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HomeMy WebLinkAbout2005-11-15; City Council; NS-777; Community Facilities District No. 3...1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 1 ORDINANCE NO. NS-777 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 3 AUTHORIZING THE LEVY OF A SPECIAL TAX IN IMPROVEMENT AREA 1 AND IMPROVEMENT AREA 2 OF SUCH COMMUNITY FACILITIES DISTRICT WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD, CALIFORNIA (the “City Council”), has initiated proceedings, held a public hearing, conducted an election and received a favorable vote from the qualified electors authorizing the levy of separate special taxes in separate improvement areas of a community facilities district, all as authorized pursuant to the terms and provisions of the “Mello-Roos Community Facilities Act of 1982”, being Chapter 2.5, Part 1. Division 2, Title 5 of the Government Code of the State of California (the “Act”). This Community Facilities District is designated as COMMUNITY FACILITIES DISTRICT NO. 3 (the “District”) and the improvement areas therein are designated as IMPROVEMENT AREA 1 and IMPROVEMENT AREA 2 (individually, an “Improvement Area” and collectively, the “Improvement Areas”). THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 3, DOES HEREBY ORDAIN AS FOLLOWS: 1. This City Council does, by the passage of this ordinance, authorize (a) the levy of special taxes on taxable properties located in Improvement Area 1 pursuant to the Rate and Method of Apportionment of Special Taxes as set forth in Exhibit “A attached hereto and incorporated herein by this reference (the “Improvement Area 1 Rate and Method”) and (b) the levy of special taxes on taxable properties located in Improvement Area 2 pursuant to the Rate and Method of Apportionment of Special Taxes as set forth in Exhibit “B attached hereto and incorporated herein by this reference (the “Improvement Area 2 Rate and Method”). 2. This City Council, acting as the legislative body of the District, is hereby further authorized, by Resolution, to annually determine the special tax to be levied within Improvement .? I 2 3 4 5 6 7 8 9 IO 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Area 1 and Improvement Area 2 for the then current tax year or future tax years; provided, however, the special tax to be levied in Improvement Area 1 shall not exceed the maximum special tax authorized to be levied pursuant to the Improvement Area 1 Rate and Method and the special tax to be levied in Improvement Area 2 shall not exceed the maximum special tax authorized to be levied pursuant to the Improvement Area 2 Rate and Method. 3. The special taxes herein authorized to be levied within the Improvement Areas, to the extent possible, shall be collected in the same manner as ad valorem property taxes and shall be subject to the same penalties, procedure, sale and lien priority in any case of delinquency as applicable for ad valorem taxes; provided, however, the District may utilize a direct billing procedure for any special taxes that cannot be collected on the County tax roll or may, by resolution, elect to collect the special taxes at a different time or in a different manner if necessary to meet its financial obligations. 4. The special taxes authorized to be levied in each Improvement Area shall be secured by the lien imposed pursuant to Sections 3114.5 and 3115.5 of the Streets and Highways Code of the State of California, which lien shall be a continuing lien and shall secure each levy of the special tax. The lien of the special tax shall continue in force and effect until the special tax obligation is prepaid, permanently satisfied and canceled in accordance with Section 53344 of the Government Code of the State of California or until the special tax ceases to be levied by the City Council in the manner provided in Section 53330.5 of said Government Code. 5. This Ordinance shall be effective thirty (30) days after its adoption. Within fifteen (15) days after its adoption, the City Clerk shall cause this Ordinance to be published in a newspaper of general circulation in the City pursuant to the provisions of Government Code Section 36933. Ill 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 INTRODUCED AND FIRST READ at a regular meeting of the Carlsbad City Council held on the 8th ,dayof November 2005, and thereafter PASSED AND ADOPTED at a regular meeting of said City Council held on the 15th day of November , 2005, by the following vote: AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES: None ABSENT: None ABSTAIN: None APPROVED AS TO FORM AND LEGALITY: l/-tL - 0 f RONALD R. BALL, City Attorney CLAUDE A. LEWIS, Mayor ATTEST: LORRAINE M. WOOD, City Clerk (SEAL) 4 EXHIBIT A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX COMMUNITY FACILITIES DISTRICT NO. 3 IMPROVEMENT AREA 1 OF THE CITY OF CARLSBAD A Special Tax shall be levied and collected in Improvement Area 1 ("IA 1 ") of Community Facilities District No. 3 (the "CFD No. 3") of the City of Carlsbad each Fiscal Year, in an amount determined by the City Council of the City of Carlsbad acting in its capacity as the legislative body of CFD No. 3 through the application of the procedures described below. All of the real property in IA 1 , unless exempted by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms used herein shall have the following meanings: "Acquisition Agreement" means that certain Acquisitioflinancing Agreement pursuant to which public improvements, authorized to be financed by CFD No. 3, are acquired by the City from the proceeds of Bonds or Special Taxes, as such agreement may be modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Acreage" or "Acre" of an Assessor's Parcel means (i) prior to the recordation of a Final Subdivision Map that acreage shown on the Assessor's Parcel Map for each such Assessor's Parcel less the acreage, as shown on a tentative map or similar land use entitlement approved by the City, to be owned by, irrevocably offered or dedicated to, or for which an easement for purposes of public right-of-way or other public purpose will be granted to the federal government, the State of California, the County, the City, or any local government or other public agency or designated with specific boundaries and acreage as open space and (ii) after recordation of a Final Subdivision Map that acreage shown on or determined from the applicable Final Subdivision Map for each such Assessor's Parcel. For Condominiums, the Acreage applicable to each Condominium shall be determined by allocating the acreage of the underlying lot on which the Condominiums are or are to be constructed in proportion to each such Condominium's building square footage. "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 following actual or reasonably estimated costs directly related to the administration of IA 1, including, but not limited to, the costs of IA 1 of CFD No. 3 Page 1 of 11 EXHIBIT A computing the Special Taxes and of preparing the annual Special Tax collection schedules; the costs of collecting the Special Taxes; the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; the costs of the City, or designee thereof, in complying with the disclosure requirements of applicable federal and state securities laws and of the Act, including public inquiries regarding the Special Taxes, the costs associated with the release of funds from any escrow account (to the extent not paid from other sources). "Annual Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C and escalated in accordance with Section D that can be levied by the Council in any Fiscal Year on any Assessor's Parcel. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel number. "Bonds" means any bonds or other debt (as defined in the Act), whether in one or more series, secured by the levy of Special Taxes within IA 1. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of Special Taxes. "CFD No. 3" or "District" means Community Facilities District No. 3 of the City of Car 1 s bad. "City" means the City of Carlsbad, California. "Condominium" means a separate interest or 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. "Council" means the City Council of the City, acting as the legislative body of CFD No. 3. "County" means the County of San Diego, California. "Developable Property" means all Taxable Property, exclusive of Final Map Property. "Exempt Property" means all property located within the boundaries of IA 1 that is exempt from the Special Tax pursuant Section F below. IA 1 of CFD No. 3 Page 2 of 11 EXHIBIT A "Final Map Property" means all Taxable Property included within a Final Subdivision Map which is approved by City Council prior to March 1 of each Fiscal Year. "Final Subdivision Map" means a subdivision of property created by recordation of a final map or parcel map approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.), a lot line adjustment or recordation of a 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. "IA 1" or "Improvement Area 1" means Improvement Area No. 1 of the District. "Improvement" or "Improvements" means an improvement or improvements authorized to be acquired by the City pursuant to the terms and conditions of the Acquisition Agreement. "Improvement Costs" means the estimated cost to construct the Improvements as set forth in Exhibit B to the Acquisition Agreement. "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. "Index" means for the purpose of calculating the escalation ofthe Annual Maximum Special Tax each Fiscal Year, the lesser of (a) the annual percentage increase, if any, in the "Construction Cost Index for ENR 20 Cities" for the City of Los Angeles as published in the "Engineering News Record" for the twelve-month period ending with the month of March preceding each Fiscal Year or (b) 3%. "Open Space" means property within the boundaries of IA 1 which, prior to March 1' of the preceding Fiscal Year, (a) has been designated with specific boundaries and acreage on a tentative map or Final Subdivision Map as open space, (b) is classified by the County Assessor as open space by the County assigning a zero assessed value, (c) has been irrevocably offered for dedication as open space to the federal government, the State of California, the County, the City, or any other public agency or (d) is encumbered by an easement or other restriction required by the City limiting the use of such property to open space. "Public Property" means property within the boundaries of IA I which prior to March 1'' of the preceding Fiscal Year is owned by, irrevocably offered or dedicated by Final Subdivision Map or other recorded document, or for which an easement for purposes of IA 1 of CFD No. 3 Page 3 of 11 7 EXHIBIT A public right-of-way, habitat mitigation preserve, pedestrian trails or other public purpose has been granted to the federal government, the State of California, the County, the City, or any local government or other public agency. Notwithstanding the foregoing, the leasehold interest or other possessory interest granted by any public agency in property owned by such public agency,to a private entity or person shall be subject to taxation under Section 53340.1 of the Act and shall be classified as Taxable Property. "Special Tax" means the Special Tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property within a Zone to fund the Special Tax Requirement. "Special Tax Requirement" means: (a) that amount required in any Fiscal Year prior to the issuance of Bonds to: (1) pay the Administrative Expenses; and (2) pay directly for acquisition or construction of the aggregate Improvements in proportion to the allocation of the Improvement Costs to IA 1 specified in Appendix A attached hereto but only to the extent such costs are not expected to be funded with the proceeds of the Bonds; or (b) that amount required in any Fiscal Year after the issuance of Bonds to: (1) pay the Administrative Expenses, (2) pay debt service on any outstanding Bonds, (3) replenish any reserve funds attributable to IA 1 and established in connection with Bonds, (4) pay 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 Bonds), (5) pay directly for acquisition or construction of the Improvements of IA 1, but only to the extent such costs cannot be funded with the proceeds of Bonds, and (6) less available funds as directed under the Indenture. IA 1 of CFD No. 3 Page 4 of 11 EXHIBIT A Zone A Zone B “Taxable Property” means all property located within the boundaries of IA 1 that is not Exempt Property. $1 5,24 1 .OO $7,265 .OO “Zone” means either Zone A or Zone B. “Zone A” means that specific geographic area as depicted on the boundary map for CFD No. 3 and designated as Zone A. “Zone B” means that specific geographic area as depicted on the boundary map for CFD No. 3 and designated as Zone B. B. CLASSIFICATION OF PROPERTY Prior to the beginning of each Fiscal Year, all property within IA I shall be classified as either Taxable Property or Exempt Property. Taxable Property shall be further classified as Final Map Property or Developable Property. C. ANNUAL MAXIMUM SPECIAL TAX The Annual Maximum Special Tax per Acre for Fiscal Year 2005-2006 for all Taxable Property is shown in Table 1 below: Table 1 Annual Maximum Special Tax per Acre For Fiscal Year 2005-2006 D. ESCALATION OF THE ANNUAL MAXIMUM SPECIAL TAX Each Fiscal Year beginning Fiscal Year 2006-07, the Annual Maximum Special Tax shall escalate at the applicable Index. The escalation shall cease in the Fiscal Year following the earlier of (1) the completion of the construction and acquisition of all of the Improvements pursuant to the Acquisition Agreement or (2) the sale of the final series of Bonds. IA 1 of CFD No. 3 Page 5 of 11 EXHIBIT A E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX F. Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement. Prior to the issuance of Bonds, the Special Tax shall be levied only on Final Map Property, in equal percentages, as necessary to fund the Special Tax Requirement up to 100% of the applicable Annual Maximum Special Tax. After the issuance of Bonds, the Special Tax shall be levied on each Assessor’s Parcel of Taxable Property to fund the Special Tax Requirement as follows: First: The Special Tax shall be levied in equal percentages on each Assessor’s Parcel of Taxable Property, exclusive of Open Space Property and Public Property, up to 100% of the applicable Annual Maximum Special Tax; and Second: If additional Special Taxes are needed after the first step, the Special Tax shall be levied in equal percentages on each remaining Assessor’s Parcel of Taxable Property (i.e., Open Space Property and Public Property which is not exempt from the Special Tax), up to 100% of the applicable Annual Maximum Special Tax. EXEMPTIONS The CFD Administrator shall classify the following as Exempt Property: (i) Public Property, (ii) Open Space and (iii) Assessor Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement; provided however, that no such classification shall reduce the sum of all Taxable Property to less than 46.35 Acres for Zone A and 77.49 Acres for Zone B. Assessor‘s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the amounts stated above will be classified as Taxable Property and shall be taxed pursuant to Section E. Exempt status for purposes of this paragraph will be assigned by the CFD administrator in the chronological order in which property becomes Exempt Property. The Annual Maximum Special Tax obligation for any property which would be classified as Public Property upon its transfer or dedication to a public agency but which is classified as Taxable Property pursuant to the preceding paragraph shall be prepaid in full by the seller pursuant to Section J prior to the transfeddedication of such property to such public agency. Until the Annual Maximum Special Tax obligation for any such Public Property is prepaid, the property shall continue to be subject to the levy of the Special Tax as Taxable Property. If the use of an Assessor’s Parcel of previously classified Exempt Property changes so that such Assessor Parcel is no longer classified as Exempt Property as defined above, such Assessor Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property. IA 1 of CFD No. 3 Page 6 of I1 EXHIBIT A G. TERM The Special Tax may not be levied (a) longer than the tenth Fiscal Year following the final maturity of the last series of Bonds or (b) longer than is needed to pay the cost and incidental expenses of the construction of the Improvements, whichever is later. H. APPEALS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor’s Parcel is in error shall first consult with the CFD Administrator regarding such error. If following such consultation, the CFD Administrator determines that an error has occurred the CFD Administrator may amend the amount of the Special Tax levied on such Assessor’s Parcel. If following such consultation and action (if any by the CFD Administrator), the landowner or resident believes such error still exists, such person may file a written notice with the Finance Director of the City who shall establish, as part of the proceedings and administration of CFD No. 3, a special three-member Review/Appeal Committee. The Review/Appeal Committee may establish such procedures, as it deems necessary to undertake the review of any such appeal. The Review/Appeal Committee shall interpret this Rate and Method of Apportionment of Special Tax and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals, as herein specified. The decision of the Review/Appeal Committee shall be final and binding as to all persons. I. MANNER OF COLLECTION The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the CFD Administrator may directly bill the Special Tax, or may collect Special Taxes at a different time or in a different manner if necessary to meet the financial obligation of CFD No. 3 for IA 1 or as otherwise determined appropriate by the CFD Administrator. J. PREPAYMENT OF SPECIAL TAX 1. Prepayment in Full The Annual Maximum Special Tax for any Assessor’s Parcel may be prepaid and permanently satisfied as described herein, provided that a prepayment may be made IA 1 of CFD No. 3 Page 7 of 11 EXHIBIT A only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 1. An owner of an Assessor's Parcel intending to prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The "Prepayment" shall be an amount equal to the sum of (I) Principal, (2) Premium, (3) Defeasance, (4) Fees, and (5) Unfunded Improvements minus the Reserve Fund Credit, as such terms are defined as follows: "Principal" means the principal amount of Bonds to be redeemed from the proceeds of such Prepayment and equals the quotient derived by dividing (a) the applicable Annual Maximum Special Tax for the Assessor's Parcel intending to prepay by (b) the expected aggregate Annual Maximum Special Taxes for all Taxable Property within IA 1 (and excluding from (b) any Annual Maximum Special Taxes for Assessor's Parcels which have fully prepaid the Annual Maximum Special Tax), and multiplying the quotient by the portion of the principal amount of Bonds outstanding. "Premium" means an amount equal to the Principal multiplied by the applicable redemption premium, if any, for the Bonds established pursuant to the Indenture so redeemed with the proceeds of any such Prepayment. "Defeasance" means an amount equal to the amount needed to pay interest on the Principal to be redeemed until the earliest redemption date for the outstanding Bonds permitted under the Indenture less the amount of earnings estimated to be received from the reinvestment of the Prepayment and the Fees to such date. Credit shall also be given for any Special Tax heretofore paid and received by the City which has not yet been utilized to pay the Special Tax Requirement or which is remaining after having paid the Special Tax Requirement. "Fees" equal the fees and expenses of CFD No. 3 directly related to the Prepayment. "Unfunded Improvements" means an amount equal to the estimated cost of the unfunded Improvements authorized to be financed from the proceeds of the Bonds or Special Taxes allocable to the Assessor's Parcel for which the Prepayment is being calculated and is computed by multiplying the quotient calculated when determining Principal by the Improvement Costs allocable to IA 1 of CFD No. 3 Page 8 of 11 EXHIBIT A JA 1, as set forth in the Acquisition Agreement, less the estimated cost of any Improvements financed by previously issued Bonds or the proceeds of Special Taxes. Unfunded Improvements shall equal zero following the issuance of all of the Bonds. "Reserve Fund Credit" shall equal the lesser of (i) the expected reduction in the applicable reserve fund requirement (as defined in the Indenture), if any, following the redemption of Bonds from proceeds of the Prepayment or (ii) the amount derived by subtracting the new reserve fund requirement in effect after the redemption of Bonds 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 Reserve Fund Credit shall apply only when the Reserve Fund for the Bonds shall at least equal the Reserve Requirement as defined in the Indenture. The sum of the amounts calculated in the preceding steps shall be paid to CFD No. 3 and shall be used to pay and redeem Bonds in accordance with the Indenture and to pay the Fees. Upon the receipt of such Prepayment by CFD No. 3, the obligation to pay the Special Tax for such Assessor's Parcel shall be deemed to be permanently satisfied, the Special Tax shall not be levied thereafter on such Assessor's Parcel, and the CFD Administrator shall cause notice of cessation of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the Prepayment and receipt of proof of Special Tax payments made to the County used in the calculation of the Prepayment, if any. 2. Prepayment in Part The Annual Maximum Special Tax for any Assessor's Parcel may be prepaid in part as described herein, provided that such a partial prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 1. An owner of an Assessor's Parcel intending to partially prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall not@ such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The amount of the prepayment shall be computed pursuant to Section J.l above substituting the portion of the Annual Maximum Special Tax to be prepaid for the Annual Maximum Special Tax applicable to the Parcel when computing Principal. The Annual Maximum Special Tax to be prepaid must result in an amount of principal which is an even integral of the denomination of Bonds set forth in the Indenture. If necessary, the prepayment amount shall be rounded up in order to IA 1 of CFD No. 3 Page 9 of 11 EXHIBIT A equal an even integral of the denomination of Bonds. The CFD Administrator shall cause a notice of reduction of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the prepayment. Notwithstanding the foregoing, no prepayment shall be allowed unless the amount of Annual Maximum Special Taxes that may be levied in IA 1 pursuant to Section E of this Rate and Method of Apportionment of Special Tax after the proposed prepayment is at least the sum of (i) the estimated Administrative Expenses and (ii) one hundred ten percent (1 10%) of the maximum annual debt service for the Bonds, taking into account the Bonds to remain outstanding after such prepayment. IA 1 of CFD No. 3 Page 10 of 11 14 EXHIBIT A Cost of Issuance Refund of Formation Deposit Discount of 2% Reserve Fund Requirement(Est @ Max DS) Contingency I Rounding Principal Issued by Improvement Area: City of Carlsbad Community Facilities District No. 3 (FaradaylMelrose) Appendix A Prior to the sale of the Bonds based upon the cost estimates at this time, the following provides the construction cost allocation percentage of total funded which will k used to determine the Special Tax Requirement. $400,000 $500.000 $1 33,333 $66,667 $1,074,901 $1,629,075 $1,000 $3,814 $I 2,695,000 $19,240,000 $253,900 ~84,800 Construction Costs Allocation acilities Fund Requirement by Area Melrose Melrose South of PAR Federal Grant (Spread on percent of pad area) Palomar Airport Road PAR Turn Lane to Melrose South Faraday Zone A $5,498,088 provem Percent it Area 1 Zone B lmprovemer IA 2 $15,212,644 kea 2 Percent I $4,954,843 $226,716 ($3,000,000) $100.000 $15,956,550 $2,798.853 $900,000 $200,000 $638,700 $2,703,976 IA 1 of CFD No. 3 Page 11 of 11 EXHIBIT B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX COMMUNITY FACILITIES DISTRICT NO. 3 IMPROVEMENT AREA 2 OF THE CITY OF CARLSBAD A Special Tax shall be levied and collected in Improvement Area 2 ("IA 2") of Community Facilities District No. 3 (the "CFD No. 3") of the City of Carlsbad each Fiscal Year, in an amount determined by the City Council ofthe City of Carlsbad acting in its capacity as the legislative body of CFD No. 3 through the application of the procedures described below. All of the real property in IA 2, unless exempted by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms used herein shall have the following meanings: "Acquisition Agreement" means that certain AcquisitiodFinancing Agreement pursuant to which public improvements, authorized to be financed by CFD No. 3, are acquired by the City from the proceeds of Bonds or Special Taxes, as such agreement may be modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Acreage" or "Acre" of an Assessor's Parcel means (i) prior to the recordation of a Final Subdivision Map that acreage shown on the Assessor's Parcel Map for each such Assessor's Parcel less the acreage, as shown on a tentative map or similar land use entitlement approved by the City, to be owned by, irrevocably offered or dedicated to, or for which an easement for purposes of public right-of-way or other public purpose will be granted to the federal government, the State of California, the County, the City, or any local government or other public agency or designated with specific boundaries and acreage as open space and (ii) after recordation of a Final Subdivision Map that acreage shown on or determined from the applicable Final Subdivision Map for each such Assessor's Parcel. For Condominiums, the Acreage applicable to each Condominium shall be determined by allocating the acreage of the underlying lot on which the Condominiums are or are to be constructed in proportion to each such Condominium's building square footage. "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 following actual or reasonably estimated costs directly related to the administration of IA 2, including, but not limited to, the costs of IA 2 of CFD No. 3 Page 1 of 10 EXHIBIT B computing the Special Taxes and of preparing the annual Special Tax collection schedules; the costs of collecting the Special Taxes; the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; the costs of the City, or designee thereof, in complying with the disclosure requirements of applicable federal and state securities laws and of the Act, including public inquiries regarding the Special Taxes, the costs associated with the release of funds from any escrow account (to the extent not paid from other sources). "Annual Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C and escalated in accordance with Section D that can be levied by the Council in any Fiscal Year on any Assessor's Parcel. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel number. "Bonds" means any bonds or other debt (as defined in the Act), whether in one or more series, secured by the levy of Special Taxes within IA 2. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of Special Taxes. "CFD No. 3" or "District" means Community Facilities District No. 3 of the City of Carlsbad. "City" means the City of Carlsbad, California. "Condominium" means a separate interest or 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. "Council" means the City Council of the City, acting as the legislative body of CFD No. 3. "County" means the County of San Diego, California. "Developable Property" means all Taxable Property, exclusive of Final Map Property. "Exempt Property" means all property located within the boundaries of IA 2 that is exempt from the Special Tax pursuant Section F below. -- IA 2 of CFD No. 3 Page 2 of IO EXHIBIT B "Final Map Property" means all Taxable Property included within a Final Subdivision Map which is approved by City Council prior to March 1 of each Fiscal Year. "Final Subdivision Map" means a subdivision of property created by recordation of a final map or parcel map approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.), a lot line adjustment or recordation of a 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. "IA 2" or "Improvement Area 2" means Improvement Area No. 2 of the District. "Improvement" or "Improvements" means an improvement or improvements authorized to be acquired by the City pursuant to the terms and conditions of the Acquisition Agreement. "Improvement Costs" means the estimated cost to construct the Improvements as set forth in Exhibit B to the Acquisition Agreement. "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. "Index" means for the purpose of calculating the escalation of the Annual Maximum Special Tax each Fiscal Year, the lesser of (a) the annual percentage increase, if any, in the "Construction Cost Index for ENR 20 Cities" for the City of Los Angeles as published in the "Engineering News Record" for the twelve-month period ending with the month of March preceding each Fiscal Year or (b) 3%. "Open Space" means property within the boundaries of IA 2 in which prior to March 1" of the preceding Fiscal Year (a) has been designated with specific boundaries and acreage on a tentative map or Final Subdivision Map as open space, (b) is classified by the County Assessor as open space by the County assigning a zero assessed value, (c) has been irrevocably offered for dedication as open space to the federal government, the State of California, the County, the City, or any other public agency or (d) is encumbered by an easement or other restriction required by the City limiting the use of such property to open space. "Public Property" means property within the boundaries of IA 2 which prior to March 1 st of the preceding Fiscal Year is owned by, irrevocably offered or dedicated by Final Subdivision Map or other recorded document, or for which an easement for purposes of I- IA 2 of CFD No. 3 Page 3 of 10 EXHIBIT B public right-of-way, habitat mitigation preserve, pedestrian trails or other public purpose has been granted to the federal government, the State of California, the County, the City, or any local government or other public agency. Notwithstanding the foregoing, the leasehold interest or other possessory interest granted by any public agency in property owned by such public agency to a private entity or person shall be subject to taxation under Section 53340. I of the Act and shall be classified as Taxable Property. "Special Tax" means the Special Tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement. "Special Tax Requirement" means: (a) that amount required in any Fiscal Year prior to the issuance of Bonds to: (1) pay the Administrative Expenses; and (2) pay directly for acquisition or construction of the aggregate Improvements in proportion to the allocation of the Improvement Costs to IA 2 specified in Appendix A attached hereto but only to the extent such costs are not expected to be funded with the proceeds of the Bonds; or (b) that amount required in any Fiscal Year after the issuance of Bonds to: IA 2 of CFD No. 3 pay the Administrative Expenses, pay debt service on any outstanding Bonds, replenish any reserve funds attributable to IA 2 and established in connection with Bonds, pay 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 Bonds), pay directly for acquisition or construction of the Improvements of IA 2, but only to the extent such costs cannot be funded with the proceeds of Bonds, and less available funds as directed under the Indenture. Page 4 of 10 EXHIBIT B "Taxable Property" means all property located within the boundaries of IA 2 that is not Exempt Property. B. CLASSIFICATION OF PROPERTY Prior to the beginning of each Fiscal Year, all property within IA 2 shall be classified as either Taxable Property or Exempt Property. Taxable Property shall be further classified as Final Map Property or Developable Property. C. ANNUAL MAXIMUM SPECIAL TAX The Annual Maximum Special Tax per Acre for Fiscal Year 2005-2006 for all Taxable Property is shown in Table 1 below: Table 1 Annual Maximum Special Tax per Acre For Fiscal Year 2005-2006 $1 2,600.00 D. ESCALATION OF THE ANNUAL MAXIMUM SPECIAL TAX Each Fiscal Year beginning Fiscal Year 2006-2007, the Annual Maximum Special Tax shall escalate at the applicable Index. The escalation shall cease in the Fiscal Year following the earlier of (1) the completion of the construction and acquisition of all of the Improvements pursuant to the Acquisition Agreement or (2) the sale of the final series of Bonds. E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement. No Special Tax shall be levied until any property is classified as Final Map Property. After any property has been classified as Final Map Property, the Special Tax shall be levied on all Taxable Property within the Improvement Area as necessary to fund the Special Tax Requirement as follows: First: The Special Tax shall be levied in equal percentages on each Assessor's Parcel of Taxable Property, exclusive of Open Space Property and Public Property, up to 100% of the applicable Annual Maximum Special Tax; and IA 2 of CFD No. 3 Page 5 of 10 EXHIBIT B Second: If additional Special Taxes are needed after the first step, the Special Tax shall be levied in equal percentages on each remaining Assessor’s Parcel of Taxable Property (i.e., Open Space Property and Public Property which is not exempt from the Special Tax), up to 100% of the applicable Annual Maximum Special Tax. F. EXEMPTIONS The CFD Administrator shall classify the following as Exempt Property: (i) Public Property, (ii) Open Space and (iii) Assessor Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement; provided however, that no such classification shall reduce the sum of all Taxable Property to less than 150.57 Acres. Assessor‘s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the amount stated above will be classified as Taxable Property and shall be taxed pursuant to Section E. Exempt status for purposes of this paragraph will be assigned by the CFD administrator in the chronological order in which property becomes Exempt Property. The Annual Maximum Special Tax obligation for any property which would be classified as Public Property upon its transfer or dedication to a public agency but which is classified as Taxable Property pursuant to the preceding paragraph shall be prepaid in full by the seller pursuant to Section J prior to the transfeddedication of such property to such public agency. Until the Annual Maximum Special Tax obligation for any such Public Property is prepaid, the property shall continue to be subject to the levy of the Special Tax as Taxable Property. If the use of an Assessor’s Parcel of previously classified Exempt Property changes so that such Assessor Parcel is no longer classified as Exempt Property as defined above, such Assessor Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property. The Special Tax may not be levied (a) longer than the tenth Fiscal Year following the final maturity of the last series of Bonds or (b) longer than is needed to pay the cost and incidental expenses of the construction of the Improvements, whichever is later. H. APPEALS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor’s Parcel is in error shall first consult with the CFD Administrator regarding such error. If following such consultation, the CFD Administrator determines that an error has IA 2 of CFD No. 3 Page 6 of 10 EXHIBIT B occurred the CFD Administrator may amend the amount of the Special Tax levied on such Assessor's Parcel. If following such consultation and action (if any by the CFD Administrator), the landowner or resident believes such error still exists, such person may file a written notice with the Finance Director of the City who shall establish, as part of the proceedings and administration of CFD No. 3, a special three-member Review/Appeal Committee. The Review/Appeal Committee may establish such procedures, as it deems necessary to undertake the review of any such appeal. The Review/Appeal Committee shall interpret this Rate and Method of Apportionment of Special Tax and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals, as herein specified. The decision of the Review/Appeal Committee shall be final and binding as to all persons. I. MANNER OF COLLECTION The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the CFD Administrator may directly bill the Special Tax, or may collect Special Taxes at a different time or in a different manner if necessary to meet the financial obligation of CFD No. 3 for IA 2 or as otherwise determined appropriate by the CFD Administrator. J. PREPAYMENT OF SPECIAL TAX 1. Prepayment in Full The Annual Maximum Special Tax for any Assessor's Parcel 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 Assessork Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 2. An owner of an Assessor's Parcel intending to prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The "Prepaymentll shall be an amount equal to the sum of (1) Principal, (2) Premium, (3) Defeasance, (4) Fees, and (5) Unfunded Improvements minus the Reserve Fund Credit, as such terms are defined as follows: "Principal" means the principal amount of Bonds to be redeemed from the IA 2 of CFD No. 3 Page 7 of 10 EXHIBIT B proceeds of such Prepayment and equals the quotient derived by dividing (a) the applicable Annual Maximum Special Tax for the Assessor's Parcel intending to prepay by (b) the expected aggregate Annual Maximum Special Taxes for all Taxable Property within IA 2 (and excluding from (b) any Annual Maximum Special Taxes for Assessor's Parcels which have fully prepaid the Annual Maximum Special Tax), and multiplying the quotient by the portion of the principal amount of Bonds outstanding. "Premium" means an amount equal to the Principal multiplied by the applicable redemption premium, if any, for the Bonds established pursuant to the Indenture so redeemed with the proceeds of any such Prepayment. "Defeasance" means an amount equal to the amount needed to pay interest on the Principal to be redeemed until the earliest redemption date for the outstanding Bonds permitted under the Indenture less the amount of earnings estimated to be received from the reinvestment of the Prepayment and the Fees to such date. Credit shall also be given for any Special Tax heretofore paid and received by the City which has not yet been utilized to pay the Special Tax Requirement or which is remaining after havingpaid the Special Tax Requirement. "Fees" equal the fees and expenses of CFD No. 3 directly related to the Prepayment. "Unfunded Improvements" means an amount equal to the estimated cost of the unfunded Improvements authorized to be financed from the proceeds of the Bonds or Special Taxes allocable to the Assessor's Parcel for which the Prepayment is being calculated and is computed by multiplying the quotient calculated when determining Principal by the Improvement Costs allocable to IA 2, as set forth in the Acquisition Agreement, less the estimated cost of any Improvements financed by previously issued Bonds or the proceeds of Special Taxes. Unfunded Improvements shall equal zero following the issuance of all of the Bonds. "Reserve Fund Credit'' shall equal the lesser of (i) the expected reduction in the applicable reserve fund requirement (as defined in the Indenture), if any, following the redemption of Bonds from proceeds of the Prepayment or (ii) the amount derived by subtracting the new reserve fund requirement in effect after the redemption of Bonds 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 Reserve Fund Credit shall apply only when the Reserve Fund for the Bonds shall at least equal the Reserve Requirement as defined in the Indenture. IA 2 of CFD No. 3 Page 8 of 10 23 EXHIBIT B The sum of the amounts calculated in the preceding steps shall be paid to CFD No. 3 and shall be used to pay and redeem Bonds in accordance with the Indenture and to pay the Fees. Upon the receipt of such Prepayment by CFD No. 3, the obligation to pay the Special Tax for such Assessor's Parcel shall be deemed to be permanently satisfied, the Special Tax shall not be levied thereafter on such Assessor's Parcel, and the CFD Administrator shall cause notice of cessation of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the Prepayment and receipt of proof of Special Tax payments made to the County used in the calculation of the Prepayment, if any. 2. Prepayment in Part The Annual Maximum Special Tax for any Assessor's Parcel may be prepaid in part as described herein, provided that such a partial prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 2. An owner of an Assessor's Parcel intending to partially prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The amount of the prepayment shall be computed pursuant to Section J.1 above substituting the portion of the Annual Maximum Special Tax to be prepaid for the Annual Maximum Special Tax applicable to the Parcel when computing Principal. The Annual Maximum Special Tax to be prepaid must result in an amount of principal which is an even integral of the denomination of Bonds set forth in the Indenture. If necessary, the prepayment amount shall be rounded up in order to equal an even integral of the denomination of Bonds. The CFD Administrator shall cause a notice of reduction of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the prepayment. Notwithstanding the foregoing, no prepayment shall be allowed unless the amount ofAnnual Maximum Special Taxes that may be levied in IA 2 pursuant to Section E of this Rate and Method of Apportionment of Special Tax after the proposed prepayment is at least the sum of (i) the estimated Administrative Expenses and (ii) one hundred ten percent (I 10%) of the maximum annual debt service for the Bonds, taking into account the Bonds to remain outstanding after such prepayment. IA 2 of CFD No. 3 Page 9 of 10 EXHIBIT B Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requiremenl(Est @ ax DS) Contingency 1 Rounding Principal Issued by Improvement Area: Refund of Formation Deposit City of Carlsbad Community Facilities District No. 3 (FaradaylMelrose) Appendix A Prior to the sale of the Bonds based upon the cost estimates at this time, the following provides the construction cost allocation percentage of total funded which will be used to determine the Special Tax Requirement. $9,879,741 $1 5,212,644 $25,092,385 $952,125 $1,443,000 52,395,125 $400,000 $500,000 $900,000 $1 33,333 $66.667 $200,000 $638,700 $253,900 $384,800 $1,074,901 $1,629,075 $2,703,976 $1,000 $3,814 $4,814 $12,695,000 $1 9,240,000 $31,935,000 Construction Costs Allocation pemnt of pad area) IA 1 of CFD No. 3 Page 10 of 10