total costs of governmental activities. • As of June 30, 2016, the City of Temecula's governmental funds had reported combined ending fund balances of $83.9 million, an increase of $13.8 million as compared to the prior year. Of this total, approximately $40.4 million, or 48% of the total fund balance, are either non -spendable or restricted due to the nature of the restriction. • As of June 30, 2016, fund balance of approximately $203,000 was committed for Contractual Obligations. • The City of Temecula's total long-term liabilities decreased by approximately $1.3 million during fiscal year 2015-16. This decrease was primarily due to debt service paid on the 2011 Financing Lease. OVERVIEW OF THE FINANCIAL STATEMENTS The Management's Discussion and Analysis is intended to serve as an introduction to the City of Temecula's basic financial statements. The City of Temecula's basic financial statements comprise three components: 1) Government -Wide Financial Statements; 2) Fund Financial Statements; and, 3) Notes to the Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves. 30 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) GOVERNMENT -WIDE FINANCIAL STATEMENTS The government -wide financial statements are designed to provide readers with a broad overview of the City of Temecula's finances in a manner similar to a private -sector business. The statement of net position presents information on all the City of Temecula's assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Temecula is improving or deteriorating. The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying events giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). The government -wide financial statements present information about the functions of the City of Temecula that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the City of Temecula include general government, public safety, public works, community services, and community development. The government -wide financial statements can be found on pages 44-45 of this report. FUND FINANCIAL STATEMENTS A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Temecula, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City of Temecula can be divided into three categories: governmental funds; proprietary funds; and, fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds are narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. 31 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Both the governmental funds balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Temecula maintains various individual government funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Community Services District Special Revenue Fund, City Housing Special Revenue Fund, Measure A Special Revenue Fund, Capital Outlay Capital Projects Fund, and Roripaugh CFD No.03-02 Capital Projects Fund, all of which are considered to be major funds. Data from other governmental funds are combined into a single, aggregate presentation. Individual fund data for each of these other governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 46-47 and 50-51 of this report. The City of Temecula adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. Proprietary Funds. The City of Temecula maintains various internal service funds. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Temecula's various functions. The City of Temecula uses internal service funds to account for its self-insurance activities, workers' compensation activities, vehicles, information technology, technology replacement, support services and facilities. Because these services benefit governmental functions, they have been included within governmental activities in the government -wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 58-60 of this report. Fiduciary Funds. Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the City of Temecula's own programs. The basic fiduciary fund financial statements can be found on page 61 of this report. NOTES TO THE FINANCIAL STATEMENTS The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 64-106 of this report. 32 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) OTHER INFORMATION The combining statements referred to earlier in connection with other governmental funds, internal service funds, and schedules of revenues, expenditures, and changes in fund balance - budget and actual can be found beginning on page 116 of this report. Summary of Net Position as of June 30, 2016 and June 30, 2015: Current and Other Assets Capital Assets TOTAL ASSETS Deferred Amounts on Pension TOTAL DEFERRED OUTFLOWS Current and Other Liabilities Long Term Liabilities TOTAL LIABILITIES Deferred Amounts on Pension TOTAL DEFERRED INFLOWS Governmental Governmental Activities for 2016 Activities for 2015 $ 130,856,671 $ 122,476,934 665,984,172 677,044,010 796,840,843 799,520,944 3,139,761 2,657,983 3,139,761 2,657,983 13,521,202 51,909,528 14,023,238 50,986,978 65,430,730 65,010,216 2,089,196 4,313,382 2,089,196 4,313,382 NET POSITION: Net Invested in Capital Assets 652,338,794 653,887,810 Restricted 40,102,473 35,846,917 Unrestricted 40,019,411 43,120,602 TOTAL NET POSITION $ 732,460,678 $ 732,855,329 33 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Total Current and Other Assets increased by $8.4 million primarily due to higher pooled cash balances in various funds due to operational savings in various funds and the receipt of monies pursuant to the Pechanga Intergovernmental agreement for future road improvements. Capital assets decreased by $11.1 million primarily due to current year depreciation on assets that are in service. Total liabilities increased by $421,000 primarily due to the addition of a capital lease for storage areas network servers. The net position of the City of Temecula decreased by approximately $395,000 at June 30, 2016 due to total governmental expenses of $93.9 million exceeding total governmental revenues of $93.5 million. The government -wide financial statements provide long-term and short-term information about the City's overall financial condition. This analysis addresses the City's financial statements as a whole. The largest portion of the City's net position (89.1%) reflects the investment in capital assets (e.g., buildings, machinery and equipment), less any related debt used to acquire those assets that are still outstanding. The City of Temecula uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Temecula's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City's net position (5.5%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of the City's net position (5.4%) may be used to meet Temecula's ongoing obligations to citizens and creditors. The decrease of $3.1 million is primarily due to the recognition of pension and other post employment benefit expenses. GOVERNMENTAL ACTIVITIES Governmental activities decreased the City of Temecula's net position by approximately $395,000, thereby accounting for 100% percent of the total change in the net position of the City of Temecula. Key elements of this change are as follows: 34 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Summary of Changes in Net Position for the years ended June 30, 2016 and June 30, 2015: Governmental Governmental Activities for Activities for 2016 2015 REVENUES: Program Revenues: Charges for Services $ 21,841,040 $ 21,695,719 Operating Grants and Contributions 4,104,939 4,516,067 Capital Grants and Contributions 10,130,756 8,117,128 General Revenues: Taxes: Property Taxes 17,485,712 16,802,422 Transient Occupancy Taxes 3,184,162 3,008,061 Sales Taxes 31,466,457 32,395,358 Franchise Taxes 3,794,085 3,788,590 Other Taxes 982,800 1,050,840 Intergovernmental Revenue -Motor Vehicles in Lieu 43,947 43,558 Use of Money and Property 310,350 159,425 Other 135,033 551,496 TOTAL REVENUES EXPENSES: General Government Public Safety Community Development Community Services Public Works Interest on Long Term Debt TOTAL EXPENSES Increase in Net Position Net Position - Beginning of Year Net Prior Period Adjustments Net Position - Beginning of Year (As Restated) 93,479,281 92,128,664 8,982,725 31,107,607 20,119,306 18,919,505 13,902,922 841,867 10,131,815 29,532,079 20,429,335 18,819,798 15,570,577 890,953 93,873,932 95,374,557 (394,651) (3,245,893) 732,855,329 763,994,627 (27,893,405) 732,855,329 736,101,222 Net Position - End of Year $ 732,460,678 $ 732,855,329 35 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) • Operating grants and contributions decreased by approximately 9.1% primarily due to reduced allocations of Section 2103 gasoline excise revenues. • Capital grants and contributions increased by approximately 25% primarily due to Transportation Uniform Mitigation Fees received from Riverside County Transportation Commission and Western Riverside Council of Governments for various capital improvement projects. • Property Taxes revenue increased by approximately 4.1% primarily due to higher assessed valuations on properties within the City. • Transient Occupancy Taxes revenue increased approximately 5.8% primarily due to increases in average room rates and occupancy. • Sales Taxes revenue decreased by approximately 2.9% primarily due to differences in earned triple flip sale taxes estimated and recognized in FY14-15 and expected to be realized in FY15-16 was higher than the actual realized amount. • Use of Money and Property increased by approximately 95% primarily due to improved interest rates and changes in fair value of investments. • Other revenue decreased by approximately 75% primarily due to higher residual receipts distributions and housing loan repayments received in the prior fiscal year. • General government expenses decreased by approximately 11.3% primarily due to the one-time allocation of funds into the pavement management program in the prior fiscal year. • Public Safety expenses increased by approximately 5.3% primarily due to higher police contractual costs related to Riverside County employee labor agreements and the implementation of a new communications system. • Public Works expenses decreased approximately 10.7% primarily due to decreased streets and drainage facilities maintenance. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS The City of Temecula uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental Funds. The focus of the City of Temecula's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Temecula's financing requirements. In particular, unassigned fund balance may serve as a useful measure of the government's net resources available for spending at the end of the fiscal year. 36 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Proprietary Funds. The City of Temecula's proprietary funds are the internal service funds, which are used to account for activities and services performed for other departments within the City on a cost reimbursement basis. The major factors in fund balance changes are as follows: • The General Fund recognized an increase of approximately $6.1 million primarily due to operating savings in various departments due to vacant positions, savings in consulting services, and savings in utilities. Higher than expected sales taxes due to growth in the auto, business, and industry sectors also contributed to the increase in fund balance. • The Community Services District Special Revenue Fund recognized an increase of approximately $1.2 million primarily due to operational savings in various programs due to vacant positions and savings in utilities. • The City Housing Fund Special Revenue Fund recognized an increase of approximately $269,000 primarily due to savings in salaries, and outside and legal services. • The Measure A Special Revenue Fund recognized an increase of approximately $1.3 million primarily due to savings in routine street and drainage maintenance services. • The Capital Outlay Capital Projects Fund recognized an increase of approximately $4.1 million primarily due to monies received pursuant to the Pechanga Intergovernmental agreement to pay for various road improvements. • The Roripaugh CFD #03-2 Capital Projects Fund recognized a decrease of approximately $143,000 primarily due to reimbursements to developers and contractors for work completed on the Butterfield Stage Road project, which were funded from proceeds of bonds issued in a prior fiscal year. • Other Governmental Funds, which are nonmajor funds, recognized a combined increase of approximately $900,000. In these funds, fund balances are often accumulated prior to their transfer to the Capital Outlay fund, where they are used to pay for capital improvement construction costs. These funds are further detailed beginning on page 116 of this report. GENERAL FUND BUDGET HIGHLIGHTS The difference between the original budget and the final amended budget reflects a $568,323 increase in appropriations, including operating transfers out, and can be briefly summarized as follows: • The net increase of $363,098 in Non -Departmental is primarily due to funding various reserve accounts for Separation/Comprehensive Annual Leave payouts and Classification Plan transitions. The accounts were designed to assist departments when filling vacant positions using Classification Plan recommendations. 37 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) • The net increase of $131,076 in Police is primarily due to increases in anticipated booking fees, CAL ID program costs, and miscellaneous costs. • The net increase of $67,817 in City Manager primarily due to increased costs related to the community survey, feasibility of a law enforcement joint powers authority, and community outreach publications. • The net decrease of $391,930 in Fire primarily due to a higher structural fire tax credit which offset contractual costs with the County of Riverside. Actual revenues, excluding transfers in, received for the General Fund were $1,038,802 higher than budget and are summarized as follows: • Taxes are higher than budget by $703,004 primarily due to increases in sales tax as a result of growth in the automobile and building and industry sectors, offset by lower than anticipated property transfer and transient occupancy taxes. • Licenses and Permits revenues are higher than budget by $302,711 primarily due to the issuance of higher than anticipated new building projects. • Use of Money and Property is higher than budget by $100,103 primarily due to improved interest rates and changes in the fair value of investments. • Miscellaneous revenues are less than budget primarily by $73,472 primarily due to less Police fees received for fingerprinting and other various services. Actual expenditures, excluding transfers out, were $4,021,796 less than budget as follows: • Public Works had expenditure savings of $911,156 primarily due to lower National Pollutant Discharge Elimination System program costs due to a dry winter, lower utilities and landscape maintenance costs, as well as vacant positions that resulted in salaries savings and internal service fund allocation savings. • Police had expenditure savings of $900,486 primarily due to vacant Community Service and Motor Officer positions. • Community Development had expenditure savings of $603,573 primarily due to less consultant services and vacant positions that resulted in salaries savings and internal service fund allocation savings. • Fire had expenditure savings of $573,210 primarily due to personnel increases that did not occur during the fiscal year, as anticipated. • Non -Departmental had expenditure savings of $347,928 primarily due to savings in reserve accounts created to assist departments in filling vacancies and implementing Class Plan recommendations. As operating departments had available savings, it wasn't necessary to utilize these reserve accounts. 38 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) • Finance had expenditure savings of $172,375 primarily due to savings in consulting services and vacant positions that resulted in salaries savings and internal service fund allocation savings. • City Attorney had expenditure savings of $146,747 due to lower than anticipated litigation costs. • City Manager had expenditure savings of $104,062 primarily due to savings in consulting services and vacant positions that resulted in salaries savings and internal service fund allocation savings. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets. The City of Temecula's capital assets for its governmental activities as of June 30, 2016, amounts to approximately $665.9 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, park facilities, roads, highways, and bridges. The total net decrease in the City of Temecula's capital assets for the current fiscal year was 1.6%. Major capital asset events during the current fiscal year include the following: • Completed reconstruction of Fire Station 73. • Completed improvements on various storm drains. • Completed construction on the Ronald Regan Sports Park Channel Silt Removal and Desilting Pond. • Completed Theater remediation and LED lighting projects. 39 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Summary of Changes in Capital Assets for the year ending June 30, 2016: GOVERNMENTAL ACTIVITIES Capital Assets Not Being Depreciated: Land Right of Way Construction in Progress Total Capital Assets Being Depreciated: Building Improvements other than Buildings Vehicles, Machinery, and Equipment Furniture and Fixtures Infrastructure Total Less Accumulated Depreciation for: Buildings Improvements other than Buildings Vehicles, Machinery, and Equipment Furniture and Fixtures Infrastructure Total Total Capital Assets Being Depreciated: Total Capital Assets -Net Balance at June 30, 2015 Balance at Increase Decrease June 30, 2016 $ 78,230,539 $ 68,738,629 56,580,686 2,265,122 $ - $ 78,230,539 68,738,629 (3,023,159) 55,822,649 203,549,854 2,265,122 (3,023,159) 202, 791, 817 112,679,425 5,443,108 58,377,033 476,835 16,215,342 1,287,176 6,063,875 48,487 546,900,890 3,060,797 118,122,533 58,853,868 (14,186) 17,488,332 6,112,362 (397,819) 549,563,868 740, 236, 565 10, 316, 403 (412,005) 750,140,963 (22,687,667) (17,027,748) (13,275,143) (6,049,257) (207,702,594) (2,681,173) (2,093,307) (1,020,633) (7,165) (14,815,926) (25,368,840) (19,121,055) 14,186 (14,281,590) (6,056,422) 397,819 (222,120,701) (266,742,409) (20,618,204) 412,005 (286,948,608) 473,494,156 463,192,355 $ 677,044,010 $ (8,036,679) $ (3,023,159) $ 665,984,172 Additional detail on capital assets is available in Note 4 to the financial statements on page 82. Long -Term Debt. At the end of the current fiscal year, the City of Temecula had a total long- term debt outstanding of approximately $22.6 million which is comprised of financing and capital leases backed by the full faith and credit of the General Fund. During the current fiscal year, long-term debt decreased approximately $1.3 million primarily due to debt service payments on the 2011 Financing Lease. Also during the current fiscal year, the City issued $751,519 capital lease for storage area network servers. 40 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Summary of Changes in Long Term Debt for the year ended June 30, 2016: Financing Lease and Capital Leases: 2011 Financing Lease Capital Leases Payable Balance Balance Due Within June 30, 2015 Additions Deletions June 30, 2016 One Year $ 23,050,000 $ - $ 1,291,000 $ 21,759,000 $ 1,343,000 106,200 751,519 54,185 803,534 174,432 Total Financing Lease and Capital Leases $ 23,156,200 $ 751,519 $ 1,345,185 $ 22,562,534 $ 1,517,432 Additional information on long-term debt is available in Note 6 to the financial statements on pages 84-85. Economic Factors and Next Year's Budgets and Rates The key assumptions in the General Fund revenue budget for Fiscal Year 2016-17 were: General Fund estimated revenues, net of operating transfers in, are estimated to reach $67,068,175, a decrease of $303,978 from Fiscal Year 2015-16 actual revenues. This increase is primarily due to: 1. Sales and Use Tax revenues, which represent 50% of total FY16-17 estimated General Fund revenues, are estimated to decrease $1,610,656, or 4.4%, from fiscal year 2015- 16 actual revenue. This decrease is primarily due to a one time receipt in 2015-16 of approximately $3.2 million in sales tax as a result of the end of the State of California's "Triple Flip" financing mechanism, offset by anticipated growth in various business sectors. 2. Intergovernmental revenues, which represent 11% of total FY16-17 estimated General Fund revenues, are estimated to increase $272,431, or 3.8%, from Fiscal Year 2015-16 actual revenue primarily due to assessed valuation of citywide property. 3. Transient Occupancy Tax revenue is estimated to increase $356,252, or 11.2%, from Fiscal Year 2015-16 actual revenue primarily due to an anticipated increase in average room rates and hotel occupancy. 4. Total property taxes are estimated to increase $257,139, or 4.0%, from Fiscal Year 2015-16 actual revenue primarily due to an anticipated increase in assessed valuations of property as properties continue to be re -valued after the Great Recession. 41 Fiscal Year 2015-16 Comprehensive Annual Financial Report MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) 5. Community development revenues are estimated to decrease $521,101, or 11.7%, from Fiscal Year 2015-16 actual revenue primarily due to delays in projects built in the City. All of these factors were considered in preparing the City of Temecula's annual operating budget for Fiscal Year 2016-17. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Temecula's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to City of Temecula Finance Department, 41000 Main Street, Temecula, California 92590. The City's Comprehensive Annual Financial Report can also be found on the City's website at http://temeculaca.gov/309/Financial-Reports. 42 33 The Heart of Southern California Wine Country BASIC FINANCIAL STATEMENTS 43 CITY OF TEMECULA, CALIFORNIA STATEMENT OF NET POSITION JUNE 30, 2016 Governmental Activities Assets: Cash and investments $ 63,332,557 Receivables: Accounts 3,315 Taxes 1,611,665 Notes and loans 26,338,124 Accrued interest 184,797 Other receivables 160,950 Prepaid costs 54,994 Deposits 1,325 Due from other governments 13,546,025 Inventories 3,058 Land held for resale 4,400,388 Restricted assets: Cash with fiscal agents 13,645,378 Net OPEB asset 2,323,141 Advance to the Successor Agency of the former RDA 5,250,954 Capital assets not being depreciated 202,791,817 Capital assets, net of depreciation 463,192,355 Total Assets 796,840,843 Deferred Outflows of Resources Deferred amounts on pension 3,139,761 Total Deferred Outflows of Resoures 3,139,761 Liabilities: Accounts payable 8,317,546 Accrued liabilities 430,084 Accrued interest 91,193 Deposits payable 3,365,969 Unearned revenues 1,316,410 Noncurrent liabilities: Due within one year 2,177,525 Due in more than one year 22,247,308 Net Pension Liability 27,484,695 Total Liabilities 65,430,730 Deferred Inflows of Resources Deferred amounts on pension 2,089,196 Total Deferred Inflows of Resources 2,089,196 Net Position: Net investment in capital assets 652,338,794 Restricted for: Community development projects 17,466,137 Capital projects 18,713,202 Community services 3,923,134 Unrestricted 40,019,411 Total Net Position $ 732,460,678 See Accompanying Notes to Financial Statements. 44 CITY OF TEMECULA, CALIFORNIA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Expenses Net (Expenses) Revenue and Change Program Revenues in Net Position Operating Capital Net Charges for Contributions Contributions Governmental Services and Grants and Grants Activities Functions/Programs Primary Government: Governmental Activities: General government $ 8,982,725 $ - $ 128,043 $ - $ (8,854,682) Public safety 31,107,607 1,686,485 413,080 214,630 (28,793,412) Community development 20,1 19,306 4,012,311 258,786 3,1 10,325 (12,737,884) Community services 18,919,505 12,577,838 4,178 (6,337,489) Public works 13,902,922 3,564,406 3,300,852 6,805,801 (231,863) Interest on long-term debt 841,867 - (841,867) Total Governmental Activities $ 93,873,932 $ 21,841,040 $ 4,104,939 $ 10,130,756 (57,797,197) See Accompanying Notes to Financial Statements. General Revenues: Taxes: Property taxes, levied for general purpose 17,485,712 Transient occupancy taxes 3,184,162 Sales taxes 31,466,457 Franchise taxes 3,794,085 Other taxes 982,800 Motor vehicle in lieu - unrestricted 43,947 Use of money and property 310,350 Other 135,033 Total General Revenues 57,402,546 Change in Net Position (394,651) Net Position, Beginning of Year 732,855,329 Net Position, End of Year $ 732,460,678 45 CITY OF TEMECULA, CALIFORNIA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 General Special Revenue Funds Community Services District City Housing Measure A Assets: Pooled cash and investments $ 28,572,258 $ 4,200,567 $ 652,164 $ 4,673,428 Receivables: Accounts 806 - - Taxes 1,378,202 233,463 - Notes and loans - - 26,338,124 - Accrued interest 75,498 12,148 5,575 15,593 Other receivables 115,696 25,874 334 - Prepaid costs - 4,994 - - Deposits 1,325 - Due from other governments 12,014,017 475,032 Due from other funds 286,468 - - - Inventories 3,058 - Land held for resale - 4,400,388 - Restricted assets: Cash and investments with fiscal agents - Advances from the Successor Agency 5,250,954 - Total Assets $ 42,447,328 $ 4,477,046 $ 36,647,539 $ 5,164,053 Liabilities: Accounts payable $ 6,292,277 $ 586,409 $ 11,651 $ - Accrued liabilities 296,809 131,699 1,576 - Deposits payable 1,949,319 50,066 - 863 Due to other funds - - - Unearned revenues 1,111,753 204,657 Total Liabilities 9,650,158 972,831 13,227 863 Deferred inflows of Resources Unavailable revenues 595,250 - - 35,483 Unavailable revenues - long term notes receivables - 25,992,305 - Total Deferred Inflows of Resources 595,250 - 25,992,305 35,483 Fund Balances: Nonspendable: Inventory 3,058 - - Deposits 1,325 - Restricted for: Land held for resale 4,400,388 Advances to Successor Agency - 5,250,954 Notes and loans 345,819 - Community development projects 644,846 - Capital projects - - - 5,127,707 Public works - Community services development 3,504,215 - Committed to: Contractual obligation 202,742 - Assigned to: Capital projects Unassigned 31,994,795 Total Fund Balances 32,201,920 3,504,215 10,642,007 5,127,707 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 42,447,328 $ 4,477,046 $ 36,647,539 $ 5,164,053 See Accompanying Notes to Financial Statements. (Continued) 46 CITY OF TEMECULA, CALIFORNIA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 Capital Projects Funds Other Total Roripaugh Governmental Governmental Capital Outlay CFD #03-02 _ Funds Funds Assets: Pooled cash and investments $ 13,064,997 $ 82,862 $ 7,437,418 $ 58,683,694 Receivables: Accounts - - - 806 Taxes - - 1,611,665 Notes and loans - - - 26,338,124 Accrued interest 26,592 15,947 23,218 174,571 Other receivables 16,316 - 2,730 160,950 Prepaid costs - - - 4,994 Deposits - - - 1,325 Due from other governments 568,933 - 474,375 13,532,357 Due from other funds 148,269 - - 434,737 Inventories - - 3,058 Land held for resale - - - 4,400,388 Restricted assets: Cash and investments with Oscal agents - 11,589,779 2,055,599 13,645,378 Advances from the Successor Agency - - - 5,250,954 Total Assets $ 13,825,107 $ 11,688,588 $ 9,993,340 $ 124,243,001 Liabilities: Accounts payable $ 1,080,477 $ 8,794 $ 56,825 $ 8,036,433 Accrued liabilities - - - 430,084 Deposits payable 1,259,861 78,201 17,659 3,355,969 Due to other funds - 72,156 362,581 434,737 Unearned revenues - - 1,316,410 Total Liabilities 2,340,338 159,151 437,065 13,573,633 Deferred Inflows of Resources Unavailable revenues 159,515 - 790,248 Unavailable revenues - long term notes receivables - 25,992,305 Total Deferred inflows of Resources 159,51.5 - - 26,782,553 Fund Balances: Nonspendable: Inventory - - - 3,058 Deposits 1,325 Restricted for: Land held for resale - - 4,400,388 Advances to Successor Agency - - 5,250,954 Notes and loans - 345,819 Community development projects - - 6,824,130 7,468,976 Capital projects 11,529,437 2,056,058 18,713,202 Public works - - 257,168 257,168 Community services development - - 418,919 3,923,134 Committed to: Contractual obligation - 202,742 Assigned to: Capital projects 11,325,254 - - 11,325,254 Unassigned - - - 31,994,795 Total Fund Balances 11,325,254 11,529,437 9,556,275 83,886,815 Total Liabilities, Deferred inflows of Resources and Fund Balances $ 13,825,107 $ 11,688,588 $ 9,993,340 $ 124,243,001 See Accompanying Notes to Financial Statements. 47 CITY OF TEMECULA, CALIFORNIA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2016 Fund balances of governmental funds $ 83,886,815 Amounts reported for governmental activities in the statement of net position are different because: Capital assets net of depreciation have not been included as financial resources in governmental fund activity. 664,234,313 Long-term debt and compensated absences have not been included in the governmental fund activity: 2011 Financing Lease $ (21,759,000) Compensated Absences (1,370,368) (23,129,368) Governmental funds report all pension contributions to the plan liability as expenditures, however in the statement of net position contributions are recorded as deferred outflows of resources to reduce the net pension liability at a future date. Additionally, the pension liability is recorded in the statement of net position as a long-term liability. The following reconciles adjustments related to the net pension liability: Deferred outflows related to pensions 3,139,761 Net Pension Liability (27,484,695) Deferred inflows related to pensions (2,089,196) Governmental funds report all OPEB contributions as expenditures, however, in the statement of net position any excess or deficiencies in contributions in relation to the Annual Required Contribution (ARC) are recorded as an asset or liability. 2,323,141 Accrued interest payable for the current portion of interest due on bonds has not been reported in the governmental funds. (67,997) Certain long-term assets are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in the funds. Long-term notes receivables 25,992,305 Taxes received after the period of availability 790,248 26,782,553 Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The assets and liabilities of the internal service funds must be added to the statement of net position. 4,865,351 Net Position of Governmental Activities $ 732,460,678 See Accompanying Notes to Financial Statements. 48 CITY OF TEMECULA, CALIFORNIA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Revenues: Taxes Licenses and permits Intergovernmental Charges for services Use of money and property Fines and forfeitures Contributions Developer participation Miscellaneous Total Revenues Expenditures: Current: General government Public safety Community development Community services Public works Capital outlay Debt service: Principal retirements Interest and fiscal charges Total Expenditures Excess (deficiency) of revenues over (under) expenditures Other Financing Sources (Uses): Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances at Beginning of Year Fund Balances at End of Year General Fund Special Revenue Funds Community Services District City Housing Measure A $ 59,361,798 2,191,273 279,535 4,549,987 170,416 717,728 100,918 $ 1,852,418 51,377 12,548,587 28,175 1,259 171,150 250,000 54,355 2,700,451 33,631 67,371,655 14,481,816 475,505 2,734,082 7,709,903 30,721,054 5,452,070 18,949,581 10,307,880 206,322 502,118 54,190,907 18,949,581 206,322 502,118 13,180,748 (4,467,765) 269,183 2,231,964 2,859,156 5,688,259 (9,898,875) (34,800) (921,903) (7,039,719) 5,653,459 6,141,029 1,185,694 26,060,891 2,318,521 269,183 10,372,824 (921,903) 1,310,061 3,817,646 $ 32,201,920 $ 3,504,215 $ 10,642,007 S 5,127,707 See Accompanying Notes to Financial Statements. (Continued) 50 CITY OF TEMECULA, CALIFORNIA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Revenues: Taxes Licenses and permits Intergovernmental Charges for services Use of money and property Fines and forfeitures Contributions Developer participation Miscellaneous Total Revenues Capital Projects Funds Other Total Capital Roripaugh Governmental Governmental Outlay CFD #03-02 Funds Funds $ - $ - $ 118,800 $ 61,333,016 2,191,273 6,169,501 - 3,026,639 12,227,503 - - 17,098,574 65,815 49,866 90,358 609,411 717,728 - - - 250,000 - 79 3,096,153 3,096,232 88,376 - 3,026 247,934 6,323,692 49,945 6,334,976 97,771,671 Expenditures: Current: General government - - 418,860 8,128,763 Public safety - - - 30,721,054 Community development - - - 5,658,392 Community services - - - 18,949,581 Public works - - 27,049 10,837,047 Capital outlay 6,874,410 - 390,651 7,265,061 Debt service: Principal retirements - - 1,291,000 1,291,000 Interest and fiscal charges - - 845,901 845,901 Total Expenditures 6,874,410 2,973,461 83,696,799 Excess (deficiency) of revenues over (under) expenditures (550,718) 49,945 3,361,515 14,074,872 Other Financing Sources (Uses): Transfers in 4,712,517 - 2,324,028 15,583,960 Transfers out - (192,727) (4,785,655) (15,833,960) Total Other Financing Sources (Uses) 4,712,517 (192,727) (2,461,627) (250,000) Net Change in Fund Balances 4,161,799 (142,782) 899,888 13,824,872 Fund Balances at Beginning of Year 7,163,455 11,672,219 8,656,387 70,061,943 Fund Balances at End of Year $ 11,325,254 $ 11,529,437 $ 9,556,275 $ 83,886,815 See Accompanying Notes to Financial Statements. 51 CITY OF TEMECULA, CALIFORNIA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Net change in fund balances - total governmental funds $ 13,824,872 Amounts reported for the governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period. Capitalized projects (capital outlay), net of deletions $ 7,265,061 Capital equipment recorded at the department level 1,098,228 Depreciation (20,221,939) (11,858,650) Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal repayments 1,291,000 Contributions to the net pension liability are recognized as expenditures in the governmental funds but are recognized as deferred outflows of resources subsequent to the measurement date. Additionally, other changes to the net pension liability are not recognized in the governmental fund statements because they do not use current financial resources: Contributions made 3,139,761 Current year pension expense, net of adjustments (1,935,1 14) 1,204,647 Accrued interest for long-term liabilities. This is the net change in accrued interest for the current period. 4,034 Compensated absences are recognized as expenditures in the governmental funds when liquidated and are recognized when incurred in the statement of activities. (46,419) Governmental funds report all contributions in relation to the annual required contribution (ARC) for OPEB as expenditures, however, the statement of activities only the ARC is an expense. (784,383) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (4,292,390) Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The net revenues (expenses) of the internal service funds is reported with governmental activities. 262,638 Change in Net Position of Governmental Activities $ (394,651) See Accompanying Notes to Financial Statements. 52 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON STATEMENT GENERAL FUND YEAR ENDED JUNE 30, 2016 Revenues: Taxes Licenses and permits Intergovernmental Charges for services Use of money and property Fines and forfeitures Miscellaneous Total Revenues Expenditures: General government: City council Community support City manager Economic development City clerk City attorney Finance Personnel Emergency management Non -departmental Public safety: Police Fire Animal control Community development: Planning Building and safety Land development Public works: Public works CIP administration Parks maintenance Total Expenditures Other Financing Sources (Uses): Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) $ 55,161,236 1,251,560 42,687 5,338,757 133,573 860,415 152,540 $ 58,658,794 1,888,562 260,255 4,515,195 70,313 765,344 174,390 $ 59,361,798 2,191,273 279,535 4,549,987 170,416 717,728 100,918 $ 703,004 302,711 19,280 34,792 100,103 (47,616) (73,472) 62,940,768 66,332,853 67,371,655 1,038,802 458,521 458,521 415,306 43,215 88,000 88,000 76,750 11,250 1,306,949 1,374, 766 1,270, 704 104,062 925,920 945,738 904,643 41,095 1,029,915 1,039,765 969,865 69,900 735,726 735,726 588,979 146,747 2,147,834 2,266,553 2,094,178 172,375 662,891 701,004 609,855 91,149 109,074 115,981 110,745 5,236 653,708 1,016,806 668,878 347,928 25,694,620 25,825,696 24,925,210 900,486 6,287,590 5,895,660 5,322,450 573,210 471,808 473,808 473,394 414 2,000,129 2,085,646 1,818,232 267,414 2,444,269 2,512,333 2,273,297 239,036 1,430,977 1,457,664 1,360,541 97,123 5,263,212 5,274,799 4,803,434 471,365 2,098,579 2,124,943 2,038,927 86,016 3,834,558 3,819,294 3,465,519 353,775 57,644,280 58,212,703 54,190,907 4,021,796 2,912,992 3,017,544 2,859,156 (158,388) (9,899,340) (9,899,240) (9,898,875) 365 (6,986,348) (6,881,696) (7,039,719) (158,023) (1,689,860) 1,238,454 6,141,029 4,902,575 26,060,891 26,060,891 26,060,891 - $ 24,371,031 $ 27,299,345 $ 32,201,920 $ 4,902,575 See Accompanying Notes to Financial Statements. 54 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON STATEMENT COMMUNITY SERVICES DISTRICT YEAR ENDED JUNE 30, 2016 Revenues: Taxes Intergovernmental Charges for services Use of money and property Miscellaneous Total Revenues Expenditures: Community services Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) $ 1,867,639 32,335 12,193,450 9,410 6,980 $ 1,852,879 32,335 12,318,956 11,797 1,180 $ 1,852,418 51,377 12,548,587 28,175 1,259 $ (461) 19,042 229,631 16,378 79 14,109,814 14,217,147 14,481,816 264,669 20,029,523 20,160,600 18,949,581 1,211,019 20,029,523 20,160,600 18,949,581 1,211,019 (5,919,709) (5,943,453) (4,467,765) 1,475,688 5,656,521 (67,482) 5,697,895 (67,482) 5,688,259 (34,800) 9,636 32,682 5,656,521 5,697,895 5,653,459 42,318 (263,188) 2,318,521 (245,558) 2,318,521 1,185,694 2,318,521 1,518,006 $ 2,055,333 $ 2,072,963 $ 3,504,215 $ 1,518,006 See Accompanying Notes to Financial Statements. 55 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON STATEMENT CITY HOUSING YEAR ENDED JUNE 30, 2016 Revenues: Use of money and property Contributions Miscellaneous Total Revenues Expenditures: Community development Total Expenditures Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) $ 222,024 $ 250,000 222,024 $ 250,000 171,150 250,000 54,355 $ (50,874) 54,355 472,024 472,024 475,505 3,481 454,811 502,437 206,322 296,115 454,811 502,437 206,322 296,115 17,213 10,372,824 (30,413) 269,183 299,596 10,372,824 10,372,824 $ 10,390,037 $ 10,342,411 $ 10,642,007 $ 299,596 See Accompanying Notes to Financial Statements. 56 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON STATEMENT MEASURE A YEAR ENDED JUNE 30, 2016 Revenues: Intergovernmental Use of money and property Total Revenues Expenditures: Public works Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) S 2,817,159 $ 24,000 2,743,679 $ 28,000 2,700,451 33,631 $ (43,228) 5,631 2,841,159 2,771,679 2,734,082 (37,597) 1,712,000 1,764,595 502,118 1,262,477 1,712,000 1,764,595 502,118 1,262,477 1,129,159 1,007,084 2,231,964 1,224,880 (841,159) (3,891,614) (921,903) 2,969,711 (841,159) (3,891,614) (921,903) 2,969,711 288,000 3,817,646 (2,884,530) 3,817,646 1,310,061 3,817,646 4,194,591 $ 4,105,646 $ 933,116 $ 5,127,707 $ 4,194,591 See Accompanying Notes to Financial Statements. 57 CITY OF TEMECULA, CALIFORNIA STATEMENT OF FUND NET POSITION PROPRIETARY FUNDS JUNE 30, 2016 Governmental Activities - Internal Service Funds Assets: Current: Cash and investments $ 4,648,863 Receivables: Accounts 2,509 Accrued interest 10,226 Due from other governments 13,668 Prepaid costs 50,000 Total Current Assets 4,725,266 Noncurrent: Capital assets - net of accumulated depreciation Total Noncurrent Assets Total Assets 1,749,859 1,749,859 6,475,125 Liabilities: Current: Accounts payable 281,113 Accrued interest 23,196 Deposits payable 10,000 Compensated absences 48,168 Claims and judgments 269,333 Capital leases 174,432 Total Current Liabilities 806,242 Noncurrent: Compensated absences 144,504 Claims and judgments 29,926 Capital leases 629,102 Total Noncurrent Liabilities 803,532 Total Liabilities 1,609,774 Net Position: Net investment in capital assets 946,325 Unrestricted 3,919,026 Total Net Position See Accompanying Notes to Financial Statements. $ 4,865,351 58 CITY OF TEMECULA, CALIFORNIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016 Governmental Activities - Internal Service Funds Operating Revenues: Sales and service charges $ 5,315,334 Total Operating Revenues 5,315,334 Operating Expenses: Administrative and general 2,715,468 Depreciation expense 396,265 Operations and maintenance 2,206,146 Total Operating Expenses 5,317,879 Operating income (loss) (2,545) Nonoperating Revenues (Expenses): Interest revenue 25,859 Interest expense (10,676) Total Nonoperating Revenues (Expenses) 15,183 Income (Loss) Before Transfers Transfers in 12,638 250,000 Change in Net Position 262,638 Net Position: Net Position, Beginning of Year 4,602,713 Net Position, End of Year $ 4,865,351 See Accompanying Notes to Financial Statements. 59 CITY OF TEMECULA, CALIFORNIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016 Governmental Activities - Internal Service Funds Cash Flows from Operating Activities: Cash received from customers and users $ 5,318,699 Cash paid to suppliers for goods and services (2,273,080) Cash paid to employees for services (2,787,760) Net Cash Provided by Operating Activities 257,859 Cash Flows from Non -Capital Financing Activities: Cash transfers in 250,000 Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets (283,227) Principal paid on capital lease (101,489) Interest paid on capital lease (10,676) Net Cash Used by Capital and Related Financing Activities (395,392) Cash Flows from Investing Activities: Interest received 24,394 Net Decrease in Cash and Cash Equivalents 136,861 Cash and Cash Equivalents at Beginning of Year 4,512,002 Cash and Cash Equivalents at End of Year $ 4,648,863 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ (2,545) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 396,265 (Increase) decrease in accounts receivable 3,365 (Increase) decrease in prepaid expense 25,352 Increase (decrease) in accounts payable (60,766) Increase (decrease) in accrued liabilities (72,292) Increase (decrease) in claims and judgments (36,400) Increase (decrease) in compensated absences 4,880 Total Adjustments 260,404 Net Cash Provided (Used) by Operating Activities Non -Cash Investing, Capital, and Financing Activities: Issuance of capital lease See Accompanying Notes to Financial Statements. $ 257,859 $ 751,519 60 CITY OF TEMECULA, CALIFORNIA STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2016 Assets: Pooled cash and investments Receivables: Taxes Accrued interest Land held for resale Restricted assets: Cash and investments with fiscal agents Capital assets: Capital assets, not being depreciated Capital assets, net of accumulated depreciation Total Assets Liabilities: Accounts payable Accrued liabilities Accrued interest Due to bond holders Long-term liabilities: Due in one year Due in more than one year Advance from City Housing Fund Total Liabilities: Net Position / (Deficit): Held in trust for other purposes Total Net Position / (Deficit): See Accompanying Notes to Financial Statements. Agency Funds Private - Purpose Trust Fund Successor Agency of the Former RDA $ 2,138,149 $ 3,223,308 74,135 20,887 12,548,131 5,228 98,484 16,730,509 3,819,108 29,201,431 $ 14,781,302 $ 53,078,068 $ 9,136 $ 20,000 343 14,771,823 1,660,266 1,860,000 81,138,785 5,250,954 $ 14,781,302 89,930,005 (36,851,937) $ (36,851,937) 61 CITY OF TEMECULA, CALIFORNIA STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2016 Private - Purpose Trust Fund Successor Agency of the Former RDA Additions: Taxes $ 6,485,483 Interest and change in fair value of investments 12,961 Contributions 317,719 Total Additions 6,816,163 Deductions: Payments to developers 159,173 Administrative expenses 321,812 Interest expense 4,832,693 Depreciation expense 1,179,997 Contributions to other governments 250,000 Total Deductions 6,743,675 Changes in Net Position 72,488 Net Position / (Deficit) - Beginning of the Year (36,924,425) Net Position / (Deficit) - End of the Year $ (36,851,937) See Accompanying Notes to Financial Statements. 62 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of Entity The reporting entity "City of Temecula" includes the accounts of the City, the Temecula Community Services District, the Industrial Development Authority of the City of Temecula, the Temecula Public Financing Authority, and the Temecula Housing Authority. The City of Temecula was incorporated on December 1, 1989, as a general law city and operates under a council/manager form of government. Temecula Community Services District (TCSD) The TCSD was organized on December 1, 1989. The TCSD currently provides street lighting, parks, recreation, slope maintenance, and refuse hauling services. The City of Temecula City Council also serves as the TCSD's Board of Directors. Additionally, the management of the City of Temecula also serves in a management capacity and has operational responsibility for the activities of the TCSD. The activities of the TCSD are reported as a blended component unit in the Community Services District Special Revenue Fund. Industrial Development Authority of the City of Temecula (Authority) The Authority was activated on March 22, 1994. The purpose of the Authority is to provide alternative methods of financing certain facilities in order to prevent the loss of existing jobs, increase employment opportunities, and otherwise contribute to the economic development of the City. The City of Temecula City Council also serves the Authority's Board of Directors. Additionally, the management of the City of Temecula also serves in a management capacity and has operational responsibility for the activities of the Authority. The Authority had no activity during the fiscal year. Temecula Public Financing Authority (TPFA) The TPFA was established pursuant to a Joint Exercise of Powers Agreement, dated April 24, 2001, by and between the City and the former Redevelopment Agency. The City and the former Redevelopment Agency formed the TPFA for the primary purpose of assisting in the financing and refinancing of a community facilities district and the issuance of bonds necessary to finance the public improvements. The TPFA may establish other community facilities districts in the future in connection with the financing of public improvements in the City and could also be used in connection with other City financings. The City of Temecula City Council also serves as the Board of Directors for the TPFA. Additionally, the management of the City of Temecula also serves in a management capacity and has operational responsibility for the activities of the TPFA. The activities of the TPFA are reported as a blended component unit within the Debt Service Fund. 64 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Description of Entity (Continued) Temecula Housing Authority (THA) The THA was established in February 22, 2011. The THA was activated pursuant to State law Section 34240 of the California Health and Safety Code, which allows for every City to establish a housing authority. The THA is designed to help protect local housing funds and programs, provide new revenue opportunities for affordable housing programs, serve the public interest, promote public safety and welfare, and ensure decent, safe, sanitary and affordable housing accommodations to persons of low income. The City of Temecula City Council serves as the THA's Commissioners. The activities of the THA are recorded in the City Housing Special Revenue Fund. Additionally, the management of the City of Temecula also serves in a management capacity and has operational responsibility for the activities of the THA. The activities of the THA are reported as a blended component unit within the City Housing Fund. The criteria used in determining the scope of the reporting entity are based on the provisions of GASB Statements No. 14 and 61. The City of Temecula is the primary governmental unit. Component units are those entities which are financially accountable to the primary governmental unit either because the City appoints a voting majority of the component unit Board, or because the component unit will provide a financial benefit or impose a financial burden on the City. The City has accounted for the TCSD, Authority, TPFA, and THA as "blended" component units. Despite being legally separate, these units are so intertwined with the City that they are in substance, part of the City's operations. Accordingly, the balances and transactions of the blended component units are included in the Special Revenue, Debt Service, and Capital Projects funds. B. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net position and the statement of activities) report information about the reporting government as a whole, except for its fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government (including its blended component units) is reported separately from discretely presented component units for which the primary government is financially accountable. The City has no business -type activities or discretely presented component units. For the most part, the effect of interfund activity has been removed from these statements. The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. 65 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Government -Wide and Fund Financial Statements (Continued) The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Separate financial statements for governmental, proprietary, and fiduciary funds are presented after the government -wide financial statements. These statements display information about major funds individually and other governmental funds in the aggregate for governmental funds. Fiduciary statements, even though excluded from the government -wide financial statements, include financial information that primarily represents assets held by the City in a custodial capacity for other individuals or organizations. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements, excluding agency funds which have no measurement focus. Under the economic resources measurement focus, all assets, liabilities, and deferred inflows / outflows of resources (whether current or noncurrent) associated with their activity are included on their balance sheets. Operating statements present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange include grants, entitlements, and donations. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all the eligibility requirements have been satisfied. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. 66 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the current financial resources measurement focus, only current assets, deferred outflows of resources, current liabilities, and deferred inflows of resources are generally included on their balance sheets. The reported fund balance (net current resources) is considered to be a measure of "available spendable resources". Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current resources. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. However, special reporting treatments are used to indicate that they should not be considered "available spendable resources" since they do not represent net current resources. Recognition of governmental fund type revenue represented by noncurrent receivables is reflected as unavailable until they become current receivables. Noncurrent portions of other long-term receivables are offset by fund balance classifications. Under the modified accrual basis of accounting, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government generally considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, except for sales tax and grants which are 90 days. Expenditures generally are recorded when a liability is incurred, except for principal and interest on general long-term liabilities, claims and judgments, and compensated absences which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources. Property taxes, sales tax, motor vehicle license fees, transient occupancy taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. D. Fund Classifications The funds designated as major funds are determined by a mathematical calculation consistent with Governmental Accounting Standards Board (GASB) Statement No. 34. The City reports the following major governmental funds: The General Fund is the primary operating fund of the City and is used to account for all revenues and expenditures that are not required to be accounted for in another fund. The Community Services District — Special Revenue Fund is used to account for special assessment proceeds restricted for parks, recreation, street lighting, slope maintenance, recycling and refuse collection, and specific street maintenance. 67 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Fund Classifications (Continued) The City Housing Fund — Special Revenue Fund is used to account for loans and program income that are restricted revenues to provide new opportunities for affordable housing programs, serve the public interest, promote public safety and welfare, and ensure decent, safe, sanitary and affordable housing accommodations to persons of low income. The Measure A Fund — Special Revenue Fund is used to account for the City's share of the County of Riverside's additional one-half percent sales tax allocation which is restricted for use on local streets and roads. The Capital Outlay Capital Projects Fund is used to account for financial resources used for the acquisition, construction and improvement of various capital facilities. The Roripaugh Community Facilities District #03-02 Capital Projects Fund is used to account for bond proceeds which will be used for capital improvements in Roripaugh Community Facilities District No. 03-02 (Roripaugh Ranch). The City's fund structure also includes the following fund types: PROPRIETARY FUNDS The Internal Service Funds are used to account for activities and services performed for other departments within the City on a cost reimbursement basis. Specific activities accounted for included risk management and insurance programs, replacement of city vehicles, information systems services, central mailing and reprographic services and city maintenance facilities operations. FIDUCIARY FUNDS The Agency Fund is used to account for assets temporarily held by the City in a fiduciary capacity for various Community Facilities Districts. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of the results of operations. The Private Purpose Trust Fund is used to account for the assets and liabilities of the former redevelopment agency and is allocated revenue to pay estimated installment payments of enforceable obligations until all obligations of the former redevelopment agency are paid in full and assets have been liquidated. This fund uses the economic resources measurement focus. E. Cash and Investments Investments are stated at fair value. A substantial portion of the City's investments are in short-term, highly liquid instruments, with original maturities of three months or less. For purposes of the statement of cash flows, all cash and investments held by the internal service funds are considered to be short term and, accordingly, are classified as cash and cash equivalents. 68 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Land Held for Resale Land held for resale represents land that was acquired in accordance with the objectives of the City Housing Successor Agency. Land held for resale is generally valued at lower of cost or fair value. In instances where an anticipated sales price is known to be lower than cost, a write down is recorded. A portion of fund balance in the City Housing Fund is restricted for land held for resale to indicate that the proceeds of selling the land is restricted for housing purposes. G. Inventories and Prepaid items Inventories of materials and supplies are carried at cost. The City uses the consumption method of accounting for inventories. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. The fund balances in the governmental fund types have been classified as nonspendable for amounts equal to the prepaid items in the fund -level statements, since these amounts are not available for appropriation. H. Capital Assets Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Contributed capital assets are valued at estimated acquisition value at the date of contribution. Generally, capital asset purchases in excess of $5,000 are capitalized if they have an expected useful life of 1 year or more. Infrastructure assets with a cost exceeding $100,000 are capitalized. Capital assets include additions to public domain (infrastructure), certain improvements including pavement, curb and gutter, sidewalks, traffic control devices, streetlights, sewers, storm drains, bridges and right-of-way corridors within the City. The City has valued and recorded all infrastructure asset data in its entirety as of June 30, 2016. Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the Government -wide Financial Statements and in the Fund Financial Statements of the Proprietary Funds. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective Statement of Net Position. The lives used for depreciation purposes of each capital asset class are: Buildings 40-50 years Improvements and other than buildings 40 years Vehicles, machinery and equipment 3-25 years Furniture and fixtures 4-25 years Infrastructure 25-75 years I. Compensated Absences In accordance with GASB Statement No. 16, an employee benefits payable liability is recorded for unused vacation and similar compensatory leave balances. The employees' entitlement to these balances is attributable to services already rendered and it is probable that virtually all of these balances will be liquidated by either paid time off or payments upon termination or retirement. 69 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Compensated Absences (Continued) Under GASB Statement No. 16, a liability is recorded for unused sick leave balances only to the extent that it is probable that the unused balances will result in termination payments. Other amounts of unused sick leave are excluded from the liability since their payment is contingent solely upon the occunence of a future event (illness) that is outside the control of the City and the employee. A proprietary fund liability is accrued for all leave benefits relating to the proprietary funds. In the government -wide financial statement, amounts expected to be liquidated within one year are classified as current with the remaining amount included as long term liabilities. J. Claims and Judgments When it is probable that a claim liability has been incurred at year-end, and the amount of the loss can be reasonably estimated, the City records the estimated loss, net of any insurance coverage under its self- insurance program. This liability, including an estimate of claims which have been incurred but not reported, has been accrued by the City's Internal Service Fund. K. Property Taxes Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City of Temecula accrues only those taxes which are received within 60 days after year end. Lien Date Levy Date Due Dates Collection Dates L. Restricted Assets January 1 June 30 November 1 and February 1 December 10 and April 10 Restricted Assets consist of cash and investments totaling $42,924,018. $13,645,378 is held by the Community Facilities District for capital projects are reported in the fund statements. $12,548,131 is held by the City as a fiduciary, to be used for debt payments. In addition, the Successor Agency of the Former Redevelopment Agency restricts $16,730,509 for future projects. M. Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City of Temecula's California Public Employees Retirement System (Ca1PERS) Plans and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by Ca1PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 70 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. Deferred Outflows / Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government only has one item that qualifies for reporting in this category. It is the contributions to the pension liability made subsequent to the measurement date. This amount is recognized during a subsequent measurement period as a reduction of the liability. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statements element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has items that arise under the modified accrual basis of accounting and items that arises under the accrual basis of accounting. Under the modified accrual basis, certain receivables are considered to be unavailable revenue as their collection is not anticipated within the City's period of availability and therefore, not available to liquidate current obligations. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The item recorded on the government -wide financial statements arises from deferred amounts on pensions. See Note 8 for more detail. O. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. P. Fund Equity In the fund financial statements, government funds report the following fund balance classifications: Nonspendable include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted include amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws or regulations of other governments or (b) by law through constitutional provisions or enabling legislation. Committed include amounts that can only be used for specific purposes pursuant to constraints imposed by the highest level of formal action of the City Council or for contractual obligations. The highest level of formal action of the City Council is an Ordinance. The City Council has not committed any amounts. All commitments are for contractual obligations. Assigned include amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed. For all governmental funds other than the General Fund, the City Council has assigned any remaining amounts not classified as nonspendable, restricted, or committed. 71 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) P. Fund Equity (Continued) Q. For the General Fund, the fund balance policy delegates the authority to assign amounts to be used for specific purposes to the Finance Director, in consultation with the City Manager, for the purpose of reporting these amounts in annual financial statements. Unassigned include the residual amounts that have not been restricted, committed, or assigned to specific purposes. The General Fund is the only fund that reports a positive unassigned fund balance. Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the government's policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Minimum Fund Balance Policy The City maintains a fund balance of at least 20% of operating expenditures in the General Fund. This is considered the minimum level necessary to maintain the City's creditworthiness and to adequately provide for: 1) economic uncertainties, local disasters, and other financial hardships or downturns in the local or national economy; 2) contingencies for unseen operating or capital needs; and 3) cash flow requirements. The City currently classifies $13,195,369 as the minimum fund balance which is equal to 20% of operating expenditures. This amount is currently classified as unassigned fund balance in the financial statements. Secondary Reserve Fund Balance Policy The City maintains a secondary reserve in the amount of 5% of General Fund operating expenditures. Use of the funds shall be limited to: 1) covering annual operating expenditures if revenue falls short of projects, creating an annual operating deficit, and 2) making one-time investments in capital infrastructure that will create long-term operational savings to the General Fund, leverage available grant funds, or provide funding for projects that will create an economic benefit to the City. The City currently classifies $3,298,842 of fund balance as the secondary reserve which is equal to 5% of operating expenditures for the fiscal year ended June 30, 2016. This amount is currently classified as unassigned fund balance in the financial statements. New GASB Pronouncements Adopted in the Current Year GASB Statement No. 72 — In February 2015, GASB issued Statement No. 72, Fair Value Measurement and Application. This Statement requires disclosures to be made about fair value measurements, the level of fair value hierarchy, and valuation techniques. These disclosures should be organized by type of asset or liability reported at fair value. It also requires additional disclosures regarding investments in certain entities that calculate net asset value per share (or its equivalent). The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2015. This Statement was implemented effective July 1, 2015. 72 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. New GASB Pronouncements (Continued) Adopted in the Current Year (Continued) GASB Statement No. 73 In June 2015, GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68. The provisions in Statement No. 73 are effective for fiscal years beginning after June 15, 2015—except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement 68, which are effective for fiscal years beginning after June 15, 2016. The City has implemented the applicable provisions effective July 1, 2015. The City has not determined the effect of the remaining provisions on the financial statements. GASB Statement No. 76 – In June 2015, GASB issues Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to identify—in the context of the current governmental financial reporting environment—the hierarchy of generally accepted accounting principles (GAAP). This Statement supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This Statement was implemented effective July 1, 2015. GASB Statement No. 79 – In December 2015, GASB issued Statement No. 79, Certain External Investment Pools and Pool Participants. The Statement addresses accounting and financial reporting for certain external investment pools and pool participants. The Statement establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. The Statement establishes additional note disclosure requirements for qualifying external investment pools that measure all of their investments at amortized cost for financial reporting purposes and for governments that participate in those pools. Both the qualifying external investment pools and their participants are required to disclose information about any limitations or restrictions on participant withdrawals. The City has implemented the applicable provisions of this Statement effective July 1, 2015. The City has not determined the effect of the remaining provisions on the financial statements. GASB Statement No. 82 – In March 2016, GASB issued Statement No. 82, Pension Issues – An Amendment of GASB Statements No. 67, No. 68, and No. 73. The objective of the Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Specifically, the Statement addresses issues regarding (1) the presentation of payroll -related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The Statement is effective for the reporting periods beginning after June 15, 2016, or the 2016-2017 fiscal year. The City has early implemented this Statement. 73 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. New GASB Pronouncements (Continued) Effective in Future Years GASB Statement No. 74 — In June 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Statement No. 74 replaces Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple -Employer Plans. It also includes requirements for defined contribution OPEB plans that replace the requirements for those OPEB plans in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, as amended, Statement No. 43, and Statement No. 50, Pension Disclosures. The provisions in Statement 74 are effective for fiscal years beginning after June 15, 2016. The City has not determined its effect on the financial statements. GASB Statement No. 75 — In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Statement No. 75 establishes new accounting and financial reporting requirements for governments whose employees are provided with OPEB, as well as for certain nonemployer governments that have a legal obligation to provide financial support for OPEB provided to the employees of other entities. The provisions in Statement No. 75 are effective for fiscal years beginning after June 15, 2017. The City has not determined its effect on the financial statements. GASB Statement No. 77 — In August 2015, GASB issued Statement No. 77, Tax Abatement Disclosures. The objective of this Statement is to provide financial statement users with essential information about the nature and magnitude of the reduction in tax revenues through tax abatement programs. This statement is not effective until the fiscal year ending June 30, 2017. The City has not determined the effect of implementing this statement. GASB Statement No. 78 - In December 2015, GASB issued Statement No 78, Pensions Provided through Certain Multiple -Employer Defined Benefit Pension Plans. The Statement amends the scope and applicability of GASB Statement No. 68 to exclude certain types of cost-sharing multiple -employer plans. The Statement is effective for the periods beginning after December 15, 2015. The City has not determined the effect of implementing this statement. GASB Statement No. 80 - In January 2016, GASB issued Statement No. 80, Blending Requirements for Certain Component Units — An Amendment of GASB Statement No. 14. The objective of the Statement is to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. This Statement amends the blending requirements established in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as amended. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. The Statement is effective for the reporting periods beginning after June 15, 2016, or the 2016-2017 fiscal year. Management has not determined the effect of implementing this statement. 74 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. New GASB Pronouncements (Continued) Effective in Future Years (Continued) GASB Statement No. 81 — In March 2016, GASB issued Statement No. 81, Irrevocable Split—Interest Agreements. The objective of the Statement is to improve financial reporting for irrevocable split -interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The Statement requires that a government that receives resources pursuant to an irrevocable split -interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, the Statement requires that a government recognize assets representing its beneficial interests in irrevocable split -interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. The Statement requires that a government recognize revenue when the resources become applicable to the reporting period. The Statement is effective for the reporting periods beginning after December 15, 2016, or the 2017-2018 fiscal year. The City has not determined the effect of implementing this statement. NOTE 2 — STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. General Budget Policies The City adheres to the following procedures in establishing the budgetary data reflected in its financial statements: 1. The annual budget adopted by the City Council provides for the general operation of the City. It includes proposed expenditures and the means of financing them. 2. The City Council approves total budgeted appropriations and any amendments to appropriations throughout the year. This "appropriated budget" covers substantially all City expenditures, with the exception of debt service on bond issues and capital improvement projects. There were no significant non -budgeted financial activities. Actual expenditures may not exceed budgeted appropriations at the departmental level. However, the City Manager is authorized to transfer budgeted amounts between individual accounts within a department. 3. Formal budgetary integration is employed as a management control device. Commitments for materials and services, such as purchase orders and contracts, are recorded during the year as encumbrances to assist in controlling expenditures. Appropriations which are encumbered at year- end lapse, and then are added to the following year's budgeted appropriations. 4. Budgets for the General, Special Revenue, Capital Projects, and Debt Service Funds are adopted on a basis substantially consistent with generally accepted accounting principles (GAAP). Accordingly, actual revenues and expenditures can be compared with related budgeted amounts without any significant reconciling items. 75 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 — STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) A. General Budget Policies (Continued) 5. Under Article XIIIB of the California Constitution (the GANN Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from the proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller, returned to the taxpayers through revised tax rates or revised fee schedules, or an excess in one year may be offset against a deficit in the following year. For the fiscal year ended June 30, 2016, based on calculations by City Management, proceeds of taxes did not exceed related appropriations. The City is not legally required to adopt a budget for the Crowne Hill Community Facilities District #03-1, Wolf Creek Community Facilities District #03-3, and Roripaugh Community Facilities District #03-02 funds; therefore no budgetary comparison schedule is presented for those funds. NOTE 3 — CASH AND INVESTMENTS As of June 30, 2016, cash and investments were reported in the accompanying financial statements as follows: Statement of net position: Cash and investments $ 63,332,557 Cash with fiscal agents 13,645,378 Fiduciary funds Cash and investments 5,361,457 Cash with fiscal agents 29,278,640 Total Cash and Investments $ 111,618,032 As of June 30, 2016, cash and investments consist of the following: Cash on hand (petty cash and change funds) $ 3,061 Deposits with financial institutions 1,938,449 Investments 109,676,522 Total Cash and Investments $ 111,618,032 76 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 3 — CASH AND INVESTMENTS (CONTINUED) Deposits At June 30, 2016, the carrying amount of the City's deposits was $1,938,449 and the bank balance was $7,297,779. The $5,359,330 difference represents outstanding checks and other reconciling items. The California Government Code requires California banks and savings and loan associations to secure a City's deposits by pledging government securities with a value of 110% of a City's deposits. California law also allows financial institutions to secure a City's deposits by pledging first trust deed mortgage notes having a value of 150% of a City's total deposits. The City Treasurer may waive the collateral requirement for deposits that are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an "Agent of Depository" has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency. Investments The table below identifies the investment types that are authorized for the City by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy. Investment Types Authorized by State Law Maximum Maximum Percentage Maximum Investment of Portfolio* Maturity In One Issuer United States (U.S.) Treasury Obligations None 5 years None U.S. Government Sponsored Enterprise Securities None 5 years None Banker's Acceptances 40% 180 days 10% Money Market Funds None N/A None Time Deposits 15% 1 year None Commercial Paper 15% 180 days 10% Negotiable Certificates of Deposit 30% 5 years 10% Repurchase Agreements 50% 92 days None Local Agency Investment Fund (LAIF) None N/A $65,000,000 / per entity * Excluding amounts held by bond trustee that are not subject to California Government Code restrictions. 77 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 3 — CASH AND INVESTMENTS (CONTINUED) Investments Authorized by Deht Agreements Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity Allowed In One Issuer United States (U.S.) Treasury Obligations None None None U.S. Government Sponsored Enterprise Securities None None None Banker's Acceptances 1 year None None Commercial Paper 180 days None None Investment Agreements (2) (2) (2) Local Agency Investment Fund (LAIF) (1) None $65,000,000 / per entity Money Market Mutual Funds (1) None None (1) Not Applicable (2) Acceptable to the Municipal Bond Issuer Investments in State Investment Pool The City is a participant in LAIF, which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. Each City may invest up to $65,000,000 without limitation in special bond proceeds amounts. Investments in LAIF are highly liquid, as deposits can be converted to cash within 24 hours without loss of interest. The City's investments with LAIF at June 30, 2016 included a portion of the pool funds invested in structured notes and asset -back securities: Structured Notes Debt securities (other than asset -back securities) whose cash flow characteristics (coupon rate, redemption amounts, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset -Backed Securities — Generally mortgage-backed securities that entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (for example, collateralized mortgage obligations) or credit card receivables. As of June 30, 2016, the City had $42,049,269 invested in LAIF, which had invested 2.81 percent of the pool investment funds in structured notes and asset -back securities. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. 78 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 3 — CASH AND INVESTMENTS (CONTINUED) Fair Value As of July 1, 2015, the City retrospectively applied Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. GASB Statement No. 72 provides guidance for determining a fair value measurement for reporting purposes and applying fair value to certain investments and disclosures related to all fair value measurements. The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset's fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. As of June 30, 2016, the City's investments in government sponsored entities (e.g. FHLB, FNMA, etc.) were considered Level 2 in the amount of $24,102,760. The investments in money market funds are valued using the net asset value (NAV) model. There are no unfunded commitments associated with these investments and the redemption frequency is monthly. Redemption notice period is 30 days. This type includes investments that are exempt from federal regular income tax, consistent with stability of principal. Additionally, the investments are short-term, high-quality, tax exempt securities that holds Aaa-mf and AAAmmf ratings from Moody's and Fitch, respectively. There are no restrictions on the redemption of these investments. Investments in LAIF are uncategorized as deposits and withdrawals are made on the basis of $1 and not fair value. Accordingly, under the fair value hierarchy, these investments are uncategorized. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: 79 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 3 — CASH AND INVESTMENTS (CONTINUED) Disclosures Relating to Interest Rate Risk (Continued) Investment Type Remaining Investment Maturities 12 Months Or Less 1 to 3 Years 3 to 5 Years Fair Value Local Agency Investment Fund U.S. Government Sponsored Enterprise Securities: FFCB FHLMC FHLB FNMA Escrow Accounts - Money Market Mutual Funds Total Cash Investments $ 42,049,269 $ - $ - $ 42,049,269 1,002,420 2,023,460 - 3,007,180 1,000,280 4,023,190 - 6,019,080 600,474 1,005,700 2,013,040 4,008,410 3,025,880 4,012,880 7,036,510 10,027,490 600,474 44,652,443 15,072,910 7,027,150 66,752,503 Investments with Fiscal Agents: Money Market Mutual Funds 25,416,667 Local Agency Investment Fund 17,507,352 Total Investments with Fiscal Agent Total Investments Disclosures Relating to Credit Risk 25,416,667 17,507,352 42,924,019 42,924,019 $ 87,576,462 $ 15,072,910 $ 7,027,150 $ 109,676,522 Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating as required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the actual rating, as reported by Standards and Poor, as of year- end for each investment type: Investment Type Local Agency Investment Fund U.S. Government Sponsored Enterprise Securities: FFCB FHLMC FHLB FNMA Escrow Accounts - Money Market Mutual Funds Held by bond trustee: Money Market Mutual Funds Local Agency Investment Fund Total (1) Not Applicable Total as of June 30, 2016 $ 42,049,269 Minimum Legal Rating AA+ Unrated (1) $ - $ 42,049,269 3,025,880 (1) 4,012,880 (1) 7,036,510 (1) 10,027,490 (1) 600,474 AAA 25,416,667 17,507,352 $ 109,676,522 AAA (1) 3,025,880 4,012,880 7,036,510 10,027,490 600,474 25,416,667 - - 17,507,352 $ 49,519,427 $ 60,157,095 80 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 3 — CASH AND INVESTMENTS (CONTINUED) Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. As of June 30, 2016, the following investments represented 5% or more of total City's investments. Issuer Total Percentage as of of Total June 30, 2016 Investments U.S. Government Sponsored Enterprise Securities: FHLB $ 7,036,510 FNMA 10,027,490 Custodial Credit Risk 6% 9% Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. As previously described, the City's deposits are collateralized in accordance with California Government Code. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. 81 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 — CAPITAL ASSETS Governmental Activities: Balance at June 30, 2015 Increase Balance at Decrease June 30, 2016 Capital Assets Not Being Depreciated: Land Right of way Construction in progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Buildings Improvements other than buildings Vehicles, machinery and equipment Furniture and fixtures Infrastructure Total Capital Assets Being Depreciated Less Accumulated Depreciation for: Buildings Improvements other than buildings Vehicles, machinery and equipment Furniture and fixtures Infrastructure Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Governmental Activities Capital Assets, Net $ 78,230,539 $ 68,738,629 56,580,686 2,265,122 $ - $ 78,230,539 - 68,738,629 (3,023,159) 55,822,649 203,549,854 2,265,122 (3,023,159) 202,791,817 112,679,425 5,443,108 58,377,033 476,835 16,215,342 1,287,176 6,063,875 48,487 546,900,890 3,060,797 - 118,122,533 58,853,868 (14,186) 17,488,332 - 6,112,362 (397,819) 549,563,868 740,236,5 65 10,316,403 (412,005) 750,140,963 22,687,667 2,681,173 17,027,748 2,093,307 13,275,143 1,020,633 6,049,257 7,165 207,702,594 14,815,926 - 25,368,840 19,121,055 (14,186) 14,281,590 6,056,422 (397,819) 222,120,701 266,742,409 20,618,204 473,494,156 (10,301,801) (412,005) 286,948,608 - 463,192,355 $ 677,044,010 $ (8,036,679) $ (3,023,159) $ 665,984,172 Depreciation expense charged to functions/programs for the government activities are as follows: General government Public safety Public works Community development Community services Capital assets used by the government's internal service funds are charged to the various functions based on their usage of the assets Total Depreciation Expense $ 1,056,327 403,486 15,332,492 201,744 3,227,890 396,265 $ 20,618,204 82 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 5 — INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The Composition of interfund balances as of June 30, 2016, is as follows: Due to Other Funds Roripaugh Other CFD #03-02 Governmental Fund Funds Totals Due from Other Funds: General Fund $ - $ 286,468 $ 286,468 Capital Outlay - Capital Projects Fund 72,156 76,113 148,269 Total $ 72,156 $ 362,581 $ 434,737 The amounts loaned to the Other Governmental funds from the General Fund were for temporary negative cash deficits. The amounts due to the Capital Outlay — Capital Projects Fund were for reimbursement of capital expenditures from the Roripaugh CFD #03-02 Capital Projects Fund and Other Governmental Funds. The compositions of the City's interfund transfers as of June 30, 2016, are as follows: Transfers Out Community Other Services Measure A Roripaugh Governmental Transfers In General Fund District Fund CFD #03-02 Funds Totals General Fund $ - $ - $ - $ - $ 2,859,156 $ 2,859,156 Community Services District 5,656,521 - - - 31,738 5,688,259 Capital Outlay - Capital Projects Fund 1,668,326 34,800 921,903 192,727 1,894,761 4,712,517 Other Governmental Funds 2,324,028 - - 2,324,028 Internal Services Funds 250,000 - 250,000 Total $ 9,898,875 $ 34,800 $ 921,903 $ 192,727 $ 4,785,655 $ 15,833,960 Other Governmental Funds made transfers to the General Fund for street related repairs and maintenance. The General Fund made transfers to the Community Services District for operating subsidies. The General Fund, Measure A Fund — Special Revenue Fund, Roripaugh CFD #03-02 — Capital Projects Fund, and Other Governmental Funds made transfers to the Capital Outlay Capital Projects Fund to provide funding for capital improvement projects. The General Fund made transfers to the Other Governmental Funds to provide for debt service payments. A one-time contribution was made by the General Fund to the Worker's Compensation Internal Service Fund in order to fund the transition of the City going to a self-funded plan. 83 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 6 — LONG TERM LIABILITIES The following is a summary of the Governmental Activities long-term liability transactions for the year ended June 30, 2016: Governmental Activities Balance at July 1, 2015 Additions Balance at Due Within Deletions June 30, 2016 One Year 2011 Financing Lease Capital Lease Payable Claims Payable Compensated Absences 2011 Financing Lease $ 23,050,000 106,200 339,951 1,507,449 $ 25,003,600 751,519 70,532 1,284,549 $ 2,106,600 $ 1,291,000 $21,759,000 $ 1,343,000 54,185 803,534 174,432 111,224 299,259 269,333 1,228,958 1,563,040 390,760 $ 2,685,367 $ 24,424,833 $ 2,177,525 In December 2011, the City of Temecula, working together with the Temecula Public Financing Authority, entered into a lease agreement in the amount of $26,835,000 for the purpose of leasing certain parcels of real property and enabling the City to refinance the construction of various community recreation facilities and, in particular, to provide for the refunding of the $6,465,000 Certificates of Participation (2001 Capital Improvement Financing Project) and to refinance the construction of the Temecula Civic Center and, in particular to provide for the refunding of the $24,535,000 Certificates of Participation (2008 Temecula Civic Center Financing Project). The interest components of the lease payments have been calculated based on an interest rate of 3.75% per annum, on the basis of a 360 -day year of twelve 30 -day months. The amount of principal and interest outstanding as of June 30, 2016, is $21,759,000 and $6,502,219, respectively. Principal and interest paid for during the current year totaled $2,136,901. The future debt service requirements on the 2011 Financing Lease are as follows: Year Ending June 30 Principal Interest Total 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032 Total Capital Lease Payable $ 1,343,000 1,389,000 1,439,000 1,493,000 1,547,000 6,443,000 7,300,000 805,000 $ 797,222 746,231 693,450 638,719 581,981 2,142, 891 890,391 11,334 $ 2,140,222 2,13 5,231 2,132,450 2,131,719 2,128,981 8,585,891 8,190,391 816,334 $ 21,759,000 $ 6,502,219 $ 27,444,885 The assets acquired through capital leases are as follows: Equipment Less: Accumulated depreciation Governmental Activities $ 8,926,087 (7,204,237) $ 1,721,850 84 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 6 — LONG TERM LIABILITIES (CONTINUED) The future minimum lease obligations and the net present value of these minimum lease payments are as follows: Year Ending Governmental June 30, Activities 2017 $ 177,891 2018 170,098 2019 159,064 2020 151,034 2021 150,304 Total minimum lease payments 808,391 Less: amounts representing interest (4,857) Present value of minimum lease payments $ 803,534 Claims Payable The claims liability of $299,259 is included in the internal service funds in the fund financial statements and is reported as a liability for governmental activities in the government -wide financial statements. Compensated Absences The outstanding liability for compensated absences earned at June 30, 2016, was $1,563,040. This liability represents the total unpaid vacation and compensation time earned by employees of the City in its governmental activities which is primarily liquidated from the general fund and internal service fund. NOTE 7— INSURANCE PROGRAMS The City is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors and omissions, road and walkway design hazards, vehicle accidents, and natural disasters for which the City maintains various insurance programs. The City has entered into contracts to supervise and administer these programs. General Liability The City is self-insured for General and Auto Liability claims up to $150,000. For amounts in excess of $150,000 and up to $10,000,000 per occurrence with an aggregate coverage of $10,000,000, the City has purchased insurance coverage. Liabilities are recorded when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The liability for claims and judgments is reported in the appropriate Internal Service Fund. An amount for current claims payable is calculated based on the current year expenses and the remainder is shown as noncurrent claims payable. 85 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 — INSURANCE PROGRAMS (CONTINUED) Changes in claims payable for the years ended June 30, 2015, and June 30, 2016, are as follows: Liability as of June 30, 2014 $ 446,145 Claims and changes in estimates during the year ended June 30, 2015 31,455 Claim payments during the year ended June 30, 2015 (137,649) Liability as of June 30, 2015 $ 339,951 Claims and changes in estimates during the year ended June 30, 2016 $ 70,532 Claim payments during the year ended June 30, 2015 (111,224) Liability as of June 30, 2016 $ 299,259 The ultimate amount of losses incurred through June 30, 2016, is dependent on future developments. Based upon information from the City Attorney, the City's claims administrators and others involved with the administration of the insurance programs, City management believes the accrual is adequate to cover such losses. Workers Compensation The City adopted a self-insured worker's compensation program during the fiscal year ended June 30, 2015, which is administered by a third party administrator. The City has a self-insured retention of up to $500,000 on each claim. Coverage in excess of the self-insured amount is provided by New York Maine and General Insurance Company at statutory amounts for workers' compensation. The City did not incur or pay any workers compensation claims during the fiscal year. Settled claims have not exceeded any of the City's coverage amounts in any of the last three fiscal years and there were no reductions in the City's coverage during the year ended June 30, 2016. NOTE 8 — PUBLIC EMPLOYEES RETIREMENT SYSTEM A. General Information about the Pension Plan Plan Descriptions All qualified permanent probationary employees are eligible to participate in the City's Miscellaneous Plan, an agent multiple employer defined benefit pension plan administered by the California Public Employees Retirement System (Ca1PERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. Ca1PERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the Ca1PERS website at http://www.calpers.ca.gov/index. j ap?bc=/about/forms-pubs/calpers-reports/actuarial-reports/home.xml. Benefits Provided — Ca1PERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non -duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. 86 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 8 — PUBLIC EMPLOYEES RETIREMENT SYSTEM (CONTINUED) A. General Information about the Pension Plan (Continued) The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows: Miscellaneous Prior to September On or after to On or after Hire Date 24, 2011 September 24, 2011 January 1, 2013 Formula 2.7% @ 55 2.0% @ 60 2% @ 62 Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50-55 50-63 52-67 Monthly benefits, as a % of annual salary 2.0% to 2.7% 1.092% to 2.418% 1.0% to 2.5% Required employee contribution rates 8.00% 8.00% 6.75% Required employer contribution rates 25.082% 25.082% 6.750% Employees Covered — At June 30, 2016, the following employees were covered by the benefit terms for the Plan: Miscellaneous Inactive employees or beneficiaries currently receiving benefits 100 Inactive employees entitled to but not yet receiving benefits 116 Active employees 180 Total 396 Contributions — Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in rate. The total plan contributions are determined through Ca1PERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the fiscal year ended June 30, 2016, the average active employee contribution rate was 8 percent of annual pay, and the employer's contribution rate was 23.082 percent of annual payroll. For the year ended June 30, 2016, the City paid 4% of the employees required contribution (for those hired before January 1, 2013). The City contributed $3,139,761 during the fiscal year. B. Net Pension Liability The City's net pension liability for the Plan was measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan was measured using an annual actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. A summary of principal assumptions and methods used to determine the total pension liability is shown below. 87 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 8 — PUBLIC EMPLOYEES RETIREMENT SYSTEM (CONTINUED) B. Net Pension Liability (Continued) Actuarial Assumptions — The total pension liability was determined using the following actuarial assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate (4) Inflation Payroll Growth Projected Salary Increase Investment Rate of Return Mortality Miscellaneous June 30, 2014 June 30, 2015 Entry -Age Normal Cost Method 7.65% 2.75% 3.0% 3.3% - 14.2% (1) 7.65% (2) (3) (1) Depending on age, service and type of employment. (2) Net of pension plan investment expenses, including inflation. (3) The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2013, valuation were based on the results of a January 2014 actuarial experience study for the period of 1997 to 2011. Further details of the Experience Study can be found on the Ca1PERS website at: http://www.calpers.ca.gov/index.j sp?bc=/about/forms-pubs/calpers-reports/actuarial-reports.xml. (4) The discount rate was adjusted from 7.50% used in the prior measurement period. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, Ca1PERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11- 60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 88 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 8 — PUBLIC EMPLOYEES RETIREMENT SYSTEM (CONTINUED) B. Net Pension Liability (Continued ) The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses: Asset Class Global Equity Global Fixed Income Inflation Sensitive Private Equity Real Estate Infrastructure and Forestland Liquidity Target Allocation 51% 19% 6% 10% 10%0 2% 2% Total 100% (1) An inflation rate of 2.5% was used for this period. (2) An inflation rate of 3.0% was used for this period. Real Return Years 1 -10 (1) 5.25% 0.99% 0.45% 6.83% 4.50% 4.50% -0.55% Real Return Years 11+ (2) 5.71% 2.43% 3.36% 6.95% 5.13% 5.09% -1.05% Discount Rate — The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, Ca1PERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation was not necessary. The long-term expected discount rate of 7.65 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed reported call "GASB Crossover Testing Report" that can be obtained at Ca1PERS' website under the GASB 68 section. C. Changes in the Net Pension Liability The changes in the Net Pension Liability for the Plan are as follows: Increase (Decrease) Balance at June 30, 2014 measurement date Changes in the year: Service Cost Interest on the total pension liability Changes of Assumptions Differences between Expected and Actual Experience Contribution - employer Contribution - employee Projected investment earnings Differences between projected and actual earnings on plan investments Benefit payments, including refunds of employee contributions Administrative Expense Net changes Balance at June 30, 2015 measurement date Total Pension Plan hduciary Net Pension Liability Net Position Liability/(Asset) $ 90,375,828 $ 64,392,450 $ 25,983,378 $ 2,282,142 6,730,946 (1,836,530) (272,870) (2,842,530) 4,061,158 $ 94,436,986 2,999,056 1,008,183 4,911,778 (3,441,253) (2,842,530) (75,393) $ 2,282,142 6,730,946 (1,836,530) (272,870) (2,999,056) (1,008,183) (4,911,778) 3,441,253 75,393 2,559,841 1,501,317 $ 66,952,291 $ 27,484,695 89 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 8 — PUBLIC EMPLOYEES RETIREMENT SYSTEM (CONTINUED) C. Changes in the Net Pension Liability (Continued) Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City for the Plan, calculated using the discount rate for each Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 -percentage point lower or 1 -percentage point higher than the current rate: 1% Decrease Net Pension Liability Current Discount Rate Net Pension Liability 1% Increase Net Pension Liability Miscellaneous 6.65% $ 41,804,999 7.65% $ 27,484,695 8.65% $ 15,789,455 Pension Plan Fiduciary Net Position — Detailed information about each pension plans' fiduciary net position is available in the separately issued Ca1PERS financial reports. D. Pension Expense and Deferred Outflows / Inflows of Resources Related to Pensions For the year ended June 30, 2016, the City recognized pension expense of $2,276,187. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of of Resources Resources Pension contributions subsequent to measurement date $ 3,139,761 $ - Changes of Assumptions (1,399,261) Differences between Expected and Actual Experience (207,901) Net differences between projected and actual earnings on plan investments (482,034) Total $ 3,139,761 $ (2,089,196) The amount of $3,139,761 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year ended June 30 2017 $ (892,333) 2018 (892,333) 2019 (892,331) 2020 587,801 Total $ (2,089,196) 90 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 9 — DEFERRED COMPENSATION PLAN Certain provisions of the Small Business Job Protection Act (the Act) affected Internal Revenue Code Section 457 plans by eliminating the requirement that Section 457 plan assets legally remain the assets of the sponsoring government. The Act requires that amounts deferred under a Section 457 plan be held in trust for the exclusive benefit of participating employees and not be accessible by the government or its creditors. The City has implemented GASB 32, "Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans". The assets have been transferred into a trust, and are no longer subject to claims of the City's general creditors, and are no longer considered the assets of the City. The plan permits all City employees to defer a portion of their salary until future years. The amount deferred is not available to employees until termination, retirement, death or unavoidable emergency. NOTE 10 — DEFINED CONTRIBUTION PLAN The City provides pension benefits for all its project (part time, temporary) employees through a defined contribution plan held with a 3rd party administrator. Any amendment to the program is designated to the City Manager as the City's "Administrator" of the plan. The plan's administrator is Nationwide Retirement/OBRA. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All project employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan. The City contributes 3.75% of the employee's salary as deferred compensation. Additionally, employees contribute 3.75% of salary towards this program on a pre-tax basis. The contribution requirements are established and may be amended by the City and/or City Council. The City's contribution for each employee (and interest earned by the account) is fully vested immediately. For the year ended June 30, 2016, the City's payroll covered by the plan was $1,999,259. The City made employer contributions of $74,972 (3.75% of current covered payroll), and employees contributed $74,972 (3.75% of current covered payroll). NOTE 11— LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES Grant Audit Contingencies Under the terms of federal and state grants, periodic audits are required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to reimbursement to the grantor agencies. City management believes disallowances, if any, will be immaterial. Other Contingencies A large local vendor has advised the City of certain errors in sales tax remittances .The City does not know whether the sales tax revenues have been earned or will be adjusted in subsequent years. The City has currently recognized an unearned revenue in the amount of $1,111,753 in the general fund as an estimate of how much sales tax has been received but not earned. Litigation The government is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the government's counsel the resolution of these matters will not have a material adverse effect on the financial condition of the government. 91 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 11— LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) Construction Commitments The City has active construction projects as of June 30, 2016. The projects include signals, streets and drainage, bridges, trails, landscape and facilities. At fiscal year-end, the City's encumbrances with contractors were as follows: Streets and drainage Sidewalks Parks Interchanges Bridges Equipment Buildings Total Spent -to -date $ 2,102,024 70,664 989,538 139,074 247,577 33,970 3,282,714 $ 6,865,561 Remaining Commitments $ 769,403 18,219 367,056 96,781 143,948 32,422 1,367,141 $ 2,794,970 NOTE 12 — AFFORDABLE HOUSING GRANT AND LOAN AGREEMENTS The City has the following Notes Receivable outstanding at the end of June 30, 2016, reported in the Housing Asset Fund: First Time Home Buyers Program Home Improvement Program Dalton Partners, LLP OPA 28500 Pujol Street DDA Temecula Gardens, L.P. OPA Summerhouse OPA AMCAL Pujol Fund L.P. OPA Total First Time Home Buyers Program City Housing Special Revenue Fund $ 91,942 6,300,000 3,331,155 359,900 9,909,014 6,346,113 $ 26,338,124 The former Temecula Redevelopment Agency sponsored a program to help first time home buyers afford a home in Temecula. This program is called the First Time Buyers Program. It provides a 30 -year second mortgage at 5% interest to qualified buyers. The maximum assistance is 20% of the purchase price plus closing costs up to a maximum of $65,000. The loan is deferred for the first 5 years, and then fully amortized in years 6 to 30. Pursuant to AB X1 26 and AB 1484, the former Redevelopment Agency was able to transfer these loans to the City Housing Successor effective February 1, 2012. The balance due to the City Housing Successor at June 30, 2016, is $91,942. 92 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 12 — AFFORDABLE HOUSING GRANT AND LOAN AGREEMENTS (CONTINUED) Home Improvement Program The former Temecula Redevelopment Agency also sponsored a home improvement loan program. Under this program qualified residents may borrow up to $10,000 at 5% interest for up to five years. The loan is only made to fund certain repairs. The program contains provisions allowing the loans to be forgiven at the end of the five year term if those provisions are not breached. First time homebuyer program participants are also permitted to participate in the home improvement loan program and may borrow up to $10,000 for up to 10 years with a wider range of allowable improvements than is permitted under the general Residential Improvement Program. These loans may also be forgiven at the end of the ten year term if their loan provisions are not breached. Pursuant to AB X1 26 and AB 1484, the former Redevelopment Agency was able to transfer these loans to the City Housing Successor effective February 1, 2012. As of June 30, 2016, all of the balances have been forgiven. Dalton Partners LLP Owner Participation Agreements The City Housing Successor has two notes receivable in the amounts of $3,000,000 and $3,300,000 from Dalton Partners LLC, a California Limited Liability Company (the LLC). The funds were loaned to the LLC under two separate Owner Participation Agreements (the OPAs) under which the LLC was to develop and operate a mixed used development including providing affordable housing. The notes are secured as second trust deed for a term of 55 years and will be forgiven if there are no violations of the covenants of the OPAs. If there is a violation of covenants of the OPA, the City Housing Successor can require full payment of the principal. 28500 Pujol Street Disposition and Development Agreement The City Housing Successor has a note receivable in the amount of $2,615,000 from 28500 Pujol Street, a California Limited Partnership (the Partnership). The funds were loaned to the Partnership under a Disposition and Development Agreement (the DDA) dated in 2003 under which the Partnership developed affordable housing. The note is due 55 years from the date of the note (August 1, 2004) with interest accrued at a rate of 3%. Fifty percent of the residual receipts as defined in the DDA for each calendar year are due March 15 of the following year. Any residual receipts are to be applied to the accrued interest. Any unpaid interest is added to the note. As of June 30, 2016, the total due from the Partnership amounted to $3,331,155 which included $716,155 of accrued interest. Temecula Gardens, L.P. Owner Participation Agreement The City Housing Successor has a note receivable in the amount of $305,000 from Temecula Gardens, L.P., a California Limited Partnership (the LP). The funds were loaned to the LP under an Owner Participation Agreement (the OPA) under which the LP was to develop real property. The note is secured by a deed of trust encumbering the property with interest accrued at 1 %. As of June 30, 2016, the total due from the Partnership amounted to $359,900 which included $54,900 of accrued interest. 93 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 12 — AFFORDABLE HOUSING GRANT AND LOAN AGREEMENTS (CONTINUED) Summerhouse Owner Participation Agreement The former Temecula Redevelopment Agency has an agreement with Summerhouse Housing Associates, L.P. (the LP) to loan up to $8,438,595 for the cost of acquiring a site and construction of 110 affordable housing units. Pursuant to AB X1 26 and AB 1484, the Redevelopment Agency transferred the agreement to the City Housing Successor effective February 1, 2013. Interest at a rate of 3% will accrue beginning at the date of the loan (September 22, 2009) and the loan shall be repaid 55 years from the date of the issuance of the Certificate of Completion. Funds were loaned to the LP under an Owner Participation Agreement (the OPA) under which the LP was to develop and operate a development providing for affordable housing. The note is secured as a second trust deed for a term of 55 years. At the end of 55 years, the LP has the option to enter into a new regulatory agreement to extend the terms of the OPA or pay the loan in its entirety. The full amount of the loan has been disbursed to the LP. The outstanding balance due to the City Housing Fund is $9,909,014 which included $1,470,419 in accrued interest. AMCAL Pujol Fund L.P. Owner Participation Agreement The former Temecula Redevelopment Agency has an Owner Participation Agreement (OPA) dated February 22, 2011, with AMCAL Pujol Fund L.P., a California limited partnership (the Partnership) to grant up to $5,579,000 for land acquisition, construction, and permanent financing of a 45 unit apartment affordable housing project. Pursuant to AB X1 26 and AB 1484, the former Redevelopment Agency transferred the agreement to the City Housing Successor effective February 1, 2013. The project will have a 55 -year covenant restricting the units to low income households as defined by California Health and Safety Code. The funds are disbursed in phases based on specific project milestones and is secured by a Deed of Trust. Interest is not to exceed 3% and will accrue on any outstanding amounts. Amounts owed will be forgiven if there are no violations of the covenants of the OPA. As of June 30, 2016, the full amount of the loan has been disbursed to the LP. The outstanding balance due to the City Housing Fund is $6,346,113. NOTE 13 — NON COMMITMENT DEBT Special Tax Bonds Neither the faith and credit nor the taxing power of the City or agency is pledged to the payment of the six bond issuances disclosed below. Therefore, the bonds are not included in the financial statements. In August 2005, the Temecula Financing Authority Community Facilities District No. 03-1 (Crowne Hill District) issued $3,865,000 in special tax bonds (Series B). The bonds were issued to finance the acquisition and construction of improvements in the District, pay administrative costs, pay the costs of issuing the bonds, and to make a deposit to the reserve fund for the bonds. The bonds are payable from special tax revenues derived by the District from the levy of the special taxes and are secured by a first pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, these bonds had an outstanding balance of $2,245,000. In September 2003, the City of Temecula Assessment District No. 03-4 (John Warner Road) issued $1,210,000 in special tax bonds. The bonds were issued to finance the cost of certain road and drainage improvements in the District, pay interest on the bonds for a revenue derived by the District from the levy of the special taxes and are secured by a first limited period, pay administrative costs, pay the costs of issuing the bonds and make a deposit to the reserve fund for the bonds. The bonds are payable from special tax pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, these bonds had an outstanding balance of $615,000. 94 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 13 — NON COMMITMENT DEBT (CONTINUED) On April 27, 2006, the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) issued $51,250,000 in special tax bonds. The bonds were issued to finance the acquisition and construction of improvements in the District, pay interest on the bonds for a limited period, pay administrative costs and pay the cost of issuing the bonds. The bonds are payable from special tax revenues derived by the District from the levy of special taxes and are secured by a first pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, these bonds had an outstanding balance of $43,025,000. In August 2007, the Temecula Public Financing Authority Community Facilities District No. 01-02 (Harveston) issued $14,470,000 2006 Special Tax Refunding Bonds, Series A and $3,075,000 2006 Special Tax Refunding Bonds, Subordinate Series B. The bonds were issued to refund, on September 1, 2006, the $17,310,000 aggregate outstanding principal amount of the Community Facilities District No. 01-02 (Harveston) Special Tax Bonds, 2002 Series A, pay the costs for issuing the 2006 Bonds, acquire a reserve surety for the Series A Bonds and establish a reserve for the Series B Bonds. The bonds are payable from special tax revenues derived by the District from the levy of special taxes are secured by a first pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, $11,810,000 in 2006 Series A and $2,285,000 in 2006 Series B bonds remain outstanding. In July 2012, the Temecula Public Financing Authority Community Facilities District No. 03-03 (Wolf Creek) issued $26,020,000 Special Tax Refunding Bonds. The bonds were issued to refund CFD 03-03 (Wolf Creek) 2003 Special Tax Bonds, pay for the costs of issuing the 2012 Bonds and establish a Reserve Fund for the 2012 Bonds. The bonds are payable from special tax revenues derived by the District from the levy of special taxes and are secured by a first pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, $23,545,000 remains outstanding. In July 2012, the Temecula Public Financing Authority Community Facilities District No. 03-06 (Harveston II) issued $4,400,000 Special Tax Refunding Bonds. The bonds were issued to defease and redeem CFD 03-06 (Harveston II) 2004 Special Tax Bonds, pay for the costs of issuing the 2012 Bonds and establish a Reserve Fund for the 2012 Bonds. The bonds are payable from special tax revenues derived by the District from the levy of special taxes and are secured by a first pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, $3,965,000 remains outstanding. In July 2012, the Temecula Public Financing Authority Community Facilities District No. 03-01 (Crowne Hill) issued $10,440,000 Special Tax Refunding Bonds. The bonds were issued to defease and redeem CFD 03-01 (Crowne Hill) 2003 Special Tax Bonds, pay for the costs of issuing the 2012 Bonds, and establish a Reserve Fund for the 2012 Bonds. The bonds are payable from special tax revenues derived by the District from the levy of special taxes and are secured by a first pledge of all the special tax revenues and monies deposited in certain funds. At June 30, 2016, $9,365,000 remains outstanding. 95 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 14 — POST EMPLOYMENT BENEFITS Plan Description The City provides other postemployment benefits (OPEB) through the California Employers' Retiree Benefit Fund (CERBT), an agent multiple -employer defined benefit healthcare plan administered by the California Public Employees' Retirement System (CaIPERS), by currently contributing a predetermined monthly maximum of $1,090 from July 1, 2013 through September 30, 2013, and $1,198 from October 1, 2013 through June 30, 2016, for each eligible retiree and spouse towards health insurance. These benefits are provided per contract between the City and the employee associations. Separate financial statements for the CERBT may be obtained by writing to Ca1PERS at Lincoln Plaza North 400 Q Street, Sacramento, California 95814 or by visiting the Ca1PERS website at www.calpers.ca.gov. Funding Policy The contribution requirements of plan members and the City are established and may be amended by the City, City Council and/or the employee associations. Currently, contributions are not required from plan members. The City pays a mandated monthly subsidy regardless of coverage elected of $115. The purpose of the contributions was to cover the required contribution rate of 4.29% of annual covered payroll (annual payroll of active employees covered by the plan) and to prefund benefits. As a result, the City calculated and recorded a Net OPEB Asset, representing the difference between the Annual Required Contribution (ARC) and actual contributions, as presented in the following table: Annual Required Contribution (ARC) Adjustment for interest Adjustment to ARC Annual OPEB cost Contributions made Net OPEB Obligation (asset) July 1, 2015 (Increase) decrease in Net OPEB asset Net OPEB Obligation (asset) June 30, 2016 $ 1,509,000 184,000 (218,000) 1,475,000 (690,617) (3,107,524) 784,383 $ (2,323,141) The contribution rate of 4.29% is based on the ARC of $1,509,000, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis is projected to cover the annual normal cost and the amortization of unfunded actuarial liabilities (or funding excess) over a thirty year period. Annual OPEB Costs and Net OPEB Obligation (Asset) For the fiscal year 2015-2016, the City's contribution amount of $690,617 was less than that the annual OPEB cost (expense) of $1,475,000 which has reduced in the Net OPEB Asset by $784,383. Fiscal Year Ending 6/30/2014 6/30/2015 6/30/2016 Annual OPEB Cost $ 433,371 474,045 1,475,000 Actual Contribution (Net of Adjustments) $ 488,207 564,082 690,617 Percentage of Annual OPEB Cost Contributed 113% 119% 47% Net OPEB Obligation (Asset) $ (3,107,524) (3,107,524) (2,323,141) 96 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 14 — POST EMPLOYMENT BENEFITS (CONTINUED) Funded Status and Funding Progress Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the City are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The funded status of the plan as of the most recent valuation is as follows: Actuarial Valuation Date Actuarial Value of Assets 6/30/2015 $ 5,623,000 Actuarial Accrued Liabilities $ 19,649,000 Actuarial Methods and Assumptions Unfunded Actuarial Accrued Liability $ 14,026,000 Funded Ratio Covered Payroll UAAL as a Percentage of Covered Payroll 28.6% $ 12,758,000 109.94% Changes in assumptions — The City made several assumption changes during the year. The assumptions included in the prior year valuation that have been changed include: 1) value of the implied subsidy was revalued; 2) discount rate lowered from 7.10% to 7.00%; 3) Affordable Care Act Excise Tax estimate included; 4) medical trend increased; 5) fixed dollar cap assumed to annually increase at 3% (no increases in prior valuation); 6) mortality improvement projection added; and 7) demographic assumptions updated to reflect more recent Ca1PERS Experience Study. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in the actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the June 30, 2015, actuarial valuation, the Entry Age Normal, Level Percent of Payroll actuarial cost method was used. The actuarial assumptions include an inflation rate of 3.00%, 7.00% investment rate of return, which is based on an expected return for asset allocation 1 published in the Statement of Investment Policy for the California Employers' Retiree Benefit Trust (CERBT) Fund, and annual healthcare cost trend rate of 3.00%. The actuarial value of assets is set equal to the reported market value of assets. The UAAL is being amortized as a level percentage of payroll over 28 years on an closed basis. The number of active participants is 187. 97 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 15 — CALIFORNIA REDEVELOPMENT AGENCY DISSOLUTION On July 18, 2011, the California Redevelopment Association ("CRA") and the League of California Cities ("League") filed a petition for writ of mandate with the California Supreme Court, requesting the Court to declare unconstitutional two bills that were passed as part of the 2011-12 State Budget, AB 1X 26 and 27 (California Redevelopment Association v. Matosantos). AB 1X 26 dissolves redevelopment agencies effective October 1, 2011. AB 1X 27 gave redevelopment agencies an option to avoid dissolution if it commits to making defined payments for the benefit of the State, school districts and certain special districts. In 2011-12, these payments amounted to a state-wide total of $1.7 billion. In 2012-13 and subsequent years, the payments totaled $400 million, annually. Each city or county's share of these payments was determined based on its proportionate share of state-wide tax increment. On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (Bill) that provided for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Temecula that previously had reported the redevelopment agency as a blended component unit. The Bill provides that upon dissolution of a redevelopment agency, either the County or another unit of local government will agree to serve as the "successor agency" to hold the assets until they are distributed to other units of state and local government. Effective February 1, 2012, the City became the Successor Agency for the former redevelopment agency in accordance with the Bill. Prior to the dissolution, the City loaned the former redevelopment agency $5,250,954 for the allocation to the Supplemental Education Revenue Augmentation ("SERAF") pursuant to the Health and Safety Code Section 33690(c). All amounts due are reported the City Housing fund. In the opinion of management, and in consultation with its legal counsel, the amounts owed to the City for advances by the former Temecula Redevelopment Agency were for legitimate redevelopment purposes. Further, management asserts that it has complied with AB 1X 26, as amended by AB 1484, and intends to perform all actions required under Health and Safety Code Section (HSC) 34191.4 to ensure collectability of the amount outstanding. On April 26, 2013, the City received notification of the "Finding of Completion" from the California State Department of Finance (DOF), which allows for: 1) loan agreements between the former redevelopment agency and City may be placed on the ROPS as an enforceable obligation, provided the oversight board makes a finding that the loan was for a legitimate redevelopment purpose per California Health and Safety Code (HSC) Section 34191.4(b)(1), and 2) utilizing proceeds derived from bonds issued prior to January 1, 2011 in a manner consistent with the original bond covenants per HSC section 34191.4(c). NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY Subject to the control of a newly established oversight board, remaining assets of the Successor Agency can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. 98 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill. Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City's position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City. In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012. After the date of dissolution, the assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund (private -purpose trust fund) in the financial statements of the City. A. Cash and Investments Cash and investments reported in the accompanying financial statements consisted of the following: Cash and investments pooled with the City Cash and investments with fiscal agent B. Capital Assets An analysis of capital assets as of June 30, 2016, follows: $ 3,223,308 16,730,509 $ 19,953,817 Balance at Balance at July 1, 2015 Additions Deletions June 30, 2016 Capital Assets Not Being Depreciated: Land $ 3,819,108 $ - $ - $ 3,819,108 Capital Assets, Being Depreciated: Buildings and structures 7,780 - - 7,780 Infrastructure 35,266,726 - - 35,266,726 Total Capital Assets Being Depreciated 35,274,506 - - 35,274,506 Less Accumulated Depreciation for: Buildings and structures 7,780 - - 7,780 Infrastructure 4,885,298 1,179,997 - 6,065,295 Total Accumulated Depreciation 4,893,078 1,179,997 - 6,073,075 Total Capital Assets, Being Depreciated, Net 30,381,428 (1,179,997) - 29,201,431 Capital Assets, Net $ 34,200,536 $ (1,179,997) $ - $ 33,020,539 99 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) C. Long -Term Debt A description of long-term debt outstanding (excluding defeased debt) of the Successor Agency as of June 30, 2016, follows: Balance at Balance at Due Within July 1, 2015 Additions Deletions June 30, 2016 One Year Tax allocation bonds: 2002 TAB $ 23,060,000 $ - $ 595,000 $ 22,465,000 $ 625,000 2006 TAB Series A 15,930,000 - 310,000 15,620,000 320,000 2006 TAB Series B 2,760,000 65,000 2,695,000 65,000 2007 TAB 14,470,000 315,000 14,155,000 335,000 2010 TAB Series B 12,720,000 - 280,000 12,440,000 290,000 2011 TAB Series A 16,435,000 - 210,000 16,225,000 225,000 85,375,000 - 1,775,000 83,600,000 1,860,000 Less: bond discount (626,754) - 25,539 (601,215) - Total Long -Term Debt $ 84,748,246 $ - $ 1,800,539 $ 82,998,785 $ 1,860,000 Tax Allocation Bonds 2002 Tax Allocation Bonds: In April of 2002 the Redevelopment Agency of the City of Temecula issued $28,055,000 of 2002 Tax Allocation Bonds consisting entirely of current interest bonds. The proceeds from the bonds were used to refund the Agency's Redevelopment Project No. I 1993 Series A Tax Allocation Bonds; discharge an obligation pursuant to the County Pass -Through Agreement of the Agency to the County of Riverside, finance redevelopment activities within or of benefit to the Project Area and provide for the costs of issuing the 2002 Bonds, including the premium for the financial guaranty insurance policy and Debt Service Reserve Surety Bond. A portion of the proceeds from the sale of the 2002 Bonds, together with certain funds made available through the defeasance of the refunded bonds, were deposited in trust with an escrow agent to provide the remaining debt service payments on the refunded debt. The trust invests solely in direct obligations of the United States Government. The advanced refunding met the requirements of an in -substance defeasance. The Project 1993 bonds were removed from the RDA's long-term debt. The defeased debt was called on June 10, 2002. This liability was transferred to the Successor Agency upon dissolution of the Redevelopment Agency. The 2002 Tax Allocation Bonds consist of: (1) $9,030,000 of Serial Bonds with annual interest rates ranging from 3.0% to 5.0%, maturing on August 1 of each year beginning in 2003 through 2020 in amounts ranging from $95,000 to $755,000; (2) $6,4$5,000 of 5.125% Term Bonds due August 1, 2027 and (3) $12,540,000 of 5.250% Term Bonds due August 1, 2036. The outstanding balance of the bonds as of June 30, 2016, is $22,465,000. 100 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) C. Long -Terra Debt (Continued) 2002 Tax Allocation Bonds (Continued): The bonds are payable solely from and secured by a pledge of a portion of property tax revenues, subject to the enforcement obligation process. The future debt service requirements on these bonds are as follows: Year Ending June 30, Principal Interest 2017 2018 2019 2020 2021 2022-2026 2026-2031 2032-2036 2037 $ 625,000 655,000 685,000 720,000 755,000 4,395,000 5,645,000 7,290,000 1,695,000 $ 1,144,774 1,113,741 1,081,239 1,046,456 1,009,581 4,500,481 3,240,681 1,589,700 88,988 $ 22,465,000 $ 14,815,641 2006 Tax Allocation Bonds Series A and Series B Payable: Total $ 1,769,774 1,768,741 1,766,239 1,766,456 1,764,581 8,895,481 8,885,681 8,879,700 1,783,988 $ 37,280,641 In December 2006, the Redevelopment Agency of the City of Temecula issued $18,105,000 2006 Tax Allocation Bonds Series A and $3,040,000 2006 Tax Allocation Bonds Series B. The proceeds of the bonds can be used to finance redevelopment activities within or of benefit to the Project Area, provide for the costs of issuing the 2006 Bonds, including the premium for a financial guaranty insurance policy for the Series A Bonds and the Series A Debt Service Reserve Surety Bond and establish a reserve account for the Series B Bonds. These liabilities were transferred to the Successor Agency upon dissolution of the Redevelopment Agency. The 2006 Series A Bonds consist of: 1) $6,345,000 of Serial Bonds with annual interest rates ranging from 4.0% to 4.2%, maturing on August 1 of each year beginning in 2007 through 2025 in amounts ranging from $235,000 to $460,000; 2) $2,600,000 of 4.25% Term Bonds due August 1, 2030, 3) $3,945,000 of4.5% Term Bonds due August 1, 2036, and 4) $5,215,000 of 4.5% Term Bonds due August 1, 2038. The outstanding balance of the Series A Bonds as of June 30, 2016, is $15,620,000. The 2006 Series B Bonds consist of: 1) $885,000 of Serial Bonds with annual interest rates ranging from 3.95% to 4.85%, maturing on December 15 of each year beginning in 2010 through 2022 in amounts ranging from $50,000 to $90,000; 2) $390,000 of 5.0% Term Bonds due December 15, 2026, and 3) $1,765,000 of 5.0% Term Bonds due December 15, 2038. The outstanding balance of the Series B Bonds as of June 30, 2016, is $2,695,000. 101 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 - SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) C. Long -Term Debt (Continued) 2006 Tax Allocation Bonds Series A and Series B Payable (Continued): The bonds are payable from property tax revenues, subject to the enforcement obligation process. The future debt service requirements on the 2006 Tax Allocation Bonds Series A are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2039 Principal $ 320,000 335,000 350,000 360,000 375,000 2,120,000 2,600,000 3,210,000 5,950,000 $ 15,620,000 Interest Total $ 673,436 660,336 646,636 632,436 617,736 2,875,764 2,389,844 1,769,175 622,350 $ 993,436 995,336 996,636 992,436 992,736 4,995,764 4,989,844 4,979,175 6,572,350 $ 10,887,713 $ 26,507,713 The bonds are payable from property tax revenues, subject to the enforcement obligation process. The future debt service requirements on the 2006 Tax Allocation Bonds Series B are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2039 Principal Interest $ 65,000 $ 70,000 75,000 75,000 80,000 460,000 585,000 745,000 540,000 131,706 128,618 125,264 121,758 118,095 535,310 409,000 246,375 55,000 Total $ 196,706 198,618 200,264 196,758 198,095 995,310 994,000 991,375 595,000 $ 2,695,000 $ 1,871,126 $ 4,566,126 102 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) C. Long -Term Debt (Continued) 2007 Tax Allocation Bonds Payable: In October 2007, the Redevelopment Agency of the City of Temecula issued $15,790,000 of 2007 Tax Allocation Bonds consisting entirely of current interest bonds. The proceeds from the bonds were used to finance redevelopment activities within or of benefit to the Temecula Redevelopment Project No.1, including establishing an escrow fund for such purposes, establish a reserve subaccount for the 2007 Bonds, fund capitalized interest with respect to the portion of the 2007 Bonds proceeds deposited into the Escrow Fund, and provide for the cost of issuing the 2007 Bonds. This liability was transferred to the Successor Agency upon dissolution of the Redevelopment Agency. The 2007 Tax Allocation Bonds consist of: 1) $4,385,000 of Serial Bonds with annual interest rates ranging from 4.1% to 5.25%, maturing on December 15 of each year beginning in 2010 through 2025 in amounts ranging from $195,000 to $380,000; 2) $1,750,000 of 5.375% Term Bonds due December 15, 2029; 3) $5,615,000 of 5.5% Term Bonds due December 15, 2038; and 4) $4,040,000 of 5.625% Term Bonds due December 15, 2038. The outstanding balance of the Bonds as of June 30, 2016, is $14,155,000. The bonds are payable from property tax revenues, subject to the enforcement obligation process. The future debt service requirements on the 2007 Tax Allocation Bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2039 Principal $ 335,000 345,000 360,000 380,000 400,000 2,350,000 3,045,000 3,985,000 2,955,000 $ 14,155,000 Interest $ 757,328 740,432 722,723 703,847 683,738 3,122,047 2,419,022 1,478,541 333,088 $ 10,960,766 Total $ 1,092,328 1,085,432 1,082,723 1,083,847 1,083,738 5,472,047 5,464,022 5,463,541 3,288,088 $ 25,115,766 103 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) C. Long -Term Debt (Continued) 2010 Tax Allocation Housing Bonds Payable: In February 2010, the Redevelopment Agency of the City of Temecula issued $1,035,000 of 2010 Tax Allocation Housing Bonds Series A (Tax -Exempt) and $12,720,000 of Tax Allocation Housing Bonds Series B (Taxable Build America Bonds). The proceeds from the bonds will be used to finance low and moderate income housing projects within or of benefit to the Temecula Redevelopment Project No. 1, including establishing a reserve for the 2010 bonds. These liabilities were transferred to the Successor Agency upon dissolution of the Redevelopment Agency. The 2010 Series A Bonds consist of $1,035,000 of Serial Bonds with annual interest rates ranging from 2% to 3.25%, maturing on August 1 of each year beginning in 2011 through 2014 in amounts ranging from $250,000 to $270,000. The bonds were paid off during the fiscal year ended June 30, 2015. The 2010 Series B Bonds consist of: 1) $3,795,000 of Serial Bonds with annual interest rates ranging from 5.201% to 7.688%, maturing on August 1 of each year beginning in 2016 through 2025 in amounts ranging from $280,000 to $425,000; 2) $2,485,000 of 7.93% Term Bonds due August 1, 2030; and 3) $6,440,000 of 8.18% Term Bonds due August 1, 2039. The outstanding balance of the bonds as of June 30, 2016, is $12,440,000. The Series B bonds are payable solely from property tax revenues, subject to the enforcement obligation process. The City is eligible for a cash subsidy payment from the United States Treasury equal to 35% of the interest payable on the 2010 Series B Bonds. The future debt service requirements on the 2010 Tax Allocation Housing Bonds Series B are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2040 Principal $ 290,000 300,000 310,000 325,000 340,000 1,950,000 2,485,000 3,205,000 3,235,000 $ 12,440,000 Interest Total $ 960,896 943,259 924,103 903,256 880,678 4,057,442 3,223,159 2,108,395 547,038 $ 14,548,226 $ 1,250,896 1,243,259 1,234,103 1,228,256 1,220,678 6,007,442 5,708,159 5,313,395 3,782,038 $ 26,988,226 104 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) C. Long -Term Debt (Continued): 2011 Tax Allocation Housing Bonds Payable: In March 2011, the Redevelopment Agency of the City of Temecula issued $17,035,000 of 2011 Tax Allocation Housing Bonds Series A. The proceeds from the bonds will be used to finance low and moderate income housing projects within or of benefit to the Temecula Redevelopment Agency Project No. 1, including establishing a reserve fund for the 2011 bonds. The 2011 Tax Allocation Housing Bonds consist of: 1) $4,555,000 of Serial Bonds with annual interest rates ranging from 2% - 6.5%, maturing on August 1 of each year beginning in fiscal years 2012 through 2027 in amounts ranging from $195,000 to $500,000; 2) $3,265,000 of 6.75% Term Bonds due August 1, 2031, and 3) $9,215,000 of 7.0% Term Bonds due August 1, 2039. The outstanding balance of the bonds at June 30, 2016, is $16,225,000. The bonds are payable solely from property tax revenues, subject to the enforcement obligation process. The future debt service requirements on the 2011 Tax Allocation Housing Bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2040 Principal $ 225,000 240,000 260,000 280,000 300,000 1,940,000 2,995,000 4,605,000 5,380,000 $ 16,225,000 Interest $ 1,080,419 1,069,356 1,056,856 1,043,006 1,027,406 4,864,350 4,101,331 2,865,100 980,000 $ 18,087,824 Total $ 1,305,419 1,309,356 1,316,856 1,323,006 1,327,406 6,804,350 7,096,331 7,470,100 6,360,000 $ 34,312,824 The City pledged, as security for bonds issued, either directly or through the Financing Authority, a portion of property tax revenue (including Low and Moderate Income Housing set-aside and pass through allocations) that it receives. The bonds issued were to provide financing for various capital projects, accomplish Low and Moderate Income Housing projects and to defease previously issued bonds. Assembly Bill 1X 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed property tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. On June 14, 2012, Moody's Investors Service ("Moody's") downgraded all California tax allocation bonds rated `Baa3' and above. As such, the Bonds' insured rating was downgraded from `A3' to `Bal' and underlying rating was downgraded from `A3' to `Bal'. According to Moody's, all California tax allocation bond ratings remain on review for possible withdrawal. 105 CITY OF TEMECULA, CALIFORNIA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 16 — SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY (CONTINUED) D. Advance from the City Housing Fund The amount loaned to the Successor Agency from the City Housing Fund is to advance money for the payment of the FY 2010 and FY 2011 Supplemental Educational Revenue Augmentation Fund in the amount of $4,354,450 and $896,504, respectively. The California Department of Finance has approved the repayment of the advance and is projected to begin during the fiscal year beginning July 1, 2016. E. Insurance The Successor Agency is covered under the City of Temecula's insurance policies. Therefore, the limitation and self-insured retentions applicable to the City also apply to the Successor Agency. Additional information as to coverage and self-insured retentions can be found in Note 7. F. Commitments and Contingencies At June 30, 2016, the Successor Agency was involved as a defendant in several lawsuits arising out of the ordinary conduct of its affairs. It is the opinion of management that settlements of these lawsuits, including losses for claims that are incurred but not reported, if any, will not have a material effect on the financial position of the Successor Agency. NOTE 17— SUBSEQUENT EVENTS On November 8, 2016, the voters in the City approved Measure S, a transactions and use tax measure effective April 1, 2017. Measure S is a 1% increase in the sales tax rate, increasing the overall rate from 8% to 9%. On October 25, 2016, the City Council approved the issuance of Special Tax Refunding Bonds for the Temecula Financing Authority Community Facilities District No. 01-2 (Harveston), and Community Facilities District No. 03-1 (Crowne Hill). 106 -ieart of Southern Lakiiornda Wine Country REQUIRED SUPPLEMENTARY INFORMATION 107 CITY OF TEMECULA, CALIFORNIA REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2016 PUBLIC EMPLOYEES RETIREMENT SYSTEM (PERS) Schedule of Changes in the Net Position Liability and Related Ratios Last 10 Years* 2016 2015 Total Pension Liability Service Cost $ 2,282,142 $ 2,380,454 Interest on the total pension liability 6,730,946 6,312,862 Changes in assumptions (1,836,530) - Differences between expected and actual experience (272,870) - Benefit payments, including refunds of employee contributions (2,842,530) (2,597,503) Net change in total pension liability 4,061,158 6,095,813 Total pension liability - beginning 90,375,828 84,280,015 Total pension liability - ending (a) $ 94,436,986 $ 90,375,828 Plan fiduciary net position Contributions - employer $ 2,999,056 $ 2,692,262 Contributions - employee 1,008,183 1,193,150 Net investment income 1,470,525 9,493,527 Administrative expenses (75,393) (83,334) Benefit payments (2,842,530) (2,597,503) Net change in plan fiduciary net position 2,559,841 10,698,102 Plan fiduciary net position - beginning 64,392,450 53,694,348 Plan fiduciary net position - ending (b) $ 66,952,291 $ 64,392,450 Net pension liability - ending (a) -(b) 27,484,695 $ 25,983,378 Plan fiduciary net position as a percentage of the total pension liabilit) 70.90% 71.25% Covered payroll** $ 12,432,674 $ 12,233,806 Net pension liability as percentage of covered payroll 22107% 212.39% Notes to Schedule: * - Fiscal year 2015 was the 1st year of implementation, therefore only two years are shown. **Amounts restated for the implementation of GASB 82 Changes in assumptions - In 2016, the discount rate was changed from 7.5 (net of administrative expense) to 7.65 percent. 108 CITY OF TEMECULA, CALIFORNIA REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2016 PUBLIC EMPLOYEES RETIREMENT SYSTEM (PERS) Schedule of Contributions — Pension Last 10 Years* 2016 2015 Actuarially determined contribution $ 3,139,761 $ 2,657,983 Contributions in relation to the actuarially determined contributions 3,139,761 2,657,983 Contribution deficiency (excess) Covered payroll** Contributions as a percentage of covered payroll 12,805,654 12,432,674 24.52% 21.38% Notes to Schedule Valuation date: June 30, 2013 June 30, 2014 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Cost Method Amortization method Level percent of payroll Remaining amortization period 20 years Asset valuation method Market value Inflation 2.75% Salary increases 3.3% to 14.20% depending on Age, Service, and type of employment Investment rate of return 7.50% 7.65% Retirement age 55 Mortality Based on Ca1PERS Experience Study * - Fiscal year 2015 was the 1st year of implementation, therefore only two years are shown. ** Amounts restated due to the implementation of GASB 82 109 CITY OF TEMECULA, CALIFORNIA REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2016 Actuarial Valuation Date 7/1/2011 7/1/2013 6/30/2015 OTHER POST EMPLOYMENT DEFINED BENEFIT PLAN (OPEB) Schedule of Funding Progress Actuarial Value of Assets $ 4,177,806 4,664,463 5,623,000 Actuarial Accrued Liabilities $ 6,788,892 9,760,063 19,649,000 Unfunded Actuarial Accrued Liability $ 2,611,086 5,095,600 14,026,000 Funded Ratio 61.5% 47.8% 28.6% Covered Payroll $ 11,718,426 11,391,998 12,758,000 UAAL as a Percentage of Covered Payroll 22.28% 44.73% 109.94% Changes in assumptions: The significant increase in the unfunded actuarial accrued liability is a result of changing some significant assumptions, including lowering the discount rate from 7.10 percent to 7.00 percent, assuming an annual increase in the fixed dollar cap of $1,198 (previous valuation assumed no changed), and the addition of the Affordable Care Act excise tax estimate. 110 -ieart of Southern Lakiiornda Wine Country COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 112 Fiscal Year 2015-16 Comprehensive Annual Financial Report DEFINITIONS OF NON -MAJOR GOVERNMENTAL FUNDS NON -MAJOR SPECIAL REVENUE FUNDS: Used to account for specific revenues that are legally restricted to expenditure for particular purposes. ➢ GAS TAX: This fund is used to account for revenues apportioned under the Streets and Highways Code of the State of California. ➢ DEVELOPMENT IMPACT: This fund is used to account for the proceeds of developmental impact fees restricted for capital improvement projects. ➢ COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG): This fund is used to account for grants received from the U.S. Department of Housing and Urban Development (HUD). The grants are used for the redevelopment of a viable community by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for persons of low and moderate income. ➢ AB 2766: This fund is used to account for the City's share of revenues received under AB 2766 to be used to reduce air pollution from motor vehicles pursuant to the California Clean Air Act of 1988. ➢ AB 3229 COPS: This fund is used to account for the revenues and law enforcement expenditures of the AB 3229 COPS grant. ➢ TEMECULA MAJOR CRIMES REWARD FUND: This fund was set up to account for a reward for information that leads to the capture and conviction of the person(s) responsible for the murder of Larry Robinson. The General Fund contributed $25,000 and the public can also contribute to this fund. ➢ BUSINESS INCUBATOR RESOURCE: This fund was set up to account for all activity at the City of Temecula Entrepreneur's Exchange Business Incubator. $150,000 was transferred from the General Fund in fiscal year 2012-13 to initially fund this activity. ➢ TEMECULA ENERGY EFFICIENCY AND ASSET MANAGEMENT (TEAM): This fund was set up to subsidize energy efficiency and rehabilitation projects at municipal facilities. Approximately $120,000 in energy efficiency related rebates initially established the fund and it is sustained by continued rebates and energy cost savings from TEAM implemented projects that maximize measured energy savings identified in routine energy audits conducted in ongoing efforts to further energy conservation. ➢ PUBLIC, EDUCATION & GOVERNMENT FEES FUND (PEG): This fund was established to track the collection and expenditures of a 1% fee collected by local cable operators for the sole purpose of supporting the access facilities and activities within the City. 113 Fiscal Year 2015-16 Comprehensive Annual Financial Report DEFINITIONS OF NON -MAJOR GOVERNMENTAL FUNDS (CONTINUED) NON -MAJOR CAPTIAL PROJECTS FUNDS: Used to account for the acquisition and construction of major capital facilities. ➢ CROWNE HILL COMMUNITY FACILITIES DISTRICT #03-1: This fund is used to account for bond proceeds which were used for capital improvements in Crowne Hill Community Facilities District #03-1. ➢ WOLF CREEK COMMUNITY FACILITIES DISTRICT #03-3: This fund is used to account for bond proceeds which were used for capital improvements in Wolf Creek Community Facilities District #03-3. NON -MAJOR DEBT SERVICE FUNDS: Used to account for the accumulation of resources for and the payment of, principal and interest on long-term liabilities. ➢ FINANCING LEASE: This fund is used to account for the payment of principal and interest on the outstanding 2011 Financing Lease. 114 CITY OF TEMECULA, CALIFORNIA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 Special Revenue Funds Development Assets: Gas Tax Impact CDBG AB 2766 Pooled cash and investments $ - $ 6,822,265 $ - $ 218,345 Receivables: Accrued interest 880 19,524 - 1,557 Other receivables - - - - Due from other governments 168,316 - 151,337 37,266 Restricted assets: Cash and investments with fiscal agent - - - - Repayment to the General Fund - - - - Total Assets $ 169,196 $ 6,841,789 $ 151,337 $ 257,168 Liabilities and Fund Balances: Liabilities: Accounts payable S - $ - $ 53,211 $ Deposits payable - 17,659 Due to other funds 169,196 - 98,126 Advances from other funds - - Total Liabilities 169,196 17,659 151,337 Fund Balances: Restricted for: Community development projects Public safety Public works Capital projects Debt service Community services development Unassigned Total Fund Balances 6,824,130 257,168 6,824,130 - 257,168 Total Liabilities and Fund Balances $ 169,196 $ 6,841,789 $ 151,337 $ 257,168 116 CITY OF TEMECULA, CALIFORNIA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 Special Revenue Fund Temecula Major Business AB 3299 Crimes incubator TEAM Assets: COPS Reward Resource Fund Pooled cash and investments S $ 25,407 $ 45,298 $ 230,928 Receivables: Accrued interest 6 56 77 488 Other receivables - 2,730 - Due from other governments 95,253 - - - Restricted assets: Cash and investments with fiscal agent Repayment to the General Fund Total Assets $ 95,259 $ 25,463 $ 48,105 $ 231,416 Liabilities and Fund Balances: Liabilities: Accounts payable $ $ - $ 3,507 $ Deposits payable - - Due to other funds 95,259 - Advances from other funds - - Total Liabilities 95,259 - 3,507 Fund Balances: Restricted for: Community development projects - - - Public safety - - - Public works - - - Capital projects - - - Debt service - - - Conniunity services development 25,463 44,598 231,416 Unassigned Total Fund Balances 25,463 44,598 231,416 Total Liabilities and Fund Balances $ 95,259 $ 25,463 $ 48,105 $ 231,416 117 CITY OF TEMECULA, CALIFORNIA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 Assets: Special Revenue Fund PEG Fund Total Pooled cash and investments $ 95,175 $ 7,437,418 Receivables: Accrued interest 171 22,759 Other receivables 2,730 Due from other governments 22,203 474,375 Restricted assets: Cash and investments with fiscal agent Repayment to the General Fund Total Assets $ 117,549 $ 7,937,282 Liabilities and Fund Balances: Liabilities: Accounts payable $ 107 $ 56,825 Deposits payable 17,659 Due to other funds 362,581 Advances from other funds - Total Liabilities 107 437,065 Fund Balances: Restricted for: Community development projects 6,824,130 Public safety - Public works 257,168 Capital projects Debt service Community services development 117,442 418,919 Unassigned - Total Fund Balances 117,442 7,500,217 Total Liabilities and Fund Balances $ 117,549 $ 7,937,282 118 CITY OF TEMECULA, CALIFORNIA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 Assets: Capital Projects Total Capital Crowne Hill Wolf Creek Projects CFD #03-1 CFD #03-3 Funds Pooled cash and investments $ - $ - $ - Receivables: Accrued interest 360 99 459 Other receivables - - - Due from other governments - - - Restricted assets: Cash and investments with fiscal agent 1,754,928 300,671 2,055,599 Total Assets $ 1,755,288 $ 300,770 $ 2,056,058 Liabilities and Fund Balances: Liabilities: Accounts payable Deposits payable Due to other funds Total Liabilities Fund Balances: Restricted for: Capital projects Total Fund Balances 1,755,288 300,770 2,056,058 1,755,288 300,770 2,056,058 Total Liabilities and Fund Balances $ 1,755,288 $ 300,770 $ 2,056,058 119 CITY OF TEMECULA, CALIFORNIA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 Assets: Debt Service Fund Total Financing Governmental Lease Funds Pooled cash and investments $ $ 7,437,418 Receivables: Accrued interest 23,218 Other receivables 2,730 Due from other governments 474,375 Restricted assets: Cash and investments with fiscal agent 2,055,599 Repayments to the General Fund Total Assets $ $ 9,993,340 Liabilities and Fund Balances: Liabilities: Accounts payable Deposits payable Due to other funds Total Liabilities 56,825 17,659 362,581 437,065 Fund Balances: Restricted for: Community development projects 6,824,130 Public safety Public works 257,168 Capital projects 2,056,058 Community services development 418,919 Unassigned Total Fund Balances 9,556,275 Total Liabilities and Fund Balances $ $ 9,993,340 120 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Special Revenue Funds Gas Tax Development Impact CDBG AB 2766 Revenues: Taxes $ - $ - $ - $ Intergovernmental 2,238,185 - 413,783 Use of money and property 2,355 42,507 - Developer participation 3,096,153 Miscellaneous - Total Revenues Expenditures: Current: General government Public works Capital outlay Debt service: Principal retirement Interest and fiscal changes Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out 136,553 4,343 2,240,540 3,138,660 413,783 140,896 219,016 27,049 219,016 27,049 2,240,540 3,138,660 194,767 113,847 (2,664,318) (1,026,106) (194,767) (423,581) Total Other Financing Sources (Uses) (2,664,318) (1,026,106) (194,767) (423,581) Net Change in Fund Balances (423,778) 2,112,554 - (309,734) Fund Balances at Beginning of Year 423,778 4,711,576 - 566,902 Fund Balances at End of Year $ - $ 6,824,130 $ - $ 257,168 122 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Special Revenue Funds Temecula Major Business AB 3229 Crimes Incubator TEAM COPS Reward Resource Fund Revenues: Taxes $ $ - $ - $ - Intergovernmental 194,790 - 9,240 33,785 Use of money and property 48 187 37,380 1,592 Developer participation Miscellaneous - - Total Revenues Expenditures: Current: General government Public works Capital outlay Debt service: Principal retirement Interest and fiscal changes Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances at Beginning of Year Fund Balances at End of Year 194,838 187 46,620 35,377 195,157 195,157 194,838 187 (148,537) 35,377 187,127 (194,838) (194,838) 187,127 187 38,590 25,276 6,008 35,377 196,039 $ 25,463 $ 44,598 $ 231,416 123 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Special Revenue Funds PEG Fund Total Revenues: Taxes $ 118,800 $ 118,800 Intergovernmental 303 3,026,639 Use of money and property - 88,412 Developer participation - 3,096,153 Miscellaneous 3,026 3,026 Total Revenues 122,129 6,333,030 Expenditures: Current: General government 4,687 418,860 Public works - 27,049 Capital outlay Debt service: Principal retirement - - interest and fiscal changes Total Expenditures 4,687 445,909 Excess (Deficiency) of Revenues Over (Under) Expenditures 117,442 5,887,121 Other Financing Sources (Uses): Transfers in - 187,127 Transfers out - (4,503,610) Total Other Financing Sources (Uses) - (4,316,483) Net Change in Fund Balances 117,442 1,570,638 Fund Balances at Beginning of Year - 5,929,579 Fund Balances at End of Year $ 117,442 $ 7,500,217 124 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Revenues: Taxes Intergovernmental Use of money and property Developer participation Miscellaneous Capital Projects Fund Crowne Hill CFI) #03-1 Wolf Creek CFI) #03-3 Total - $ $ 1,491 455 1,946 Total Revenues 1,491 455 1,946 Expenditures: Current: General government Public works Capital outlay Debt service: Principal retirement interest and fiscal changes Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures 390,651 390,651 390,651 390,651 (389,160) 455 (388,705) Other Financing Sources (Uses): Transfers in - Transfers out - (282,045) (282,045) Total Other Financing Sources (Uses) - (282,045) (282,045) Net Change in Fund Balances (389,160) (281,590) (670,750) Fund Balances at Beginning of Year 2,144,448 582,360 2,726,808 Fund Balances at End of Year $ 1,755,288 $ 300,770 $ 2,056,058 125 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Revenues: Taxes Intergovernmental Use of money and property Developer participation Miscellaneous Debt Service Fund Total Financing Governmental Lease Funds $ 118,800 3,026,639 90,358 3,096,153 3,026 Total Revenues 6,334,976 Expenditures: Current: General government 418,860 Public works 27,049 Capital outlay 390,651 Debt service: Principal retirement 1,291,000 1,291,000 Interest and fiscal changes 845,901 845,901 Total Expenditures 2,136,901 2,973,461 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,136,901) 3,361,515 Other Financing Sources (Uses): Transfers in 2,136,901 2,324,028 Transfers out (4,785,655) Total Other Financing Sources (Uses) 2,136,901 (2,461,627) Net Change in Fund Balances 899,888 Fund Balances at Beginning of Year 8,656,387 Fund Balances at End of Year $ $ 9,556,275 126 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE GAS TAX YEAR ENDED JUNE 30, 2016 Revenues: Intergovernmental Use of money and property Total Revenues Other Financing Sources (Uses): Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) $ 2,246,801 3,000 $ 2,419,513 4,000 $ 2,238,185 2,355 $ (181,328) (1,645) 2,249,801 2,423,513 2,240,540 (182,973) (2,673,579) (2,847,291) (2,664,318) 182,973 (2,673,579) (2,847,291) (2,664,318) 182,973 (423,778) 423,778 (423,778) (423,778) 423,778 423,778 128 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE DEVELOPMENT IMPACT YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Use of money and property $ - $ - $ 42,507 $ 42,507 Developer participation 4,369,877 4,369,877 3,096,153 (1,273,724) Total Revenues 4,369,877 4,369,877 3,138,660 (1,231,217) Other Financing Sources (Uses): Transfers in Transfers out (10,591,170) (10,591,170) (1,026,106) 9,565,064 Total Other Financing Sources (Uses) (10,591,170) (10,591,170) (1,026,106) 9,565,064 Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year (6,221,293) (6,221,293) 2,112,554 8,333,847 4,711,576 4,711,576 4,711,576 $ (1,509,717) $ (1,509,717) $ 6,824,130 $ 8,333,847 129 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE CDBG YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Intergovernmental $ 1,180,958 $ 1,217,713 $ 413,783 $ (803,930) Total Revenues 1,180,958 1,217,713 413,783 (803,930) Expenditures: General Government 223,801 260,556 219,016 41,540 Total Expenditures 223,801 260,556 219,016 41,540 Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year 957,157 957,157 194,767 (762,390) (957,157) (957,157) (194,767) 762,390 (957,157) (957,157) (194,767) 762,390 130 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE AB 2766 YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Intergovernmental $ 134,294 $ 133,033 $ 136,553 $ 3,520 Use of money and property 2,700 3,000 4,343 1,343 Total Revenues 136,994 136,033 140,896 4,863 Expenditures: Public works 37,790 37,790 27,049 10,741 Total Expenditures 37,790 37,790 27,049 Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year 10,741 99,204 98,243 113,847 15,604 99,204 (655,693) (423,581) 232,112 99,204 _ (655,693) (423,581) 232,112 198,408 (557,450) (309,734) 247,716 566,902 566,902 566,902 - $ 765,310 $ 9,452 $ 257,168 $ 247,716 131 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE AB 3229 COPS YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Intergovernmental $ 171,000 $ 195,253 $ 194,790 $ (463) Use of money and property - 48 48 Total Revenues 171,000 195,253 194,838 (415) Other Financing Sources (Uses): Transfers out (171,000) (195,253) (194,838) 415 Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year (171,000) (195,253) (194,838) 415 Fund Balance, End of Year $ $ - $ - $ 132 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE TEMECULA MAJOR CRIMES REWARD FUND YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Use of money and property $ 100 $ 100 $ 187 $ 87 Miscellaneous - - Total Revenues 100 100 187 87 Net Change in Fund Balance 100 100 187 Fund Balance, Beginning of Year 25,276 25,276 25,276 87 Fund Balance, End of Year $ 25,376 $ 25,376 $ 25,463 $ 87 133 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE BUSINESS INCUBATOR RESOURCE YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Intergovernmental $ - $ 10,000 $ 9,240 $ (760) Use of money and property 28,000 34,785 37,380 2,595 Total Revenues 28,000 44,785 46,620 1,835 Expenditures: General government 215,127 225,127 195,157 29,970 Total Expenditures 215,127 225,127 195,157 29,970 Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Total Other Financing Sources (Uses) (187,127) (180,342) (148,537) 31,805 187,127 187,127 187,127 187,127 187,127 187,127 Net Change in Fund Balance - 6,785 38,590 31,805 Fund Balance, Beginning of Year 6,008 6,008 6,008 Fund Balance, End of Year $ 6,008 $ 12,793 $ 44,598 $ 31,805 134 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE TEAM FUND YEAR ENDED JUNE 30, 2016 Revenues: Intergovernmental Use of money & property Total Revenues Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) $ 29,600 $ 1,000 29,600 S. 33,785 $ 4,185 1,200 1,592 392 30,600 30,800 35,377 4,577 30,600 30,800 35,377 4,577 196,039 196,039 196,039 $ 226,639 $ 226,839 $ 231,416 $ 4,577 135 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE PEG FUND YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues: Taxes $ - $ 55,995 $ 118,800 $ 62,805 Use of money & property - 303 303 Miscellaneous - 3,026 3,026 Total Revenues - 55,995 122,129 66,134 Expenditures: General government - 24,500 4,687 19,813 Total Expenditures - 24,500 4,687 19,813 Net Change in Fund Balance Fund Balance, Beginning of Year 31,495 117,442 66,134 Fund Balance, End of Year $ - $ 31,495 $ 117,442 $ 66,134 136 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE CAPITAL OUTLAY YEAR ENDED JUNE 30, 2016 Revenues: Intergovernmental Use of money and property Miscellaneous Total Revenues Expenditures: Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) $ 25,236,459 $ 25,236,459 58,200 58,200 $ 6,169,501 65,815 88,376 $ (19,066,958) 65,815 30,176 25,294,659 25,294,659 6,323,692 (18,970,967) 67,995,027 67,995,027 6,874,410 61,120,617 67,995,027 67,995,027 6,874,410 61,120,617 (42,700,368) (42,700,368) (550,718) 42,149,650 31,037,288 31,037,288 4,712,517 (26,324,771) 31,037,288 31,037,288 4,712,517 (26,324,771) (11,663,080) (11,663,080) 7,163,455 7,163,455 4,161, 799 7,163,455 15,824,879 $ (4,499,625) $ (4,499,625) $ 11,325,254 $ 15,824,879 137 CITY OF TEMECULA, CALIFORNIA BUDGETARY COMPARISON SCHEDULE FINANCING LEASE — DEBT SERVICE YEAR ENDED JUNE 30, 2016 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures: Debt service: Principal retirement $ 1,291,000 $ 1,291,000 $ 1,291,000 $ - Interest and fiscal charges 846,366 846,366 845,901 465 Total Expenditures 2,137,366 2,137,366 2,136,901 465 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,137,366) (2,137,366) (2,136,901) 465 Other Financing Sources (Uses): Transfers in 2,137,366 2,137,366 2,136,901 (465) Total Other Financing Sources (Uses) 2,137,366 2,137,366 2,136,901 (465) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year $ - $ 138 Fiscal Year 2015-16 Comprehensive Annual Financial Report DEFINITIONS OF INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the City on a cost reimbursement basis. INSURANCE: This fund is used to finance and account for the City's risk management and insurance programs. WORKER'S COMPENSATION: This fund is used to finance and account for the City to administer its self-insured retention related to worker's compensation liability claims. VEHICLES: This fund is used to account for the replacement of the City's vehicles. INFORMATION SYSTEMS: This fund is used to account for the cost of providing electronic data processing equipment and software and central telephone services. TECHNOLOGY REPLACEMENT: This fund is used to finance and account for the City's replacement of technology equipment and software upon the end of the assets' useful life. SUPPORT SERVICES: This fund is used to account for the cost of providing central mailing and reprographic services. FACILITIES: This fund is used to account for the cost of City Hall and City Maintenance Facility operations and maintenance. 139 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2016 Governmental Activities - internal Service Funds Worker's Insurance Compensation Vehicles information Systems Assets: Current: Cash and investments $ 598,780 $ 413,262 $ 1,627,055 $ 188,526 Receivables: Accounts 418 - - 1,759 Accrued interest 1,189 772 4,464 1,113 Due from other governments - - Prepaid costs 42,715 7,285 - Total Current Assets 643,102 421,319 1,631,519 191,398 Noncurrent: Capital assets - net of accumulated depreciation - 401,170 Total Noncurrent Assets - 401,170 Total Assets 643,102 421,319 2,032,689 191,398 Liabilities: Current: Accounts payable $ 15,415 $ 1,050 $ 113,027 $ 45,514 Accrued liabilities 1,261 - - 14,789 Deposits payable 10,000 - - - Compensated absences 3,404 - - 23,226 Claims and judgments 269,333 - - Capital leases - - Total Current Liabilities 299,413 1,050 113,027 83,529 Noncurrent: Compensated absences 10,213 - 69,678 Claims and judgments 29,926 - - Capital leases - - Total Noncurrent Liabilities Total Liabilities Net Position: Net investment in capital assets Unrestricted Total Net Position 40,139 - - 69,678 339,552 1,050 113,027 153,207 401,170 303,550 420,269 1,518,492 38,191 $ 303,550 $ 420,269 $ 1,919,662 $ 38,191 140 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2016 Governmental Activities - Internal Service Funds Technology Support Replacement Services Facilities Totals Assets: Current: Cash and investments $ 750,316 $ 491,117 $ 579,807 $ 4,648,863 Receivables: Accounts 332 - 2,509 Accrued interest 507 1,174 1,007 10,226 Due from other governments 13,668 13,668 Prepaid costs - 50,000 Total Current Assets 750,823 492,623 594,482 4,725,266 Noncurrent: Capital assets - net of accumulated depreciation 1,264,191 84,498 - 1,749,859 Total Noncurrent Assets 1,264,191 84,498 1,749,859 Total Assets 2,015,014 577,121 594,482 6,475,125 Liabilities: Current: Accounts payable $ 35,544 $ 19,940 $ 50,623 $ 281,113 Accrued liabilities 3,219 3,927 23,196 Deposits payable - 10,000 Compensated absences 10,253 11,285 48,168 Claims and judgments - - 269,333 Capital leases 150,304 24,128 - 174,432 Total Current Liabilities 185,848 57,540 65,835 806,242 Noncurrent: Compensated absences 30,760 33,853 144,504 Claims and judgments - - 29,926 Capital leases 601,215 27,887 - 629,102 Total Noncurrent Liabilities 601,215 58,647 33,853 803,532 Total Liabilities 787,063 116,187 99,688 1,609,774 Net Position: Net investment in capital assets 512,672 32,483 - 946,325 Unrestricted 715,279 428,451 494,794 3,919,026 Total Net Position $ 1,227,951 $ 460,934 $ 494,794 $ 4,865,351 141 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION INTERNAL SERVICE FUNDS YEAR ENDED JUNE 30, 2016 Governmental Activities - Internal Service Funds Worker's Information Insurance Compensation Vehicles Systems Operating Revenues: Sales and service charges $ 982,192 $ - $ 120,097 $ 2,195,076 Total Operating Revenues 982,192 120,097 2,195,076 Operating Expenses: Administration and general 107,813 61,111 - 1,343,391 Depreciation expense - - 119,821 - Operations and maintenance 853,014 - - 853,477 Total Operating Expense 960,827 61,111 119,821 2,196,868 Operating Income 21,365 (61,111) 276 (1,792) Nonoperating Revenues (Expenses): Interest revenue 1,827 2,198 11,703 1,762 Interest expense Total Nonoperating Revenues (Expenses) 1,827 2,198 11,703 1,762 Income Before Transfers 23,192 (58,913) 11,979 (30) Transfers in 250,000 - Changes in Net Position 23,192 191,087 11,979 (30) Net Position: Beginning of Year 280,358 229,182 1,907,683 38,221 End of Fiscal Year $ 303,550 $ 420,269 $ 1,919,662 $ 38,191 142 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION INTERNAL SERVICE FUNDS YEAR ENDED JUNE 30, 2016 Governmental Activities - Internal Service Funds Technology Support Replacement Services Facilities Totals Operating Revenues: Sales and service charges $ 239,209 $ 510,920 $ 1,267,840 $ 5,315,334 Total Operating Revenues 239,209 510,920 1,267,840 5,315,334 Operating Expenses: Administration and general - 367,101 836,052 2,715,468 Depreciation expense 241,873 34,571 - 396,265 Operations and maintenance - 95,480 404,175 2,206,146 Total Operating Expense 241,873 497,152 1,240,227 5,317,879 Operating Income (2,664) 13,768 27,613 (2,545) Nonoperating Revenues (Expenses): Interest revenue 2,666 2,972 2,731 25,859 Interest expense - (10,676) (10,676) Total Nonoperating Revenues (Expenses) 2,666 (7,704) 2,731 15,183 Income Before Transfers 2 6,064 30,344 12,638 Transfers in - - 250,000 Changes in Net Position 2 6,064 30,344 262,638 Net Position: Beginning of Year 1,227,949 454,870 464,450 4,602,713 End of Fiscal Year $ 1,227,951 $ 460,934 $ 494,794 $ 4,865,351 143 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS YEAR ENDED JUNE 30, 2016 Governmental Activities - Internal Service Funds Insurance Worker's Compensation Vehicles Information Systems Cash Flows from Operating Activities: Cash received from customers and users $ 982,443 $ - $ 120,097 $ 2,197,066 Cash paid to suppliers for goods and services (885,312) (6,235) - (841,529) Cash paid to employees for services (111,224) (61,638) (1,388,455) Net Cash Provided (Used) by Operating Activities (14,093) (67,873) 120,097 (32,918) Cash Flows from Non -Capital Financing Activities: Cash transfers in from other funds 250,000 - - Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets - (70,921) Principal paid on capital lease - - - Interest paid on capital lease - - Net Cash Provided (Used) by Capital and Related Financing Activities - (70,921) Cash Flows from Investing Activities: Interest received 1,691 1,788 10,598 2,015 Cash and Cash Equivalents at Beginning of Year 611,182 229,347 1,567,281 219,429 Cash and Cash Equivalents at End of Year $ 598,780 $ 413,262 $ 1,627,055 $ 188,526 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ 21,365 $ (61,111) $ 276 $ (1,792) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation - - 119,821 - (Increase) decrease in accounts receivable 251 - - 1,990 (Increase) decrease in prepaid expense 32,637 (7,285) - - Increase (decrease) in accounts payable (26,031) 1,050 - 7,656 Increase (decrease) in accrued liabilities (3,411) (527) - (45,064) Increase (decrease) in claims and judgments (40,692) - - 4,292 Increase (decrease) in compensated absences 1,788 - - - Total Adjustments (35,458) (6,762) 119,821 (31,126) Net Cash Provided (Used) by Operating Activities $ (14,093) $ (67,873) $ 120,097 $ (32,918) Non -Cash Investing, Capital, and Financing Activities: Issuance of capital leases 144 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS YEAR ENDED JUNE 30, 2016 Cash Flows from Operating Activities: Cash received from customers and users Cash paid to suppliers for goods and services Cash paid to employees for services Net Cash Provided (Used) by Operating Activities Cash Flows from Non -Capital Financing Activities: Cash transfers in from other funds Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets Principal paid on capital lease Interest paid on capital lease Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows from Investing Activities: Interest received Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Reconciliation of Operating income to Net Cash Provided (Used) by Operating Activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation (increase) decrease in accounts receivable (increase) decrease in prepaid expense increase (decrease) in accounts payable increase (decrease) in accrued liabilities increase (decrease) in claims and judgments increase (decrease) in compensated absences Total Adjustments Net Cash Provided (Used) by Operating Activities Non -Cash investing, Capital, and Financing Activities: issuance of capital leases Governmental Activities - internal Service Funds Technology Replacement Support Services $ 239,209 $ (8,330) Facilities Totals 511,330 $ (95,802) (376,431) 230,879 39,097 (273,795) 61,489 (101,489) (10,676) (273,795) (50,676) 3,172 2,747 790,060 499,949 1,268,554 $ (435,872) (850,012) 5,318,699 (2,273,080) (2,787,760) (17,330) 257,859 250,000 (283,227) (101,489) (10,676) (395,392) 2,383 24,394 594,754 4,512,002 $ 750,316 $ 491,117 $ 579,807 $ 4,648,863 $ (2,664) $ 13,768 $ 241,873 34,571 410 (8,330) (9,299) (9,330) 8,977 233,543 25,329 $ 230,879 $ 27,613 $ (2,545) 714 (25,812) (13,960) (5,885) 396,265 3,365 25,352 (60,766) (72,292) (36,400) 4,880 (44,943) 260,404 39,097 $ $ 751,519 $ (17,330) $ 257,859 $ $ 751,519 145 Fiscal Year 2015-16 Comprehensive Annual Financial Report DEFINITIONS OF AGENCY FUNDS Agency funds are used to account for assets held by the City, as an agent for individuals, private organizations and other governments. COMMUNITY FACILITIES DISTRICTS: This fund is used to account for monies held by the City, collected by special taxes to service debt issued by the districts. 147 CITY OF TEMECULA, CALIFORNIA COMBINING BALANCE SHEET ALL AGENCY FUNDS JUNE 30, 2016 Community Facilities Districts Assets: Pooled cash and investments $ 2,138,149 Receivables: Taxes 74,135 Accrued interest 20,887 Restricted assets: Cash and investments with fiscal agents 12,548,131 Total Assets $ 14,781,302 Liabilities: Accounts payable $ 9,136 Accrued liabilities 343 Due to Bond holders 14,771,823 Total Liabilities: $ 14,781,302 148 CITY OF TEMECULA, CALIFORNIA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAR ENDED JUNE 30, 2016 Community Facilities Districts Balance Balance July 1, 2015 Additions Deductions June 30, 2016 Assets: Pooled cash and investments $ 5,635,850 $ 7,931,018 $ 11,428,719 $ 2,138,149 Receivables: Taxes 121,730 74,135 121,730 74,135 Accrued interest 14,346 33,443 26,902 20,887 Restricted assets: Cash and investments with fiscal agents 8,882,801 11,327,864 7,662,534 12,548,131 Total Assets $ 14,654,727 $ 19,366,460 $ 19,239,885 $ 14,781,302 Liabilities: Accounts payable $ 17,275 $ 11,388,356 $ 11,396,495 $ 9,136 Accrued liabilities 2,500 30,796 32,953 343 Due to Bond holders 14,634,952 7,947,308 7,810,437 14,771,823 Total Liabilities: $ 14,654,727 $ 19,366,460 $ 19,239,885 $ 14,781,302 149 Fiscal Year 2015-16 Comprehensive Annual Financial Report CONTENTS OF STATISCAL SECTION This part of the City of Temecula's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the government's overall financial health. Page No. Description 152 Locator Map 153 Financial Trends — these schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 167 Revenue Capacity — these schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. 173 Debt Capacity — these schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. 181 Demographic and Economic Information — these schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. 185 Operating Information — these schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Fiscal Year 2015-16 Comprehensive Annual Financial Report 151 The Heart of Southern California Wing Country Fiscal Year 2015-16 Comprehensive Annual Financial Report LOCATOR MAP • Palm Springs 75 Min. Temecula • Southwest Kalifornia Fiscal Year 2015-16 Comprehensive Annual Financial Report 152 1I The Heart of Southern California wane Country Fiscal Year 2015-16 Comprehensive Annual Financial Report FINANCIAL TRENDS Fiscal Year 2015-16 Comprehensive Annual Financial Report 153 I� of". --Tout,.,, Fiscal Year 2015-16 Comprehensive Annual Financial Report Governmental Activities: Net Investment in Capital Assets Restricted Unrestricted NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2007 2008 (As Restated) 2009 2010 (As Restated) 2011 $ 526,541,448 89,542,605 80,433,986 $ 542,917,967 170,557,711 3,950,360 $ 591,669,819 145,381,273 (8,259,676) $ 629,206,256 108,036,903 (11,712,664) $ 644,802,424 95,402,130 (9,262,370) Total Government Net Position: $ 696,518,039 $ 717,426,038 $ 728,791,416 $ 725,530,495 $ 730,942,184 Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 154 J The Heart of Southern California Wine Country Fiscal Year 2015-16 Comprehensive Annual Financial Report Fiscal Year 2012 (As 2013 (As Restated) Restated) 2014 2015 2016 $ 621,391,785 $ 641,857,265 $ 660,695,733 $ 653,887,810 $ 652,338,794 79,561,526 44,747,890 37,184,909 35,846,917 40,102,473 54,087,452 69,751,824 66,113,985 43,120,602 40,019,411 $ 755,040,763 $ 756,356,979 $ 763,994,627 $ 732,855,329 $ 732,460,678 Fiscal Year 2015-16 Comprehensive Annual Financial Report 155 Plk I� of Gout ,r,;n Fiscal Year 2015-16 Comprehensive Annual Financial Report CHANGES IN NET POSITION EXPENSES: GOVERNMENT ACTIVITIES: General Government Public Safety Community Development Community Services Public Works Interest on Long Term Debt TOTAL EXPENSES: PROGRAM REVENUES: GOVERNMENT ACTIVITIES: Charges for Services: General Government Public Safety Community Development Community Services Public Works Operating Contributions and Grants Capital Contributions and Grants TOTAL PROGRAM REVENUES: Net Revenues (Expenses): GENERAL REVENUES AND OTHER CHANGES IN NET POSITION: GOVERNMENT ACTIVITIES: Taxes: Property Taxes Sales Taxes Other Taxes Use of Money and Property Other Special Item TOTAL GOVERNMENT REVENUES: Extraordinary Gain / (Loss) CHANGES IN NET POSITION: Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2007 2008 (As Restated) 2009 2010 (As Restated) $ 15,502,875 22,196, 822 32,389,210 18,992,957 20,666,677 2,311,241 $ 18,335,093 23,378,627 28,440,339 22,935,715 20,335,862 3,604,580 $ 16,214,425 23,240,092 21,846,282 22,427,530 20,006,739 4,620,424 $ 15,626,816 24, 842,123 38,378,782 23,267,301 19,311,995 4,932,985 $ 112,059,782 $ 117,030,216 $ 108,355,492 $ 126,360,002 $ 2,575,738 2,127,918 9,336,514 18,462,235 1,784,676 4,923,439 60,765,351 2,100,665 7,050,214 20,758,900 1,836,289 5,398,302 29,989,183 1,924,106 7,248,403 19,805,723 1,625,756 8,703,467 13,703,226 1,520,718 4,879,851 19,994,844 1,661,564 9,420,299 22,164,262 $ 99,975,871 $ 67,133,553 $ 53,010,681 $ 59,641,538 $ (12,083,911) $ (49,896,663) $ (55,344,811) $ (66,718,464) $ 28,149,257 30,069,312 8,090,565 4,197,019 833,847 $ 32,117,022 27,185,873 7,608,109 3,547,717 345,941 $ 33,310,255 23,087,328 6,972,165 3,055,857 284,584 $ 31,931,299 23,503,682 6,593,459 1,161,980 267,123 $ 71,340,000 $ 70,804,662 $ 66,710,189 $ 63,457,543 $ 59,256,089 $ 20,907,999 $ 11,365,378 $ (3,260,921) Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 156 Baa is, • �L:..,�i Of S, I7er, CaPorn,a 4Vn.� Country Fiscal Year 2015-16 Comprehensive Annual Financial Report Fiscal Year 2011 2012 (As Restated) 2013 (As Restated) 2014 2015 2016 $ 13,669,474 23,234,398 20,637,467 22,605,557 19,801,378 5,936,927 $ 105,885,201 $ 13,649,168 26,283,511 23,682,621 23,629,080 17,129,875 3,110,690 $ 107,484,945 $ 8,672,963 27,704,560 19,089,897 18,054,896 20,604,789 979,384 $ 9,189,203 28,501,674 19,730,017 18,868,246 12,851,618 933,468 $ 10,131,815 29,532,079 20,429,335 18,819,798 15,570,577 890,953 $ 8,982,725 31,107,607 20,119,306 18,919,505 13,902,922 841,867 $ 95,106,489 $ 90,074,226 1,637,770 5,898,500 19,915,194 1,607,188 7,254,914 13,782,751 1,723,360 5,829, 585 20,425,552 1,486,894 4,520,508 10,395,357 1,836,863 6,323,202 11, 504,164 1,534,647 4,085,807 20,462,014 1,916,774 4,651,706 11,396,780 3,890,285 4,590,883 18,187,293 $ 50,096,317 $ 44,381,256 $ 45,746,697 $ 44,633,721 $ (55,788,884) $ (63,103,689) $ (49,359,792) $ (45,440,505) $ 95,374,557 1,757,949 4,541,176 11,738,954 3,657,640 4,516,067 8,117,128 $ 34,328,914 $ (61,045,643) $ 93,873,932 1,686,485 4,012,311 12,577,838 3,564,406 4,104,939 10,130,756 $ 36,076,735 $ (57,797,197) $ 30,815,540 24,926,072 6,583,637 449,055 3,196,237 (4,769,968) $ 20,477,479 27,112,311 6,600,874 474,927 633,318 $ 15,051,588 27,749,883 6,917,853 107,240 849,444 $ 15,809,284 29,576,765 7,326,884 163,537 201,683 $ 16,802,422 32,395,358 7,847,491 159,425 595,054 $ 17,485,712 31,466,457 7,961,047 310,350 178,980 $ 61,200,573 $ 5,411,689 $ 55,298,909 32,106,918 $ 24,302,138 $ 50,676,008 $ 53,078,153 $ 1,316,216 $ 7,637,648 $ 57,799,750 $ (3,245,893) $ 57,402,546 $ (394,651) Fiscal Year 2015-16 Comprehensive Annual Financial Report 157 I� of Soul'-w�, Fiscal Year 2015-16 Comprehensive Annual Financial Report FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2008 (As 2010 (As 2007 Restated) 2009 Restated) GENERAL FUND: (1) Reserved $ 2,998,053 $ 2,021,686 $ 10,920,738 $ 12,985,989 Unreserved 40,934,281 42,701,654 38,301,328 32,358,447 Nonspendable Restricted Committed Assigned Unassigned TOTAL GENERAL FUND: $ 43,932,334 $ 44,723,340 $ 49,222,066 $ 45,344,436 ALL OTHER GOVERNMENTAL FUNDS: (1) Reserved $ 32,741,964 $ 27,110,075 $ 55,860,978 $ 37,002,971 Unreserved, reported in: Special Revenue Funds 16,343,213 23,119,560 23,088,225 23,591,691 Capital Projects Funds 88,582,057 102,273,113 59,018,488 30,574,986 Debt Service Funds 17,864,502 3,259,330 715,660 Nonspendable Restricted Committed Assigned Unassigned TOTAL ALL OTHER GOVERNMENTAL FUNDS: $ 137,667,234 $ 170,367,250 $ 141,227,021 $ 91,885,308 Notes: (1) Substantial increases or decreases in fund balance components are explained in the Management's Discussion and Analysis (MD&A) Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 158 of 5nui:7err.c:aPorma Country Fiscal Year 2015-16 Comprehensive Annual Financial Report Fiscal Year 2011 2012 2013 2014 2015 2016 589,064 150,000 10,782,816 20,556,436 65,590 150,000 12,080,977 13,085,339 4,338,969 75,641 306,074 6,896,447 20,343, 588 94,857 163,295 996,648 24,046,303 4,383 549,754 25,506,754 4,383 202,742 31,994,795 $ 32,078,316 $ 29,720,875 $ 27,621,750 $ 25,301,103 $ 26,060,891 $ 32,201,920 12,321,142 10,008,502 83,039,180 48,032,766 40,835 17,656,412 13,919,190 (4,461,127) 82,622 44,941,010 604,815 8,611,653 4,994 37,676,100 6,627,678 36,837,597 40,359,641 7,163,455 11,325,254 $ 108,596,442 $ 71,960,458 $ 54,240,100 $ 44,308,772 $ 44,001,052 $ 51,684,895 Fiscal Year 2015-16 Comprehensive Annual Financial Report 159 J The Heart of Southern California Wine Country Fiscal Year 2015-16 Comprehensive Annual Financial Report CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) REVENUES: Taxes Licenses and Permits Intergovernmental Charges for Services Use of Money and Property Fine and Forfeitures Developer Fees Contributions Miscellaneous TOTAL REVENUES: EXPENDITURES: Current: General Government Public Safety Community Development Community Services Public Works Capital Outlay Debt Services: Principal Retirement Interest and Fiscal Charges Cost of Issuance Passthroughs TOTAL EXPENDITURES: Excess (deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (uses): Transfers In Transfers Out Capital Debt Issued Financing Lease Issued Bond Discount Sales of Property Payment to Refunded Bond Escrow Agent TOTAL OTHER FINANCING: Special Item Extraordinary Gain / (Loss) Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures Fiscal Year 2006 2007 2008 2009 2010 (As Restated) $ 63,497,706 5,486,534 12,150,394 21,836,997 4,281,982 1,259,194 6,878,014 46,965,547 12,168, 398 $ 174,524,766 $ 64,313,342 5,884,122 17,523,592 21,992,126 9,076,097 1,307,174 6,134,458 9,122,586 $ 135,353,497 $ 69,545,155 1,901,811 9,774,958 22,488,288 8,856,748 1,275,372 1,981,523 5,241,000 $ 121,064,855 $ 66,169,119 2,178,784 14,885,505 21,660,748 6,383,842 1,167,821 3,977,338 3,059,333 $ 119,482,490 $ 63,405,871 1,756,586 10,216,302 20,074,306 2,119,985 896,096 1,005,246 2,048,697 $ 101,523,089 $ 16,220,837 19,745,813 16,215,070 15,185, 649 7,660,252 42,614,653 1,116,135 1,814,687 $ 15,207,010 21,950,928 10,460,887 17,788,867 8,602,982 46,765,045 1,159,211 2,390,216 8,661,255 8,778,831 $ 129,234,351 $ 133,103,977 $ 127,297,918 $ 19,795,561 23,118,556 10,337,789 20,069,314 9,196,416 28,327,851 1,527,447 4,343,274 10,581,710 $ 14,675,600 22,843,755 9,972,429 19,463,230 8,290,764 51,406,464 1,440,332 4,525,041 11,506,378 $ 144,123,993 $ 14,520,872 24,489,716 26,417,627 20,271,018 6,983,347 57,748,273 1,415,000 4,517,341 368,090 11, 676,392 $ 168,407,676 $ 45,290,415 $ 2,249,520 $ (6,233,063) $ (24,641,503) $ (66,884,587) $ 28,502,739 (28,502,739) $ 30,848,306 (30,848,306) 21,145,000 (222,191) $ 14,029,999 $ 27,781,914 (14,029,999) (27,781,914) 40,325,000 - (606,895) $ 37,119,117 (37,119,117) 13,755,000 (89,756) $ 45,290,415 $ 20,922,809 $ 39,718,105 $ - $ 13,665,244 $ - $ - $ - $ $ - $ - $ - $ $ 23,172,329 $ 33,485,042 $ (24,641,503) $ (53,219,343) Source: City of Temecula Finance Department 3.16% 3.80% 6.28% 5.07% 5.34% Fiscal Year 2015-16 Comprehensive Annual Financial Report 160 The Heart of Southern California Wine Country Fiscal Year 2015-16 Comprehensive Annual Financial Report Fiscal Year 2011 2012 2013 2014 2015 2016 $ 65,579,175 1,786,528 12,794,003 20,824,914 1,207,757 960,239 2,562,079 7,876,526 $ 113,591,221 $ 57,221,043 1,814,309 7,173, 033 21,124, 634 797,561 829,875 2,328,732 125,000 2,407,410 $ 49,262,776 2,362,575 22,108,391 20,366,131 423,032 854,991 3,698,306 250,000 624,764 $ 51,850,112 2,540,449 21,101,943 16,162,421 438,303 849,030 3,099,926 250,000 538,364 $ 55,936,413 2,294,934 10,377,791 15,714,807 482,888 810,332 2,032,153 250,000 1,774,963 $ 61,333,016 2,191,273 12,227,503 17,098,574 609,411 717,728 3,096,232 250,000 247,934 $ 93,821,597 $ 99,950,966 $ 96,830,548 $ 89,674,281 $ 97,771,671 $ 12,825,887 25,431,463 9,247,454 19,806,297 6,668,130 29,453,976 1,705,000 5,317,659 392,459 11,211,870 $ 12,919,308 25,925,613 18,235,289 20,584,128 7,999,950 18,019, 717 2,279,000 3,620,501 207,243 5,335,555 $ 12,386,569 27,339,158 5,204,608 17,872,194 11,413,940 42,851,737 1,153,000 982,987 $ 8,183,998 28,123,219 5,354,821 18,701,986 11,347,898 35,232,735 1,199,000 938,866 $ 9,798,217 $ 8,128,763 29,148,761 30,721,054 5,875,037 5,658,392 18,664,551 18, 949, 581 12,557,744 10,837, 047 11,040,713 7,265,061 1,244,000 1,291,000 893,190 845,901 $ 122,060,195 $ 115,126,304 $ 119,204,193 $ 109,082,523 $ 89,222,213 $ 83,696,799 $ (8,468,974) $ (21,304,707) $ (19,253,227) $ (12,251,975) $ 452,068 $ 14,074,872 $ 24,488,322 (24,488,322) 17,035,000 (358,320) 7,276 16,683,956 (4,769,968) $ 47,643,296 (47,756,556) 26,835,000 $ 20,141,510 (20,707,766) (27,421,633) - $ (699,893) $ (566,256) $ - $ $ (16,988,825) $ - $ 29,891,683 (29,891,683) $ 17,755,711 $ 15,583,960 (17,755,711) (15,833,960) $ $ - $ (250,000) $ - $ $ $ $ $ $ 3,445,014 7.79% $ (38,993,425) $ (19,819,483) $ (12,251,975) $ 452,068 $ 13,824,872 6.48% 2.59% 2.96% 2.74% 2.82% Fiscal Year 2015-16 Comprehensive Annual Financial Report 161 I� of Soul'-w�, Fiscal Year 2015-16 Comprehensive Annual Financial Report GOVERNMENT -WIDE REVENUES Program Revenues Fiscal Charges for Year Services Last Ten Fiscal Years Operating Capital Contributions and Contributions and Grants Grants Taxes General Revenues Use of Money and Property Other Total 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $ 34,287,081 $ 31,746,068 $ 30,603,988 $ 28,056,977 $ 29,058,652 $ 29,465,391 $ 21,198,876 $ 21,855,545 $ 21,695,719 $ 21,841,040 $ 4,923,439 $ 5,398,302 $ 8,703,467 $ 9,420,299 $ 7,254,914 $ 4,520,508 $ 4,085,807 $ 4,590,883 $ 4,516,067 $ 4,104,939 $ 60,765,351 $ 29,989,183 $ 13,703,226 $ 22,164,262 $ 13,782,751 $ 10,395,357 $ 20,462,014 $ 18,187,293 $ 8,117,128 $ 10,130,756 Source: City of Temecula Finance Department $ 66,309,134 $ 66,911,004 $ 63,369,748 $ 62,028,440 $ 62,325,249 $ 54,190,664 $ 49,773,164 $ 52,757,492 $ 57,088,829 $ 56,957,163 4,197,019 $ 3,547,717 $ 3,055,857 $ 1,161,980 $ 449,055 $ 474,927 $ 107,240 $ 163,537 $ 159,425 $ 310,350 $ 833,847 $ 171,315,871 345,941 $ 137,938,215 284,584 $ 119,720,870 267,123 $ 123,099,081 3,196,237 $ 116,066,858 32,740,236 '$ 131,787,083 795,604 $ 96,422,705 157,124 '$ 97,711,874 551,496 '$ 92,128,664 135,033 '$ 93,479,281 Fiscal Year 2015-16 Comprehensive Annual Financial Report 162 I� of 'S.001. n (.-nl-lt rn, t_Ou.�,Cr Fiscal Year 2015-16 Comprehensive Annual Financial Report GOVERNMENT -WIDE EXPENSES BY PROGRAM Last Ten Fiscal Years Interest on Fiscal General Community Community Long Term Year Government Public Safety Development Services Public Works Debt Total 2007 $ 15,502,875 $ 22,196,822 $ 32,389,210 $ 18,992,957 $ 20,666,677 $ 2,311,241 $ 112,059,782 2008 $ 18,335,093 $ 23,378,627 $ 28,440,339 $ 22,935,715 $ 20,335,862 $ 3,604,580 $ 117,030,216 2009 $ 16,214,425 $ 23,240,092 $ 21,846,282 $ 22,427,530 $ 20,006,739 $ 4,620,424 $ 108,355,492 2010 $ 15,626,816 $ 24,842,123 $ 38,378,782 $ 23,267,301 $ 19,311,995 $ 4,932,985 $ 126,360,002 2011 $ 13,669,474 $ 23,234,398 $ 20,637,467 $ 22,605,557 $ 19,801,378 $ 5,936,927 $ 105,885,201 2012 $ 13,649,168 $ 26,283,511 $ 23,682,621 $ 23,629,080 $ 17,129,875 $ 3,110,690 $ 107,484,945 2013 $ 8,672,963 $ 27,704,560 $ 19,089,897 $ 18,054,896 $ 20,604,789 $ 979,384 $ 95,106,489 2014 $ 9,189,203 $ 28,501,674 $ 19,730,017 $ 18,868,246 $ 12,851,618 $ 933,468 $ 90,074,226 2015 $ 10,131,815 $ 29,532,079 $ 20,429,335 $ 18,819,798 $ 15,570,577 $ 890,953 ,$ 95,374,557 2016 $ 8,982,725 $ 31,107,607 $ 20,119,306 $ 18,919,505 $ 13,902,922 $ 841,867 r$ 93,873,932 Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 163 J The Heart of Southern California Wine Country Fiscal Year 2015-16 Comprehensive Annual Financial Report GENERAL GOVERNMENTAL REVENUES BY SOURCE Fiscal Licenses and Inter- Charges for Fines and Use of Money Year Taxes Permits governmental Services Forfeitures and Property Misc. Total 2007 $ 64,313,342 $ 5,884,122 $ 17,523,592 $ 22,397,014 $ 1,438,949 $ 14,673,892 $ 9,122,586 $ 135,353,497 2008 $ 69,551,135 $ 1,901,811 $ 9,774,958 $ 22,488,288 $ 1,275,372 $ 8,856,748 $ 7,222,523 $ 121,070,835 2009 $ 66,169,119 $ 2,178,784 $ 14,885,505 $ 21,660,748 $ 1,167,821 $ 6,383,842 $ 7,036,671 $ 119,482,490 2010 $ 63,405,871 $ 1,756,586 $ 10,216,302 $ 20,074,306 $ 896,096 $ 2,119,985 $ 3,053,943 $ 101,523,089 2011 $ 65,579,175 $ 1,786,528 $ 12,794,003 $ 20,824,914 $ 960,239 $ 1,207,757 $ 10,438,605 $ 113,591,221 2012 $ 57,221,043 $ 1,814,309 $ 7,173,033 $ 21,124,634 $ 829,875 $ 797,561 $ 4,861,142 $ 93,821,597 2013 $ 49,262,776 $ 2,362,575 $ 22,108,391 $ 20,366,131 $ 854,991 $ 423,032 $ 4,573,070 '$ 99,950,966 2014 $ 51,850,112 $ 2,540,449 $ 21,101,943 $ 16,162,421 $ 849,030 $ 438,303 $ 3,888,290 `$ 96,830,548 2015 $ 55,936,413 $ 2,294,934 $ 10,377,791 $ 15,714,807 $ 810,332 $ 482,888 $ 4,057,116 '$ 89,674,281 2016 $ 61,333,016 $ 2,191,273 $ 12,227,503 $ 17,098,574 $ 717,728 $ 609,411 $ 3,594,166 $ 97,771,671 $140,000,000 - $120,000,000 - $100.000.001) - $80,000,000 - $60.000,000 - $40,000.006 - $20,000,000 - $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: City of Temecula Finance Department 0 Miscellaneous • Use of Money and Property • Fines and Forfeitures • Charges for Services • intergovernmental • Licenses and Permits • Taxes Fiscal Year 2015-16 Comprehensive Annual Financial Report 164 Fiscal Year 2015-16 Comprehensive Annual Financial Report GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION Fiscal General Community Community Year Government Public Safety Public Works Development* Services Capital Outlay Debt Service Total 2007 $ 15,207,010 $ 21,950,928 $ 8,602,982 $ 19,239,718 $ 17,788,867 $ 46,765,045 $ 3,549,427 $ 133,103,977 2008 $ 19,795,561 $ 23,118,556 $ 9,196,416 $ 20,919,499 $ 20,069,314 $ 28,327,851 $ 5,870,721 $ 127,297,918 2009 $ 14,675,600 $ 22,843,755 $ 8,290,764 $ 21,478,807 $ 19,463,230 $ 51,406,464 $ 5,965,373 $ 144,123,993 2010 $ 14,520,872 $ 24,489,716 $ 6,983,347 $ 38,094,019 $ 20,271,018 $ 57,748,273 $ 6,300,431 $ 168,407,676 2011 $ 12,825,887 $ 25,431,463 $ 6,668,130 $ 20,459,324 $ 19,806,297 $ 29,453,976 $ 7,415,118 $ 122,060,195 2012 $ 12,919,308 $ 25,925,613 $ 7,999,950 $ 18,235,289 $ 20,584,128 $ 18,019,717 $ 11,442,299 $ 115,126,304 2013 $ 12,386,569 $ 27,339,158 $ 11,413,940 $ 5,204,608 $ 17,872,194 $ 42,851,737 $ 2,135,987 '$ 119,204,193 2014 $ 8,183,998 $ 28,123,219 $ 11,347,898 $ 5,354,821 $ 18,701,986 $ 35,232,735 $ 2,137,866 '$ 109,082,523 2015 $ 9,798,217 $ 29,148,761 $ 12,557,744 $ 5,875,037 $ 18,664,551 $ 11,040,713 $ 2,137,190 '$ 89,222,213 2016 $ 8,128,763 $ 30,721,054 $ 10,837,047 $ 5,658,392 $ 18,949,581 $ 7,265,061 $ 2,136,901 $ 83,696,799 $180,000,000 -� 8160.000,000 - $140,000,000 - 81 0,000,000 - $100,000,000 -880.000,000 - 860,000,000 - $40,000,000 - 820,000,000 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Includes general, transportation and parks maintenance special revenue and debt service funds. *Includes Pass -Through Source: City of Temecula Finance Department ❑ Debt Service • Capital Outlay • Community Services ❑ Community Development ■ Public Works ❑ Public Safety • General Government Fiscal Year 2015-16 Comprehensive Annual Financial Report 165 The Heart of Southern California wane Country Fiscal Year 2015-16 Comprehensive Annual Financial Report REVENUE CAPACITY Fiscal Year 2015-16 Comprehensive Annual Financial Report 167 I� ofaui,.,, Fiscal Year 2015-16 Comprehensive Annual Financial Report PRINCIPAL SECURED PROPERTY OWNERS TAXPAYER Last Ten Fiscal Years (Value in Thousands) 2007 2008 2009 2010 Abbott Cardiovascular System, Inc. $ 175,216 $ 91,350 $ 112,462 $ 205,037 International Rectifier Corporation 109,180 102,636 106,016 88,617 Temecula Towne Center Associates 96,198 98,122 100,084 116,419 Temecula Valley Hospital Inc. Wolf Creek Maintenance Corporation Woodside Wolf Creek Inc. 70,069 Lakha Properties Temecula TC 49,419 50,407 51,853 52,890 Vineyards Temecula Apartments Kimco Palm Plaza 43,424 46,272 Redhawk Towne Center 38,258 Inland Valley Regional Medical Center Inland Western Temecula Common 52,567 53,618 80,717 55,784 Federal National Mortgage Association Temecula Properties BACM 2006-5 Rancho California Alexander and Baldwin, Inc Temecula Villa Apartments MG Sage Canyon Apartments LP MV Housing Partners III 33,571 Standard Pacific Corporation 57,348 68,723 Foothills at Old Town LLC LIPT Winchester Road Inc. FG Temecula Senior Apartments 46,750 45,251 Macy's Department Stores Inc. 43,343 36,958 Medline Industries Inc. Universe at Temecula Park 53,442 54,690 55,878 Cape May Harveston Company Inc. 47,528 48,473 49,441 Temecula Redevelopment Agency 44,773 Fairfield Solana Ridge Top Ten Totals $ 667,902 $ 597,794 $ 706,726 $ 760,362 Total Assessed Valuation $ 11,836,051 $ 13,434,244 $ 13,435,853 $ 11,133,227 Source: City of Temecula Finance Department and HdL Companies Fiscal Year 2015-16 Comprehensive Annual Financial Report 168 of Sn,rllem c:dPar,, ., Mn.,, CowAri Fiscal Year 2015-16 Comprehensive Annual Financial Report (Value in Thousands) 2011 2012 2013 2014 2015 2016 $ 205,759 $ 207,308 $ 211,454 $ 215,683 $ 216,662 $ 205,984 81,401 86,702 87,296 108,459 91,362 79,630 147,752 148,865 144,813 147,709 148,379 151,344 98,427 100,393 48,938 58,118 47,440 48,389 55,476 56,557 56,807 57,986 55,869 75,461 59,730 55,223 55,291 57,885 75,203 63,068 51,426 54,287 54,696 52,760 52,765 53,162 48,639 44,855 48,058 37,559 55,720 49,323 37,841 38,598 50,604 50,639 60,477 58,469 57,000 59,526 61,199 54,545 59,669 55,108 $ 823,095 $ 796,427 $ 786,853 $ 847,318 $ 900,013 $ 906,042 $ 11,700,673 $ 11,167,952 $ 11,131,110 $ 11,778,504 $ 12,720,924 $ 13,472,075 Fiscal Year 2015-16 Comprehensive Annual Financial Report 169 I� T'�� iN,ari of Gain' Fiscal Year 2015-16 Comprehensive Annual Financial Report PROPERTY TAX RATES (per $100 assessed valuation) DIRECT AND OVERLAPPING GOVERNMENTS Direct Rates: Basic County, City and School Levy Overlapping Rates: Various Water Districts School District Total Overlapping Rates COMBINED TOTAL Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0.0990 0.1049 0.0829 0.0807 0.0793 0.0796 0.0785 0.0774 0.0764 0.0766 0.2485 0.3325 0.4411 0.3932 0.4079 0.4186 0.3707 0.2729 0.2871 0.2833 0.3475 0.4374 0.5240 0.4739 0.4873 0.4982 0.4492 0.3503 0.3635 0.3600 1.3475 1.4374 1.5240 1.4739 1.4873 1.4982 1.4492 1.3503 1.3635 1.3600 Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 170 Of Gnu;,r,;n (.,, lcrn„ Fiscal Year 2015-16 Comprehensive Annual Financial Report PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Collected within the Fiscal Year of the Levy Total Collections to Date Fiscal Taxes Collections Year Levied for in Ended the Fiscal Percentage Subsequent Percentage June 30 Year Amount of Levy Years Amount of Levy 2007 $ 5,334,622 $ 4,751,074 89.06% $ 475,692$ 5,226,766 97.98% 200$ $ 6,014,790 $ 5,243,899 87.18% $ 669,398 $ 5,913,297 98.31% 2009 $ 5,881,484 $ 5,204,872 88.50% $ 543,382$ 5,748,254 97.73% 2010 $ 5,052,858 $ 4,567,207 90.39% $ 324,371 $ 4,891,578 96.81% 2011 $ 4,999,012 $ 4,633,112 92.68% $ 215,922 $ 4,849,034 97.00% 2012 $ 5,040,082 $ 4,775,460 94.75% $ 174,247 $ 4,949,707 98.21% 2013 $ 5,048,493 $ 4,841,988 95.91% $ 138,051 $ 4,980,039 98.64% 2014 $ 5,364,377 $ 5,282,045 98.47% $ 128,692 $ 5,410,737 100.86% 2015 $ 5,880,910 $ 5,942,394 101.05% $ 118,383 $ 6,060,777 103.06% 2016 $ 6,225,930 $ 6,266,731 100.66% $ 126,284 $ 6,393,015 102.68% NOTE: Since the fiscal year ended June 30, 1994, the City of Temecula has received its property tax revenues in accordance with the Teeter Plan. Under the Teeter Plan, the City is paid in full each year for the actual amount of property taxes levied, regardless of the amount of delinquencies. As delinquent property taxes are collected, they are kept by the County including any penalties and interest. After 1994, any differences between the total tax levy and total collections are due to tax roll adjustments made during the year. Source: Riverside County Auditor -Controller, HDL Companies, and City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 171 I� of Saul'-w�, Fiscal Year 2015-16 Comprehensive Annual Financial Report ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years (Value in Thousands) Total Secured Exemptions Net Total and Veteran Net Assessed Exemptions Assessed Total Direct Fiscal Year Unsecured Church, etc. Value Homeowners Value Rate 2007 $ 11,836,051 $ (75,082) $ 11,760,969 $ (111,392) $ 11,649,577 0.16811% 2008 $ 13,434,244 $ (88,037) $ 13,346,207 $ (113,341) $ 13,232,866 0.17287% 2009 $ 13,537,220 $ (101,367) $ 13,435,853 $ (114,841) $ 13,321,012 0.19216% 2010 $ 12,003,561 $ (112,286) $ 11,891,275 $ (115,783) $ 11,775,492 0.20989% 2011 $ 11,932,655 $ (116,038) $ 11,816,617 $ (115,944) $ 11,700,673 0.20865% 2012 $ 11,971,877 $ (129,004) $ 11,842,873 $ (114,451) $ 11,728,422 0.20136% 2013 $ 11,996,227 $ (145,041) $ 11,851,186 $ (112,450) $ 11,738,736 0.20101% 2014 $ 12,581,717 $ (153,544) $ 12,428,173 $ (109,890) $ 12,318,283 0.06776% 2015 $ 13,547,737 $ (182,877) $ 13,364,860 $ (108,001) $ 13,256,859 0.06753% 2016 $ 14,268,280 $ (204,291) $ 14,063,989 $ (107,401) $ 13,956,588 0.06774% Source: Riverside County Assessor's Office and HdL Companies Fiscal Year 2015-16 Comprehensive Annual Financial Report 172 Baa is, • �L:..,�i of 5nuOlerr. Cal6forma 4Vn.� Country Fiscal Year 2015-16 Comprehensive Annual Financial Report DEBT CAPACITY Fiscal Year 2015-16 Comprehensive Annual Financial Report 173 I� Fiscal Year 2015-16 Comprehensive Annual Financial Report COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT 2015-16 Assessed Valuation: $ 14,055,545,643 Redevelopment Incremental Valuation: 1,812,034,820 Adjusted Assessed Valuation: $ 12,243,510,823 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District Eastern Municipal Water District, I.D. No. U-8 Mt. San Jacinto Community College District Murrieta Valley Unified School District Temecula Valley Unified School District Rancho California Water District Community Facilities District No. 88-3 Eastern Municipal Water District Community Facilities District No. 2002-04 Eastern Municipal Water District Community Facilities District No. 2002-08 Eastern Municipal Water District Community Facilities District No. 2005-38, I.A. B Eastern Municipal Water District Community Facilities District No. 2010-60 Temecula Public Financing Authority Community Facilities District No. 01-2 Temecula Public Financing Authority Community Facilities District No. 03-1 Temecula Public Financing Authority Community Facilities District No. 03-2 Temecula Public Financing Authority Community Facilities District No. 03-3 Temecula Public Financing Authority Community Facilities District No. 03-6 Temecula Valley Unified School District Community Facilities District No. 89-1 Temecula Valley Unified School District CFD No. 2002-1, I.A. No. 1 Temecula Valley Unified School District CFD No. 2002-2 Temecula Valley Unified School District CFD No. 2004-1, I.A. A and B Temecula Valley Unified School District CFD No. 2005-1 City of Temecula Assessment District No. 03-04 Applicable(1) Debt 6/30/16 0.573% $ 532,116 85.933% 3,555,048 18.380% 12,866,000 0.012% 21,381 69.949% 33,907,827 100.000% 495,000 100.000% 600,000 100.000% 3,970,000 100.000% 608,000 100.000% 3,045,000 100.000% 14,095,000 100.000% 11,610,000 100.000% 43,025,000 100.000% 23,545,000 100.000% 3,965,000 100.000% 7,880,000 27.654% 1,681,363 100.000% 14,985,000 100.000% 23,320,000 28.720% 2,525,924 100.000% 450,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: $ 206,682,659 Ratios to 2015-16 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.47% Fiscal Year 2015-16 Comprehensive Annual Financial Report 174 I� Fiscal Year 2015-16 Comprehensive Annual Financial Report COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT (continued) DIRECT AND OVERLAPPING GENERAL FUND DEBT: Rverside County General Fund Obligations Riverside County Pension Obligations Rverside County Board of Education Certificates of Participation Murrieta Valley Unified School District Certificates of Participation City of Temecula General Fund Obligations TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT: Less: Riverside County Supporting Obligations TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT: TOTAL DIRECT DEBT TOTAL GROSS OVERLAPPING DEBT TOTAL NET OVERLAPPING DEBT 5.917% $ 53,461,855 5.917% 17,963,635 5.917% 55,156 0.012% 2,428 100.000% 21,759,000 $ 93, 242, 074 367,917 $ 92,874,157 $ 22,562,534 $ 361,765,733 $ 361,397,816 GROSS COMBINED TOTAL DEBT: $ 383,524,733 (2) NET COMBINED TOTAL DEBT: $ 383,156,816 (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue, and non -bonded capital lease obligations. Ratios to Adjusted Assessed Valuation: Total Direct Debt ($21,759,000) Gross Combined Total Debt Net Combined Total Debt 0.15% 2.73% 2.73% Fiscal Year 2015-16 Comprehensive Annual Financial Report 175 Fiscal Year 2015-16 Comprehensive Annual Financial Report RATIO OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Fiscal Year Total Percentage of Debt Ended Certificates of Tax Allocation Financing Capital Lease Notes Governmental Personal per June 30 Participation Bonds Lease Payable Payable Activities Income Capita 2007 $ 5,240,000 $ 48,175,000 $ - $ - $ 1,012,779 $ 54,427,779 4.73% 581 2008 $ 29,520,000 $ 63,210,000 $ - $ - $ 495,332 $ 93,225,332 2.99% 960 2009 $ 29,255,000 $ 62,530,000 $ $ $ - $ 91,785,000 3.15% 920 2010 $ 28,550,000 $ 75,575,000 $ $ $ - $ 104,125,000 2.77% 1,014 2011 $ 27,825,000 $ 91,630,000 $ - $ - $ - $ 119,455,000 2.28% 1,137 2012 $ - $ - $ 26,646,000 $ 112,908 $ - $ 26,758,908 10.42% 260 2013 $ - $ - $ 25,493,000 $ 145,762 $ - $ 25,638,762 10.83% 244 2014 $ - $ - $ 24,294,000 $ 122,710 $ - $ 24,416,710 11.65% 230 2015 $ - $ - $ 23,050,000 $ 106,200 $ - $ 23,156,200 12.41% 213 2016 $ $ - $ 21,759,000 $ 803,534 $ - $ 22,562,534 13.32% 207 NOTE: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Fiscal Year 2015-16 Comprehensive Annual Financial Report 176 Fiscal Year 2015-16 Comprehensive Annual Financial Report RATIO OF GENERAL BONDED DEBT Last Ten Fiscal Years Fiscal Year Certificates Tax Percent of Ended of Allocation Financing Capital Lease Assessed Per June 30 Participation Bonds Lease Payable Total Value* Capita 2007 $ 5,240,000 $ 48,175,000 $ - $ $ 53,415,000 0.46% 570 2008 $ 29,520,000 $ 63,210,000 $ - $ $ 92,730,000 0.70% 955 2009 $ 29,255,000 $ 62,530,000 $ - $ $ 91,785,000 0.69% 920 2010 $ 28,550,000 $ 75,575,000 $ - $ $104,125,000 0.88% 1,014 2011 $ 27,825,000 $ 91,630,000 $ - $ $119,455,000 1.02% 1,137 2012 $ $ - $ 26,646,000 $ 112,908 $ 26,758,908 0.23% 260 2013 $ $ - $ 25,493,000 $ 145,762 $ 25,638,762 0.22% 244 2014 $ $ - $ 24,294,000 $ 122,710 $ 24,416,710 0.20% 230 2015 $ $ - $ 23,050,000 $ 106,200 $ 23,156,200 0.17% 213 2016 $ $ - $ 21,759,000 $ 803,534 $ 22,562,534 0.16% 207 *Assessed value has been used because the actual value of taxable property is not readily available in the State of California. Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 177 I� J ' fiN,a�i of Soul'*,�, l.aYlorn„ Fiscal Year 2015-16 Comprehensive Annual Financial Report LEGAL DEBT MARGIN Net Assessed Value Plus Exempt Property Total Assessed Value Debt Limit — 15% of total assessed value Amount of Debt Applicable to Debt Limit Less Assets in Debt Service Funds Available for Payment of Principal Total Amount of Debt Applicable to Debt Limit Last Ten Fiscal Years FISCAL YEAR ENDED JUNE 30 (Values in Thousands) 2007 2008 2009 2010 $ 11,649,577 $ 13,232,866 $ 13,321,012 $ 11,775,492 111,392 113,341 114,841 115,783 $ 11,760,969 $ 13,346,207 $ 13,435,853 $ 11,891,275 1,764,145 2,001,931 2,015,378 1,783,691 24,535 24,535 24,105 (840) (857) (794) 23,695 23,678 23,311 Legal Debt Margin (Debt Limit - Applicable Debt) $ 1,764,145 $ 1,978,236 $ 1,991,700 $ 1,760,380 Total Net Debt Applicable to the Limit as a Percentage of Debt Limit Source: City of Temecula Fnance Department 0% 1.18% 1.17% 1.31% Fiscal Year 2015-16 Comprehensive Annual Financial Report 178 is, • �L:..,�i Of S,, 17era (.al6forma 4Vn.� Country Fiscal Year 2015-16 Comprehensive Annual Financial Report FISCAL YEAR ENDED JUNE 30 (Values in Thousands) 2011 2012 2013 2014 2015 2016 $ 11,700,673 $ 11,728,422 $ 11,738,736 $ 12,318,283 $ 13,256,859 $ 13,956,588 115,944 114,451 112,450 109,890 108,001 107,401 $ 11,816,617 $ 11,842,873 $ 11,851,186 $ 12,428,173 $ 13,364,860 $ 14,063,989 1,772,493 1,776,431 1,777,678 1,864,226 2,004,729 2,109,598 23,665 26,646 25,493 24,294 23,050 21,759 (796) 22,869 26,646 25,493 24,294 23,050 21,759 $ 1,749,624 $ 1,749,785 $ 1,752,185 $ 1,839,932 $ 1,981,679 $ 2,087,839 1.29% 1.50% 1.43% 1.30% Source: City of Temecula Fnance Department 1.15% 1.03% Fiscal Year 2015-16 Comprehensive Annual Financial Report 179 Fiscal Year 2015-16 Comprehensive Annual Financial Report PLEDGED REVENUE COVERAGE Last Ten Fiscal Years Fiscal Year Tax Ended Tax Allocation June 30 Increment Principal Interest Coverage Bonds 2007 $ 15,492,144 $ 415,000 $ 1,649,139 7.51 $ 48,175,000 2008 $ 18,741,727 $ 755,000 $ 2,897,307 5.13 $ 63,210,000 2009 $ 20,315,017 $ 680,000 $ 3,078,921 5.40 $ 62,530,000 2010 $ 20,684,073 $ 710,000 $ 3,051,121 5.50 $ 75,575,000 2011 $ 19,809,410 $ 980,000 $ 3,915,543 4.05 $ 91,630,000 2012 $ 9,442,075 $ 1,335,000 $ 2,458,141 2.49 $ 2013 $ $ $ $ 2014 $ $ - $ $ 2015 $ - $ $ $ - 2016 $ - $ - $ $ Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 180 1I The Heart of Southern California wane Country Fiscal Year 2015-16 Comprehensive Annual Financial Report DEMOGRAPHIC AND ECONOMIC STATISTICS Fiscal Year 2015-16 Comprehensive Annual Financial Report 181 I� of Soul'-w�, Fiscal Year 2015-16 Comprehensive Annual Financial Report DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years Personal Per Capita Calendar Income (In Personal Unemployment Year Population Thousands) Income Rate 2007 93,683 $ 2,573,739 $ 27,473 3.3% 2008 97,131 $ 2,783,278 $ 28,655 4.0% 2009 99,809 $ 2,887,286 $ 28,928 5.7% 2010 102,713 $ 2,883,377 $ 28,072 9.3% 2011 105,029 $ 2,718,676 $ 25,885 10.1% 2012 103,092 $ 2,787,505 $ 27,039 9.3% 2013 104,879 $ 2,776,147 $ 26,470 6.5% 2014 106,289 $ 2,845,250 $ 26,769 5.6% 2015 108,920 $ 2,874,756 $ 26,393 4.7% 2016 109,064 $ 3,004,878 $ 27,552 4.8% Source: HDL, Caren & Cone Fiscal Year 2015-16 Comprehensive Annual Financial Report 182 Fiscal Year 2015-16 Comprehensive Annual Financial Report NAME OF EMPLOYER LARGEST EMPLOYERS BY NUMBER OF EMPLOYEES Current Year and Nine Years Ago Percent of Percent of Number of Total Number of Total Employees Employment Employees Employment As of June 2007 As of June 2016 Temecula Valley Unified School District 2,828 5.84% 2,961 4.45% Abbott Laboratories (aka Guidant) 4,798 9.91 % 2,000 3.01 Professional Hospital Supply 1,235 2.55% 900 1.35% Temecula Valley Hospital 0.00% 650 0.98% Walmart 600 1.24% 600 0.90% International Rectifier 605 1.25% 585 0.88% Macy's (Robinson's May) 230 0.47% 420 0.63% Milgard Manufacturing 420 0.87% 400 0.60% Costco Wholesale Corporation 352 0.73% 376 0.57% EMD Millipore (aka Chemi Con International) 350 0.72% 330 0.50% FFF Enterprises Inc. 179 0.37% 303 0.46% Norm Reeves Auto Group/DCH 369 0.76% 293 0.44% Channell Commercial Corp. 300 0.62% 264 0.40% Temecula Creek Inn 230 0.47% 245 0.37% The Scotts Company 160 0.33% 244 0.37% Home Depot 125 0.26% 191 0.29% Albertson's 45 0.09% 188 0.28% Toyota of Temecula Valley 185 0.38% 187 0.28% Cassidian Communication (Plant Equipment, Inc.) 294 0.61% 180 0.27% Lowe's 150 0.31% 170 0.26% Dayton Hudson/Target 200 0.41% 166 0.25% City of Temecula 210 0.43% 156 0.23% Opto 22, Inc. 200 0.41% 150 0.23% Rancho Ford Lincoln Mercury 165 0.34% 150 0.23% JC Penney Company 195 0.40% 150 0.23% Rancho California Water District 130 0.27% 143 0.21% McMillan Farm Management 115 0.24% 120 0.18% Stater Brothers 150 0.31% 115 0.17% Sears 249 0.51% 109 0.16% Southwest Traders 257 0.53% 109 0.16% K -Mart Corporation 100 0.21% 95 0.14% TGI Friday 80 0.17% 70 0.11% Fiscal Year 2015-16 Comprehensive Annual Financial Report 183 The Heart of Southern California wane Country Fiscal Year 2015-16 Comprehensive Annual Financial Report OPERATING INFORMATION Fiscal Year 2015-16 Comprehensive Annual Financial Report 185 I� of S001 Fiscal Year 2015-16 Comprehensive Annual Financial Report OPERATING INDICATORS BY FUNCTION Last Ten Fiscal Years FISCAL YEAR FUNCTION 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Police: Total Citations 25,237 15,164 17,747 16,348 19,071 19,065 20,420 19,248 20,766 17,549 Red Light Citations 3,194 1,938 2,866 2,007 1,825 1,660 1,046 590 807 1,006 DUI Arrests 353 439 352 357 400 341 387 259 188 211 Traffic Collisions 838 557 799 767 930 763 724 876 867 861 Fire: Number of Emergency Calls 5,895 5,764 6,087 6,333 6,583 6,890 7,202 7,194 7,586 8,051 Inspections 5,714 3,633 938 3,134 2,408 2,731 3,503 3,144 2,610 2,746 Public Works: Miles of City Streets Slurry Sealed 18 12 13 14 7.8 22 15 28 Parks and Recreation: Number of Recreation Classes 800 800 1000 1000 1150 1,350 1,300 1,600 1,300 1,500 Number of Parks 37 37 38 39 39 39 39 39 39 40 Source: City of Temecula Departments Fiscal Year 2015-16 Comprehensive Annual Financial Report 186 A71 Fiscal Year 2015-16 Comprehensive Annual Financial Report FULL-TIME CITY EMPLOYEES Last Ten Fiscal Years FUNCTION 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 City Council 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 City Manager City Manager 10.00 10.00 11.00 5.00 4.50 4.50 4.00 5.00 3.75 3.75 Human Resources - 2.50 2.50 2.50 2.00 2.75 3.50 3.25 Economic Development - 2.50 3.00 1.00 4.00 4.00 4.00 3.30 Emergency Management - - - 0.00 0.00 0.00 0.50 City Clerk 8.00 8.00 8.00 7.00 7.00 7.00 6.00 6.00 6.00 6.00 Finance Strategic Budgeting & Operations - - - 4.00 0.00 0.00 0.00 Finance 15.50 15.50 15.50 14.00 13.50 13.00 9.00 12.50 12.50 12.40 Community Development Planning 24.00 24.00 19.65 11.70 4.90 9.15 9.00 9.75 6.50 7.00 Building and Safety 21.00 21.00 21.90 16.90 15.90 13.00 13.25 10.75 14.25 15.00 Public Works Land Development 15.38 15.38 13.63 9.80 7.95 6.60 6.70 6.70 7.25 7.25 Public Works 48.62 48.62 50.37 19.80 19.60 18.60 18.90 18.90 19.40 19.20 CIP Administration - 15.40 13.25 13.60 13.05 13.05 11.80 11.20 Parks Maintenance - - - 8.00 8.00 8.20 8.00 Police 1.00 1.00 1.00 0.50 0.50 0.50 0.50 0.50 0.50 0.38 Fire 3.00 3.00 3.00 3.00 3.00 3.00 2.50 3.00 3.00 3.00 Community Services 35.90 37.90 38.40 35.65 33.15 32.05 26.55 30.30 29.30 29.30 Business Incubator Resource - - - 0.00 0.00 0.00 0.70 Community Development Block Grant Redevelopment Agency 3.00 3.00 4.45 4.40 6.45 Successor to the Redevelopment Agency - - - 4.25 0.70 0.70 0.85 0.80 Affordable Housing - - - 2.55 2.05 1.65 1.45 Community Facility District - - - 0.00 0.00 0.00 0.22 Internal Services Funds Internal Service Funds 18.35 18.35 17.85 - - 0.00 0.00 0.00 0.00 Insurance - 0.50 0.50 0.50 0.50 1.25 0.75 0.50 Information Technology - 10.00 10.00 9.00 9.00 9.50 9.70 9.70 Central Services - 3.00 3.00 3.00 2.00 0.00 0.00 0.00 Support Services - - - 2.00 3.50 3.30 3.50 Facilities - 4.35 4.30 5.75 4.80 4.80 4.80 4.80 208.75 210.75 209.75 171.00 158.00 152.00 154.00 158.00 156.00 156.20 Source: City of Temecula Finance Department Fiscal Year 2015-16 Comprehensive Annual Financial Report 187 Fiscal Year 2015-16 Comprehensive Annual Financial Report CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years Function 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Police: Stations 1 1 1 1 1 1 1 1 1 1 Storefronts 2 2 2 2 2 2 2 2 2 2 Fire: Stations 5 5 5 5 5 5 5 5 5 5 Public Works: Miles of Streets 281 284.9 293.6 300.68 299.19 301.44 307.18 309.3 313.49 315.48 Traffic Signals 96 96 110 113 118 121 122 122 122 122 Parks and Recreation: Number of Parks 37 38 38 39 39 39 39 39 39 40 Source: City of Temecula Departments Fiscal Year 2015-16 Comprehensive Annual Financial Report 188 Fiscal Year 2015-16 Comprehensive Annual Financial Report COMPARATIVE CITY INFORMATION Last Five Fiscal Years ESTIMATED BUDGETED NUMBER OF GENERAL FUND GENERAL FUND EXPENDITURE NAME OF CITY YEAR EMPLOYEES POPULATION REVENUES EXPENDITURES S PER CAPITA TEMECULA 2016 158 109,064 $ 69,558,281 $ 65,986,844 $ 605 2015 158 108,920 $ 65,853,760 $ 65,418,521 $ 601 2014 156* 106,289 $ 61,977,909 $ 61,639,375 $ 580 2013 160* 104,879 $ 60,338,110 $ 60,124,586 $ 573 2012 158* 103,092 $ 58,195,650 $ 57,969,867 $ 562 ESCONDIDO 2016 978 150,760 $ 91,416,000 $ 92,644,125 $ 615 2015 978 147,294 $ 89,213,910 $ 90,468,505 $ 614 2014 1,000 147,102 $ 86,278,100 $ 87,586,765 $ 595 2013 1,116 145,908 $ 80,694,915 $ 81,891,615 $ 561 2012 1,073 143,000 $ 75,900,000 $ 76,100,000 $ 532 MORENO VALLEY 2016 354 201,175 $ 91,885,401 $ 90,909,226 $ 452 2015 354 202,976 $ 89,392,559 $ 87,509,843 $ 431 2014 361 199,258 $ 79,960,000 $ 80,840,000 $ 406 2013 400 198,129 $ 77,892,736 $ 76,868,536 $ 388 2012 435 196,495 $ 75,856,762 $ 77,160,662 $ 393 HEMET 2016 293 83,032 $ 36,792,685 $ 40,958,937 $ 493 2015 291 82,253 $ 35,914,300 $ 39,298,385 $ 493 2014 288 81,537 $ 34,600,000 $ 39,065,000 $ 479 2013 266 80,877 $ 37,374,000 $ 34,670,000 $ 429 2012 284 81,000 $ 31,991,700 $ 34,647,200 $ 428 LAKE ELSINORE 2016 130 58,426 $ 38,179,983 $ 41,526,344 $ 711 2015 131 60,029 $ 38,126,132 $ 38,952,583 $ 649 2014 111 56,718 $ 35,872,965 $ 37,675,788 $ 664 2013 78 55,430 $ 27,115,197 $ 29,944,817 $ 540 2012 80 54,000 $ 25,303,554 $ 26,649,026 $ 494 MURRIETA 2016 310 113,795 $ 41,456,896 $ 39,970,664 $ 351 2015 310 108,368 $ 39,954,041 $ 38,824,448 $ 358 2014 312 106,425 $ 34,775,900 $ 35,785,826 $ 336 2013 340 105,832 $ 33,927,381 $ 35,203,150 $ 333 2012 335 102,000 $ 32,901,670 $ 34,429,545 $ 338 *Denotes funded positions within the City of Temecula Fiscal Year 2015-16 Comprehensive Annual Financial Report 189 J The Heart of Southern California Wing Country Fiscal Year 2015-16 Comprehensive Annual Financial Report MISCELLANEOUS STATISTICS June 30, 2016 Incorporation Date December 1, 1989 Form of Government Council / City Manager Number of Authorized City Employees (full-time equivalent) 158 Number of Registered Voters 44,454 Personal Family Income $94,001 Area in Square Miles 37.19 Altitude 1000-1200 Feet Rainfall 19.42 inches per year Location 55 miles north of San Diego; 85 miles southeast of Los Angeles Miles of streets 315.48 Park sites 40 Park Acreage (total) 597 Park Acreage (developed) 309 Education: Number of Schools 32 Number of Teachers 1,316 Number of Students Enrolled 27,700 Libraries (contracted with Riverside County): Number of Libraries 2 Number of Volumes 3 million Fire Protection (contracted with Riverside County): Number of Stations 5 Number of Firefighters 65 Number of Volunteer Firefighters 0 Police Protection (contracted with Riverside County): Number of Stations 3 Number of Sworn Officers 101 Supervision / Management 20 Public School Fiscal Year Population* Enrollment** 2007 97,935 27,962 2008 101,057 28,186 2009 102,604 28,697 2010 105,029 29,492 2011 101,657 24,835 2012 103,092 25,671 2013 104,879 28,752 2014 106,289 28,509 2015 108,920 28,426 2016 109,064 27,700 SOURCE: *State of California, Department of Finance **Temecula Valley Unified School District Fiscal Year 2015-16 Comprehensive Annual Financial Report 190 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants To the City Council City of Temecula, California VALUE THE DIFFERENCE We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Temecula, California (City) for the year ended June 30, 2016. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 14, 2016. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. As described in Note 1, the City implemented Governmental Accounting Standards Board (GASB) Statements No. 72, Fair Value Measurement and Application, as of July 1, 2015. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were: Management's estimate of the • Net other post -employment benefits (OPEB) asset and related actuarial assumptions, • Fair market value of investments, • Net pension liability, deferred inflows of resources, deferred outflows of resources and disclosures related to defined benefit plans administered by the California Public Employees Retirement System (Ca1PERS), and • Management's estimate of the unearned revenue. We evaluated the key factors and assumptions used in developing these estimates in determining that they were reasonable in relation to the financial statements taken as a whole. 1 19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.3010 Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were: • The disclosure of the City's defined benefit pension plan, net pension liability and related deferred inflows of resources and deferred outflows of resources in Note 8 to the financial statements. The valuation of the net pension liability and related deferred outflows (inflows) of resources are sensitive to the underlying actuarial assumptions used including, but not limited to, the investment rate of return and discount rate. As disclosed in Note 8, a 1% increase or decrease in the discount rate has a significant effect on the City's net pension liability. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors' report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representation We have requested certain representations from management that are included in the management representation letter dated December 22, 2016. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to management's discussion and analysis, schedules of changes in the net pension liability and related ratios, schedule of contributions, and schedule of funding progress other post - employment benefits, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. 2 We were engaged to report on combining and individual non -major fund financial statements and schedules, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the introductory and statistical sections, which accompany the financial statements but are not RSI, We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the use of the City Council and management of the City of Temecula and is not intended to be, and should not be, used by anyone other than these specified parties. Riverside, California' December 22, 2016 3 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants VALUE THE DIFFERENCE INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING, AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council City of Temecula, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Temecula, California (City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements and have issued our report thereon dated December 22, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 1 19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.3010 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Riverside, California December 22, 2016 2 JOINT MEETING OF THE CITY COUNCIL AND COMMUNITY SERVICES COMMISSION Item No. 19 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Randi Johl, City Clerk DATE: January 24, 2017 SUBJECT: Conduct Annual Joint Meeting Between the City Council and the Community Services Commission PREPARED BY: Randi Johl, City Clerk RECOMMENDATION: That the City Council conduct the annual joint meeting between the City Council and the Community Services Commission. BACKGROUND: On January 26, 2016 the City Council approved an amendment to the role and authority of Board and Commission Members, as set forth in the Board and Commission Handbook, to include annual joint meetings between the City Council and each board and/or commission. At the annual joint meeting, each board and/or commission will provide a brief overview of the previous year highlights, anticipated activities for the upcoming year, and take further direction from the City Council as necessary. The schedule for the 2017 annual joint meetings is as follows: Planning Commission (January 10, 2017), Old Town Local Review Board (January 10, 2017), Community Services Commission (January 24, 2017) and Public Traffic/Safety Commission (February 14, 2017). FISCAL IMPACT: None ATTACHMENTS: None DEPARTMENT REPORTS Item No. 20 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Council FROM: Aaron Adams, City Manager DATE: January 24, 2017 SUBJECT: City Council Travel/Conference Report PREPARED BY: Sue Steffen, Executive Assistant RECOMMENDATION: Receive and file. On January 16, 2017 Mayor Maryann Edwards traveled to Washington DC to attend the United States Conference of Mayors 85th Winter Meeting. On January 17, 2017 Council Member James Stewart traveled to Sacramento to attend the League of California Cities New Mayors and Council Members Conference ATTACHMENT: Meeting Agendas THE UNITED STATES CONFERENCE OF MAYORS 85th Winter Meeting January 17-19, 2017 Capital Hilton Hotel Washington, DC DRAFT AGENDA (12122116) Unless otherwise noted, all plenary sessions, committee meetings, task force meetings, and social events are open to all mayors and other officially -registered attendees. TUESDAY, JANUARY 17 Registration 7:00 a.m. - 6:00 p.m. (Upper Lobby) Special Working Session: Summer Jobs Plus - How to Create Summer Jobs Programming that Leads to Long -Term Youth Employment (Breakfast - Mayors and Workforce Development Council Members Only) 8:00 a.m. - 9:30 a.m. ( ) Moderator: TBA Panelists: JAMES KENNEY Mayor of Philadelphia GREG FISCHER Mayor of Louisville JULIE TEER Chief Development & Public Affairs Officer Boys and Girls Clubs of America MARTHA ROSS Fellow Metropolitan Policy Program Brookings #USCMwinterl7 1 Title Sponsor: Orientation for New Mayors and First Time Attendees (Continental Breakfast) 8:00 a.m. - 9:00 a.m. ( ) The U.S. Conference of Mayors welcomes its new mayors, new members, and first time attendees to this informative session. Connect with fellow mayors and learn how to take full advantage of what the Conference has to offer. Presiding: TOM COCHRAN CEO and Executive Director The United States Conference of Mayors BRIAN C. WAHLER Mayor of Piscataway Chair, Membership Standing Committee Membership Standing Committee 9:00 a.m. - 10:00 a.m. ( ) Join us for an interactive discussion among Membership Committee members and new mayors / first-time attendees on best practices and local mayoral priorities. Chair: BRIAN C. WAHLER Mayor of Piscataway Mayors Water Council 9:00 a.m. - 10:30 a.m. ( ) Co -Chairs: JOY COOPER Mayor of Hallandale Beach Remarks: JILL TECHEL Mayor of Napa TBA Council on Metro Economies and the New American City 9:30 a.m. - 11:00 a.m. ( ) Chair: Remarks: #USCMwinter 17 GREG FISCHER Mayor of Louisville TBA 2 Title Sponsor: Community Development and Housing Standing Committee 11:00 a.m. - 12:00 p.m. ( ) Chair: SETTI D. WARREN Mayor of Newton Remarks: TBA Jobs, Education and the Workforce Standing Committee 11:00 a.m. - 12:00 p.m. ( ) Chair: CHRISTOPHER L. CABALDON Mayor of West Sacramento Remarks: BRUNO MANNO Senior Advisor K-12 Education Program The Walton Family Foundation National Pathways with a Purpose Grant Awards Update STEPHANIE NELLONS-PAIGE Vice President National Engagement & Philanthropy USA Funds Metro Economies Standing Committee 11:00 a.m. - 12:00 p.m. ( ) Chair: RICHARD J. BERRY Mayor of Albuquerque Remarks: The Economic Potential of Women: The Gender Gap and Power of Parity VIVIAN E. RIEFBERG Senior Partner McKinsey and Company, Inc. Opening Press Conference 11:30 p.m. - 12:30 p.m. ( ) Remarks: USCM Officers #USCMwinterl7 3 Title Sponsor: OPENING PLENARY LUNCHEON 12:30 p.m. - 2:30 p.m. (Presidential Ballroom) Sponsor: Wells Fargo & Company Airbnb Presiding: Remarks: MICK CORNETT Mayor of Oklahoma City President, The United States Conference of Mayors BRAD BLACKWELL Executive Vice President Wells Fargo & Company Remarks: Airbnb Presentation: USCM/Walmart U.S. Manufacturing Innovation Fund Awards Remarks: TBA Advanced Manufacturing Task Force 2:45 p.m. - 4:00 p.m. ( ) Chair: VIRGIL 'VIRG' BERNERO Mayor of Lansing Vice Chairs: DENNY DOYLE Mayor of Beaverton Remarks: NEIL M. O'LEARY Mayor of Waterbury Investing in the Manufacturing Community NAN WHALEY Mayor of Dayton #USCMwinterl7 4 Title Sponsor: Technology and Innovation Task Force 2:45 p.m. - 4:00 p.m. ( ) Chair: EDWIN M. LEE Mayor of San Francisco Remarks: TBA Small Business and Entrepreneurship Task Force 2:45 p.m. - 4:00 p.m. ( ) Co -Chair: ELIZABETH B. KAUTZ Mayor of Burnsville SYLVESTER "SLY" JAMES, JR. Mayor of Kansas City, MO Remarks: TBA Mayors Professional Sports Alliance 4:00 p.m. - 5:00 p.m. ( ) Chair: MICK CORNETT Mayor of Oklahoma City Vice Chairs: MAHER MASO Mayor of Frisco RICK KRISEMAN Mayor of St. Petersburg Remarks: TBA Children, Health and Human Services Standing Committee 5:30 p.m. - 6:30 p.m. ( ) Chair: Remarks: TBA #USCMwinterl7 5 Title Sponsor: Energy Standing Committee 5:30 p.m. - 6:30 p.m. Chair: JON MITCHELL Mayor of New Bedford Remarks: Mayors' Lighting Partnership STACY GILLEN Vice President for Professional End User Sales Philips Lighting North America OPENING RECEPTION: Capital Hilton Hotel 6:30 p.m. - 8:00 p.m. (Presidential Ballroom) Sponsors: Uber Technologies, Inc. All 84th Winter Meeting participants are invited. WEDNESDAY, JANUARY 18 Registration 7:00 a.m. - 5:00 p.m. (Upper Lobby) PLENARY BREAKFAST: Mayors and Business Leaders 7:30 a.m. - 9:00 a.m. (Presidential Ballroom) Sponsors: Target Corporation Starbucks Coffee Company Presiding: Greeting: CAROLYN G. GOODMAN Mayor of Las Vegas Chair, Mayors Business Council TOM COCHRAN CEO and Executive Director The United States Conference of Mayors JEAN CANTRELL Vice President -State & Local Government Relations Philips Lighting Co -Chair, The Mayors Business Council Steering Committee USCM Platinum Partner #USCMwinterl7 6 Title Sponsor: KIMBERLY SCHULZ Senior Project Engineer HDR Co -Chair, The Mayors Business Council Steering Committee USCM Platinum Partner Remarks: Target Corporation KIM WINSTON Director, State Government Affairs Starbucks Coffee Company Remarks: TBA Educational Excellence Task Force 9:15 a.m. - 10:15 a.m. ( Chair: Vice Chair: Remarks: ) MIKE RAWLINGS Mayor of Dallas CARLYN G. GOODMAN Mayor of Las Vegas BRUNO MANNO Senior Advisor K-12 Education Program The Walton Family Foundation Food Policy Task Force 9:15 a.m. - 10:15 a.m ( ) Co -Chairs: PAUL SOGLIN Mayor of Madison Remarks: MURIEL BOWSER Mayor of District of Columbia SCOTT A. CARTER Chief, Office of Governmental Affairs Food and Nutrition Services U.S. Department of Agriculture #USCMwinterl7 7 Title Sponsor: PLENARY SESSION 10:30 a.m. - 11:30 a.m. (Presidential Ballroom) Presiding: Discussion: MICK CORNETT Mayor of Oklahoma City President, The United States Conference of Mayors The Human Impact of Smart Mobility BILL FORD Executive Chairman Ford Motor Company Remarks: TBA Criminal and Social Justice Standing Committee 11:45 a.m. - 12:45 p.m. ( ) Chair: KAREN FREEMAN -WILSON Mayor of Gary Remarks: TBA Environment Standing Committee 11:45 a.m. - 12:45 p.m. ( ) Chair: GREG STANTON Mayor of Phoenix Remarks: TBA Transportation and Communications Standing Committee 11:45 a.m. - 12:45 p.m. ( ) Chair: KASIM REED Mayor of Atlanta Remarks: TBA USCM Executive Committee (Closed) 11:45 a.m. - 12:45 p.m. ( ) #USCMwinter 1 7 8 Title Sponsor: CHILDHOOD OBESITY PREVENTION AWARDS LUNCHEON 1:00 p.m. - 2:30 p.m. (Presidential Ballroom) Sponsor: American Beverage Association Presiding: Presentation: MICK CORNETT Mayor of Oklahoma City President, The United States Conference of Mayors Childhood Obesity Prevention Awards SUSAN NEELY President American Beverage Association USCM Platinum Partner Remarks: TBA Best Practice Forum: Superfast Internet for Cities 2:45 p.m. - 3:45 p.m. ( ) Sponsor: Google Task Force on Aging 2:45 p.m. - 3:45 p.m. ( ) Chair: FRANK ORTIS Mayor of Pembroke Pines Remarks: NANCY A. LeaMOND Chief Advocacy and Engagement Officer AARP Mayors and Police Chiefs Task Force 2:45 p.m. - 3:45 p.m. ( ) Chair: ED MURRAY Mayor of Seattle Remarks: TBA #USCMwinterl7 9 Title Sponsor: International Affairs Standing Committee 4:00 p.m. - 5:00 p.m. ( ) Chair: NAN WHALEY Mayor of Dayton Remarks: TBA Tourism, Arts, Parks, Entertainment and Sports Standing Committee 4:00 p.m. - 5:00 p.m. ( ) Chair: MITCHELL J. LANDRIEU Mayor of New Orleans Remarks: TBA Community Leaders of America: Republican Mayors (Closed) 5:30 p.m. - 6:30 p.m. ( ) Chair: BETSY PRICE Mayor of Fort Worth National Conference of Democratic Mayors (Closed) 5:30 p.m. - 6:30 p.m. ( ) President: SYLVESTER "SLY" JAMES, JR. Mayor of Kansas City, MO LATE NIGHT EVENT Astor Ballroom, St. Regis Hotel 9:30 p.m. - 12:00 a.m. Sponsors: American Heart Association - Southwest Affiliate Linebarger Goggan Blair & Sampson LLP All 84th Winter Meeting participants are invited. #USCMwinterl7 10 Title Sponsor: THURSDAY, JANUARY 19 Registration 7:00 a.m. - 2:00 p.m. (Upper Lobby) PLENARY BREAKFAST: Honoring Leadership in the Arts 7:30 a.m. - 9:00 a.m. (Presidential Ballroom) Sponsors: Americans for the Arts The United States Conference of Mayors Moderator: Remarks: MITCHELL J. LANDRIEU Mayor of New Orleans Chair, Standing Committee on Tourism, Arts, Parks, Entertainment and Sports TOM COCHRAN CEO and Executive Director The United States Conference of Mayors ROBERT LYNCH President and CEO Americans for the Arts Award Winners: 2017 National Award for Local Arts Leadership 2017 National Award for State Arts Leadership 2017 National Artist Advocacy Award Remarks: Uber Technologies, Inc. Women Mayors Leadership Alliance of The United States Conference of Mayors 9:15 a.m. - 10:15 a.m. ( ) Chair: KIM McMILLAN Mayor of Clarksville Remarks: TBA #USCMwinterl7 11 Title Sponsor: PLENARY SESSION 10:30 a.m. - 11:30 a.m. (Presidential Ballroom) Presiding: Presentation: Remarks: MICK CORNETT Mayor of Oklahoma City President, The United States Conference of Mayors 2017 GRO1000 Community Gardens and Green Spaces Awards SU LOK Director of Corporate and Community Partnerships The Scotts Miracle Gro Company Autonomous Vehicles and the City: Ten Rules for Mayors JEFF SPECK City Planner and Author, Walkable City Remarks: TBA Task Force Meetings 11:45 a.m. - 12:45 p.m. Substance Abuse and Recovery Task Force 11:45 a.m. - 12:45 p.m. ( ) Chair MARTIN J. WALSH Mayor of Boston Remarks: TBA PLENARY LUNCHEON 1:00 p.m. - 3:00 p.m. (Presidential Ballroom) Presiding: MICK CORNETT Mayor of Oklahoma City President, The United States Conference of Mayors Remarks: TBA Adjourn #USCMwinterl7 1 2 Title Sponsor: THE U.S. CONFERENCE OF MAYORS WORKFORCE DEVELOPMENT COUNCIL TUESDAY, JANUARY 17 Workforce Development Council Board Meeting/Annual Winter Meeting 8:00 a.m. - 3:15 p.m. (St. Regis Hotel, Astor Ballroom) President: ANDREW MCGOUGH Executive Director Worksystems, Inc., Portland NOTICE: 8:00 a.m. - 9:30 a.m. WDC members attend the Special Working Session: Summer Jobs Plus - How to Create Summer Jobs Programming that Leads to Long -Term Youth Employment in the Room of the Capital Hilton Hotel. 11:00 a.m. - 12:00 p.m. WDC members attend the Jobs, Education and the Workforce Standing Committee Meeting in the ( ) Room of the Capital Hilton Hotel. The Workforce Development Council is an affiliate organization of The U.S. Conference of Mayors. WEDNESDAY, JANUARY 18 Workforce Development Council Annual Winter Meeting 8:00 a.m. - 3:30 p.m. (St. Regis Hotel, Astor Ballroom) #USCMwinterl7 13 Title Sponsor: c. New Mayors & Council Members ACADEMY 2017 NEW MAYORS AND COUNCIL MEMBERS ACADEMY dnesday,Jar u ry18 REGISTRATION OPEN » 8:00 am. - 4:00 p.m. Your League and How To Use It » 9:30 - 10:15 a.m. As a city official, you are the League. Its success, along with your own, depends on your involvement and leadership. Receive an introduction to the services of the League of California Cities, how you can access them, and how you can become involved. Basics Boot Camp » 10:30 - 11:45 a.m. After a few council meetings you discover that sitting on the "target" side of the dais means you must be prepared for anything. Equip yourself with the necessary tools by reviewing some basic rules for new mayors and council members. GENERAL LUNCHEON Effective Advocacy & Key City Issues » 12:00 - 1:30 p.m, Meet the League's Legislative team, and learn about the League's strategic goals, the legislative calendar, and what issues are trending in the legislature in 2017. Lobbyists will also share ideas for establishing practical skills to develop persuasive arguments and testimony that will serve your city's interests. Get to know your regional public affairs representatives, and network with other mayors and council members from your regional division. Your Legal Powers and Obligations » 2:00 - 3:45 p.m. You were elected to make things happen in your city. Learn the breadth, as well as the limitations of your powers as a city official. Acquire a basic understanding of the legal authorities and restrictions under which cities and city officials operate, with a focus on the Brown Act. Policy Role in Land Use Planning » 4:00 - 5:00 p.m. Land use planning is one of the most important aspects of a city official's responsibilities because of the long-term impacts it can have on a community's environment, economic vitality and the physical health of its residents. Learn about tools and processes in land use planning such as the general plan, zoning, the California Environmental Quality Act (CEQA) as well as the role of regional agencies and the state. This knowledge will help you foster a solid working relationship with your city's planning commission and planning staff. LEGISLATIVE RECEPTION » 6:00 - 7:00 p.m. Join us for this great opportunity for newly elected city officials to gather and meet with 2 **Sessions are subject to change** REGISTRATION OPEN » 7:30 a.m. - Noon NETWORKING BREAKFAST » 7:30 - 8:30 a.m. Relationship Between City Council and City Manager Staff » 8:30 -10:00 a.m. As an elected official, there will be various competing values and priorities that drive you and your colleagues within your city. Your success on the council requires an effective relationship with your city manager, city attorney and staff, where everyone's values are respected and represented. Learn how to work together while cultivating each of your diverse roles. Communications and the New Media » 10:15-11:45 a.m. With so many advancements in social media over the last several years, it can be hard to keep up with the "do's and don'ts" of every platform.There is a wide variety of almost immediate online informational sources, and elected officials need to be quick on their feet with the necessary skills to proactively manage public perceptions about local governmental affairs. Discover what cities should be doing to communicate with their constituents in the 21st Century, and the new forms of media that must be embraced. GENERAL LUNCHEON City of Dysfunction Junction - How to Conduct an Effective and Respectful Council Meeting » 12:00 - 2:00 p.m. Enjoy the ever popular skit contrasting the wrong and the right ways to conduct your city council meetings. Financial Responsibilities, City Revenues Workshop » 2:15 - 4:45 p.m. Cover your responsibilities as elected officials in exercising fiduciary accountability and transparency in open government. Discuss the local government financial cycle, elected official financial oversight duties, state and local funding relationships, and identify the four stages of fiscal meltdown. The importance of structurally balanced budget tips for setting city council goals, and the need for financial policies will be stressed. Learn to avoid micromanagement and complacency management. EVENING ON YOUR OWN re gam,fun , fx. • www,cacities.orgImayorscounciled **Sessions are subject to change** 3 Friday, January 20 JANUARY 10 - 20, 2011 I SACRAMENTO NETWORKING BREAKFAST » 8:00 - 9:15 a.m. How to Build and Maintain the Public's Trust: Practical Ethics and the Law (AB1234 Training) » 9:45 -11:45 a.m, State law requires elected and appointed officials to receive training in specified ethics laws and principles every two years. Newly elected and appointed officials must receive this training within one year of becoming a public servant.This lively, example laden, two -hours will make this mandatory training more tolerable - if not outright enjoyable. Sign -in begins at 9:15 a.m., and you must be present for the full two hours to receive the certification of attendance at 11:45. (Planned with the Institute for Local Government). Ddil Ye &eh Qe,rikte./ Save the date for these valuable upcoming educational opportunities for Mayors & Council Members: Mayors & Council Members Executive Forum June 28-29, 2017 Monterey Conference Center Mayors & Council Members Advanced Leadership Workshops June 30, 2017 Monterey Marriott Annual Conference & Expo September 13-15, 2017 Sacramento Convention Center **Sessions are subject to change** 4 2017 NEW MAYORS AND COUNCIL MEMBERS ACADEMY General Information All attendees must register for the conference online prior to reserving a hotel room. Registration is not complete until full payment is received. The League is unable to accept purchase orders. Once registration is complete, you will be directed to the housing reservations page. • For online registration, go to www.cacities.org/events and select "New Mayors and Council Members Academy". • Registration must be received by Friday, January 6. After this date, please register onsite if space is still available. COSTS/FEES Full registration includes electronic access to all program materials, admission to all sessions, two breakfasts, two lunches, and a Wednesday evening legislative reception. FULL CONFERENCE Elected Officials and City Staff $575 Non -Member City Elected Officials and City Staff.... .$1575 Spouse Registration (Wednesday reception only) $35 The spouse fee is restricted to persons who are not city or public officials, are not related to any Partner or sponsor, and would have no professional reason to attend the conference. It includes admission to Wednesday's legislative reception only. There is no refund for the cancellation of a spouse registration. It is not advisable to use city funds to register a spouse. CANCELLATIONS Refunds of rate paid, minus $75 processing charge, will be made for cancellations submitted in writing to mdunn@cacities.org and received by Friday, January 6. There are no refunds for cancellations after this date. Substitutions can be made onsite. If you require special accommodations related to facility access, transportation, communication and/or dietary requests, please contact our Conference Registrar at mdunn@cacities.org by Friday, January 6, 2017. HOTEL INFORMATION & RESERVATIONS Hotel reservation changes, date modifications, early check-out, or cancellations made prior to Friday, January 6 must be done through the online reservation link you received when registering for the conference. Use your confirmation/ acknowledgement number to access your reservation to make changes. Once the January 6 deadline has passed, please contact the hotel directly with any changes or cancellations. Please note that any hotel cancellations after the housing deadline has passed may incur a financial penalty or a minimum one-night room charge or attrition fees. Hyatt Regency Sacramento 1209 L Street, Sacramento, CA 95814 Hotel Rate (per night): $174 - Single/Double Occupancy (plus tax and fees) Valet parking: $29 per day / Self -parking: $20 per day (subject to change without notice) *Please DO NOT book outside of the League hotel block. This will cause an increase in event costs, liabilities and higher registration rates. PLEASE NOTE: The information you provide to the League when registering for a League conference or meeting may be shared with the conference or meeting hotel(s). The hotel(s) will also share with the League the information you provide to the hotel(s) when you make your hotel reservation for the conference or meeting. The information shared between the League and the hotel(s) will be limited to your first name, last name and dates/length of stay in the hotel. Item No. 21 Approvals City Attorney Finance Director City Manager Por - CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Luke Watson, Community Development Director DATE: January 24, 2017 SUBJECT: Community Development Department Monthly Report PREPARED BY: Lynn Kelly -Lehner, Principal Management Analyst RECOMMENDATION: Receive and file. The following are the highlights for the Community Development Department for the months of November and December 2016. CURRENT PLANNING ACTIVITIES New Cases: In November and December 2016, Planning received 42 new applications, including 5 pre -applications, and conducted 6 Public Hearings. A detailed account of current planning activities is attached to this report. Old Town Boutique Hotel: On February 18, 2016, staff received an application for a Development Plan to construct a five -story 155,630 square foot hotel. The 151 room hotel will extend the entire length of 3rd Street between Old Town Front Street and Mercedes. A six -story parking structure for hotel valet parking will be located directly across 3rd Street. Amenities include restaurant and retail space, meeting and banquet rooms, and a pool. A Supplemental Environmental Impact Report will be prepared by ESA. The Old Town Local Review Board will be reviewing the project on January 9, 2017. (JONES) Temecula Gateway: On November 3, 2014, staff received applications related to the proposed Temecula Gateway project. The proposed project will consist of a Planned Development Overlay/Zone Change and General Plan Amendment to change the General Plan designation to Community Commercial and the zoning designation to Planned Development Overlay 14, a Tentative Parcel Map to allow for the creation of seven lots from four, a Development Plan to allow for the construction of four commercial buildings totaling approximately 23,666 square feet, a Conditional Use Permit to allow for an automobile service station with a corresponding car wash and convenience store that will serve alcohol, a Conditional Use Permit to allow for a drive-thru for a restaurant. The City has entered into an agreement with Michael Baker International to conduct an Environmental Impact Report. The project was heard by the Planning Commission on October 5, 2016. The Commission recommended City Council Approval. The project was approved by the City Council on November 15, 2016. (JONES) Audi Dealership: On February 18, 2015, staff received a pre- application for a 37,000 square foot Audi dealership to be located on Temecula Center Drive, adjacent to 1-15 and south of the existing Mercedes- Benz of Temecula dealership. A Development Plan application was filed for the project on April 6, 2015. A community meeting was held with the Harveston community on March 25, 2015 and approximately 20 Harveston residents attended the meeting and were positive about the addition of the Audi dealership to the community. A Supplemental EIR was available for public review from July 20, through September 8, 2015. A second community meeting was held with Harveston residents on August 13, 2015, to discuss the findings of the Supplemental EIR. The Planning Commission approved Audi on October 21, 2015. Construction began on April 26, 2016, and is anticipated to be completed in March 2017. (FISK) Cypress Ridge: On December 21, 2015, staff received an application for a Development Plan to construct 245 market rate residential units in the form of duplex, triplex, attached and detached cluster units. The project will be located on the northeast corner of Pechanga Parkway and Loma Linda Road. The project also includes a Tentative Tract Map (for condo purposes), Zone Change/Planned Development Overlay, and a General Plan Amendment. A fiscal impact analysis (FIA) and EIR are currently underway. The applicant is proposing to upgrade Pala Park to include amenities and play equipment for special needs. (JONES) Altair Specific Plan: On November 12, 2013, City Council approved an Entitlement Processing Agreement with Ambient Communities (Developer) to process extensive land use entitlements for the 270 acre property located west of Old Town including General Plan Amendment, Specific Plan, Subdivision Maps, Development Agreement, and Environmental Impact Report (EIR). Ambient Communities is proposing a mixed-use development comprised of residential single-family and multi- family units, as well as retail/commercial, open space, and institutional uses. Staff is currently reviewing a Multiple Species Habitat Conservation Plan (MSHCP) Consistency Report and has prepared an Initial Study. Keyser Marston Associates has prepared a fiscal impact analysis for the project. Staff is working through environmental issues associated with the MSHCP and wildlife corridors and negotiating a Development Agreement. A Draft EIR, prepared by ESA, was circulated, and the comment period ended on June 17, 2016. A Planning Commission workshop was held on June 6, 2016, and a City Council Workshop was held on July 28, 2016. Staff was directed to work with wildlife agencies to address adjacent wildlife corridors and mountain lion movement. A second City Council Workshop was held on September 27, 2016. Ambient Communities presented an increase to the voluntary conservation features from $500,000 to $850,000 for land acquisitions and engineering feasibility studies for a wildlife crossing. Staff is working on the EIR response to written comments, and details in the Development Agreement. Staff anticipates taking the project to the City Council during the first quarter of 2017. (PETERS) Temecula Creek Inn (TCI) Specific Plan: JC Resorts is proposing a General Plan Amendment, Specific Plan, Tentative Tract Map, and Development Plan for a hotel expansion at Temecula Creek Inn. This project also includes a Fiscal Impact Analysis to evaluate the project's potential impacts on the City's General Fund. Since 2008, the Developer has modified the site plan and project description to address concerns regarding site layout, number of units, traffic impacts, cultural resources, potential Development Agreement, and timing of the hotel expansion. As a result of the changes, the applicant completed a pre -application to make a final determination on the site plan and project description. The final project description includes 385 single-family dwelling units, reducing the current 27 -hole golf course to an 18 -hole golf course, on 305 acres located on Rainbow Canyon Road. The Specific Plan proposes five Planning Areas: Planning Area 1 includes an expansion of the existing hotel by 99 rooms from 128 to 227 guest rooms, and the addition of a spa and banquet facilities totaling 153,837 square feet. Planning Areas 2-4 accommodate the 385 single family homes. Planning Area 5 consists of the golf course. Staff is reviewing a draft fiscal impact analysis. A Draft EIR is anticipated to be circulated in early 2017. (PETERS) LONG RANGE PLANNING Uptown Temecula Specific Plan: The Uptown Temecula Specific Plan Area encompasses approximately 560 acres and is located north of Rancho California Road, west of Interstate 15, south of Cherry Street, and east of Diaz Road. The Specific Plan is based upon the eight visioning recommendations of the community and as directed by the Jefferson Corridor Ad Hoc Subcommittee. The Specific Plan was adopted by the City Council along with the certification of the Final EIR on November 17, 2015. Staff is developing the scope of work for the Request for Proposal for the Streetscape Beautification Plan for the Specific Plan area. (WEST) SUCCESSOR AGENCY TO THE TEMECULA REDEVELOPMENT AGENCY & AFFORDABLE HOUSING Town Square Marketplace: On January 13, 2015, City Council entered into an Exclusive Negotiating Agreement (ENA) with Truax Development (Truax) to negotiate the disposition and development of the two, currently Successor Agency owned, vacant lots in front of the Civic Center, flanking the Town Square Park on the north and south sides of Main Street. On June 23, 2015, City Council extended the term of the ENA for an additional six months. While both Truax Development and the City have been negotiating in good faith, the complexities of the project require the ENA be extended to allow for the completion of additional work. A Disposition and Development Agreement was approved by City Council on December 13, 2016. (WATSON) Affordable Housing RFP: The Supportive Housing Subcommittee, formerly Council Members Naggar and Washington, directed staff to issue an RFP to solicit project proposals from interested developers for the construction of an affordable housing development. In late 2015, the Successor Agency obtained clearance from the Department of Finance on the remaining affordable housing dollars that had been previously "frozen" within the Affordable Housing Fund, gaining discretion on $12.4 million of affordable housing funds. In conjunction with the current Supportive Housing Subcommittee, now consisting of Mayor Naggar and Council Member McCracken, staff issued an RFP to solicit development proposals that address one or more of the following housing needs: seniors, veterans, special needs, transitional, or supportive. The RFP includes potential City -owned parcels that can be considered for development, but proposals will not be limited to City -owned properties. Uptown Temecula is also encouraged with the recently adopted Specific Plan. Projects are encouraged to integrate a mix of uses, as well as market -rate units into projects. The City received 20 proposals from interested developers. Keyser Marston Associates, who assisted in the development of the pro forma templates utilized in the RFP, assisted staff in the review and analysis of the proposals. Staff will present the proposals to the Supportive Housing Subcommittee in early 2017 before scheduling interviews with potential developers. KMA will also prepare interview questions and participate in the developer interviews. (WATSON, LEHNER) Recognized Obligation Payment Schedule: As part of the ongoing wind -down of the former Temecula Redevelopment Agency, the Successor Agency (SARDA) is required to complete a Recognized Obligation Payment Schedule (ROPS) outlining the financial and debt obligations of the former Redevelopment Agency. Based on the outstanding obligations that are due, SARDA makes requests from the Property Tax Trust Fund to make the appropriate payments. On January 24, 2017, the 2017-18 ROPS will be brought before the SARDA Executive Board for approval, and subsequently to the SARDA Oversight Board prior to the state deadline of February 1, 2017. (WATSON, LEHNER) Affordable Housing Overlay and Density Bonus Ordinance: The City Council adopted the 2014- 2021 General Plan Housing Element Update on January 28, 2014, and the City received certification from the State Department of Housing and Community Development (HCD) on March 10, 2014. A project processing schedule has been prepared for the Affordable Housing Overlay and Density Bonus Ordinances as required by Programs 1 and 4 of the Housing Element. The Code Amendment will also encompass land use updates as required by Program 3. The project is in the initial planning phase. Staff is currently conducting research and anticipates completing the ordinance for adoption in 2017. (WEST) COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) CDBG Consolidated Plan and Assessment of Fair Housing: Every five years, the City, as an Entitlement City, is required to prepare an updated Consolidated Plan (ConPlan) and Assessment of Fair Housing (AFH). The ConPlan and AFH process is designed to help local jurisdictions assess their affordable housing and community development needs. The City entered into an agreement with MDG Associates on January 26, 2016 for preparation of the ConPlan. Three public workshops were held in conjunction with this process — two on June 29, 2016, and a third on July 30, 2016. A survey was created to assess resident and stakeholder input regarding fair housing. The public had the opportunity to review the AFH for 30 days from August 27 through September 27, 2016. The City Council approved the Assessment of Fair Housing on September 27, and it was submitted to HUD for review on October 3. The Consolidated Plan is due to HUD May 17, 2017 and becomes effective July 1, 2017 and will cover through June 30, 2022. (LEHNER) CDBG Administration: The City will receive $515,688 in CDBG grant funding for Fiscal Year 2016-17. City Council approved the Annual Action Plan on April 26, 2016 and staff submitted the plan to HUD. Funding will be allocated as detailed below. (LEHNER) CDBG Public Service Programs Organization Program Name Recommendation Fair Housing Council Comprehensive Fair Housing Program $16,810 Assistance League of Temecula Valley Operation School Bell $8,283 Safe Alternatives for Everyone (SAFE) Creating Safe Families $8,283 Senior Citizens Service Center Emergency Food/Temp. Assistance $8,283 VNW Circle of Care Circle of Care Food Ministry $8,283 I TEAM Evangelical Assistance Ministries Temecula Community Pantry $8,283 Community Mission of Hope Inclement Weather Shelter $8,283 1 Michelle's Place Breast Health Assistance Program $8,283 Canine Support Teams, Inc. Service Dogs for the Disabled $2,556 1 Subtotal Public Service Program Funds Recommended $77,350 CDBG Housing Activities and Public Facilities Projects Organization Program Name Recommendation Habitat for Humanity Inland Valley Critical Home Maintenance and Repairs $25,000 1 City of Temecula Sam Hicks Monument Park Playground $64,681 City of Temecula Rotary Park Rehabilitation $25,000 l City of Temecula Old Town Sidewalk Rehabilitation $220,520 City of Temecula Temecula Community Center Rehab backup I Subtotal Public Facilities and Housing Activities Funds Recommended $335,201 CDBG Administrative Costs City of Temecula Administration $103,137 Subtotal Administration Costs Recommended $103,137 TOTAL 2016-17 CDBG RECOMMENDED ALLOCATION $515,688 The City anticipates receiving approximately $515,000 in CDBG grant funding for Fiscal Year 2017-18. Staff held two community and technical workshops for applicants on November 30, 2016. The application period for the 2017-18 fiscal year was open from November 16 through December 15, 2016. Staff reviewed 14 applications for public service providers and four for capital improvement projects. Staff will present the applications to the Finance Subcommittee for recommendations in February 2017. ENERGY & CONSERVATION Temecula Energy Efficiency Management (TEEM) Fund: The TEEM Fund is a self-sustaining fund that utilizes rebate incentives while also re -directing annual utility cost savings from energy efficiency projects into the fund. City Council established the fund in June 2013, with an initial deposit of $119,728.90 in SCE and SCG rebates. As energy efficiency projects are completed, rebates are deposited into the fund for future energy efficiency project. (WEST) Western Riverside Energy Leadership Partnership: This Partnership, consisting of eleven Western Riverside Council of Government (WRCOG) member cities, Southern California Edison (SCE), and Southern California Gas (SCG), provides incentives for participants to develop energy efficiency programs. Staff is currently working with NRG EV Services to install an electric vehicle charging station in the 6th Street Parking Lot. The charging station will complement the existing charging stations in the 6th Street Parking Lot and the Civic Center Parking Garage, by adding fast charging capabilities allowing drivers to add 50 miles of range in 15 minutes. (WEST) Solid Waste and Recycling Program: Staff manages the City's Solid Waste and Recycling Agreement with CR&R and acts as a liaison between the City, CR&R, and their customers. City staff and CR&R coordinate two Citywide Clean-up events each year for residents to dispose of household waste and Targe miscellaneous items that do not fit into the standard residential trash receptacle. The Fall Citywide Clean-up was held on October 29, 2016 at Chaparral High School. Staff also assists with outreach for the Riverside County Mobile Household Hazardous Waste Collection events and the Backyard Composting Workshops. The next Riverside County Mobile Household Hazardous Waste Collection event will be in early 2017. (WEST) BUILDING & SAFETY Building and Safety statistics for November and December 2016 are highlighted below. Building and Safety Statistics — November & December 2016 Permits 411 Single Family Residential Units 4 Photovoltaic 101 Tenant Improvements 35 Non Construction C of 0 51 Inspections 1,696 Inspections Per Day 80.76 Inspections Per Person Per Day 20.19 Visitors to Counter 772 New Commercial/Tenant Improvements Nestle Toll House — 40820 Winchester Road Blaze Pizza — 32240 Temecula Parkway Vineyard Veterinary- 30680 Rancho California Road Non -Construction Certificate of Occupancy Y Not Mexican & Seafood — 41413 Margarita Road Fred Finch Youth Center (CARES. Inc.) — 28991 Old Town Front Street CODE ENFORCEMENT During the months of November & December, Code Enforcement responded to 99 web complaints. In addition, the division opened 103 code cases and forwarded 40 referrals to Public Works, Police, Animal Control, and Fire. Code Enforcement assisted 45 people at the Community Development Counter. Detailed Code Enforcement case activity can be found in the following chart: Type of Code Case Total Abandoned or Inoperable Vehicle 9 Vacant Home / Property Maintenance / Rodent/ Mold 13 Business or Home Occupation w/o license/CUP 10 Trash and Debris / Dumping 8 Overgrown Vegetation / Weeds / Fire Hazard 8 Green Pool / Vector Control 3 Graffiti 6 Noise/Nuisance/Animal Control 0 Trailer / RV Stored/Boat/Parking 9 Construction w/o Permit/Building Code 11 Encroach Public ROW / Trash Cans 10 Other / Homeless Encampment 1 Signs Pulled - Violations 4 Public Safety & Health 11 Total Number of Cases 103 Foreclosure Tracking: Code Enforcement works with the local real estate community to monitor foreclosures, defaults and real estate owned properties. The following charts demonstrate the past six months of activities in Temecula. Residential Foreclosure Tracking July August September October November December 2016 2016 2016 2016 2016 2016 DEFAULT 80 82 74 81 85 80 FORECLOSED 63 64 56 60 63 67 REO 62 61 61 61 55 78 TOTALS 205 207 191 202 203 225 Commercial Foreclosure Tracking ATTACHMENT: Current Planning Activity Report July August September October November December 2016 2016 2016 2016 2016 2016 DEFAULT 0 0 0 0 0 0 FORECLOSED 0 0 0 0 0 0 REO 11 12 12 13 13 13 TOTALS 12 12 11 12 13 13 ATTACHMENT: Current Planning Activity Report PLANNING ACTIVITY REPORT Assigned Planner PA Number Project Name APN Apply Date Approval Date Applicant Company Name Business Phone Owner Status PA16-1486 955-492-005 Jaime Cardenas 11/01/2016 11/29/2016 Adam Skumawitz Case Title / Description: Football Proper Inc (Home Occupation) (951) 326-9117 Approved PA16-1491 916-511-005 Jaime Cardenas 11/02/2016 Nicolas Nunez GAYLE SORENSEN Case Title / Description: NRN Holdings Inc (Home Occupation) Plan Review PA16-1492 910-300-018 Jaime Cardenas 11/02/2016 Case Title / Description: Palm Plaza Trash MOD: A Minor Modification (Planning Review Only) to install a new trash enclosure at the Palm Plaza shopping center (near the former Alley Store) located at 26495 Ynez Road Nikki Fowler KIMCO PALM Plan Review PLAZA PA16-1493 921-680-031 Brandon Rabidou 11/02/2016 Ann Mowry George Galanoudes Case Title / Description: Pinot Palette CUP: A Minor Conditional Use Permit to operate a paint and sip art studio (with a Type -42 On -Sale Beer and Wine License) for Pinot Palette located at 41789 Nicole Lane B6 Hearing PA16-1497 921-810-013 Jaime Cardenas 11/02/2016 11/25/2016 Vincent Alipranti Case Title / Description: Costco Tree TUP: A Temporary Use Permit for Costco to operate a Christmas Tree store on the existing property located at 26610 Ynez Road (from 11/27/16 - 12/18/16 from 9:30 a m-9:00pm) (951) 719-2003 COSTCO Approved PA16-1498 960-223-003 Jaime Cardenas 11/02/2016 11/02/2016 Lawrence (Larry) Furie Case Title / Description: Fast and Furies Motorsports (Home Occupation) (951) 302-7250 Approved PA16-1501 922-150-019 Jaime Cardenas 11/03/2016 11/03/2016 Marvin Morton Case Title / Description: Morton Realty (Home Occupation) (951) 775-4780 ANDRES Approved RODRIGUEZ PA16-1502 945-140-005 Scott Cooper 11/03/2016 12/12/2016 Fred Connary Fred Connary Approved Case Title / Description: Connary Lot EOT #2: The second (one year) Extension of Time for a Tentative Parcel Map No 33488 (PA06-0245) to allow for the subdivision of a 5 5 acre lot into two lots with a minimum net lot size of 2 5 acres located at 30876 Lolita Road Page 1 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1503 921-310-025 Brandon Rabidou 11/03/2016 11/21/2016 Dean Hinson Case Title / Description: Lyndie Cell Site Mod: A Minor Modification (Planning Review Only) to relocate the existing transformer and switch gear for the existing cellular site located at 42101 Moraga Road First Baptist Approved Church of Temecula PA16-1506 960-020-063 Jaime Cardenas 11/04/2016 11/14/2016 Alejandra Gonzalez Case Title / Description: Vail Ranch Plaza Zoning Letter: a Zoning Letter for the property known as Vail Ranch Plaza located at 32389 Temecula Parkway (APN: 960-020-063 -065: -070 -071) (330) 915-2443 INLAND Completed WESTERN TEMECULA VAI L PA16-1509 910-281-001 Jaime Cardenas 11/04/2016 11/18/2016 Adrian Troncoso Case Title / Description: Ynez Site ADA Modification (Planning Review Only): a Minor Modification application (Planning Review Only) to allow for re -striping for a proposed ADA path of travel, new striping and concrete pavement reconstruction to the parking lot for the property located at 26201 Ynez Road (949) 660-9128 SR Approved Commercial PA16-1510 954-261-030 Jaime Cardenas 11/04/2016 11/04/2016 Edgardo Balanza Approved Jr Case Title / Description: Coach Edgar Balanza Jr. Services (Home Occupation) PA16-1511 Jaime Cardenas 11/04/2016 11/04/2016 Jason Ednoff Case Title / Description: Southern Outdoor Services (Home Occupation) (951) 206-4631 Approved PA16-1514 916-671-009 Jaime Cardenas 11/07/2016 11/07/2016 Yvonne Holk Approved Case Title / Description: Fit for Fun (Home Occupation) PA16-1518 955-225-031 Scott Cooper 11/08/2016 12/20/2016 Rigoberto ERLENE Approved Cancelada GARDINER Case Title / Description: A C A Janitorial Service (Home Occupation) PA16-1520 916-490-002 Jaime Cardenas 11/09/2016 11/30/2016 MICHAEL DUNN Case Title / Description: Dunn Remodel Mod: A Minor Modification (Planning Review Only) to install a 252 SF back porch and deck to an existing residence located at 40339 Bellevue Dr Scott Hall Approved PA16-1524 962-242-010 Scott Cooper 11/09/2016 11/14/2016 Steven White Approved Case Title / Description: Eklund Room Addition MOD: A minor modification (planning review only) for a 130 square foot room addition/garage conversion located at 32483 Corte Zaragoza Page 2 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1527 921-810-010 Jaime Cardenas 11/09/2016 Richard Clemente Case Title / Description: Flantastic (Home Occupation) Plan Review PA16-1529 966-180-031 Jaime Cardenas 11/10/2016 Case Title / Description: Universal Auto Dealers (Home Occupation) Venus Khestoo Plan Review PA16-1531 961-203-001 Brandon Rabidou 11/10/2016 11/14/2016 Robert Wehe Approved Case Title / Description: Western Business Systems (Home Occupation) PA16-1532 910-310-007 Brandon Rabidou 11/10/2016 Case Title / Description: Staybridge Suites DP: A Development Plan for a 90 832 square foot 4 -story 125 room Staybridge Suites hotel located at 27500 Jefferson Avenue Don Cape (702) 385-4988 J & G Gosch Out PA16-1534 955-141-005 Jaime Cardenas 11/10/2016 11/22/2016 Matthew Armeni Approved Case Title / Description: Matthew Armeni (Home Occupation) PA16-1536 921-730-022 Brandon Rabidou 11/14/2016 12/19/2016 Gary Walker Case Title / Description: Gosch Ford Mod: A Minor Modification to the existing Gosch Ford to update the exterior elevations and add an entry facade at 28701 Ynez Road MEG INV Approved PA16-1537 944-060-006 Brandon Rabidou 11/14/2016 Mohamad (323) 874-8000 MIRA LOMA Plan Review Younes RECOVERY LLC Case Title / Description: Rancho Vista Village Landscape & QUIMBY: A Planning Application for landscape tracking purposes and QUIMBY fee payment (original approval under PA13-0217/PA16-1410) PA16-1538 966-180-031 Jaime Cardenas 11/14/2016 Case Title / Description: Universal Auto Dealers (Home Occupation) Venus Khestoo Plan Review PA16-1541 957-721-014 Jaime Cardenas 11/14/2016 11/14/2016 Rodrigo De Leon Approved Case Title / Description: Rod Handcraft (Home Occupation) PA16-1542 960-052-015 Jaime Cardenas 11/14/2016 11/14/2016 Andrea Corona MIGUEL Approved LOPEZ Case Title / Description: AC Creations (Home Occupation) PA16-1544 944-321-002 Jaime Cardenas 11/15/2016 11/15/2016 Marichit Banaag Approved Case Title / Description: Mary Banaag (Home Occupation) Page 3 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1546 919-230-018 Brandon Rabidou 11/16/2016 Mark Christensen Case Title / Description: Kolopzi/Zick Lot Line Adjustment: A lot line adjustment to add approximately 1,400 square feet to Parcel B (919-230-003/31020 Via Norte) from Parcel A (919-230-018/30989 Calle Fuente) (951) 676-5012 DAVID Plan Review BURKETT PA16-1547 921-040-018 Jaime Cardenas 11/16/2016 12/07/2016 Arthur Alvarez (951) 676-5967 Carlos Alvarez Approved Case Title / Description: Refuge Brewery 4th Anniversary - A Minor Temporary Use Permit to allow for live entertainment indoors and a food truck on December 17. 2016 from the hours of 5:30 p m through 10 p m The project is located at 43040 Rancho Way Suite 200 PA16-1549 962-270-014 Jaime Cardenas 11/17/2016 Case Title / Description: Tour D' Wine (Home Occupation) Shawn Temple Plan Review PA16-1550 940-310-030 Scott Cooper 11/17/2016 Case Title / Description: 43500 Ridge Park Drive MOD: A Major Modification for the construction of a 19.536 square foot parking deck including a bridge that connects the second floor of the parking structure to the building The project is located at 43500 Ridge Park Drive Pam Danoff (714) 504-3444 M & A Plan Review PA16-1551 959-321-031 Jaime Cardenas 11/17/2016 11/30/2016 Kyle Dasher Approved Case Title / Description: Pro Glass Works (Home Occupation) PA16-1552 960-300-003 Jaime Cardenas 11/17/2016 11/22/2016 Brock Hicks Approved Case Title / Description: RJ Lock (Home Occupation) PA16-1553 960-010-044 Eric Jones 11/17/2016 12/29/2016 Jerry Tessier Case Title / Description: Vail Ranch Headquarters Minor Modification (Planning Review Only): A Minor Modification (Planning Review Only) to allow Vail Ranch Headquarters to make exterior elevation modifications to a recently constructed two-story commercial structure Modifications include the removal of a display window addition of doors at the rear, and removal of a canvas awning The project is located at 32127 Temecula Parkway (909) 994-5904 VAIL Approved HEADQUARTE RS PA16-1556 909-370-036 Jaime Cardenas 11/18/2016 Donna Williams Case Title / Description: 42375 Remington Zoning Letter (LI); a request for a zoning verification letter for the property at 42375 Remington Avenue (APN 909-370-036) (951) 430-1235 5670 Plan Review TEMECULA PA16-1557 954-302-001 Jaime Cardenas 11/18/2016 11/29/2016 Sierra Buchanan Case Title / Description: Flirt Beauty Bar (Home Occupation) (951) 234-9332 Approved Page 4 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1559 959-080-033 Scott Cooper 11/18/2016 Bridge Housing Bridge Housing (949) 622-5510 Summerhouse Plan Review Corporation Corporation Housing 3 L P Case Title / Description: Madera Vista formerly Summerhouse III Quimby Fee Collection PA16-1562 962-020-011 Jaime Cardenas 11/18/2016 12/02/2016 Patricia Bell Case Title / Description: GOALS Bingo License Renewal: A Bingo License renewal to continue the operation of bingo games for the Great Oak Academic Leadership Society at 32555 Deer Hollow Way (Great Oak High School) The events will be on 12/3/16 3/4/17 and 5/6/17 (951) 553-5119 Approved PA16-1563 921-523-031 Jaime Cardenas 11/18/2016 Louie Vega (951) 491-9987 Philip Delgado Plan Review Case Title / Description: Margo Home Expansion MOD: A Minor Modification (Planning Review Only) for a 785 square foot attached living area consisting of a kitchenette a bedroom, bathroom and family room to an existing 1200 square foot house located at 42037 Humber Drive PA16-1572 960-020-046 Scott Cooper 11/22/2016 12/02/2016 Richard Finkel Case Title / Description: Vail Ranch Carwash MOD: A Minor Modification (Planning Review Only) to modify the approved elevations (PA15-1572) of the carwash building (714) 850-7575 Grady Approved Hanshaw PA16-1573 965-410-003 Jaime Cardenas 11/22/2016 01/10/2017 Rose Corona Case Title / Description: Big Horse Pumpkin and Harvest Festival Major Temporary Use Permit: A Major Temporary Use Permit to allow a Harvest festival to be located on the north east corner of Temecula Parkway and Butterfield Stage Road The festival will feature pumpkin picking corn maze; car show and a 5K run The event will be held September 28th through October 29th 2017 from 1 pm to 6 pm Weekend hours will be from 10 am to 5 pm (909) 208-7848 Corona Family Approved LTD Partnership PA16-1576 965-351-020 Jaime Cardenas 11/22/2016 Case Title / Description: Dedfish Surf Company (Home Occupation) Dennis Iverson Plan Review PA16-1577 916-411-050 Jaime Cardenas 11/22/2016 11/22/2016 Cynthia Lanham Approved Case Title / Description: Inland Metal Trading (Home Occupation) PA16-1578 909-270-013 Eric Jones 11/22/2016 ZaherAbou (858) 717-2710 41890 Enterprise Circle Case Title / Description: Zarka's Cigar Lounge Minor Modification: A Minor Modification to allow for an outdoor patio The project is located on the southwest corner of Winchester Road and Enterprise Circle South at 41890 Enterprise Circle South Out Page 5 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1579 909-270-013 Eric Jones 11/22/2016 ZaherAbou (858) 717-2710 41890 Enterprise Circle Case Title / Description: Zarka's Cigar Lounge Minor Conditional Use Permit: A Minor Conditional Use Permit to allow an existing cigar lounge to be relocated to 41890 Enterprise Circle South Related application PA16-1578 Out PA16-1585 921-020-043 Brandon Rabidou 11/23/2016 01/06/2017 Warren Tong (714) 838-8981 International Approved Rectifier Co Case Title / Description: Rancho California Business Park MOD: A 2 23 acre square foot drought tolerant landscape Minor Modification (Planning Review Only) for Rancho California Business Park Association PA16-1594 Scott Cooper 11/28/2016 01/03/2017 Arvin Norouzi Case Title / Description: Verizon Chaparral MOD: A Minor Modification for Verizon to replace an existing 50' wood pole with new 60' wood pole, replacement of existing 8' double cross arms with new 12' double composite cross arms remove existing (6) 48" panel antennas and replace with (6) new 72" panel antennas and other equipment The project is located within the public right-of-way (818) 653-1393 Approved PA16-1596 910-271-004 Jaime Cardenas 11/29/2016 01/11/2017 Wayne Bosley Jr Approved Case Title / Description: Bozman LLC - DBA Choices (Home Occupation) PA16-1597 959-292-013 Jaime Cardenas 11/29/2016 12/08/2016 Sheri Chamney Approved Case Title / Description: Paws n Claws Pet Sitting in Your Home (Home Occupation) PA16-1602 Jaime Cardenas 11/30/2016 11/30/2016 Saori Spencer Approved Case Title / Description: Signal Processing Solutions (Home Occupation) PA16-1604 922-190-012 Jaime Cardenas 11/30/2016 12/01/2016 Leah Faddis Approved Case Title / Description: Leah Marie Photography (Home Occupation) PA16-1605 922-190-012 Jaime Cardenas 11/30/2016 12/01/2016 Daniel Faddis Case Title / Description: Captured Photo Booths (Home Occupation) (951) 303-8503 Approved PA16-1606 918-323-006 Jaime Cardenas 12/01/2016 12/01/2016 Heather Impson Approved Case Title / Description: Sweetart Cooke Co (Home Occupation) PA16-1610 921-614-032 Jaime Cardenas 12/01/2016 12/15/2016 Jacob Corirossi OSMAN Approved SOYKUT Case Title / Description: Universal Weddings and Events (Home Occupation) Page 6 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1611 921-290-004 Dale West 12/01/2016 01/05/2017 Daniel Mawyin Case Title / Description: DCM Services (Home Occupation) for Handyman Services (951) 476-9620 Approved PA16-1615 921-020-051 Scott Cooper 12/02/2016 12/13/2016 Nouri Nahoraof Case Title / Description: 28820 Single Oak MOD: A Minor Modification (Planning Review Only) for the installation of a 575 square -foot outdoor storage enclosure located at 28820 Single Oak Drive CHEMICON Approved INTERNATION AL INC PA16-1616 922-062-029 Eric Jones Case Title / Description: Baked (Home Occupation) 12/02/2016 12/02/2016 Eyohnna (951) 383-0488 AMCAL PUJOL Approved Jimerson FUND PA16-1621 957-733-008 Jaime Cardenas 12/05/2016 12/06/2016 Terry DeArmond (909) 730-0509 BARBARA Plan Review JARVIS Case Title l Description: Jarvis Residence Minor Exception: a Minor Exception to allow for the the 4' setback reduction for an outdoor California Room located at 31517 Sweetwater Circle PA16-1622 919-332-007 Jaime Cardenas 12/05/2016 12/05/2016 CAROL KRAUSE (951) 294-2043 RONALD (Ron) Approved KRAUSE Case Title / Description: Innovative Landscapes, Inc (Home Occupation) PA16-1623 921-680-031 Brandon Rabidou 12/05/2016 Ann Mowry George Galanoudes Case Title / Description: Pinot's Palette PC or N: A Public Finding of Convenience or Necessity application for Pinot's Palette to operate at 41789 Nicole Lane, Suite B Hearing PA16-1624 962-142-030 Jaime Cardenas 12/05/2016 12/05/2016 Rebecca Ek Approved Case Title /Description: FHL Entertainment (Home Occupation) PA16-1625 960-082-025 Jaime Cardenas 12/05/2016 01/05/2017 Sean Van Wyk Case Title /Description: Kilroy Plumbing Heating & Air Inc (Home Occupation) (951) 837-0288 Approved PA16-1628 Jaime Cardenas 12/06/2016 12/06/2016 LaShun Williams Approved Case Title / Description: Essence of Amore (Home Occupation) PA16-1629 921-400-064 Jaime Cardenas 12/06/2016 Case Title / Description: Mobile to You, LLC (Home Occupation) Kenneth Kindt Cancelled Page 7 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1632 916-440-006 Jaime Cardenas 12/06/2016 12/06/2016 Adriana Vazquez Approved Case Title / Description: Sandys Fun Farm Events (Home Occupation) PA16-1633 909-240-015 Jaime Cardenas 12/06/2016 Case Title / Description: Massage Establishment Renewal - Paradise Foot Massage Center Chunjing Wang (951) 506-0603 Hilbert Group Plan Review PA16-1634 922-130-016 Scott Cooper 12/06/2016 Case Title / Description: Reliance Church Modification: A modification for Reliance Church to relocate buildings and parking and revise the architecture on the classroom/office buildings from the previously approved plans (PA15-0583) The project is located at 29825 Santiago Road Brian Gridley (951) 742-7179 Reliance Plan Review Church PA16-1636 961-320-038 Jaime Cardenas 12/06/2016 12/12/2016 Wei Li Case Title / Description: USA Express (Home Occupation) (267) 470-4171 Approved PA16-1637 965-100-027 Jaime Cardenas 12/07/2016 12/07/2016 Kelly Chrisman Approved Case Title / Description: Courtroom Presentations Inc (Home Occupation) PA16-1639 921-280-001 Scott Cooper 12/07/2016 12/12/2016 Whitney Morgan DONALD Approved MANDERSCH EID Case Title / Description: Ballast Point Sign Program Amendment: An amendment to the Ballast Point Sign Program #133 to add a 43 square foot non illuminated sign on the north building elevation The project is located at 28551 Rancho California Road PA16-1647 957-540-011 Jaime Cardenas 12/09/2016 12/09/2016 KIMBERLY Approved LOCKHART Case Title / Description: Lockhart Assistant Services (Home Occupation) PA16-1648 910-470-015 Jaime Cardenas 12/09/2016 12/19/2016 Kim Dunn Case Title / Description: Power Center Zoning Letter (SP -7): a zoning verification letter for the properties with assessor's parcel numbers 910-470-001 -002, -003 -004 -005: -006 -014 -015 (405) 415-5027 Inland Western Completed Temecula Commons LLC PA16-1649 916-641-031 Brandon Rabidou 12/09/2016 12/20/2016 Sheena Adams (808) 639-3341 CHAD ADAMS Approved Case Title / Description: Lularoe Sheena Adams ( Home Occupation ) Page 8 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1650 916-361-003 Jaime Cardenas 12/09/2016 12/27/2016 RUBEN Approved MORALES Case Title l Description: SC Global Advisors (Home Occupation) PA16-1651 922-120-011 Brandon Rabidou 12/08/2016 Case Title 1 Description: Shooters PC or N: A finding of Public Convenience or Necessity for Shooters Sports Bar and Grill to obtain a Type 47 (On -Sale General) alcohol license for the existing billiard hall located at 28950 Old Town Front Street William (Bill) Alden (951) 255-1116 Edwin Manske Cancelled PA16-1652 957-751-025 Jaime Cardenas 12/12/2016 12/12/2016 MELISSA WHITE Approved Case Title / Description: Melissa Joy Designs (Home Occupation) PA16-1654 960-020-058 Jaime Cardenas 12/12/2016 Matee (562) 277-6386 ORIGO REAL Plan Review Suksunpantep ESTATE INV FUND Case Title / Description: MC Thai Massage Massage Establishment Renewal: A Massage Establishment Renewal for MC Thai Massage located at 32467 Temecula Parkway, Suite F101 PA16-1656 916-480-040 Jaime Cardenas 12/12/2016 12/12/2016 Jessica McIntosh Case Title / Description: Lessons in Literature (Home Occupation) (951) 219-8434 Approved PA16-1657 921-060-006 Eric Jones 12/12/2016 Dave Jenkins (951) 694-0595 UPTOWN Hearing TEMECULA AUTO SPA Case Title / Description: Uptown Auto Spa Major Modification: A Major Modification application to allow revisions to a recently approved car wash generally located at the northwest corner of Jefferson Avenue and Del Rio Road at 28111 Jefferson Avenue PA16-1659 960-020-026 Brandon Rabidou 12/12/2016 Case Title / Description: Redhawk Car Wash Building MOD: A Minor Modification Planning (Planning Review Only) to alter the colors on the existing Redhawk Car Wash Building located at 44260 Apis Road Rick Alnagar (619) 729-2003 Naythan Plan Review Properties LLC PA16-1660 944-290-029 Eric Jones 12/12/2016 12/29/2016 Vicky Phillips (951) 296-3466 HIGHGATE Approved ext 202 TEMECULA Case Title / Description: Highgate Senior Living Minor Modification (Planning Review Only): A Minor Modification to allow architectural revisions to the interior courtyard of the recently approved Highgate Senior Living Page 9 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1661 921-720-001 Brandon Rabidou 12/13/2016 12/20/2016 Joseph Marca Case Title / Description: DCH Chrysler/Dodge/Jeep/Ram/Fiat Mod: A Minor Modification (Planning Review Only) to approve minor exterior changes to a previously approved Modification for DCH Chrysler/Dodge/Jeep/Ram/Fiat located (PA15-1898) at 26845 Ynez Road (760) 743-4109 DCH ext 214 Investments Inc Approved PA16-1665 961-350-003 Jaime Cardenas 12/13/2016 12/13/2016 Matthew Lordanich Case Title / Description: Pure Performance Pools (Home Occupation) (714) 943-6376 Approved PA16-1668 961-350-003 Jaime Cardenas 12/14/2016 12/14/2016 Matthew Case Title / Description: Pure Performance Pools (Home Occupation) (714) 943-6376 Michael Approved Lordanich Lordanich PA16-1672 921-433-003 Jaime Cardenas 12/15/2016 12/30/2016 Samuel (Sam) Balian Case Title / Description: True Line Painting (Home Occupation) (951) 699-3132 Approved PA16-1675 966-160-008 Dale West 12/15/2016 12/15/2016 AHMAD FARID Approved ALAM Case Title / Description: Unlock Army Wholesale Yousofzay,. Inc (Home Occupation) PA16-1676 955-141-022 Jaime Cardenas 12/15/2016 12/15/2016 MEISHAA Approved LEWIS Case Title / Description: Meisha Ann Lewis (Home Occupation) PA16-1682 957-213-032 Jaime Cardenas 12/16/2016 Walt Eden Case Title / Description: 40156 Calle Medusa Room Addition MOD: A Minor Modification (Planning Review Only) for a 646 square foot room addition at 40156 Calle Medusa (949) 874-9170 Walt Eden Plan Review PA16-1684 909-270-013 Jaime Cardenas 12/19/2016 Case Title / Description: Ann Sauna Massage Establishment Renewal Permit: A Massage Establishment Renewal permit for Ann Sauna located at 41892 Enterprise Circle South, Suite F Jum Park (951) 440-2305 41890 Enterprise Circle Plan Review PA16-1687 954-140-030 Jaime Cardenas 12/19/2016 01/05/2017 Paul Turnbull Case Title / Description: Turnbull Exhaust Hood Service (Home Occupation) (951) 219-1984 Approved Page 10 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1689 921-070-024 Jaime Cardenas 12/20/2016 12/22/2016 Caroline Hoelzle Senior Golden Years Case Title / Description: Senior Golden Years Bingo License: a Bingo License renewal to continue the operation of bingo games for Seniors Golden Years at 41845 6th Street (Mary Phillips Senior Center) Bingo games will be played 2-4 times per month (see statement of operations) City of Temecula Plan Review PA16-1694 909-370-045 Jaime Cardenas 12/21/2016 01/06/2017 Dean Nathan Case Title / Description: NufactorADA Ramp: A Minor Modification (Planning Review only) for NuFactor to add an exterior concrete ramp for ADA compliance, replace two exterior windows with doors to match existing and relocating a light pole to accommodate ramp (858) 500-4618 Medline Approved Industries Inc PA16-1698 959-153-015 Matt Peters 12/22/2016 Lena Hoffmeyer Aspectus (714) 608-5052 Paseo Del Sol Plan Review Master Assn Case Title / Description: A Conditional Use Permit for Crown Castle to install a 40' high concrete street light pole as part of its wireless distributed antenna system (DAS) Master Plan (Node TM -08M3) in the City of Temecula right-of-way at the intersection of Jerez Lane on west side of Modena Drive PA16-1701 921-270-054 Brandon Rabidou 12/22/2016 12/23/2016 SFC SFC (949) 553-8566 Heritage Approved Communications Communications Partners Inc Inc Case Title / Description: Sprint MOD: A Minor Modification (Planning Review Only) to an existing Sprint site to install three (3) new antennas and RRUs at 27555 Ynez Road PA16-1702 959-112-002 Jaime Cardenas 12/22/2016 12/22/2016 MICHAEL DAUL Approved Case Title / Description: Michael Daul Photography (Home Occupation) PA16-1703 921-050-012 Jaime Cardenas 12/22/2016 Mingkun Gao Case Title / Description: Sunny Spa Massage Permit Renewal: A Massage Establishment Permit renewal for Sunny SPa located at 27911 Jefferson Ave (Suite 102) (951) 676-7169 PETAR Plan Review MAROVIC PA16-1704 921-400-024 Jaime Cardenas 12/22/2016 Case Title / Description: Relax Spa Massage Permit: A Massage Establishment Permit for Relax Spa located at 29711 Jefferson Ave Mingkun Gao (951) 676-7169 JEFFERSON Plan Review CAPITAL PA16-1705 921-551-010 Jaime Cardenas 12/22/2016 12/22/2016 Thouma Graham Approved Case Title / Description: Sengoku Solar LLC (Home Occupation) PA16-1707 955-225-021 Jaime Cardenas 12/27/2016 12/27/2016 Mahmood Rjoub Kelly Manriquez Case Title / Description: Conscious Coconuts (Home Occupation) Approved Page 11 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PA16-1723 962-440-013 Jaime Cardenas 12/28/2016 01/05/2017 Vance Harksen Approved Case Title / Description: Vance Harksen Tile (Home Occupation) PA16-1725 909-252-002 Jaime Cardenas 12/29/2016 01/04/2017 Doris Hess (818) 439-9539 Christie Prop Approved Case Title / Description: Relentless Brewing 2017 Series TUP: a Major Temporary Use Permit to allow for Relentless Brewing Company to conduct six (6) events during the 2017 calendar year The events will be single day events scheduled on 1/28/17, 6/24/17, 7/29/17, 8/26/17, 9/24/17, and 10/8/17 The site is located at 42030 Avenida Alvarado PA16-1726 960-030-042 Jaime Cardenas 12/29/2016 Leann Sumner Case Title / Description: Massage Envy Massage Establishment: A renewal for Massage Envy located at 32909 Temecula Parkway (Suite 105) to operate a massage establishment (951) 551-6186 Vail Prop Plan Review PA16-1729 921-260-022 Scott Cooper 12/29/2016 Case Title / Description: Sonmelzer Building MOD: A Minor Modification (Planning Review Only) to add an exterior door and rooftop mechanical screening located at 27423 Ynez Road Jon Egan (909) 549-4712 SONMEZLER Out LLC PA16-1731 966-200-033 Jaime Cardenas 12/29/2016 12/29/2016 Reba Marabotto Case Title / Description: Mehe'ula Music Productions (Home Occupations) (951) 553-8279 Approved PA16-1732 961-454-077 Scott Cooper 12/29/2016 12/29/2016 Maurice Watkins Approved Case Title / Description: Intangibly Qualified Real Estate & Property Management (Home Occupation) PA16-1734 944-290-007 Jaime Cardenas 12/29/2016 Case Title / Description: Temecula Gardens Apartments MOD: A Minor Modification (Planning Review Only) to meet the Development Code for non-smoking units of a multifamily development located at 29485 Rancho California Road Scott Kelly (619) 792-2141 TEMECULA Plan Review TERRACES PA16-1738 957-340-030 Jaime Cardenas 12/30/2016 Case Title / Description: Rench Workshop Minor Mod (Planning Review Only): A Minor Modification (Planning Review Only) to allow a workshop to be constructed on a custom home lot located at 39330 Kimberly Lane William Rench William Rench Plan Review P REAP P 16-1528 961-440-010 Scott Cooper 11/10/2016 Case Title / Description: Pechanga Square Pre -app: A pre -application for Pechanga Square that includes a convenience store, gas station, and retail store located off of the southwest corner of Temecula Parkway and Pechanga Parkway Greg Hann (951) 809-7601 Void Page 12 of 13 Assigned Planner Approval Business PA Number Project Name APN Apply Date Date Applicant Company Name Phone Owner Status PREAPP16-1575 961-410-010 Brandon Rabidou 11/22/2016 12/08/2016 Tom Utman Case Title / Description: Fast 5 Xpress Car Wash Pre -app: A Pre -Application for the construction of a single story express car was at 30679 Temecula Parkway (949) 640-6420 Completed PREAPP 16-1643 959-080-026 Scott Cooper 12/08/2016 12/22/2016 Andrew Van Loy Case Title / Description: TVH Trailer Pre -App: A pre -application for a temporary job trailer to accommodate construction of hospital expansion at 31700 Temecula Parkway (760) 745-8118 Temecula Completed ext 231 Valley Hospital PREAPP16-1644 959-080-026 Scott Cooper 12/08/2016 12/22/2016 Andrew Van Loy Case Title / Description: TVH CT Trailer Pre -App: A pre -application for a temporary trailer for hospital imaging equipment at Temecula Valley Hospital located at 31700 Temecula Parkway (760) 745-8118 Temecula Completed ext 231 Valley Hospital PREAPP16-1674 922-190-033 Scott Cooper 12/15/2016 01/05/2017 Matthew Fagan Case Title / Description: Parkway Medical Plaza Pre -App: A Pre -Application for a new 34426 square foot; two-story medical office building (APN: 922-190-033) (951) 265-5428 Completed Page 13 of 13 Item No. 22 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Charlie DeHart, Fire Chief/Fire Marshall DATE: January 24, 2017 SUBJECT: Fire Department Monthly Report PREPARED BY: Wendy Miller, Administrative Assistant RECOMMENDATION: That the City Council receive and file the Fire Department Monthly Report. Riverside County Fire Department/ CAL FIRE Emergency Incident Statistics John R. Hawkins Fire Chief 1/3/2017 Report Provided By: Riverside County Fire Department Communications and Technology Division GIS Section Please refer to Map and Incident by Battalion, Station, Jurisdiction Incidents Reported for the month of December,2016 and Temecula City Page 1 of 6 *Incidents are shown based on the primary response area for the incident location. This does not represent total response times for all units only the first unit in. Response Activity Incidents Reported for the month of December,2016 and Temecula City • Com Fire 1 0.1% False Alarm 88 10.6% • Haz Mat 5 0.6% • Medical 585 70.6% • Multi-FamDaelling Fire 1 0.1% Other Fire 2 0.2% • Other Misc 4 0.5% • Public Service Assist 40 4.8% • Res Fire 1 0.1% • Standby 4 0.5% • Traffic Collision 91 11.0 Vehicle Fire 7 0.8% Total: 829 100.0% Com Fire 1 False Alarm 88 Haz Mat 5 Medical 585 Multi-Fam Dwelling Fire 1 Other Fire 2 Other Misc 4 Public Service Assist 40 Res Fire 1 Standby 4 Traffic Collision 91 Vehicle Fire 7 Incident Total: Average Enroute to Onscene Time* Enroute Time = When a unit has been acknowledged as responding. Onscene Time = When a unit has been acknowledge as being on scene. For any other statistic outside Enroute to Onscene please contact the IT Help Desk at 951-940-6900 829 <5 Minutes +5 Minutes +10 Minutes +20 Minutes Average % 0 to 5 min 586 178 13 4 4.1 75.0% The following incidents are included in the total number of records but not in the average time HZM, HZMMC, OAC, OAF, OAM, OAMAD, OAMAI, OAMTE, OAMVA, OAP, OAR, OAV, OUT, OOU, LEB, LEO, LEI, BRNPMT, OES, PAA, PAD, PAF, PAO, PAP, HFS, HFSAM, HFSCA, HSBT, HSBTC, HSBTS, HSBTV, HSE, HSG Last Updated 1/3/2017 3:1 Page 2 of 6 *Incidents are shown based on the primary response area for the incident location. This does not represent total response times for all units only the first unit in. Incidents by Battalion, Station and Jurisdiction Com False Haz Mat Medical Multi -Fa Other Other Public Res Standby Traffic Vehicle Fire Alarm m Fire Misc Service Fire Collisio Fire Total Station 12 Temecula Station 73 Rancho California Station 83 French Valley Station 84 Parkview Station 92 Wolf Creek Temecula Station Total 23 1 90 29 157 23 1 90 29 Temecula 0 33 0 187 0 1 2 12 1 1 35 1 Station Total 33 0 187 0 1 2 12 1 1 35 Temecula 0 0 0 6 0 1 0 0 0 0 0 0 Station Total Temecula 0 16 2 179 0 0 2 10 0 1 14 2 Station Total 16 2 179 0 0 2 10 0 1 14 Temecula 0 16 2 123 0 0 0 10 0 1 13 1 Station Total Battalion Total 1 Grand Total 1 Last Updated 1/3/2017 3:1 16 123 10 13 157 273 273 7 7 226 226 166 166 88 5 585 1 2 4 40 1 4 91 7 829 88 5 585 1 2 4 40 1 4 91 7 829 *Incidents are shown based on the primary response area for the incident location. This does not represent total response times for all units only the first unit in. Page 3 of 6 Incidents by Jurisdiction emecula Com Fire False Haz Mat Medical Multi -Fa Other Other Public Res Fire Standby Traffic Vehicle Alarm m Fire Misc Service Collision Fire Grand Total Last Updated 1/3/2017 3:1 88 5 585 1 2 4 40 1 4 91 7 *Incidents are shown based on the primary response area for the incident location. This does not represent total response times for all units only the first unit in. Page 4 of 6 Incidents by Supervisorial District - Summary DISTRICT 3 CHUCK Grand Total 1 1 88 88 5 5 585 585 1 1 2 2 4 4 40 40 1 1 4 4 91 91 7 7 Total 829 829 Com Fire False Alarm Haz Mat Medical Multi-Fam Dwelling Fire Other Fire Other Misc Public Service Assist Res Fire Standby Traffic Collision Vehicle Fire Last Updated 1/3/2017 3:1 *Incidents are shown based on the primary response area for the incident location. This does not represent total response times for all units only the first unit in. Page 5 of 6 MONTH = 12 and YEAR = 2016 and CITYNAME = 'Temecula' 0 0 0: 0 0 0 rra-' r.:. I 0 Tt=VF.E?i1LA. 'r'. Z4 r ink yrs . I`- 00 w Statiun73 0 C'''';'.'",1 ° 1 n 0 0 0 0 Oy '400- 4". w tIII1k'l LB'hai 0 5-_ 00 0 ▪ 0 O O . Ci 0_ 00 - 0 x.047 _ v 0 0 0 I.J or 6, 0 :1:: , L).0, 0 0 Rah un12 41 ,h+ Steitiun&# o ii 0 At 0 it 0 _ .% 14 0 00 0 0 a- a crcro VI,ay r 0� 0 0 r r.-4 Suck Mese 0 n \P A U R A VALLEY 0 f0 0 Hr- k0 0 LO 0 a 0 0 00 0) 0 a0 0 0 0- r LtStrskiun92 PECHANGACASINO AND RV LJ� St9tiun02 wy V 0 /;; Legend O Fie ti ? Haz Mat ' Medical Last Updated 1/3/2017 3:1 Other M is c p Public Servi ce Ass ists 0 Hazard //// Rivers ide County Reservations Fie Station Casinos Riversid e C aunty Fire GIS "Incidents are shown based on the primary response area for the incident location. This does not represent total response times for all units only the first unit in. Page 6 of 6 2016 City of Temecula Fire Department Emergency Response and Training Totals PUBLIC SAFETY CLASS TOTALS 2016 Class Totals Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total CPR/AED 20 16 31 19 43 38 70 51 39 25 27 0 379 FIRST AID 7 0 12 0 22 11 76 42 13 0 8 0 191 PEDIATRIC FIRST AID 0 0 0 0 0 0 0 0 0 0 0 0 0 HCP 0 0 0 0 0 0 30 21 0 0 0 0 51 STAFF HCP 3 0 0 0 0 0 0 0 0 0 0 0 3 CERT 0 0 0 36 0 0 0 0 0 27 0 0 63 TEEN CERT 0 0 28 0 0 0 0 0 43 0 0 0 71 Total 30 16 71 55 65 49 176 114 95 52 35 0 758 ** 153 additional contacts were made at a CERT event in which sidewalk CPR was taught. INCIDENT/RESPONSE TOTALS FOR THE CITY OF TEMECULA 2016 Incident Response Totals Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total COMMERCIAL FIRE 0 2 0 2 0 0 0 2 1 0 2 1 10 FALSE ALARM 75 59 52 69 58 83 48 49 81 82 82 88 826 HAZ MAT 6 3 1 1 3 5 6 2 4 2 4 5 42 MEDICAL AID 463 479 434 467 513 453 513 504 500 515 520 585 5946 MUTI FAMILY DWELLING 0 0 1 0 0 0 1 2 0 0 0 1 5 OTHER FIRE 13 6 8 12 2 9 12 2 9 2 4 1 80 OTHER MISC. 0 1 3 1 2 3 1 2 3 1 2 4 23 PSA 33 21 32 44 48 41 38 39 40 33 33 40 442 RINGING ALARM 1 1 1 1 1 0 2 0 2 1 2 1 13 RESIDENTIAL FIRE 3 1 1 0 0 0 2 0 2 3 1 0 13 RESCUE 0 0 2 0 1 0 0 0 0 1 1 1 6 STANDBY 12 10 6 9 4 19 10 12 7 13 13 4 119 TRAFFIC COLLISSION 83 90 78 74 66 80 69 81 99 86 97 91 994 VEHICLE FIRE 1 1 1 0 0 2 4 2 2 2 3 7 25 WILDLAND FIRE 3 1 1 1 4 7 2 2 1 3 2 0 27 Total 693 675 621 681 702 702 708 699 751 744 766 829 8571 FIRE DEPARTMENT TOTAL CALL COMPARISON 2015 vs. 2016 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 F r{'riW.ri'. gPg1- z Ps v- ��Q�Q OHO �OJ� Oc P O Oo 0 201 YTD 0 201 YTD MONTH 2015 YTD 2016 YTD JANUARY 660 693 FEBRUARY 584 675 MARCH 640 621 APRIL 678 681 MAY 714 702 JUNE 626 702 JULY 614 708 AUGUST 646 699 SEPTEMBER 679 751 OCTOBER 677 744 NOVEMBER 677 766 DECEMBER 684 829 TOTAL TO DATE 7879 8571 FIRE DEPARTMENT CLASS TOTAL COMPARISON 1800 1600 1400 1200 1000 800 600 400 200 2015 vs. 2016 P, J4%Z- 4\%Z - ,<<<' Q 4 PQ J`' 5) J PJ ■ 2015 YTD y�Q ■2016 YTD 'b�P «Q 43- � .s s MONTH 2015 YTD 2016 YTD JANUARY 180 30 FEBRUARY 111 16 MARCH 78 71 APRIL 583 55 MAY 38 65 JUNE 79 49 JULY 128 176 AUGUST 208 114 SEPTEMBER 68 95 OCTOBER 99 52 NOVEMBER 56 35 DECEMBER 0 0 TOTAL TO DATE 1628 758 Ant Fire Department Temecula Battalion Fire Stations- Public Education Reporting Month: December Reporting Stations: 12, 73, 84, 92 Reporting Year: 2016 PR and Public Education Programs: Total Number of Events for Reporting Month Event Type Total Number of Hours Number of Public Contacts: 0 School Event 0 0 Adult Education 0 0 0 0 Fair/Safety Expo 0 0 1 Display 3.5 100 4 Station Tour 4 68 0 Fire Safety Trailer 0 0 1 Other 4 20 Field Inspections: Total Number of Initial Field Inspections for Reporting Month 0 LE -100's (Weed Total Number of LE -100 Inspections for Reporting Month Abatement) 0 Total Number of Re -inspections for Reporting Month 0 Prevention Total Number of Fire Prevention Referrals for Reporting Month Referrals: 2 Significant Events: Provide a brief synopsis of significant TC's, Fires, Near Drowning's, Road Closures etc... Include photos if available. Fire Explorer end of year event: FAE Anne Marie Miller Firefighter of the year for the city. Engine 12 attended a display event for the Winter Wonderland event and had over a 100 contacts. Item No. 23 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Jeffrey Kubel, Chief of Police DATE: January 24, 2017 SUBJECT: Police Department Monthly Report PREPARED BY: Joseph Greco, Sergeant RECOMMENDATION: Receive and file. The following report reflects the activity of the Temecula Police Department for the month of November 2016. PATROL SERVICES Overall calls for police service 3,152 "Priority One" calls for service 50 Average response time for "Priority One" calls 7.99 Minutes VOLUNTEERS Volunteer administration hours 155 Special Events hours 93 Community Action Patrol (CAP) hours 736 Reserve officer hours (patrol) 37 Training hours 50 Total Volunteer hours 925 CRIME PREVENTION Crime prevention workshops/Neighborhood watch meetings conducted 0/1 Safety presentations/Training 0/0 Special events 0 Residential/Business security surveys conducted 0/0 Businesses visited 0 Residences/Businesses visited for past crime follow-up 0/3 Station Tour 1 Planning Review Projects/Temp Outdoor Use Permits 1/2 Sq. Footage of Graffiti Removed 1,261 OLD TOWN STOREFRONT Total customers served 208 Sets of fingerprints taken 48 Police reports filed 3 Citations signed off 32 Total receipts $2,641 SPECIAL TEAMS (POP / SET) On sight felony arrests 9 On sight misdemeanor arrests 7 Felony arrest warrants served 4 Misdemeanor arrest warrants served 5 Follow-up investigations 13 Parole/Probation Searches 0/11 Pedestrian Checks 27 Traffic Stops/Vehicle Checks 14 Crime Free Housing Checks 105 TRAFFIC Citations issued for hazardous violations 766 Grant funded D.U.I. / Traffic safety checkpoints 1 Grant funded traffic click it or ticket 0 D.U.I. Arrests 15 Non -hazardous citations 290 Stop Light Abuse/Intersection Program (S.L.A.P.) citations 38 Neighborhood Enforcement Team (N.E.T.) citations 77 Parking citations 179 School Zone 34 Seatbelts 12 Cell Phone Cites 47 Injury collisions 40 INVESTIGATIONS Beginning Caseload 272 Total Cases Assigned 31 Total Cases Closed 34 Search Warrants Served 4 Arrests 2 Out of Custody Filings 9 PROMENADE MALL TEAM Calls for service 526 Felony arrest/filings 4 Misdemeanor arrest/filings 8 Traffic Citations 19 Fingerprints/Livescans 193 Total receipts $6,740 SCHOOL RESOURCE OFFICERS Felony arrests 1 Misdemeanor arrests 9 Reports 16 Youth counseled 131 Meetings 60 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Jeffrey Kubel, Chief of Police DATE: January 24, 2017 SUBJECT: Police Department Monthly Report PREPARED BY: Joseph Greco, Sergeant RECOMMENDATION: Receive and file. The following report reflects the activity of the Temecula Police Department for the month of December 2016. PATROL SERVICES Overall calls for police service 3,268 "Priority One" calls for service 62 Average response time for "Priority One" calls 6.12 Minutes VOLUNTEERS Volunteer administration hours 184 Special Events hours 142 Community Action Patrol (CAP) hours 662 Reserve officer hours (patrol) 66 Training hours 10 Total Volunteer hours 819 CRIME PREVENTION Crime prevention workshops/Neighborhood watch meetings conducted 0/0 Safety presentations/Training 0/0 Special events 0 Residential/Business security surveys conducted 0/0 Businesses visited 0 Residences/Businesses visited for past crime follow-up 1/1 Station Tour 2 Planning Review Projects/Temp Outdoor Use Permits 1/2 Sq. Footage of Graffiti Removed 1,436 OLD TOWN STOREFRONT Total customers served 215 Sets of fingerprints taken 68 Police reports filed 9 Citations signed off 23 Total receipts $2,467 SPECIAL TEAMS (POP / SET) On sight felony arrests 13 On sight misdemeanor arrests 7 Felony arrest warrants served 2 Misdemeanor arrest warrants served 11 Follow-up investigations 8 Parole/Probation Searches 0/12 Pedestrian Checks 16 Traffic Stops/Vehicle Checks 80 Crime Free Housing Checks 49 TRAFFIC Citations issued for hazardous violations 928 Grant funded D.U.I. / Traffic safety checkpoints 0 Grant funded traffic click it or ticket 0 D.U.I. Arrests 24 Non -hazardous citations 273 Stop Light Abuse/Intersection Program (S.L.A.P.) citations 31 Neighborhood Enforcement Team (N.E.T.) citations 95 Parking citations 211 School Zone 23 Seatbelts 22 Cell Phone Cites 43 Injury collisions 33 INVESTIGATIONS Beginning Caseload 269 Total Cases Assigned 65 Total Cases Closed 46 Search Warrants Served 6 Arrests 3 Out of Custody Filings 7 PROMENADE MALL TEAM Calls for service 1033 Felony arrest/filings 7 Misdemeanor arrest/filings 19 Traffic Citations 98 Fingerprints/Livescans 207 Total receipts $8,645 SCHOOL RESOURCE OFFICERS Felony arrests 1 Misdemeanor arrests 5 Reports 11 Youth counseled 83 Meetings 50 Item No. 24 Approvals City Attorney Finance Director City Manager CITY OF TEMECULA AGENDA REPORT TO: City Manager/City Council FROM: Patrick Thomas, Interim Public Works Director DATE: January 24, 2017 SUBJECT: Public Works Department Monthly Report RECOMMENDATION: Receive and file the Public Works Department Monthly Report for Capital Improvement Projects, Maintenance Projects, and Land Development Projects. City of TemecuCa DEPARTMENT OF PUBLIC WORKS PROJECT STATUS REPORT JANUARY 24, 2017 PROJECT NAME BRIEF DESCRIPTION TOTAL PROJECT COST ESTIMATED/CURRENT MILESTONES CAPITAL IMPROVEMENT PROJECTS CIRCULATION PROJECTS Citywide Slurry Seal for Arterial Streets Slurry arterial streets (Winchester, Jefferson, and Temecula Parkway) with the goal to prolong their useful life and avoid much more costly roadway rehabilitation measures $658,750 • On June 14, 2016, City Council awarded a Construction Contract to Pavement Coatings Co. • Traffic Control Plans are under review Interstate -15 / State Route 79 South Ultimate Interchange, PW04-08 Construction of ramp system that will improve access to Interstate 15 from Temecula Parkway / State Route 79 South $50,646,479 • On November 15, 2016, City Council approved a Construction Management Agreement with Falcon Engineering Services, Inc. and a Construction Engineering Support Agreement to Michael Baker International, Inc. • On November 15, 2016, City Council approved the Plans and Specifications and authorized solicitation of construction bids • Bid Opening is scheduled for January 24, 2017 Overland Drive Extension (Commerce Center Drive to West of Enterprise Circle) Design and construction of the extension of Overland Drive from Commerce Center Drive to Murrieta Creek, just west of Enterprise Circle West $8,423,347 • On December 16, 2016, City Council approved Plans and Specifications, and authorized solicitation of construction bids Pavement Rehabilitation Program — Margarita Road Rehabilitation of Margarita Road from Rancho California Road to Temecula Parkway $3,700,000 • On January 24, 2017, City Council will consider the approval of Plans and Specifications, and authorize solicitation construction bids Pechanga Parkway Widening, PW15-14 WideningServices of Pechanga Parkway between Via Gilberto to North Casino Drive $5,000,000 • City Council approved a Professional Agreement for the Design and the Environmental Document at their meeting on April 26, 2016 • Completion of Design Plans is anticipated in Spring 2017 City of Temecula DEPARTMENT OF PUBLIC WORKS PROJECT STATUS REPORT JANUARY 24, 2017 PROJECT NAME BRIEF DESCRIPTION TOTAL PROJECT COST ESTIMATED/CURRENT MILESTONES CAPITAL IMPROVEMENT PROJECTS (continued) CIRCULATION PROJECTS Winchester Road at Roripaugh Road Signal Provides for the design and construction of modifications by providing designated left run movements from Roripaugh Road onto Winchester Road $92,000 • On June 14, 2016, City Council awarded a Construction Contract to Los Angeles Traffic Signal Transportation • Construction is currently underway • Anticipate completion by end of January 2017 INFRASTRUCTURE PROJECTS Citywide Sidewalks - Ynez Road Sidewalk, PW15-12 Construct a six-foot wide sidewalk and various adjustments to existing landscape and irrigation, and facilities to accommodate the sidewalk located on the east side of Ynez Road from Pauba Road to Portraits Lane $750,000 • A bid opening was held on November 28, 2016 • On December 13, 2016, City Council awarded a Construction Contract to L.C. Paving & Seal, Inc. in the amount of $464,462 • Anticipate construction will begin the first part of February 2017 Old Town Sidewalks Improvement Project, PW15-06 Will provide walking surfaces for pedestrians $360,000 • On October 25,2016, City Council approved the Plans and Specifications, and authorized solicitation of construction bids Temecula Park and Ride, PW06-09 Design and construction of a park and ride facility in the vicinity of Temecula Parkway and La Paz Street $2,764,093 • Project is suspended pending negotiations with the surety company PARKS & RECREATION PROJECTS: Sam Hicks Monument Park Playground Enhancement, PW12-20 Design and construct a new innovative play area to replace the existing equipment $648,888 • Notice to Proceed with Design and Fabrication was issued on June 9, 2015 • On December 13, 2016, City Council rejected all bids and authorized Public Works to re -bid the project for construction bids • Anticipate completion of design plans January 2017 City of T'emecuCa DEPARTMENT OF PUBLIC WORKS PROJECT STATUS REPORT JANUARY 24, 2017 PROJECT NAME BRIEF DESCRIPTION TOTAL PROJECT COST ESTIMATED/CURRENT MILESTONES MISCELLANEOUS Citywide Concrete Repairs Fiscal Year 2016-17, PW16-04 Removing and replacing various concrete street and park improvements including, but not limited to curb and gutter, sidewalk sections, drive approaches, undersidewalk drains, cross gutters, spandrels and ADA ramps, with all necessary traffic control $245,000 • Bid Opening was held on January 17, 2017 Murrieta Creek Flood Control Project, Phase 2 This project is for flood control and environmental restoration and is a U.S. Army Corps of Engineers and Riverside County Flood Control and Water Conservation District project N/A • Construction continues with the placement of soil cement walls PROJECT NAME BRIEF DESCRIPTION ESTIMATED/CURRENT MILESTONES LAND DEVELOPMENT PROJECTS Islamic Center Located on Nicolas Road • Paving was complete during the week of January 9, 2017 • Grind and overlay is anticipate to occur in February 2017 Gas Line Repairs Located at Vail Elementary School on Mira Loma Dr. • Gas line repairs and repaving anticipated to begin at the end of January 2017 City of T'emecuCa DEPARTMENT OF PUBLIC WORKS PROJECT STATUS REPORT JANUARY 24, 2017 PROJECT NAME BRIEF DESCRIPTION TOTAL PROJECT COST ESTIMATED / CURRENT MILESTONES MAINTENANCE PROJECTS Playground Equipment Enhancement and Safety Surfacing Replace aging play structures and associated safety surfacing (Nicolas Park, Veterans Park, Sunset Park, and Vail Ranch Park) $275,000 • Responses to the Request for Qualifications are being reviewed • Anticipate project completion by July 2017 Pennypickle's Workshop Roof Replacement Project Replace both sloped roof and wood shingle roof areas at the Museum $200,000 • Roof consultant is preparing specifications for bid • Anticipate project completion by December 2017 Community Recreation Center and City Library Joint Seal Caulk all concrete driveway and walkway joints at both facilities $14,300 • Anticipate project completion by March 2017 Temecula Elementary School Pool Heater Replace 12 -year old pool heater with a new high efficient, low NOx heater $41,000 • Anticipate project completion by March 2017 Old Town Sound System Upgrade speakers at intersections $4,800 • Anticipate project completion by February 2017 Sports Lighting Re -tamping Lifecycle replacement of Musco sports lighting lamps at Pat Birdsall Sports Park (soccer field #2), and Ronald Regan north/south fields $8,050 • Anticipate project completion by February 2017 Smart Irrigation Controller Conversion Replace the remaining 80 outdated irrigation controllers to weather -based smart controller with rain sensor $125,000 • Partially funded by SoCal WaterSmart Rebates • Pending final rebate approval • Anticipate project completion by April 2017 REQUESTS TO SPEAK City Council Meeting 01/24/17 REQUEST TO SPEAK CITY OF TEMECULA Date: ! 2 4/ I wish to speak on: r9" --Public Comment CITY COUNCIL / CSD / SARDA / THA / TPFA (Circle One) Subject: Agenda Item No. For Against Request to Speak forms for Public Comments or items listed on the Consent Calendar must be submitted to the City Clerk prior to the City Council commencing the Public Comment period. For all Public Hearing or Council Business items on the Agenda, a Request to Speak form must be submitted to the City Clerk prior to the City Council addressing that item. The City Clerk will call your name when the matter comes up. Please go to the podium and state your name for the record. Name: Qr Gr1eCj' Address: Phone Number: If you Iare representing an organization or group,ro/please give the name: �i 0Fe u'r'n e,- In (eft aY'EJI Please note that all information presented at a City Council meeting becomes public record. All information provided is optional.