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HomeMy WebLinkAbout2005-11-08; City Council; 18335; Community Facilities District 3 Faraday-Melrose Public Hearing Forming District, Declaring Debt, Results Special Election, Tax LevyCITY OF CARLSBAD - AGENDA BILL IIITG. 1 1-08-05 IEPT. CM - TITLE: COMMUNITY FACILITIES DlSTRiCT NO. 3 (FARADAY-MELROSE) PUBLIC HEARING FORMING THE 4B# 18,335 DISTRICT, DECLARING THE NECESSITY TO INCUR DEBT, DECLARING THE RESULTS OF THE SPECIAL ELECTION, AUTHORIZING THE SPECIAL TAX LEVY AND RELATED ACTIONS RECOMMENDED ACTION: Hold a public hearing and Adopt Resolution No. 2005-329 forming and establishing Community Facilities District No. 3, designating improvement areas and authorizing the submittal of the levy of special taxes within each such improvement area to the qualified electors. Adopt Resolution No. 2005-330 determining the necessity to incur bonded indebtedness for each improvement area of Community Facilities District No. 3, submitting to the qualified electors of each such improvement area separate propositions to authorize the levy of a special tax within each such improvement area, to authorize such community facilities district to incur a bonded indebtedness for each such improvement area secured by the levy of a special tax within such improvement area, to finance certain public facilities and to establish an appropriations limit for such Community Facilities District, and giving notice thereon. Adopt Resolution No. 2005-331 , acting in its capacity as the legislative body of Community Facilities District No. 3 declaring the results of a special election in such Community Facilities District and in Improvement Area 1 And Improvement Area 2. Introduce Ordinance No. NS-777 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. ITEM EXPLANATION: On October 4, 2005, the City Council adopted a resolution stating its intent to form a Community Facilities District (CFD #3) to fund certain public improvements necessary to serve the Palomar Forum, Raceway and Carlsbad Oaks North developments. At that time, the City Council also adopted a map of the proposed CFD boundaries, approved the acquisition agreement, approved the use of tax-exempt debt, set the date for this public hearing and ordered the initiation of the ballot proceedings. This agenda item contains the final actions necessary to complete the CFD formation and sets the maximum tax for the parcels of land within the CFD boundaries. A CFD is a mechanism to finance the acquisition or construction of public improvements and to spread the cost of such public improvements among properties that will benefit from the improvements. Council Policy 33 sets forth the policies and procedures to be followed in using Community Facilities Districts (CFD) financing. The improvements proposed to be acquired by the City from the proceeds of bonds issued for CFD #3 include the following: The widening of Palomar Airport Road from west of Melrose Drive Intersection to the Vista City Limits; Faraday Avenue from Orion Street to Melrose Drive; Melrose Drive from Palomar Airport Road to the Vista City Limits; Melrose Drive construction of right turn lane south of Palomar Airport Road; El Fuerte from northerly terminus to the future extension of Faraday Avenue; and 0 0 0 0 Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of Palomar Airport. Property Name Palomar Forum Raceway Carlsbad Oaks North Related costs for environmental, acquisition and creation of mitigation lands, engineering, and inspection are included in the cost of acquiring such improvements in addition to the actual cost of construction. Developable Acreage Developable Lots 51.50 8 86.10 25 167.30 23 The boundaries of the proposed CFD #3 are shown on the location map in Exhibit 1 and are divided into two improvement areas. Improvement Area 1 includes the Palomar Forum (Zone A) and the Raceway property (Zone B) while Improvement Area 2 contains the Carlsbad Oaks North property. Improvement Area 1 contains two separate tax rate zones. These distinctions are necessary to properly spread the cost of the improvements to the properties that are benefiting from them. The developable acreage and lots for each of the properties are shown below. Number of The primary improvements noted above are important links in the City’s traffic circulation system and are needed to meet the increased demands and needs placed upon the City as a result of development within the proposed CFD boundaries. Compliance with Council Policy 33 The CFD, as proposed, complies with City Policy Statement No. 33 as revised on December 17, 2002. As required by Policy 33, the City’s Special District Review Committee has reviewed this CFD, finds that it complies with the terms and conditions of the Council’s policy and recommends that the City Council proceed with the formation of the CFD. The property owners have requested that the District be a Community Facilities District (CFD) and that they be authorized to pass through the special taxes to new property owners as the lots are sold. Under the Council Policy 33, CFD’s are not allowed to pass through the special taxes to residential property but it does allow the pass-through to non-residential (commercial or industrial) properties. Since the boundaries of the proposed District consist of only non-residential properties, Policy 33 does allow the pass-through of the taxes at the discretion of the City Council. Adoption of the attached resolutions presumes the Council approval of the developer’s request to pass-through the taxes to future owners. ENVIRONMENTAL REVIEW: The Carlsbad Oaks North (CT 97-1 3), Carlsbad Raceway Business Park (CT98-IO), and Palomar Forum (CT99-06) projects have all processed environmental review per CEQA requirements. A Program Environmental Impact Report and the associated Candidate Findings of Fact, Statement of Overriding Considerations and Mitigation Monitoring and Reporting Program was certified on October 8, 2002 for the Carlsbad Oaks North project. Mitigated Negative Declarations dated July 15, 2001 were issued for the Carlsbad Raceway Business Park and Palomar Forum projects. FISCAL IMPACT: The total cost of the improvements is estimated at $25.1 million. Staff is requesting a bond authorization not to exceed $35 million. The additional amount requested is to cover the formation costs, debt issuance costs, capitalized interest and the establishment of a debt service reserve fund. The bonds are scheduled to be sold in the first half of 2006; although, financial policy considerations may require that the bonds be split into two series with the second series being issued a year or two after the first. The City Council will receive more information on the terms and conditions of the bonds prior to the initial sale. The City is not responsible for the funding of the construction of any of the improvements included in the CFD. The improvements will be constructed by the developers and acquired by the City after the bonds are sold. However, in the event that any of the developers default on their obligations to construct such improvements under their respective Subdivision Improvement Agreements, the Acquisition/Financing Agreement permits the City to utilize the remaining eligible proceeds of the bonds, if necessary, to finance the completion of the improvements. The annual maximum special tax per acre for fiscal year 2005-06 for each area is shown below. This amount is a maximum. The actual tax rate will be set annually by the City Council based upon the needs of the District similar to the City’s CFD #I. The maximum amount will escalate based on the change in the Engineering News Record index annually. Improvement Area Improvement Area 1, Zone A Improvement Area 1, Zone A Improvement Area 2 Annual Maximum $ 15,241 $ 7,265 $ 12,600 EXH I BITS : 1. 2. 3. 4. 5. 6. Boundary Map Community Facilities District No. 3. Resolution No. 2005-329 Forming and Establishing Community Facilities District No. 3, Designating Improvement Areas Therein and Authorizing Submittal of Levy of Special Taxes Within Each Such Improvement Area to the Qualified Electors Thereof Resolution No. 2005330 Determining The Necessity To Incur A Bonded Indebtedness For Each Improvement Area Of Community Facilities District No. 3, Submitting To The Qualified Electors Of Each Such Improvement Area Separate Propositions To Authorize The Levy Of A Special Tax Within Each Such Improvement Area, To Authorize Such Indebtedness For Each Such Improvement Area Secured By The Levy Of A Special Tax Within Such Improvement Area To Finance Certain Public Facilities And To Establish An Appropriations Limit For Such Community Facilities District And Giving Notice Thereon Resolution No. 2005-331 Acting In Its Capacity As The Legislative Body Of Community Facilities District No. 3 Declaring The Results Of A Special Election In Such Community Facilities District And In Improvement Area 1 And Improvement Area 2 Thereof Ordinance No. NS-777 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 Community Facilities District Report for Community Facilities District No. 3 (on file with the City Clerk) DEPARTMENT CONTACT: Lisa Hildabrand, (760) 434-2823, Ihild@ci.carlsbad.ca.us 3 Exhibit 1 r3 r: W I 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 2 RESOLUTION NO. 2005 - 329 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, FORMING AND ESTABLISHING COMMUNITY FACILITIES DISTRICT NO. 3, DESIGNATING IMPROVEMENT AREAS THEREIN AND AUTHORIZING SUBMllTAL OF LEVY OF SPECIAL TAXES WITHIN EACH SUCH IMPROVEMENT AREA TO THE QUALIFIED ELECTORS THEREOF WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD, CALIFORNIA (the “City Council”), has previously declared its intention to form a community facilities district and to designate two improvement areas (each, an “Improvement Area”) therein to finance the acquisition or construction of the public facilities described in Exhibit A hereto and ordered the preparation of a Community Facilities District Report relating to the initiation of proceedings to create such community facilities district 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 shall hereinafter be referred to as COMMUNITY FACILITIES DISTRICT NO. 3 (the “District”); and, WHEREAS, notice of a public hearing relating to the establishment of the District, the extent of the District, the designation of the Improvement Areas within the District, the financing of the Facilities and all other related matters has been given, and a Community Facilities District Report, as ordered by this City Council, has been presented to this City Council and has been made a part of the record of the hearing to establish such District; and, WHEREAS, all communications relating to the establishment of the District, the designation of the Improvement Areas within the District, the financing of the Facilities and the proposed rate and method of apportionment of special tax for each Improvement Area have been presented, and it has further been determined that a majority protest as defined by law has not been received against these proceedings or the levy of the special tax within either Improvement Area; and, . WHEREAS, inasmuch as there have been less than twelve (12) registered voters residing within the territory of each Improvement Area of the District for at least the preceding ninety (90) days, the authorization to levy special taxes within each Improvement Area of the District shall be 5 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 2 submitted to the landowners of each such Improvement Area, such landowners being the qualified electors as authorized by law. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES AS FOLLOWS: 1. RECITALS. The above recitals are all true and correct. 2. DETERMINATIONS. It is hereby determined by this City Council that: A. All prior proceedings pertaining to the formation of the District and designation of the Improvement Areas were valid and taken in conformity with the requirements of the law, and specifically the provisions of the Act, and that this finding and determination is made pursuant to the provisions of Government Code Section 53325.1. B. The written protests received, if any, do not represent a majority protest as defined by the applicable provisions of the Act and as applied to each Improvement Area and, therefore, the special tax proposed to be levied within each Improvement Area of the District has not been precluded by majority protest pursuant to Section 53324 of the Government Code of the State of California. C. The District as proposed conforms with the City of Carlsbad Statement of Goals and Policies Regarding the Establishment of Community Facilities Districts (the "Goals and Policies"), as amended. D. Less than twelve (12) registered voters have resided within the territory of each Improvement Area within the District for each of the ninety (90) days preceding the close of the public hearing, therefore, pursuant to the Act the qualified electors of each of the Improvement Areas within the District shall be the landowners of such Improvement Area as such term is defined in Government Code Section 53317(f) and each such landowner who is the owner of record as of the close of the public hearing, or the authorized representative thereof, shall have one vote for each acre or portion of an acre of land that she or he owns within such Improvement Area. 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 2 E. The time limit specified by the Act for conducting an election to submit the levy of the special taxes to the qualified electors of each Improvement Area of the District and the requirements for impartial analysis and ballot arguments have been waived with the unanimous consent of the qualified electors of each such Improvement Area. F. The City Clerk, acting as the election official, has consented to conducting any required election on a date which is less than 125 days following the adoption of any resolution forming and establishing the District. COMMUNITY FACILITIES DISTRICT REPORT. The Community Facilities District Report for the District (the “Report”), as now submitted by Special Districts Financing & Administration, Special Tax Consultant, shall stand as the report as required pursuant to Government Code Section 53321.5 for all future proceedings and all terms and contents are approved as set forth therein. 3. 4. NAME OF DISTRICT. The City Council does hereby establish and declare the formation of the District known and designated as ‘COMMUNITY FACILITIES DISTRICT NO. 3.” BOUNDARIES OF DISTRICT AND IMPROVEMENT AREAS. The boundaries of the 5. District and each of the Improvement Areas are now hereby generally described as follows: All property within the boundaries of COMMUNITY FACILITIES DISTRICT NO. 3, as shown on a boundary map as previously approved by this legislative body, such map designated by the name of this District, a copy of which is on file in the Office of the City Clerk. The boundary map of the proposed District has been filed pursuant to Sections 31 11 and 31 13 of the Streets and Highways Code of the State of California in the Office of the County Recorder of the County of San Diego, at Page 83 of Book 39 of the Book of Maps of Assessment and Community Facilities Districts for such County. 6. DESIGNATION OF IMPROVEMENT AREAS. For purposes of financing of, or contributing to the financing of the Facilities described in Section 7 below, this City Council, acting 1 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 Exhibit 2 pursuant to Government Code Section 53350, hereby designates portions of the District as the following Improvement Areas as shown on the Boundary Map of the District: IMPROVEMENT AREA I IMPROVEMENT AREA 2 7. DESCRIPTION OF FACILITIES AUTHORIZED TO BE FINANCED. A general description of the Facilities which this legislative body is authorized by law to construct, own or operation, which are the types of facilities proposed to be financed under these proceedings, are generally described in Exhibit A attached hereto and incorporated herein by this reference. The Facilities as above described are facilities, which the City Council is authorized by law to contribute revenue to or to construct, own or operate. It is hereby further determined that the proposed Facilities are necessary to meet increased demands placed upon the City as a result of development occurring within the District, and the costs and expenses charged to this District represent the fair share costs of the Facilities attributable to this District and the Improvement Areas therein. For a full and complete description of such Facilities, reference is made to the Report, a copy of which is on file in the Office of the City Clerk. In addition to financing the Facilities, the financing of those incidental expenses described in the Report are also approved and authorized. 8. SPECIAL TAX. Except where funds are othewise available a special tax, secured by recordation of a continuing lien against all non-exempt real property in each of the Improvement Areas within the proposed District, is hereby authorized, subject to voter approval, to be levied within the boundaries of each such Improvement Area. For particulars as to the rate and method of apportionment of the special tax proposed to be levied within each Improvement Area, reference is made to the attached and incorporated Exhibit “B” (the “Special Tax Formulas”), which sets forth in sufficient detail the method of apportionment of the special tax applicable to each Improvement Area to allow each landowner or resident within such Improvement Area to estimate the maximum amount that such person will have to pay. Such special tax shall be utilized to pay directly for the Facilities, to pay debt service on bonds issued by the District for each Improvement Area to assist in 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 2 financing the Facilities, to replenish any reserve fund established for such bonds, and to pay the costs of administering the bonds, the District and each respective Improvement Area. The special taxes herein authorized, 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. This legislative body further authorizes that special taxes may be prepaid and satisfied by payment of the prepayment amount calculated pursuant to the Special Tax Formulas. Upon recordation of a Notice of Special Tax Lien pursuant to Section 31 14.5 of the Streets and Highways Code of the State of California against the property within each Improvement Area, a continuing lien to secure each levy of the special tax shall attach to all non-exempt real property in such Improvement Area and this lien shall continue in force and effect until the special tax obligation is prepaid and permanently satisfied and the lien canceled in accordance with law or until collection of the tax by the legislative body ceases. 9. SPECIAL TAX ACCOUNTABILITY MEASURES. Pursuant to and in compliance with the provisions of Government Code Section 50075.1, this City Council hereby establishes the following accountability measures pertaining to the levy by the District of the special taxes described in Section 8 above: A. above. B. applicable purposes set forth in Section 8 above. C. special tax shall be deposited. Each such special tax shall be levied for the specific purposes set forth in Section 8 The proceeds of the levy of each such special tax shall be applied only to the specific The District shall establish a separate account into which the proceeds of each such 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 2 D. The City Manager or his or her designee, acting for and on behalf of the District, shall annually file a report with the City Council as required pursuant to Government Code Section 50075.3. IO. PREPARATION OF ANNUAL TAX ROLL. The name, address and telephone number of the office, department or bureau which will be responsible for preparing annually a current roll of special tax levy obligations by Assessor's parcel number and which shall be responsible for estimating future special tax levies pursuant to Section 53340.1 of the Government Code of the State of California, are as follows: Finance Department City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 760-602-2430 1 1. SUBSTITUTION FACILITIES. The description of the Facilities, as set forth in Exhibit A hereto, is general in its nature. The final nature and location of such Facilities will be determined upon the preparation of final plans and specifications therefore. Such final plans may show substitutes in lieu of, or modification to, the above described Facilities and any such substitution shall not be a change or modification in the proceedings as long as the facilities provide a service substantially similar to that as set forth in this Resolution. 12. ELECTION. This City Council herewith submits the levy of the special taxwithin each Improvement Area to the qualified electors of each such Improvement Area, such electors being the landowners in each such Improvement Area, with each landowner having one (1) voter for each acre or portion thereof of land that he or she owns within such Improvement Area. Ill Ill 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 2 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 8th day of November ,2005 by the following vote, to wit: AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES: None CLAUDE A. LEWIS, Mayor Attest: LORRAINE M. WOOX, City Clerk I\ Exhibit 2 EXHIBIT A DESCRIPTION OF THE FACILITIES The Facilities proposed to be financed by the District include the following: I. Improvement A - Palomar Airport Road Widening from West of Melrose Drive Intersection to the Vista City Limits (as shown on Drawing No. 3994). Grading to prime arterial standards (but not to include grading outside the right-of-way in future developed areas), erosion control landscaping and irrigation located within an easement granted to the City, parkway landscaping and irrigation (located within a easement granted to the City), asphalt pavement to prime arterial standard width, raised median in certain areas, median curb, median hardscaping and landscaping with irrigation, curb and gutter, sidewalk, storm drain facilities within the City right-of-way and easements (excluding any Master Drainage Plan facilities and water lines), appurtenant to Palomar Airport Road construction, dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, modification of an existing traffic signal at Paseo Valindo, relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acq u is i tion/Fi n a ncing Agreement . 2. 3. Improvement B - Faraday Avenue from Orion Street to Melrose Drive. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk, storm drain facilities within the right-of-way (excluding Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, new traffic signals and a modification of any existing traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. Improvement C - Melrose Drive from Palomar Airport Road to the Vista City Limits (as shown on Drawing No. 399-4). Full width grading to prime arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to prime arterial standard width on either side of a raised median, median curb, median hardscaping and landscaping with irrigation, curb, gutter and sidewalk, storm drain facilities within the right-of-way (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non- reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal and a modification of an existing traffic signal at Palomar Airport Road (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation, and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. Exhibit 2 4. Improvement D - Melrose Drive construction of right turn lane south of Palomar Airport Road. 5. Improvement E - El Fuerte from northerly terminus to the future extension of Faraday Avenue. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City) asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees). Sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. 6. Improvement F - Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of Palomar Airport Road. Exhibit 2 EXHIBIT B 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 'I) 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: ff Acquisition Agreement" means that certain Acquisitiofiinancing 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 I, including, but not limited to, the costs of IA 1 of CFD No. 3 Page 1 of 11 Exhibit 2 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 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 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 1 that is exempt from the Special Tax pursuant Section F below. IA 1 of CFD No. 3 Page 2 of 11 Exhibit 2 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 6641 0 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 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 1 which, prior to March 1 st 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 1 which prior to March Is' 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 Exhibit 2 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 53340.1 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: IA 1 of CFD No. 3 pay the Administrative Expenses, pay debt service on any outstanding Bonds, replenish any reserve funds attributable to IA 1 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 1, 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 11 Exhibit 2 Zone A EXHIBIT B “Taxable Property“ means all property located within the boundaries of IA 1 that is not $15,241.00 Exempt Property. “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 1 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 2 E. EXHIBIT B 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. 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 (Le., 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 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 11 1 --> - Exhibit 2 EXHIBIT B 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 2 EXHIBIT B 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 (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 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 1 I Exhibit 2 EXH I BIT .B IA 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 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 IA 1 of CFD No. 3 Page 9 of 11 Exhibit 2 EXHIBIT B 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 I1 Exhibit 2 El Fuerte City of EXFPIT arls a B I $4,055,423 Community Facilities District No. 3 (Faraday/Melrose) 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. Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement (Est @ M~X os) Refund of Formation Deposit Construction Costs Allocation $9,879,741 $952,125 $400,000 $133,333 $253,900 $1,074.90 1 Improvement Area 1 I improvementArea2 I Total Di ZoneA I Percent I Zone B 1 Percent] IA 2 I Percent I Total Cost I I I I I I Contingency I Rounding I $1,000 I 1 $3,814 I I I I I I I I Facilities Fund Requirement by Area I $5,498,088 I I $4,381,653 1 I $15,212,644 I I $25,092,385 I I I $4,814 I Melrose Melrose South of PAR Federal Grant (Spread on percent of pad area) Palomar Airport Road PAR Turn Lane to Melrose South Faraday $4,954,843 $226,7 16 ($3,000,000 $2,798,853 $100,000 $1 5,956,550 Series B $1 521 2,644 $1,443,000 $500,000 $66,667 $384,800 l- $1,629,075 rict Percent 100.00% $2,395,125 $900,000 $200,000 $638,700 $2,703,976 IA 1 of CFD No. 3 Page 11 of 11 EXHIBIT B Exhibit 2 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 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 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 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 2, including, but not limited to, the costs of IA 2 of CFD No. 3 Page I of 10 1- ------ a5 Exhibit 2 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). EXHIBIT B "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 Assessork Parcel. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessork Parcel number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessork 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 10 Exhibit 2 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'' 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 2 of CFD No. 3 Page 3 of 10 I Exhibit 2 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 53340.1 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 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 2 "Taxable Property" means all property located within the boundaries of IA 2 that is not Exempt Property. EXHIBIT B 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 $12,600.00 1 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 2 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 (Le., 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. 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 IA 2 of CFD No. 3 Page 6 of 10 Exhibit 2 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 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 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 (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 2 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 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 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 Exhibit 2 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.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 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 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 (1 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 33 Exhibit 2 Improvement Area 1 I I I Zone A I Percent [ Zone B [Percent EXHIBIT B Improvement kea 2 I Total Di IA 2 I Percent I Total Cost I I City of Carlsbad Community Facilities District No. 3 (Faraday/Melrose) $5,498,088 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. $4,381,653 $1 521 2,644 $25,092.385 $4,954,843 $226,716 ($3,000,000 $2 ~ 798,853 $100,000 $1 5,956,550 Construction Costs Allocation I I I Facilities 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 I $4,055,423 El Fuerte Facilities Total Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement (Est @ M~X os) Contingency / Rounding Principal Issued by Improvement Area: Refund of Formation Deposit $9,879,741 $15,212,644 $25,092,385 $952,125 $1,443,000 $2,395,125 $400,000 $500,000 $900,000 $133,333 $66,667 $200,000 $253,900 $384,800 $638,700 $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 trict Percent 100.00% IA 1 of CFD No. 3 Page 10 of 10 I 2 3 4 5 6 7 8 9 IO I1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 3 RESOLUTION NO. 2005330 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DETERMINING THE NECESSITY TO INCUR A BONDED INDEBTEDNESS FOR EACH IMPROVEMENT AREA OF COMMUNITY FACILITIES DISTRICT NO. 3, SUBMllTlNG TO THE QUALIFIED ELECTORS OF EACH SUCH IMPROVEMENT AREA SEPARATE PROPOSITIONS TO AUTHORIZE THE LEVY OF A SPECIAL TAX WITHIN EACH SUCH IMPROVEMENT AREA, TO AUTHORIZE SUCH COMMUNITY FACILITIES DISTRICT TO INCUR A BONDED INDEBTEDNESS FOR EACH SUCH IMPROVEMENT AREASECURED BY THE LEVY OF A SPECIAL TAX WITHIN SUCH IMPROVEMENT AREA TO FINANCE CERTAIN PUBLIC FACILITIES AND TO ESTABLISH AN APPROPRIATIONS LIMIT FOR SUCH COMMUNITY FACILITIES DISTRICT, AND GIVING NOTICE THEREON WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD (the “City Council”), has previously declared its intention and held and conducted a public hearing relating to the issuance of bonds to be secured by special taxes to finance certain public facilities in a community facilities district and improvement areas designated therein, as authorized pursuant to the terms and provisions of the “Mello-Roos Community Facilities Act of 1982”, being Chapter 2.5, Part I, Division 2, Title 5 of the Government Code of the State of California (the “Act”). This Community Facilities District shall hereinafter be referred to as COMMUNITY FACILITIES DISTRICT NO. 3 (the “District”) and the improvement areas shall be designated as IMPROVEMENT AREA I and IMPROVEMENT AREA 2 (each, an “Improvement Area” and, collectively, the “Improvement Areas”); and, WHEREAS, at this time the City Council desires to proceed to make the determination of necessity to incur a separate bonded indebtedness for each of the Improvement Areas, to declare the purposes for such debt, and to authorize the submittal of a separate proposition to the qualified electors of each such Improvement Area, being the landowners of each such Improvement Area, all as authorized and required by law; WHEREAS, the City Council further desires to authorize the submittal of propositions to such qualified electors of each Improvement Area to (a) authorize the levy of special 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 3 taxes within each such Improvement Area and (b) to establish an appropriation limit for the District; WHEREAS, all of the qualified electors of each Improvement Area have waived the time limits specified in the Act pertaining to the conduct of the election and the requirements for impartial legal analysis and arguments have also been waived by the unanimous consent of the qualified electors of each Improvement Area; and WHEREAS, the City Clerk, as the Election Official, has concurred in the shortening of time for conducting the election. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES AS FOLLOWS: 1. RECITALS. The above recitals are all true and correct. 2. NECESSITY FOR BOND ISSUES. The City Council hereby expressly declares and states that it is necessary to incur a separate bonded indebtedness of the District for each Improvement Area thereof as authorized under the terms and provisions of the Act, in order to finance the facilities described in Exhibit A attached hereto and incorporated herein by this reference (the “Facilities”). 3. BOND INDEBTEDNESS FOR IMPROVEMENT AREA 1. The specific purposes for the proposed bonded indebtedness for Improvement Area I are as follows: To finance a portion of the costs of the acquisition or construction of the Facilities, appurtenances and appurtenant work and any and all of those applicable incidental costs described in and authorized by Government Code Section 53345.3. 4. BOND INDEBTEDNESS FOR IMPROVEMENT AREA 2. The specific purposes for the proposed bonded indebtedness for Improvement Area 2 are as follows: To finance a portion of the costs of the acquisition or construction of the Facilities, appurtenances and appurtenant work and any and all of those 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 3 applicable incidental costs described in and authorized by Government Code Section 53345.3. 5. This City Council determines that the property within Improvement Area 1 will pay for the bonded indebtedness referred to in Section 3 above. A general description of Improvement Area 1 is as follows: TERRITORY TO PAY FOR BONDED INDEBTEDNESS. All property within the boundaries of Improvement Area 1 of Community Facilities District No. 3, as shown on a map as previously approved by the City Council, such map designated by the name of this District, a copy of which is on file in the Office of the City Clerk (the “Boundary Map”). This City Council determines that the property within Improvement Area 2 will pay for the bonded indebtedness referred to in Section 4 above. A general description of Improvement Area 2 is as follows: All property within the boundaries of Improvement Area 2 of Community Facilities District No. 3, as shown on the Boundary Map. 6. BOND AMOUNT. The amount of the proposed bonded indebtedness, including the cost of the Facilities, together with all incidental expenses, shall not exceed the following: A. Improvement Area 1 - $14,000,000 B. Improvement Area 2 - $21,000,000 7. BOND TERM This City Council hereby further determines that the maximum term of bonds and/or any series shall not exceed forty (40) years, and such bonds may be issued in differing series, at differing times. The maximum rate of interest to be paid on such bonds may not exceed the greater of either twelve percent (12%) per annum or the maximum rate permitted by law at the time of sale of any of such bonds. The bonds issued for each Improvement Area, except where other funds are made available, shall be paid 37 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 3 exclusively from the annual levy of the special tax within such Improvement Area, and are not secured by any other taxing power or funds of the District or the City. 8. ACCOUNTABILITY MEASURES. Pursuant to and in compliance with the provisions of Article I .5 (commencing with Section 53410) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code, this City Council hereby establishes the following accountability measures pertaining to any bonded indebtedness incurred by or on behalf of the District: A. Such bonded indebtedness shall be incurred for the applicable specific purposes set forth in the Section 3 or 4 above, as applicable. B. The proceeds of any such bonded indebtedness shall be applied only to the applicable specific purposes identified in Section 3 or 4 above, as applicable. C. The document or documents establishing the terms and conditions for the issuance of any such bonded indebtedness shall provide for the creation of an account into which the proceeds of such indebtedness shall be deposited. D. The City Manager or his or her designee, acting for and on behalf of the District, shall annually file a report with this City Council as required by Government Code Section 5341 1. 9. ELECTION. The propositions related to the incurring of the bonded indebtedness shall be submitted to the appropriate qualified voters, together with ballot propositions to authorize the levy of special taxes within the Improvement Areas and to establish an appropriations limit for the District, at a special election to be held on November 8, 2005, and such election shall be a special election to be conducted by the City Clerk (the “Election Official”). If any proposition for the levy of the special tax and any proposition for incurring the bonded indebtedness receives the approval of two-thirds (2/3) or more of the votes cast on each respective proposition, bonds may be authorized, issued and sold for the applicable purposes set forth herein and the applicable special tax may be levied as provided in resolution forming and establishing the District. If the proposition to establish the 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 3 appropriations limit for the District receives the approval of a majority of the votes cast on such proposition, such appropriations limit shall be established. IO. BALLOTS. The ballot proposals to be submitted to the qualified voters of each Improvement Area the election shall generally be as follows: IMPROVEMENT AREA 1 PROPOSITION A Shall the City of Carlsbad Community Facilities District No. 3, subject to accountability measures required by California Government Code Section 50075.1, levy a special tax throughout Improvement Area 1 of such district pursuant to the rate and method of apportionment thereof set forth in the resolution forming and establishing such district for the purposes of paying debt service on bonds of such district issued for Improvement Area I, replenishing the reserve fund for such bonds, paying costs of administering such indebtedness and such district and paying directly for the facilities described in such resolution? PROPOSITION B Shall the City of Carlsbad Community Facilities District No. 3, subject to the accountability measures required by California Government Code Section 5341 0, incur a bonded indebtedness for Improvement Area 1 of such district in an amount not to exceed $14,000,000 for the specific purposes set forth in such resolution? Ill Ill 39 I 2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IMPROVEMENT AREA 2 PROPOSITION C Shall the City of Carlsbad Community Facilities District No. 3, subject to accountability measures required by California Government Code Section 50075.1, levy a special tax throughout Improvement Area 2 of such district pursuant to the rate and method of apportionment thereof set forth in the resolution forming and establishing such district for the purposes of paying debt service on bonds of such district issued for Improvement Area 2, replenishing the reserve fund for such bonds, paying costs of administering such indebtedness and such district and paying directly for the facilities described in such resolution? PROPOSITION D Shall the City of Carlsbad Community Facilities District No. 3, subject to the accountability measures required by California Government Code Section 5341 0, incur a bonded indebtedness for Improvement Area 2 of such district in an amount not to exceed $21,000,000 for the specific purposes set forth in such resolution? IMPROVEMENT AREAS 1 AND 2 PROPOSITION E Shall the City of Carlsbad Community Facilities District No. 3 establish an Article XlllB appropriations limit equal to $35,000,000? Exhibit 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 3 11. VOTE The appropriate mark placed on line before the word “YES” shall be counted in favor of the adoption of the proposition, and the appropriate mark placed on the line before the word “NO” in the manner as authorized, shall be counted against the adoption of such proposition. 12. ELECTION PROCEDURE The Election Official is hereby authorized to take any and all steps necessary for the holding of such election. The Election Official shall perform and render all services and proceedings incidental to and connected with the conduct of the election, which services shall include, but not be limited to, the following activities as are appropriate to the election: A. the .conduct of the election. B. other necessary forms. C. Furnish and address official ballots for the qualified electors of each Improvement Area. D. authorized representatives, as required by law. E. F. canvassing of the returns. G. Canvass the returns of the election. H. Furnish a tabulation of the number of votes given in the election. I. Make all arrangements and take the necessary steps to pay all costs of the election incurred as result of services performed by the District and pay costs and expenses of all election officials. J. of the election in the manner and form as required by law. Prepare and furnish to the election officers necessary election supplies for Cause to be printed the requisite number of official ballots, tally sheets and Cause the official ballots to be delivered to the qualified electors or their Receive the returns of the election and supplies. Sort and assemble the election material and supplies in preparation for the Conduct and handle all other matters relating to the proceedings and conduct 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 3 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 8th day of November, 2005 by the following vote, to wit: AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES: None ABSENT: None A CLAUDE A. LEWIS, Mayor Attest: LORRAINE M. WOODyty Clerk Exhibit 3 EXHIBIT A DESCRIPTION OF THE FACILITIES The Facilities proposed to be financed by the District include the following: 1. improvement A - Palomar Airport Road Widening from West of Melrose Drive Intersection to the Vista City Limits (as shown on Drawing No. 399-4). Grading to prime arterial standards (but not to include grading outside the right-of-way in future developed areas), erosion control landscaping and irrigation located within an easement granted to the City, parkway landscaping and irrigation (located within a easement granted to the City), asphalt pavement to prime arterial standard width, raised median in certain areas, median curb, median hardscaping and landscaping with irrigation, curb and gutter, sidewalk, storm drain facilities within the City right-of-way and easements (excluding any Master Drainage Plan facilities and water lines), appurtenant to Palomar Airport Road construction, dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, modification of an existing traffic signal at Paseo Valindo, relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. 2. Improvement B - Faraday Avenue from Orion Street to Melrose Drive. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk, storm drain facilities within the right-of-way (excluding Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, new traffic signals and a modification of any existing traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the AcquisitionlFinancing Agreement. 3. Improvement C - Melrose Drive from Palomar Airport Road to the Vista City Limits (as shown on Drawing No. 399-4). Full width grading to prime arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to prime arterial standard width on either side of a raised median, median curb, median hardscaping and landscaping with irrigation, curb, gutter and sidewalk, storm drain facilities within the right-of-way (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non- reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal and a modification of an existing traffic signal at Palomar Airport Road (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation, and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. L13 Exhibit 3 4. Improvement D - Melrose Drive construction of right turn lane south of Palomar Airport Road. 5. Improvement E - El Fuerte from northerly terminus to the future extension of Faraday Avenue. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City) asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees). Sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. 6. Improvement F - Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of Palomar Airport Road. 1 2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 4 RESOLUTION NO. 2005-331 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 3 DECLARING THE RESULTS OF A SPECIAL ELECTION IN SUCH COMMUNITY FACILITIES DISTRICT AND IN IMPROVEMENT AREA 1 AND IMPROVEMENT AREA 2 THEREOF WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD, CALIFORNIA (the “City Council”), has previously undertaken proceedings to create and did establish a Community Facilities District and to designate two separate improvement areas therein 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 shall hereinafter be referred to as COMMUNITY FACILITIES DISTRICT NO. 3 (the “District”) and the improvement areas shall be designated as IMPROVEMENT AREA I and IMPROVEMENT AREA 2; and, WHEREAS, this City Council did call for and order to be held an election to submit to the qualified electors of each improvement area of the District a proposition relating to the levy of special taxes within such Improvement Areas and the issuance of bonds to be secured by the levy of special taxes within such Improvement Areas and a separate proposition relating to the establishment of an appropriations limit for the District; and, WHEREAS, at this time said election has been held and the measures voted upon and each such measure did receive the favorable 2/3’s vote of the qualified electors, and this City Council desires to declare the results of the election in accordance with the provisions of the Elections Code of the State of California. US 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 I9 20 21 22 23 24 25 26 27 28 Exhibit 4 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 3, HEREBY RESOLVES AS FOLLOWS: I. 2. Recitals. The above recitals are all true and correct. This City Council hereby receives and approves the CERTIFICATE OF ELECTION OFFICIAL AND STATEMENT OF VOTES CAST, as submitted by the City Clerk, acting in her capacity as the Election official, said Statement setting forth the number of votes cast in the election, the measures voted upon, and the number of votes given for and/or against the measures voted upon. A copy of said Certificate and Statement is attached hereto, marked Exhibit “A, referenced and so incorporated. 3. The City Clerk is hereby directed, pursuant to the provisions of the Elections Code of the State of California, to enter in the minutes the results of the election as set forth in said STATEMENT OF VOTES CAST. 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 4 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 8th day of November , 2005 by the following vote, to wit: AYES: Council Members Lewis, Hall, Rulchin, Packard, Sigafoose NOES: None ABSENT: None CLAUDE A. LEWIS, Mayor Attest: LORRAINE M. WOOD, City Clerk Exhibit 4 EXHIBIT “A‘ CERTIFICATE OF ELECTION OFFICIAL AND STATEMENT OF VOTES CAST STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO CITY OF CARLSBAD ) ) ss. The undersigned, ELECTION OFFICIAL OF THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, DOES HEREBY CERTIFY that pursuant to the provisions of Section 53326 of the Government Code and Division 12, commencing with Section 17000 of the Elections Code of the State of California, I did canvass the returns of the votes cast at the CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 SPECIAL ELECTION in said City, held November 8, 2005. I FURTHER CERTIFY that this Statement of Votes Cast shows the whole number of votes cast in said District in said City, and the whole number of votes cast for the Measures in said District in said City, and the totals of the respective columns and the totals as shown for the Measures are full, true and correct. Improvement Area 1 VOTES CAST ON PROPOSITION A: YES /y< VOTES CAST ON PROPOSITION 6: YES /?A No z No z I. 2. Improvement Area 2 3. VOTES CAST ON PROPOSITION C: YES 396 No 6 NO YES 4. VOTES CAST ON PROPOSITION D: Improvement Areas 1 & 2 sgf ;“o“ 7 5. WITNESS my hand this &)% day of %!,,?!&$Wb% , 2005. VOTES CAST ON PROPOSITION E: ELECTION OFFICIAL CITY OF CARLSBAD STATE OF CALIFORNIA 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 5 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 LEW 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 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 5 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 I 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 1 2 3 4 5 6 7 8 9 IO I1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 5 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 day of , 2005, by the following vote: AYES: NOES: ABSENT: ABSTAIN: APPROVED AS TO FORM AND LEGALITY: RONALD R. BALL, City Attorney ~~ ~ CLAUDE A. LEWIS, Mayor ATTEST: LORRAINE M. WOOD, City Clerk (SEAL) EXHIBIT A Exhibit 5 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 AcquisitionFinancing 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 5 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 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 1 that is exempt from the Special Tax pursuant Section F below. IA 1 of CFD No. 3 Page 2 of 11 53 Exhibit 5 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 ofproperty created by recordation ofa 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 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 ofLos 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 1 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 Exhibit 5 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$o 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: (I) 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: IA 1 of CFD No. 3 pay the Administrative Expenses, pay debt service on any outstanding Bonds, replenish any reserve funds attributable to IA 1 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 1, 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 11 Exhibit 5 EXHIBIT A Zone A Zone B “Taxable Property” means all property located within the boundaries of IA I that is not Exempt Property. $15,241.00 $7,265.00 LbZone” 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 1 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 5 EXHIBIT A 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. 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. F. EXEMPTIONS The CFD Administrator shall classifL 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 11 51 EXHIBIT A Exhibit 5 H. 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. 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 I. 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 5 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 (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 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 5 EXHIBIT A IA 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 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.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 5 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%) ofthe 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 EXHIBIT A Facilities Fund Requirement by Area Melrose Melrose South of PAR Federal Grant (Spread on percant d pad ares) Palomar Airport Road PAR Turn Lane to Melrose South Faraday El Fuerte Facilities Total Exhibit 5 Zone A $5,498,088 $5,498,088 City of Carlsbad Community Facilities District No. 3 (Faraday/Melrose) 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. Construction Costa Allocation mprovement Area 1 I lmprovementArea2 I Total District Pxntr Zone B I Percent] IA 2 I Percent I Total Cost I Percent I I I I I I I I $15,212,644 I I $25,092,385 I I I I $15,212,644 I I $25,092,385 I I $4,954,843 $226,7 16 ($3,000,000) $2,798.853 $1 00.000 $15,956,550 $4,954,843 $226,7 16 ($3,000,000) $2,798.853 $1 00.000 $15,956,550 Estimate of Bond Sizing Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement (Eat Q Max DS) Refund of Formation Deposit Contingency I Rounding I Principal Issued by Improvement Area: I 1 I I I I $4,055,423 I 21.91%1 $4,381,653 I 17.46%1 $15,212,644 I 60.63%1 $25,092,385 I 100.00% Series A Series B $952,125 $1,443,000 $2,395,125 $400,000 $500,000 $900,000 $133,333 $66,667 $200,000 $253,900 $384,800 $638,700 $1.074.901 $1.629.075 52.703.976 .. .. I $1,000 I $3,814 I $4,814 I $12,695,000 I I $19,240,000 I I $31,935,000 I IA 1 of CFD No. 3 Page 11 of 11 EXHIBIT B Exhibit 5 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 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 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 AcquisitionFinancing 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 5 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 Carls 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 2 that is exempt from the Special Tax pursuant Section F below. -- IA 2 of CFD No. 3 Page 2 of 10 Exhibit 5 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. %nprovement" 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 St 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, (0) 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" 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 6- IA 2 of CFD No. 3 Page 3 of 10 Exhibit 5 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 53340.1 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 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 5 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 $12,600.00 I 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. Afier 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% ofthe applicable Annual Maximum Special Tax; and IA 2 of CFD No. 3 Page 5 of IO Exhibit 5 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 transferldedication 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 5 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 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 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 (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 5 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 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 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 Exhibit 5 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 Assessorls 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.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 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 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 5 : Area 2 Percent EXHIBIT B Total District Total Cost Perceni $25,092,385 $4,954,843 $226,7 I6 ($3,000,000) $2,798,853 $1 00,000 915.956.550 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. Continaency I Rounding Construction Coats Allocation I I $1,000 I I $3,814 I $4,814 I Facilities 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 El Fuerte Facilities Total Improvement Area I Zone A I Percent I Zone B I I Estimate of Bond Sizing Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement(Est Q Msx os) Refund of Formation Deposit Series A 1 $9,879,741 I $952,125 $400,000 $1 33,333 $253,900 $1,074,901 I lmprovemei Percent1 IA2 I -. . I $4,055,423 I 60.63°/ol $25,092,385 I 100.009 Series B I $15,212,644 I $1,443,000 $500,000 $66,667 $384,800 $1,629,075 rota/ I $25,092,385 I $2,395,125 $900,000 $200,000 $638,700 $2,703,976 IA 1 of CFD No. 3 Page 10 of 10 PROOF OF PUBLICATION (2010 & 2011 C.C.P.) STATE OF CALIFORNIA County of San Diego I am a citizen of the United States and a resident of the County aforesaid: I am over the age of eighteen years and not a party to or interested in the above- entitled matter. I am the principal clerk of the printer of This space is for the County Clerk's Filing Stamp Proof of Publication of the City of Escondido, Court Decree numb 171349, for the County of San Diego, that tl notice of which the annexed is a printed copy (s published in each regular and entire issue of s in type not smaller than nonpariel), has WHCREAS this C Council desires to proceed to adopt its Resolution of Intention to initiate the roceedin s to by such District to indicate separate rgte and method of apportlohment of special taxes proposed to,be levied withii each Improverdent Area sufficient, to finance the, acquisition or coostruction of the Facilitles. the administration of,the District and the repayment pf any indebtedness incurred by the District for each Improvement Area, and to set a time and place for a publlc hearing relating to the establishment of such District; and newspaper and not in any supplement them f ~~~~~~~~~~~~~~~e~~~~~~~~~~~ I"h~~~r~~~~t~~~s~~~~~~ ~oo.Ms$~&~& the following dates, to-wit: WHEREAS, the Act ppvides that the City Council may Initiate pmceedings,to establish a community faciliies distrkt only If It has first considered and adopted local goals and policies concerning the use of the Act: and October 2Sth, 2005 I certify (or declare) under penalty of perjury tl the foregoing is true and correct. Dated at SAN MARCOS California This 28th Day of October, 2005 WHEREAS. thls Glty Council has previously adopted local goals and policies as required pursuant to the Act; and WHEREAS there has been presented to the C:i Council an AcquisitidFinandng Agreement and among the C and the wicants (the AcquistiordFinancing A reement") to establish the ms and cond&ons rsuant to $ch the Facii 18s ere to be congycted or acquired%om the proceeds of bonds issued by or for the &to be secured by special taxes levled wthin each Improvement Area. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES AS FOLLOWS: 1. &.Jp nf Procaedm. These proceedings are now initiated by thii City &ncil pursuant to the provisions of The above recitals are all true and correct. ~e~~~~~~~~~~~~~~~~~~~~ ,sl tEt%o~Y%AtK@% the District including the Improvement Areas therein and the properbes and parcels of land proposed to be subject to the levy of a special tax by the District is as folbws: Pursuant to Wenpent Code Section 53350. those portions of the District as shown on the Boundary Map as Improvement Afea o 1 and Improvement Am No. 2 respectively are hereby destgnatw as improvements areas. All J, mee 9s$or the purposes of a bond election and for the purpose of levying speaal taxes for the payment of su bonds s apply separately to each Improvement Area. 4. J$g@@ a=. The name of the proposed District shall be 'Community Facilities District No. 3.' forth in Attachment A attached ereto and incoporated herein by this re erence. A0 (0-Q- &@&%n It ofthe%atties is th mt ntion pro.cfwd?o of this Ci Co~lnciLt~fiaaaca be acquired or --Ad% The Facilities are facilities which this I islative bod is authorized b law to contribute revenue to or to construct own or operate. It is hereby further d3ermined tha! the proposed 4cilies ay necessa~~ to meet increased de: mands and needs placed upon the Ci as a result of development within the District. Signature Jane Allshouse NORTH COUNTY TIMES Lena1 Advertising The cost of acquirin or constructin the Facilities may include those Incidental Expenws as such term iqdefined in Government Code &on 53317f rela!M to the construction of the Facilflles includin but n@,be limited lo, Ihe costs of, plannin and designing t e,Fpcilities and any other expenses incidental to thtacquistion. construction, comp!&on and ispection of the FaciiLes. v Y r- r--- - I I -I ~ ,, .-.~pva.- 4. Name of District. The name of the proposed District shall be "Community Facilities District No. 3." 5. Description of th F cili ies It is the inten!ion of this Cit Council to finance the acquisition or construction of the FaEilitE. Tened&&i6n of the Facilities pro osed & be. acquired or constructed through financing provided by the DistriA is set forth in Attachment A altached{ereto and incorporated herein by this reference. - The Facilities are facilities which this le islative bod is authorized bq law to contribute revenue to or to construct own or operate. It is hereby further degermined tha! the proposed ,acilities are necessary to meet increased de: mands and needs placed upon the City as a result of development within the Distnct. The cost of acquirin or constructin the Facilities may include those Incidental Expenses as such term is, defined in Government Code gection 53317$ related to the construction of the Facilities including but notpe limited to, the costs of, planning and designing t e ,Facilities and any other expenses incidental to the' acquisition, construction, completion and inspection of the Facilities. Signature 1 Jane Allshouse NORTH COUNTY TIMES .. Legal Advertising 6 Special & It is hereb further pro osed that. except where funds are otherwise available a separate special taxshme adhorized to f!e levied witRin each Improvement Area sulficient to a finance the acquisition or con- struction of the orooorlionate share of the cost of sucn Facilities allocated to eacb hxovement Area [ai oav debt service on indetitedness incurred by the District for each Improvement Area (c) fund 6 resetve fund and &i itslized interest for such indebtedness and d pay Incidental Expenses including, bh not limited lo, the pro ortionare share all costs associated with the establisLment of the District allocated to each Improvement Area tie issuance and administration of bonds to be issued for the District for each Improvement Area includin the payment of any rebate obligation due and owing to the federal government, the determination of thA amoungof any special taxes to be levied within each Improvement Area the costs of collecting such special taxes and costs otherwise incurred in order to carry out the authorized purpbses of the District Such special taxes shall be secured by recordation of a continuina lien aaainst all non-exemot real orooertv within each resoective lmorovement Area and will be levied annuall kithin tKe boundaries 01 each respecfive Improvement Area For fuitner articulars as to the rate and melhodYol apportionment of the proposed special tax applicable to eacn Im rovement &ea (the 'Rates and Methods of Apportionment reference is made to the anached and Incorporated A8achment B. which sets forth in sulficient detail tne rate ana method 01 apportionment of each speclal tax to allow each landowner or resident within each respectwe Improvement Area to clearly estmate the maximum amount that such person will have to pay The special taxes herein proposed to the extent possible shall be collected in the same manner as ad valorem pro erty taxes or in such other manner as this City Council shall determine including without limitation direct billing of tte affected properly owners and shall be sub ect to the same penalties procedure. sale and lien prlority in any case of del,nquency as aiglicable for ad valorem \axes Any speclal taxes fhat may not be collected on the County 01 San Die o tax rol sha e collected through a direct billing procedure by the Treasdrer of the City acting for and on oehall c! tne Distrct The special lax ooli ation for an parcel may be prepaid and permanently satisfieo in whole or in pan pursuant lo the provnslons there?or containedYin the applicable Rate and Method of Apportionment If a written majority prptest.against the.establishment of the District is filed, the proceedin s shall be abandoned. If such,majorit protest !s Imted to certain Facilities or portions of a special tax, those FaciliEes or that portion of such special tax s\aS be eliminated by the City Council. B leclion If lollowing the public hearin described in Sect,on 7 above the Cit Council determines to establish theb and proposes to levy a s ecialgax within each Improvement Area the kity Council shall then submit the levy of !ne special faxes to the qua&& electors of each Improvement Area If at least twelve (12) persons who need not necessarilv oe the same twelve 112) oersons have been reoistered to vote within an lmorovement Area lor each of the ninety (90) days precedin the close of the ublic hearing, the vote shall be by regisfered voters of such Improvement Area, with each voter Eavi, one (1) vofe Otherwiw, the vote shall be by the landowners of such Improvement Area who were the owners 4 record at the close of the public hearing with each such landowner or lbe authonzed representative thereof. having one (1) vote for each acre or portion of an acre of land owned within srrch Improvement Area Notice of the time and place of the public hearin shall be given by the City Clerk by causin the publi- Notice of Public Hearin in the legal1 designate3 news aper of general circulation such pu%lication to be pursuant to Section 6061 of the aovernment Zode, with such pugication to be completed at (east segen (7) days prior to the date set for the public hearing. The Community Facilities Distrlct Re ort upon its reparation shall be submitted to this Cit Council for review and wch report shad be made a part of t$e r'ecord of #e publc hearing on the Resolution of Inyention to establish sucn sw&red'thereb the bond or other obligation to be take'n at par and credit to be given for the accrued interest shown 1 thereby compuyed to the date of tender 12. proval of Acquisition/Financlng Agreement Tne form of tne Acquisitiontfinancing Agreement herewith bm%enappcovGIsu s an ia y In e fom=iitted The Ma or is hereby authorized to execute the'final form such agreement on behalf of the City The City Manager subjecyto tne review of the Ci Attorney and Best Best ?Kh er LLP as Bond to:nselllis a:horized to approve changes in such agreement jeemed to be in tne best lnteres% of the City and tne District. approval of such changes to be evibenced by the execution 01 swh agreement In ryldftion pursuant to the Ac uisition/Financing .Agreement the Applicants shall construct and install certain.of the Faalitles ind the District shall qhrough the acquisition of such Facilities repa the funds expended by the applicable Applicant for such purpose orlvalue or cost of the work in-kind, whicheber is yes. PASSED APPROVED AND ADOPTED at a Re ular Meeting of the City Council of the City of Carlsbad on the 4th day d Odtober. 2005 by the following vote, to wi! AYES: Council Members Lewis, Hall, Packard, Sigafoose NOES None ABSENT: Council Member Kulchin lY Claude A Lewis Attest /s/ Lorraine M Wood Mayor City Clerk PROOF OF PUBLICATION (2010 & 2011 C.C.P.) STATE OF CALIFORNIA County of San Diego I am a citizen of the United States and a resident of the County aforesaid: I am over the age of eighteen years and not a party to or interested in the above- entitled matter. I am the principal clerk of the printer of North County Times Formerly known as the Blade-Citizen and The Times-Advocate and which newspapers have been adjudicated newspapers of general circulation by the Superior Court of the County of San Diego, State of California, for the City of Oceanside and the City of Escondido, Court Decree number 171349, for the County of San Diego, that the notice of which the annexed is a printed copy (set in type not smaller than nonpariel), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit: October 2Sth, 2005 I certify (or declare) under penalty of perjury that the foregoing is true and correct. Dated at SAN MARCOS California This 28'h Day of October, 2005 1Lo www Signature Jane Allshouse NORTH COUNTY TIMES Legal Advertising This space is for the County Clerk's Filing Stamp Proof of Publication of NOTICE IS HEREBY GIVEN THAT A P BLlC HEARING HAS BEEN SCHE ULED FOR NOVEMBER 8 2005, AT THE HOYR OF 6:00 O'CLOCK P.M. IN THE WEGU. LAR MEETING PLAC OF THE CITY COUNCIL BEING COUNCIL CHAMBERS CITY HALL 1200 CA$LSBAD VILLAGE DRIVE CARLSBAD CALIFORNIA Ai WHICH TI& THE CITY OUNCIL OF TH CITY b~ CARLSBAD WILL HEAR ALL EVIDENCE AND TEST~M~NY BY ALL INTZRESTED PERSONS PROPERTY OWN- A S~PARATE BONDED INDEBT~DNESS OF COMMUNITY FACILITIES DISTRICT ERS VOTERS AND TAXPAYERS REGARDING THE AUTHORiZATlON TO INCUR NO. 3 FOR IMPROVEMENT AREA 1 AND IMPROVEMENT AREA 2 THEREOF TO BE SECURED BY THE LEVY OF SPECIAL TAXES WITHIN EACH RESPECTIVE IMPROVEMENT AREA TO FINANCE CERTAIN PUBLIC FACILITIES. FOR PARTIC- ULARS, REFERENCE IS MADE'TO THE RESOLUTION AS SET FORTH BELOW: RESOLUTION NO. 2005 - 302 I RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD CALIFOR. NIA DECLARING THE NECESSITY OF COMMUNITY FACILITIES DISTRICT NO. 3 PROVEMENT AREA NO. 1 AND IMPROVEMENT AREA NO. 2 THEREOF TO BE SECURED BY SPECIAL T XES LEVIED WITHIN EACH SUCH IMPROVEMEN1 LIC FACILITIES OF ?HE CITY OF CARLSBAD TO INCUR A BONDED INDEBTEDNESS FOR IM. AREA TO PAY FOR THE Abui~iTiON OR CONSTRUCT~ON OF CERTAIN PUB- WHEREAS, it is the. intention of this legislative body to finance the acquisition or con- struction of the Fawlities from the proceeds of bonds to be issued by the District for each Improvement Area such bonds to be secured by special taxes, to be levied on taxable property within the applicable Improvement Area, all as authorized pursuant to the Act. NOW THEREFORE THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESdLVES AS FOLLOWS: 1. Recital% The above recitals are all true and correct. 2. D I r ion of public onveni n & ecessi . This Ci Council declares that the*vTnience fkiddfrequirewbonded in3ebtedness be incurred by tRe District for each Improvemen Area to finance the acquisition or construction of the Facilities. % 'E %~rWi 2% P~~~O,~~"~~~~~~~~~ of the Facilities fund a reserve fund fund capitalized interest and pay for the costs of fomin~ the Distrjct, issuin the bodds and administering the bonds and the Districi during he initial fiscal yearlollowing the issuance of the bonds. $bnmmf$MsP&r %%Fro- mih~nX%20% and estimated costs incidental to, or connecte8with. the accompliskment of the pur- pose lor which the indebtedness IS proposed to be incurred as authorized pursuant io he Act. The maximum rlncipal amount of the indebtedness proposed to be authc- rized to be issued by Disgict for each Improvement Area is as follows. Improvement Area No. 1 - $14,000,000 Improvement Area No. 2 - $21,000,000 fl . NOTICE IS GIVEN THAT on November 8 2005 at the hour of 6:OO z'cwp.%?i%e regular meeting lace of the Ci Council'bein 'the Council Cham- bers, City.Hall, located at 1200 Carysbad Village &,e, Carlsba? Calilornia. a public hearina will be held on the intention of this leaislahve bodv to incur a bonded indebt- ednesg of the Dklrkt for each Imoroveme5t Area for fhe I)urDoses described ir Sectmn 3 above such indebtedwid to be secured tho levy' of spew1 taxes with each respective improvement Area At the time and%ace fixed for said public heanng any penons interested including ersons owning property within the District may appear and present an matters reyabn to the proposed intention and necessity for incurnng a bonded indebdness of the 8istrlct for the Improvement Areas 6. o e P I Hearing Notice of the time and place ofthe public hearing,shall be lven &%e7!$%lXFy causing the publption of a Notice o! Public Hearin in the?egall desi na ed newspaper of general circulation such publication pursuang to Section &l ohhe Government Code with such publidation to be completed at least seven (7) days pnw to the date set for the publlc heanng. PASSED, APPROVED AND ADOPTED at a Re lar City of Carkbad on the 4th day of October, 200!!%y AYES: Council Members Lewis, Hall, Packard, Sigafwse NOES None ABSENT Council Member Kukhin /s/ Claude A. Lewis Attest: /d Lorraine M. Wopd Mayor City Clerk A COPY OF EXHIBIT A TO THE RESOLUTION NO. 2005-302 WHICH IS THE DE- CRlPTlON OF THE FACILITIES REFERRED TO THEREIN IS ON FILE IN THE 8 FFICE OF THE CITY CLERK OF THE CITY OF CARLSBAD. 1200 CARLSBAO VILLAGE DRIVE CARLSBAD CALIFORNIA AND WILL BE AVAILABLE FOR IN. SPECTION DURkG NO AL'BUSINESS HOURS OF SUCH OFFICE NcT 1867620 October w2005 NOTICE OF PUBLIC HEARING OF THE CITY COUNCIL OF THE CITY OF CARLSBAD TO CONSIDER THE ESTABLISHMENT OF COMMUNITY FACILITIES DISTRICT NO. 3 OF THE CITY OF CARLSBAD AND THE AUTHORIZATION TO LEVY A SPECIAL TAX THEREIN NOTICE IS HEREBY GIVEN THAT A PUBLIC HEARING HAS BEEN SCHEDULED FOR NOVEMBER 8, 2005, AT THE HOUR OF 6:OO O’CLOCK P.M., IN THE REGULAR MEETING PLACE OF THE CITY COUNCIL BEING COUNCIL CHAMBERS, CITY HALL, 1200 CARLSBAD VILLAGE DRIVE, CARLSBAD, CALIFORNIA, AT WHICH TIME THE CITY COUNCIL, WILL HEAR ALL EVIDENCE AND TESTIMONY BY ALL INTERESTED PERSONS, PROPERTY OWNERS, VOTERS AND TAXPAYERS, REGARDING THE ESTABLISHMENT OF A COMMUNITY FACILITIES DISTRICT FOR THE PURPOSE OF FINANCING THE ACQUISITION OR CONSTRUCTION OF CERTAIN TYPES OF PUBLIC FACILITIES TO BE FINANCED THROUGH THE LEVY OF A SPECIAL TAX. FOR FURTHER INFORMATION, REFERENCE IS MADE TO THE RESOLUTION AS SET FORTH BELOW: RESOLUTION NO. 2005 - 301 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DECLARING ITS INTENTION TO ESTABLISH COMMUNITY FACILITIES DISTRICT NO. 3, TO DESIGNATE TWO IMPROVEMENT AREAS THEREIN, TO AUTHORIZE THE LEVY OF A SEPARATE SPECIAL TAX WITHIN EACH IMPROVEMENT AREA TO FINANCE THE ACQUISITION OR CONSTRUCTION OF CERTAIN PUBLIC FACILITIES; DIRECTING THE PREPARATION OF A COMMUNITY FACILITIES DISTRICT REPORT AND APPROVING AN ACQUISITION/FINANCING AGREEMENT PERTAINING TO SUCH PUBLIC FACILITIES WHEREAS, the City Council of the City of Carlsbad (the “City”), CALIFORNIA (“City Council”), pursuant to the request of Palomar Forum Associates L.P., a California limited partnership (“Forum”), Fenton Raceway LLC, a California limited liability company (“Raceway”), Carlsbad Oaks North Partners, L.P., a California limited partnership (“Oaks North”) and Techbilt Construction Corp., a California corporation (collectively, the “Applicants”), the owners and/or developers of certain real property located in the City, desires to initiate proceedings to consider the establishment of a community facilities district and the designation of two improvement areas therein 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”), to include such property and to finance the acquisition or construction of the public facilities described in Attachment A attached hereto and incorporated herein by this reference (the “Facilities”). This community facilities district is hereby designated as Community Facilities District No. 3 (the “District”) and the improvement areas are hereby designated as Improvement Area No. 1 and Improvement Area Notice of Public Hearing - Formation No. 2 respectively (each, an “Improvement Area” and collectively, the “Improvement Areas”); and WHEREAS, this City Council desires to proceed to adopt its Resolution of Intention to initiate the proceedings to consider the establishment of such District, to designate the Improvement Areas therein, to set forth the proposed boundaries for such District and the Improvement Areas therein, to indicate the Facilities proposed to be financed by such District, to indicate separate rate and method of apportionment of special taxes proposed to be levied within each Improvement Area sufficient to finance the acquisition or construction of the Facilities, the administration of the District and the repayment of any indebtedness incurred by the District for each Improvement Area, and to set a time and place for a public hearing relating to the establishment of such District; and WHEREAS, the Act provides that the City Council may initiate proceedings to establish a community facilities district only if it has first considered and adopted local goals and policies concerning the use of the Act; and WHEREAS, this City Council has previously adopted local goals and policies as required pursuant to the Act; and WHEREAS, there has been presented to the City Council an Acquisitioflinancing Agreement by and among the City and the Applicants (the “AcquisitiodFinancing Agreement”) to establish the terms and conditions pursuant to which the Facilities are to be constructed or acquired from the proceeds of bonds issued by or for the District to be secured by special taxes levied within each Improvement Area. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES. AS FOLLOWS: 1. Recitals. The above recitals are all true and correct. 2. Initiation of Proceedings. These proceedings are now initiated by this City Council pursuant to the provisions of the Act. 3. Boundaries Of District and Designation of Improvement Areas. It is the intention of this City Council to establish the boundaries of the proposed District. A description of the proposed boundaries of the territory to be included in the District including the Improvement Areas therein and the properties and parcels of land proposed to be subject to the levy of a special tax by the District is as follows: All that property as shown on a map as previously approved by this City Council (the “Boundary Map”), such map designated as “BOUNDARY MAP OF COMMUNITY FACILITIES DISTRICT NO. 3, CITY OF CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA,” a copy of which is on file in the Office of the City Clerk and shall remain open for public inspection. Notice of Public Hearing - Formation Pursuant to Government Code Section 53350, those portions of the District as shown on the Boundary Map as Improvement Area No. 1 and Improvement Area No. 2 respectively are hereby designated as improvements areas. All proceedings for the purposes of a bond election and for the purpose of levying special taxes for the payment of such bonds shall apply separately to each Improvement Area. 4. Name of District. The name of the proposed District shall be “Community Facilities District No. 3.” 5. Description of the Facilities. It is the intention of this City Council to finance the acquisition or construction of the Facilities. A general description of the Facilities proposed to be acquired or constructed through financing provided by the District is set forth in Attachment A attached hereto and incorporated herein by this reference. The Facilities are facilities which this legislative body is authorized by law to contribute revenue to or to construct, own or operate. It is hereby further determined that the proposed Facilities are necessary to meet increased demands and needs placed upon the City as a result of development within the District. The cost of acquiring or constructing the Facilities may include those Incidental Expenses as such term is defined in Government Code Section 533 17(e) related to the construction of the Facilities including, but not be limited to, the costs of planning and designing the Facilities and any other expenses incidental to the acquisition, construction, completion and inspection of the Facilities. 6. Special Tax. It is hereby further proposed that, except where funds are otherwise available, a separate special tax shall be authorized to be levied within each Improvement Area sufficient to (a) finance the acquisition or construction of the proportionate share of the cost of such Facilities allocated to each Improvement Area, (a) pay debt service on indebtedness incurred by the District for each Improvement Area, (c) fund a reserve fund and capitalized interest for such indebtedness and (d) pay Incidental Expenses including, but not limited to, the proportionate share all costs associated with the establishment of the District allocated to each Improvement Area, the issuance and administration of bonds to be issued for the District for each Improvement Area, including the payment of any rebate obligation due and owing to the federal government, the determination of the amount of any special taxes to be levied within each Improvement Area, the costs of collecting such special taxes, and costs otherwise incurred in order to carry out the authorized purposes of the District. Such special taxes shall be secured by recordation of a continuing lien against all non-exempt real property within each respective Improvement Area and will be levied annually within the boundaries of each respective Improvement Area. For fbrther particulars as to the rate and method of apportionment of the proposed special tax applicable to each Improvement Area (the “Rates and Methods of Apportionment”) reference is made to the attached and incorporated Attachment B, which sets forth in sufficient detail the rate and method of apportionment of each special tax to allow each landowner or resident within each respective Improvement Area to clearly estimate the maximum amount that such person will have to pay. Notice of Public Hearing - Formation The special taxes herein proposed, to the extent possible, shall be collected in the same manner as ad valorem property taxes or in such other manner as this City Council shall determine, including without limitation, direct billing of the affected property owners, and shall be subject to the same penalties, procedure, sale and lien priority in any case of delinquency as applicable for ad valorem taxes. Any special taxes that may not be collected on the County of San Diego tax roll shall be collected through a direct billing procedure by the Treasurer of the City, acting for and on behalf of the District. The special tax obligation for any parcel may be prepaid and permanently satisfied in whole or in part pursuant to the provisions therefor contained in the applicable Rate and Method of Apportionment. 7. Public Hearing NOTICE IS GIVEN THAT on November 8,2005, at the hour of 6:OO o'clock p.m., in the regular meeting place of the City Council being the Council Chambers, City Hall, located at 1200 Carlsbad Village Drive, Carlsbad, California, a public hearing will be held where this City Council will consider the establishment of the proposed District, the rate and method of apportionment of the special tax proposed to be levied within each Improvement Area, and all other matters as set forth in this Resolution of Intention. At the above-mentioned time and place for public hearing any persons interested, including taxpayers and property owners may appear and be heard. The testimony of all interested persons for or against the establishment of the District, the extent of the District, or the financing of the Facilities, will be heard and considered. Any protests may be made orally or in writing, however, any protests pertaining to the regularity or sufficiency of the proceedings shall be in writing and shall clearly set forth the irregularities and defects to which the objection is made. All written protests shall be filed with the City Clerk of the City on or before the time fixed for the public hearing. Written protests may be withdrawn in writing at any time before the conclusion of the public hearing. If a written majority protest against the establishment of the District is filed, the proceedings shall be abandoned. If such majority protest is limited to certain Facilities or portions of a special tax, those Facilities or that portion of such special tax shall be eliminated by the City Council. 8. Election. If, following the public hearing described in Section 7 above, the City Council determines to establish the District and proposes to levy a special tax within each Improvement Area, the City Council shall then submit the levy of the special taxes to the qualified electors of each Improvement Area. If at least twelve (12) persons, who need not necessarily be the same twelve (12) persons, have been registered to vote within an Improvement Area for each of the ninety (90) days preceding the close of the public hearing, the vote shall be by registered voters of such Improvement Area, with each voter having one (1) vote. Otherwise, the vote shall be by the landowners of such Improvement Area who were the owners of record at the close of the public hearing, with each such landowner or the authorized representative thereof, having one (1) vote for each acre or portion of an acre of land owned within such Improvement Area. 9. Notice. Notice of the time and place of the public hearing shall be given by the City Clerk by causing the publication of a Notice of Public Hearing in the legally designated Notice of Public Hearing - Formation newspaper of general circulation, such publication to be pursuant to Section 6061 of the Government Code, with such publication to be completed at least seven (7) days prior to the date set for the public hearing. 10. Community Facilities District Report. The City Manager, pursuant to the provisions of Section 53321.5 of the Government Code of the State of California, is hereby directed and ordered to prepare or to cause the preparation of a report to provide more detailed information relating to the proposed District, the proposed Facilities to be financed through the District, and estimate of the cost of providing such facilities (the “Community Facilities District Report”). The Community Facilities District Report, upon its preparation, shall be submitted to this City Council for review, and such report shall be made a part of the record of the public hearing on the Resolution of Intention to establish such District. 11. Reservation of Rights to Authorize Tender of Bonds. The City Council reserves to itself, in its capacity as the legislative body of the District if formed, the right and authority to allow any interested owner of property within an Improvement Area, subject to the provisions of Government Code Section 53344.1 and to such conditions as this City Council may impose, and any applicable prepayment penalties as may be described in the bond indenture or comparable instrument or document, to tender to the Treasurer, acting for and on behalf of the District, in full payment or partial payment of any installment of the special taxes or the interest or penalties thereon which may be due or delinquent, but for which a bill has been received, any bond issued for such Improvement Area or other obligation secured thereby, the bond or other obligation to be taken at par and credit to be given for the accrued interest shown thereby computed to the date of tender. 12. Approval of the Acquisitioflinancing Agreement. The form of the AcquisitiodFinancing Agreement, herewith submitted, is approved substantially in the form submitted. The Mayor is hereby authorized to execute the final form of such agreement on behalf of the City. The City Manager, subject to the review of the City Attorney and Best Best & Krieger LLP, as Bond Counsel, is authorized to approve changes in such agreement deemed to be in the best interests of the City and the District, approval of such changes to be evidenced by the execution of such agreement. 13. Advances of Funds or Work-In-Kind. At any time either before or after the formation of the District, the City Council may accept advances of funds or work-in-kind from any source, including, but not limited to, private persons or private entities and may provide, by resolution, for the use of those funds or that work-in-kind for any authorized purpose, including, but not limited to, paying any cost incurred by the City in creating the District. The City may enter into an agreement, by resolution, with the person or entity advancing the funds or work-in- kind, to repay all or a portion of the funds so advanced, or to reimburse the person or entity for the value, or cost, whichever is less, of the work-in-kind, as determined by the City Council. The Applicants have provided for such advances for the payment of all initial consulting and administration costs and expenses related to the proceedings to consider the formation of the District and to subsequently authorize the issuance and sale of bonds for the District. Such ’ Notice of Public Hearing - Formation advances are subject to reimbursement as permitted pursuant to the Act. No such reimbursement obligation shall constitute a debt or liability of the City. In addition, pursuant to the AcquisitiodFinancing Agreement the Applicants shall construct and install certain of the Facilities and the District shall, through the acquisition of such Facilities, repay the funds expended by the applicable Applicant for such purpose or value or cost of the work in-kind, whichever is less. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 4th day of October, 2005 by the following vote, to wit: AYES: Council Members Lewis, Hall, Packard, Sigafoose NOES: None ABSENT: Council Member Kulchin Is/ Claude A. Lewis CLAUDE A. LEWIS, Mayor Attest: Is/ Lorraine M. Wood LORRAINE M. WOOD, City Clerk COPIES OF ATTACHMENT A TO RESOLUTION NO. 2005-301 WHICH IS THE DESCRIPTION OF THE FACILITIES AND ATTACHMENT B TO SUCH RESOLUTION WHICH IS THE RATES AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR EACH IMPROVEMENT AREA WITHIN COMMUNITY FACILITIES FOR DISTRICT NO. 3 ARE ON FILE IN THE OFFICE OF THE CITY CLERK OF THE CITY OF CARLSBAD, 1200 CARLSBAD VILLAGE DRIVE, CARLSBAD, CALIFORNIA AND WILL BE AVAILABLE FOR INSPECTION DURING NORMAL BUSINESS HOURS OF SUCH OFFICE. PWAU20676.1 Notice of Public Hearing - Formation NOTICE OF PUBLIC HEARING OF THE CITY COUNCIL OF THE CITY OF CARLSBAD TO CONSIDER THE AUTHORIZATION TO INCUR A SEPERATE BONDED INDEBTEDNESS OF COMMUNITY FACILITIES DISTRICT NO. 3 OF THE CITY OF CARLSBAD FOR IMPROVEMENT AREA 1 AND IMPROVEMENT AREA 2 THEREOF NOTICE IS HEREBY GIVEN THAT A PUBLIC HEARING HAS BEEN SCHEDULED FOR NOVEMBER 8, 2005, AT THE HOUR OF 6:OO O’CLOCK P.M., IN THE REGULAR MEETING PLACE OF THE CITY COUNCIL BEING COUNCIL CHAMBERS, CITY HALL, 1200 CARLSBAD VILLAGE DRIVE, CARLSBAD, CALIFORNIA, AT WHICH TIME THE CITY COUNCIL OF THE CITY OF CARLSBAD WILL HEAR ALL EVIDENCE AND TESTIMONY BY ALL INTERESTED PERSONS, PROPERTY OWNERS, VOTERS AND TAXPAYERS, REGARDING THE AUTHORIZATION TO INCUR A SEPARATE BONDED INDEBTEDNESS OF COMMUNITY FACILITIES DISTRICT NO. 3 FOR IMPROVEMENT AREA 1 AND IMPROVEMENT AREA 2 THEREOF TO BE SECURED BY THE LEVY OF SPECIAL TAXES WITHIN EACH RESPECTIVE IMPROVEMENT AREA TO FINANCE CERTAIN PUBLIC FACILITIES. FOR PARTICULARS, REFERENCE IS MADE TO THE RESOLUTION AS SET FORTH BELOW: RESOLUTION NO. 2005 - 302 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DECLARING THE NECESSITY OF COMMUNITY FACILITIES DISTMCT NO. 3 OF THE CITY OF CARLSBAD TO INCUR A BONDED INDEBTEDNESS FOR IMPROVEMENT AREA NO. 1 AND IMPROVEMENT AREA NO. 2 THEREOF TO BE SECURED BY SPECIAL TAXES LEVIED WITHIN EACH SUCH IMPROVEMENT AREA TO PAY FOR THE ACQUISITION OR CONSTRUCTION OF CERTAIN PUBLIC FACILITIES WHEREAS, the City Council of the City of Carlsbad, California (the “City Council”), pursuant to the request of pursuant to the request of Palomar Forum Associates L.P., a California limited partnership (“Forum”), Fenton Raceway LLC, a California limited liability company (“Raceway”), Carlsbad Oaks North Partners, L.P., a California limited partnership (“Oaks North”) and Techbilt Construction Corp., a California corporation, the owners andor developers of certain real property located in the City, has initiated proceedings to establish a community facilities district and to designate two improvement areas therein pursuant to the termssand 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”), to include such property and to finance the acquisition or construction of the public facilities described in Exhibit A attached hereto and incorporated herein by this reference (the “Facilities”). This Community Facilities District shall hereinafter be referred to as Community Facilities District No. 3 (the “District”) and the improvement areas shall be designated as Improvement Area No. 1 and Improvement Area No. 2 respectively (each, an “Improvement Area” and collectively, the “Improvement Areas”); and, Notice of Public Hearing - Bonded Indebtedness WHEREAS, it is the intention of this legislative body to finance the acquisition or construction of the Facilities from the proceeds of bonds to be issued by the District for each Improvement Area, such bonds to be secured by special taxes to be levied on taxable property within the applicable Improvement Area, all as authorized pursuant to the Act. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES AS FOLLOWS: 1. Recitals. The above recitals are all true and correct. 2. Declaration of Public Convenience and Necessity. This City Council declares that the public convenience and necessity requires that a bonded indebtedness be incurred by the District for each Improvement Area to finance the acquisition or construction of the Facilities. 3. Purpose of the Proposed Indebtedness. The purpose of the proposed indebtedness of the District for each Improvement Area is to finance the acquisition or construction of the Facilities, fund a reserve fund, fund capitalized interest and pay for the costs of forming the District, issuing the bonds and administering the bonds and the District during the initial fiscal year following the issuance of the bonds. 4. Maximum Principal Amount of the Proposed Indebtedness. The amount of the bonded indebtedness of the District for each Improvement Area may include all costs and estimated costs incidental to, or connected with, the accomplishment of the purpose for which the indebtedness is proposed to be incurred as authorized pursuant to the Act. The maximum principal amount of the indebtedness proposed to be authorized to be issued by District for each Improvement Area is as follows: Improvement Area No. 1 - $14,000,000 Improvement Area No. 2 - $21,000,000 5. Public Hearing. NOTICE IS GIVEN THAT on November 8,2005, at the hour of 6:OO o'clock p.m., in the regular meeting place of the City Council being the Council Chambers, City Hall, located at 1200 Carlsbad Village Drive, Carlsbad, California, a public hearing will be held on the intention of this legislative body to incur a bonded indebtedness of the District for each Improvement Area for the purposes described in Section 3 above, such indebtedness to be secured by the levy of special taxes within each respective Improvement Area. At the time and place fixed for said public hearing any persons interested, including persons owning property within the District, may appear and present any matters relating to the proposed intention and necessity for incurring a bonded indebtedness of the District for the Improvement Areas. 6. Notice of the Public Hearing. Notice of the time and place of the public hearing shall be given by the City Clerk by causing the publication of a Notice of Public Hearing in the legally designated newspaper of general circulation, such publication pursuant to Section 6061 of Notice of Public Hearing - Bonded Indebtedness the Government Code, with such publication to be completed at least seven (7) days prior to the date set for the public hearing. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 4th day of October, 2005 by the following vote, to wit: AYES: Council Members Lewis, Hall, Packard, Sigafoose NOES: None ABSENT: Council Member Kulchin /s/ Claude A. Lewis CLAUDE A. LEWIS, Mayor Attest: /s/ Lorraine M. Wood LORRAINE M. WOOD, City Clerk A COPY OF EXHIBIT A TO THE RESOLUTION NO. 2005-302 WHICH IS THE DESCRIPTION OF THE FACILITIES REFERRED TO THEREIN IS ON FILE IN THE OFFICE OF THE CITY CLERK OF THE CITY OF CARLSBAD, 1200 CARLSBAD VILLAGE DRIVE, CARLSBAD, CALIFORNIA AND WILL BE AVAILABLE FOR INSPECTION DURING NORMAL BUSINESS HOURS OF SUCH OFFICE. PWAU20674.1 Notice of Public Hearing - Bonded Indebtedness c c f c r r r c c c r r r r f c c c c c c c c c r r c c c c c c c r r r r c r COMMUNITY FACILITIES DISTRICT REPORT MELLO-ROOS COMMUNITY FACILITIES ACT OF 1982 COMMUNITY FACILITIES DISTRICT NO. 3 IMPROVEMENT AREAS 1 AND 2 OF THE CITY OF CARLSBAD Prepared for: City of Carlsbad 163 5 Faraday Avenue Carlsbad, California 92008-73 14 November 8,2005 SPECIAL DISTRICT FINANCING & ADMINISTRATION 437 W. Grand Avenue Escondido CA 92025 760 -233 *2630 Fax 233 -2631 TABLE OF CONTENTS I. 11. 111. IV. V. VI. VII. INTRODUCTION .................................................................................. PROJECT DESCRIPTION ......................................................................... A. Description of Proposed Public Improvements .................................. BONDED INDEBTEDNESS AND INCIDENTAL EXPENSES .................................... A. Projected Bond Sale ................................................................ B. Incidental Bond Issuance Expenses to be Included in the Proposed Bonded C. Incidental Expenses to be Included in the Annual Levy of Special Taxes DESCRIPTION AND ESTIMATED COST OF PROPOSED FACILITIES ....................... B. Estimated Cost of Proposed Public Improvements .............................. Indebtedness for Improvement Areas 1 and 2.. .................................. for Improvement Areas 1 and 2.. .................................................. RATE ANDMETHODOFAPPORTIONMENTOFTHE SPECIALT AX..................... A. Explanation for Special Tax Apportionment .................................... B. Actual Special Tax Rates .......................................................... C. Accuracy of Information.. ......................................................... BOUNDARIES OF COMMUNITY FACILITIES DISTRICT ................................... GENERAL TERMS AND CONDITIONS ....................................................... A. Substitution Facilities .............................................................. B. Bonds ................................................................................. C. Appeals and Interpretation Procedure ............................................ D. Special Terms and Conditions.. ................................................... Page EXHIBITS Exhibit A Description of Facilities Exhibit B Exhibit C Estimate of Cost Exhibit D Amendment to Boundary Map Rate and Method of Amortionment 1 2 2 2 3 4 4 4 5 5 6 6 6 7 7 7 7 7 8 F - I. INTRODUCTION WHEREAS, the City Council of the City of Carlsbad (the “City”) did, pursuant to the provision 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 (hereinafter referred to as the “Act”), and specifically Section 53321.5 thereof, expressly order the filing of a written “Report” with the legislative body of the proposed Community Facilities District. This Community Facilities District being Community Facilities District No. 3 shall hereinafter be referred to as “CFD No. 3”; and WHEREAS, the Resolution, as defined below, ordering the preparation of the Report did direct that such Report generally contain the following: A. A description of the public capital facilities proposed to be financed through the District; B. A general description of the boundaries of the District; C. A cost estimate setting forth the costs and expenses for providing the public facilities; D. The Rate and Method of Apportionment of the Special Tax (the “RMA”) in sufficient detail to allow each landowner or resident within the proposed District to estimate the maximum amount of payment; E. General terms and conditions relating to the proceedings. For particulars, reference is made to the Resolution of Intention, Resolution No. 2005-301, adopted by the City Council on October 4, 2005, for the District, which directed the preparation of this Report. NOW, THEREFORE, the undersigned authorized representative of the City of Carlsbad, the appointed Special Tax Consultant and responsible person directed to prepare the Report, pursuant to the provisions of the Act, does hereby submit the following data: Communiv Facilities District No. 3 Page I November 8,2005 11. PROJECT DESCRIPTION This Community Facilities District No. 3 (“CFD No. 3”) encompasses approximately 585.67 gross acres of land located in the North East quadrant of the City of Carlsbad. Refer to Exhibit “B” for a reduced copy of the Amendment to Boundary Map. Of this acreage, approximately 304.90 acres (the lot area only) is expected to be developed for planned industrial development. This Community Facilities District is divided into two separate areas, Improvement Area 1 and Improvement Area 2. Improvement Area 1 Improvement Area 1 consists of approximately 190.09 gross acres of land in CFD No. 3. Improvement Area 1 is divided into two zones for Special Tax purposes, Zone A and Zone B. Zone A Zone A is commonly referred to as the Forum and consist of 55.03 gross acres of land. Of this acreage, approximately 5 1 SO acres (the lot area only) is expected to be developed. Zone A abuts Palomar Airport Road to the South, Zone B to the North and is East of El Camino Real. Zone B is commonly referred to as the Raceway and consists of 135.06 gross acres of land. Of this acreage, 86.10 acres (the lot area only) is expected to be developed. Zone B is located North of Zone A and East of El Camino Real. ImDrovement Area 2 Improvement Area 2 consists of approximately 395.58 gross acres of land in CFD No. 3 and is commonly referred to as Carlsbad Oaks North. Of this acreage, 167.30 acres (the lot area only) is expected to be developed. Improvement Area 2 is located North of Palomar Airport Road and East of El Camino Real. 111. DESCRIPTION AND ESTIMATED COST OF PROPOSED FACILITIES A. DescriDtion of ProDosed Public ImDrovementq A community facilities district may provide for the purchase, construction, expansion, or rehabilitation of any real or tangible property, including public facilities and Community Facilitits District No. 3 Page 2 November 8,2005 c c” rc infrastructure improvements with an estimated useful life of five (5) years or longer, which is necessary to meet increased demands placed upon local agencies as a result of development or rehabilitation occurring within the community facilities district. In addition, a community facilities district may pay in full all amounts necessary to eliminate any fixed special assessment liens or to pay, repay, or defease any obligation to pay or any indebtedness secured by any tax, fee, charge, or assessment levied within the area of the community facilities district. The facilities described in this Report are all facilities which the legislative body creating CFD No. 3 is authorized to own, construct, or finance, and which are required, in part, to adequately meet the needs of CFD No. 3. In addition, the facilities meet the criteria for authorized public facilities set forth in the City’s Statement of Goals and Policies regarding the establishment of Community Facilities Districts. The actual facilities described herein are those currently expected to be required to adequately meet, in part, the needs of CFD No. 3. Because the actual needs of CFD No. 3 arising as development progresses therein may differ from those currently anticipated, the City Council of the City, acting as the legislative body of CFD No. 3 if formed, reserves the right to modify the actual facilities proposed herein to the extent CFD No. 3 deems necessary, in its sole discretion to meet those needs. The Special Taxes required to pay for the construction or financing of said facilities will be apportioned as described in the Rate and Method of Apportionment (“RMA”) of the Special Tax for CFD No. 3, Improvement Area 1 and Improvement Area 2 (Exhibit D). Proceeds of the proposed bonded indebtedness or Special Taxes of CFD No. 3 will be used to finance backbone streets and associated improvements (Le., grading, drainage, sewer, recycled water, roadway, construction, environmental, utilities, etc.). Following is a general description of the proposed facilities: 0 Melrose 0 0 Palomar Airport Road 0 0 Faraday 0 ElFuerte Melrose South of Palomar Airport Road Palomar Airport Road turn lane to Melrose South B. Estimated Cost of ProDosed Public ImDrovements The facilities and the estimated costs herein are subject to review and confirmation. The costs listed in the table below are estimates only, based upon current construction and land costs and actual costs may differ from those estimates herein. Community Facilities District No. 3 Page 3 November 8,2005 Facilities Improvements Melrose Melrose South of Palomar Airport Road Federal Grant (*Spread on percent of pad area.) Palomar Airport Road Palomar Airport Road turn lane to Melrose South Faraday El Fuerte Total *Pad area as provided by the Developers for each buildable lot. Total District Estimated Cost $4,954,843 $226,716 ($3,000,000) $2,798,853 $1 5,956,550 $4,055,423 $100,000 $25,092,3 85 For further particulars as to the facilities to be financed through the District, reference is made to Exhibit “A” attached hereto and incorporated herein. IV. BONDED INDEBTEDNESS AND INCIDENTAL EXPENSES A. B. Proiected Bond Sale For CFD No. 3 there may be two separate issuance of bonds. One for Improvement Area 1 and one for Improvement Area 2 each with its own accounting, processing, and specifics to its obligated improvements within the CFD No. 3. The bond amount for Improvement Area 1 is estimated to be $12,695,000, which will finance approximately $9,879,741 in facilities. The bond amount for Improvement Area 2, is estimated to be $19,240,000, which will finance approximately $15,212,644 in facilities. The bonds issued by CFD No. 3 for Improvement Areas 1 and 2 will meet the terms and conditions of special tax bonds set forth in the City’s Statement of Goals and Policies Regarding the Establishment of Community Facilities Districts. Incidental Bond Issuance Expenses to be Included in the Prooosed Bonded Indebtedness for ImDrovement Areas 1 and 2 Pursuant to Section 53345.3 of the Act, bonded indebtedness may include all costs and estimated costs incidental to, or connected with, the accomplishment of the purpose for which the proposed debt is to be incurred, including, but not limited to, the costs of legal, fiscal, and financial consultant fees; bond and other reserve funds; discount fees; interest on any bonds of the district due and payable prior to the expiration of one year from the date of completion of the facilities, not to exceed two years; election costs; and all costs of issuance of the bonds, including, but not limited to, fees for bond counsel, costs of Communi@ Facilities District No. 3 Page 4 November 8,2005 C. obtaining credit ratings, bond insurance premiums, fees for letters of credit, and other credit enhancement costs, and printing costs. The reserve fimd is estimated to be the maximum allowable under Federal Tax Law. All other incidental bond issuance expenses are estimated at 4% of the face amount of the bonds. Incidental Expenses to be Included in the Annual Lew of Special Taxes for Improvement Areas 1 and 2 Pursuant to Section 53340 of the Act, the proceeds of any special tax may only be used to pay, in whole or part, the cost of providing public facilities, services and incidental expenses. As defined by the Act, incidental expenses include, but are not limited to, the cost of planning and designing public facilities to be financed, including the cost of environmental evaluations of those facilities; the costs associated with the creation of the district, issuance of bonds, determination of the amount of taxes, collection of taxes, payment of taxes, or costs otherwise incurred in order to carry out the authorized purposes of the district; any other expenses incidental to the construction, completion, and inspection of the authorized work; and the retirement of existing bonded indebtedness. While the actual cost of administering CFD No. 3 may vary, it is anticipated that the amount of special taxes, which can be collected, will be sufficient to fund at least $100,000 in annual administrative expenses. V. RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX All of the property located within CFD No. 3, unless exempted by law, shall be taxed for the purpose of providing necessary facilities to serve CFD No. 3. Pursuant to Section 53325.3 of the Act, the tax imposed “is a Special Tax and not a special assessment, and there is no requirement that the tax be apportioned on the basis of benefit to any property.” The Special Tax “may be based on benefit received by parcels of real property, the cost of making facilities or authorized services available to each parcel or other reasonable basis as determined by the legislative body,” although the Special Tax may not be apportioned on an ad valorem basis pursuant to Article XIIIA of the California Constitution. As shown in Exhibit ”D’, for Improvement Area 1 and Improvement Area 2 respectively, the Rate and Method of Apportionment provides information sufficient to allow each property owner within CFD No. 3 to estimate the Maximum Annual Special Tax he or she will be required to pay. Sections A through B, below, provide additional information on the Rate and Method of Apportionment of the Special Tax for CFD No. 3. Community Facilities District No. 3 Page 5 November 8,2005 A. Explanation for Special Tax Apportionment When a community facilities district is formed, a Special Tax may be levied on each parcel of taxable property within the CFD to pay for the construction, acquisition and rehabilitation of public facilities, to pay for authorized services or to repay bonded indebtedness or other related expenses incurred by such CFD. This Special Tax must be apportioned in a reasonable manner; however, the tax may not be apportioned on an ad valorem basis. The Act does not require the Special Taxes to be apportioned to individual parcels based on benefit received. However, in order to insure fairness and equity, benefit principles have been incorporated in establishing the Special Tax rates for CFD No. 3. The major assumption inherent in the Special Tax rates set forth in the Rate and Method of Apportionment is that the level of benefit received from the proposed public improvements is a function of land use. All Taxable Property within CFD No. 3 has a Genera Plan land use of Planned Industrial and is projected to develop as Planned Industrial. As such, the Special Tax has been allocated uniformly based on lot acres of Taxable Property. Based on the types of public facilities that are proposed for CFD No. 3 and the common projected development type described above, the Maximum Annual Special Taxes are generally proportionate to the relative benefits received by them, and, accordingly, the Special Taxes in CFD No. 3 can be considered fair and reasonable. B. Actual Special Tax Rates Exhibit “D” lists the Maximum Annual Special Tax rates that may be levied against Taxable Property within Improvement Areas 1 and 2 of CFD No. 3. The City Council will annually determine the actual amount of the Special Tax levy based on the method described in the RMA’s. The City will levy a Special Tax to the extent necessary, sufficient to meet the Special Tax Requirement. C. Accuracv of Information In order to establish the Maximum Annual Special Tax rates as set forth in the Rate and Method of Apportionment for CFD No. 3, Special District Financing & Administration has relied on information including, but not limited to, land-use types, pad area and net taxable acreage (lot area) which were provided to Special District Financing & Administration by others. Special District Financing & Administration has not independently verified such data and disclaims responsibility for the impact of inaccurate data provided by others, if any, on the Rate and Method of Apportionment for CFD No. 3, including the inability to meet the financial obligations of CFD No. 3. Community Facilities District No. 3 Page 6 November 8,2005 VI. BOUNDARIES OF COMMUNITY FACILITIES DISTRICT The boundaries of CFD No. 3 include all land on which the Special Taxes may be levied. The Amendment to Boundary Map showing the area included within CFD No. 3 is provided as Exhibit “B’. The Amendment to the map was recorded on October 18, 2005, Book 39 of Maps of Assessment and Community Facilities Districts, Pages 83 and as an Instrument No. 2005-899437. VII. GENERAL TERMS AND CONDITIONS A. Substitution Facilities The description of the public facilities as set forth herein are general in their nature. The final nature and location of improvements and facilities will be determined upon the preparation of final plans and specifications. The final plans may show substitutes, in lieu or modifications to the proposed work in order to accomplish the work of improvement, and any such substitution shall not be a change or modification in the proceedings as long as the facilities provide a service and are of a type substantially similar to that as set forth in this Report. B. Bonds In order to finance the public facilities as set forth in the Report, it may be necessary for bonds, or equivalent securities, to be issued pursuant to the terms, conditions and authorization as set forth in the Act. The maximum amount of authorized bonded indebtedness for Improvement Area 1 of the District has been specified as an amount not to exceed $14,000,000. The maximum amount of authorized bonded indebtedness for Improvement Area 2 of the District has been specified as an amount not to exceed $21,000,000. C. Ameals and Intermetation Procedure 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 Communi@ Facilities District No. 3 Page 7 November 8,2005 r ?- 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. If the CFD Administrator’s decision requires that the Special Tax 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), but an adjustment shall be made to the Annual Special Tax on that Assessor’s Parcel in the subsequent Fiscal Year(s). The decision of the Review/Appeal Committee shall be final and binding as to all persons, pursuant to Section H of the RMA. D. Special Terms and Conditions Special terms and conditions applicable for these proceedings and as approved by this Council are listed herein as follows: GOALS AND POLICIES: On and after January 1, 1994, a local agency may initiate proceedings to establish a community facilities district pursuant to Government Code provisions only if it has first considered and adopted certain goals and policies. The City of Carlsbad duly adopted such goals and policies. Community Facilities District No. 3 Page 8 November 8.2005 EXHIBIT A CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 DESCRIPTION OF FACILITIES Communi@ Facilities District No. 3 Page 9 November 8,2005 The Facilities proposed to be financed by the District include the following: 0 Improvement A' - Palomar Airport Road Widening from West of Melrose Drive Intersection to the Vista City Limits (as shown on Drawing No. 399-4). Grading to prime arterial standards (but not to include grading outside the right- of-way in future developed areas), erosion control landscaping and irrigation located within an easement granted to the City, parkway landscaping and irrigation (located within a easement granted to the City), asphalt pavement to prime arterial standard width, raised median in certain areas, median curb, median hardscaping and landscaping with irrigation, curb and gutter, sidewalk, storm drain facilities within the City right-of-way and easements (excluding any Master Drainage Plan facilities and water lines), appurtenant to Palomar Airport Road construction, dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, modification of an existing traffic signal at Paseo Valindo, relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisitioflinancing Agreement. 0 Improvement B2 - Faraday Avenue from Orion Street to Melrose Drive. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk, storm drain facilities within the right-of-way (excluding Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, new traffic signals and a modification of any existing traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the AcquisitiodFinancing Agreement. Improvement C3 - Melrose Drive from Palomar Airport Road to the Vista City Limits (as shown on Drawing No. 399-4). Full width grading to prime arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an Improvement to be Einanced by Improvement Area 1 * Improvement to be financed by Improvement Area 1 and Improvement Area 2 Improvement to be financed by Improvement Area 1 and Improvement Area 2 Community Facilities District No. 3 Page IO November 8,2005 easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to prime arterial standard width on either side of a raised median, median curb, median hardscaping and landscaping with irrigation, curb, gutter and sidewalk, storm drain facilities within the right-of-way (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal and a modification of an existing traffic signal at Palomar Airport Road (excluding those portions reimbursed fkom Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation, and incidental costs of construction to the extent permitted in the AcquisitiodFinancing Agreement. 0 Improvement D4 - Melrose Drive construction of right turn lane south of Palomar Airport Road. Improvement E5 - El Fuerte from northerly terminus to the future extension of Faraday Avenue. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City) asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk (excluding any Master Drainage Plan facilities subject to reimbursement fiom Local Drainage Area Fees). Sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable fkom sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the AcquisitiodFinancing Agreement. 0 Improvement F6 - Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of Palomar Airport Road. Improvement to be financed by Improvement Area 1 and Improvement Area 2 Improvement to be financed by Improvement Area 2 Improvement to be financed by Improvement Area 1 Community Facilities District No. 3 Page 11 November 8,2005 EXHIBIT B CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 AMENDMENT TO BOUNDARY MAP Page 12 November 8,2005 Community Facilities District No. 3 I EXHIBIT C CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 ESTIMATE OF COST Community Facilities District No. 3 Page I3 November 8,2005 CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 ESTIMATE OF COST Overview of Construction Costs Based on spreadsheet dated 12/11/02; Revised by actual bids for Melrose South of PAR and PAR; The Settlement Agreement Improvement Description Location of Improvement Total Spread Forum Raceway CON County SoofPAR Vista Melrose "Core" (inside lanes) - pad area Grading 428,280 1,017,735 Drainage 10,665 350,637 Roadwav 638.168 959.430 1,446,015 361,302 1.597.598 .. Environmental 12,450 375,300 387,750 Subtotal: 1,089,563 2,703,102 0 0 0 0 3,792,665 "Frontage" (outside lanes) - frontage Sewer 22,163 22,162 Recycled Water 37,485 72,188 Private Utilities 41,400 116,100 44,325 109,673 157,500 Roadway 320,175 530,505 850,680 Subtotal: 421,223 740,955 0 0 0 0 1,162,178 Melrose Total 1,510,786 3,444,057 0 0 0 0 4,954,843 Costs CFD Eligible 1,510,786 3,444,057 0 0 0 0 4,954,843 Faraday "Core" (inside lanes) - pad area Grading Drainage Roadway Intersection (MelroseIFaraday) 1,162,688 1,087,470 2,250,158 1,241,700 294,000 1,535,700 1,785,713 596,025 2,381,738 280,000 280,000 .. Environmental 2,233,500 1,282,275 3,515,775 Subtotal: 0 0 6,423,601 3,259,770 0 280,000 9,963,371 "Frontage" (outside lanes) -frontage I pad area for County property Sewer 372,000 0 372,000 Recycled Water 336,525 137,715 474,240 Private Utilities 436,500 212,940 649,440 Roadway 1,619,951 821,725 2,441,676 Subtotal: 0 0 2,764,976 1,172,380 0 0 3,937,356 "Developer" Export* 1,451,250 1,451,250 Environmental 604,573 604,573 Subtotal 0 0 2,055,823 0 0 0 2,055,823 Faraday Total 0 0 11,244,400 4,432,150 0 280,000 15,956,550 Costs CFD Eligible 0 0 11,244,400 4,432,150 0 280,000 15,956,550 Note: Only required if roadway constructed by City. September 2,2005 Page 1 of 3 CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 ESTIMATE OF COST Overview of Construction Costs Based on spreadsheet dated 131 1102; Revised by actual bids for Melrose South of PAR and PAR The Settlement Agreement Improvement Description Location of Improvement Total Spread Forum Raceway CON County SooffAR Vista El Fuerte Total Improvement to Carlsbad Oaks North "Developer" Grading Drainage Roadway Sewer Recycled Water Private Utilities 940,215 738,450 1,755,833 124,650 0 252.000 940,215 738,450 1,755,833 124,650 0 252.000 Melrose South of PAR The three property owners are each responsible for one fourth of the total improvement. (The fourth party responsible is Bressi Ranch) "Developer" Project Wide 35,000 35,000 Clearing & Demo 28,700 28,700 Earthwork 32,690 32,690 Surface Improvements 145,441 145,441 Private Utilities 0 0 Environmental 0 0 241,831 241,831 Subtotal Lowest Bid (08/29/03) PI1 IC 7! 5% contingency' 60,458 60,458 iR Tntnl n n n n 31377~9 n 3137 789 Melrose South of Pf.. . . - - - - _,_ - - - -- ,_ - - Costs CFD Eligible 0 0 0 0 226,717 0 226,717 Contingency taken on Subtotal per City. Palomar Airport Road Total Improvement to Palomar Forum "Developer" Project Wide 220,300 220,300 Clearing & Demo 35,740 35,740 Earthwork 209,734 209,734 Storm Drain 39,750 39,750 Signallst LghUDry Utls 154,300 154,300 Surface Improvements 760,850 760,850 Median Landscape 49,204 49,204 Median Irrigation 68,155 68,155 Parkway Landscape 63,448 63,448 Parkway Irrigation 60,962 60,962 Private Utilities 267,800 267,800 Subtotal Lowest Bid (08/29/03) 1,930,243 1,930,243 Plus 45% Contingency' 868,610 868,610 PAR Total 2,798,853 0 0 0 0 0 2,798,853 Costs CFD Eligible 2,798,853 0 0 0 0 0 2,798,853 Contingency taken on Subtotal per City. September 2,2005 Page 2 of 3 CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 ESTIMATE OF COST Overview of Construction Costs Based on spreadsheet dated 12/11/02; Revised by actual bids for Melrose South of PAR and PAR The Settlement Agreement Improvement Description Location of Improvement Total Spread Forum Raceway CON County SoofPAR Vista Palomar Airport Road Right Turn Lane to Melrose South 50% of the Total Cost is the responsibility of Improvement Area 1. "Developer Project Wide 200,000 200,000 PAR Total 0 0 0 0 200,000 0 200,000 Costs CFD Eligible 0 0 0 0 100,000 0 100,000 ** Funded only from available proceeds as set forth in the AquisitionlFinancing Agreement. The total cost being determined at the time of the bond sal Total Costs Less Melrose South of PAR Contribution by Others (Bressi Ranch carries one fourth of the obligation) Less PAR Turn Lane to Melrose South Contribution by Others Subtotal: Reduction for Federal Grant taken into consideration in the setting of the tax rates (Grant; $3,000,000) District Facilities Costs September 2,2005 28,267,958 75,572 100,000 28,092,386 3,000,000 25,092,386 Page 3 of 3 EXHIBIT D CITY OF CARLSBAD COMMUNITY FACILITIES DISTRICT NO. 3 RATE AND METHOD OF APPORTIONMENT Community Facilities District No. 3 Page 14 November 8,2005 F F- c- F F 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 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 andor 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 September 2,2005 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 Assessorls 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 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. IA 1 of CFD No. 3 Page 2 of 11 September 2,2005 P .- "Exempt Property" means all property located within the boundaries of IA 1 that is exempt from the Special Tax pursuant Section F below. "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. "Improvementt* 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 andor 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 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. IA 1 of CFD No. 3 Page 3 of 11 September 2,2005 P- c "Public Property" means property within the boundaries of IA 1 which prior to March lSt 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 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 IA 1 of CFD No. 3 Page 4 of 11 September 2,2005 (6) less available funds as directed under the Indenture. Zone A Zone B “Taxable Property” means all property located within the boundaries of IA 1 that is not Exempt Property. $15,24 1 .OO $7,265.00 “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 1 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 September 2,2005 P c 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. 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. 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 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. IA 1 of CFD No. 3 Page 6 of 11 September 2,2005 rc 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 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. IA 1 of CFD No. 3 Page 7 of 1 1 September 2,2005 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 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 (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 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 Properly 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 IA 1 of CFD No. 3 Page 8 of 11 September 2,2005 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, 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 IA 1 of CFD No. 3 Page 9 of 11 September 2,2005 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.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 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 September 2,2005 City of Carlsbad Community Facilities District No. 3 (Faraday/Mel rose) 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. Area 2 Percent Construction Costs Allocation Total District Total Cost Percen $25,092,385 Improvement Area 1 I lmprovemer ZoneA I Percent I Zone6 I Percent1 IA2 I I I I $4,954,843 $226,716 ($3,000,000: $2,798,853 $100,000 $15,956,550 I I I I I I I I I I :acilities Fund Requirement by Area I $5,498,088 I I $4,381,653 I I $15,212,644 Melrose Melrose South of PAR Federal Grant (Spread on percent of pad area) Palomar Airport Road PAR Turn Lane to Melrose South Faradav Facilities Fund Requirement $9,879,741 Capitalized Interest (12 months at 7.5%) $952,125 Cost of Issuance $400,000 Refund of Formation Deposit $133,333 Discount of 2% $253,900 Reserve Fund Requirement (Est @ Max DS) $1,074,901 Contingency I Rounding $1,000 Principal Issued by Improvement Area: $12,695,000 El Fueie I Facilities Total I $5,498,088 I 21.91%1 $4,381,653 I 17.46%1 $15,212,644 $15,212,644 $1,443,000 $500,000 $66,667 $384,800 $1,629,075 $3,814 $1 9,240,000 I $4,055,423) 60.63%1 $25,092,385 I 100.00' IA 1 of CFD No. 3 Page 11 of 11 rota/ $25,092,385 I $2,395,125 $900,000 $200,000 $638,700 $2,703,976 September 2,2005 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 ('X4 2") of Community Facilities District No. 3 (the "CFD No. 3'7 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 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 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 andor 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 11 September 2,2005 rc rc- P F 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 fimds 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. t'Citytl 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. IA 2 of CFD No. 3 Page 2 of 11 September 2,2005 "Exempt Property" means all property located within the boundaries of IA 2 that is exempt fiom the Special Tax pursuant Section F below. "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 andor supplemented fiom 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 lSt 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. IA 2 of CFD No. 3 Page 3 of 11 September 2,2005 F "Public Property" means property within the boundaries of IA 2 which prior to March lSt 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 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 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 hded 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 Page 4 of 11 September 2,2005 (6) less available funds as directed under the Indenture. "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 MAX"M 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 $12,600.00 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: IA 2 of CFD No. 3 Page 5 of 11 September 2,2005 c 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 (Le., 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. 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. IA 2 of CFD No. 3 Page 6 of 11 September 2,2005 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 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 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 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. IA 2 of CFD No. 3 Page 7 of 11 September 2,2005 c F The "Prepayment" shall be an amount equal to the sum of (1) Principal, (2) Premium, (3) Defeasance, (4) Fees, and (5) Unfbnded 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 Assessorls 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 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 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. Unhnded 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 IA 2 of CFD No. 3 Page 8 of 11 September 2,2005 c any, following the redemption of Bonds from proceeds of the Prepayment or (ii) the amount derived by subtracting the new reserve find requirement in effect after the redemption of Bonds from the balance in the reserve fhd (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 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.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 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 2 pursuant to Section E of this Rate and IA 2 of CFD No. 3 Page 9 of 11 September 2,2005 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 2 of CFD No. 3 Page 10 of 11 September 2,2005 f- F- Facilities 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 El Fuerte Facilities Total r Improvement Area 1 Improvement Area 2 Total District ZoneA Percent ZoneB Percent IA2 Percent Totalcost Percent $5,498,088 $4,381,653 $15,212,644 $25,092,385 $4,954,843 $226,716 ($3,000,000) $2,798,853 $100,000 $1 5,956,550 $4,055,423 $5,498,088 21.91% $4,381,653 17.46% $15,212,644 60.63% $25,092,385 100.00% .P Contingency I Rounding Ci of Carlsbad Community Facilities District No. 3 (Faraday/Melrose) 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. $1,000 I I $3,814 I $4,814 I Construction Costs Allocation Estimate of Bond Sizing Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement (Est Q Max DS) Refund of Formation Deposit Series A $9,879,741 $952,125 $400,000 $133,333 $253,900 n $1,074,901 Series B Total $1,443,000 $2,395,125 $500,000 $900,000 $66,667 $200,000 $384,800 $638,700 $1,629,075 $2,703,976 r IA 2 of CFD No. 3 Page 11 of 11 September 2,2005 Community Facilities District #3Faraday-MelroseFormation History•Dec. 2001: Authorized to begin work•Financing Team Assembled9Tax Administrator–Special District Financing9Bond Counsel–Best, Best and Krieger9Underwriter–Stone and Youngberg HistoryAuthorized to begin workWaiver and Consent Agreements approved•Allowed development to proceed while District was being formedResolution of Intention•Boundaries set•Notified the public•Approved acquisition agreement•Dec. 2001:•Mid 2004: •Oct. 2005: Tonight’s Purpose•Form the District–Accept the CFD Report–Approve the improvements –Set the maximum tax rate–Hold Public Hearing–Hold election•Set Debt Limit Order of Procedure1.Staff Report2.Public Hearing3.Council Questions and Comments4.Council Action:ƒAssuming no protest; adopt first 2 Resolutions5.City Clerk report results of election6.Council Action: ƒIf in favor; adopt 3rdResolution and OrdinanceƒIf not in favor; direct staff to abandon process Glenn PruimDeputy Public Works Director CFD #3CFD #3CFD #3CFD #3CFD #3CFD #3CFD #3 CFD #3StreetsTotal Development# of LotsGross AcresPad/Net Acres# of LotsAcresAcresAcresCarlsbad Oaks North23167.2129.84220.226.6414.0Raceway2586.173.0348.912.1147.1Forum851.544.523.414.969.8Open Space LotsBuilding Lots Cost Estimate for the ProjectConstruction$28,100,000Less Grant funding <3,000,000>Formation and Bond Issuance1,700,000Capitalized Interest (one year)2,400,000Bond Reserve Fund2,700,000Estimated Debt Needed$31,900,000Contingent Debt Allowance3,100,000Total Debt Limit Requested$35,000,000 Maximum Special Taxes per Improvement AreaFiscal Year 2004-05$ 15,241$7,265$12,600Forum (Area 1A)Raceway (Area 1B)Carlsbad Oaks North (Area 2)Per AcreImprovement Area Compliance with Policy•Council Policy 33–Defines when special financing districts can be used•District complies with policy•Developers are requesting pass-through of special taxes–Allowed on non-residentialproperty at City’s discretion Bond Issuance•Value to Lien–Must be 4:1 unless specific findings made•All other Terms and Conditions to be determined at Council’s discretion•Expect issuance in early 2006 Actions Requested1.Hold the Public Hearing2.Council Questions and Comments3.Council ActionƒConsider 1st2 Resolutions4.Clerk count the ballots and report 5.Council ActionƒIf in favor; adopt 3rdResolution and OrdinanceƒIf not in favor; direct staff to abandon process