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HomeMy WebLinkAbout2005-10-04; City Council; Resolution 2005-3011 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 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 “Citf‘), 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 No. 2 respectively (each, an “Improvement Area” and collectively, the “Improvement Areas”); and WHEREAS, this City Council desires to proceed to adopt ita 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 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 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 Acquisition/Financing Agreement by and among the City and the Applicants (the “Acquisition/Financing 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, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. 2. That the above recitations are true and correct. Initiation of Proceedings. These proceedings are now initiated by this City Council pursuant to the provisions of the Act. 3. Boundaries Of District and Desiqnation 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 prwiously 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 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 Clerk and shall remain open for public inspection. 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. DescriDtion 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 thc 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 53317(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. 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 6. \Q 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 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 further 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. 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 throrigh 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 therefore contained in the applicable Rate and Method of Apportionment. 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 7. 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 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 irregularitias 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 estnblishment 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 oi 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 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. 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 IO. 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 Finance Director, 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 Acquisition/Financina Agreement. The form of the Acquisition/Financing Agreement, herewith submitted, is approved substantially in the form submitted. The City Manager or his designee is hereby authorized to execute the final form of such agreement on behalf of the City. The City Manager or his designee, 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 af such changes to be evidenced by the executior of such agreement. 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 13. Advances of Funds or Work-ln-Kind. At any time either before or after the formation of the District, the City Council may accept advarlces 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 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 Acquisition/Financing 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 Carlsbad City Council held on the 4th day of October ,2005 by the following vote, to wit: AYES:Council Members Lewis, Hall, P NOES: None ABSENT: Council Member Kulchin ATTEST: LORRAINE M. WOdd, City Clerk ' ' /y W (SEAL) \L\ ACQUISITION/FINANCING AGREEMENT THIS AGREEMENT is made and entered into this 4th day of October, 2005 (the "Effective Date"), by and among the CITY OF CARLSBAD, a municipal corporation duly organized and validly existing under the Constitution and laws of the State of California, (the "City"), P ALOMAR 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 ("Techbilt"). Forum, Raceway, Oaks North and Techbilt may be referred to individually as an "Private Party" or collectively as the "Private Parties." The City and the Private Parties may be referred to individually as a "Party" or collectively as the "Parties." WHEREAS, Private Parties are the owners and/or developers of separate properties located generally north of Palomar Airport Road and east of El Camino Real in the City and which properties are depicted in Exhibit A attached hereto and incorporated herein by this reference (collectively, the "Properties"); and WHEREAS, Private Parties are individually required to construct, or contribute to the costs of constructing, certain public improvements as conditions of approval of certain land use entitlements approved by the City to enable the development of their respective Properties; and WHEREAS, in order to finance the acquisition of certain public improvements, together with appurtenances and appurtenant work within the jurisdictional limits of said City, the Private Parties have requested that the City initiate proceedings to consider the formation of a community facilities district (the "Community Facilities District") as permitted pursuant to Mello-Roos Community Facilities Act of 1982, as amended (the "Community Facilities District Law") and the policies of the City pertaining to the establishment of community facilities districts contained in Council Policy No. 33 adopted pursuant to Resolution No. 2002-369 on December 17, 2002 (the "City Financing District Policies"); and WHEREAS, Private Parties, hi order to proceed in a timely way with development of their respective Properties (respectively, the "Forum Property," the "Raceway Property," the "Oaks North Property" and the "Techbilt Property"), desire to construct certain public improvements described in Exhibit B that are, following the completion of the construction thereof, to be acquired, owned, operated and maintained by the City (each an "Improvement" and collectively, the "Improvements"); and WHEREAS, Private Parties will individually solicit bids for, award and administer the contracts for and finance the construction of certain of the Improvements (the Private Party which solicits bids for, awards and administers a contract for and initially finances the construction of an Improvement may be referred to herein as the "Contracting Private Party"); and WHEREAS, Private Parties have requested that the Community Facilities District consist of two separate improvement areas (each, an "Improvement Area"), one improvement area corresponding to the Forum Property and Raceway Property ("Improvement Area No. 1") and a WBDV296656.12 1 second improvement area corresponding to the Oaks North Property and the Techbilt Property ("Improvement Area No. 2"); and WHEREAS, Improvement Area No. 1 will include two zones (each a "Zone") corresponding to the Forum Property and Raceway Property, respectively; and WHEREAS, the City and Private Parties agree that separate discrete series of bonds for an Improvement Area ("Improvement Area Bonds") may, at the sole discretion of the City Council acting as the legislative body of the Community Facilities District, be issued by the Community Facilities District secured by the special taxes authorized to be levied within such Improvement Area; provided, however, only a single series of Improvement Area Bonds shall be issued for each Improvement Area, unless otherwise permitted by the City Council; and WHEREAS, the City and Private Parties agree that each Improvement may, upon the completion of the construction thereof, be acquired from the applicable Contracting Private Party by the City from the proceeds of the applicable Improvement Area Bonds issued for or on behalf of the Community Facilities District at prices determined pursuant to and in accordance with the provisions of this Agreement; and WHEREAS, City and the San Diego Association of Governments ("SANDAG") have received approval of a grant of $3,000,000 in federal Regional Surface Transportation Program funds (the "Grant Funds") for the extension of Melrose Drive. Pursuant to City Council Resolution No. 2002-160 (the "Resolution"), the City requested the SANDAG Board of Directors approve an exchange of the Grant Funds for an equal amount of funds of the City's Proposed Community Facilities District No. 2, including amounts paid in lieu of the proposed special taxes of such proposed community facilities district (the "CFD No. 2 Funds"), so that the Grant Funds could be used to pay for the cost of construction of improvements to Rancho Santa Fe Road and the CFD No. 2 Funds could be used to pay for the cost of construction of Melrose Drive. The Resolution requires the City to transfer CFD No. 2 Funds into an interest-bearing account in the amount of Grant Funds received upon receipt of the Grant Funds and to expend the CFD No. 2 Funds for the Melrose Drive extension. The Board of Directors of SANDAG approved the exchange pursuant to the terms of the Resolution by SANDAG Resolution No. 2003-11 approving Amendment No. 1 to the 2002 Regional Transportation Improvement Program adopted September 27, 2002. The amount of money contained in such interest-bearing account established pursuant to the Resolution is referred to in this agreement as "Exchanged Funds" and the allocation of such Exchanged Funds, and earnings thereon, to each Improvement Area and Zone to finance a portion of the cost of the acquisition of Melrose Drive allocated to each such Improvement Area are set forth in Section 7.E.(3) herein; and WHEREAS, the estimated construction and incidental costs of the Improvements (the "Estimated Cost") and the percentage allocation of the actual costs of each Improvement to each Improvement Area and Zone therein are set forth in Exhibit B attached hereto and incorporated herein by this reference; and WHEREAS, the City and the Contracting Private Parties further agree that payment by the City for the acquisition of the Improvements shall be funded solely from (a) the eligible proceeds of the applicable Improvement Area Bonds which shall be secured by special tax liens on properties WBD\296656.12 within the Improvement Area for which such Improvement Area Bonds have been issued and the interest earnings on such proceeds, (b) the Exchanged Funds, and the interest earnings thereon, which may only be utilized to pay for the acquisition of Improvement C as identified in Exhibit B, and (c) the proceeds of special taxes levied within such Improvement Area only if Improvement Area Bonds may not be issued for an Improvement Area; and, WHEREAS, it is the intent of this Agreement that each Contracting Private Party shall be entitled pursuant to the provisions of this Agreement to be paid for each Improvement constructed by such Contracting Private Party at the prices as determined by the City pursuant to this Agreement upon: (i) the formation of the District, the designation of the Improvement Areas and the confirmation of the levy of special taxes on properties within each of the Improvement Areas, (ii) the sale and delivery of Improvement Area Bonds by the District and (iii) the completion of the construction of such Improvement as required herein; and WHEREAS, notwithstanding the intent of the parties as set forth in the preceding recital, the parties acknowledge that the decision of the City Council to form the Community Facilities District as requested by the Private Parties is a legislative action and that the City Council, by its approval of this Agreement, may not and is not obligating itself or committing itself or any future City Council to approve the formation of the Community Facilities District; and WHEREAS, the City is willing to acquire the Improvements from the Private Parties subject to the requirements of the Community Facilities District Law, the City Financing District Policies and this Agreement and Private Parties desire that the City so acquire such Improvements. NOW, THEREFORE, IT IS MUTUALLY AGREED between the respective parties as follows: SECTION 1. Recitals. The above recitals are all true and correct. SECTION 2. Design and Construction of Improvements. Each Private Party covenants and agrees that each Improvement to be acquired from such Private Party, as a Contracting Private Party, pursuant to this Agreement shall be designed and constructed pursuant to the terms and conditions set forth in the applicable subdivision improvement agreement ("Subdivision Improvement Agreement") entered into by and between the City and such Private Party as of the Effective Date or to be entered into by and between the City and such Private Party after the Effective Date but prior to commencement of the construction of the Improvement or Improvements to which such Subdivision Improvement Agreement applies. Wherever the terms and conditions of any Subdivision Improvement Agreement and this Agreement may conflict, the terms and conditions of such Subdivision Improvement Agreement shall prevail. SECTION 3. Bid and Award of the Contract or Contracts for the Construction of the Improvements. A Contracting Private Party shall solicit bids for the construction of any Improvement to be acquired with the proceeds of the Bonds and shall award the contract or contracts for such construction pursuant to the procedures and requirements set forth in the City of Carlsbad Engineering Department Administrative Procedures for Reimbursable Public Works Projects (the "Administrative Procedures") established by the City Engineer of the City (the "City Engineer") and WBDV296656.12 attached hereto as Exhibit C, subject to waivers or modifications requested by the Contracting Private Party and approved in writing by the City Engineer as being substantially consistent with the intent of the Administrative Procedures. SECTION 4. Inspection and Acceptance of the Improvements. The construction activities relating to the Improvements shall be subject at all reasonable times to inspection by authorized representatives of City pursuant to the terms and conditions of the applicable Subdivision Improvement Agreement or Subdivision Improvement Agreements and the Administrative Procedures, as applicable. SECTION 5. Eligibility of Payment of the Base Increment or Retained Increment. Once the construction of an Improvement is substantially complete, then such Improvement shall be eligible for payment of the Base Increment of the Purchase Price (as defined in Section 7 below). For purposes of this Agreement, an Improvement shall be deemed "substantially complete" when construction or work with respect to the Improvement has progressed to the point where it is sufficiently complete in the sole judgment of the City Engineer or his or her designee so that the Improvement is opened to the public or otherwise could be opened to the public but for the fact that such opening has been withheld or delayed solely by the City. An Improvement may be deemed by the City Engineer to be "substantially complete" pursuant to the preceding sentence even though such Improvement is subject to the completion of a punch list of items before such Improvement would be eligible for acceptance by the City. An Improvement shall be eligible for payment of the Retained Increment (as defined in Section 7 below) of the Purchase Price for such Improvement upon the determination by the City Engineer that each of the following has occurred: A. Acceptance of such Improvement by the City pursuant to the applicable Subdivision Improvement Agreement and the City's Municipal Code; and B. The Notice of Completion for such Improvement has been recorded as provided for in Section 6 below and a period of at least 35 calendar days has elapsed since the date of such recordation. SECTION 6. Notice of Completion and Lien Releases. Upon completion of the construction of an Improvement, the Contracting Private Party shall notify the City Engineer in writing of such completion and shall prepare and execute a Notice of Completion for such Improvement in the form prescribed by Section 3093 of the California Civil Code and shall record such notice in the Official Records of the County of San Diego. The Contracting Private Party shall cause its contractors to provide unconditional lien releases for such Improvement in accordance with Section 3262 of the Civil Code. SECTION 7. Payment of Purchase Price. A. Amount of Purchase Price. The amount to be paid by City for an Improvement to be acquired from a Contracting Private Party (the "Purchase Price") shall, as to each such Improvement constructed by such Contracting Private Party, be determined by City in WBDV296656.12 accordance with the provisions of this Section. The Purchase Price shall equal the lesser of the actual cost or the value of the Improvement. The actual cost of an Improvement shall include all costs of construction thereof and all incidental costs of the construction of such Improvement eligible under the Community Facilities District Law and the City Financing District Policies, including the following: (1) Usual and customary design and engineering costs including civil engineering, soils engineering, landscape architecture, survey and construction staking, utility engineering and coordination, plan check and inspection fees as they relate to the Improvement only. (2) Costs of acquisition of off-site rights-of-way and/or easements located on properties not owned by the Private Parties including the following: a. appraisal and title insurance costs; b. costs of preparing acquisition plats; c. the appraised value or actual cost of right-of-way or easement, whichever is less; and d. legal fees and costs approved by the City Attorney related to (1) the negotiated acquisition of such rights-of-way or easements, e.g., preparation of a purchase agreement and related escrow instructions, or (2) acquisition through eminent domain proceedings. (3) Costs of environmental review, permitting and habitat mitigation related to the Improvement, including the value of the land or eligible mitigation credits owned by the Private Party required for such mitigation and not required to be dedicated to the City or a third party as a condition of approval of the land use entitlements for the development of the property within the District, to the extent authorized to be financed pursuant to the City Financing District Policies and not previously reimbursed. The value of any such land shall be the lesser of (1) the amount paid by the Private Party to acquire such land plus the cost, if any, to convert such land to wetlands or habitat, as applicable, or (2) $120,000 per acre for wetland mitigation land and $29,693 per acre for other habitat mitigation land. The actual value of any such land that may be included in the Purchase Price of an Improvement may be further limited by the rules of the Internal Revenue Service of the United States government if such land is to be owned by an entity that is not a political subdivision or a qualified 501(c)3 corporation. (4) An amount equal to 4.0% of the direct cost of construction of the Improvement excluding all incidental costs, including but not limited to, the costs set forth in subparagraphs (1), (2) and (3), for the Contracting Private Party's overhead, construction management and supervision including all on-site supervision. (5) An amount equal to 1.5% of the direct cost of construction of the Improvement, excluding all incidental costs, including but not limited to, the costs set forth in subparagraphs (1), (2) and (3), for costs of premiums paid for improvement and/or performance bonds relating to construction of the Improvements. WBDV296656.12 (6) An amount equal to 1.8% of the direct cost of construction of the Improvement, excluding all incidental costs, including but not limited to, the costs set forth in subparagraphs (1), (2) and (3), to reimburse the Contracting Private Party for the allocable portion of premiums paid by the Contracting Private Party for blanket liability insurance coverage. In no event shall the actual cost or value of the construction of an Improvement be deemed to exceed the total of (i) the construction contract prices for such Improvement set forth in the applicable contracts and change orders approved in accordance with the Administrative Procedures and (ii) the additional items in (1) through (6) above. B. Incremental Payment of Purchase Price. The Purchase Price for an Improvement shall be payable in not to exceed two (2) increments. The first increment shall be the "Base Increment" which shall be an amount equal to 90% of the lesser of (i) the costs incurred to the date of the substantial completion (as such term is defined in Section 5 above) or (ii) the value of such Improvement. The second increment shall be the "Retained Increment" which shall be an amount not to exceed the remaining, unpaid portion of the Purchase Price of such Improvement determined pursuant to Section 7.A. above. C. Requisition for Incremental Payment of Purchase Price. (1) Base Increment. The Contracting Private Party may submit a written request or requests to the City Engineer for the payment of the Base Increment for an Improvement when such Improvement is substantially complete as such term is described in Section 5 above. It is the intention of the parties that payment requests for relevant portions of an Improvement may be submitted and processed even though payment will not be made until the entire Improvement for which such requests have been submitted is substantially complete. Each Base Increment payment request must be in the form attached hereto as Exhibit D, which is incorporated herein by this reference, and shall be properly executed. Each request for payment of the Base Increment for an Improvement shall be accompanied by a copy of the following documents related to the construction of such Improvement: (a) a list including the name of the contractor, each subcontractor and materialman for the Improvement, (b) each applicable construction contract (unless submitted with a prior payment request in which case reference shall be made to such contract and the prior payment request), (c) each applicable change order (unless submitted with a prior payment request in which case reference shall be made to such change order and the prior payment request), (d) each invoice submitted pursuant to such construction contracts, (e) copies of the front and back of cancelled checks or other evidence of payment of each invoice satisfactory to the City Engineer and (i) written conditional lien releases executed by each applicable contractor, subcontractor and materialman in a form satisfactory to the City Attorney of the City (the "City Attorney") for the Improvement. The amounts in 7A(4), (5) and (6) are straight percentage amounts and the Contracting Private Party need not provide separate cost and payment justifications for those amounts. (2) Retained Increment. The Contracting Private Party may submit a written request to the City Engineer for the payment of the Retained Increment for an Improvement in the form attached hereto as Exhibit D. WBD\296656.I2 D. Review of Payment Request. The City Engineer or his designee shall review each payment request and the supporting documentation accompanying such payment request. If the City Engineer finds that any such payment request is incomplete, improper or otherwise not suitable for approval, the City Engineer shall inform the Contracting Private Party in writing within sixty (60) calendar days after receipt thereof, the reasons for his or her finding. The Contracting Private Party shall have the right to respond to this finding by submitting further documentation and/or resubmitting the payment request. The City Engineer shall review any further documentation received from the Contracting Private Party in support of a payment request and inform the Contracting Private Party of his or her approval or denial of the payment request as supplemented in accordance with this Section within twenty (20) calendar days after receipt of the supplemental documentation. A resubmittal of a payment request shall be deemed a new payment request for purposes of this Section. Costs incurred under a construction contract for an Improvement entered into pursuant to the requirements of this Agreement and change orders approved in accordance with the Administrative Procedures are deemed to be reasonable and representative of the cost and value of the Improvement and, subject to the other provisions of this Agreement, shall be included in the Purchase Price for such Improvement. Following (i) the sale of Improvement Area Bonds pursuant to Section 16 hereof the proceeds of which are intended to be used to acquire an Improvement for which a payment request has been received and (ii) his or her approval of such payment request, the City Engineer shall immediately forward a request to the Finance Director of the City (the "Finance Director") notifying the Finance Director of his or her approval of the payment request and requesting that such payment be made to the appropriate payee(s). The Finance Director shall process any such request of the City Engineer pursuant to the applicable procedures of the Finance Department and shall make or authorize such payment pursuant to such procedures and subsection 7.E. below. E. Payment. (1) Payment for Improvements. The City and the Private Parties acknowledge and agree that the aggregate amount to be paid by the City to acquire the Improvements is limited to (a) the aggregate amount of eligible proceeds of Improvement Area Bonds as determined pursuant to (3) below that will be available for the payment thereof and the interest earnings thereon, (b) the Exchanged Funds which may be applied only to the Purchase Price of Improvement C and the interest earnings thereon, and (c) the proceeds of the levy of special taxes within an Improvement Area only if Improvement Area Bonds may not be issued for such Improvement Area. The City and the Private Parties further acknowledge and agree that the aggregate amount that may be paid by the City to acquire Improvements constituting dry utilities or Mitigation Land which are to be owned by an entity other than a "political subdivision" or a designated "501(c)3 corporation" as such terms are used in the Internal Revenue Code and regulations of the Internal Revenue Service from the proceeds of tax exempt bonds issued for the Financing District shall be limited to 5% of the proceeds of such bonds which are eligible to be used to finance the acquisition of the Improvements. WBDV296656.12 (2) Timing of the Payment of the Purchase Price for an Improvement. Subject to the limitations contained in (3) and (4) below, the increment of the Purchase Price for each Improvement shall be paid to the Contracting Private Party within thirty (30) calendar days after the date of the City Engineer's approval of the payment request for any such increment; provided, however, no Retained Increment may be paid earlier than thirty-five (35) calendar days after the recording of a Notice of Completion for the Improvement. (3) Source of Payment. Subject to the provisions of Section 16 and except as provided in the third paragraph below, the Purchase Price or any increment thereof for an Improvement shall be payable to the Contracting Private Party solely from (a) those proceeds of the sale of the Improvement Area Bonds authorized and eligible for the payment for such Improvement remaining after (i) the costs of formation of the District and all costs of issuance of such Improvement Area Bonds have been paid, (ii) deposits of accrued and capitalized interest, if any, to the redemption fund, bond service fund or the equivalent thereof, (iii) the initial deposit to the reserve fund have been made, (iv) the deposit of the amount necessary to pay the costs of administering the applicable Improvement Area Bonds and the District until the receipt of the proceeds of the special taxes levied in the Improvement Area for which such Improvement Area Bonds were issued, and (v) any costs previously paid by the City toward such Improvement have been reimbursed to the City, and (b) the Exchanged Funds, including earnings thereon, which may only be used to pay the Purchase Price of Improvement C allocated to the Improvement Area shown in the following paragraph. For example, as shown in Exhibit B, 33.16% of the Purchase Price for Improvement B as identified in Exhibit B is allocated to Improvement Area No. 1 and 66.84% of the Purchase Price is allocated to Improvement Area No. 2. The 33.16% share of the Purchase Price of Improvement B allocated to Improvement Area No. 1 will be payable from the eligible proceeds of Improvement Area Bonds issued for Improvement Area No. 1 and the 66.84% share of such Purchase Price will be payable from the eligible proceeds of Improvement Area Bonds issued for Improvement Area No. 2. In the event that the Purchase Price for an Improvement is less than the estimated cost set forth in Exhibit B hereto, the proportionate share of the reduction in the Purchase Price shall be allocated to each Improvement Area based upon the Percentage Allocation set forth in Exhibit B applicable to such Improvement. Conversely, in the event that the Purchase Price for an Improvement is more than the estimated cost set forth in Exhibit B hereto, the proportionate share of increase in the Purchase Price shall be allocated to each Improvement Area based upon such Percentage Allocation. The Exchanged Funds allocated to each Improvement Area and, in the case of Improvement Area No. 1, each Zone therein are as follows: Improvement Area or Zone Improvement Area No. 1 Zone A Improvement Area No. 1 ZoneB Improvement Area No. 2 Exchanged Funds Allocated to Improvement Area of Zone $539,830 $885,564 $1,574,606 WBD\296656.12 In the event that Improvement Area Bonds cannot be issued pursuant to the provisions of Section 16 for an Improvement Area, the proportionate share of the Purchase Price of the Improvements allocated to such Improvement Area shall be paid over time from the proceeds of special taxes levied by the District if and to the extent that the District is legally authorized to levy and collect such special taxes. Beyond the amount of such available Improvement Area Bond proceeds, the Exchanged Funds which be used only to pay the Purchase Price for Improvement C and the special taxes, neither the City nor the District shall have an obligation to pay for the acquisition of the Improvements. (4) Withholding of Payment. In addition to the foregoing, the City shall have the right to withhold payment of the Purchase Price or any increment thereof of any Improvement if the Contracting Private Party (a) is delinquent in the payment of (i) any special taxes levied by the City on properties then owned by the Contracting Private Party within the Community Facilities District and/or (ii) ad valorem taxes levied on properties then owned by the Contracting Private Party within the Community Facilities District or (b) is not then, in the reasonable judgment of the City Engineer, in substantial compliance with all applicable conditions and obligations imposed upon the Contracting Private Party hereunder or under any Subdivision Improvement Agreement to which such Contracting Private Party is a party, including but not limited to, payment of all applicable fees, dedication of all applicable rights-of-way or other property, and construction of all applicable public improvements. The Finance Director shall, within 15 calendar days of the determination to withhold such payment, provide written notice to the Contracting Private Party of the decision to withhold any such payment and shall specify the reason for such decision. If the payment is withheld as a result of the delinquency in the payment of special taxes, the notice shall identify the delinquent parcels and the amount of such delinquency. If the payment is withheld as a result of substantial non-compliance with a condition or obligation, the notice shall specify such condition or obligation and what action will be necessary by the Contracting Private Party to substantially comply with such condition or obligation. Upon receipt by the Finance Director of evidence reasonably satisfactory to the Finance Director of the payment of the delinquent special taxes or upon the determination by the Finance Director that the Contracting Private Party has substantially complied with the subject condition or obligation, the Finance Director shall within 30 calendar days cause any payment which has been withheld pursuant to the provisions of this paragraph to be made. (5) Grant Funds. City agrees to continue to diligently pursue and take all reasonable actions, if any, required to receive the Grant Funds and comply with the Resolution. F. Time Periods. The inability of City or any Private Party to perform within each time period set forth in this Section 7, notwithstanding its best efforts, shall not constitute a breach of this Agreement by such party. SECTION 8. Audit. The authorized representatives of City shall have the right, upon five (5) working days, i.e., days on which the City offices are open for business, prior written notice to the Contracting Private Party and during normal business hours, to review all books and records of any WBD\296656.12 Contracting Private Party pertaining to costs and expenses incurred by such Contracting Private Party in construction of any Improvement. SECTION 9. Indemnification by the Private Parties. Each Contracting Private Party shall defend, indemnify and hold harmless the City, its officers, directors, employees and agents from and against any and all claims, losses, liabilities, damages, including court costs and reasonable attorneys' fees by reason of, or resulting from, or directly or indirectly out of (a) the failure of any Improvement constructed by the Contracting Private Party following the adoption of the resolution of intention to form a community facilities district to be constructed in accordance with the Administration Procedures and this Agreement, (b) the solicitation by such Contracting Private Party, its contractors, officers, directors, employees and agents of bids for the construction of the Improvement, (c) the award and administration by such Contracting Private Party, its contractors, officers, directors, employees or assigns of contracts for the construction of the Improvement, (d) the supervision by such Contracting Private Party, its contractors, officers, directors, employees or assigns of the construction of the Improvement and (e) the design and construction of the Improvement by such Contracting Private Party, its contractors, officers, directors, employees or assigns. Each Private Party shall defend, indemnify and hold harmless the City, its officers, directors, employees and agents from and against any and all claims, losses, liabilities, damages, including court costs and reasonable attorneys' fees by reason of, or resulting from, or directly or indirectly out of the proceedings to form the Community Facilities District; provided, however, the City and each Private Party acknowledges and agrees that the liabilities and costs of such defense, indemnification and hold harmless shall be allocated among the Private Parties in the same percentages as the allocation of the costs of the Improvements set forth in Exhibit B. Notwithstanding the foregoing, no Private Party or Contracting Private Party shall have an obligation to defend, indemnify or hold harmless the City, its officers, directors, employees and agents from and against any such claims, liabilities, losses or damages (including court costs and attorneys' fees) which result from or arise out of the sole negligence or willful misconduct of the City, its officers, directors, employees, or agents. SECTION 10. Obligation of City. The City has no legal or financial obligation to construct or finance the actual construction of the Improvements. All costs incurred for actual construction of the Improvements, including all incidentals thereto, shall be borne by the Private Parties, and the obligations of the City are limited to the acquisition of the Improvements pursuant to the provisions of this Agreement. SECTION 11. Failure by the Contracting Private Party to Acquire Mitigation Land or Construct Improvements. If the City determines at any time that the acquisition of land or mitigation credits necessary to mitigate the environmental impacts of any Improvement (collectively, the "Mitigation Land") and/ or the construction of any Improvement has not been completed prior to the deadline date for acquisition of such Mitigation Land and/or completion of such Improvement as set forth in the applicable Subdivision Improvement Agreement or any applicable regulatory permits, the City may give written notice of such failure of performance to the Contracting Private Party and the other Private Parties. The Contracting Private Party and the other Private Parties shall have sixty (60) calendar days from the date of receipt of such notice to either (i) cure such failure of performance by demonstrating to the satisfaction of the City during such cure period reasonable progress in or towards the acquisition of such Mitigation Land and/or the construction of the WBD\296656.12 10 Improvement and a continuing ability to complete the acquisition of such Mitigation Land and/or construction of such Improvement in accordance with the applicable Subdivision Improvement Agreement or applicable regulatory permits or (ii) reasonably demonstrate that such failure of performance is due to circumstances or conditions beyond the Contracting Private Party's reasonable control ("Force Majeure") including, without limitation, the City's actions, omissions or inaction which result in a delay of performance by the Contracting Private Party, labor disputes, acts of God, war, riots, insurrections, civil commotions, moratoriums, inability to obtain labor or materials or reasonable substitutes for either, fire, unusual delay in transportation, and adverse weather conditions. Should the Contracting Private Party and the other Private Parties fail to reasonably demonstrate such reasonable progress towards or such continuing ability to acquire such Mitigation Land and/or to complete the construction of such Improvement or Force Majeure, the obligation of the City to pay the Purchase Price for the acquisition of such Improvement pursuant to this Agreement may be terminated by the City by providing ten (10) calendar days written notice to the Contracting Private Party and the other Private Parties. Upon termination, the City may in its sole discretion then proceed to acquire such Mitigation Land and/or advertise and bid the balance of the construction of such Improvement, and except as provided in the following sentence there will be no further obligation on the part of the City for payment of the Purchase Price for such Improvement due to the Contracting Private Party pursuant to this Agreement. If, following the acquisition of such Mitigation Land and/or completion of the construction of such Improvement pursuant to a contract awarded by the City, there are surplus Improvement Area Bond proceeds that are eligible and authorized to be used to finance the acquisition of such Improvement, the Contracting Private Party shall be entitled to payment to the extent of such funds of an amount equal to the costs, as determined by the City Engineer, incurred by the Contracting Private Party prior to such termination for the construction of such Improvement. In the event that the City chooses not to acquire such Mitigation Land and/or advertise and bid the balance of the construction of any such Improvement following such a termination, any monies remaining in the improvement fund for any applicable Improvement Area Bonds and set aside for the acquisition of such Improvement shall be transferred to the redemption fund for such Improvement Area Bonds and used to call outstanding Improvement Area Bonds. The provisions of this Section 11 shall constitute a cumulative remedy for the failure of the Contracting Private Party to complete the construction of an Improvement by the deadline date set forth in the applicable Subdivision Improvement Agreement. Exercise by the City of its rights provided by this Section 11 shall not constitute a waiver of any remedy that the City may have under such Subdivision Improvement Agreement in the event of a default by the Contracting Private Party thereunder. SECTION 12. Agreement Contingent. This Agreement is contingent upon the formation of the Community Facilities District and the designation of the Improvement Areas, the authorization by the owners of property within each Improvement Area of the Community Facilities District to levy special taxes therein and the successful sale of the Improvement Area Bonds, and it shall be null and void if the first series of Improvement Area Bonds is not sold within a five (5) year period following the date of this Agreement. This time period within which the first series of Improvement Area WBD\296656.12 11 Bonds must be sold can be extended by request of the Private Parties within the applicable Improvement Area and concurrence of the City Council. The City may, at its option, suspend the performance of its obligations under this Agreement if, during the 30-day statute of limitations period following the formation of the Community Facilities District, any legal challenge is filed relating to the validity or enforceability of this Agreement, the Community Facilities District proceedings or the issuance of the Improvement Area Bonds. The obligations of the City hereunder shall be reinstated upon the entry of a final judgment in any such proceedings upholding the validity and enforceability of the Agreement, the Community Facilities District proceedings and the issuance of the Improvement Area Bonds. In the event that a final judgment or other final and non-appealable resolution is entered invalidating or declaring unenforceable this Agreement, the Community Facilities District proceedings or the issuance of the Improvement Area Bonds, the City may, at its option, terminate this Agreement by giving thirty (30) calendar days advance written notice of such termination to the Private Parties. SECTION 13. Notice of Special Tax. Private Parties, or the successor or assigns of a Private Party who succeed to or are assigned the interests of a Private Party following formation of the Community Facilities District, shall provide written notice of the special tax as required by the Community Facilities District Law and/or the City Financing District Policies to all potential purchasers of lots under a disclosure program and in a form approved by the City Council prior to the sale of Bonds. Each Private Party shall defend, indemnify and hold harmless the City, its officers, directors, employees and agents from and against any and all claims, losses, liabilities, damages, including court costs and reasonable attorneys' fees by reason of, or resulting from such Private Party's failure to provide such written notice. SECTION 14. Relationship to Public Works. This Agreement is for the acquisition of certain Improvements by City and the sale of the Improvement Area Bonds for the payment of acquisition costs for such Improvements and such other amounts as are herein provided, and is not intended to be a public works contract, hi performing its obligations under this Agreement, each Private Party is an independent contractor and not the agent of City or one another. City shall have no responsibility for payment to any contractor or supplier of any Contracting Private Party. SECTION 15. Special Taxes - Authorization to Levy and Compliance with City Financing District Policies. Special taxes levied within the Community Facilities District shall comply with all applicable provisions of the Community Facilities District Law and the City Financing District Policies unless a specific waiver of policy is approved by the City Council. The rate and method of apportionment of the special taxes (the "RMA") proposed to be authorized to be levied within each Improvement Area is set forth in Exhibit D attached hereto and incorporated herein by this reference. The Community Facilities District shall, upon formation of such district and the authorization by the qualified electors thereof to levy special taxes in accordance with the RMA pursuant to the Community Facilities District Law, be authorized to levy such special taxes for the purposes specified in and pursuant to the provisions of the RMA. WBDV296656.12 12 SECTION 16. Sale of Bonds. A. Issuance of Bonds; Required Value to Debt Ratio. Bonds of the Community Facilities District may be issued pursuant and subject to the provisions of this Section 16 if and when the Community Facilities District is successfully formed and authorization for the levy of special taxes within each Improvement Area is approved by the owners of property within each such Improvement Area and authorization for the issuance of Improvement Area Bonds is similarly approved, all in accordance with the Community Facilities District Law and City Financing District Policies. The Community Facilities District shall, upon receipt of a written request of a Private Party, proceed with the issuance and sale of Improvement Area Bonds for the Improvement Area in which such Private Party owns and/or is developing property pursuant to the Community Facilities District Law, the City's Financing District Policies, this Agreement, a resolution of the City Council acting as the legislative body of the Community Facilities District and a bond indenture (the "Indenture") which shall establish the terms and conditions for the issuance, sale and administration of such Improvement Area Bonds. Except as provided in the last sentence of this paragraph, only one series of Improvement Area Bonds will be issued for each Improvement Area. Each series of the Improvement Area Bonds shall be sized so that as of the date of issuance (i) the aggregate appraised value of all properties within the Improvement Area for which such bonds are to be issued shall be at least four (4) times the Land Secured Debt (defined below) allocable to such properties and (ii) the aggregate appraised value of all properties within each Zone within Improvement Area No. 1 or discrete development area, if any, designated by the Finance Director within Improvement Area No. 2 shall also be at least four (4) times the Land Secured Debt (defined below) allocable to the properties within each such Zone or development area, as applicable. "Land Secured Debt" means as to any taxable property, the principal amount of all outstanding Improvement Area Bonds allocable to such property, together with the principal amount of any other indebtedness of any community facilities district secured by the levy of special taxes which is allocable to such parcel and the principal amount of any other fixed lien assessment levied against such property. The appraised value of such property for purposes of this paragraph shall be determined by an independent appraisal undertaken for the City utilizing appraisal assumptions approved by the City. The City may, in its sole discretion, as to any series of Improvement Area Bonds accept a lower ratio of appraised value to Land Secured Debt, accept a form or forms of credit enhancement such as a letter of credit, cash deposit, bond insurance or the escrow of Improvement Area Bond proceeds or agree to issue a second series of Improvement Area Bonds for the applicable Improvement Area to offset a deficiency in the required value-to-debt ratio. B. Funds and Accounts. The documents providing for the issuance of each series of the Bonds shall provide for the establishment of separate funds and accounts for each such series of the Bonds. The proceeds of each series of the Improvement Area Bonds shall be used in the following priority to (1) pay for costs of issuance of the Improvement Area Bonds including, without limitation, underwriter's discount, bond counsel fees, printing, and fiscal agent fees; (2) fund a reserve fund for the payment of principal and interest with respect to such series of the Improvement Area Bonds; (3) fund capitalized interest on such series of the Improvement Area Bonds in an amount approved by the City; (4) pay for the share of the costs of forming the Community Facilities District allocable to the Improvement Area for such series of Improvement Area Bonds, including reimbursement of advances of funds to the City by the Private Party(s) within the Improvement Area WBD\296656.12 13 to pay costs incurred by the City in the formation of the District and the issuance of the Improvement Area Bonds; (5) pay, if necessary, for the costs of administering such Improvement Area Bonds and the District until the receipt of the proceeds of the special taxes levied within such Improvement Area, (6) reimburse the City for any costs incurred by the City towards any Improvement authorized to be financed from the proceeds of such Improvement Area Bonds, and (7) pay that portion of the Purchase Price of the Improvements allocable to the Improvement Area for which such Improvement Area Bonds are issued as provided below (the "Improvement Proceeds") or pay for the construction of such Improvements. The Improvement Area Bonds to be issued for Improvement Area No. 1 will be eligible to fund the proportionate share of the Improvements allocated to Improvement Area No. 1 as specified in Exhibit B. The Improvement Area Bonds to be issued for Improvement Area No. 2 will be eligible to fund the proportionate share of the Improvements allocated to Improvement Area No. 2 as specified in Exhibit B. The Improvement Proceeds for each series of Improvement Area Bonds shall be deposited in an "Improvement Fund" and, as provided for below, into "Improvement Accounts" within such funds, each established pursuant to the applicable Indenture. Investment earnings on funds in each Improvement Fund or the accounts therein shall be credited to such Improvement Fund or Improvement Account until completion of all Improvements the cost of which is allocated, in whole or in part, to the applicable Improvement Area. Within the Improvement Fund for the Improvement Area Bonds issued for Improvement Area No. 1, separate Improvement Accounts shall be established and an amount equal to the percentage share of the Purchase Price for Improvement B, Improvement D and Improvement F allocated to Improvement Area No. 1 shall be deposited into the applicable account from the proceeds of the Improvement Area Bonds deposited in the Improvement Fund prior to the disbursement of such proceeds for any other purpose. Except as provided in the following sentence, the funds on deposit in such account shall be utilized only to pay the percentage share of the Purchase Price for Improvement B, Improvement D and Improvement F, as applicable, allocated to Improvement Area No. 1. If funds remain in such account following the payment of the entire Purchase Price for Improvement B, Improvement D or Improvement F, as applicable, such funds shall remain on deposit in the Improvement Fund but the applicable Improvement Account shall be closed and such funds may be used to pay the Purchase Price for other Improvements eligible to be paid from the proceeds of such Improvement Area Bonds. Within the Improvement Fund for the Improvement Area Bonds issued for Improvement Area No. 2, an Improvement Account shall be established and an amount equal to the percentage share of the Purchase Price for Improvements C and D as designated in Exhibit B allocated to Improvement Area No. 2 less the amount of the Exchanged Funds allocated to such Improvement Area shall be deposited in such account from the proceeds of the Improvement Area Bonds deposited in the Improvement Fund prior to the disbursement of such proceeds for any other purpose. Except as provided in the following sentence, the funds on deposit in such account shall be utilized only to pay the percentage share of the Purchase Price for Improvement C and D allocated to Improvement Area No. 2. If funds remain in such account following the payment of the entire Purchase Price for such WBD\296656.12 14 Improvements, such funds shall remain on deposit in the Improvement Fund but such account shall be closed and such funds may be used to pay the Purchase Price for other Improvements eligible to be paid from the proceeds of such Improvement Area Bonds. Upon approval of a payment request for the payment of an increment of the Purchase Price of Improvement C, the amount of Exchanged Funds allocated to each Improvement Area as specified hi Section 7(E)(3) shall be paid to the Contracting Private Party in an amount up to the portion of the Purchase Price of Improvement C allocated to each Improvement Area and the remaining unpaid portion of the increment of the Purchase Price, if any, for Improvement C allocated to each Improvement Area shall be paid to the Contracting Private Party from the Improvement Fund for the Improvement Area Bonds issued for such Improvement Area. If insufficient funds remain in an Improvement Fund for any Improvement Area Bonds to fund such Improvement Area's share of the approved Purchase Price, the amount paid to the Contracting Private Party shall be reduced by the amount of the shortfall and paid later if and to the extent additional funds are deposited in the Improvement Fund. Earnings on funds in the reserve fund for each series of Improvement Area Bonds hi excess of the "Reserve Requirement" established pursuant to the Indenture ("Excess Reserve Fund Earnings") shall be allocated to the Improvement Fund until that portion of the Purchase Price of the Improvements allocated to the Improvement Area for which such series of Improvement Area Bonds was issued has been paid in full. Following the final payment of the portion of the Purchase Price for all such Improvements allocated to such Improvement Area, the Excess Reserve Fund Earnings thereafter shall be allocated to the payment of the principal of and interest on such Improvement Area Bonds and applied by the Community Facilities District as a credit against the levy of annual special taxes within such Improvement Area or shall be used to fund any rebate obligation that the District may have to the federal government for the applicable series of Improvement Area Bonds. C. Conditions of the Sale of Bonds. The timing of the issuance and sale of each series of Improvement Area Bonds, the terms and conditions upon which each series of Improvement Area Bonds shall be issued and sold, the method of sale of each series of Improvement Area Bonds and the pricing thereof shall be determined solely by the City and shall conform to the applicable policies of the City and this Agreement. Notwithstanding the foregoing, the City shall not issue and sell any series of Bonds without first meeting and consulting with the applicable Private Party or Private Parties regarding the timing, terms and conditions and method of sale of such Bonds. The sale of each series of Improvement Area Bonds shall be subject to receipt by the City of a competitively bid or negotiated bond purchase agreement which is acceptable to the City. The sale of each series of Improvement Area Bonds shall also be conditional upon the preparation of an official statement that is, in the sole judgment of the City, "deemed final" as such term is used in Rule 15c2- 12 of the Securities and Exchange Commission (the "Rule"). Each Private Party, on behalf of itself, any affiliates of such Private Party and any successor or assign of such Private Party, agrees (a) to provide all information regarding the development of its property within the District, including the financing plan for such development, which are necessary to ensure that the official statement for any series of Improvement Area Bonds to be secured by WBDV296656.12 15 special taxes levied on Properties owned by such Private Party complies with the requirements of the Rule and all other applicable federal and state securities laws; (b) to enter into a continuing disclosure agreement to provide such continuing disclosure pertaining to the Community Facilities District, the development of such Private Party's property and such Private Party as necessary to ensure ongoing compliance with the continuing disclosure requirements of the Rule and (c) to cause its counsel to provide an opinion of such counsel in a form satisfactory to the underwriter of such series of the Improvement Area Bonds and underwriter's counsel or disclosure counsel, as applicable. SECTION 17. Effect of This Agreement on Other Agreements. Except as specifically provided herein, nothing contained herein shall be construed as releasing Private Parties, or any of them, from any condition of development or requirement imposed by any other agreement with City. SECTION 18. General Standard of Reasonableness. Any provision of this Agreement which requires the consent, approval, discretion or acceptance of any party hereto or any of their respective employees, officers or agents shall be deemed to require that such consent, approval or acceptance not be unreasonably withheld or delayed, unless such provision expressly incorporates a different standard. SECTION 19. Entire Agreement; Amendment. This Agreement and the agreements expressly referred to herein contains all of the agreements of the parties hereto with respect to the matters contained herein and no prior or contemporaneous agreement or understandings, oral or written, pertaining to any such matters shall be effective for any purpose. No provision of this Agreement may be modified, waived, amended or added to except by a writing signed by the party against which the enforcement of such modification, waiver, amendment or addition is or may be sought. SECTION 20. Notices. Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered or seventy-two (72) hours following deposit of the same in any United States Post Office in California, registered or certified, postage prepaid, addressed as follows: WBD\296656.12 16 Private Parties: Palomar Forum Associates L.P. 1420 Bristol Street North, Suite 100 Newport Beach, CA 92660 Attn: Larry Nelson Fenton Raceway LLC 7588 Metropolitan Drive San Diego, CA 92108 Attn: Allen M. Jones Carlsbad Oaks North Partners, L.P. P.O. Box 80036 San Diego, CA 92138 Attn: TedTchang Techbilt Construction Corp. P.O. Box 80036 San Diego, CA 92138 Attn: TedTchang City: City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 Attn: City Engineer/Engineering Services Each party may change its address for delivery of notice by delivering written notice of such change of address to the other party. SECTION 21. Severability. If any provision of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible. SECTION 22. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. No Private Party may assign its rights or obligations hereunder except upon written notice to City indicating the name and address of the assignee. Upon such notice and the assumption by the assignee of the rights, duties and obligations of such Private Party arising under or from this Agreement, such Private Party shall be released by City from all future duties or obligations rising under or from this Agreement. Notwithstanding the preceding sentence, a Private Party may assign its rights and obligations hereunder as security to lenders for the purpose of obtaining loans to finance development within the Community Facilities District, but no such assignment shall release such Private Party from its obligations hereunder to City. WBDY296656.12 17 SECTION 23. Governing Law. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California. Additionally, this Agreement and the construction of the Improvements shall be subject to all City ordinances and regulations relating to the requirement of improvement agreements, land division, improvement security or other applicable development requirements. SECTION 24. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by any other party, or the failure by a party to exercise its rights under the default of any other party, shall not constitute a waiver of such party's right to insist and demand strict compliance by any other party with the terms of this Agreement thereafter. SECTION 25. Singular and Plural; Gender. As used herein, the singular of any work includes the plural, and terms in the masculine gender shall include the feminine. SECTION 26. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original. SECTION 27. Construction of Agreement. This Agreement has been reviewed by legal counsel for the City and each of the Private Parties and shall be deemed for all purposes to have been jointly drafted by the City and each of the Private Parties. No presumption or rule that ambiguities shall be construed against the drafting party shall apply to the interpretation or enforcement of this Agreement. The language in all parts of this Agreement, in all cases, shall be construed as a whole and in accordance with its fair meaning and not strictly for or against any party and consistent with the provisions hereof, in order to achieve the objectives of the parties hereunder. The captions of the sections and subsections of this Agreement are for convenience only and shall not be considered or referred to in resolving questions of construction. SECTION 28.No Obligation to Form Community Facilities District. Private Parties acknowledges that the decision of the City Council of the City to form the Community Facilities District is a legislative action and the City may not enter into an agreement to obligate the City Council to exercise its legislative discretion in a particular manner or for a particular result. This Agreement does not, therefore, in any way create a contractual, legal or equitable obligation of or commitment by the City to approve the formation of the Community Facilities District. SECTION 29. Recitals; Exhibits. Any recitals set forth above and any attached exhibits are incorporated by reference into this Agreement. SECTION 30. Authority of Signatories. Each signatory and party hereto hereby represents and warrants to the other party that it has legal authority and capacity and direction from its principal to enter into this Agreement, and that all resolutions and/or other actions have been taken so as to enable such party to enter into this Agreement. [End of page. Next page is signature page.] WBDV296656.12 18 Signature Page to Acquisition/Financing Agreement by and among the City of Carlsbad and Palomar Forum Associates L.P., Fenton Raceway LLC, Carlsbad Oaks North Partners, L.P. and Techbilt Construction Corp. EXECUTED by and between the parties hereto on the day and year first hereinabove written. "CITY" CITY OF California By: . rporation of the State ofr MAYOR ATTEST: CITY OF CARLSBAD STATE OF CALIFORNIA * :fe >/£-r V0'^^pp^> « . , . t ^ APPROVED AS TO FORM: RONALD R. BALL, CITY ATTORNEY By: BEPUTY CITY ATTORNEY CITY OF CARLSBAD STATE OF CALIFORNIA - 2o.ce. S-l WBDV296656.12 "FORUM" Palomar Forum Associates L.P., a California limited partners "RACEWAY" Fenton Raceway, a California limited liability company By: H. G. Fenton Company, California corporation, its Managing Partner By: Title: By: Its: S-2 WBD\296656.12 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT f I ! ^•<7Oc^x7Cc<?'C<x^<i*XXXlX^'C<X^X3^C<^ State of California 1 ^-> V ss. County of C~}tLAi^£aG7 1J On K.\M-JOV- \^.Z/5C>ip, before me, CxWMsdS Cx^LC IsirtTKa-M VO^MC.- , Date personally appeared L. As*-*- a 1 ^^ CHRK1ECOE l^Tra CommlHton* 161 4007 fOV9B Notary WB«c - California J \BE^ CXange County Place Notary Seal Above Name and Title of Officer (e.g.f "Jane Doe, Notary Fjublic11) Name(s) of Signer(s) ^ personally known to me D 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 i capacity(ies), and that by his/her/their i signature(s) on the instrument the person(s), or acted, executed the instrument. WITNESS my hand and official seal. -Signature of NotaryPublic /•MTT-JX-k*! A 1"~ \sr i iv/f Vy^L. ... Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Tvpe of Document: Document Date: Siqner(s) Other Than Named Above: Capacity(ies) Claimed by Signer Sianer s Name: LJ Individual LJ Corporate Officer — Title(s): LJ Partner — :Z Limited D General D Attorney in Fact D Trustee D Guardian or Conservator Z Other: Siqner Is Representing: Number of Pages: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^H Rlt^WT THl IWlRPRiMT ^^^H ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^B OF SlfiMFR ^^^1 Top of thumb here < ii « X?e<?c<? © 1999 National Notary Association • 9350 De Soto Ave., P.O. Box 2402 • Chatsworth, CA 91313-2402 • vvww.nationalnotary.org "FORUM" Palomar Forum Associates L.P., a California limited partnership By: "RACEWAY" Fenton Raceway, a California limited liability company By: H. G. Fenton Company, California corporation, its Managing Partner By: Title: By: Its: S-2 WBDV296656.12 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA COUNTY OF SAN DIEGO ) ss On March 15, 2006 before me,Clare Chavez. Notary Public personally appeared Michael P. Neal and Allen M. Jones , personally known to me (or 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. WITNESS my hand and official seal. CLARE CHWEZ Commission f 1466393 Notary Public - CaWbmta San Dtego County My Convn. Expte»Jon29.'. (SEAL) Signature of Notary Public OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document DESCRIPTION OF ATTACHED DOCUMENT: Title or Type of Document: Date of Document: Number of Pages: Signer(s) Other than Named Above: CAPACITY(IES) CLAIMED BY SIGNER: Signer's Name: D Individual D Corporate Officer: Title(s): D Partner: - D Limited Q Individual O Attorney-in-Fact D Trustee D Guardian or Conservator D Other: Signer is Representing: Signer's Name: D Individual Q Corporate Officer: Title(s): D Partner: - Q Limited D Individual D Attorney-in-Fact D Trustee D Guardian or Conservator D Other: Signer is Representing: "OAKS NORTH" Carlsbad Oaks North Partners, L.P., a California limited partnership By: Sun Tech Investments Corp., a California corporation, General Partner By: Title:President Title: Secretary "TECHBILT" Techbilt Construction C^rp.^a California corporation By: Title:Presiden Proper notary acknowledgment of execution by the Private Parties must be attached to this document. President or vice-president AND secretary, or assistant secretary must sign for corporations. If only one officer signs, the corporation must attach a resolution certified by the secretary or assistant secretary under corporate seal empowering that officer to bind the corporation with his or her signature alone. S-3 WBDV296656.I2 CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT STATE OF CALIFORNIA ) COUNTY OF San Diego ) On March 9, 2006 before me, Susan E. Eubank DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC" personally appeared, Paul K. Tchang and Genevieve Tchang personally known to me (or 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. WITNESS my hand and official seal. SUSAN E. EUBANK iCOMM. # 1394222 5 lOTARYPUBUC-CAUFORNuQ SAN DIEGO COUNTY 0COMM. EXP. FEB. 13, 2007 ? OPTIONAL INFORMATION TITLE OR TYPE OF DOCUMENT Arqn1-g-i M Carlsbad Oaks North Techbilt Construction Corp. DATE OF DOCUMENT NUMBER OF PAGES SIGNER(S) OTHER THAN NAMED ABOVE EXHIBIT "A" MAP OF THE PROPERTIES A-l WBD\296656.12 DRAFT 9/12/05 EXHIBIT "B' DESCRIPTION OF AND COST ESTIMATE FOR THE IMPROVEMENTS Improvement Description 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-way2, 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. Estimated Cost $2,800,000 Percentage Allocation IA1 ZONI . A 100% ZONE B 0% IA2 0% B-l WBD\296656.12 DRAFT 9/12/05 Improvement Description 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. Estimated Cost $15,900,0003 Percentage Allocation IA1 ZONE A 12..56 ZONEa 20.60 IA2 66.34 B-2 WBDN296656.12 DRAFT 9/12/05 EXHIBIT "B" IMPROVEMENT DESCRIPTION AND ESTIMATED COSTS (CONTINUED) Improvement Description 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-way2, 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 mitigation2, and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. Estimated Cost $5,000,000 Percentage Allocation IA1 ZONE A 22.27 ZONE B.. 37.55 IA2 40.18 Improvement Description Improvement D - Melrose Drive construction of right turn lane south of Palomar Airport Road Pro rated share of all construction costs as determined at time of formation of the Community Facilities District. Estimated Cost $230,000 Percentage Allocation IA1 ZONE A 33.33 ZONE B 33.33 IA2 33.33 B-3 WBD\296656.12 DRAFT 9/12/05 Improvement Description 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-way2, street lights, one new traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation2 and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. Estimated Cost $4,100,000 Percentage Allocation IA1 ZONE A 0 ZONE B 0 IA2 100% Improvement Description Improvement F - Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of Palomar Airport Road4 Pro rated share of all construction costs as determined at time of formation of the Community Facilities District. Estimated Cost $100,000 Percentage Allocation IA1 ZONE A 55.65 ZONE B 44.35 «SJ. B-4 WBDV296656.12 DRAFT 9/12/05 Footnotes: 1. The description of the Improvements set forth in this Exhibit "B is preliminary and general. The final improvements shall be as approved by the City pursuant to the final plans and specifications. 2. The aggregate amount of the cost of dry utilities or mitigation land which are to be owned by an entity other than a "political subdivision" or a designated "501(c)3 corporation" as such terms are used in the Internal Revenue Code and regulations of the Internal Revenue Service which may be financed from the proceeds of tax exempt bonds issued for the Financing District shall be limited to 5% of the proceeds of such bonds which are eligible to be used to finance the acquisition of the Improvements 3. The "Estimated Cost" includes the cost associated with exporting dirt which would be required if the adjacent Carlsbad Oaks North development is not graded concurrent with the grading for Faraday Avenue. If the Carlsbad Oaks North development is graded concurrent with Faraday Avenue the "Estimated Cost" would be reduced $1,450,000. 4. Purchase Price for this Improvement payable, if at all, only from surplus proceeds of the Improvement Area Bonds issued for Improvement Area No. 1 following the payment of that portion of the Purchase Price for all other Improvements allocated to Improvement Area No. 1. B-5 WBDV296656.12 DRAFT 9/12/05 EXHIBIT "C" CITY OF CARLSBAD ENGINEERING DEPARTMENT ADMINISTRATIVE PROCEDURES FOR REIMBURSABLE PUBLIC WORKS PROJECTS C-l WBD\296656.12 DRAFT 9/12/05 CITY OF CARLSBAD ENGINEERING DEPARTMENT Administrative Procedures for Reimbursable Public Works Projects Applies to: All Developer constructed public works improvements for which reimbursement is sought by the Developer from public funds including improvements to be acquired as part of an assessment district or other special financing district proceedings Applicable Codes and Policies: Carlsbad City Code Sections 3.28.080, 13.08.050, 14.24.060, 15.08.080, 18.42.050, 18.42.080, 20.16.041; California Labor Code Sections 1720-1742 and 1770-1780, Council Policy No. 33 General Guidelines: 1. In accordance with State and City Codes, Developer's may seek and receive reimbursement and/or fee credits from the City for public improvements constructed as a requirement of development in cases where the Developer constructs: a. sewer, water and/or drainage facilities in excess of the needs created by the development for the purpose of serving future development of other properties; or, b. an improvement which would otherwise be constructed from the proceeds of an established facility impact fee program; or, c. an improvement to be acquired from the proceeds of an assessment district or other special financing district; or, d. a road or utility improvement in excess of the needs of the development which is mutually agreed by the City and Developer to be constructed by Developer subject to a reimbursement agreement. 2. Compliance with these procedures is required for any work to be acquired by the City and paid for out of the proceeds of the bonds for an assessment district or other special financing district. 3. A reimbursement and/or fee credit agreement, hereinafter referred to as a "Reimbursement Agreement", between the City and Developer is required, preferably prior to initiating construction on any improvement for which the Developer seeks reimbursement and/or credit against payment of facility impact fees. No credits will be provided unless and until a Reimbursement Agreement is fully executed by City and Developer. 4. For a Developer to receive credit and/or reimbursement for costs incurred to construct a public improvement, the Developer must: a. Comply with the bidding, contracting and change order procedures established in this procedure; and, b. Comply with all applicable City Codes, State law and regulations including laws related to payment of prevailing wages; and, c. Comply with all provisions of the specific Acquisition and/or Reimbursement Agreement. Where there is a conflict between these procedures and the provisions of the Acquisition and/or Reimbursement Agreement, the provisions of the Acquisition and/or Reimbursement Agreement shall take precedence. d. Have all payment requests approved by City staff and/or an independent auditor employed by the City. 5. The cost for any independent auditor is generally paid by the Developer, unless specifically provided for under the provisions of the funding or financing program from which the reimbursement is being made. 6. The timeframes for City staff response described in these procedures are intended to assist Developers in completing reimbursable work in a timely manner. Failure of the City to meet any of the timeframes stated herein does not automatically confer approval or rejection of the eligibility for reimbursement of any item or items of work requested for reimbursement. The City assumes no responsibility for any claims of damage or other increased costs that may accrue to Developer by virtue of City's failure to meet any of the timeframes described in these procedures. All construction costs for reimbursable work including change orders and damage claims shall be reviewed on a case by case basis and their eligibility for reimbursement shall be determined by the City based upon the merits of each individual request and the reimbursement criteria established for each respective financing mechanism. Procedures Pre-Bid Process 1. Plans and Specifications shall be prepared to City Standards and processed for signature consistent with the procedures for a development project. The Developer shall pay all normal plan check and inspection fees, acquire all needed rights-of-way and enter into a secured Subdivision/Development Improvement Agreement with the City prior to going out to bid on a project. The City may require the developer to deposit additional funds with the City to adequately defray the cost to administer the reimbursement provisions of any Acquisition and/or Reimbursement Agreement (over and above normal City inspection services). Any such deposited funds used by the City may be eligible for reimbursement pursuant to the provisions of the specific financing program from which the improvements are being financed. 2. For each submittal during the plan check process, a set of the improvement plans together with a copy of the engineer-of-work's estimate shall be forwarded to the City Project Engineer responsible for preparing the Acquisition and/or Reimbursement Agreement. The Project Engineer shall ensure that a copy of the improvement plans and cost estimate are routed to the "Assessment Engineer" responsible for preparation of the "Engineer's Report" (or assessment spread methodology) for the assessment district or other special financing district (if any). 3. The Project Engineer shall work with the Finance Director and City Attorney, or their approved designees, to prepare the Acquisition and/or Reimbursement Agreement, preferably prior to signature of the project grading or improvement plans. Prior to going out to bid, the Developer shall submit the bid proposal and contract documents ("Bid Documents") to the Project Engineer for review and approval. The Project Engineer shall coordinate the bid document review with the Assessment Engineer (if any). The Project Engineer shall ensure that the Bid Documents satisfy the following requirements: a. Scope of work for the construction of the Improvement or Improvements is uniquely described and unambiguous and is consistent with the description in the Engineer's Report (if any) and the Acquisition and/or Reimbursement Agreement. b. Engineer's Estimate is reasonable. c. Provide that the notice inviting bids for the work on the improvements will be noticed in a form and manner and at a time or times acceptable to the City. d. Require payment of prevailing wages and otherwise adhere to the provisions of Part 7, Chapter 1, commencing with section 1720 of the California Labor Code. e. Contain appropriate bonding and insurance coverage provisions. f. The number of allotted working days specified in the Bid Documents is reasonable for the proposed work. g. Liquidated damage clauses, if any, are consistent with City policy. h. An appropriate payment retention clause (if any) is included in the Bid Documents as required pursuant to the Acquisition and/or Reimbursement Agreement. i. Any further conditions as required in the reasonable professional judgment of the Deputy Public Works Director and as approved by the City Attorney. 5. After Plans and Specifications have been signed and the Bid Documents have been reviewed and approved by the City, the Developer may then proceed with the bid process to construct the Improvement or Improvements. Bidding Process 6. Where bidding on the construction of an Improvement or Improvements will be open to any qualified bidder, Developer shall advertise each notice inviting bids in at least one newspaper of general circulation in the City. The first posting/publication of the notice shall be at least ten (10) days before bid opening. Such notice shall be published for at least ten (10) consecutive times in a daily newspaper of general circulation in the City or for at least two (2) consecutive times in a weekly newspaper in the City. Developer shall, in addition, advertise in consecutive addition(s) in either the "Daily Construction Service" or "The Green Sheet" (or other trade journals approved by the Deputy Public Works Director) for a period of not less than one (1) week. Proof of publication shall be sent to the Project Engineer. A copy of each bid package shall be sent to each plan house used by the City (See Attachment "D" for copy of City's April 16, 2002 Plan Room Listing. An updated list of plan rooms can be obtained by contacting the City's Purchasing Department). A list of the name, address, and telephone number of each person or contractor given a bid package set shall be maintained by the Developer and shall be sent to the Project Engineer. 7. Where the notice inviting bids will only be sent to a list of pre-qualified bidders, a minimum of three (3) bidders shall be pre-qualified based on criteria reviewed and approved by the Deputy Public Works Director. Prior to selecting the final bidders qualified to bid, the Deputy Public Works Director may require the Developer to solicit requests for qualifications by placing an Advertisement in a daily newspaper of general circulation and a list of plan rooms and trade journals approved by the City. The Deputy Public Works Director will then review responses to the request for qualifications and rank them based on established criteria. Based on the ranking by the City, Developer can select the list of qualified bidders. 8. Each bidder shall be sent a sufficient number of bid packages to provide full and accurate bidding by the prime contractor, including subcontractors. The Notice Inviting Bids must clearly state the time, date, and place for the submission of bids. These dates and times must be strictly adhered to unless changed by addendum. 9. Each Request for Bid shall state that the successful bidder shall be required to furnish a performance and warranty bond equal to one hundred percent (100%) of the amount bid and a labor and materials bond equal to one hundred percent (100%) of the amount bid. In lieu of the bond requirements described herein, the Developer may permit securities (acceptable to the City and the Developer), or cash to be substituted therefore. Providers of architectural, engineering, and land surveying services shall not be required to post such bonds. 10. The Request for Bid shall also require bidders to furnish a certificate of insurance for commercial general liability, automobile liability, workers compensation and employer's liability in amounts as specified by the City. 11. Bid document/contract addenda must be mailed to all plan holders by first class mail. If significant changes to the plans and/or specifications require the issuance of an addendum in the last five (5) working days of the bidding period, the bid opening date must be extended to allow bidders a minimum of five (5) working days from receipt of the addendum to accommodate the change. 12.The minimum period between issuance of the Notice Inviting Bids and Bid Opening for any Improvement is four (4) weeks; however, a shorter period of time may be permitted with the prior approval of the Deputy Public Works Director. 13. Developer shall conduct a bid opening at a location approved by the Developer and the City. Sealed bids will be required to be submitted on or before the specified date and time and will be publicly opened and the bidder's name and total bid announced at the bid opening in the presence of any interested party. 14. Developer shall notify the Project Engineer a minimum of five (5) days prior to any bid openings and provide the Project Engineer a copy of the notice requesting bids and the final Bid Documents. 15. Project Engineer shall attend any pre-bid meeting(s) and the public bid opening for each Improvement, and shall receive all addenda to the Bid Documents. Bid Award Process 16. Developer shall open all bids in the presence of any interested parties and shall rank all bids from the lowest to the highest bid amount, based upon costs for reimbursable improvements. Developer shall prepare a summary analysis of all bids and provide its findings regarding the rationale for bid award to the Project Engineer within five (5) working days of the date such award is made. The summary analysis package shall include, but not be limited to, the following information: a. Itemized summary of all bids received for the construction of the Improvement. b. A certificate executed by an authorized representative of the Developer that: i. All bidders received the same set of bid documents (including all addenda issued), and that there are no pending disputes over the bidding procedures. ii. All applicable City bonding, insurance and licensing requirements for the work have been met. iii. The bid was made without connection with any person, firm or corporation making a bid for the same work, and is in all respects fair and without collusion or fraud. c. A copy of the selected bid proposal for award. 17. Developer shall retain the original of all bids received for a minimum of three (3) years after bid award. 18. Project Engineer shall review the lowest qualified bid, as determined by the Developer, with respect to the Engineer's Estimate for the reimbursable work, and appraise the Deputy Public Works Director if the amount of reimbursable costs is higher than originally estimated in the Engineer's Report. 19. Developer shall award all contracts to the lowest responsive, responsible bidder within sixty (60) days after bid opening with concurrence of the Project Engineer, and shall authorize Contractor to proceed with the work within sixty (60) days (maximum) after award. 20. If the Developer wishes to award a contract for the construction of a reimbursable Improvement to a bidder other than the lowest responsive, responsible bidder (based upon the cost for the reimbursable items of work), then the unit prices to be utilized for purposes of determining the Purchase Price (as defined in the Acquisition and/or Reimbursement Agreement) for the acquisition or reimbursement of such Improvement shall be those of the low bidder or as otherwise established by the Deputy Public Works Director based on generally prevailing values for comparable work. 21. Developer shall not authorize the Contractor to begin construction until the following documentation has been submitted to, and approved by, the Project Engineer: a. Copies of the signed Bid Documents for the construction of the Improvement. b. Copies of all Developer/Contractor/Subcontractor insurance certificates prepared in conformance with City requirements and the provisions of the Contract. c. A written statement to certify and declare, under penalty of perjury, that the Bid Documents and bidding procedures were prepared and followed in accordance with these policies and procedures. The Project Engineer shall approve the above documents within five working (5) days of receipt from the Developer. Upon written approval of such documents by the Project Engineer, the Developer may issue the Notice to Proceed. The Developer shall forward a copy of the Notice to Proceed to the Project Engineer. Construction Process 22. Developer shall schedule and conduct a pre-construction meeting prior to the beginning of construction of an Improvement. The parties invited to attend the pre-construction meeting will be as follows: Developer, design engineer, Project Engineer, Assessment Engineer (if any), Inspector, contractor, agencies issuing permits, affected utilities, and any other interested parties. The Project Engineer shall receive written notification at least five (5) days prior to the meeting setting a mutually agreeable time, place, and date for such meeting. It is the responsibility of the Project Engineer to inform City Inspector of the acquisition/reimbursement status of the proposed Improvements and to advise City Inspectors of any special requirements needed to comply with the Acquisition and/or Reimbursement Agreement. 23. Project Inspector shall provide contractor with a copy of the Labor Compliance Package (copy included as Attachment "C") and obtain contractor acknowledgement of receipt of the included "Labor Compliance Procedures - Instructions to Contractors" 24. Project Engineer is encouraged to meet monthly with the Project Inspector to review project status and discuss issues regarding reimbursable work items. 25. Contractor shall coordinate all inspections for the Improvement in accordance with normal City inspection procedures. Project Inspector shall review and retain all appropriate records with regards to payment quantities consistent with the Acquisition and/or Reimbursement Agreement. 26. If the Developer desires that any change order be included in the Purchase Price for an Improvement, the Developer shall, prior to undertaking such work, obtain the written acknowledgment of the Project Inspector as to the need to perform the work in order to satisfactorily complete the construction of the Improvement. The Inspector's written acknowledgment shall be documented on a form entitled "Request for Change Of Reimbursable Work Acknowledgment" copy included as Attachment "A"). Project Inspector shall respond within three (3) working days to any change order requests. If the Developer undertakes such work prior to obtaining the Project Inspector's written acknowledgement, Developer assumes the risk that such change order may not be considered in the purchase price or otherwise be reimbursed by the City. 27. The Project Engineer shall, with the assistance of the Assessment Engineer (if necessary), determine whether any adjustments are to be made to the Purchase Price as a result of any such change order referred to in procedure # 26 noted above. The Project Engineer shall consider reimbursement value, as well as cost information, in making this cost adjustment determination. The City's approval shall be obtained on a form entitled "Request for Change in Value or Eligibility of Reimbursable Work" (copy included as Attachment "B"). The Project Engineer shall notify the Deputy Public Works Director if the contract change orders increase the previously noticed contract amount. Project Engineer shall obtain said determination within three (3) working days of receipt of change order form. 28. Contracts for the construction of an Improvement shall provide for payments of prevailing wages by all Contractors and Subcontractors for all work performed in the construction of such Improvement. Copies of certified payrolls using the California Department of Industrial Relations Form A-1-131 or equivalent shall be provided to the Project Inspector withinthirty (30) days of payroll payment. Each payroll form shall be accompanied by the required certification per Form A-1-131 (See Labor Compliance Package Attachment "C"). 29. Revisions to the Plans shall be reviewed by the Project Engineer and approved by the Deputy Public Works Director, or his assigned designee, in accordance with the City's Subdivision/Development Plan Check procedures. Reimbursement and Payment Process 30. Developer may submit a Payment Request to the Project Engineer after the completion and acceptance by the City of an Improvement, or otherwise in accordance with the requirements of the Acquisition and/or Reimbursement Agreement. The Payment Request shall follow the format provided in the Acquisition and/or Reimbursement Agreement and shall contain, but not be limited to, the following information as applicable. For Progress and/or Base Increment Payment Requests: a. Copies of the signed Improvement Contract together with all approved Contract Change Orders. b. A letter from the Developer certifying that the Contractor and all Subcontractors have complied with the Labor Code prevailing wage provisions on the construction of the Improvement. c. A printed spreadsheet together with a digital copy on disc, utilizing Microsoft Excel, showing all eligible and non-eligible costs for each Contractor/Subcontractor/Vendor by bid item with the unit price bid, estimated quantity, actual quantity, total bid amount, change order amount, amount invoiced, cumulative amount invoiced and retained amount. A summary sheet of all costs shall be included for each Payment Request compared to the budget for each item of work and cross- reference to the voucher and canceled check number. d. Copies of invoices, vouchers, canceled checks (front and back), or other evidence of payment, etc., to support all eligible expenditures by the Developer. e. Copies of all quantity vouchers and/or certificates approved by the Project Inspector. f. Itemized breakdown of all other reimbursable expenses as allowed in the Acquisition and/or Reimbursement Agreement. g. Any other submittals required per the Acquisition and/or Reimbursement Agreement. For Final and/or Retained Increment Payments: h. All documentation required for Progress and/or Base Payment Requests, as noted above; plus, i. A copy of the City issued and recorded Notice of Completion. j. Copies of all Final Mechanics Lien Releases from each contractor, subcontractor or vendor for the Improvement. k. A copy of the approved As-Built Plans, which incorporates all approved changes. 31. The cost of any work charged as overtime will not be eligible for reimbursement and/or fee credit unless it is approved by the Deputy Public Works Director. 32. Contract administration performed by the Developer, including management, supervision, bond premiums and insurance shall be allowed as specified in the Acquisition and/or Reimbursement Agreement. No reimbursement shall be allowed for any Subdivision Map Act processing, land development or planning costs for any associated private land development activities. Unless specifically approved by the Deputy Public Works Director, the following percentages of the construction contract amount shall be used to compensate the Developer for Contract administration, bond premiums and insurance costs: a. An amount equal to 4% for Developer's construction management and/or administrative expenses above the level of construction superintendent. b. An amount equal to 1.5% for costs of premiums paid for improvement and/or performance bonds relating to construction of Improvements. c. An amount equal to 1.8% to reimburse the Developer for the allocable portions of premiums paid by Developer for blanket general liability insurance coverage. 33. The Project Engineer will prepare, or contract for the preparation of, an Acquisition or Reimbursement Audit Report ("Audit Report"). The Audit Report shall make recommendations as to the eligibility for reimbursement for each item of work requested for reimbursement or credit. The Audit Report shall include copies of all original supporting documentation as supplied by the Developer. When completed, the Audit Report shall be submittal to the Deputy Public Works Director for review and approval. 34.The City reserves the right to reject any additional cost or claim that, in its sole judgment, appears excessive, inappropriate or out of line with those costs normally expected in a similar public works contract, or for which supporting documentation is not properly submitted. If additional information is required during the review process, the Project Engineer shall request in writing that the Developer supply the supplemental data. 35. Upon approval of the Audit Report, the Project Engineer shall mail a copy of the Audit Report together with a transmittal letter to the Developer indicating City concurrence with the Audit Report and approving the total amount of eligible costs for reimbursement or credit to the Developer. 36. Upon receipt of the approved Audit Report and transmittal letter, the Developer may submit an invoice to the City requesting payment in the amount approved in the Audit Report. Prior to or independently of the invoice submittal, the Developer may submit additional amplifying information or supporting documentation as to any item of work not allowed for reimbursement in the Audit Report. The Project Engineer shall review the additional information and cause the Audit Report to be amended accordingly. 37. In the event the Developer and the Deputy Public Works Director cannot agree regarding the amount and/or eligibility of any item or items of work requested for reimbursement by the Developer, the dispute procedures of the Acquisition and/or Reimbursement Agreement shall be followed. 38. Upon receipt of the Developer's invoice in conformance with the certified Audit Report, the Project Engineer shall process the invoice for payment in accordance with City invoice payment procedures. The Project Engineer is responsible for ensuring that any withholding/retention amount is properly deducted from the payment request in accordance with the terms of the Acquisition and/or Reimbursement Agreement. Resolution of any disputed costs or items of work should not delay processing of an invoice that has been properly submitted by the Developer for reimbursement of costs that were deemed eligible for reimbursement by the City. 39. The City shall be entitled to rely on the authenticity of all supporting data, documents, representations and certifications provided by the Developer and/or Developer consultants without independent verification. Failure to comply with these requirements or any deviation from these procedures or from any reasonable additional procedures required by the Deputy Public Works Director without prior written authorization from the Deputy Public Works Director may result in costs being declared ineligible for reimbursement or credit for the affected Improvement. Attachment "A" Request for Change of Reimbursable Work Acknowledgement Request for Change of Reimbursable Work Acknowledgement Project Name:Project ID: Developer Name:Drawing No: Contractor Name:Change Order Request No: Project Inspector: Project Engineer:Plan Revision Required?Yes No Description of Proposed Change in Work: Reason for Proposed Change in Work: Check One Estimated Amount It is anticipated that the effect of this Change Order Request will be to: Increase the Reimbursable Amount by: Decrease the Reimbursable Amount by: Not Change Reimbursable Amount Submitted by: Developer/Owner Representative Signature Date City Acknowledgement of Potential Change of Work In my opinion, the above described Potential Change of Work. following reason (s) is is not required for the Acknowledged by: Project Inspector Date I acknowledge that the potential Change of Work described above is required. This acknowledgement does not represent approval of any requested design changes, or approval of a change to the value or eligibility of the reimbursable work for the Improvement. The sole purpose of this acknowledgement is to facilitate Developer's timely completion of the Improvement work. Should Developer desire to change the value or eligibility of reimbursable work, as a result of the change in work described above, Developer must submit to and receive approval from the City Engineer for a Request for Change in Value or Eligibility of Reimbursable Work. Acknowledged by: _ Deputy City Engineer Date Attachment "B" Request for Change in Value or Eligibility of Reimbursable Work Request for Change in Value or Eligibility of Reimbursable Work Project Name: Developer Name: Contractor Name: Project Inspector: Project Engineer: Project ID: Drawing No: Change Order Request No: Item Add Items Estim ated Q uantity Unit Unit Cost Subtotal of Add Items Deduct Items Estim ated Value $ Prepared by: Developer/Owner Representative Date Recommended by: District Assessment Engineer Date I approve of the requested changes in value and eligibility of the reimbursable work for the items listed above. My approval does not guarantee that any reimbursement will be made to Developer for these items. Any reimbursement will be made in accordance with the provisions of the specific Acquisition or Reimbursement Agreement between the City and Developer for the specified Improvements and is subject to availability of District or Facility Impact Fee Funds, as appropriate. This approval does not represent approval of any requested design changes Approved by: Deputy City Engineer Date Attachment "C" City of Carlsbad Labor Compliance Package For Reimbursable Public Works Projects CITY OF CARLSBAD LABOR COMPLIANCE PROCEDURES INSTRUCTIONS TO CONTRACTOR PRE-CONSTRUCTION CONFERENCE PREVAILING WAGES The State of California General Prevailing Wage Rates are applicable for the work done pursuant to this contract. Contact the State of California, Department of Industrial Relations at (415) 703-4774 to obtain copies of the prevailing wage rates. The prevailing wage rate information can also be accessed via the internet at: www.dir.ca.gov. Just click on the heading of Statistics and Research, then Current General Prevailing Wage Determinations Menu (Journeyman and when applicable Apprentice). Then follow the instructions provided on the selected web page to obtain the prevailing wage rates required for the particular wage classifications required by this contract. The local wage rates to be used for this contract are for the San Diego County. Check the expiration dates for each of the crafts of work. The single asterisk shown after the expiration date means the wage rate will not change for the life of the contract. The double asterisks mean the rate will expire on the date shown and a new rate will go into effect the following day. Contractors and subcontractors are responsible for paying the new rates when a "double asterisk" is shown. The Developer is required to make copies of the applicable current Prevailing Wage Deteminations representing all crafts of work used on the project and to display them at the job site. Subsistence, when applicable, must be shown on the certified payroll reports ("CPR's"), as it is money that is paid directly to the employee. If it is not shown on the payroll and you charge it on Extra Work Bills, we will ask for proof it has been paid. Note: There are very few areas in San Diego County that require subsistence payments. Overtime is paid for work performed in excess of 8 hours in a day and 40 hours in a week. Sundays and holidays are overtime days of work. Some classifications allow for Saturdays in the same workweek to be worked at the straight-time rate for the first 8 hours, if the employee was unable to complete the 40 hours during the normal workweek. Check the footnotes for the classification you are using to determine additional information regarding application and/or restrictions on overtime rates. II. CERTIFIED PAYROLL REPORTS (CPR) Contractor shall use the standard California Department of Industrial Relations "Public Works Payroll Reporting Form" (FORM A-1-131) or equivalent. All prime contractors should keep a supply of CPR forms in their office and provide them to subcontractors, as needed. In the interest of keeping the copies clear and legible, we ask that you provide original forms to subcontractors instead of faxed versions. Illegible CPR's will not be accepted by the City and Department of Industrial Relations. Name, address and SSN for each employee are required on CPR's. Classifications and group numbers are required on each CPR. Refer to the General Prevailing Wage Determination sheets. Example: A general laborer would be shown on the payroll as Laborer Group 1. Make sure hours worked on the job are reported accurately. CPR's must show all hours an employee worked for contract item work and extra work. CPR's are to be submitted to the Public Works Inspector within thirty (30) days of payroll payment together with the required certifications. III. OTHER REQUIRED DOCUMENTS Apprentices-A copy of the Apprenticeship Agreement issued by the State of California, Division of Apprenticeship Standards, or a certification from the applicable apprenticeship program, must be submitted for each apprentice utilized on the work. Carlsbad will accept an apprentice dispatch slip from the union only as a temporary substitute for the Apprenticeship Agreement. IV. GENERAL INFORMATION The prime contractor is responsible for all subcontractors. Make sure all requirements (the prevailing wage rates, the due dates for payrolls, the deduction process for missing payrolls, etc.) are covered with the subcontractors and the office staff that is responsible for paying the employees and submitting the payroll documents. All wage rates updates that are provided to prime contractors should be copied and distributed to subcontractors. The City's project number is required on all CPR's, Fringe Benefit Statements, Statement of Compliance, correspondence, etc. When contacting the City and Department of Industrial Relations, please refer to the contract/project number. Commercial/Material Suppliers - CPR's are not required for suppliers or deliveries. However, should a supply or delivery company stay on the job site and physically work on the project they must pay prevailing wage rates for the on-site work and then a CPR is required. Trucking - All trucking on the job site is covered work, as is trucking of materials off the job site to another public work site. Trucking activities will be monitored by the Resident Engineer and staff. Truckers must be paid the prevailing wage rate for their work and certified payroll reports are required. A COPY OF THE PRE-CONSTRUCTION CONFERENCE NOTES AND THE LABOR COMPLIANCE PACKAGE WAS RECEIVED BY THE PRIME CONTRACTOR: Contractor's Representative Date Attachment "D" City of Carlsbad Plan Room Listing Placeholder only. Obtain latest copy of the Current Plan Room Listing from Purchasing Department. EXHIBIT "D" PAYMENT REQUEST NO. The undersigned (the "the Contracting Private Party") hereby requests payment in the total amount of $ for the Base Increment, or Retained Increment of the Purchase Price of the Improvements (as defined in the Acquisition/Financing Agreement by and among the City of Carlsbad (the "City") and the Contracting Private Party and described in Exhibit B to that Agreement), all as more fully described in Attachment 1 hereto. In connection with this Payment Request, the undersigned hereby certifies, represents and warrants to the City as follows: 1. He(she) is a duly authorized representative or signatory of the Contracting Private Party, qualified to execute this Payment Request for payment on behalf of the Contracting Private Party and is knowledgeable as to the matters set forth herein. 2. The Improvements for which payment is requested were constructed in accordance with the requirements of the Agreement. t 3. If this Payment Request is for payment of all or a portion of the Base Increment include the following sentence: The Improvements that are the subject of this Payment Request for payment of the Base Increment have been opened by the City for use by the public or can be opened for use the public but such opening has been deferred solely by the City. If this Payment Request is for payment of all or a portion of the Retained Increment include the following sentence: The Improvements that are the subject of this Payment Request for payment of the Retained Increment have been accepted by the City Council of the City and the Notice of Completion for such Improvements, a copy of which is attached as Attachment 2 hereto, was recorded in the Office of the County Recorder of the County of San Diego on ,20 . 4. The Purchase Price for the Improvements has been calculated in conformance with the terms of the Agreement. All costs for which payment is requested hereby are eligible costs (as permitted in the Agreement) and have not been inflated in any respect. The Base and/or Retained Increment for which payment is requested has not been the subject of any prior payment request paid by the City. 5. Supporting documentation (such as third party invoices, change orders and checks) is attached with respect to each cost for which payment is requested. 6. No mechanics liens or other encumbrances have attached, or to the best knowledge of the Contracting Private Party, after due inquiry, will attach to the Improvements. D- 1 WBD\296656 12 DRAFT 9/12/05 I hereby declare under penalty of perjury that the above representations and warranties are true and correct. CONTRACTING PRIVATE PARTY: Dated: CITY Payment Request Approved for Submission to Finance Director City Engineer Dated: D-2 WBDV296656.12 DRAFT 9/12/05 ATTACHMENT 1 SUMMARY OF IMPROVEMENTS TO BE ACQUIRED AS PART OF PAYMENT REQUEST NO. Improvement Amount Previously Paid Towards Purchase Price Amount of Payment Request [List here all Improvements for which payment is requested, and attach supporting documentation] D-3 WBD\296656.12 DRAFT 9/12/05 EXHIBIT "E" RATES AND METHODS OF APPORTIONMENT OF SPECIAL TAXES E- 1 WBDV296656.12 DRAFT 9/12/05 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 ("LA 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 Acquisition/Financing 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 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 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. IA 1 of CFD No. 3 Page 2 of 11 September 2, 2005 "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. "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 1st 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 "Public Property" means property within the boundaries of IA 1 which prior to March 1st 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 LA 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. "Taxable Property" means all property located within the boundaries of IA 1 that is not 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 1A 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 Zone A $15,241.00 ZoneB $7,265.00 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 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 ,""C~3T~sive 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 transfer/dedication 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. 1A 1 of CFD No. 3 Page 6 of 11 September 2, 2005 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 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 11 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 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 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.I 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 LA 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 (110%) of the maximum annual debt service for the Bonds, taking into account the Bonds to remain outstanding after such prepayment. LA 1 of CFD No. 3 Page 10 of 11 September 2, 2005 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 Costs Allocation Facilities Fund Requirement by Area Melrose Melrose South or 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 1 Zone A $5,498,088 $5,498,088 Percent 21.91% Zone B $4,381,653 $4,381,653 Percent 17.46% Improvement Area 2 IA2 $15,212,644 $15,212,644 Percent 60.63% Total District Total Cost $25,092,385 $4,954,843 $226,716 ($3,000,000) $2,798,853 $100,000 $15,956,550 $4,055,423 $25,092,385 Percent 100.00% Estimate of Bond Sizing Series A Series B Total Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Refund of Formation Deposit Discount of 2% Reserve Fund Requirement (Est@ Max DSJ Contingency / Rounding Principal Issued by Improvement Area: $9,879,741 $952,125 $400,000 $133,333 $253,900 $1,074,901 $1,000 $12,695,000 $15,212,644 $1,443,000 $500,000 $66,667 $384,800 $1,629,075 $3,814 $19,240,000 $25,092.385 $2,395,125 $900,000 $200,000 $638,700 $2,703,976 $4,814 $31,935,000 IA 1 of CFD No. 3 Page 11 of 11 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 ("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 Acquisition/Financing 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 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 Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel number. "Bonds" means any bonds or other debt (as defined in the Act), whether in one or more series, secured by the levy of Special Taxes within IA 2. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of Special Taxes. "CFD No. 3" or "District" means Community Facilities District No. 3 of the City of Carlsbad. "City" means the City of Carlsbad, California. "Condominium" means a separate interest or unit meeting the statutory definition of a condominium contained in the California Civil Code, Section 1351, and for which a condominium plan has been recorded pursuant to California Civil Code, Section 1352. "Council" means the City Council of the City, acting as the legislative body of CFD No. 3. "County" means the County of San Diego, California. "Developable Property" means all Taxable Property, exclusive of Final Map Property. 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 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 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 1st 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 "Public Property" means property within the boundaries of LA. 2 which prior to March 1st 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 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 LA 2 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 2, but only to the extent such costs cannot be funded with the proceeds of Bonds, and LA 2 of CFD No. 3 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 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 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 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 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 transfer/dedication 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 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 LA 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 LA 2 of CFD No. 3 Page 8 of 11 September 2, 2005 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 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.I 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 (110%) 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 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 Costs Allocation 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 1 Zone A $5,498,088 $5,498,088 Percent 21 .91 % Zone B $4,381,653 $4,381,653 Percent 17.46% Improvement Area 2 IA2 $15,212,644 $15,212,644 Percent 60.63% Total District Total Cost $25,092,385 $4,954,843 $226,716 ($3,000,000) $2,798,853 $100,000 $15,956,550 $4,055,423 $25,092,385 Percent 100.00% Estimate of Bond Sizing Series A Series B Total Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Refund of Formation Deposit Discount of 2% Reserve Fund Requirement (Est @ Max DS) Contingency / Rounding Principal Issued by Improvement Area: $9,879,741 $952,125 $400,000 $133,333 $253,900 $1,074,901 $1,000 $12,695,000 $15,212,644 $1,443,000 $500,000 $66,667 $384,800 $1,629,075 $3,814 $19,240,000 $25,092,385 $2,395,125 $900,000 $200,000 $638,700 $2,703,976 $4,814 $31,935,000 IA2ofCFDNo. 3 Page 11 of 11 September 2, 2005