HomeMy WebLinkAbout2018-07-24; City Council; ; Acquisition of 2686 Alameda Circle, an affordable housing unit, and appropriation of community development block grant funds in the amount of $220,000 for said purchase oCA Review gt<__
CITY COUNC I L
Staff Report
Meeting Date:
To:
From:
Staff Contact:
Subject:
July 24, 2018
Mayor and City Council
Kevin Crawford, City Manager
Debbie Fountain, Community & Economic Development Director
debbie.fountain@carlsbadca.gov or 760-434-2935
Acquisition of 2686 Alameda Circle, an affordable housing unit, and
appropriation of community development block grant funds in the amount
of $220,000 for said purchase of real property.
Recommended Action
Adopt a Resolution authorizing the City Manager to execute all required documents to
complete acquisition of 2686 Alameda Circle, an affordable housing unit, and appropriating
community development block grant funds in the amount of $220,000 and authorizing the
Finance Director to disburse said funds to complete said purchase of real property.
Executive Summary
As part of the City of Carlsbad's loan documents for homes purchased through the city's
lnclusionary Housing Program, the city entered into a Resale Restriction and Option to Purchase
Agreement ("Agreement") on April 13, 2006 with the owner of property at 2686 Alameda
Circle. This agreement allows the city the option to purchase the property at a restricted price
at the time the owner provides notice of intent to sell or transfer ownership of the property
during the 30-year term of the Agreement. The owner of said property provided notice to the
city of the intent to sell on April 19, 2018. Based on prior authorization by the City Council, city
staff subsequently notified owner of the city's intent to purchase the home at a restricted price
on April 30, 2018, which has been calculated to be $206,200.
The city and owner entered into a purchase agreement, and escrow has been opened with the
intent of completing the acquisition by July 28, 2018. At this time, staff is recommending that
the City Council authorize the City Manager to execute all required documents to complete the
purchase of the subject property, which includes Acceptance of the Grant Deed, and authorize
the appropriation and expenditure of federal community development block grant funds to
complete said acquisition; staff is recommending an appropriation of $220,000 to cover the
purchase price and all related escrow and other processing fees. This action by the City Council
will allow for completion of the acquisition process for the subject affordable housing unit; the
city will own the property at the end of this transaction and intends to resell it at a later date to
an eligible low-income buyer.
July 24, 2018 Item #2 Page 1 of 14
Discussion
In 1993, the city adopted an inclusionary housing ordinance that requires all residential
development to include 15% of the total number of homes to be affordable to low income
households. The residential developer has the option to produce rental or ownership product
to satisfy the inclusionary requirements. The Bressi Ranch developer produced ownership
product to satisfy its inclusionary housing obligation; a total of 100 condominiums were
developed and sold to low income buyers. As part of this sale, the developer transfers its
financial subsidy (difference between market value of the home and restricted low-income
price) to the City of Carlsbad; the city then records a silent second loan agreement (in the
amount of subsidy) and a Resale Restriction and Option to Purchase Agreement against the
property to ensure that the property remains affordable for a 30-year term, as required by the
inclusionary ordinance.
At the time an owner of a restricted condominium decides to sell the home, the city has the
first option to purchase the home at a restricted price (based on low income maximums at the
time of the notice to sell). On March 13, 2018, the City Council approved an amendment to its
Community Development Block Grant (CDBG) Program Action Plan authorizing city staff to
respond with the city's intent to exercise its option to purchase resales of affordable, restricted
price homes as they become available on the market, and to utilize CDBG funds to purchase
these resale units. This action would allow the city to recapture an affordable home and then
resell it to an eligible low-income buyer. As the owner, the city will be able to place additional
restrictions on the property and/or resale at a lower price, if necessary,-to create more
affordable housing opportunities; this effort will assist with implementation of the Homeless
Response Plan and the city's goals to create more affordable housing opportunities for the
purpose of implementing efforts to re-house homeless residents of Carlsbad .
The owner ofthe affordable, restricted condominium at 2686 Alameda Circle provided notice
to the city of intent to sellthe unit on April 19, 2018. On April 30, 2018 the city responded with
its intent to exercise its option to purchase the home. The restricted sales price was calculated
at $206,200 and a purchase agreement was executed by the city and the owner and deposited
into escrow. Per the requirements of the Resale Restriction and Option to Purchase Agreement,
the city indicated its intent to complete acquisition of the resale unit within 90 days of the city's
notice of intent to exercise its purchase option.
To proceed with the subject acquisition, the City Council is being asked to authorize the City
Manager to execute all acquisition documents, including the Grant Deed, and to authorize the
Finance Director to appropriate and expend CDBG funds in an amount not to exceed $220,000
for purchase of the affordable, restricted home and related acquisition costs.
Fiscal Analysis
The restricted price to purchase the affordable residential property at 2686 Alameda Circle is
$206,200. It is anticipated that there will be additional acquisition costs including escrow fees.
Staff is requesting that the City Council approve a total appropriation of federal CDBG funds in
the amount of $220,000 to cover all acquisition costs for the subject property; the City Council
has an approved set-aside of $750,000 to date in CDBG funds for this purpose. The Resale
Restriction and Option to Purchase Agreement states that the 6% real estate agent fee
July 24, 2018 Item #2 Page 2 of 14
($12,370) is to be paid to the City of Carlsbad at close of escrow, since the city acts as the real
estate agent for the purposes of this sales transaction. These funds will be deposited to the
CDBG fund to allow for additional purchases of these resale homes in the future.
Next Steps
All acquisition documents will be executed by the City Manager, and the city will complete the
purchase of the subject affordable, restricted home and subsequently record the Grant Deed to
transfer ownership of the home to the City of Carlsbad.
Environmental Evaluation (CEQA)
Pursuant to Public Resources Code section 21065, this action does not constitute a "project"
within the meaning of CEQA in that it has no potential to cause either a direct physical change
in the environment, or a reasonably foreseeable indirect physical change in the environment,
and therefore, does not require environmental review.
Public Notification
This item was noticed in accordance with the Ralph M. Brown Act and was available for public
vi~wing and review at least 72 hours prior to the scheduled meeting date.
Exhibits
1. City Council Resolution
2. Form of Grant Deed
July 24, 2018 Item #2 Page 3 of 14
RESOLUTION NO.2018-137
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE ALL REQUIRED
DOCUMENTS TO COMPLETE ACQUISITION OF 2686 ALAMEDA CIRCLE,
CARLSBAD, CALIFORNIA, AN AFFORDABLE HOUSING UNIT, AND
APPROPRIATING COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS IN THE
AMOUNT OF $220,000 AND AUTHORIZING THE CITY'S FINANCE DIRECTOR
TO DISBURSE SAID FUNDS TO COMPLETE SAID PURCHASE OF REAL
PROPERTY.
WHEREAS, the City Council of the City of Carlsbad, California has determined that it desires to
exercise its option to purchase an affordable housing unit located at 2686 Alameda Circle, Carlsbad,
California as set forth in the Resale Restriction and Option to Purchase Agreement executed between
the city and property owner on April 13, 2006; and
WHEREAS, the property owner for 2686 Alameda Circle provided notice to the city on April 19,
2018 indicating the owner's intent to sell or transfer ownership of the restricted affordable housing
unit at the noted location; and
WHEREAS, the city responded to the property owner of the restricted affordable housing unit
on April 30, 2018 indicating its intent to exercise its option to purchase the property at 2686 Alameda
Circle; and
WHEREAS, the City Council approved a change in policy on March 13, 2018 and amended its
Community Development Block Grant Program Action Plan authorizing city staff to respond with the
city's intent to exercise its option to purchase resales of affordable, restricted price homes as they
become available on the market, and to utilize CDBG funds to purchase these resale units; and
WHEREAS, the purchase approval by City Council allows for the city to recapture an affordable
home and extend its affordability for an indefinite period of time, if so desired, and to resell it to an
eligible buyer at a lower price, if necessary, to implement the city's affordable housing goals and
policies; and
WHEREAS, the purchase approval by City Council will also assist with implementation of the
city's Homeless Response Plan and the city's goals to create more affordable housing opportunities for
the purpose of implementing efforts to re-house homeless residents of Carlsbad.
July 24, 2018 Item #2 Page 4 of 14
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1. That the above recitations are true and correct.
2. That the City Council hereby authorizes the City Manager to execute all acquisition
documents, including the Acceptance of the Grant Deed, for the purchase of the
affordable housing unit located at 2686 Alameda Circle, Carlsbad, California at the
restricted purchase price of $206,200.
3. That the City Council hereby authorizes the city's Finance Director to appropriate and
expend Community Development Block Grant funds in an amount not to exceed
$220,000 for purchase of the affordable, restricted home and related acquisition costs
for the property located at 2686 Alameda Circle, Carlsbad, California.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 24th day of ~2018, by the following vote, to wit:
AYES:
NOES:
ABSENT:
M. Hall, K. Blackburn, M. Schumacher, C. Schumacher, M. Packard.
None.
None.
(SEAL)
July 24, 2018 Item #2 Page 5 of 14
RECORDING REQUESTED BY:
Chicago Title San Diego
DOC# 2018-0307898
111111111111 lllll 1111111111111111111111111 lllll lllll 111111111111111111
Jul 27, 2018 04:59 PM
OFFICIAL RECORDS Ernest J. Dronenburg, Jr.,
AND WHEN RECORDED
MAIL TO:
SAN DIEGO COUNTY RECORDER
FEES: $0.00 (SB2 Atkins: $0.00) PCOR: YES
Mall Tax statements to:
Allen Edwards
City of Carlsbad, a municipal Corporation
Housing and Nelborhood Services Department,
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Grant Deed
(Please fill In document title(s) on this line)
PAGES: 7
1 0 Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that
is subject to the imposition of documentary transfer tax, or,
2 0 Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was
subject to documentary transfer tax which was paid on document recorded previously on
_______ (date*) as document number ___________ of Official
Records, or,
3 D Exempt from fee per GC27388.l due to the maximum fees being paid on documents in this
transaction, or,
4 D Exempt from fee per GC27388.l due to the maximum fees having been paid on documents in the
transactlon(s) recorded previously on _________ (date*) as document number(s)
______________________ of Official Records, or,
5 D Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to
an owner-occupier, or, document is recorded In connection with concurrent transfer that is a
residential dwelling to an owner-occupier, or,
6 D Exempt from fee per GC27388.1 due to it being recorded In connection with a transfer of real
property that is a residential dwelling to an owner-occupier. The recorded document transferring
the dwelling to the owner-occupier was recorded on _________ (date*) as
document number(s)
7 ll] Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in
accordance with the Uniform Federal Lien Registration Act, by the state, or any county,
municipality or other political subdivision of the state, or,
8 D Exempt from the fee per GC 27388.1 (a) (1); Not related to real property, or,
9 D Exempt from fee under GC27388.1 for the following reasons:
Rev 5/18
TH IS PAGE ADDED TO PROVIDE SENAlEBIU.2 EXEMPTIONINFORMA11ON
(Additional recording fee applies)
*The Prior Recording Reference must have been recorded within the last 60 days and is subject to review
July 24, 2018 Item #2 Page 6 of 14
..
''
RECORDING REQUESTED BY:
Chicago Title Company
When Recorded Mail Document
and Tax Statement To:
Allen Edwards
City of Carlsbad, a municipal corporation
Housing and Neighborhood Services
Department, 1200 Carlsbad Village Drive
Carlsbad, CA 92008
Escrow Order No.: 73718006413
APN/Parcel ID(s): 213-190-04-29
SPACE ABOVE THIS LINE FOR RECORDER'S USE
Exempt from fee per GC 27388.1 (a) (2); recorded in connection with a transfer subject to
the imposition of documentary transfer tax.
~ R&T 11922
GRANT DEED
The grantee is (s~e United St t · The undersigned grantor(s) declares <!-es or an agency or instrumentality thereof a state or territory, or political subdivsion thereof. '
D This transfer is exempt from the documentary transfer tax.
0 The documentary transfer tax is $ 0, l1) )I( and is computed on:
0 the full value of the interest or property conveyed.
D the full value less the liens or encumbrances remaining thereon at the time of sale.
The property is located in 0 the City of Carlsbad.
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Jaci Michele Johnson, an
unmarried woman
hereby GRANT(S) to City of Carlsbad, a municipal corporation
the following described real property in the City of Carlsbad, County of San Diego, State of California:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
Dated: July 2, 2018
ITNESS WHEREOF, the undersigned have executed this document on the date(s) set forth below.
/
Grant Deed
SCA0000129.doc I Updated: 11.20.17
MAIL TAX STATEMENTS AS DIRECTED ABOVE
Printed: 07.02.18@03:32 PM
CA-CT-FWDO-02180.055824-73718006413
July 24, 2018 Item #2 Page 7 of 14
APN/Parcel ID(s): 213-190-04-29
GRANT DEED
(continued)
A notary public or other officer completing this certificate
verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the
truthfulness, accuracy, or validity of that document.
~=~~t:fo_f_a~::::::=:::::~iQ,...~!,l:::1..a:,::!.:-=~"----
On 7 \ \5 \ 1..-0)'6': befor-e-me-, -r\-t~->0---:-~,_g__~-~
(here insert name and title oAhe officer)
, Notary Public,
personally appeared -.Jc:;_~ f'v\ \c.i..--.Q.._ \..e-, = Seth M -<Dt--,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies ),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and
correct.
Signature
Grant Deed
SCA0000129.doc I Updated: 11.20.17
(Seal)
Notary Public • California
;: San Diego County ~
,' Commission# 2171989 ~
My Cornm Expires Dec 13. 2020' , . ..,.~~,... ~-... ~~-0 C ♦♦¥-~
Printed: 07.02.18@ 03:32 PM
CA-CT-FWD0-02180.055824-73718006413
July 24, 2018 Item #2 Page 8 of 14
CERTIFICATE OF ACCEPTANCE
(Pursuant to Government Code 27281)
This is to certify that the interest in real property conveyed by the Grant Deed from
To.~ ~ICV\~\~ Jol1~e City of Carlsbad, a municipal corporation (the "City"), is hereby
accepted on u.\ "2.lo , 20\~, by the undersigned officer or agent on behalf of the City
pursuant to authori conferred by resolution of the City Council adopted on ll.l\u ;ll, ,~11,
and the City Council consents to the recordation of said document in the Office of the Recorder
of San Diego County, State of California
l01011712367843.2
, a municipal corporation
By:
Name: Ke✓v Lo Cxn W\OYd
1ts: t;t:) o£ Ga..v-\~bru:,i
July 24, 2018 Item #2 Page 9 of 14
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document.
State of California
County of San Diego
On ju._\ ~ ).U/ 1 J.() l t before me, Morgen Fry, Notary Public
(insert name and title of the officer)
personally appeared ~V \ V\ ~ , ,
who proved to me on the basis of satisfactory evidence to be the perso~ whose name~ is.l8f;Q
subscribed to the within instrument and acknowledged to me that he/el 1eftl 1e, executed the same in
his/Mii"J'tflsir authorized capacity(~ and that by his/~ri'tl 1eh signature~on the instrument the
person('s.l, or the entity upon behalf of which the person~) acted, executed the instrument.
I certify under PENAL TY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature \ ~~(Seal]
July 24, 2018 Item #2 Page 10 of 14
EXHIBIT A
Order No.: 73718006413
For APN/Parcel ID(s): 213-190-04-29
A CONDOMINIUM UNIT COMPOSED OF:
PARCEL 1 (COMMON AREA INTEREST):
AN UNDIVIDED FRACTIONAL INTEREST AS TENANT IN COMMON IN AND TO THE COMMON AREA
OF PHASE 2 AS DESCRIBED ON THE MULBERRY AT BRESSI RANCH CONDOMINIUM PLAN (THE
"CONDOMINIUM PLAN") RECORDED ON FEBRUARY 11, 2005, AS DOCUMENT NO. 2005-0117224,
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, CALIFORNIA, BEING A
PORTION OF LOT 1 OF CARLSBAD TRACT MAP CT 03-03, IN THE CITY OF CARLSBAD, COUNTY
OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 14800, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON MAY 21, 2004. THE UNDIVIDED
FRACTIONAL INTEREST HEREBY CONVEYED IS THE RECIPROCAL OF THE NUMBER OF
RESIDENTIAL UNITS SHOWN ON THE CONDOMINIUM PLAN AS BEING WITHIN PHASE 2 OF THE
CONDOMINIUM PLAN.
EXCEPTING THEREFROM ALL RESIDENTIAL UNITS SHOWN ON THE CONDOMINIUM PLAN.
EXCEPTING THEREFROM THE EXCLUSIVE RIGHT TO POSSESSION AND USE OF ANY
EXCLUSIVE USE AREA SHOWN ON THE CONDOMINIUM PLAN.
PARCEL 2 (RESIDENTIAL UNIT):
RESIDENTIAL UNIT NO. 79, AS SHOWN UPON THE CONDOMINIUM PLAN.
PARCEL 3 (EXCLUSIVE USE AREAS):
THE EXCLUSIVE RIGHT TO USE ANY EXCLUSIVE USE AREA SHOWN ON THE CONDOMINIUM
PLAN AS BEING APPURTENANT TO THE RESIDENTIAL UNIT DESCRIBED IN PARCEL 2 ABOVE.
PARCEL 4 (EASEMENT OVER ASSOCIATION PROPERTY):
A NON-EXCLUSIVE EASEMENT FOR USE AND ENJOYMENT OF AND ACCESS OVER THE
ASSOCIATION PROPERTY ("ASSOCIATION PROPERTY" IS DEFINED IN THE DECLARATION OF
COVENANTS, CONDITIONS AND RESTRICTIONS AND RESERVATION OF EASEMENTS FOR
MULBERRY AT BRESSI RANCH DESCRIBED BELOW), EXCEPTING ANY EXCLUSIVE USE AREA.
THE EASEMENT HEREBY RESERVED, WHICH IS APPURTENANT TO THE RESIDENTIAL UNIT
DESCRIBED ABOVE, IS FOR ACCESS AND USE OF THE ASSOCIATION PROPERTY, SUBJECT TO
THE PROVISIONS OF THE DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS
AND RESERVATION OF EASEMENTS FOR MULBERRY AT BRESSI RANCH AND THE RULES AND
REGULATIONS OF THE MULBERRY AT BRESSI RANCH HOMEOWNERS ASSOCIATION, A
CALIFORNIA NONPROFIT MUTUAL BENEFIT CORPORATION.
EXCEPTING THEREFROM FROM ALL PARCELS ALL EASEMENTS FOR ACCESS, DEVELOPMENT,
ENCROACHMENTS, MAINTENANCE AND OTHER PURPOSES SET FORTH IN THE DECLARATION
OF COVENANTS, CONDITIONS AND RESTRICTIONS AND RESERVATION OF EASEMENTS FOR
MULBERRY AT BRESSI RANCH (REFERRED TO AS THE "MULBERRY DECLARATION"). THE
MULBERRY DECLARATION IS DESCRIBED BELOW.
July 24, 2018 Item #2 Page 11 of 14
EXHIBIT A
(continued)
ALSO EXCEPTING FROM ALL PARCELS, FOR THE BENEFIT OF GRANTOR, ITS SUCCESSORS IN
INTEREST AND ASSIGNEES, THE RIGHT TO ENTER THE LOT (I) TO COMPLETE AND REPAIR ANY
IMPROVEMENTS OR LANDSCAPING LOCATED THEREON AS DETERMINED NECESSARY BY
GRANTOR, IN ITS SOLE DISCRETION, (11) TO COMPLY WITH REQUIREMENTS FOR THE
RECORDATION OF THE SUBDIVISION MAP DESCRIBED ABOVE OR THE GRADING OR
CONSTRUCTION OF THE PROPERTIES, AS DEFINED IN THE MULBERRY DECLARATION, OR (Ill)
TO COMPLY WITH REQUIREMENTS OF APPLICABLE GOVERNMENTAL AGENCIES. GRANTOR
SHALL PROVIDE REASONABLE NOTICE TO GRANTEE BEFORE SUCH ENTRY. IF GRANTEE
REFUSES TO COOPERATE WITH GRANTOR'S EXERCISE OF THIS RIGHT, GRANTOR MAY
ENFORCE THIS RIGHT OF ENTRY IN A COURT OF LAW GRANTEE.
July 24, 2018 Item #2 Page 12 of 14
To the members of the:
CITYCOUNOL ACbiil CA~ QZ; V
Date 1 1& CM v'cOO _
July 24, 2018
Council Memorandum
To: Honorable Mayor Hall and Members of the City Council
From: Gary Barberio, Assistant City Manager ~ (\
Via: Scott Chadwick, Chief Operations Officer~
Re: Responses to Questions from July 23 Council Briefings
Agenda Item No. 2 -Acquisition of 2686 Alameda Circle
{cityof
Carlsbad
Question 1: What was the original purchase price for the unit and how much equity gain
will the seller realize?
Answer: The original purchase price for 2686 Alameda Circle was $163,600; the home
was originally purchased in 2006. The current restricted purchase price is $206,200. The seller
will realize a total equity gain of $42,600. The seller must pay the full 6% realtor commission to
the city, which is $12,372. Therefore, the seller will receive an estimated $30,228 upon close of
escrow.
Agenda Item No. 6 -Fire Station 5 Storage Building Roof
Note: City staff is recommending that this item be rescheduled to a future City Council
meeting.
Agenda Item No. 7 -Carlsbad Public Safety and Service Center Improvements
Note: City staff is recommending that this item be rescheduled to a future City Council
meeting.
Agenda Item No. 10 -State Agreement for Federal Aid Projects
Question: What were the specific changes to the Agreement?
Answer: An Additional Material/Information Memo has been prepared and distributed
to address this question.
(
Agenda Item Nq. 11-Trail Connectivity to Tamarack State Beach and the ADA Beach Access
Study Projects
Question: Will the contractor coordinate with the California State Department of Parks
and Recreation?
Answer: An Additional Material/Information Memo has been prepared and distributed
to address this question.
Agenda Item No.12-Short-Term Vacation Rentals
Question: How many legally permitted STVR's exist in the coastal zone?
City Manager's pffice
City Hall 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2820 t July 24, 2018 Item #2 Page 13 of 14
'
Responses to Questions from July 23 Coundl Briefings .
July 24, 2018 t:· · ' -
Page 2 . \' ., .:! .
.,·~ w"-~ , ~-!
Answer: According to the Finance Department, we have 257 legally permitted STVRs in
the coastal zone; 118 of those 257 permits were issued in the last year.
Agenda Item No. 17 -TEFRA Hearing-6408 Halyard Place -Vista Las Flores
Question: What year was the project built?
Answer: Vista Las Flores was built in 2001, and satisfied the inclusionary obligation of
the Mariano development.
cc: City Attorney
City Manager
City Clerk
"
July 24, 2018 Item #2 Page 14 of 14