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HomeMy WebLinkAbout2005-11-08; City Council; Resolution 2005-3291 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 RESOLUTION NO. 2005 - 329 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, FORMING AND ESTABLISHING COMMUNITY FACILITIES DISTRICT NO. 3, DESIGNATING IMPROVEMENT AREAS THEREIN AND AUTHORIZING SUBMllTAL OF LEVY OF SPECIAL TAXES WITHIN EACH SUCH IMPROVEMENT AREA TO THE QUALIFIED ELECTORS THEREOF WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD, CALIFORNIA (the “City Council”), has previously declared its intention to form a community facilities district and to designate two improvement areas (each, an “Improvement Area”) therein to finance the acquisition or construction of the public facilities described in Exhibit A hereto and ordered the preparation of a Community Facilities District Report relating to the initiation of proceedings to create such community facilities district pursuant to the terms and provisions of the “Mello-Roos Community Facilities Act of 1982,” being Chapter 2.5, Part 1 , Division 2, Title 5 of the Government Code of the State of California (the “Act”). This community facilities district shall hereinafter be referred to as COMMUNITY FACILITIES DISTRICT NO. 3 (the “District”); and, WHEREAS, notice of a public hearing relating to the establishment of the District, the extent of the District, the designation of the Improvement Areas within the District, the financing of the Facilities and all other related matters has been given, and a Community Facilities District Report, as ordered by this City Council, has been presented to this City Council and has been made a part of the record of the hearing to establish such District; and, WHEREAS, all communications relating to the establishment of the District, the designation of the Improvement Areas within the District, the financing of the Facilities and the proposed rate and method of apportionment of special tax for each Improvement Area have been presented, and it has further been determined that a majority protest as defined by law has not been received against these proceedings or the levy of the special tax within either Improvement Area; and, . WHEREAS, inasmuch as there have been less than twelve (12) registered voters residing within the territory of each Improvement Area of the District for at least the preceding ninety (90) days, the authorization to levy special taxes within each Improvement Area of the District shall be 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 submitted to the landowners of each such Improvement Area, such landowners being the qualified electors as authorized by law. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES AS FOLLOWS: 1. RECITALS. The above recitals are all true and correct. 2. DETERMINATIONS. It is hereby determined by this City Council that: A. All prior proceedings pertaining to the formation of the District and designation of the Improvement Areas were valid and taken in conformity with the requirements of the law, and specifically the provisions of the Act, and that this finding and determination is made pursuant to the provisions of Government Code Section 53325.1. B. The written protests received, if any, do not represent a majority protest as defined by the applicable provisions of the Act and as applied to each Improvement Area and, therefore, the special tax proposed to be levied within each Improvement Area of the District has not been precluded by majority protest pursuant to Section 53324 of the Government Code of the State of California. C. The District as proposed conforms with the City of Carlsbad Statement of Goals and Policies Regarding the Establishment of Community Facilities Districts (the "Goals and Policies"), as amended. D. Less than twelve (12) registered voters have resided within the territory of each Improvement Area within the District for each of the ninety (90) days preceding the close of the public hearing, therefore, pursuant to the Act the qualified electors of each of the Improvement Areas within the District shall be the landowners of such Improvement Area as such term is defined in Government Code Section 53317(f) and each such landowner who is the owner of record as of the close of the public hearing, or the authorized representative thereof, shall have one vote for each acre or portion of an acre of land that she or he owns within such Improvement Area. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 E. The time limit specified by the Act for conducting an election to submit the levy of the special taxes to the qualified electors of each Improvement Area of the District and the requirements for impartial analysis and ballot arguments have been waived with the unanimous consent of the qualified electors of each such Improvement Area. F. The City Clerk, acting as the election official, has consented to conducting any required election on a date which is less than 125 days following the adoption of any resolution forming and establishing the District. COMMUNITY FACILITIES DISTRICT REPORT. The Community Facilities District Report for the District (the “Report”), as now submitted by Special Districts Financing & Administration, Special Tax Consultant, shall stand as the report as required pursuant to Government Code Section 53321.5 for all future proceedings and all terms and contents are approved as set forth therein. 3. 4. NAME OF DISTRICT. The City Council does hereby establish and declare the formation of the District known and designated as ‘COMMUNITY FACILITIES DISTRICT NO. 3.” BOUNDARIES OF DISTRICT AND IMPROVEMENT AREAS. The boundaries of the 5. District and each of the Improvement Areas are now hereby generally described as follows: All property within the boundaries of COMMUNITY FACILITIES DISTRICT NO. 3, as shown on a boundary map as previously approved by this legislative body, such map designated by the name of this District, a copy of which is on file in the Office of the City Clerk. The boundary map of the proposed District has been filed pursuant to Sections 31 11 and 31 13 of the Streets and Highways Code of the State of California in the Office of the County Recorder of the County of San Diego, at Page 83 of Book 39 of the Book of Maps of Assessment and Community Facilities Districts for such County. 6. DESIGNATION OF IMPROVEMENT AREAS. For purposes of financing of, or contributing to the financing of the Facilities described in Section 7 below, this City Council, acting 1 2 3 4 5 6 7 8 9 IO 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 pursuant to Government Code Section 53350, hereby designates portions of the District as the following Improvement Areas as shown on the Boundary Map of the District: IMPROVEMENT AREA I IMPROVEMENT AREA 2 7. DESCRIPTION OF FACILITIES AUTHORIZED TO BE FINANCED. A general description of the Facilities which this legislative body is authorized by law to construct, own or operation, which are the types of facilities proposed to be financed under these proceedings, are generally described in Exhibit A attached hereto and incorporated herein by this reference. The Facilities as above described are facilities, which the City Council is authorized by law to contribute revenue to or to construct, own or operate. It is hereby further determined that the proposed Facilities are necessary to meet increased demands placed upon the City as a result of development occurring within the District, and the costs and expenses charged to this District represent the fair share costs of the Facilities attributable to this District and the Improvement Areas therein. For a full and complete description of such Facilities, reference is made to the Report, a copy of which is on file in the Office of the City Clerk. In addition to financing the Facilities, the financing of those incidental expenses described in the Report are also approved and authorized. 8. SPECIAL TAX. Except where funds are othewise available a special tax, secured by recordation of a continuing lien against all non-exempt real property in each of the Improvement Areas within the proposed District, is hereby authorized, subject to voter approval, to be levied within the boundaries of each such Improvement Area. For particulars as to the rate and method of apportionment of the special tax proposed to be levied within each Improvement Area, reference is made to the attached and incorporated Exhibit “B” (the “Special Tax Formulas”), which sets forth in sufficient detail the method of apportionment of the special tax applicable to each Improvement Area to allow each landowner or resident within such Improvement Area to estimate the maximum amount that such person will have to pay. Such special tax shall be utilized to pay directly for the Facilities, to pay debt service on bonds issued by the District for each Improvement Area to assist in 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 financing the Facilities, to replenish any reserve fund established for such bonds, and to pay the costs of administering the bonds, the District and each respective Improvement Area. The special taxes herein authorized, to the extent possible, shall be collected in the same manner as ad valorem property taxes and shall be subject to the same penalties, procedure, sale and lien priority in any case of delinquency as applicable for ad valorem taxes; provided, however, the District may utilize a direct billing procedure for any special taxes that cannot be collected on the County tax roll or may, by resolution, elect to collect the special taxes at a different time or in a different manner if necessary to meet its financial obligations. This legislative body further authorizes that special taxes may be prepaid and satisfied by payment of the prepayment amount calculated pursuant to the Special Tax Formulas. Upon recordation of a Notice of Special Tax Lien pursuant to Section 31 14.5 of the Streets and Highways Code of the State of California against the property within each Improvement Area, a continuing lien to secure each levy of the special tax shall attach to all non-exempt real property in such Improvement Area and this lien shall continue in force and effect until the special tax obligation is prepaid and permanently satisfied and the lien canceled in accordance with law or until collection of the tax by the legislative body ceases. 9. SPECIAL TAX ACCOUNTABILITY MEASURES. Pursuant to and in compliance with the provisions of Government Code Section 50075.1, this City Council hereby establishes the following accountability measures pertaining to the levy by the District of the special taxes described in Section 8 above: A. above. B. applicable purposes set forth in Section 8 above. C. special tax shall be deposited. Each such special tax shall be levied for the specific purposes set forth in Section 8 The proceeds of the levy of each such special tax shall be applied only to the specific The District shall establish a separate account into which the proceeds of each such 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 D. The City Manager or his or her designee, acting for and on behalf of the District, shall annually file a report with the City Council as required pursuant to Government Code Section 50075.3. IO. PREPARATION OF ANNUAL TAX ROLL. The name, address and telephone number of the office, department or bureau which will be responsible for preparing annually a current roll of special tax levy obligations by Assessor's parcel number and which shall be responsible for estimating future special tax levies pursuant to Section 53340.1 of the Government Code of the State of California, are as follows: Finance Department City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 760-602-2430 1 1. SUBSTITUTION FACILITIES. The description of the Facilities, as set forth in Exhibit A hereto, is general in its nature. The final nature and location of such Facilities will be determined upon the preparation of final plans and specifications therefore. Such final plans may show substitutes in lieu of, or modification to, the above described Facilities and any such substitution shall not be a change or modification in the proceedings as long as the facilities provide a service substantially similar to that as set forth in this Resolution. 12. ELECTION. This City Council herewith submits the levy of the special taxwithin each Improvement Area to the qualified electors of each such Improvement Area, such electors being the landowners in each such Improvement Area, with each landowner having one (1) voter for each acre or portion thereof of land that he or she owns within such Improvement Area. Ill Ill 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 8th day of November ,2005 by the following vote, to wit: AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES: None CLAUDE A. LEWIS, Mayor Attest: LORRAINE M. WOOX, City Clerk I\ Exhibit 2 EXHIBIT A DESCRIPTION OF THE FACILITIES The Facilities proposed to be financed by the District include the following: I. Improvement A - Palomar Airport Road Widening from West of Melrose Drive Intersection to the Vista City Limits (as shown on Drawing No. 3994). Grading to prime arterial standards (but not to include grading outside the right-of-way in future developed areas), erosion control landscaping and irrigation located within an easement granted to the City, parkway landscaping and irrigation (located within a easement granted to the City), asphalt pavement to prime arterial standard width, raised median in certain areas, median curb, median hardscaping and landscaping with irrigation, curb and gutter, sidewalk, storm drain facilities within the City right-of-way and easements (excluding any Master Drainage Plan facilities and water lines), appurtenant to Palomar Airport Road construction, dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, modification of an existing traffic signal at Paseo Valindo, relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acq u is i tion/Fi n a ncing Agreement . 2. 3. Improvement B - Faraday Avenue from Orion Street to Melrose Drive. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk, storm drain facilities within the right-of-way (excluding Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, new traffic signals and a modification of any existing traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. Improvement C - Melrose Drive from Palomar Airport Road to the Vista City Limits (as shown on Drawing No. 399-4). Full width grading to prime arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City), asphalt pavement to prime arterial standard width on either side of a raised median, median curb, median hardscaping and landscaping with irrigation, curb, gutter and sidewalk, storm drain facilities within the right-of-way (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees), sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non- reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal and a modification of an existing traffic signal at Palomar Airport Road (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation, and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. Exhibit 2 4. Improvement D - Melrose Drive construction of right turn lane south of Palomar Airport Road. 5. Improvement E - El Fuerte from northerly terminus to the future extension of Faraday Avenue. Full width grading to secondary arterial standards (but not to include grading outside of the right-of-way in future developed areas), erosion control landscaping and irrigation (located within an easement granted to the City), parkway landscaping and irrigation (located within an easement granted to the City) asphalt pavement to secondary arterial standard width, curb and gutter, sidewalk (excluding any Master Drainage Plan facilities subject to reimbursement from Local Drainage Area Fees). Sewer, water and reclaimed water lines and appurtenances within the right-of-way (excluding any portion of such costs reimbursable from sewer and/or water connection fees), dry utilities which are non-refundable or non-reimbursable by the utility agency and which are located within the right-of-way, street lights, one new traffic signal (excluding those portions reimbursed from Traffic Impact Fees and Public Facilities Fees), relocation of existing utilities, environmental mitigation and incidental costs of construction to the extent permitted in the Acquisition/Financing Agreement. 6. Improvement F - Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of Palomar Airport Road. Exhibit 2 EXHIBIT B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX COMMUNITY FACILITIES DISTRICT NO. 3 IMPROVEMENT AREA 1 OF THE CITY OF CARLSBAD A Special Tax shall be levied and collected in Improvement Area 1 ("IA 1 'I) of Community Facilities District No. 3 (the "CFD No. 3") of the City of Carlsbad each Fiscal Year, in an amount determined by the City Council of the City of Carlsbad acting in its capacity as the legislative body of CFD No. 3 through the application of the procedures described below. All of the real property in IA 1, unless exempted by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms used herein shall have the following meanings: ff Acquisition Agreement" means that certain Acquisitiofiinancing Agreement pursuant to which public improvements, authorized to be financed by CFD No. 3, are acquired by the City from the proceeds of Bonds or Special Taxes, as such agreement may be modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Acreage" or "Acre" of an Assessor's Parcel means (i) prior to the recordation of a Final Subdivision Map that acreage shown on the Assessor's Parcel Map for each such Assessor's Parcel less the acreage, as shown on a tentative map or similar land use entitlement approved by the City, to be owned by, irrevocably offered or dedicated to, or for which an easement for purposes of public right-of-way or other public purpose will be granted to the federal government, the State of California, the County, the City, or any local government or other public agency or designated with specific boundaries and acreage as open space and (ii) after recordation of a Final Subdivision Map that acreage shown on or determined from the applicable Final Subdivision Map for each such Assessor's Parcel. For Condominiums, the Acreage applicable to each Condominium shall be determined by allocating the acreage of the underlying lot on which the Condominiums are or are to be constructed in proportion to each such Condominium's building square footage. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of IA I, including, but not limited to, the costs of IA 1 of CFD No. 3 Page 1 of 11 Exhibit 2 EXHIBIT B computing the Special Taxes and of preparing the annual Special Tax collection schedules; the costs of collecting the Special Taxes; the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; the costs of the City, or designee thereof, in complying with the disclosure requirements of applicable federal and state securities laws and of the Act, including public inquiries regarding the Special Taxes, the costs associated with the release of funds from any escrow account (to the extent not paid from other sources). "Annual Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C and escalated in accordance with Section D that can be levied by the Council in any Fiscal Year on any Assessor's Parcel. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel number. "Bonds" means any bonds or other debt (as defined in the Act), whether in one or more series, secured by the levy of Special Taxes within IA 1. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of Special Taxes. "CFD No. 3" or "District" means Community Facilities District No. 3 of the City of Carlsbad. "City" means the City of Carlsbad, California. "Condominium" means a separate interest or unit meeting the statutory definition of a condominium contained in the California Civil Code, Section 1351, and for which a condominium plan has been recorded pursuant to California Civil Code, Section 1352. "Council" means the City Council of the City, acting as the legislative body of CFD No. 3. "County" means the County of San Diego, California. "Developable Property" means all Taxable Property, exclusive of Final Map Property. "Exempt Property" means all property located within the boundaries of IA 1 that is exempt from the Special Tax pursuant Section F below. IA 1 of CFD No. 3 Page 2 of 11 Exhibit 2 EXHIBIT B "Final Map Property" means all Taxable Property included within a Final Subdivision Map which is approved by City Council prior to March 1 of each Fiscal Year. "Final Subdivision Map" means a subdivision of property created by recordation of a final map or parcel map approved by the City pursuant to the Subdivision Map Act (California Government Code Section 6641 0 et seq.), a lot line adjustment or recordation of a condominium plan pursuant to California Civil Code 1352. "Fiscal Year" means the period starting on each July 1 and ending on the following June 30. "IA 1" or "Improvement Area 1" means Improvement Area No. 1 of the District. "Improvement" or "Improvements" means an improvement or improvements authorized to be acquired by the City pursuant to the terms and conditions of the Acquisition Agreement. "Improvement Costs" means the estimated cost to construct the Improvements as set forth in Exhibit B to the Acquisition Agreement. "Indenture" means the indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Index" means for the purpose of calculating the escalation of the Annual Maximum Special Tax each Fiscal Year, the lesser of (a) the annual percentage increase, if any, in the "Construction Cost Index for ENR 20 Cities" for the City of Los Angeles as published in the "Engineering News Record" for the twelve-month period ending with the month of March preceding each Fiscal Year or (b) 3%. "Open Space" means property within the boundaries of IA 1 which, prior to March 1 st of the preceding Fiscal Year, (a) has been designated with specific boundaries and acreage on a tentative map or Final Subdivision Map as open space, (b) is classified by the County Assessor as open space by the County assigning a zero assessed value, (c) has been irrevocably offered for dedication as open space to the federal government, the State of California, the County, the City, or any other public agency or (d) is encumbered by an easement or other restriction required by the City limiting the use of such property to open space. "Public Property" means property within the boundaries of IA 1 which prior to March Is' of the preceding Fiscal Year is owned by, irrevocably offered or dedicated by Final Subdivision Map or other recorded document, or for which an easement for purposes of IA 1 of CFD No. 3 Page 3 of 11 Exhibit 2 EXHIBIT B public right-of-way, habitat mitigation preserve, pedestrian trails or other public purpose has been granted to the federal government, the State of California, the County, the City, or any local government or other public agency. Notwithstanding the foregoing, the leasehold interest or other possessory interest granted by any public agency in property owned by such public agency to a private entity or person shall be subject to taxation under Section 53340.1 of the Act and shall be classified as Taxable Property. "Special Tax" means the Special Tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property within a Zone to fund the Special Tax Requirement. "Special Tax Requirement" means: (a) that amount required in any Fiscal Year prior to the issuance of Bonds to: (1) pay the Administrative Expenses; and (2) pay directly for acquisition or construction of the aggregate Improvements in proportion to the allocation of the Improvement Costs to IA 1 specified in Appendix A attached hereto but only to the extent such costs are not expected to be funded with the proceeds of the Bonds; or (b) that amount required in any Fiscal Year after the issuance of Bonds to: IA 1 of CFD No. 3 pay the Administrative Expenses, pay debt service on any outstanding Bonds, replenish any reserve funds attributable to IA 1 and established in connection with Bonds, pay the costs of remarketing, credit enhancement and liquidity facility fees (including such fees for instruments that serve as the basis of a reserve fund in lieu of cash related to any Bonds), pay directly for acquisition or construction of the Improvements of IA 1, but only to the extent such costs cannot be funded with the proceeds of Bonds, and less available funds as directed under the Indenture. Page 4 of 11 Exhibit 2 Zone A EXHIBIT B “Taxable Property“ means all property located within the boundaries of IA 1 that is not $15,241.00 Exempt Property. “Zone” means either Zone A or Zone B. “Zone A” means that specific geographic area as depicted on the boundary map for CFD No. 3 and designated as Zone A. “Zone B” means that specific geographic area as depicted on the boundary map for CFD No. 3 and designated as Zone B. B. CLASSIFICATION OF PROPERTY Prior to the beginning of each Fiscal Year, all property within IA 1 shall be classified as either Taxable Property or Exempt Property. Taxable Property shall be further classified as Final Map Property or Developable Property. C. ANNUAL MAXIMUM SPECIAL TAX The Annual Maximum Special Tax per Acre for Fiscal Year 2005-2006 for all Taxable Property is shown in Table 1 below: Table 1 Annual Maximum Special Tax per Acre For Fiscal Year 2005-2006 D. ESCALATION OF THE ANNUAL MAXIMUM SPECIAL TAX Each Fiscal Year beginning Fiscal Year 2006-07, the Annual Maximum Special Tax shall escalate at the applicable Index. The escalation shall cease in the Fiscal Year following the earlier of (1) the completion of the construction and acquisition of all of the Improvements pursuant to the Acquisition Agreement or (2) the sale of the final series of Bonds. IA 1 of CFD No. 3 Page 5 of 11 Exhibit 2 E. EXHIBIT B METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement. Prior to the issuance of Bonds, the Special Tax shall be levied only on Final Map Property, in equal percentages, as necessary to fund the Special Tax Requirement up to 100% of the applicable Annual Maximum Special Tax. After the issuance of Bonds, the Special Tax shall be levied on each Assessor’s Parcel of Taxable Property to fund the Special Tax Requirement as follows: First: The Special Tax shall be levied in equal percentages on each Assessor’s Parcel of Taxable Property, exclusive of Open Space Property and Public Property, up to 100% of the applicable Annual Maximum Special Tax; and Second: If additional Special Taxes are needed after the first step, the Special Tax shall be levied in equal percentages on each remaining Assessor’s Parcel of Taxable Property (Le., Open Space Property and Public Property which is not exempt from the Special Tax), up to 100% of the applicable Annual Maximum Special Tax. F. EXEMPTIONS The CFD Administrator shall classify the following as Exempt Property: (i) Public Property, (ii) Open Space and (iii) Assessor Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement; provided however, that no such classification shall reduce the sum of all Taxable Property to less than 46.35 Acres for Zone A and 77.49 Acres for Zone B. Assessor‘s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the amounts stated above will be classified as Taxable Property and shall be taxed pursuant to Section E. Exempt status for purposes of this paragraph will be assigned by the CFD administrator in the chronological order in which property becomes Exempt Property. The Annual Maximum Special Tax obligation for any property which would be classified as Public Property upon its transfer or dedication to a public agency but which is classified as Taxable Property pursuant to the preceding paragraph shall be prepaid in full by the seller pursuant to Section J prior to the transfeddedication of such property to such public agency. Until the Annual Maximum Special Tax obligation for any such Public Property is prepaid, the property shall continue to be subject to the levy of the Special Tax as Taxable Property. If the use of an Assessor’s Parcel of previously classified Exempt Property changes so that such Assessor Parcel is no longer classified as Exempt Property as defined above, such Assessor Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property. IA 1 of CFD No. 3 Page 6 of 11 1 --> - Exhibit 2 EXHIBIT B G. TERM The Special Tax may not be levied (a) longer than the tenth Fiscal Year following the final maturity of the last series of Bonds or (b) longer than is needed to pay the cost and incidental expenses of the construction of the Improvements, whichever is later. H. APPEALS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor’s Parcel is in error shall first consult with the CFD Administrator regarding such error. If following such consultation, the CFD Administrator determines that an error has occurred the CFD Administrator may amend the amount of the Special Tax levied on such Assessor’s Parcel. If following such consultation and action (if any by the CFD Administrator), the landowner or resident believes such error still exists, such person may file a written notice with the Finance Director of the City who shall establish, as part of the proceedings and administration of CFD No. 3, a special three-member Review/Appeal Committee. The Review/Appeal Committee may establish such procedures, as it deems necessary to undertake the review of any such appeal. The Review/Appeal Committee shall interpret this Rate and Method of Apportionment of Special Tax and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals, as herein specified. The decision of the Review/Appeal Committee shall be final and binding as to all persons. I. MANNER OF COLLECTION The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the CFD Administrator may directly bill the Special Tax, or may collect Special Taxes at a different time or in a different manner if necessary to meet the financial obligation of CFD No. 3 for IA 1 or as otherwise determined appropriate by the CFD Administrator. J. PREPAYMENT OF SPECIAL TAX 1. Prepayment in Full The Annual Maximum Special Tax for any Assessor’s Parcel may be prepaid and permanently satisfied as described herein, provided that a prepayment may be made --- IA 1 of CFD No. 3 Page 7 of 11 Exhibit 2 EXHIBIT B only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 1. An owner of an Assessor's Parcel intending to prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The "Prepayment" shall be an amount equal to the sum of (1) Principal, (2) Premium, (3) Defeasance, (4) Fees, and (5) Unfunded Improvements minus the Reserve Fund Credit, as such terms are defined as follows: "Principal" means the principal amount of Bonds to be redeemed from the proceeds of such Prepayment and equals the quotient derived by dividing (a) the applicable Annual Maximum Special Tax for the Assessor's Parcel intending to prepay by (b) the expected aggregate Annual Maximum Special Taxes for all Taxable Property within IA 1 (and excluding from (b) any Annual Maximum Special Taxes for Assessor's Parcels which have fully prepaid the Annual Maximum Special Tax), and multiplying the quotient by the portion of the principal amount of Bonds outstanding. "Premium" means an amount equal to the Principal multiplied by the applicable redemption premium, if any, for the Bonds established pursuant to the Indenture so redeemed with the proceeds of any such Prepayment. "Defeasance" means an amount equal to the amount needed to pay interest on the Principal to be redeemed until the earliest redemption date for the outstanding Bonds permitted under the Indenture less the amount of earnings estimated to be received from the reinvestment of the Prepayment and the Fees to such date. Credit shall also be given for any Special Tax heretofore paid and received by the City which has not yet been utilized to pay the Special Tax Requirement or which is remaining after having paid the Special Tax Requirement. "Fees" equal the fees and expenses of CFD No. 3 directly related to the Prepayment. "Unfunded Improvements" means an amount equal to the estimated cost of the unfunded Improvements authorized to be financed from the proceeds of the Bonds or Special Taxes allocable to the Assessor's Parcel for which the Prepayment is being calculated and is computed by multiplying the quotient calculated when determining Principal by the Improvement Costs allocable to IA 1 of CFD No. 3 Page 8 of 1 I Exhibit 2 EXH I BIT .B IA 1 , as set forth in the Acquisition Agreement, less the estimated cost of any Improvements financed by previously issued Bonds or the proceeds of Special Taxes. Unfunded Improvements shall equal zero following the issuance of all of the Bonds. "Reserve Fund Credit'' shall equal the lesser of (i) the expected reduction in the applicable reserve fund requirement (as defined in the Indenture), if any, following the redemption of Bonds from proceeds of the Prepayment or (ii) the amount derived by subtracting the new reserve fund requirement in effect after the redemption of Bonds from the balance in the reserve fund (as such term is defined in the Indenture) on the prepayment date, but in no event shall such amount be less than zero. The Reserve Fund Credit shall apply only when the Reserve Fund for the Bonds shall at least equal the Reserve Requirement as defined in the Indenture. The sum of the amounts calculated in the preceding steps shall be paid to CFD No. 3 and shall be used to pay and redeem Bonds in accordance with the Indenture and to pay the Fees. Upon the receipt of such Prepayment by CFD No. 3, the obligation to pay the Special Tax for such Assessor's Parcel shall be deemed to be permanently satisfied, the Special Tax shall not be levied thereafter on such Assessor's Parcel, and the CFD Administrator shall cause notice of cessation of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the Prepayment and receipt of proof of Special Tax payments made to the County used in the calculation of the Prepayment, if any. 2. Prepayment in Part The Annual Maximum Special Tax for any Assessor's Parcel may be prepaid in part as described herein, provided that such a partial prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 1. An owner of an Assessor's Parcel intending to partially prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The amount of the prepayment shall be computed pursuant to Section J.1 above substituting the portion of the Annual Maximum Special Tax to be prepaid for the Annual Maximum Special Tax applicable to the Parcel when computing Principal. The Annual Maximum Special Tax to be prepaid must result in an amount of principal which is an even integral of the denomination of Bonds set forth in the Indenture. If necessary, the prepayment amount shall be rounded up in order to IA 1 of CFD No. 3 Page 9 of 11 Exhibit 2 EXHIBIT B equal an even integral of the denomination of Bonds. The CFD Administrator shall cause a notice of reduction of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the prepayment. Notwithstanding the foregoing, no prepayment shall be allowed unless the amount of Annual Maximum Special Taxes that may be levied in IA 1 pursuant to Section E of this Rate and Method of Apportionment of Special Tax after the proposed prepayment is at least the sum of (i) the estimated Administrative Expenses and (ii) one hundred ten percent (1 10%) of the maximum annual debt service for the Bonds, taking into account the Bonds to remain outstanding after such prepayment. IA 1 of CFD No. 3 Page 10 of I1 Exhibit 2 El Fuerte City of EXFPIT arls a B I $4,055,423 Community Facilities District No. 3 (Faraday/Melrose) Appendix A Prior to the sale of the Bonds based upon the cost estimates at this time, the following provides the construction cost allocation percentage of total funded which will be used to determine the Special Tax Requirement. Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement (Est @ M~X os) Refund of Formation Deposit Construction Costs Allocation $9,879,741 $952,125 $400,000 $133,333 $253,900 $1,074.90 1 Improvement Area 1 I improvementArea2 I Total Di ZoneA I Percent I Zone B 1 Percent] IA 2 I Percent I Total Cost I I I I I I Contingency I Rounding I $1,000 I 1 $3,814 I I I I I I I I Facilities Fund Requirement by Area I $5,498,088 I I $4,381,653 1 I $15,212,644 I I $25,092,385 I I I $4,814 I Melrose Melrose South of PAR Federal Grant (Spread on percent of pad area) Palomar Airport Road PAR Turn Lane to Melrose South Faraday $4,954,843 $226,7 16 ($3,000,000 $2,798,853 $100,000 $1 5,956,550 Series B $1 521 2,644 $1,443,000 $500,000 $66,667 $384,800 l- $1,629,075 rict Percent 100.00% $2,395,125 $900,000 $200,000 $638,700 $2,703,976 IA 1 of CFD No. 3 Page 11 of 11 EXHIBIT B Exhibit 2 RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX COMMUNITY FACILITIES DISTRICT NO. 3 IMPROVEMENT AREA 2 OF THE CITY OF CARLSBAD A Special Tax shall be levied and collected in Improvement Area 2 ("IA 2") of Community Facilities District No. 3 (the "CFD No. 3") of the City of Carlsbad each Fiscal Year, in an amount determined by the City Council of the City of Carlsbad acting in its capacity as the legislative body of CFD No. 3 through the application of the procedures described below. All of the real property in IA 2, unless exempted by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms used herein shall have the following meanings: "Acquisition Agreement" means that certain Acquisitioflinancing Agreement pursuant to which public improvements, authorized to be financed by CFD No. 3, are acquired by the City from the proceeds of Bonds or Special Taxes, as such agreement may be modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Acreage" or "Acre" of an Assessor's Parcel means (i) prior to the recordation of a Final Subdivision Map that acreage shown on the Assessor's Parcel Map for each such Assessor's Parcel less the acreage, as shown on a tentative map or similar land use entitlement approved by the City, to be owned by, irrevocably offered or dedicated to, or for which an easement for purposes of public right-of-way or other public purpose will be granted to the federal government, the State of California, the County, the City, or any local government or other public agency or designated with specific boundaries and acreage as open space and (ii) after recordation of a Final Subdivision Map that acreage shown on or determined from the applicable Final Subdivision Map for each such Assessor's Parcel. For Condominiums, the Acreage applicable to each Condominium shall be determined by allocating the acreage of the underlying lot on which the Condominiums are or are to be constructed in proportion to each such Condominium's building square footage. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of IA 2, including, but not limited to, the costs of IA 2 of CFD No. 3 Page I of 10 1- ------ a5 Exhibit 2 computing the Special Taxes and of preparing the annual Special Tax collection schedules; the costs of collecting the Special Taxes; the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; the costs of the City, or designee thereof, in complying with the disclosure requirements of applicable federal and state securities laws and of the Act, including public inquiries regarding the Special Taxes, the costs associated with the release of funds from any escrow account (to the extent not paid from other sources). EXHIBIT B "Annual Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C and escalated in accordance with Section D that can be levied by the Council in any Fiscal Year on any Assessork Parcel. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessork Parcel number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessork Parcel number. "Bonds" means any bonds or other debt (as defined in the Act), whether in one or more series, secured by the levy of Special Taxes within IA 2. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of Special Taxes. "CFD No. 3" or "District" means Community Facilities District No. 3 of the City of Carlsbad. "City" means the City of Carlsbad, California. "Condominium" means a separate interest or unit meeting the statutory definition of a condominium contained in the California Civil Code, Section 1351, and for which a condominium plan has been recorded pursuant to California Civil Code, Section 1352. "Council" means the City Council of the City, acting as the legislative body of CFD No. 3. "County" means the County of San Diego, California. "Developable Property" means all Taxable Property, exclusive of Final Map Property. "Exempt Property" means all property located within the boundaries of IA 2 that is exempt from the Special Tax pursuant Section F below. IA 2 of CFD No. 3 Page 2 of 10 Exhibit 2 EXHIBIT B "Final Map Property" means all Taxable Property included within a Final Subdivision Map which is approved by City Council prior to March 1 of each Fiscal Year. "Final Subdivision Map" means a subdivision of property created by recordation of a final map or parcel map approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.), a lot line adjustment or recordation of a condominium plan pursuant to California Civil Code 1352. "Fiscal Year" means the period starting on each July 1 and ending on the following June 30. "IA 2" or "Improvement Area 2" means Improvement Area No. 2 of the District. "Improvement" or "Improvements" means an improvement or improvements authorized to be acquired by the City pursuant to the terms and conditions of the Acquisition Agreement. "Improvement Costs" means the estimated cost to construct the Improvements as set forth in Exhibit B to the Acquisition Agreement. "Indenture" means the indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Index" means for the purpose of calculating the escalation of the Annual Maximum Special Tax each Fiscal Year, the lesser of (a) the annual percentage increase, if any, in the "Construction Cost Index for ENR 20 Cities" for the City of Los Angeles as published in the "Engineering News Record" for the twelve-month period ending with the month of March preceding each Fiscal Year or (b) 3%. "Open Space" means property within the boundaries of IA 2 in which prior to March 1'' of the preceding Fiscal Year (a) has been designated with specific boundaries and acreage on a tentative map or Final Subdivision Map as open space, (b) is classified by the County Assessor as open space by the County assigning a zero assessed value, (c) has been irrevocably offered for dedication as open space to the federal government, the State of California, the County, the City, or any other public agency or (d) is encumbered by an easement or other restriction required by the City limiting the use of such property to open space. "Public Property" means property within the boundaries of IA 2 which prior to March 1'' of the preceding Fiscal Year is owned by, irrevocably offered or dedicated by Final Subdivision Map or other recorded document, or for which an easement for purposes of IA 2 of CFD No. 3 Page 3 of 10 I Exhibit 2 EXHIBIT B public right-of-way, habitat mitigation preserve, pedestrian trails or other public purpose has been granted to the federal government, the State of California, the County, the City, or any local government or other public agency. Notwithstanding the foregoing, the leasehold interest or other possessory interest granted by any public agency in property owned by such public agency to a private entity or person shall be subject to taxation under Section 53340.1 of the Act and shall be classified as Taxable Property. "Special Tax" means the Special Tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement. "Special Tax Requirement'' means: (a) that amount required in any Fiscal Year prior to the issuance of Bonds to: (1) pay the Administrative Expenses; and (2) pay directly for acquisition or construction of the aggregate Improvements in proportion to the allocation of the Improvement Costs to IA 2 specified in Appendix A attached hereto but only to the extent such costs are not expected to be funded with the proceeds of the Bonds; or (b) that amount required in any Fiscal Year after the issuance of Bonds to: IA 2 of CFD No. 3 pay the Administrative Expenses, pay debt service on any outstanding Bonds, replenish any reserve funds attributable to IA 2 and established in connection with Bonds, pay the costs of remarketing, credit enhancement and liquidity facility fees (including such fees for instruments that serve as the basis of a reserve fund in lieu of cash related to any Bonds), pay directly for acquisition or construction of the Improvements of IA 2, but only to the extent such costs cannot be funded with the proceeds of Bonds, and less available funds as directed under the Indenture. Page 4 of 10 Exhibit 2 "Taxable Property" means all property located within the boundaries of IA 2 that is not Exempt Property. EXHIBIT B B. CLASSIFICATION OF PROPERTY Prior to the beginning of each Fiscal Year, all property within IA 2 shall be classified as either Taxable Property or Exempt Property. Taxable Property shall be further classified as Final Map Property or Developable Property. C. ANNUAL MAXIMUM SPECIAL TAX The Annual Maximum Special Tax per Acre for Fiscal Year 2005-2006 for all Taxable Property is shown in Table 1 below: Table 1 Annual Maximum Special Tax per Acre For Fiscal Year 2005-2006 $12,600.00 1 D. ESCALATION OF THE ANNUAL MAXIMUM SPECIAL TAX Each Fiscal Year beginning Fiscal Year 2006-2007, the Annual Maximum Special Tax shall escalate at the applicable Index. The escalation shall cease in the Fiscal Year following the earlier of (1) the completion of the construction and acquisition of all of the Improvements pursuant to the Acquisition Agreement or (2) the sale of the final series of Bonds. E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement. No Special Tax shall be levied until any property is classified as Final Map Property. After any property has been classified as Final Map Property, the Special Tax shall be levied on all Taxable Property within the Improvement Area as necessary to fund the Special Tax Requirement as follows: First: The Special Tax shall be levied in equal percentages on each Assessor's Parcel of Taxable Property, exclusive of Open Space Property and Public Property, up to 100% of the applicable Annual Maximum Special Tax; and IA 2 of CFD No. 3 Page 5 of 10 Exhibit 2 EXHIBIT B Second: If additional Special Taxes are needed after the first step, the Special Tax shall be levied in equal percentages on each remaining Assessor’s Parcel of Taxable Property (Le., Open Space Property and Public Property which is not exempt from the Special Tax), up to 100% of the applicable Annual Maximum Special Tax. F. EXEMPTIONS The CFD Administrator shall classify the following as Exempt Property: (i) Public Property, (ii) Open Space and (iii) Assessor Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement; provided however, that no such classification shall reduce the sum of all Taxable Property to less than 150.57 Acres. Assessor‘s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the amount stated above will be classified as Taxable Property and shall be taxed pursuant to Section E. Exempt status for purposes of this paragraph will be assigned by the CFD administrator in the chronological order in which property becomes Exempt Property. The Annual Maximum Special Tax obligation for any property which would be classified as Public Property upon its transfer or dedication to a public agency but which is classified as Taxable Property pursuant to the preceding paragraph shall be prepaid in full by the seller pursuant to Section J prior to the transfeddedication of such property to such public agency. Until the Annual Maximum Special Tax obligation for any such Public Property is prepaid, the property shall continue to be subject to the levy of the Special Tax as Taxable Property. If the use of an Assessor’s Parcel of previously classified Exempt Property changes so that such Assessor Parcel is no longer classified as Exempt Property as defined above, such Assessor Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property. G. TERM The Special Tax may not be levied (a) longer than the tenth Fiscal Year following the final maturity of the last series of Bonds or (b) longer than is needed to pay the cost and incidental expenses of the construction of the Improvements, whichever is later. H. APPEALS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor’s Parcel is in error shall first consult with the CFD Administrator regarding such error. If following such consultation, the CFD Administrator determines that an error has IA 2 of CFD No. 3 Page 6 of 10 Exhibit 2 EXHIBIT B occurred the CFD Administrator may amend the amount of the Special Tax levied on such Assessor's Parcel. If following such consultation and action (if any by the CFD Administrator), the landowner or resident believes such error still exists, such person may file a written notice with the Finance Director of the City who shall establish, as part of the proceedings and administration of CFD No. 3, a special three-member Review/Appeal Committee. The Review/Appeal Committee may establish such procedures, as it deems necessary to undertake the review of any such appeal. The Review/Appeal Committee shall interpret this Rate and Method of Apportionment of Special Tax and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals, as herein specified. The decision of the Review/Appeal Committee shall be final and binding as to all persons. I. MANNER OF COLLECTION The Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the CFD Administrator may directly bill the Special Tax, or may collect Special Taxes at a different time or in a different manner if necessary to meet the financial obligation of CFD No. 3 for IA 2 or as otherwise determined appropriate by the CFD Administrator. J. PREPAYMENT OF SPECIAL TAX 1. Prepayment in Full The Annual Maximum Special Tax for any Assessor's Parcel may be prepaid and permanently satisfied as described herein, provided that a prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 2. An owner of an Assessor's Parcel intending to prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The "Prepayment'' shall be an amount equal to the sum of (1) Principal, (2) Premium, (3) Defeasance, (4) Fees, and (5) Unfunded Improvements minus the Reserve Fund Credit, as such terms are defined as follows: "Principal" means the principal amount of Bonds to be redeemed from the IA 2 of CFD No. 3 Page 7 of 10 Exhibit 2 EXHIBIT B proceeds of such Prepayment and equals the quotient derived by dividing (a) the applicable Annual Maximum Special Tax for the Assessor's Parcel intending to prepay by (b) the expected aggregate Annual Maximum Special Taxes for all Taxable Property within IA 2 (and excluding from (b) any Annual Maximum Special Taxes for Assessor's Parcels which have fully prepaid the Annual Maximum Special Tax), and multiplying the quotient by the portion of the principal amount of Bonds outstanding. "Premium" means an amount equal to the Principal multiplied by the applicable redemption premium, if any, for the Bonds established pursuant to the Indenture so redeemed with the proceeds of any such Prepayment. "Defeasance" means an amount equal to the amount needed to pay interest on the Principal to be redeemed until the earliest redemption date for the outstanding Bonds permitted under the Indenture less the amount of earnings estimated to be received from the reinvestment of the Prepayment and the Fees to such date. Credit shall also be given for any Special Tax heretofore paid and received by the City which has not yet been utilized to pay the Special Tax Requirement or which is remaining after having paid the Special Tax Requirement. "Fees" equal the fees and expenses of CFD No. 3 directly related to the Prepayment. "Unfunded Improvements" means an amount equal to the estimated cost of the unfunded Improvements authorized to be financed from the proceeds of the Bonds or Special Taxes allocable to the Assessor's Parcel for which the Prepayment is being calculated and is computed by multiplying the quotient calculated when determining Principal by the Improvement Costs allocable to IA 2, as set forth in the Acquisition Agreement, less the estimated cost of any Improvements financed by previously issued Bonds or the proceeds of Special Taxes. Unfunded Improvements shall equal zero following the issuance of all of the Bonds. "Reserve Fund Credit" shall equal the lesser of (i) the expected reduction in the applicable reserve fund requirement (as defined in the Indenture), if any, following the redemption of Bonds from proceeds of the Prepayment or (ii) the amount derived by subtracting the new reserve fund requirement in effect after the redemption of Bonds from the balance in the reserve fund (as such term is defined in the Indenture) on the prepayment date, but in no event shall such amount be less than zero. The Reserve Fund Credit shall apply only when the Reserve Fund for the Bonds shall at least equal the Reserve Requirement as defined in the Indenture. IA 2 of CFD No. 3 Page 8 of 10 Exhibit 2 EXHIBIT B The sum of the amounts calculated in the preceding steps shall be paid to CFD No. 3 and shall be used to pay and redeem Bonds in accordance with the Indenture and to pay the Fees. Upon the receipt of such Prepayment by CFD No. 3, the obligation to pay the Special Tax for such Assessor's Parcel shall be deemed to be permanently satisfied, the Special Tax shall not be levied thereafter on such Assessor's Parcel, and the CFD Administrator shall cause notice of cessation of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the Prepayment and receipt of proof of Special Tax payments made to the County used in the calculation of the Prepayment, if any. 2. Prepayment in Part The Annual Maximum Special Tax for any Assessor's Parcel may be prepaid in part as described herein, provided that such a partial prepayment may be made only if at the time of the prepayment there are no delinquent Special Taxes with respect to such Assessor's Parcel and all other Assessor's Parcels which are under the same ownership and located within IA 2. An owner of an Assessor's Parcel intending to partially prepay the Special Tax shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel and the date through which the amount any such prepayment shall be valid. The amount of the prepayment shall be computed pursuant to Section J.l above substituting the portion of the Annual Maximum Special Tax to be prepaid for the Annual Maximum Special Tax applicable to the Parcel when computing Principal. The Annual Maximum Special Tax to be prepaid must result in an amount of principal which is an even integral of the denomination of Bonds set forth in the Indenture. If necessary, the prepayment amount shall be rounded up in order to equal an even integral of the denomination of Bonds. The CFD Administrator shall cause a notice of reduction of the Special Tax for such Assessor's Parcel to be recorded within 30 working days of receipt of the prepayment. Notwithstanding the foregoing, no prepayment shall be allowed unless the amount of Annual Maximum Special Taxes that may be levied in IA 2 pursuant to Section E of this Rate and Method of Apportionment of Special Tax after the proposed prepayment is at least the sum of (i) the estimated Administrative Expenses and (ii) one hundred ten percent (1 10%) of the maximum annual debt service for the Bonds, taking into account the Bonds to remain outstanding after such prepayment. IA 2 of CFD No. 3 Page 9 of 10 33 Exhibit 2 Improvement Area 1 I I I Zone A I Percent [ Zone B [Percent EXHIBIT B Improvement kea 2 I Total Di IA 2 I Percent I Total Cost I I City of Carlsbad Community Facilities District No. 3 (Faraday/Melrose) $5,498,088 Appendix A Prior to the sale of the Bonds based upon the cost estimates at this time, the following provides the construction cost allocation percentage of total funded which will be used to determine the Special Tax Requirement. $4,381,653 $1 521 2,644 $25,092.385 $4,954,843 $226,716 ($3,000,000 $2 ~ 798,853 $100,000 $1 5,956,550 Construction Costs Allocation I I I Facilities Fund Requirement by Area Melrose Melrose South of PAR Federal Grant (Spread on percent of pad area) Palomar Airport Road PAR Turn Lane to Melrose South Faraday I $4,055,423 El Fuerte Facilities Total Facilities Fund Requirement Capitalized Interest (12 months at 7.5%) Cost of Issuance Discount of 2% Reserve Fund Requirement (Est @ M~X os) Contingency / Rounding Principal Issued by Improvement Area: Refund of Formation Deposit $9,879,741 $15,212,644 $25,092,385 $952,125 $1,443,000 $2,395,125 $400,000 $500,000 $900,000 $133,333 $66,667 $200,000 $253,900 $384,800 $638,700 $1,074,901 $1,629,075 $2,703,976 $1,000 $3,814 $4,814 $12,695,000 $1 9,240,000 $31,935,000 trict Percent 100.00% IA 1 of CFD No. 3 Page 10 of 10