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04-2 Official Statement (2)
NEW ISSUE -BOOK-ENTRY ONLY SYSTEM NO RATING In the opinion of Orrick, Herrington &Sutclifje LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions and assuming /among other things) compliance with ceRain covenants, interest on the Bonds is excluded from grass income for federal tax purposes and is exempt from State of California personal income taxes. In the opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the faders! individual and corporate a[ternative minimum taxes, although Bortd I Counsel observes that such interest is included in adjusted current comings in calculating federal corporate alternative minimum taxable income. Band Counsel expresses no opinion '. regarding any other tax consequences reused by the ownership or disposition of, or [he accrual or receipt of interest on, the Bonds. See "TAX MATTERS" $4,915,000 CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 04-2 (BRIGHTON PARK5/BRIGHTON VILLAGE/ STOCKDALE AT ALLEN COMMERCIAL/CHERRY HILL II) LIMTI'ED OBLIGATION IMPROVEMENT BONDS Dated: Date of Delivery Due: September 2, as shown below The Bonds described herein (the'Bonds") are special, limited obligation bonds being issued by the Ciry of Bakersfield, CalEmia (the "Ciy'9), to finance the acquisition of certain public improvements specially benefiting properties located within the boundaries of the City's Assessment District No. Q4-2 (Brighton Parks/Brighton Village/Srockda(e a[ Allen CommerciallCherry }lilt II) (the "Assessment District").The Assessment District was formed and the acquisition of the improvements will be undertaken as authorized under the provisions of the Municpal Improvement Ac[ of 1913 (Division l2 of the Califomia Streets and Highways Code} and Section 13.08.010 of the Municipal Code of the City. The Bonds are being issued pursuant to the provisions of the Improvement Band Ac[ of 1915 (Division 10 of the CaBfamia Streets and Highways Code} (the "1915 AcP'). ~'. The Bonds are issuable only as fully registered Bands m the denomination of $5,000 each or any integral multiple thereof. Principal, interest at maturity or upon earlier ~redemptioq as applicable, and premium, if any, with respect to the Bonds will be payable upon presentation and surrender thereof at [he corporate trust o%ce of U.S. Bank National Association, the paying agent, registrar, and transfer agent for the Bonds (the "Paying Agent"), N St. Paul, Minnesota. Interest on the Bonds (other than the final payment of interest, which is payable upon surender of the Bonds) will be payable from [heir date of delivery, commencing September 2, 2005, and thereafter semiannually on Maroh 2 and September 2 (each an "Interest Payment Date"j in each year by check of the Paying Agent mailed on each Interest Payment Dale to [he parsons in whose names """ such Bonds are registered a[ the close of business on the fifteenth day of the calendar month immediately prior to an Interest Payment Date (or, in the case of an owner of at least ' $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of business an the fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer). The Bonds wilt be issued initially Nbook-entry only form through the book-entry system of The Depository Trust Company, Mew York, New York. See "BOOK-ENTRY ONLY SYSTEM." i The Bonds aze sobject [o redemption on any Interest Payment Dale in advance oC maturity at the option of the City upon giving a[ ]east thirty (30) days prior notice and j upon payment of the principal thereof and interest accrued thereon [o the date of redemption, plus any applicable redemption premium, as more fully described herein. The Term Bonds maturing on September 2, 2025, aze also subject to mandatory redemption in part prior to their stated maturity, as more fully described herein. i Further development of parcels within the Assessment District, transfers of property ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of [he Bonds prior to their stated maturities. _ '. Under the provisions of the 1915 Act, installments of principal and interest sufficient to meet annual debt service requirements with respect to the Bonds shall be included on '. the regular Kem County [ax bills sent to owners of property against which [here are unpaid assessments. The portion of [he annual installments for the payment of principal of and interest on [he Bonds is to be paid into the Redemption Fund, to be held by [he Finance Director, and will be used to pay debt service on the Bonds as it becomes due. To provide funds Cor payment of the Bonds and the interest thereon as a rcsul[ of any delinquent assessment installments, the Cily will establish a Special Reserve Fund and deposit [herein Bond proceeds in the original amount of $38$ti70. Additionally, the City has covenanted that, under certain circumstances, by no later than October 1 in any year, it will 51e an action in superior court to foreclose the lien on each delinquent assessment, as more particularly described herein. [F A DELINQUENCY OCCURS IN THE PAYMENT OF ANY ASSESSMENT INSTALLMENT, THE CITY WILL HAVE A DUTY ONLY TO TRANSFER INTO THE REDEMPTION FUND THE AMOUNT OF THE DELINQUENCY OUT OF THE SPECIAL RESERVE FUND. THIS DUTY OF THE CITY IS CONTINUING DURING THE PERIOD OF DELINQUENCY, ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND, UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. THERE IS NO ASSURANCE THAT SUFFICIENT FUNDS WILL " BE AVAILABLE FROM THE SPECIAL RESERVE FUND FOR THIS PURPOSE. THEREFORE, IF, DURING THE PERIOD OF DELINQUENCY, THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINEU THA2 [T WILL NOT OBLIGATE ITSELF TO ADVANCE FUNDS FROM ITS '~, TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND. ~' This cover page contains certain information for quick reference only. It is no[ a summary of the issue. Investors must read fhe entire Official Statement to obtain - information essential to the making of an informed investment decision. MATURITY SCHEDULE ' "~ $3,245,000 Serial Bonds Maturity Principal Interest Maturity Principal Interest (September 2) Amount Rate Price CUSIPt++ No. (Septembe[ 2) Amount Bate Price CUSIPt~t No. ' 2006 $165,000 3,000% 100.00'yo 057510 ZT9 2014 $22Q000 4.4509'0 100.00% 057510 A33 2007 170,000 3.150 100.00 057510 ZU6 2015 230,000 4.550 100.00 057510 A41 2008 175,000 3.400 100.00 057510 ZV4 2016 24Q000 4.650 100.00 057510 A58 2009 180,000 3.600 100.00 057510 ZW2 2017 250,000 4.750 100.00 057510 A66 2010 185,000 3.850 100.00 057510 ZXO 2018 260,000 4.850 100.00 057510 A74 ZOl t 195,000 4A00 100.00 057510 ZY8 2019 275,000 4.450 100.00 057510 A82 2012 20Q,000 4.150 IOOAO 057510 ZZS 2020 290,000 5.000 100.00 057510 A90 - ~ 2013 21Q000 4.300 100.00 057510 A2S --- ', $1,670,000 5.100% Term Bond Due September 2, 2025 -Price: ]0(LOtIF'o (CUSIli01 No. 057510 B2A) (L j Copyright 2005, American Bankers Association. CUSIP data herein is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. THE BONDS ARE NOT SECURED BY THE GENERAL TAXING POWER OF THE C[TY, THE COUNTY OF KERN {THE "COUNTY"), THE STATE OF CALIFORNIA (THE "STATE"), OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE CITY, NOR THE COUNTY, NOR THE STATE, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE HAS PLEDGED ITS FULL FAITH AND CREDIT FOR THE PAYMENT OF THE BONDS. The Bonds are being offered when, as, and if issued by the Cily and received by [he Underwriter; subject to prior s¢!e and to the approval of validity by Orrick, Herrington & Sutcliffe LLP, San Franciseq California, Bond Counsel, and the approval of certain matters for the City by the Ciry Attorney of the City of Bakersfield. Certain other legal matters will be passed on by Pillsbury Wircthrop Shaw Pittman LLP, Century Ciry, Califomia, as disclosure counsel to the City, It is expected that the Bonds in definitive form will be available for delivery in New York, New York, on or about July !3, 2005. RBC DAIN RAUSCHER Dated: June 23, 2005 No dealer, broker, salesperson, or other person has been authorized by the City or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Bonds, nor shall there be any sale of the Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. This Official Statement is not to be construed to be a contraot with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts, or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from the City and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and it is not to be construed as a representation by the City. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the City or the Assessment District since the date hereof. The Underwriter has provided-the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. CITY OF BAKERSFIELD M9VOC and Citv Council Harvey L. Hall, Mayor Irma Carson, Councilmember First Ward Susan M. Benham, Councilmember Second Ward Mike Maggard, Vice Mayor, Councilmember Third Ward David R. Couch, Councihnember Fourth Ward Harold Hanson, Councilmember Fifth Ward Jacquie Sullivan, Councilmember Sixth Ward Zack Scrivner, Councilmember Seventh Ward City Staff Alan Tandy, City Manager Virginia Gennaro, City Attorney Pamela A. McCarthy, City Clerk _ Raul M. Rojas, Public Works Director Gregory 7. Klimko, Finance Director Nelson K. Smith, Assistant Finance Director BOND COUNSEL Orrick, Herrington & Sutcliffe LLP San Francisco, California ASSESSMENT ENGINEER Wilson & Associates Fresno, California PAYING AGENT, REGISTRAR, AND TRANSFER AGENT U.S. Bank National Association Los Angeles, California PROPERTY APPRAISER Launer & Associates Bakersfield, California DISCLOSURE COUNSEL Pillsbury Winthrop Shaw Pittman LLP Century City, California Oregon I-5 Nevada Seat Aae7'ra Oo~ The Ciry of Bakersfield, California, the county seat of the County of Kern, is located at the southern end of California's San Joaquin Valley. Bakersfield is approximately 110 miles north of I,os Angeles and 290 miles south of San Francisco. i-5 \ t "lMMM ~ Las Angetex ,,,~ San Qiego -8 ~, TABLE OF CONTENTS Page INTRODUCTORY STATEMENT ..................................................................................:........ 1 ............................. The Bonds ....................................................................................................................................................... ....... ....... I The Assessment District .................................................................................................................................. ....... l Property Ownership ......................................................................................................................................... ... 1 Improvements ............................................................................................................................:.................... .... ....... 2 Assessments ..................................................................................................................................................... ....... 2 Appraisal ......................................................................................................................................................... ....... 2 Security for the Bonds ..................................................................................................................................... .......3 ' Special Reserve Fund ...................................................................................................................................... .......3 Foreclosure ...................................................................................................................................................... ....... 3 Assessment Delinquencies .............................................................................................................................. .......3 Book-Entry Only System ................................................................................................................................ .......4 Continuing Disclosure ........................................................................................................._........................... ......4 Forward-Looking Statements .................................................................. _....................................................... ...... 4 Miscellaneous ..................................................................................................................::............................... ......4 ESTIMATED SOURCES AND USES OF FUNDS .............................................._............................................... ......5 THE BONDS ........................................................................................................................................................... ......5 Purpose of the Bonds .........................................................................._.................................._........................ ......5 Authority for Issuance ...................................................................................................................................... ......5 General ............................................................................................................................................................. ......6 Transfer and Exchange of Bonds ...................................................................................................................... ......6 Bonds Mutilated, Destroyed, or Lost ................................................................................................................ ......7 ', Redemption ...................................................................................................................................................... ...... 7 Effect of Redemption; Defeasance ................................................................................................................... ......8 Refunding Bonds .............................................................................................................................................. ......8 Disposition of Surplus from the Improvement Fund ........................................................................................ ......8 Investment of Bond Proceeds ........................................................................................................................... ...... 8 Security for the Bonds ...................................................................................................................................... ......9 Special Reserve Fund ....................................................................................................................................... ....10 Redemption Fund Deficiencies .............................................................._........................................................ .... I 1 '. Covenant to Commence Superior Court Foreclosure ..........................................._.......................................... ....11 Priority ofLien ................................................................................................................................................. ....11 - Tax Covenants .................................................................................................................................................. ....12 Debt Service Schedule ...................................................................................................................................... ....13 BOOK-ENTRY ONLY SYSTEM ............................................._.............................._............................................ ....13 THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS .............................._......................................... ....15 General ............................................................................................................................................................. .... I S Description of the Community Areas and the Improvements ..................................................._..................... ....16 Estimated Improvement Costs .......................................................................................................................... ....19 Method of Assessment Spread ......................................................................................................................... ....20 OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT... ...21 Ownership of Property in the Assessment District ......................................................_.................................... ...21 i C&C California .........................................................................................:......................._....::....................... ...21 Cherry Hill ......................................................................................................................................................... ...23 Development and Financing Plans .................................................................................................................... ...23 Assessment Roll ................................................................................................................................................ ...27 Utilities .............................................................................................................................................................. ... 2 7 Flood and Earthquake Zones ............................................................................................................................. ...27 Zoning ............................................................................................................................................................... ...27 Tax Delinquencies ............................................................................................................................................. ...28 Environmental Issues Affecting Assessment District Property ......................................................................... ...28 Bulk Value-to-Assessment Lien Ratio .............................................................................. ...................................28 Direct and Overlapping Debt ............................................................................................. ...................................30 SPECIAL RISK FACTORS ..................................................................................................... ...................................31 General ............... ...................................................................................................... _........ .................................. 31 Risks of Real Estate Secured Investments Generally ..............................................._........ ..................................31 Concentration of Ownership......__ .................................................................................... ......................_...........31 Property Values ........................................................................................................ ..................................32 Availability of Funds to Pay Delinquent Assessment Installments .................................... ..................................32 Hazardous Substances ........................................................................................................ ..................................32 Endangered and Threatened Species .................................................................................. ..................................33 Factors Which May Affect Land Development .................................................................. ..................................33 Private Improvements; Increased Debt ............................................................................... ..................................34 Subordinate Debt; Payments by FDIC and other Federal Agencies ................................... ..................................34 Tax Delinquencies .............................................................................................................. ..................................35 Limited Obligation of the City Upon Delinquency ............................................................ .................................. 35 Bankruptcy and Foreclosure ............................................................................................... ..................................36 Economic, Political, Social, and Emiromnental Conditions .............................................. ..................................36 Articles XIIIA and XIIIB of the California Constitution ............................_...................... ..................................37 Articles XIIIC and XIIID of the California Constitution ............................_...................... ..................................38 Future Initiatives ................................................................................................................. .:................................39 Covenant to Commence Superior Caurt Foreclosure ......................................... Price Realized Upon Foreclosure .............................. _....................................... Priority of Lien ...................................................................................... Refunding Bands .................................................._............................... Absence of Market for Bonds ................................................................ Loss of Tax Exemption ......................................................................... ENFORCEABILITY OF REMEDIES ......................................................... NO LITIGATION ......................................................................................... CERTAIN INFORMATION CONCERNING THE CITY .......................... TAX MATTERS .......................................................................................... APPROVAL OF LEGALITY ...................................................................... CINDER W RITING ....................................................................................... NO RATING ................................................................................................ CONTINUING DISCLOSURE ................................................................................ MISCELLANEOUS ......................................... _...................................................... APPENDIX A -CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION ......................................... APPENDLY B -APPRAISAL ...................................................................._........ APPENDIX C -FORM OF OPINfON OF BOND COUNSEL ........................... APPENDIX D -ASSESSMENT DIAGRAM ...................................................... APPENDIX E -ASSESSMENT ROLL AND VALUE-TO-LIEN DATA.......... APPENDIX F -CONTINUING DISCLOSURE CERTIFICATES ..................... ............................................. 39 ..............................................40 an ................................................. 42 ................................................. 42 ................................................ 43 ................................................ 43 ............................................43 .......................................... 44 .....: .................................. A-1 ............................................ B-1 ........................................... C-1 ........................................... D-1 ...........................................E-1 ........................................... F-1 OFFICIAL STATEMENT $4,915,000 CITY OF BAKERSFIELD ASSESSMENT DISTRICT N0.04-2 (BRIGHTON PARKSBRIGHTON VILLAGEt STOCKDALE AT ALLEN COMMERCIALICHERRY HILL II) LIMITED OBLIGATION IMPROVEMENT BONDS INTRODUCTORY STATEMENT THIS INTRODUCTORY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE COVER PAGE AND APPENDICES HERETO, AND THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF TAE ENTIRE OFFICIAL STATEMENT. The Bonds The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to set forth certain information concerning the issuance and sale by the City of Bakersfield, California (the "City"), of $4,915,000 in principal amount of its City of Bakersfield Assessment District No. 04-2 {Brighton ParksBrighton Village/Stockdale at Allen Commercial/Cherry Hill II) Limited Obligation Improvement Bands (the "Bonds") for Assessment Distract Na. 04-2 (Brighton ParksBrighton Village/Stockdale at Allen CommexciallChetry Hill II) (the "Assessment District' ). The Bonds are issued pursuant to the Improvement Bond Act of 1915, being Division 10 of the California Streets and Highways Code (the "1915 Act"~, the Charter and Municipal Cade of the City, and Resolution No. 125-05 adopted by the City Council of the City (the "City Council") on June 8, 2005 (the "Bond Resolution"). The Assessment District The Assessment District was formed and the assessments are being levied in accordance with the Municipal Improvement Act of 1913, being Division 12 of the Califomia Streets and Highways Code (the "1913 Act"), and Section 13.08.070 of the Municipal Code of the City. Proceedings for the formation of the Assessment District were commenced by the City Council pursuant to property owner petitions filed by Castle & Cooke California, Inc., a California corporation ("C&C Califomia"), and Cherry Hill, Inc„ a California corporation ("Cherry Hill"), as the owners at the date of the filing thereof of more than 60% of the assessable land within the Assessment District. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Assessment District is comprised of four separate community areas in northwest Bakersfield that are identified as (i) the "Brighton Parks Area," (ii) the "Brighton Village Area," {iii) the "Stockdale at Allen Commercial Area," and {iv} the "Cherry Hill II Area" {collectively, the "Community Areas"}. The Assessment District boundaries are shown on the assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further description of the Assessment District and the Community Areas, see "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -General" Property Ownership _...__- "-- C&C Califomia owned approximately 80.24% of the assessed property in the Assessment District at the time petitions to form the Assessment District were filed by the applicable property owners, all of which property comprises the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area. As of June 8, 2005, C&C California had not transferred any of such property. Cherry Hill owned approximately 19.76% of the assessed property in the Assessment District at the time the petitions to form the Ass~-sment District were filed by the applicable property owners, all of which property comprises the Cherry Hill II Area. As of June 8, 2005, Cherry Hilt had not transferred any of such property. Upon the issuance of the Bonds, the Community Areas will, together, bear 100% of the total assessment lien. The property within the Assessment District is involved in various stages of the land development process. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT" for a description of the planned development of the respective Community Areas. ]mprovements Proceeds From the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to 5nance (i) the acquisition of certain public infrastmcture improvements for each of the four Community Areas, which improvements will be owned, operated, and maintained by the City (collectively, the "Improvements"), and (ii) the paymem of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2005. For a further description of the Conununity Areas and the Improvements, see "THE ASSESSMENT DISTRICT AND THE IMPROV P_M G.NTS -Description of the Community Areas and the Improvements." The Impn~acments are proposed to be fnanced by [he City in accordance with the terms and conditions of (i) the Acquisition and Disclosure Agreement, by and between the City and CRC California (approved by the City as Agreement No. IAi-34l on December I5, 2004, and referred to herein as the "CRC California Acquisition Agreement'}, mid lit) the Acquisition and Disclosure Agreement, by and between the City and Cheery Hill (approved by the C'it}' as Agreement No. 04-342 on December 15, 2004, and referred to herein as the "Cherry Hill Acquisition Agreement:' and collectively with the CRC California Acquisition Agreement, the "Acquisition Agreements"). Upon their completion by CRC California and Cherry Hill, as applicable, the Improvements are proposed to be acquired by the City using Bond proceeds. Assessments The land within each of the four respective Community Areas in the Assessment District specially benefited by the Improvements has been assessed to pay the estimated cost of the Improvements and certain ftnancing costs related thereto. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Estimated hnprovemenY Costs." The City Council, pursuant to Resolution No. 123-05, adopted on June 8, 2005, confirmed the amount of assessments for the Assessment District in the aggregate amount of $5,045,000. The Bonds aze secured by the assessments as hereinafter described under the heading "THE BONDS -Security for the Bonds." The total assessment lien is not less than the aggregate principal amount of the Bonds being issued. - Appraisal Launer R Associates, Bakersfield, California (the "Appraiser"}, has prepazed an appraisal dated as of May 23, 2005 {the "Appraisal"), appraising, as of Apri125, 2005, the property within the Assessment District that is subject to the lien of the assessments. Based on the Appraisal, the ratio of the aggregate Bulk Value of the Assessment District property to the aggregate assessment lien is 8.08:1. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Bulk Value to Assessment Lien Ratio." The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, a copy of which is attached hereto as APPENDIX B. Certain considerations relating to-the Appraisal are discussed under the heading "SPECIAL RISK FACTORS." Neither the City nor the Underwriter makes any representation. as to the accuracy or completeness of the Appraisal. See APPENDIX E for a listing of the ratio of the appraised value of each assessed parcel to the amount of the assessment lien against such parcel. The appraised values of the Assessment District property reflected in the Appraisal have been detemvned assuming, among other things, the completion of the Bond-financed Improvements. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Description of the Community Areas and the Improvements'° and "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT" for descriptions of the plans of C&C California and Cherry Hill for the development of the property within the Assessment District. Security for the Bonds The Bonds are issued upon and secured by the unpaid assessments and, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. Al] the Bonds are secured by the moneys in the Redemption Fund created pursuant to the Bond Resolution and by the unpaid assessments levied to provide for payment of said acquisition of the Improvements, and; including principal and interest, are payable exclusively out of the Redemption Fund. The unpaid assessments represent fixed liens on the parcels of land assessed under the proceedings. They do not, however, constitute the personal indebtedness of the owners of said parcels. Under the provisions of the 1915 Act, assessment installments sufficient to meet annual debt service on the Bonds are to be collected on the regular Kern County tax bills sent to_owners of property within the Assessment District against which there are unpaid assessments. These annual installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay Bond principal and interest as they become due. The installments billed against each pazcel of property each year represent a pro rata share of the total principal and interest coming due that year, based on the percentage which the tmpaid assessment against that property bears to the total of unpaid assessments within the Assessment District. The Bonds are not secured by the general taxing power of Che City, the County of Kern (the "County"}, the State of California (the "State"), or any other political subdivision of Che State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment of the Bonds. Special Reserve Fund The City will establish a Special Reserve Fund (the "Special Reserve Fund"} in the amount of $389,670 from Bond proceeds, which amount will be transferred to the Redemption Fund in the event of delinquencies in the payment of the assessment installments to the extent of such delinquencies. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the least of (i) 10% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (the "Reserve Requirement"). See "THE BONDS -Special Reserve Fund." Foreclosure -"- The City has covenanted that it will, no later than October 1 in any year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is less than the Reserve Requiremenk See "THE BONDS - Covenant to Commence Superior Court Foreclosure" and "SPECIAL RISK FACTORS -Covenant to Commence Superior Court Foreclosure" Assessment Delinquencies If a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is continuous during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for such purpose and if, during the geriod of delinquency, there are insufficient moneys in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. _ As authorized by the 1915 Act, the City has elected not to obligate itse]f to advance available funds ~,, from its treasury to cure any deficiency which may occur in the Redemption Fund by reason of the failure of a property owner to pay an assessment installment when due. If there are additional delinquencies after deplefion of funds in the Special Reserve Fund, Che City is not obligated to Cransfer into the Redemption Fund the amount of such delinquencies out of any other available moneys of the City. Book-Entry Only System The Bonds will be initially issued and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Payment of principal of and interest on .the Bonds to the Beneficial Owners (as defined below) will be made in accordance with the procedures of DTC, described below. See "BOOK-ENTRY ONLY SYSTEM." Continuing Disclosure The City and C&C California have each covenanted in its respective Continuing Disclosure Certificate for the benefit of Bondholders to provide an annual or semi-annual report, as applicable, containing certain financial information and operating data relating to the Assessment District and the property in the Assessment District and to provide notices of the occurrence of certain enumerated events, if material. The form of each such Continuing Disclosure Certificate is attached hereto as "APPENDIX F -CONTINUING DISCLOSURE CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange I, Commission Rule 15c2-12(b){5), as it may be amended from time to time. See "CONTINUING DISCLOSURE." Cherry Hill does not have an obligation to provide continuing disclosure information and has not entered into a continuing disclosure; certificate. However, in the event Cherry Hill or any other person or entity should acquire property in the Assessment District that, when aggregated with all other properly in the Assessment District owned by such owner or its affiliates, is subject to a lien of twenty percent {24%) or more of the annual assessment securing payment of the Bonds, such owner shall be required to enter into a Continuing Disclosure Certificate as described in the preceding paragraph. Forward-Looking Statements This Official Statement contains statements relating to future results that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words "estimate," "Forecast," "intend,"' "expect," and similar expressions idenrify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. See also "SPECIAL RISK FACTORS" herein. Miscellaneous Set forth herein are brief descriptions of the Bonds, the Assessment District, the Community Areas, the Improvements, the City, the Bond Resolution, C&C Califomia, Cherry Hill, and certain other matters. Such descriptions and the discussions and information contained herein do not purport to be comprehensive or definitive. All references in this Official Statement to documents, the Bonds, and the Assessment District proceedings are ` ! qualified in their entirety by references to such documents and the City's resohnions setting forth the terms and descriptions thereof. Copies of the Bond Resolution and other documents described in this Official Statement may be obtained from the City. The City's address for such purpose is: City of Bakersfield, 1501 Truxtun Avenue, Bakersfield, California 93341, Attention: Finance Director; telephone number (661) 326-3030. ESTIMATED SOURCES AND USES OF FUNDS The proceeds of the sale of the Bonds will be deposited with the Finance Director in tmst pursuant to the terms of the Bond Resolution in the amounts set forth below. The moneys in the Improvement Fund established for the Bonds will. be used to acquire or otherwise finance the Improvements and to pay certain costs associated with the issuance and delivery of the Bonds. A portion of the net proceeds of the Bonds will be deposited in the Special Reserve Fund Capitalized interest on the Bonds from their dated date to September 2, 2005, will be deposited into the Redemption Fnnd. The estimated sources and uses of funds for the Bonds are summarized as follows: Sources of Funds Principal Amount of Bonds $4,915,000.00 Less: Underwriter's Discount (58,980.00) Total $4,856,020.00 Uses of Funds Improvement Fund $4,435,837.971~~ Special Reserve Fund 389,670.00 Redemption Fund 30.512.03~2~ - Total $4,856,020.00 (1) lncludea costs oPissuance ofapproximately$284,032.97_ (2) Represents capitalizedimerest on the Bonds from their dated date to September 2, 2Q05. THE BONDS Purpose of the Bonds Proceeds From the sale of the Bonds will be used to finance (i) the Improvements, which are comprised of the acquisition of certain public improvements within the four Community Areas, and (ii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2005. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Description of the Community Areas and the Improvements." Authority for Issuance The Assessment District proceedings are being conducted pursuant to the 1413 Act, Section 13.08.070 of the Municipal Code of the City, and a Resolution of Intention No. 1357, adopted by the City Council of the City on December 15, 2004. The Bonds, which represent the unpaid assessments levied against privately owned property in the Assessment District, are being issued pursuant to the provisions of the 1915 Act and the Bond Resolution approving the issuance of the Bonds under the 1915 Act and the terms thereof. In the proceedings of the City with respect to the Assessment District, all costs either axe estimated or are ascertained prior to the constmetion or acquisition of the improvements, right-of--way, or property involved. Under such proceedings, the assessments are then levied, cash collections are made, and bonds are sold. to represent unpaid assessments. The money obtained from cash collections and bond proceed§ is used by the City as payment for the ' improvements to be acquired, for the property or rights-of--way (if any) to be acquired, and for incidental expenses and expenses of the Bond issue. C&C California and Cherry Hill have each waived the cash collection period and no such cash collections were made. Assessment district proceedings can be initiated by either a petition or by the Ciry Council without a petition. Petitions filed with the Ciry Council and signed by C&C California and Cherry hill, respectively, the owners of more than 60°l° of the assessable land within the Assessment District at the time of such filing, initiated the proceedings far the Assessment District. The property owner petitions were accepted by Resolution No. 318-04, adopted by the City Council on December 15, 2004. After the proceedings were initiated, Wilson & Associates, Fresno, Califomia {the "Assessment Engineer"), prepared a written report, which contains, among other things, the list of improvement costs and the amount of the assessments to be levied against the parcels in the Assessment District. The assessments were levied on the basis of the special benefit to be derived by such parcels from the Improvements. (See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Method of Assessment Spread.") The Assessment Engineer's written report was filed with the City Clerk on April 29, 2005, and was approved by the City Council in preliminary form on May 11, 2005. The Assessment Engineer's written report in final fomm was filed with the City Clerk on May 27, 2005. The public hearing required by law was held on June 8, 2005. The property owners in the Assessment District had the right to protest the levy of the proposed assessments in writing prior to or at the commencement of the hearing and to be heard at the hearing. No such protests were made. In accordance with Article XIIID of the State Constitution, the property owners were also requested to submit ballots. ++eighted according to the proportional financial obligation of the affected property, in favor of or opposition to the assessment. All ballots submitted by property owners were in favor of the assessment. See "SPECIAL RISK FACTORS-Articles XIIIC and XII]D of the Califomia Constitution." Upon conclusion of the hearing, the City Council tabulated the ballots and-adopted its resolution confirming ihr assessments and ordering the acquisition of improvements. The assessments confirmed by the City were based on the improvement costs listed in the Assessment Engineer's final written report {the "Engineer's Report"). Aitcr conlirnmation, the assessments became liens against the assessed parcels by recordation of a notice of assessment. ++hich recording was made in the Office of the Superintendent of Streets on June 9, 2005, and in the Office of the Counh~ Recorder an June 14, 2005. No cash payments were made by the property owners. Genera] The Bonds will be issued in fully registered form, without coupons, in the denomination of $5,000 each or in any integral multiple thereof: The Bonds will be dated the date of delivery, and will bear interest at the rates per annum, will mature on the dates (each a "Principal Payment Date"), and will mature in the amounts set forth on the front cover pages of this Official Statement. Interest on the Bonds is payable on September 2, 2005, and thereafrer semiannually on Mazch 2 and September 2 (each an "Interest Payment Date"). Principal, interest at maturity or upon earlier redemption, if applicable, and premium, if any, with respect to the Bonds will be payable at the corporate tmst office of U.S. Bank National Association, as paying agent, registrar, and transfer agent (the "Paying Agent"}, in St. Paul, Minnesota, upon presentation and surrender of the Bonds. Interest (other than at maturity or upon earlier redemption) on the Bonds will be payable by check of the Paying Agent mailed on each Interest Payment Date to the owners of record at the addresses shown on the registration books maintained by the Paying Agent for such purposes (the "Registration Books") as of the fifteenth day of the month immediately prior to an Interest Payment Date (or, in the case of an owner of at least $1,000,000 in principa] amount of the Bonds who so requests in writing prior to the close of business on the fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer). Transfer and Exchange of Bonds - Any Bond may be transferred or exchanged upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer or authorization for exchange, duly executed in a form approved by the Paying Agent. The Paying Agent shall not be obligated to make any transfer or exchange of any Bond during the period commencing with the fifteenth day of the month immediately preceding each Interest Payment Date and i ending on such Interest Payment Date. The City may require the Bond Owner requesting such transfer or exchange to pay any tax or other governmental chazge required to be paid with respect to such transfer or exchange. Bonds Mutilated, Destroyed, or Lost If any Bond becomes mutilated, the City, at the expense of the Owner of such Bond, will execute, and the Paying Agent will authenticate and deliver, a new Bond in exchange and substitution. far the Bond so mutilated, but only upon surrender by the owner of the Bond so mutilated. Every mutilated Bond so surrendered will be canceled. If any Bond becomes lost or destroyed, evidence of such loss or destruction may be submitted to the City and, if such evidence is approved by the City and indemnity satisfactory to the City is given, the City, at the expense of the Owner, will execute, and the Paying Agent will authenticate and deliver, a new Bond in lieu of and in replacement for the Bond so lost or destroyed. The owner must pay all costs of issuance of the new Bond. Redemption Optional Redemption and Prenavment of Bonds. Any Bond or portion thereof in the amount of $5,000 or any integral thereof outstanding may be called for redemption prior to maturity on any Interest Payment Date upon payment of the principal, plus accmed interest to the date of redemption, together with a redemption premium (calculated as a percentage of the par value of Bonds being redeemed) as set forth in the following table: Redemption Dates Redemntion Premium September 2, 2005, through September 2, 2014 3.0% 'i March 2, 2015 and September 2, 2015 2.0% '~ March 2, 201b and September 2, 20]6 LO°fo March 2, 2017 and thereafter 0.0°l0 Na interest will accrue on a Bond beyond the Interest Payment Date on which said Bond is called for redemption. Notice of redemption must be given to the registered owner of the Bond by registered or certified mail or by personal service at least thirty (30) days prior to the redemption date, as provided in the 1915 Act. In accordance with the 1915 Act, the Finance Director will select Bonds for redemption in such a way that the ratio of outstanding Bonds to issued Bonds will be approximately the same in each annual series insofar as possible. Within each annual series, Bonds shall be selected for redemption by lot. Further development of the parcels in the Assessment District, a transfer of property ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of the Bonds prior to their stated maturities. Mandatory Redemption of Term Bonds The Bonds maturing on September 2, 2025 (the "Term Bonds"), are subject to mandatory advance redemption in part-prior zo their stated maturity, as authorized under the Bond Resolution. The redemption shall occur on September 2 in the following years and in the following principal amounts, together with interest accmed on such amounts to the date fixed for redemption, and shall be without premium: Year 2021 2022 2023 2024 2025 (maturity) Princinal Amount $300,000 315,000 335,000 350,000 37Q000-._ if the Bonds are redeemed in part, as described under the subheading "Optional Redemption and Prepayment of Bonds" above, the principal of the Tetrn Bonds to be redeemed on each of the payment dates set forth above shall be modified by deducting the principal amount of the Bonds redeemed in $5,000 increments as proportionally as practicable from the principal amounts set forth above. Effect of Redemption; Defeasance From and after the date fixed for redemption pursuant to the Bond Resolution, if funds available for the payment of the principal of and interest (and redemption premium, if any) on the Bonds or portion of Bonds so called for redemption have been duly provided, then Bonds or portion of Bonds so called for redemption will become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price or interest) such Bonds or portions of Bonds shall be defeased and shall cease to be entitled to any benefit or security under the Bond Resolution (other than the right to receive payment of the redemption price and interest) and shall cease to bear interest. Receipt of notice of redemption. by the owner of a Bond shall not be a condition precedent to redemption and failure by the owner of a Bond to actually receive such notice of redemption shall not affect the validity of the proceedings for the redemption of such Bond or the cessation of interest. Refunding Bonds Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. The City may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in the Assessment District, or giving notice to the owners of the Bonds, if the City Council finds that: (A) Each estimated annual installment of principal and interest on the reassessment to secure the refunding bonds is less than the corresponding annual installment of principal and interest on the portion of the original assessment being superseded and supplanted by the same percentage for all subdivisions of land within the Assessment District. Any amount added to the annual installments on the reassessment due to a delinquency in payment on the original assessment need not be considered in this calculation; (B) The number of years to maturity of all refunding bonds is not more than the number of years to the last maturity of the Bonds; and (C} The principal amount of the reassessment on each subdivision of land within the Assessment District is less than the unpaid principal amount of the portion of the original assessment being superseded and supplanted by the same percentage for each subdivision of land within the Assessment District. Any amount added to a reassessment because of a delinquency in payment on the original assessment need not be considered in this calculation. Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis which the City Council detemilnes is for the City's benefit, if the $ond owners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as - they become due, or advance the maturity of the Bonds and pay Che principal of and interest and redemption premium thereon. Disposition of Surplus from the Improvement Fund The amount of any surplus remaining in the Improvement Fund after completion of the acquisition of the Improvements and payment of all claims shall be applied as a credit to the assessments or to call Bonds, all as provided in the 1913 Act. Investment of Bond Proceeds Moneys held in the Improvement, Redemption, and Special Reserve Funds created pursuant to the Bond Resolution shall be invested by the Finance Director in accordance with generally applicable City investment policies, subject to State law and federal tax regulations governing the investment of tax-exempt bond proceeds. Investment income on moneys in the Redemption Fund shall be retained therein. Proceeds of the investment of amounts in the Improvement Fund and the Special Reserve Fund will be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extant required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance Director as of June 30 of each year, such moneys shall be transfesed to the Special Reserve Fund until the balance therein is equal to the Reserve Requirement. The remaining balance, if any, in the Investment Earnings Fund will be transferred, first, to the Improvement Fund until the Improvements are completed and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Duector, as a credit upon the annual installments of assessments or for the advance retirement of Bonds. Security for the Bonds The Bonds are issued upon and secured by the unpaid assessments against the property in the Assessment District, together with interest thereon, and said unpaid assessments, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. The Bonds are further secured by the moneys in the Redemption Fund and the Special Reserve Fund created pursuant to the Assessment District proceedings. Principal of and interest and redemption premiums, if any, on the Bonds are payable exclusively out of the Redemption Fund. The assessments and each installment thereof and any interest and penalties thereon constitute a lien against the parcels of land on which the assessments are levied until the same are paid. Such lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all existing and future private liens and over all fixed special assessment liens that may thereafter be created against the property. Such lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the "Me1lo-Roos Commnnity Facilities Act of 1982" {being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California} (the "Mello-Roos Act"), whenever created against the property. Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other special assessment lien created under the 1913 Act. The property within Brighton Parks Area, the Brighton Village Area, the Stockdale at Allen Cammercial Area, and the Cherry Hill II Area, are subject to an existing special tax lien created by Community Facilities District No. 9Z-1 of the RNR School Financing Authority ("RNR CFD No. 92-1") pursuant to the Mello-Roos Act. The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon the zoning, the entitlements, and the type and level of development of such property. See "THE BONDS -Priority of Lien." The fonds are not secured by the general taxing power of the City, the County, the State, or any other political subdivision of the Stale, and neither the City, nor the County, nar the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment thereof. Although the unpaid assessments constitute fixed liens on the parcels assessed, they do not constitute the personal indebtedness of the owners of said parcels. Furthermore, there can be no assurance as to the ability or the willingness of such owners to pay the unpaid assessments. In addition, there can be no assurance that the present owners will continue to own all or any of said parcels. The unpaid assessmems will be collected in annual installments, together with interest on the declining balance, on the County tax roll on which general taxes on real property are-collected, and are payable and become delinquent at the same fime and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do said general taxes. Notwithstanding the City's covenant to commence foreclosure proceedings in connection with delinquent assessments, the property upon which the assessments were levied is subject to the same provisions for sale and redemption as aze properties for nonpayment of general taxes. The annual assessment installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay the principal of and interest on the Bonds as they become due. The installments billed against all of the pazcels of property in the Assessment District subject Yo the assessments will be equal to the total principal and interest coming due on all of the Bonds that year, plus, with respect to each parcel in the Assessment District, an additional amount to cover the administrative charges of the City. Special Reserve Fund Out of the proceeds of the sale of the Bonds, the City Council will set aside into a Special Reserve Fund the amount of $384,670. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the least of (i) ]0% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (the "Reserve Requirement"). The Special Reserve Fund will constitute a tmst fund for the benefit of the owners of the Bonds. The Special Reserve Fund will be maintained, used, transferred, reimbursed, and liquidated as follows: (a) Whenever there are insufficient funds in the Redemption Flmd to pay tare next maturing installment of principal of or interest on the Bonds, an amount necessary to make up such deficiency will be tmnsferred from the Special Reserve Fund, to the extent of available funds, to the Redemption Fund. The amounts so advanced will be reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments of the assessments and interest thereon has been made from the Special Reserve Fund. In the event that the Special Reserve Fund is completely depleted from such advances prior to reimbursement from- resales of property or delinquency redemptions, payments to the owners of the Bonds will be dependent upon reimbursement of the Special Reserve Fund. (b) If any assessment or any portion thereof is prepaid prior to the final maturity of the Bonds, the amount of principal of the assessment to be prepaid will be reduced by an amount which is in the same ratio to the original amount of the Special Reserve Fund as the original amount of the prepaid assessment bears to the total original amount of unpaid assessments originally securing the Bonds. The reduction in the amount of principal prepaid shall be compensated for by a transfer of like amount from the Special Reserve Fvnd to the Redemption Fund. (c) All proceeds from the investment of moneys in the Special Reserve Fund will be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund are not required for rebate to the federal government, as deternvned by the Finance Director as of June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal to, as of the date of calculation, the Reserve Requirement. The remaining balance, if any, ht the Investment Earnings Fund will be transferred, first, to the Improvement Fund until the Improvements are completed and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Director, as a credit upon the annual installments of assessments or for the advance retirement of Bonds. Amounts in the Special Reserve Fund in excess of the Reserve Requirement shall be deposited into the Investment Earnings Fund. See "THE BONDS -Investment of Bond Proceeds." (d} Whon the balance in the Special Reserve Fund is sufficient to retire all Bonds then outstanding (whether by advance retirement or otherwise), the amount of the Special Reserve Fund will be transferred to the Redemption Fund, and the remaining installments of principal and interest not yet due from the assessed property owners will be canceled without payment, and the Special Reserve Fund will be liquidated upon the retirement of the Bonds. ~, (e) In the event that the balance in fire Special Reserve Fund aT the Eime of liquidation exceeds the amount necessary to retire all Bonds then outstanding, the excess will be paid to the owners of the assessed parcels in the Assessment District provided, however, that, if the excess is less than $1,000, such excess may be transferred by the Finance Director to the General Fund of the City. The need to make advances from the Special Reserve Fund may result in its total depletion prior to reimbursement from resales of property or delinquency redemptions. In that event, there could be a default in 10 payments to owners of the Bonds, the curing of which would be dependent upon reimbursement of the Special Reserve Fund. Redemption Fund Deficiencies If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency and the City Council determines that there is a deficiency in the Redemption Fund to pay the principal of and interest on the Bonds such that there will be an ultimate loss accruing to the owners of the Bonds, the City will pay j to the owners of the Bonds a proportionate share of the principal and interest due on the Bonds based on the percentage that the amount on deposit in the Redemption Fund is of the total amount of the unpaid principal of the Bonds and the interest thereon. Thereafter, as moneys representing payments of the assessments are periodically deposited into the Redemption Fund, similar proportionate payments will be made to the owners of the Bonds, all in. accordance with the procedures set forth in the 1915 Act. If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency and it is determined by the Finance Director that there will not be an ultimate loss. to the owners of the Bonds, the Finance Director is required to direct the Paying Agent to pay matured Bonds as presented and pay interest on the Bonds when due as long as there are available funds in the Redemption Fund, in the following order of priority: (1}all matured interest payments shall be made before the principal of any Bonds is paid; {2) interest on Bonds of earlier maturity shall be paid before interest on Bonds of later maturity; (3) within a single maturity, interest on lower-numbered Bonds shall be paid before interest on higher-numbered Bonds; and {4) the principal of Bonds shall be paid in the order in which the Bands are presented for payment. This procedure could result in some matured Bonds not being redeemed and interest on the Bonds not being fully paid on the due dates. Such matured Bonds would not be fully redeemed and such delayed interest would not be paid until funds are available from a foreclosure sale of the property having the delinquent assessment installments. Covenant to Commence Superior Court Foreclosure The 1915 Act provides That in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action. to foreclose the lien of the unpaid assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sate. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted with the Bond owners that, in the event any assessment or installment thereof, including any interest thereon, is not paid when due, the City will, no later than October 1 in any year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year, and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. Itt the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bond owners pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. See "SPECIAL RISK FACTORS - Covenant to Commence Superior Court Foreclosure." Priority of Lien Each assessment {and any reassessment) and each installment thereof, and any interest and penalties thereon, constitutes a lien against the pazcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens that may thereafter-be created against fhe property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property. None of the property in the Assessment District is subject to any other special assessment lien created under the 1913 Act. The property within Brighton Parks Area, the Brighton Village Area, the Stockdale at Allen Commercial Area, and the Cherry Hill II Area, however, are subject to an existing special tax lien created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. The amount of special taxes, if any, to which property within RNR CFD No. 92-I is subject varies based upon the zoning, the entltlements, and the type and level of development of such property. For fiscal yeaz ending June 30, 2005, the residential properties within the Brighton Parks Area, the Brighton Village Area, and the Cherry Hill II Area are subject to the following RNR CFD No. 92-I special taxes: No special taxes are collected from property for which no final tract map has been recorded. Upon recordation of a final tract map and if no building permit has been issued for a subdivision lot prior to March 1, 2004, an annual special tax of $124.33 (which maybe increased by 2% each fiscal year) per subdivision lot acre of subject property is payable. Upon the issuance of a residential building permit for a lot or parcel prior to March ], 2004, aone-time special tax payment of $1.25 (which may be increased each fiscal year based upon the percentage change in the designated constmction cost index) per building square foot is payable, and such. parcel is subject to an annual special tax payment of $487.43 (which tray be increased by 2% each fiscal year). In the altemative, at the time of issuance of such residential building permit, the owner of such parcel may prepay a specified amount, in which case the one-time special tax payment and the annual special tax described above will not be levied on such pazcel. The prepayment amount for the fiscal year ending June 30, 2005, is $9,122.34 (which may be increased each fiscal year based upon the percentage change in a designated construction cost index). For the fiscal year ending June 30, 2005, the commercial properties in the Stockdale at Allen Commercial Area are subject to the following RNR CFD No. 92-1 special taxes: the commerciallindustrial use buildings do not pay the $1.25 per building square foot special tax, but upon the issuance of a building pemut prior to March 1, 2004, the property is subject to the levy of an ' annual RNR CFD No. 92-1 special tax of $0.04 per building square foot (which may be increased by 2% each fiscal - year). In The alternative, at the time of issuance of such commercial building pemrit, the owner of such parcel may - prepay a specified amount, in which case the annual special tax described above will not be levied on such parcel. The prepayment amount is currently $0.775 per building square foot, also subject to an increase each fiscal year based upon the percentage change in a designated constmction cost index. There are no properties within the i Assessment District that are subject to the multi-family residential use RNR CFD No. 42-1 special tax rates. ', Accordingly, the RNR CFD No. 92-1 multifamily residential designation parcel special tax rates are not presented herein. Information on the RNR CFD No. 92-1 special taxes for the fiscal year ending June 3Q 2006 (covering ', building perailts issued before March 1, 2005) is estimated to be available in July 2005, and is not presented herein. Each of C&C Califomia and Cherry Hill has indicated that it does nor intend to pay the specified prepayment amount of the special tax for any parcel within the Assessment District that lies within the RNR CFD No. 92-1. Therefore, the annual special tax will be payable by all property owners within the Assessment District that lies within the RNR CFD No. 92-1 after the parcels therein are developed. Each of C&C California and Cherry Hill has reported that the majority of the building petxnits required for the planned development in its respective Community Area have not been obtained as of June 8, 2005. Tax Covenants Pursuant to the Bond Resolution, the City has covenanted that it will nat make any use of the proceeds of the Bonds which would cause the Bonds to become "arbitrage bonds" subject to Federal income taxation pursuant to the provisions of Section 148{a) of the Internal Revenue Code of 1986, as amended (the "Code"), or Uo become "Federally-guazanteed obligations" pursuant to the provisions of Section 149(b) of the Code, or to become "private activity bonds" pursuant to the provisions of Section 141 (a) of the Code. To that end, the City will comply with all applicable requirements of the Code and all regulations of the United States Department of Treasury issued thereunder to the extent such requirements are, at the time, applicable and in effect. [Remainder of Page Intentionally Left Blank] 12 Debt Service Schedule Set forth below is the debt service schedule for the Bonds. Annual Bond Debt Service Period Ending Principal Interest Total Bond (September 2) Maturine Deb[Service 2005 $ - $ 3Q512.03t11 $ 30,512.03 2006 165,000 224,170.00 389,170.00 2007 170,000 219,220.00 389,220.00 2608 175,000 213,865.00 ~ ~ 388,865.00 2009 180,000 207,915.00 387,915.00 2010 185,000 201,435.00 386,435.00 2011 195,000 194,312.50 389,312.50 2012 200,000 ]86,512.50 386,512.50 301? 210,000 ]78,212.50 388,272.50 3oU 220,000 169,182.50 389,182.50 3u15 230,000 159,392.50 389,392.50 ^nin 240,000 148,927.50 388,927.50 _uC 250,000 137,767.50 387,767.50 ]ms 260,000 125,892.50 385,892.50 3oie 275,000 113,28250 _ 388,282.50 'o'u 290,000 99,610.00 389,670.00 3u31 300,000 85,170.00 385,170.00 _'022 315,000 69,870.00 384,870.00 2023 335,000 53,805.00 388,805.00 2034 350,000 36,720.00 386,720.00 2u'_5 370.000 18 870.00 388.R70.00 Tatar $4,915,000 $2,874,704.53 $7,789,704.53 '~ Q) Capitalized imm~->i un Ih~~ Bonds has been funded through September 2, 2005. Source: R13C Drain tt:un+chcr BOOK-ENTRY ONLY SYSTEM The Bonds will be initially delivered in the form of one fully registered Bond for each of the maturities of the Bonds, registered in the name of Cede & Co., as nominee of DTC, as registered owner of all the Bonds. The following description of DTC and its book-entry system has been provided by DTC and has not been verified for accuracy or completeness by the City, and the City shall have no liability in respect thereof The City shall have no responsibility or liability for any aspects of the records maintained by DTC relating to or payments made on account of beneficial ownership, or for maintaining, supervising, or reviewing any records maintained by DTC relating to beneficial ownership, of interests in the Bonds. DTC, the world's largest depository, is alimited-purpose tmst company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve Sysrem, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over two million issues of U.S. and non-U.S. equity, corporate and municipal debT issues, and money market instrument from over 85 countries that DTC's participants ("Direct Participants"} deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic-computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need far physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trost & Clearing Corporation ("DTCC'°). DTCC, in tum, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and 13 the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, tmst companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant; either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Bonds under the DTC system must be made by or through Dtrect Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confnmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Cu, or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name-of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such ' Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will ', remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as maybe In effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners,, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. REDEMPTION NOTICES SHALL BE SENT BY THE PAYING AGENT TO DTC. IF LESS THAN ALL OF THE BONDS ARE BEING REDEEMED, DTC'S PRACTICE IS TO DETEItM1NE BY LOT THE AMOUNT OF THE INTEREST OF EACH DIRECT PARTICIPANT LN SUCH ISSUE TO BE REDEEMED. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments with respect the Bonds will be made..to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (or its nominee), the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or to such other nominee as maybe requested by an authorized representative of DTC) is the responsibility of the Ciry or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor securities depository is noC obtained, Bond certificates are required to be printed and delivered in accordance with the terms of the Bond Resolution. THE INFORMATION E4 THIS SECTION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CITY BELIEVES TO BE RELIABLE, BUT IT TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE CITY CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE BONDS RECEIVED BY DTC OR TTS NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES, OR OTHER NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL SERVE AND ACT BV THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS The informaian under this heading is taken primm~ily from the Engineer's Report for the Assessment District prepared by Wilson & Associates, Eresno, California, which Engineer's Report is on fele with the City, and from information provided by C&C California or Cherry Hill, as applicable. General The Assessment District was formed in accordance with the 1913 Act and Section 13.08.070 of the Municipal Code of the City. Proceedings for the fom~ation of the Assessment District were commenced by the City Council pursuant to property owner petitions filed by C&C California and Cherry Hill, who, at the time the petition was filed, were the owners of over 60% of the assessable land within the Assessment District. The petitions were accepted by Resolution No. 318-04, adopted by the Ciry Council on December 15, 2004, and the petitions are on file with the City Clerk of the City. The Assessment District is comprised of Four separate Community Areas in northwest Bakersfield totaling approximately 2339 acres and generally described as (i) the Brighton Parks Area, containing approximately 103.7 acres and generally bounded by the south boundary of the right-of-way for the proposed Kern River Freeway and the south boundary of the future water recharge basin on the north, the Rio Bravo Canal on the northeast, Jewetta Avenue on the southeast, the Stockdale at Allen Commercial Area on the south, and the Brighton Village Area on the west, and also identified as Tract No. 6250, (ii) Brighton Village Area, containing approximately 55.4 acres and generally bounded by the south boundary of the right-of--way for the proposed Kern River Freeway on the north, the Brighton Parks Area on the east and southeast, the Stockdale at Allen Commercial Area on the south, and Allen Road on the west, and also identified as Tract No. 6281, (iii) the Stockdale at Allen Commercial Area, containing approximately 37.0 acres and generally bounded by Stockdale Highway on the south, Allen Road on the west, and the Brighton Parks Area and the Brighton Village Area on the north, and also identified as proposed Vesting Tentative Pazcel Map No. 11192, and (iv) the Cherry Hill II Area, containing approximately 37.8 acres and generally located at the southeast comer of the intersection of Reina Road and Old Farm Road, and also identified as Tract No. 6153 Units Three and Four. _..._ -- The four irregularly shaped Community Areas are located within a rectangular section of northwest Bakersfield that has anorth-to-south dimension of approximately four miles as measured from the north end of the Cherry Hill II Area to the south end of the Stockdale at Allen Commercial Area and awest-to-east dimension of approximately three-quarters of a mile as measured from the westerly boundaries of the Brighton Village Area and the Stockdale at Allen Commercial Area to the easterly boundary of the Cherry Hill II Area. Each of the four Community Areas is involved in various stages of the land development, entitlement, or site development process. rs See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Assessment Disirict boundaries are shown on the assessment diagram, consisting of six sheets, entitled "ASSESSMENT DIAGRAM OF CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 04-2 (BRIGHTON PARKSBRIGHTON VILLAGEISTOCKDALE AT ALLEN COMMERCIALICHERRY HILL R), COUNTY OF KERN, STATE OF CALIFORNIA," a copy of which is attached hereto as APPENDIX D. Proceeds from the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to - finance (i) the Improvements, which are generally described as the acquisition of certain .public intiastmature improvements for each of the four Community Areas, which Improvements will be owned, operated, and maintained by the City, and (ii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2005. The Improvements are proposed to be financed by the City in accordance with the terms and conditions of the Acquisition Agreements, as applicable. The Acquisition Agreements set forth the procedure by which the ' improvement. arc to be constructed and installed by C&C Califomia and Cherry Hill, as applicable, and, upon their completion. acquired by the City using funds provided through the Assessment District proceedings. The sropc aC the Improvements includes the acquisition by the City of off-site andlor on-site (in-tract) subdivision impnncments and the payment of incidental costs that are already required or that are expected by C&C Califomia or Chem- Hill, as applicable, to be required to be installed as conditions of final subdivision or site plan approvals, as applirnble. within the four Community Areas. The Brighton Parks Area, the Brighton Village Area, and the Stockdalc at Allen Commercial Area are collectively classified as one assessment area for the purpose of assessment allocation, and the Cheny Full II Area is a separate assessment area within the Assessment District. The costs fmanced by the Assessment District for the acquisition of the respective Improvements located within or adjacent to each of the four Community Areas (andlor two assessment areas) have been allocated only to the parcels that are located within the Community Area to be served by those Improvements. Bond proceeds are not expected to be used for the acquisition of land, easements, orrights-of--way. I Description of the Community Areas and the Improvements The lnfornurtion xsnder this subheading has been provided by the Engineer's Rep©rt, C&C Cadiforr~ia, or Cherry Hlll, as applicable, and has not been verified for accuracy or eompdeteness by the City or the Underwriter, and neither the City nor the Underwriter shall have liability with respect Uaereta. The current development glans for the respecfive Community Areas within the Assessment District are subject to change. Furthermore, the current plans are subject, in large part, to the financial resources and construction and marketing capabilities and efforts of C&C California and Cherry Hill, as applicable, and the other builders or persons to whom the parcels within the Assessment District are sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. Brighton Parks Area The Brighton Parks Area encompasses an approximately 103.7-acre block of land that is planned for subdivision into a combined total of 425 R-1 lots (as defined in the section entitled "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THF, ASSESSMENT-DISTRICT -Zoning"), one private park lot, and 32 private landscape lots pursuant to Vesting Tentative Tract No. 6250 ("Tract No. 6250"). C&C California is the subdivider of Tract No. 6250 and is responsible for constmcting the Impravements therein. C&C California intends to subdivide Tract No. 6250 into 12 phases. C&C Califomia has recorded the following subdivision maps with the Kern County Recorder: (i) Tract No. 6250-Unit 1, with 72 R-1 lots, one private park lot, and five private landscape lots, (ii) Tract No. 6250-Unit 2, with nine R-1 lots, and (iii} Tract No. 6250-Unit 3, with 37 R-1 lots and five private landscape lots. C&C California has informed the City that the remaining phases of Tract No. b250 will not be recorded with the Kern County Recorder prior to the issuance of the Bonds. 16 Brighton Village Area The Brighton Village Area encompasses an approximately 55.4-acre block of land that is planned for subdivision into a combined total of 95 R-1 lots, one storm drain sump lot, one future water recharge basin lot, and eight public landscape lots pursuant to Vesting Tentative Tract No. 6281 ("Tract Na. 6281'x. Cd:C California is the subdivider of Tract No. 6281 and is responsible for constmcting the Improvements therein. C&C California has subdivided Tract No. 62$I into three phases, and has recordedthe following subdivision maps for all three phases with the Kern County Recorder: (i) Tract No. 6281-Unit 1, with 35 R-1 lots, one storm drain sump lot, one water rechazge basin lat and four public landscape lots, (ii) Txact No. 6281-Unit 2, with 32 R-1 lots and two public landscape lots, and (iii} Tract No. 6281-Unit 3, with 28 R-1 lots and two public landscape lots. Stockdale atAllen Commercial Area The Stockdale at Allen Commercial Area encompasses an approximately 37.0-acre block of land that is plamted for development as a future general commercial/retail site pursuant to proposed Vesting Tentative Parcel Map No. 11192 ("Parcel Map No. ] 1192'x. No specific site development proposal for the Stockdale at Allen Commercial Area has been approved by the City. The Improvements for the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area -' C&C California intends to develop the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area as a contiguous development area. The Improvements related to the development of the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area are generally described as improvements in and along Stockdale Highway, Allen Road, San Juan Avenue, and Jewetta Avenue, and various City development fees. The general location and extent of the Improvements in Stockdale Highway include constmction on the north side of the street of the westbound travel lane to its full design width, along the frontage of Parcel Map No. 11192, complete with excavation, paving, pavement striping and markings, curb, gutter, sidewalk, street signs, street lights with conduits and pull boxes, a short section of median curb, median deposit, waterline crossings, and 6- and 8-inch diameter sewer lines with manholes and appurtenances. The Improvements also include afour-way traffic signal at the intersection of Stockdale Highway and entryway to the Stockdale at Allen Commercial Area, and the entryway to a school site located south of Stockdale Highway. The general location and extent of the Improvements in Alien Road include completion of the northbound half of the street {east half of the street) Co its full design width, along the frontages of Parcel Map No. ll 192 and Tract No. 6281 {from the intersection of Allen Road and Stockdale Highway to approximately 300 feet north of the intersection of Allen Road and San Juan Avenue), complete with excavation, paving, pavement striping and markings, curb, lmtter, sidewalk, street signs, street lights with conduits and pull boxes; median curb for both sides of the street and median hardscape, 18-inch diameter storm drain pipeline with manholes, water service hot taps, adjustment of existing sewer manholes to grade, and relocation of the existing power poles. The Improvements also include afour-way traffic signal at the intersection Allen Road and San Juan Avenue. The general location and extent of the Improvements in San Juan Avenue include completion of the entire street to its full design width (from the intersection of San Juan Avenue and Allen Road to its easterly terminus at the westerly entryway to the private gated community in the Brighton Parks Area}, complete with excavation, paving curb, gutter, sidewalk, driveways, handicap ramps, street signs, street lights with conduits and pull boxes, median curb and median hardscape, 8- and ] 0-inch diameter sewer lines with manholes and appurtenances, 8- and 12-inch diameter water lines with gate valves, fire hydrants, and 2-inch diameter imgation service, and 42-, 36-, and 18-inch diameter storm drain pipelines with catch basins and manholes. The Improvements also include the constmction of a storm drain sump located on the south side of San Juan Avenue, complete with sump excavation, outlet stmctures, 12-foot wide access gate, and a block wall azound the sump perimeter. The genera] location and extent of the Improvements in Jewetta Avenue include the constmction of a four- way traffic signal at the intersection of Wincanton Drive and Jewetta Avenue. Also included in the scope of the Improvements are City development fees (e.g., water availability fees and City Park Land in-lieu fees) and ~7 incidental casts for design and engineering, improvement bonds, constmction staking, soils and materials analysis and testing, plan check fees, and inspection fees. i Cherry Hi11II Area The Chetry Hill II Area encompasses an approximately 37.8-acre block of land that is planned for subdivision into a combined total of 119 R-1 lots pursuant to a portion of revised Vesting Tentative Tract No. 6153 '~, ("Tract No. 6153"). Cherry Hill is the subdivider of Tract No. b153 and is responsible for constructing the Improvements therein Chevy Hill has subdivided the Cherry Hill II Area into two phases and has informed the City that the following subdivision maps for both phases will be recorded with the Kern County Recorder prior to the issuance of the Bonds: (i) Tract No. 6153 Unit Three, with 56 R-1 lots, and {ii) Tract No. 6153 Unit Four, with 63 R-1 lots. The Improvements for the Cherry Hitl II Area The improvements for the Cherry Hill II Area are generally described as improvements in and along Old Fann Road and Reina Road, and as in-traction-site street, sewer, and storm drain improvements. The general location and extent of the improvements in Old Farm Road include completon of the northbound half of the street (east half of the street} to its full design width, along the frontages of Tract No. 6153 Unit Three and Tract No. 6153 Unit Four, complete with excavation, paving, curb, gutter, multi-purpose bicycle trail, and-subdivision block wall. The general location and extent of the planned Improvements in Reina Road include completion of the eastbound half of the street (south half of the street) to its full design width, along the frontage of Tract No. 6153 Unit Three, complete with excavation, paving, eurb, guner, sidewalk, and subdivision block wall. The general location and extent of the planned in-tractton-site Improvements in the Chetry Hill II Area include completion of all in-tractlon- site streets in Tract No. 6153 Unit Three and Tract No. 6153 Unit Four, complete with excavation, paving, curb, gutter, sidewalk, driveway approaches, and cross gutters. The Improvements relating to sewer service include constmction of the in-tractton-site sewer system for Tract No. 6153 Unit Three and Tract No. 6153 Unit Four, complete with 10-, 8-, and 6-inch diameter sewer lines, 4-inch diameter sewer laterals For all 119 R-I lots, manholes, and clean outs. The Improvements relating to the storm drain system for Tract No. 6153 Unit Three and Tract No. 6153 Unit Four include construction of the in-tract/on-site storm drain system, complete with 24- and 18-inch diameter storm drain pipelines with manholes and catch basins. The scope of the Improvements for the Chevy Hill II Area does not include Cherry Hill's incidental costs for design and engineering, improvement bands, construction staking, soils and materials analysis and testing, plan check fees, and inspection fees. [Remainder of Page Intentionally Lefr Blank] ~s Estimated Improvement Costs Set forth below are the confirmed assessment amounts with regard to the estimated costs of the Improvements and other costs relaTing to the Assessment District proceedings, as described in the Engineer's Reporf. A copy of the Engineer's Report is on file with the City. ENGINEER'S ESTIMATE OF TOTAL COST AND ASSESSMENT CITY OF BAKERSFIELD ASSESSMENT DISTRICT N0.04-2 (BRIGHTON PARKSfBRIGHTON VILLAGE! STOCKDALE AT ALLEN COMMERCL4LlCHERRY HILL II) ACTIVITY DESCRIPTION CONFIRMED ' ASSESSMENT 1. BRIGHTON PARKS AREA, BRIGHTON VILLAGE AREA, AND S'POCKDALE AT ALLEN COMMERCIAL AREA IMPROVEMENT COST A. IMPROVEMENTS $2,765,209.00 B. CONTINGENCY - 231,987.00 C. INCIDENTALS 427.774.00 D. TOTAL BRIGHTON PARKS AREA, BRIGHTON VILLAGE AREA, AND STOCKDALE AT - $3,424,970.00 ALLEN COMMERCIAL AREA IMPROVEMENT COST 2. CHP:RRY HILL II AREA IMPROVEMENT COST ~~ A. IMPROVEMENTS $726,835.00 I B. CONTINGENCY 0.00 ' C INCIDENTALS 0.00 D. TOTAL CHERRY NILL I(AREA IMPROVEMENT COST $72fi,83$.00 3. ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE A. BRIGHTON PARKS AREA, BRJGHTON VILLAGE AREA, AND S'COCKDAL6 AT ALLEN $222,(>97.00 COMMERCIAL AREA B. CHERRY HILL II AREA 59.913 00 C. TOTAL ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND $282,fi10.00 ~ EXPENSE 4. SUBTOTAL COST TO ASSESSMEMF A. BRIGHTON PARKS AREA, BRIGHTON VILLAGE AREA, AND STOCKDALE AT ALLBN $3,647,667.00 ~~ COMMERCIAL AREA ~'~, 8. CHERRY HIZL U AREA 786 70.8 00 C. SUBTOTAL COST TO ASSESSMENT $4,434,415.00 5. UNDERIVRITER'S DISCOUNT, CAPITALIZED INTEREST, ANU RESERVE FUND - A. BRIGHTON-PARKS AREA, BKIGHTON VILLAGE AREA, AND STOCKDALE AT ALLEN $502,256.00 COMMERCIAL AREA B. CHERRY H[LL II AREA ]08329.00 C. TOTAL UNDERWRITER'S DISCOUNT, CAPITALIZED INTEREST, 5610,585.00 AND RESERVE FUND ~, 6. TOTAL AMOUNT ASSESSED $5,045,000.00 ALLOCATION OF TOTAL AMOUNT ASSESSED TO EACH DEVELOPMENT AREA I. BRIGHTON PARKS AREA, BR1GIiTON VILLAGE AREA, AND STOCKDALE AT ALLEN $4,149,923.00 COMMERCIAi_ AREA 2. CHERRY HILL II AREA __ _ $895,077.00 Source: Engineer's Report prepared by Wilson & Associates 19 Method of Assessment Spread Spread of the Assessment District Costs to Benefited Parcels Section 10204 of the 1413 Act requires that the assessments must be levied in proportion to the estimated benefit that the subject properties receive from the works of improvement. The statute does not provide the specific I method or formula that should be used in any particular special assessment district proceeding. That responsibility rests initially with the Assessment Engineer, who is retained by the City for the purpose of making an independent analysis of the facts and recommendations about the apportionment of the assessment obligation. For the proceedings with respect to the Assessment District, the City hae retained Wilson & Associates, Fresno, California, to serve as the Assessment Engineer. The 1913 Act provides that the Assessment Engineer makes his recommendations as to the cost and method of apportionment of the assessments in the Engineer's Report, which is then considered at the public hearing on the Assessment District. Final authority and action with respect to the levy of the assessments rests with the City Council a8er hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public hearing, the City Council must take final action in determining the proportionality of the benefits received by the properties assessed. The fmanced costs will be spread to the assessed parcels in the Assessment District in the manner set forth in Municipal Code Section 13A$070 -Benefit Spread, which was added to the City's Municipal Code on April 5, 1995, by City Council adoption of Ordinance No. 3643. The parcel assessment shares for City assessment districts are to be allocated or spread In accordance with the 1913 Act, which requires that the fmanced cost in a special assessment proceeding be allocated among the benefited parcels of land in proportion to the estimated benefit each parcel can be expected to receive from the work and improvement covered by the assessment. Municipal Code Section 13.08.070 authorizes the "reallocation" to altemate properties of assessments initially allocated to parcels in proportion to their estimated benefit (i.e., initial allocation made in accordance with the 1913 Act cost benefit requirement), when such reallocation is so requested by the owner of all property to be assessed and upon the written consent of the owner of the property to which assessments are reallocated and approval thereof by the City Councih The Assessment District individual parcel. assessment amounts shown on APPENDIX E have been caiculated or spread among the assessed parcels pursuant to Municipal Code Section 13.08.070. The altemate ', method used by the Assessment Engineer to reallocate the benefit based assessment shares initially allocated by the Assessment Engineer to each assessed parcel has been provided by C&C California and Cherry Hill. The Assessment Engineer has deternrined that the spreading of the assessments in accordance with the alternate method conforms to the requirements of Municipal Code Section 13.08.070. To the extent that any assessments are reapportioned after the Bonds have been issued, the City will approve the same only if the security for the Bonds is not reduced ar impaired. Reallocation Spread Method In accordance with Municipal Code Section 13.08.070, C&C California and Cherry Hill have submitted a proposed alternate method and mte of assessment. Further, C&C California and Cheny Hill have stated that, as of the date of the approval of the altemate method and rate of assessment, they were the owners of all the property proposed to be reallocated a share of the assessment and, as of such date, they consented to the reallocation. The --' ~~ Assessment Engineer's estimates of the coats of the Improvements is presented above under'tiie heading "THE ASSESSMENT DISTRICT AND TFIE IMPROVEMENTS -Estimated Improvement Costs." The alternate method {the "Reallocation Spread Method"} is described as follows: The total improvement acquisition cost within each of the four Community Areas is spread among the developed and undeveloped parcels within each Community Area in direct proportion to parcel acreage and to each planned or existing single-family residential {R-1} lot within those developed and undeveloped parcels as an equal per R-1 lot cost share. There are no exceptions in the Brighton Parks Area, the Brighton Village Area, the Stockdale 20 j at Allen Commercial Area, or the Cherry Hill II Area to the equal cost share per acre and equal cost per existing or planned R-1 lot Reallocation Spread Method. In the Brighton Parks Area, the R-1 lots are further classified into three different categories of lot sizes (each a "Product Type Area'. Except fox the City Park Land In-Lieu Fee which is assessed to the R-1 loss in the Brighton Parks Area as an equal per R-1 lot charge, the rest of the Brighton Parks Area share of the Improvements costs is first allocated to each Product Type Area's R-I lot net area. Each Product Type Area's total allocated share of the Improvement costs is then apportioned as an equal share per existing or plamted R-I lot within the Product Type Area. OWNERSHH' AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Ownership of Property in the Assessment District C&C California owned 80.24% of the assessed property in the Assessment District prior to the recording of Che notice of assessment and currently owns approximately 80.24% of the assessed property in the Assessment District, all of which property is in the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Conunercial Area. C&C California is developing the Brighton Pazks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area, which areas will bear approximately 82.26°l0 of the total assessment lien. Cherry Hill owned 19.76°l0 of the assessed property in the Assessment District prior to the recording of the notice of assessment and currenty owns approximately 19.76% of the assessed property in the Assessment District. Cherry Hill is developing the Cherry Hill II Area, which area will bear approximately 17.74% of the total assessment lien, all of which property is in the Cherry Hill II Area. None of C&C California, Cherry Hill, or any other owner of property within the Assessment District (each, a "Property Owner"}, will be personally liable for payments of the assessments to be applied to pay the principal of and interest on the Bonds. In addifion, there is no assurance that C&C California, Cherry Hill, or any other Property Owner will be able to pay the assessment installments or that C&C California, Cherry Hill, or any other Property Owner will pay such installments even if it is financially able to do so. Furthermore, except to the extent expressly set forth herein, no representation is made that C&C California, Cherry Hill, or any other Property Owner will have moneys available to complete or improve the development of the land within the Assessment District (other than rho Improvements) in the manner described herein. Accordingly, no Property Owner's financial statements are included in this Official Statement. C&C California Phe inforrriktiorz under this subheading has been provided by C&C California and has nat been verifted for accuracy or canzpleteness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof. C&C Califomia is a Califomia corporation and wholly owned subsidiary of Castle & Cooke, Inc., a Hawaii corporation ("Castle"). Castle was formed on October 1Q 1995, to be the successor W the real estate, commercial real estate, and resort business of Dole Food Company, Inc., primarily in the states of Hawaii, California, and Arizona, but also in other states in the United States. C&C Califomia was incorporated on November 16, 1995, and assumed some of Castle's real estate developments in the State of California. C&C California is curzently engaged in the development of residential real estate properties in the United States, primarily in the State of California. C&C California develops finished lots for re-sale to custom homebuilders and is also engaged in the constmction of homes. C&C Califomia is currently undertaking the following real estate developments in the City: Seven Oaks. Seven Oaks is amaster-planned community on approximately 1,100 acres in the City of Bakersfield. Seven Oaks surrounds the Seven Oaks Country Club and Golf Course, which was also developed by C&C Califomia Currently, C&C Califomia has the exclusive right to sell memberships in the Seven Oaks Country 21 Club. C&C California intends to contribute and transfer its right, title, and interest in the Seven Oaks Couatry Club to a non-pro5t mutual benefit corporation on or before October 31, 2012. Development of the community is being completed in phases, based on market demand. C&C California has developed neighborhoods offering homesites from "move-up" to luxury homes. Current homesite prices in Seven Oaks range from approximately $105,000 to $335,000. Approximately $2% of the project has been completed with current home prices averaging $490,000. Approximately 538 homesites and homes remain to be developed on approximately 408 acres. Silver Creek. Silver Creek is amaster-planned community encompassing approximately 600 acres in the City of Bakersfield. Approximately 213 homes remain to be developed on approximately 43 acres. Home prices in this community currently average $244,000. Brimhall. Brimhall is a residential community in the City of Bakersfield comprised of approximately 1,400 acres that is planned to attract first-time to custom home buyers. The prices of homes in Brimhall average approximately $259,000. Approximately 98% of The project has been completed, with approximately 27 homes remaining to be developed on approximately G acres. Brighton. Brighton is a master planned community encompassing approximately 395 acres in the City of Bakersfield. This community is currently under development and will encompass approximately 1,038 units. 801 homes and homesites remain to be developed. Lot prices range from $110,000 to $175,OOQ, and home prices range from $270,000 to $390,000. - Southern Oaks. Southem Oaks is a master planned community just south of Seven Oaks. Approximately 78% of the project has been completed. Approximately 38 units remain to be developed on I S acres with an average price of $ ] 30,000. C&C California owns additional development property in the City of Bakersfield, including Renfro, an 80- acre single family development currently being master planned, approximately 31 acres of property zoned R-2 (for multifamily use) at Ming Avenue and Gosford Road, and approximately 32 acres of freeway right-of--way in the Brimhall development, which is expected to be developed as an expressway through the southwest portion of the City. Other California properties owned by C&C California include the following: • Approximately 987 of open space in the City of San Jose. Coyote Creek Golf Course, located approximately 2.5 miles south of the City of San Jose. The Coyote Creek Golf Course, formerly known as Riverside Golf Course, consists of two 18-hole daily fee courses designed by Jack Nicklaus, as well as a 12,000 square foot clubhouse (constmcted with the first of the two existing courses in 1499j. • Mountaingate, amaster-planned community located in Los Angeles County adjacent to the Mountaingate Country Club. Construction is expected to commence for this development in December 2006. Mountaingate is planned to include 29 custom lots that are expected to sell at a price of approximately $1,700,000 each. C&C Califomia, or an affiliate of C&C California, also owns and is developing land in Hawaii, Arizona, Georgia, North Carolina, and Florida. [Remainder of Page Intentionally Left Blank] 22 Cherry Hill The inforrnafion under thds subheading has been provided by Cherry Hid! and has nat been veri~ed for accuracy or conapdeteness by zhe City or the Underwriter-, and the City and the Underwriter- shall have no liability Gt respect thereof Cherry Hill is a California corporation. James Bryan Batey and Ben E. Batey are the president and vice president, respectively, of Cherry Hill, and each owns 50% of the outstanding stock thereof Cherry Hill was formed to purchase real estate and develop and constmct improvements thereon. James Bryan Batey has more than 20 years of experience in the real estate industry. Mr. Batey has held a California real estate broker andlor salesman licenses for more than 10 years and is licensed by the State of California as a general building contractor. Mr. Batey is the president of Rosedale Builders, lna, which is an active builder of custom and semi-custom homes in the Bakersfield market. Mr. Batey has also been the managing partner for entities that have constmcted residential subdivisions in and azound the City. Ben E. Batey, James Bryan Batey's Father, has more than 30 years of experience in the real estate industry. Mr. Ben Batey has held a California real estate broker license for more than 30 years and is licensed by the State of California as a general building contractor. Mr. Ben Batey is the president of Batey Development, Inc., which is an active builder of custom and semi-custom homes in the Bakersfield market. Mr. Ben Batey has also been developer andlor partner in several residential subdivisions in and around the City. Representative subdivisions in which James Bryan Batey and Ben E. Batey have participated include the following: Olive Park -Phase I. A 1 IO-lot single-family development located at the corner of Olive Drive and Jewetta Avemre in the City. All of the lots in this development have been sold to merchant builders at prices ranging from $40,000 to $60,000. Olive Park -Phase II An 83-lot single-family development located at the corner of Old Farm Road and Reins Road in the City. All of the lots in this development have been sold to merchant builders at prices ranging from $6Q000 to $90,000. Olive Park -Phase III A ~~-lot single-family development located at the corner of Reins Road and Jewetta Avenue in the City. Approximately 80% of the lots in this development have been sold to merchant builders at prices ranging from $8Q000 to $120,000. Yerdugo and Noriega Phase II A 36-lot single-family residential development located at the corner of Noriega Road and Verdugo Lane in the City. All of the prepared residential lots have been sold to merchant builders at prices ranging from $40,000 to $60,000, or improved with homes and sold to final customers at prices ranging from $200,000 to $40Q000. Development and Financing Plans The current development plans and financing plans of C&C California and Cherry Hill for the development of the property witbin the Assessment District are subject to change. Furthermore, the current development plans and tinancing plans envisioned for the Assessment District are subjeet,n large part, to the , financial resources and construction and marketing capabilities and efforts of C&C California, Cherry Hill, and any other merchant builders and other persons to whom the parcels within the Assessment District may be sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. The information under this section has been provided by C&C California and Cherry Hill, as applicable, and has not been verified for accuracy or completeness by the City or the Underwriter, and neither the City nor the Underwriter shall have any liability with respect thereto. 23 C&C California Development Plan C&C California is the developer of the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area. C&C Califomia plans to develop these Commtmity Areas as follows: Brighton Parks Area. The Brighton Parks Area encompasses approximately 103.7 acres and is planned for subdivision into 425 R-1 lots in Tract No. 6250. C&C California glans to develop the property in the Brighton Parks Area into developable R-1 lots and homes for sale to third parry buyers. C&C California intends to subdivide Ttact No. 6250 into 12 phases. C6zC California lras recorded the following subdivision maps with the Kem County Recorder. (i) Tract 6250-Unit 1, with 72 R-1 lots, (ii) Tract 6250- Unit Z, with nine R-I lots, and (iii) Tract 6250-Unit 3, with 37 R-I lots. Future Tract No 6250 Units 4 through 12 will have a eambined total of 307 R-1 lots. C&C California anticipates that future Tract No. 6250 Units 4 through 12 will contain the following number of lots, respectively: 381ots in TR 6250-Unit 4 37 lots ht TR 62S0-Unit 9 371ots in TR 6250-Unit 5 30 lots in TR 6250-Unit 10 31 lots in TR 6250-Unit 6 251ots in TR 6250-Unit 11 341ots in TR 6250-Unit 7 371ots in TR b250-Unit 12 381ots in TR 6250-Unit 8 - C&C California is developing three lot product types within the Brighton Parks Area, Product Type 1 is comprised of all lots with a lot area of approximately 5,000 square feet to 6,599 square feet, inclusive. Product Type 2 is comprised of all lots with a lot area of approximately 6,600 square feet to 7,699 square feet, inclusive. Product Type 3 is comprised of all lots with a lot area of approximately 7,700 square feet and larger. The following is a breakdown of the anticipated product designation within each of Tract No. Units 1-12 in the Brighton Parks Area: Product Tvne 1 Tract 6250-Unit 1 35 Tmct 6250-Unit 2 5 Tract 6250-Unit 3 15 Tract 6250-Unit 4 28 Tract 6250-Unit 5 11 Tract 6250-Unit 6 25 Tract 6250-Unit 7 29 Tract 6250-Unit 8 14 Tract 6250-Unit 9 5 Tract 6250-Unit ] 0 20 Tract6250-Unitll 13 Tract 6250-Unit 12 30 Tonal 230 Product Time 2 Product Tyue 3 Total 13 24 72 2 2 9 11 11 37 3 7 38 12 14 37 I 5 31 3 2 34 17 7 38 3 29 37 7 3 - 30 7 5 25 6 1 37 85 110 425 C&C California estimates that prices for Product Type 1 in the Brighton Parks Area will begin at approximately $270,000, with an annual absorption of approximately 50 units. C&C California estimates that prices for Product Type 2 in the Brighton Parks Area will begin at approximately $380,000, with an annual absorption of approximately 30 units. C&C California estimates that prices for Product Type 3 in the Brighton Parks Area will begin at approximately $39Q,000, with an annual absorption of approximately 20 units. Brighton Vidda e Area. The Brighton Village Area encompasses approximately 55.4 acres and is planned fox subdivision into 95 R-1 lots in Tract No. 6281. C&C California plans to develop the property in the Brighton Village Area into developable R-1 lots and homes for sale to third party buyers. C&C California has subdivided Tract No. 6281 into three phases, and has recorded the following subdivision maps for all three phases with the Kern County Recorder: (i) Tract No. 6281-Unit 1, with 35 R-1 lots, (ii) Tract No. 6281-Unit 2, with 32 R-1 lots, and (iii) Tract No. 6281-Unit 3, with 28 R-1 lots. Construction in the phases wilt also include certain regtured off-site improvements. C&C California estimates that prices of homes in the Brighton Village Area will begin at 2a approximately $290,000. C&C Califomia estimates that approximately 60 homes will be sold each year in the Brighton Village Area. Stockdale aY Allen Comrnercial Area. The Stockdale at Allen Commercial Area boundaries encompass an approximately 37.0 acre block of land that is planned for development as future general office space. C&C plans to sell completed pads to office users at a price pex square foot beginning at approximately $i SAOISF, and to build out the remainder of the Stockdale at Allen Commercial Area for lease to third Barry office users. C&C Catifornfa Finanedng Pian In December 2003, C&C California entered into an amended and restated credit agreement (the "Credit Agreement") with a syndicate of banks (the "Credit Banks"). All Improvements in the Assessment District not financed with proceeds from the sale of the Bonds will be financed with moneys derived from the Credit Agreement. Pursuant to the Credit Agreement, the Credit Banks agreed to provide athree-year secured term loan of $125 million and a three-year secured revolving line of credit of up to $250 million, based on a percentage of the value of certain commercial properties, land holdings, and homebuilding inventory, and subject to certain limitations. Repayment obligations under the Credit Agreement are subject to interest at a variable rate based on the London Interbank Offered Ratc t"1.IBOR"), or at an alternate rate based upon a designated Credit Bank's prime rate or the federal funds rate. CSC Calili~rnia's obligations under the Credit Agreement are secured by certain of C&C California's assets, includin_ all of the Assessment District property owned by CBcC Califomia. The Credit Agreement contains customary ancnanis. including, but not limited to, limitations on investments, sale of assets, limitation on other debt, financial cotenants related to tangible net worth, leverage, interest coverage, and inventory levels. As of December 31, 2UUJ. the amount available under the Credit Agreement was $130 million. Prior to explxation of the term of the existing Credit Agreement, C&C Califomia plans Co renew the Credit Agreement in substantially similar terms. C&C California's estimated constmction budgets for the Brighton Pazks Area and the Brighton Village Area are set forth below. A construction budget For the Stockdale at Allen Commercial Area has not yet been determined by C&C Califomia. Brighton Parks Area Estimated Construction Budget Land $ 1,300,000 Offsite lmprovements {Net of Reimbursements from Bond Proceeds) 6,200,000 Onsite and Indirect Improvements - 8,400,000 Capitalized Home Costs 68,000,000 Total $83,400,000 Expenditures Incurred as of June 1, 2005 $14,000,000 Brighton Village Area Estimated Construcfion Budget Land $ 200,000 Offsite Improvements (Net of Reimbursements from Bond Proceeds) 600,000 Onsite and Indirect Improvements 2,000,000 Capitalized Home Costs 13,800,000 Total $16,600,000 Expenditures Incurred as of June 1, 2005 $1,700,000 25 C&C California has represented that the funding sources described above will be sufficient To complete the development of the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area, as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available from C&C Califomia or any other source, when needed. Neither C&C California nor any of its affiliated entities are under any legal obligation of any kind to expend funds for the development of the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area. Any contributions by C&C California to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, C&C Califomia is under no obligation to apply such sources to the completion of its development within the Brighton Parks Area, the Brighton Village Area, and the Stockdale at Allen Commercial Area. Cherry Hidl Development Plan The Cherry Hill II Area encompasses approximately 37.8 acres. Cherry Hill plans to develop the Cherry Hill II Area as asingle-family subdivision, which is expected to include 119 buildable R-1 lots. Finished R-1 lots are expected to range in size from approximately 9,000 square feet to approximately 20,000 square feet. Cherry Hill, plans to sell the completed lots to merchant builders. Cherry Hill expects Co sell approximately 54 lots to the following merchant builders (collectively, the "Cherry Hill II Merchant Builders") prior to the sale of the Bonds, which lots represent approximately 45°l0 of the property in the Chery Hill II Area: Merchant Builder Anticipated Number of Lots Purchase Date Expected to be Purchased Soper Homes, Ina June 16, 2005 12 Stephen Smith June 16, 2005 12 BR constmction June 16, 2005 3 Delfino Canstmetion June 16, 2005 5 Joe Roberson Homes, Inc. June 16, 2005 5 WSBG, inc. June 16, 2005 7 Richland Homes, Inc. ~ June 16, 2005 IO Total 54 ~ Richland Homes, Inc. is a custom home builder that is 100% owned by James Bryan Batey. The Cherry Hill II Merchant Builders are expected to construct single-family homes on their respective lots within the Cherry Hill II Area, which constmction is expected to commence in July 2005. Such homes are expected to range in size from approximately 2,200 square feet to 3,000 square feet and to range in price from approximately $400,000 to $600,000.- Cherry Hill expects that all of the Improvements in the Cherry Hill R Area that are to be financed with Bond proceeds will be completed by August 2005. The Cherry Hill Fiaancing Plan All improvements being undertaken by Cherry Hil] within the Cherry Hill II Area not financed with proceeds from the sale of the Bonds will be financed through a combination of cash assets and credit agreements. Cherry Hill has estimated the total budget for land acquisition and constmction of its improvements in the Cherry Hill II Area to be $4.4 million. As of June 8, 2005, Cherry Hill has expended approximately $LO million on land acquisition and approximately $2.4 million on constmction, leaving approximately $1.0 million in remaining constmction costs to finish the lots within the Cherry Hill II Area. The officers and shareholders of Cherry Hill have agreed to extend credit to Cherry Hill in the amount of $4.4 million to complete its planned development in the Cherry Hill B Area. In addition, James Bryan Batey maintains a credit agreement with Wells Fargo Bank (the "JB Batey Credit Agreement"}, pursuant to which Wells Fargo Bank provides a revolving credit line of $2,000,000. Under the JB Batey Credit Agreement, James Bryan Batey is required to pay interest to Wells Fargo Bank on outstanding balances at a rate per annum that is adjusted z~ based on Wells Fargo Bank's prime rate. As of May 5, 2005, the total outstanding borrowed balance under the JB Batey Credit Agreement was $0. Ben E. Batey (through Batey Development, Inc.) also maintains a credit agreement with Wells Fargo Bank (the "Batey Development Credit Agreement"), pursuant Yo which Wells Fargo Bank provides an unsecured revolving credit line of up to $2,000,000. Under the Batey Development Credit Agreement, Ben E. Batey is required to pay interest to Wells Fargo Bank on outstanding balances at a rate per annum that is adjusted based on Wells Fargo Bank's prime rate. As of May 5, 2005, the total outstanding bosowed amount under the Batey Development Credit Agreement was $0. Cherry Hill has represented that the funding sources described above will be sufficient to complete the development of the Cherry Hill II Area as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available from Cherry Hill or any other source, when needed. Neither Cherry Hill nor any of its affiliated entities are under any legal obligation of any kind to expend funds for the development of the Cherry Hill II Area. Any contributions by Cherry Hill. to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, Cherry Hill is under no obligation to apply such sources to the completion of its development within the Cherry Hill II Area. Assessment Roll Set forth in APPENDIX E is the assessment roll, including Bulk Value (as defined herein) to assessment lien ratio information, for the parcels of property within the Assessment District that are subject to the lien of the assessments. The assessment roll shows the amount of the total estimated cost of the proposed Improvement acquisition, construction and incidental cost that is assessed upon each of the lots and parcels within the Assessment District based upon the alternate method and rate of assessment permitted under Section 13.08.070 of the Municipal Code of the City. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Method of Assessment Spread" above. The assessment numbers that appear on the assessment roll correspond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D. Utilities For each Cormnunity Area, all utilities, including gas, water, electricity, sewer, storm drains, telephone service, and cable television service are or will be installed in the frontages along the streets within the Community Area and will connect to existing facilities in the surrounding streets. Natural gas service is provided by Southern California Gas Company; water service is provided by California Water Service or Vaughn Water Company; sewer service is provided by the City; electricity service is provided by PG&E; telephone service is provided by SBC; and cable television is provided by Bright House Networks or Cox Communications. Flood and Earthquake Zones Pursuant to the Appraisal, according to the maps prepared by the Federal. Emergency Management Agency, the Community Areas aze situated in a Zone C flood area. "Zone C" denotes an area that is not considered a flood hazard zone. No flood insurance is required for property in a Zone C flood area, and no flood insurance has been obtained for any property within the Assessment District. Pursuant to the Appraisal, the Assessment District is not located within any Special Studies Zone, as defined in the Alquist-Prialo Special Studies Zone Act. Zoning According to the Planning Department of the City, all of the parcels in the Assessment District, except for the Stockdale at Allen Commercial Area, are zoned for residential uses. Tract No. 6281 is zoned R-l. An R-1 zoniug designation allows single-family residential land uses, with a mhvmum lot size of 6,000 squaze feet for each dwelling unit (referred to herein as "R-1 lots'"). Tract No. 6250 Units 1-12 have PUD (planned unit development) zoning, which allows for a higher density than the R-1 zoning. A total of 355 lots in Tract No. 6250 are expected to z~ include less than 6,640 square feet of total lot area. Tract No. G153 is zoned R-1. The Stockdale at Allen Commercial Area is zoned C-2. A C-2 zoning designation allows for a wide variety of commercial land uses. Tax Delinquencies The City reports that, based upon the records of the office of the Kern County Tax Collector, there are no delinquent taxes or penalties owed against the parcels in the Assessment District. C&C California and Cherry Hill have each reported that it has never been late on making assessment paymems in other assessment districts, defaulted on any assessment payments, or lost any property to foreclosure as a result of not paying assessments. Environmental Issues Affecting Assessment District Property Pursuant to the Charter and Municipal Code of the City, the formation of an assessment district is exempt from compliance with the California Environmental Quality Act ("CEQA"). Accordingly, a Notice of Exemption from CEQA was filed by the City with the Kern County Clerk for the Assessment District proceedings on April 7, 2005. The City reports that separate environmental review proceedings will be conducted for the improvement projects proposed to be financed by the District as part of the CEQA compliance associated with the land use entitlemcm and subdivision approval process within each Community Area. Each of C&C California and Cherry Hill has repnncd that, to its knowledge, there are no additional environmental issues affecting its respective property within the Assessment District that would impede the development of such property as described in this Official Statement. Bulk Value-hrassessment Lien Ratio An Appruisa) of the property within each of the four Community Areas in the Assessment District that is subjecT to the lien of the assessments has been prepared for the City by the Appraiser. The Appraisal, subject to the various limitations and assumptions set forth therein, provides an estimate of the as-is market value (designated in the Appraisal as the "Bulk Value of Recorded hots or band" and defined herein as the "Bulk Value") of each parcel of property within the Assessment District. The "Aggregate Finished Lot Value When Complete" is described in the Appraisal as the value of each parcel assuming the completion of the Improvements and taking into account the value added by existing impmvements, a recorded subdivision map, and the "Completion Costs," which are defined therein as the costs associated with the developer-funded improvements necessary to develop such parcel as a finished lot available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indirecC costs for each lot, taxes during constmetion, costs associated with school bonds and other applicable direct and overlapping debt, profits, commissions, administrative and miscellaneous expenses, and the time value of money. See "APPENDIX $ -Appraisal. For a discussion of liens encumbering the Assessment District property other than the assessments, see "Direct and Overlapping Debt" below and "THE BONDS -Priority of Lien" herein. Based on the Appraisal, the ratio of the aggregate Bulk Value of the Assessment District property to the aggregate assessment lien is 8.08:1. The following table sets forth the Bulk Value of the Assessment District property and the applicable Bulk Value-to-assessment lien ratios. [Remainder of Page Intentionally Left Blank] za APPRAISED VALUES AND BULK VALUE-TO-ASSESSMENT LIEN RATIOS CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. OA-2 {BRIGHTON PARKSBRIGHTON VILLAGEI STOCKDALE AT ALLEN COMMERCIALtCHERRY HILL H) Assessment No. Product Type Net Acres°' Bulk Yalue Assessment Bulk Value-tm Designation Lien Assessment (Sq. ft.) Lien 1=50006599 Ratio 2=6600.7699 ~ 3=7700-above BRIGHTON PARKS AREA 29, 30, 35-52, 54-68 {Tract No. 6250.Unit 1, Residential Lots) 1 2,275,000 180,687.53 12.59 21-28, 31-34, 69 (Tract No.6250-lJnit I, Residential Lots) 2 910,000 85,860.47 10.60 1-20, 53, 70-72 ('Crae[ No. 6250-Unit ], Residential Lots) 3 1,848,000 200.,072.44 9.06 Subtotals Tract No. 6250-Unit 1 2292 5,033,000 470,620.44 10.69 84-88 (Tract No. 6250-Unit 2, Residential Lots) 1 325,000 25,812.SD 12.59 82, 83 (Tract No. 6250-Unit 2, Residential Lots) 2 140,000 13,209.30 10.60 80, 81 (Tract No. 6250-Unit 2, Residential Lots) 3 154,000 17,006.04 9.06 Subtotals Tract Nu. 6250-Unit2 1.82 619,000 56,027.84 11.p5 90-92, 95-97, 1 I5, 117-123, 126 {Curet No. 6250-Unit 3, Residential Lots) 1 975,000 _ 77,437.51 12.59 ' 93, 94, 99. 100, 108-113, 125 {Tract No. 6250-Unit 3, Residential Lots) 2 770,000 72,651.16 10.60 '. 98, ]01-107, 114, I I6, 124 {'T'ract No. 6250-UniC 3, Residential Lots) 3 ~ 847A00 93,533.20 9.06 , Subtotals Tract No. 6350-Unit3 9.41 2,592,000 243,62L8'7 10.64 '~ Suhtotals Tract No. 6250 Future Units4 through 12 67.28 14,491,924 1,913,832.44 7.57 SUBTO'fA1S BRIGHTON PARKS AREA 101.43 22,135y24 2,684,102.59 8.47- ~, BRIGHTON VILLAGE AREA ~'~ 134-168 (tract No. 6281-Unit 1, Residential Lots} nla 10.06 1,637,027 199,836.15 8.19 175-206 (Tract No. 6281-Unit 2, Residential Lots} n/a 6.52 1,496,710 182,707.33 8.19 209-236 (Tract No. 6281-Unit 3, Residential Lots) n/a 5.70 1,309,627 159,868.93 8.19 SUBTOTALS BRIGHTON VILLAGE AREA 22.28 4,443,358 542,412.41 8.19 ', STOCKDALE AT ALLb:N COMMERCIAL AREA . 239 {Tentative Parcel Map No. 11192) 30.76 7,461,625 923,408.00 8.08 : TOTALStAVERACF.S FOR BRIGHTON PARKS AREA, 154.47 34,640,401 4,149,923.00 R.35 BRIGHTON VILLAGE AREA, AND STOCKDALE AT ALLF,N COMMERCIAL AREA CHERRY HILL 11 AREA - 240-295 (Tract No. 6153 Unit Three, Residential Lots) nla 11.38 2,819,400 421,212.70 6.84 296-358 (Tract No. 6153 Unit Pour, Residential Lots) n/a 20.65 3,239,325 473,864.30 6.84 TOTALS/AVERAC,ES FOR CHERRY HILL II AREA 38.03 G,118,725 895,077.00 6.84 ASSESSMENT DISTRICT TOTALS 192.50 AQ,754,632 5,045,000.00 8.08 (t) Net Acrs does not include offsite street right-of-way, smrm drain sump lot, water recharge basi n lot, and private park lots. Source: Appraisal. '' The assumptions and limitations regarding the appraised valuations-are set forth in t he -Appraisal, a copy of which is attached hereto as APPENDIX B. See APPENDIX E for additional information regarding the appraised value of each assessed parcel and the ratio of such value to the amount of the assessment l ien against such parcel. The City makes no representations as to the accuracy or completeness of the Appraisal. Certain considerations relating to the Appraisal are discussed under the heading "SPECIAL RISK FAC TORS." NO REPRESENTATIONS ARE MADE REGARDING THE APPRAISED VALUATIONS QUOTED IN APPENDDt B OR E, AND PRQSPECTIVE PURCHASERS ARE CAUTIONED NOT TO RELY ON THE VALUATIONS IN DETERMINING WFIETHER OR NOT THE BONDS DESCRIBED HEREIN ARE A 29 SUITABLE INVESTMENT. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD NOT ASSUME THAT THE PROPERTY WITHIN THE ASSESSMENT DISTRICT COULD BE SOLD FOR THE VALUATION AMOUNT AT A FORECLOSURE SALE FOR DELINQUENT ASSESSMENTS. Direct and Overlapping Debt The following table (the `"Direct and Overlapping Debt Table") details the direct and overlapping debt currently enctanbering property within the Assessment District. The Direct and Overlapping Debt Table has been derived from data assembled and reported to the City by California Municipal Statistics, Inc., as of May 1, 2005. Neither the City nor the Underwriter has independently verified the information in the Direct and Overlapping Debt Table and neither the City nor the Underwriter guarantees its completeness or accuracy. The Direct and Overlapping Debt Table does not include the special tax liens described under the heading "THE BONDS -Priority of Lien" herein. Direct and Overlapping Debt City of Balzersfield Assessment District No. 04-2 (BRIGHTON PARKS/BRIGHTON VILLAGE/ STOCKDALE AT ALLEN COMMERCIAL/CHERRY HILL II) 2004-OS Local Secured Assessed Valuation: $4,607,785 DIREC"I' AND OVERLAPPING TAX ANU ASSESSMENT DEBT: % Applicable Debt 511/OS Kem Community College District School Facilities Improvement District No. I 0.010% $ 7,333 Kem High School District 0.015 12,767 Rosedale Union School District 0213 7,466 City of Bakersfield 0.032 662 '~ Kem County Water Agency, LD. No. 4 0.026 295 Kem Community College District Assessment District O.OI 1 783 City of Bakersfield Assessment District NO.04-2 100.000 (1) TOTAI. CROSS DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $29,306 Less: City of Bakersfield water bonds 662 TOTAL NET DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT S28,G44 '~ OVERLAPPING GENERAL FUND OBLIGATION DEBT: Kem Canny General Fund Obligations 0.010% $ 9,124 Kem County Pension Obligations 0.010 49,598 Kem County Board of Education Certificates of Participation 0.010 9,659 Kem Community College District Certificates of Participation 0.010 7,740 ', Kem High School District General Fund Obligations 0.016 15,248 City of Bakersfield Certificates of Participation 0.033 11 043 TOTAL OVERLAPPING GENERAL FUND OBLIGATION DEBT $102,412 GROSS COMBINED T09'AL DEBT $131,718 (2) NET COMBINED TOTAL DEBT $131,056 Q) Excludes 14U Acc bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation hoods and non-bonded capital lease obligations. Ratios m 2004-OS Assessed Valuation: Direct Uebt ..................................................................................................... ................... . Total Gross Direct and Overlapping Tax and Assessment Debt.._......_..._ ... ....................0.64% Total Net Direct and Overlapping Tax and Assessment Debt _...._.__ .......... ....................0.6?% Gross Combined Total Debt ...................... ._..................._...._... ....................286% Net Combined Total Debt_._.........._..._ ................_....................................... .................._2.84 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6130/04: $0 Source: California Municipal Statistics, Inc. 30 SPECIAL RISK FACTORS General Under the provisions of the 1915 Act, assessment installments, from which funds for the payment of annual installments of principal and interest with respect to the Bonds are derived, will be billed to properties against which there are unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the future. In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land within the Assessment District are paid in a timely manner. Should the installments not be paid on time, the City has established a Special Reserve Fund in the initial amount of $389,670, which will whereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement, to cover delinquencies in the payment of assessments. The assessments are secured by a lien on the parcels of land and the City can institute foreclosure proceedings to sell land in the Assessment District with delinquent installments for the amount of such delinquent installments in order to obtain funds to pay debt service on the Bonds. Failure by owners of the parcels to pay installments of assessments when due, degleCion of the Special Reserve Fund, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of assessments levied against such parcels may result in the inability of the City to make full or punctual payments of debt service on the Bonds, and Bond owners would therefore be adversely affected. The Bonds are not secured by the general taxing power of the City, the County, the State, or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its fall faith and credit for the payment Thereof. Unpaid assessments do not constitute a persona] indebtedness of the owners of the lots and parcels within the Assessment District. There is no assurance the owners will be able to pay the assessment installments or that they will pay such installments even though financially able to do so. Risks of Real Estate Secured Investments Generally Owners of the Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in and in the vicinity of the Assessment District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings andlor sites in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rnles (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses. Concentrafion of Ownership , As of June 8, 2005, C&C California owned approximately 80.24% of the assessed property in the Assessment District, and Cherry Hill owned approximately 19.76% of the assessed property in the Assessment District. Although C&C California and Cherry Hill have each indicated its intention to sell some or all of its Assessment District property to merchant builders, there can be no assurance that such sales will occur as planned. Therefore, there is no assurance of any degree of further diversification of ownership of the assessed property. Also, unless and until such ownership is further diversified, the inability or refusal of C&C California or Cherry Hill to 31 pay its respective assessment installments when due could result in the rapid total depletion of the Special Reserve Fund prior to reimbursement thereof from foreclosure proceedings. Under such circumstances, there would be insufficient moneys with which to pay principal of and/or interest on the Bonds. Failure of any future property owners to pay installments of assessments when due could also result in a default in payment of the principal of and interest on the Bonds prior to the resales of foreclosed property or delinquency redemptions. In that event, there could be a default in payments of the principal of and interest on the Bonds. Property Values Reference is made to APPENDIX B, which contains the Appraisal and the Appraiser's opinion with respect to the value of the property that is subject to the lien of the assessments and the assumptions made by the Appraiser in connection therewith. Reference is also made to "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Bulk Value-to-Assessment Lien Ratio" for a summary of the value of the property within each of the four respective Community Areas in the Assessment District that is subject to the lien of the assessments and the ratio of the appraised value of such property to the total amount of the assessment liens on such property that secure the Bonds. Sae also APPENDIX E for a listing of the ratio of the appraised value of each assessed parcel to the amount of the assessment lien against such parcel. No assurance can be given that this appraised value to lien ratio will not decline should subsequent liens be placed on property within the Assessment District. Further, there is no assurance that in the event of a foreclosure sale for a delinquent assessment installment, any bid will be received for any such property within the Assessment District or that any bid received or resale price will be sufficient to pay such delinquent installments (plus costs and penalties). The 1915 Act provides that a parcel be sold for the delinquent installment(s) amount (plus costs and penalties) and not the entire outstanding assessment. The Appraiser has made various assumptions, which may vary from the assumptions made by other parties (including C&C California and Cherry Hill), in order to derive the aggregate valuation estimate of the property within the Assessment District to be assessed. See APPENDIX B for an explanation of methodology and a statement of contingent and limiting conditions and assumptions used by the Appraiser to derive the aggregate value of the property. Although these contingent and limiting conditions and assumptions were considered reasonable by the Appraiser based on information available to the Appraiser, neither the Appraiser nor the City can give any assurance that any parcel will be developed in accordance with the uses that the Appraiser has projected. Availability of Funds to Pay Delinquent Assessment Installments The City will establish a Special Reserve Fund out of Bond proceeds in the amount of $384,670, which will thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement. As discussed herein under the heading "THE BONDS -Special Reserve Fund," if a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer to the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is cantinuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that the balance in the Special Reserve Fund will always be adequate to pay all delinquent installments and if, during the period of delinquency, there are insufficient funds in the Special Reserve Fund to pay all delinquent installments, a delay may occur in payments to the owners of the Bonds. Hazardous Substances Although governmental taxes, assessments, and charges are a common claim against the value of an assessed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the unpaid assessments is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the Assessment District may be required by law to remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California 32 laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the Assessment District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel 6y the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure. The appraised values set forth in the Appraisal do not, unless expressly noted, take into account the possible reduction in marketability and value of any of the parcels by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. C&C Califomia and Cherry Hill have each represented Yo The City that it is not aware of any current liability for hazardous substances with respect to any of its parcels within the Assessment District. Further, it is possible that liabilities may arise in the future with respect to any of the parcels within the Assessment District resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the value of an assessed parcel that is realizable upon a delinquency of an unpaid assessment. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Environmental Review." Endangered and Threatened Species No threatened ar endangered species (or their respective habitats) have been identified in any of the Community Areas. If, however, any threatened or endangered species (or their respective habitats) were to be discovered on a parcel within the Assessment District prior to or during development, the ability of the then-current landowner to develop the affected parcel could be severely limited. In such an event, the then-current landowner's willingness or ability to pay assessment installments could be adversely affected. The property within the Assessment District is subject to the Metropolitan Bakersfield Habitat Conservation Plan {"MBHCP"), a joint program of the Ciry and the County that was undertaken to assist urban development applicants in complying with State and federal endangered species laws. Under the MBHCP, each development applicant pays to the City a mitigation fee for grading or building permits that funds the purchase and maintenance of habitat land to oornpensate for the effects of urban development on endangered species habitat. The lands acquired for-the MBHCP program are generally located outside the metropolitan Bakersfield area. In exchange for the MBHCP mitigation fee, the applicant is relieved of the obligation of demonstrating compliance with the endangered species laws by preparing biological reports, securing compensation lands, and undertaking other measures to avoid impacts to the species. Factors Which May Affect Land Development There is no assurance that the amount to be financed by the assessments will be sufficient to pay for the entire cost of the Improvements. C&C California and Cherry Hill will each be obligated to pay all of its costs in excess of the amount financed by the assessments. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Description of the Community Areas and the Improvements." Future development in the Assessment District may be affected by changes in the general economic conditions, fluctuations in the real estate market, and other factors. In addition, development may be subject to future federal, state, and local regulations. Approval may be required from various agencies from time to time in connection with the layout and design of any proposed development in the Assessment District, the nature and extent of public improvements, land use, zoning, and other matters. Although no such delays are anticipated, failure to meet any such future regulations or obtain any such approvals in a timely manner could delay or adversely affect 33 any proposed development in the Assessment District The development of property within the Assessment District could be adversely affected if lawsuits or other actions were commenced to restrict or prevent further development within the Assessment District. Private Improvements; Increased Debt The development of the property within the Assessment District depends upon both public and private improvement of land within the Assessment District. The cost of additional private improvements within the Assessment District, together with public improvements financed with any additional property secured financing, will increase the public and private debt for which the land within the Assessment District is the security. Any additional public improvements for which the property owners or their properties might be obligated could reduce the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against their property. See "SPECIAL RISK -Priority of Lien." In addition to the assessments being levied to Finance the constmction and acquisition of the hmprovements, the City intends to include as a pan of such levy an annual assessment upon each parcel of land in the Assessment District to cover all administrative costs of the City with respect to the Assessment District. These additional administrative assessment amounts could reduce the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against their property. Subordinate Debt; Payments by FDIC and other Federal Agencies C&C California has reported that all of its property within the Assessment District currently serves as security for its obligations under the Credit Agreement (See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Development and Financing Plans - C&C California Financing Plan.") Cherry Hill has reported that none of its property within the Assessment District currently serves as security far any of its ob(iga6ons to third party lenders. All or portions of the Assessment District property may in the future secure additional loans of the owners thereof. Any such loans are subordinate to the lien of the assessments. However, in the event that any of the financial institutions making any loan that is secured by real property within the Assessment District is taken over by the Federal Deposit Insurance Corporation ("FDIC") or if a lien is imposed on the property by the Dmg Enforcement Agency, the Internal Revenue Service, or other similar federal governmental agency, and, prior thereto or thereafter, the loan or loans go into default, the ability of the City to collect interest and penalties specified by state law and to foreclose the lien of a delinquent unpaid assessment maybe limited. Specifically, with respect to the FDIC, on June 4, 1997, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"}. The 1991 Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides ttiat real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest} on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement is unclear as to whether the FDIC considers assessments such as those levied by the City to be "real property taxes" which they intend to pay. However, the Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest 34 - unless the atnount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the Assessment District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the City will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Special Reserve Fund and perhaps, ultimately, a default in payment on the Bonds. Based on the secured tax roll as of Sune 8, 2005; the FDIC does not presently own any property within the Assessment District. The City expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. Tax Delinquencies Assessment installments, from which funds necessary for the payment of annual installments of principal of and interest on the Bonds are to be derived, will be billed to each property against which there is an unpaid assessment on the regular property tax bills sent to the owner of such property. Such installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Under certain circumstances, assessment installment payments on parcels of property in Kern County can be made separately from regulaz property tax payments for such pazcels. Property tax payments will not be accepted, however, unless the assessment installments for such parcels have also been paid. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills, as evidenced by property tax delinquencies, will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the furore. A failure of property owners to pay installments of assessments when due could result in a default in ~, payments of the principal of and interest on the Bonds. The City reports that, based upon the records of the office of the Kern County Tax Collector, none of the parcels in the respective Community Areas within The Assessment District shows delinquencies in the payment of fiscal year 2001-02, 2002-03, 2003-04, or 2004-OS property tax installments. Limited Obligation of the City Upon Delinquency If a delinquency occurs in the payment of any assessment installment, the City bas a duty only to transfer into the Redemption Fund the amount of the delinquency out of the Specie] Reserve Fund and to turdertake, under certain circumstances, judicial foreclosure proceedings to recover such delinquencies. See "THE BONDS- Covenant to Commence Superior Court Foreclosure." This duty of the City is continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for this purpose and if, during the period of delinquency, there are insufficient funds in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. If there are additional delinquencies afrer exhaustion of funds in the Special Reserve Fund, The City is not obligated to transfer into the applicable Redemption Fund the amount of such delinquency out of any other available moneys of the City. THE CITY'S LEGAL RESPONSIBILITIES WITH RESPECT TO SUCH DELINQUENT INSTALLMENTS ARE LIMITED TO ADVANCING THE AMOUNT THEREOF SOLELY FROM ANY AVAILABLE MONEYS IN THE SPECIAL RESERVE FUND AND TO UNDERTAKING, UNDER CERTAIN CIRCUMSTANCES, JUDICIAL FORECLOSURE PROCEEDINGS TO RECOVER SUCH DELINQUENCIES. THIS DUTY OF THE CITY TO ADVANCE FUNDS IS CONTINUING DURING THE PERIOD OF DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. IN ACCORDANCE WITH SECTION 87b9(b) OF THE 1415 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND. 35 Bankruptcy and Foreclosure The payment of assessment installments and the ability of the City to foreclose on the lien of a delinquent unpaid assessment, as discussed below in the section entitled "SPECIAL RISK FACTORS -Covenant to Commence Superior Court Foreclosure," may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified, as to the enforceability of the various legal instruments, by reference to bankruptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws affecting the rights of creditors generally,-to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held Yhat ad valorem property taxes levied by Snohomish County in the State of Washingtan after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as "administrative expenses'" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes: According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time become subjecC to current ad valorem taxes. Glasply is controlling precedent on bank¢uptcy courts in the State of California. Pursuant To statute, the lien date for general ad valorem property taxes levied in the State of California is the January I preceding the fiscal year for which the taxes are levied. Therefore, under Glasply, a banlauptcy petition filing would grevent the lien far general. ad valorem property taxes levied in subsequent fiscal years from attaching so long as the property was a part of the estate in battlmtptcy. Under current law, the lien of an assessment, unlike the lien for geneml ad valorem property taxes, attaches upon recordation of the notice of assessment. The notice of assessment for the Assessment District assessments was recorded in the Official Records of the County on October 22, 2004. Therefore, before applying Glasply to a bankruptcy situation involving assessments rather than general ad valorem property taxes, a court would need to consider the differences in the statutory provisions for creation of the applicable assessment lien. If a court were to apply Glasply to eliminate the priority as a secured claim of the assessment lien with respect to post petition levies of [he assessments as against property owners within the Assessment District who file for bankruptcy, collections of the assessments from such property owners could be reduced It should also be noted that on October 22, 1994, Congress enacted-11 U.S.C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bond owners should be aware that the potential effect of 11 U.S.C. Section 362(b)(18} on the Assessment District assessments depends upon whether a court were to determine that the assessments should be treated like ad valorem taxes for this purpose. Whether or not bankruptcy proceedings were to cause the assessment liens to become extinguished, bankruptcy of a property owner in all likelihood would result in a delay in prosecuting superior court foreclosure I proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds, and the possibility that delinquent assessment installments might not be paid in fill. Economic, Political, Social, and Environmental Conditions Prospective investors are encouraged to evaluate current and prospective economic, political, social, and environmental conditions as part of an informed investment decision. Changes in economic, political, social, or 36 environmental conditions on a local, state, federal andlor international level may adversely affect investment risk generally. Such changes may also adversely affect the value of property within the Assessment District and/or the willingness or ability of the owners of land within the Assessment District to pay their assessments. Such conditional changes may include (but are not limited to) fluctuations in business production, consumer prices, or financial markets, unemployment rotes, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of wax or terrorism, environmental damage, and natural disasters. Articles XIIIA and XIIIB of the California Constitution On June 6, 1978, California voters approved an amendment to the Califomia Constitution, commonly known as Proposition 13 (the JarvislGann Initiative) which added Article XIIIA to the Califomia Constitution. The effect of Article XIIIA is to limiC ad vatorern taxes on real property. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA. Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1% of "firll cash value" as determined by the county assessor. Article XIIIA defines "full cash value" to mean "the county assessor's valuation of real property as shown on the 1975=?6 tax bill under `full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destmction or other factors. Article XIIIA oxempts from the 1 % tax limitation any taxes to repay indebtedness approved by the voters prior to July I, 1978, and allows local governments to raise their property tax rates above the constitutionally mandated 1% ceiling for the purpose of paying off certain new general obligation debt Issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. Article XIIIA requires a vote of two-thizds of the qualified etectorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws resulting in increased tax revenues. Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that the City will have surplus funds, other than the Special Reserve Fund, with which to advance funds [o make any payments or to cure any deficiency in the Redemption Fund, should the City, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City has no obligation to transfer into the Redemption Fund the amount of any such delinquencies out of any surplus moneys of the City. On July 2, 1979, the Fifth District Court of Appeal rendered a 3-0 decision in the case of Counri of Fresno v. Malmstrom (94 Cal_ App. 3d 1974) that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held Che one percent tax limitation imposed by Califomia Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within the definition of "special taxes" in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by atwo-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court-refused to hear an appeal of the lower court's decision. At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution. Article XIIIS of the Califomia Consttution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level. of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and 37 services rendered by the governmental entity. The "base year" for establishing such appropriation ]inrit is the fiscal year 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cast of services provided by these public agencies. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. "Proceeds of taxes" include, but axe not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts pernritted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years. On December 17, 198Q the Third District Court of Appeal rendered a 3-0 decision in the case County of Placer v. Corin (173 Cal. App. 3d 443) that deternuned that special assessments aze not subject to the limitation of Article XIIIB {Proposition 4). The Cotnt held that the definition of "proceeds of taxes" imposed by California Constimtion Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision ofthe Court was not appealed. The enactment of Article XIIIA of the California Constitution (Proposition 13) anti subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collecC a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of ', assessable property within the City in any one year) if other funds are not available to cover delinquencies. In eazly 199Q, the U.S. Supreme Court stmck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be reassessed up to 2%, per year, except upon change of ownership or new constmction, recent purchasers may pay substantially higher property taxes than long-time owners of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to cornmenT in any way on the eonsCitutionality ofArticle XIIIA. Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of Article XIIIA's assessment rules and concluded that the West Virginia case did not apply to California's laws. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in Che challenge relating to commercial property, but the plaintiff subsequently decided to drop the case. On June 18~ 1992, in the case of Nordlineer v. Lvnch (112 U.S. 2326), the U.S. Supreme Court affirmed the decision of the California Court of Appeal, Second Appellate District, which lower court previously held that Article XIIIA does not violate the U.S_ Constitution. The City cannot predict whether any other pending or future challenges to the State's present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State's present system of property [ax assessment will have on the City's revenues or on the State's financial obligations to local governments. ' Articles XIIIC and XIIID of the California Constitufion - ~ --- -- Proposition 218, a state ballot initiative known as the "Right to Vote on Taxes Act," was approved by California voters on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996. Article XBID, entitled "Assessment and Property Related Fee Reform," contains several new provisions making it generally more difficult for local agencies to levy and maintain "assessments" for municipal services and programs. Article XIIID requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the 38 City under The 1913 Act (including, if applicable, any increase in such assessment or any supplemental assessment under the 1913 Act) must be conducted in conformity with the provisions of Section 4 of Article XIIID. "Assessment" is defined to mean any levy or charge upon real property for a special benefit conferred upon the real property. Article XIIID additionally provides that in levying "assessments" a local government must separate the "general benefits" from the "special benefits" conferred on a pazcel and may not impose on any parcel an assessment which exceeds the "reasonable cost of the proportional special benefit conferred on that parcel." Anicle XIIID also contains various notice requirements and a public hearing requirement and prohibiTS the imposition of an assessment if ballots submitted by property owners, weighted according to the proportional financial obligation of the affected property, in opposition to the assessment exceed the ballots submitted in favor of the assessment. The City believes that it has complied with all provisions of Article XIIID applicable to the-Assessment District proceedings described herein. All ballots submitted by property owners were in favor of the assessment. Article XIIIC, entitled "Voter Approval for Local Tax Levies," provides, in Section 3 thereof, that the initiative power shall "not be prohibited or otherwise litnited in matters reducing or repealing any ... assessment" of the City. Therefore, Article XIIIC removes limitations on the initiative power in matters of, among other things, assessments. Consequently, the voters of the City could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any assessment. "Assessment," is not defined in Article XIIIC and it is not clear whether the definition of that term in Article XIIID (which is generally property-related as described above} would be applied to Article XIIIC. No assurance can be given that the voters of the City will not, in the future, approve initiatives that repeal, reduce, or prohibit the future imposition or increase of any assessments. In the case of the unpaid assessments that are pledged as security for payment of the Bonds, the 1915 Act provides a mandatory, statutory duty of the City and the Kem County Auditor to post installments on account of the unpaid assessments to the Kem County property tax roll each year while any of the Bonds aze outstanding in aggregate amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year. Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal [he unpaid assessments that are pledged as security for payment of the Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the Kern County Auditor with respect to the unpaid assessments that are pledged as security for payment of the Bonds. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such detemvnation. Future Initiatives Articles XIIIA, XIIIB, XIIIC, and XIIID of the Constitution were each adopted as measures that qualified for the ballot pursuant to Califomfa's initiative process. From time to time other initiative measures could be adopted, which may affect the ability of the City to levy and maintain assessments. Covenant to Commence Superior Court Foreclosure The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the insritution of a court action to foreclose the lien of assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted that, in the event any assessment or installment thereof, including any interest thereon, is noY paid when due, the City will, no later than - October 1 irr any year, file an action in the Superior Court of Kern County-to foreclose the lieh on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax colt for that fiscal year and (ii) the amount in the Special Reserve Ftmd is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to the owners of the Bonds, pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. 39 Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 140 days must elapse after a court adjudges and decrees a lien against the lot or parcel of land covered by an assessment or reassessment before the sale of such parcel can be given. Furthermore, if the purchaser at the sale is the judgment creditor, i.e., the City, an action may be commenced by the delinquent property owner within ninety (90) days afer the date of sale to set aside such sale. Price Realized Upon Foreclosure The 1915 Act provides that, under certain circumstances, property may be sold upon foreclosure at less than the Minimum Price or without a Minimum Price upon petition by the City. "Minimum Priee" as used in this section is the amount equal to the delinquent installments of principal and interest on the assessment or reassessment, together with all interest, penalties, costs, fees, charges and other amounts more fully detailed in the 1915 Act. The court may authorize a sale at less than the Minimum Price if the court determines, based on the evidence introduced at the required hearing, any of the Following: tA! Snle at the lesser Minimum Price or without a Minimum Price will not result in an ultimate loss to the owner, ol'd~c Brands. tB) (Aaners of 75°l° or more of the outstanding Bonds, by principal amount,-have consented to such petition hp the Cin and the sale will noT result in an ultimate loss to fhe non-consenting Bond owners. (C! Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to the petition and all of the Iollowing applyc t 1 ! By reason of detemunation pursuant to the 1915 Act, the City is not obligated to advance funds to cure a delicicncy {the City made such a detemvnation not to be obligated with respect to the Bonds). (21 No bids equal to or greater than the Minimum Price have been received at the foreclosure sale. (3 } No funds remain in the Special Reserve Fund. t4) The City has reasonably detemtined that a reassessment and refunding proceeding is not practicable, or has in good faith endeavored to accomplish a reassessment and refunding and has not been successful, or has completed a reassessment and refunding arrangement which will, to the maximum extent feasible, minimize the ultimate loss to the Bond owners. (5) No other remedy acceptable to owners of 75% or more of the outstanding Bonds, by principal amount, is reasonably available. The assessment or reassessment lien upon property sold pursuant to this procedure at a lesser price than the Minimum Price shall be reduced by the difference between the Minimum Price and the sale price. In addition, the court shall pemait participation by the Bond owners in its consideration of the petition as necessary to its detem>inations. Implementation of the above-described Minimum Price provision by the court upon foreclosure could result in nonpayment of amounts due to Bond owners who are not in agreement with the 75% of such Bond owners regtired to approve the sale at less thau the Minimum Price. Reference should be made to Che 1915 Act for a complete presentation of this provision. Priority of Lien Each assessment {and any reassessment) and each installment thereof, and any interest and penalties thereon, consfimtes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously unposed upon. the same property, but has priority over all ao private liens and over all fixed special assessment liens which may thereafter be created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property. Upon the issuance of the Bonds, none of the property in the Assessment DistricT will be subject to any other special assessment lien created under the 1913 Act. The property within the Brighton Pazks Area, the Brighton Village Area, the Stoekdale at Allen Commercial Area, and the Cherry Hill II Area is subject to an existing special tax lien created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. The amount of spacial taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon the zoning, the entitlements, and the type and level of development of such property. See "THE BONDS -Priority of Lien." Refunding Sonds Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California Streets and Highways Code}, the City may issue refunding bonds for the purpose of redeeming the Bonds. After the making of certain required findings by the City Council, the Ciry may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in the assessment district, or giving notice to the owners of the Bonds. See "THE BONDS -Refunding Bonds." Upon issuing refunding bonds, the City Council could require [hat the Bonds be exchanged for refunding bonds on any basis which the City Council determines is for the City's benefit, if the Bond owners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as they become due, ar advance the maturity of the Bonds and pay the principal of and interest and redemption premium thereon. Absence of Market for Bonds No application has been made for a rating for the Bonds, and it is not known whether a rating for the Bonds could be secured either now ar in the furore. There can be no assruance that there will ever be a secondary market for pttrchase or sale of the Bonds, and. from time to fime there may be no market for them, depending upon prevailing market conditions and the fmancial condition or market position of firms who may make the secondary market. Loss of Tax Exemption As discussed under the heading "TAX MATTERS," interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the City. ENFORCEABILITY OF REMEDIES The remedies available Yo the Paying Agent, the City, or the owners of the Bands upon any nonpayment of assessment installments are in many respects dependent upon judicial acfions, which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code {the federal bankruptcy code) and relevant banking and insurance law, the remedies provided in the 1915 Act and the 1913 Act may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal inshuments by limitations imposed by banlauptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally, to the application of equitable prineiples,~to-the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State of California. NO LITIGATION No litigation is pending conceming the validity of the Bonds or the Bond Resolution, and an opinion of the Ciry Attorney to that effect will be furnished to the purchaser at the time of the original delivery of the Bonds. The Ciry is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the City's ability to pay interest on the Bonds. There are a number of lawsuits and claims pending against the City. 41 In the opinion of the City Attorney, the aggregate amount of liability that the City might incur as a result of adverse resolutions in such cases would likely be covered under the City's insurance policies or self-insurance program. CERTAIN INFORMATION CONCERNING THE CITY Certain general information concerning the City is included in APPENDIX A hereto. THE GENERAL FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE BONDS OR THE INTEREST THEREON, AND THE TAXING POWER OF THE CITY IS NOT PLEDGED FOR THE PAYMENT OF THE BONDS OR THE INTEREST THEREON. TAX MATTERS In the opinion of Omck, Hemngton & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific preference item for purposes.. of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate altemative minimum taxable income, A complete copy of the opinion of Bond counsel is set forth in APPENDIX C hereto. The Internal Revenue Code of 1986 (the "Code") imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The City has covenanted Co comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person} whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the tax stahis of the interest on the Bonds. Certain requirements and procedures contained or referred to in the Bond Resolution, the tax certificate to be executed by the City at closing, and other relevant documenta may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bonds or the interest thereon if any such change occurs or actions aze taken or omitted upon the advice or approval of bond counsel other than Orrick, Hemngton & Sutcliffe LLP. However, without limiting the generality of the foregoing, the City has covenanted in the Bond Resolution that, prior to making any change to or taking or omitting to take any action with respect Yo any of the agreements, requirements, or procedures contained or referred to in the Bond Resolution, the tax certificate, or other relevant documents pertaining to the Bonds, the City will do either of the following: (i) obtain a subsequent opinion of Omck, Herrington & Sutcliffe LLP that such change, action, or omission will not adversely affect the exclusion from gross income For federal income tax purposes of interest on the Bonds; or (ii) obtain an opinion of altemative nationally recognized bond counsel to the effect originally delivered by Bond Counsel that, notwithstanding such change, action, or omission, interest on the Bonds is excluded from gross income for federal income tax purposes. Although Bond Counsel will render an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder's federal tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status ofthe-Bondholder or the Bondholder's other items of income or deduction. Bond Counsel expresses no opinion regazding any such other tax consequences. APPROVAL OF LEGALITY The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of bond counsel opinion is contained in APPENDDC C hereto and is printed on the Bonds. Bond counsel undertakes no responsibility for the az accuracy, completeness, or fairness of this Official Statement. Certain matters will be passed upon for the City by the City Attarney of the City of Bakersfield. Certain other matters will be passed upon by Pillsbury Winthrop Shaw Pittman LLP, Century City, California, as disclosure counsel to the City. UNDERWRITING Pursuant to a Bond Purchase Contract between the City and the Underwriter, the Bonds are being purchased by the Underwriter at a purchase price equal [o the principal amount of Bonds being issued less an Underwriter's discount of $58,980.00. The Bond Purchase Contract provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and conditions set forth in the Bond Purchase Contract, the approval of certain legal matters by counsel, and certain other conditions. The Underwriter may offer and sell Bonds to certain dealers and others at a price other than the offering price. The offering price may be changed from time to time by the Underwriter. NO RATING The City has not made and does not contemplate making application to any rating agency for the assignment of a rating to the Bonds. - CONTINUING DISCLOSURE The City and C&C Califomia have each covenanted for the benefit of Bondholders to provide an annual of semi-annual report, as applicable, containing certain financial information and operating data relating to the Assessment District and the property in the Assessment District, and to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in each annual or semi-annual report, as applicable, or each notice of material events, if any, and the applicable deadlines, are set forth in the respective Continuing Disclosure Certificates, the forms of which are attached hereto as "APPENDIX F - CONTINUING DISCLOSURE CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule ISc2-12(b)(5), as amended (the "Rule"). Each of the City and C&C California has represented that it has never failed to comply with any previous undertaking to provide annual or semi-annual reports, as applicable, and notices of material events. Cherry Hill, as owner of property in the Assessment District that, when aggregated with all other property in the Assessment owned by such entity or its affiliates, is subject to a lien of less than twenty {20%) of the annual assessment securing payment of the Bonds, does not have an obligation to provide continuing disclosure information and therefore has not entered into a continuing disclosure certificate. However, in the event Cherry Hill or any other person or entity should acquire property in the Assessment District that, when aggregated with all other property in the Assessment District owned by such owner or its affiliates, is subject to a lien of twenty percent (20%) or more of the annual assessment securing payment of the Bonds, such owner shall be required to enter into a Continuing Disclosure Certificate as described in the preceding paragraph. [Remainder of Page Intentionally Left Blank] 43 MISCELLANEOUS The foregoing summaries or descriptions of provisions of the Bonds, the Bond Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof, and reference is made to said documents for full and complete statements of their provisions. The appendices hereto are a parC of this Official Statement. Any statements in this Official Statement involving matters of opinion, whether or noC expressly so stated, are intettded as such and not as representations of fact. The Official Statement is not to be consirued as a contract or agreement between the City and the purchasers or owners of any of the Bonds. The execution and delivery of this Official Statement has been duly authorized by the City. CITY OF BAKERSFIELD By: !s! GreQOrv J. Klirnko ', Gregory J. Klimko '~~ Finance Director 44 APPENDIX A CITY OF BAI{ERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION General The City is located at the southern end of the San Joaquin Valley, approximately 110 miles north of Los Angeles and 290 miles south of San Francisco. The City includes over 116 square miles of-land and an additional 7G square miles of land area is located within the City's sphere of influence. The City is a regional center for industry, government, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers of the state and is the commercial hub of Rern County (the "County"). As the County seat, it is the location of many county, state, and federal offices. The metropolitan area has expanded considerably beyond the City limits. As of January 1, 2005, the estimated population of the County was 753,070 and the estimated populatian of the City Was 295,893, according to the California Department of Finance. The Bakersfield Standard Metropolitan Statistical Area (SMSA) includes all of Kem County, as defined by the State Department of Employment Development. City Government The City was incorporated on January 11, 1898, under Che general laws of the State of California (Che "State"). The City is a charter city with acouncil/manager form of government. The City Council is comprised of seven council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected for afour-year term. The council appoints the City Attorney and the City Manager, who also serves as the Executive Director of the Bakersfield Redevelopment Agency (the "Agency"). There are approximately 1,325 permanent City employees, including 68 persons in management and 179 persons in supervisory positions. Fire protection is provided by 175 Firefighters, manning 13 stations. The police department has 321 Police Officers. I Tax Levies and Delinquencies; Assessed Valuation of Taxable Property The Kern County Tax Collector collects ad valorem property tax levies representing taxes levied for each fiscal year on taxable real and personal property which is situated in the County as of the preceding March I. Unsecured taxes are assessed and payable on March 1 and become delinquent August `31, in the next fiscal year. Accordingly, unsecuied taxes are levied at the rate applicable to the fiscal year preceding the ono in which they are paid. One half of the secured tax levy is due November 1 and becomes delinquent December 10; the second installment is due Febmary 1 and becomes delinquent April 10. A ten percent penalty is added to any late installment. On June 30, delinquent properties are sold to the State. Property owners may redeem property upon payment of delinquent taxes and penalties. Tax-defaulted properties are subject to a redemption penalty of one and one-half percent {1-112%} of the tax due, charged from July 1 following the date on which the property became tax-defaulted to the date of redemption, plus a penalty for every subsequent tax year (t.e., July 1 through June 30) in which the property remains tax-defaulted, at a rate of one and one-half percent {1-112°l°) of the tax due for each such tax year. Properties may be redeemed under an installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest accnring at one and one-half percent {I-112%) per month on the unpaid balance. 1f no payments have been made on delinquent taxes at the end of five fiscal years, the property is deeded to the State. Such properties may thereafter be conveyed to the County Tax Callector as provided by law. A-1 The table below summarizes the City's property tax levies, the current amounts delinquent, and total collections for fiscal years 1994-95 through 2003-04. Table A-1 City of Bakersfield Property Tax Levies and Delinq uencies o) Fiscal Years 1994-95 through 2003-04 Fiscal Total Total Tax Percent of Levy Percent of Current Year Tax Levv Collections Collected Taxes Collected 1944-95 $16,349,776 $16,239,085 969% `99.3% 1995-96 16,856,805 16,975,278 46.4 100.7 1996-97 17,175,495 17,464,195 97.5 101.7 1997-98 17,289,200 17,430,365 97.4 100.8 1998-99 17,864,445 20,488,683 11 L7 114.7 1999-00 18,554,717 19,123,448 99.5 103.1 2000-O1 19,093,149 18,199,926 92.9 95.3 2001-02 20,121,528 20,675,415 99.4 102.8 2002-03 _ 21,301,453 23,523,106 107.4 110.4 2003-04 22,792,274 23,186,177 101.7 105.0 (1) Ezoludes redevelopment tax increment revenues. '. Source: City Compm hensive Annual Financia l Report for Fiscal Year Ended June 30, 2004. The table below summarizes the assessed valuations in the City for fiscal years 1994-95 through 2003-04. Table A-2 City of Bakersfield Assessed Value of Taxable Property (Fiscal Years 1994-95 through 2003-04) Fiscal Year Secured Unsecured Utility Total Assessed Percent Value Increase Decrease 1994-95 $7,662,423,762 $342,662,118 $14,097,810 $8,019,183,690 -- 1995-96 8,068,506,294 356,616,991 13,232,785 8,438,356,0?0 5.23% 1996-97 $,213,247,086 350,499,835 13,971,013 8,577,717,934 1.65 1997-98 8,407,516,746 374,446,012 15,497,196 8,797,459,954 2.56 1998-99 8,628,532,571 453,535,838 17,719,409 9,099,787,818 3.44 1999-00 9,268,459,616 423,862,659 19,424,133 9,711,746,413 6.72 2000-01 9,809,567,800 432,049,903 19,039,560 10,260,657,263 5.65 2001-02 10,111,103,444 462,192,054 18,851,231 1Q,592,146,734 3.23 2002-03 10,820,926,740 481,183,430 18,614,866 11,320,725,086 6.88 2003-04 11,947,359,805 483,752,532 26,993,919 12,458,106,256 10.05 Source: City Cnmpre6ensive Annual Financial Report Yor Fiscal Year Ended June 30, 2004 A-2 The table below shows the assessed valuations of the principal taxpayers in the City as of Tune 30, 2004. Table A-3 City of Bakersfield Assessed Valuation of Principal Taxpayers (June 30, 2004) 2002-03 Assessed Percentage of Total Taxaaver (1) Tvne of Business Valuation Assessed Valuation Castle & Cooke Comm. Inc. Rea] Estate Development $ 136,181,708 1.09% Bakersfield Mall LLC Shopping Center 115,620,887 0.93 Ice Cream Partners, USA Manufacturing 66,359,323 0.53 State Farm Insurance Company Insurance 60,782,568 0.49 Bear Mountain Limited Cogeneration 53,804,041 0.43 Chevron USA Inc. Oil Company 47,975,958 0.39 Albertsons Inc. Groceries 30,840,700 0.25 Cox Communications Bakersfield Cable 24,115,674 0.19 Hopper Properties Limited Partnership Real Estate Development 20,323,638 0.16 Nakanogumi Corporation SBD Real Estate Development 12,500,000 - 0 )D Group Inc. Total taxable assessed value of ten (10) largest taxpayers $ 568,504,497 4.56 Total taxable assessed value of other taxpayers 11,889,601,759 95_44 Total taxable assessed value of all taxpayers $12.458.106.25fi 190.4.0% (1) Related parties grouped together on the anginal source document (County's list oC assessed valuations) ar e included in the Coral assessed valuation amomll Fnr each taxpayer citerL Unitary and operating nonunitary are excluded as valuation by parcel is no longer available. Sourco: City Comprehensive Annual Financial Report for Fiscal Yeer Ended Ju ne 30, 2004, citing HDL Coren & Cane and Kem County Assessor 200310d Combined Tax Rolls_ Demographic Statistics The following table sets forth various demographic data regarding the City, including population, estimated median household income, elementary school emolhnent, and estimated unemployment rate, from fiscal year 1994- 95 through 2003-04. Table A-4 City of Bakersfield Demographic Statistics (Fiscal Years 1994-95 through 2003-04) Fiscal Year Population Estimated Median Elementary Estimated Household Income School Unemployment Enrollment Rate 1994-95 207,472 $37,449 26,350 12.8% 1995-96 212,715 31,852 26,903 12.4 1996-97 214,554 31,888 27,126 11.4 1997-98 221,689 33,339 27,374 10.9 1998-99 230,771 33,754 27,668 11.0 1999-00 237,222 34,343 29;783 1~.5 2000-O1 254,368 37,573 28,099 10.4 2001-02 257,914 35,153 28,267 11.2 2002-03 266,784 42,800 28,179 12.0 2003-04 279,672 46,000 28,315 12.6 Sources: City Comprehensive Annual Fina ncial Report for Fiscal Year Gnded June 30, 2004. A-3 Employment The County's total labor force, the number of persons who work or are available for work, is estimated to be 317,100 for February 2005, an increase of 0.63% over the preceding year. The number of employed workers in the labor farce is estimated to be 284,000 for the same date. The following table sets forth information regarding the size of the labor force, employment and '. unemployment rates for the County, the State, and the United States for the calendar years 2000 through 2005. Table A-5 Employment -Averages ' Calendar Years 2000 - 2005 2000 2001 2002 2003 2004 Feb 2005 Kern County Labor Force (OOOs) 287.1 292.0 299.1 305.4 315.1 317.1 Employment (OOOs} 254.7 260.9 264.0 . .2679 284.5 284 Unemployment Rate 11.3°l° 10.6% 11.7% 12.32% 9.7°l0 10.4% State of California LaborFome{OOOs) 16,884.2 17,182.9 17,404.6 17,629.3 17,627 17,714 Employment (OOOs} 16,0489 16,260.1 16,241.8 16,435.4 16630 16,625 Unemployment Rate 4.9% 5.4% 6.7% 6.7% 5.7% 6.1% United States ~~ Labor Force {OOOs) 142,583 {1) 143,734 144,863 146,510 (1} 147,877 147,649 Employment (OOOs) 136,891 {1) 136,933 136,485 137,736 140,278 139,100 Unemployment Rate 4.0°10 4.7% 5.8% 6.0% 5.1% 5.8% Q) Not strictly comparable with data For prior years. Source: C°lifornia Employment Development Depart ment and U.S. Department of Labor Bu reau of Labor Statistics. The following table sets forth the top twenty employers in the City as of July 2003. Table A-6 CITY OF BAKERSFIELD Principal Employers (As of July 2003) '. FIRM PRODUCT/SERVICE EMPLOYEES County of Kern Government 9,400 Grimmway Enterprises Agriculture 5,000 Giumarra Farms Agriculture - 4,000 bVm. Bolthouse Farms Apiculture 2,400 Bakersfield Memorial Hospital Hospital 1,350 City of Bakersfield Government 1,275 Aera Energy LLC Oil and Gas Production 1,150 Mervy Hospitals Hospital 1,100 State Farm Insurance lnsurancc 7,003 California State University Bakersfie ld Education 1,003 ChevronTexaco Oil and Gas Production 1,400 Pandol & Sons Agriculture 1,000 San Joaquin Community Hospital Hospital 95i I ACS Call Center ...__- 800 '' Frito-Lay Inc. Food Production 800 Kaiser Petmanente Health Care 729 Sears Logistics Logistics 650 B.A.RC. Non-Profit 560 Paramount Citrus Association Agriculture 550 '. Bakersfield College Education 400 Source: City of Rakersfietd. A-4 Building Activity 95. The following table summarizes the City's total annual building permit valuations since Fiscal Year 1994- Table A-7 CITY OF BAKERSFIELD Property Value, Construction, end Bank Deposits u) Fiscal Years 1994-95 through 2003-04 Commercial Residential Construction Construction Fiscal Number of Number of Year Units Value Units Value 1994 95 39 $65,891 1,571 $150,429 1995')6 5u 26,287 1,909 179,127 1996 ~)7 IIC 42,352 1,352 ]32,785 1997-98 147 49,241 1,983 197,773 1998-99 "13 78,199 2,088 223,576 1999-(lll 14u 51,251 1,890 218,656 2000-01 I2t 38,113 2,012 261,522 2001-02 I4 ~ 70,874 2,445 311,63) 2002-03 14 i 56,644 2,981 428,534 2003-04 1311 82,003 3,677 568,413 (1) Ropeny value and hmk deFosits are reported in thousands Sources: City Finance Uepartmmu. Commercial ActR'ih' Other Total Construction Construction Number of Bank Value Units Value Deposits $37,167 1,610 $253,487 $1,563,075 41,962 1,959 247,376 1,678,075 40,459 1,454 215,596 2,31Q,008 67,281 2,130 314,295 2,438,004 36,958 2,301 _ 338,733 2,464,202 34,438 2,030 304,245 2,454,280 48,067 2,135 347,702 2,730,107 57,983 2,588 440,496 2,865,985 62,112 3,122 547,340 3,179,623 65,878 3,807 716,294 (not available) Consumer spending in calendar year 2003 resulted in approximately $4,164,067,000 in taxable sales in the City, which is approximately 8.77% above calendar year 2002. The following table sets forth information regarding taxable sales in the City for calendar years 1999 through 2003. Table A-$ CITY OF BAKERSFIELD Taxable Retail Sales 1999 - 2003 (OOOs) 1999 2000 2001 2002 2003 Apparel stores $ 97,207 $ 109,847 $ 117,059 $ 126,267 $ 129,457 General merchandise stores 564,971 598,519 633,892 667,344 699,810 Food stores 162,505 176,986 181,300 146,060 215,506 Eating and drinking places 266,476 287,815 309,643 330,0&1 362,907 Home furnishings and appliances 113,435 123,510 126,841 142,019 154,731 Building materials and farm implmts. 217,197 244,146 256,506 286,088 340,528 Automobile dealers and auto supplies 623,868 716,804 845,904 850,364 913,717 Service stations 179,011 209,649 187,447 178,716 210,459 Other retail stores 342,586 372,930 384,'538 413,285 464,338 Total Retail Outlets 2,567,256 2,840,206 3,043,180 3,190,204 3,491,453 All Other Outlets 629,476 657,574 701.212 637,989 672,614 Total All Outlets $3,196,732 $3,497,780 $3,744,392 $3,828,193 4,164,067 Sources California State Board of Equalization A-5 There aze three major shopping centers in the City. Major department stores with local outlets include Robinsons-May, Macy's, Mervyns, J.C. Penney, and Sears. The retail base includes two Wal-Marts, two Targets, one K-Mart, two Home Depots, a Lowe's Home Improvement Store, and a Costco. The number of sales pernuts issued and the valuation of taxable transactions for the years 1999 through 2003 is presented in the following table. Table A-9 CITY OF BAKERSFIELD Number of Permits and Valuation of Taxable Transactions 1999-2003 Retail Stores Total All Outlets Yeaz No. of Permits Taxable Transactions No. of Permits Taxable Transactions 1999 2,955 2,567,256 .5,887 3,196,732 2000 3,163 2,840,206 5,961 3,497,780 2001 3,422 3,043,180 6,213 3,744,392 2002 3,552 3,190,204 6,359 3,828,193 I 2003 3,899 3,491,453 b,709 - 4,164,067 '. Source: California State Board of Equalisation. Transportation Well-developed surface and air transportation facilities are available to City residents and business firms. Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the area. Amtrak service is available. State Highway 99, the main north-south artery serving the most populous communites along the east side of the Central Valley, runs through the center of the City. State Highway 58 provides east-west linkage between Interstate 5, 20 miles west, and Interstate IS aC Barstow, to the east, Highway 178, heading northeast, is the major route along the Kem River Valley. Highway 65, to the north, provides access to communities east of Highway 99 and to Sequoia National Park. Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways. Golden Empire Transit provides local bus transportation. Meadows Field (Kem County Airport) adjoins the City to the north. Regularly scheduled passenger and air cargo service is available as well as charter service and general aviation services. The main mnway is 11,000 feet in length. Utilities Electricity throughout the City is supplied by Pacific Gas and Electric Company. This company, along with Southern California Gas Company, also supplies natural gas. Telephone service is by SBC. Fifteen private water companies serve the City. Sewer service is provided by the City. Education Public education in the City through the secondary grades is provided by a number of elementary school districts, including the Bakersfield City School District and Kern High School District. There are also a number of private schools, nursery schools, and pre-schools within the City. The City lies within Kern Community College District, which administers Bakersfield College. This two year institution is located on a 150-acre site in northeast Bakersfield. Vocational and technical courses are offered A-6 as well as academic courses designed to equip the student for transfer to afour-year college or university in the third year. Bakersfield College attracts about half the local high school graduating class each year. California State University, Bakersfield opened in 1970 and received its university status in 1988. It is on a 315-acre site located in the western portion of the City. Majors offered include anthropology, art, earth sciences, philosophy, mathematics, political science, business and teaching. A graduate program offers the master's degree in a number of fields. The newest campus in the University of California system, UC Merced, is scheduled to open in 2005. UC Merced will serve the entire Sea Soaquin Valley, with the main campus located in the City of Merced and satellite centers located in the City (which satellite center has already opened) and the Cities of Fresno and Modesto. Fioaneial Services Statewide banking systems serving the City include Bank of America, Washington Mumal Bank, Sanwa Bank California, Union Bank, Rabobank, and Wells Fargo Bank. Their services. are supplemented by local and regional banks, and various savings and loan associations. Community Facilities The City has six general hospitals with a total bed capacity of 1,075. The City is a primary medical center of a region larger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the largest employers in the City. Kern Medical Center, administered by the County, is affiliated with UCLA Medical Center of Los Angeles. The daily "Bakersfield Californian" and two weekly newspapers provide regional news coverage. Bakersfield has twenty radio stations, four television stations, and three cable TV companies. The City has 47 public parks, covering a total of 395 acres. The Bakersfield Rabobank Arena, Theater and Convention Center contains a 3,250-seat concert hall, a 9,000-seat arena, four meeting halls, and six conference rooms. Memorial Stadium hosts more National AAU track meets than any other city in the country. County-owned golf courses and five private courses offer year-round golf, and tennistsplayed throughout the year at the Bakersfield Racquet Club. Cultural advantages of the Ciry include a community theater, the Bakersfield Symphony orchestra, a community concert group, and Cunningham Art Gallery. Bakersfield College and California State University, Bakersfield, sponsor plays, concerts, lectures, and special events throughout the year. A-7 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX B APPRAISAL ea (THIS PAGE INTENTIONALLY LEFT BLANK) APPRAISAL REPORT OF Assessment District 04-2 LOCATED AT: Various Locations in Southwest and Northwest Bakersfield, California _ Areas known as Brighton Parks, Brighton Village, Stockdale at Allen Commercial and Cherry Hill II AS OF: Apri125, 2005 PREPARED FOR: City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301 PREPARED BY: ---- Lauver & Associates, fnc. PO Box 564 Bakersfield, California 93302 (661)399-0819 Launer & Associates, Inc. Real Estate Appraisal Services PO Box 564 Bakersfield, California 93302 (661) 399-0819 FAX 399-9828 April 2b, 2005 City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301 ATTN: Nelson Smith, Assistant Finance Director RE; Assessment District 04-2 Brighton Parks, Brighton Village, Stockdale at Allen Commercial and Cherry IIill II Areas Bakersfield, California Gentlemen, In accordance with your request, I have inspected the other related data regarding the above real estate, Bakersfield, California, as hereinafter described. real estate, specific plan documents, and in the incorporated area of the City of The inspection was made for the purpose and as part of the process, of providing value estimates of the subject property, as of April 25, 2005. The hypothetical sale referred to in the definition of Market Value, and thus any values in this report are on the basis of all cash to the seller, therefore, no consideration has been given to existing or proposed financing. The definition of Market Value as herein used and the property rights appraised are set forth on pages eight and nine of this report. The function of this appraisal report is to assist the client in ascertaining their collateral position that is to be secured by the herein-described property. In accordance with our agreement, this appraisal report is a Summary Report {under Standards Rule 2-2, as defined in the Uniform Standards of Professional Appraisal Practice, USPAP) of a Complete Appraisal performed under Standards Rule 1 of the USPAP. As a result of the investigation and based upon the data presented in this report, it is the appraiser's finding that the values applicable to the subject property, as of the date previously mentioned, are as reflected in the Summary of Important Facts and Conclusions on Page 1 of this report. All values for the subject properties that were estimated in this report are subject to the liens imposed by Assessment District 04-2 and school CFD bonded indebtedness (see the Engineer's Report prepared by Wilson & Associates dated April 21, 2005, pages I-4 and I-5 and made a part hereof by reference. It was our finding that the CFD bond payments represent a minor fraction totaling in most cases less than 1/10°i of 1% of the monthly sales proceeds in the various assessed areas. Moreover, the payments associated with carrying cost of bonded indebtedness imposed by Assessment District 04-2 are also covered in our estimate of variable indirect expense in the discounted cash flow analyses for each of the areas addressed in this appraisal. The Appraisal, subject to the various limitations and assumptions set forth therein, provides an estimate of the `As-Is' market value (also designated in the Appraisal as the "Bulk Value of Recorded Lots" and defined herein as the "Bulk Value") of each parcel of property within the Assessment District. It was the appraiser's finding that the market for land in the Bakersfield ', area is currently so strong the subject lots and land have a ready market and could be sold to any li number of developers immediately. No discounting is necessary for any of the parcels either i individually or in the aggregate to consummate a sale within the next thirty days. The "Aggregate Finished Lot Value When Complete" as described in the Appraisal refers to Tract 6250 Units 1 through 3 and represents the full value of each lot. This value includes a recorded subdivision map, and the "Completion Costs," which are defined herein as the costs associated with the developer-funded improvements necessary to develop such parcel as a finished lot available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indirect costs for each lot, taxes during construction, costs associated with school bonds, profits, commissions, administrative and miscellaneous expenses, and other direct and indirect overlapping debt. Our research indicates the subject properties have no natural, cultural, recreational or scientific value. The appraiser observed no apparent environmental hazards during the visits to the site. Also, in this regard, please read the Underlying Assumptions and Limiting Conditions, and Certifications sections of this report both of which are important parts and govern the use and validity of this appraisal. report. Based on the studies and investigations conducted, and, after careful consideration of all ' pertinent factors affecting value, I have formed the conclusion that the `As Is' market values of the subject properties, as defined, as of the effective date of this appraisal, are as shown on Page One (1) of this report and are summarized on the Consolidated Worksheet of the Assessment District 04-2 contained in the Addenda. - This report is for the exclusive use of the City of Bakersfield, prospective bond holders and bond holders. No other parties shall have any right to rely on any service provided by Launer & Associates, Inc. without prior written consent. The appraiser has granted permission to publish this appraisal in the Official Statement and consented for its use in marketing of the Assessment District 04-2 bonds. Sincerely, Michael Launer, MAI SRA Certified General Appraiser State of California Certificate No. AG 002049 TABLE OF CONTENTS Title Page Letter of Transmittal Table of Contents DEFINITIONS Executive Sumrnary ............................................................... ................................. .....................1 .... Introductian ............................................................................ ......................................................... 2 Purpose of Appraisal .............................................................. ..........................................................2 Use of the Appraisal ............................................................... ..........................................................7 Function and Objective of Appraisal ...................................... .........................................................7 Scope of Appraisal .................................................................. .........................................................7 Property Identification ............................................................ .........................................................8 Definition of Market Value .............:....................................... .........................................................8 Date of Valuation .................................................................... .........................................................9 Property Rights Appraised ...................................................... .........................................................9 Statement of Ownership .......................................................... .........................................................9 DESCRIPTIONS General Area Analysis ................................................. City Data ...................................................................... Neighborhood Analysis ............................................... Site Descriptions .......................................................... Property History ........................................................... Assessed Value and Taxes ........................................... Highest and Best Use ................................................... VALUATION . 43 ........................................... ....... .. 52 ........................................... ....... .. 57 ........................................... ....... .. 58 ........................................... ....... .. 58 Valuation Methodology ....................................................... .............................. 62 Valuation ....................................................................................................................................... 66 Conclusion of Residential Raw Land Values ................................................................................87 Finished Residential Lot Values -Sales Comparison Approach ...................................................90 Conclusion of As Is and Bulk Values ............................................................................................97 Certifications ............................................................................................................................... 102 ADDENDA Assumptions & Limiting Conditions Qualifications of Michael Lauver, MAI, SRA Consolidated Spreadsheet of AD 04-2 Values ASSESSMENT DISTRICT 04-2 BOTTNDARTES ~.~- _..._.,..._.___ _.__.~_~ ~_ ~m_ _~._~~ x~+'nr=~c~~ rra~ ~>z• ~=rz~pcsi:n ~=;ixnur~s€s ~r ~ ;7'Y G1 Hik; F.7?SFtYLL1 1~SliSSh4F,:4T L?.[.PWtc`i h:~?. ~.!-<"; i v 4 i x rwn ~ . } ~ rvTwiro »ex M MRU . 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U : : ~ .~ ~ ~ ._. _ _.~_. .. . .., ...,.. _ : : Launer & Associates Assessment District 04-2 EXECUTIVE SUMMARY Name/Identification Owners of Record: Highest & Best Use Effective Date of Appraisal Assessment District 04-2 - Various Locations in the Northwest and Southwest Quadrants of Bakersfield, California Castle & Cooke California, Inc. and Bryan Batey Homes, Bakersfield, CA Develop with single-family residential April 25, 2005 Value Opinions -Assessment District 04-2 Brighton VillagetBrighton Parks Areas Value of Unimproved Residential Land (per paper or tentative mapped lot} $35,000 Value of Product Type 1 when complete (5,000 square foot lots) $65,000 Value of Product Type 2 when complete (6,600 square foot lots) $70,000 Value of Product Type 3 and Brighton Village when complete (7,700 SF lots} $77,000 Cherry $ill II Area Value of Ll4lots in Cherry Hi11 II when complete (10,000+ SF lots) $115,000 Stockdale at Allen Commercial Area Value of Stockdale at Allen Commercial Land @$5 PSF $7,461,625 The `As Is' and Bulk Value of the various assessment areas is shown individually on pages 97- 99 of this report. Al] the values developed within this report are presented on the Consolidated Worksheet that can be found in the Addenda section of this report. Client City of Bakersfield __ Finance Department Gregory Klirnko, Finance Director Appraiser Michael Launer, MAI SRA CGREA No. AG002049 1 Laaaer & Associates Assessment District 04-2 INTRODUCTION PURPOSE OF THE APPRAISAL The purpose of this report is to estimate the "As Is" market values of the various properties identified and described herein, as part of Assessment District 04-2. The "As Is" values also represent the `Bulk", or discounted value of the lots as of the effective date of this report. The bulk value of the lots and land recognize the value of the improvements financed by the assessment district funds. A consolidated worksheet summarizing these values will be found in the Addenda Section. Assessment District 04-2 is in the Northwest and Southwest quadrants of Bakersfield and cansists of distinct development areas, further described below. A map depicting their location is presented on the opposite facing page. The following descriptions of the various areas were taken from the Engineer's report prepared by Wilson & Associates; Fresno, California dated April 21, 2005. Assessment District 04-2 was formed for the purpose of providing financing for the offsite improvements and infrastructure as described. Brighton Parks Area. Brighton Viltaee Area and Stockdale at Allen Commercial Area The Brighton Parks Area is located in Southwest Bakersfield and contains approximately 101.7- acres of land that has been approved for subdivision into a combined total of 425 single-family residential (R-1) lots, a private park lot and 32 private landscape lots pursuant to Tentative Tract 6250. The Improvement Acquisitions for the Brighton Parks Area are improvements related to the development of the subdivision. The Brighton Village Area boundaries encompass an approximately 55.4-acre block of land that is planned for subdivision into a combined total of 95 single=family (R-1} lots a storm drain ` sump lot, a future water recharge basin lots and 8 public landscape lots pursuant to Tentative Tract 6281. 2 File 3806 Launer & Associates Assessment District 04-2 The Stockdale at Allen Commercial Area boundaries encompass an approximately 37-acre block of land that is planned for development as a future general commercial retail site pursuant to Tentative Parcel Map 11192 The improvements are generally described as improvements in and along Stockdale Highway, Allen Road, San Juan Avenue and Jewetta Avenue that are required to be constructed, or are expected by the District Proponent to be required to be constructed, as conditions of approval for that subdivision. The general location. and extent of the planned Improvement Acquisitions in Stockdale Highway include completion of the westbound half of the street {northerly half of the street) to its full design width along the frontage of Tentative Parcel Map 11192, complete with excavation, grading, paving, pavement striping and markings, curb, gutter, sidewalk, street signs, street lights with conduits and pull boxes a short section of median curb, median deposit waterline crossings and 6 and 8-finch diameter sewer line with manholes and appurtenances. Also included in the Stockdale Highway Improvement Acquisitions is the construction of a four-way traffic signal at the intersection of Stockdale Highway and the entryway to the future commercial site in the Stockdale at Allen Commercial Area and the entryway to a school site located south of Stockdale Highway The general location and extent of the planned Improvement Acquisitions in Allen Road include completion of the northbound half of the street (east half of the street} to its full design width along the frontage of Tentative Parcel Map 11192 and Tentative Tract 6281 {from the intersection of Allen Road and San Juan Avenue), complete with excavation, paving, pavement striping and markings, curb, gutter, sidewalk, street signs, street lights with conduits and pull boxes, median curb for both sides of the street and median hardscape, 18-inch diameter storm drain pipeline with manholes, water service hop taps, adjustment of existing sewer manholes to grade, and relocation of the existing power poles. Also included in the Stockdale Highway°Improvement Acquisitions is the construction of a four-way traffic signal at the intersection of Allen Road and San Juan Avenue. The general location and extent of the planned Improvement Acquisitions in San Juan Avenue include completion of the entire street to its full design width (from the intersection of San Juan 3 Lauver & Associates Assessment District D4-2 Avenue and Allen Road to its easterly terminus at the westerly entryway to the private gated community in the Brighton Parks Area), complete with excavation, paving, curb, gutter, sidewalk, driveways, handicap ramps, street signs, street lights with conduits and .pull boxes, median curb and median hardscape, 8 and 10-inch diameter sewer lines with manholes and appurtenances, 8 and 12-inch diameter water lines with gate valves, fire hydrants and 2-inch diameter irrigation service and 42, 36 and 18-inch diameter storm drain pipelines with catch basins and manholes. Also included in the San Juan Avenue Improvement Acquisitions is the construction of a storm drain sump located on the south side of San Juan Avenue, complete with sump excavation, outlet structures, 12-foot wide access gate and a block wall around the sump perimeter. The general location and extent of the planned Improvement Acquisitions in Jewetta Avenue include the construction included the construction of a four-way traffic signal at the intersection of Wincanton Drive and Jewetta Avenue. The planned City development fees funded as a part of the Improvement Acquisitions include the Water Availability Fee for Tentative Tract 6250, Tentative Tract 6281 and Tentative Parcel Map 11192 and the City Park Land in lieu fee for Tentative Tract 6250 and Tentative Tract 6281. Also included in the Brighton Parks Area, Brighton Village Area and Stockdale at Allen Commercial Area Improvement Acquisitions are the District Proponent's incidental costs for design engineering, improvement bonds, construction staking, soils and materials analysis testing, plan check fees, and inspection fees, all as itemized in Table B-II-B and the Assessment District Area map as shown in the Engineer's Report prepared by Wilson & Associates, dated April 21, 2005. Cherrv Hill II Area The Cherry Hill II Area boundaries encompass an approximatelp'37.8-acre block of land that is planned for subdivision into a combined total of 119 single-family R-1 lots pursuant to Tentative Tract 6153 (identified as Tract 6153-3 and Tract 6153-4}. One of the District Proponents (Cherry Hill, Inc.) is the subdivider of Tract 6153-3 and Tract 6153-4. 4 File 3806 Lauver & Associates Assess»lentDistrict 04-2 A11 of the Improvement Acquisitions for the Cherry Hill II Area are improvements related to the development of those subdivisions and are generally described as improvements in and along Old Farm Road and Reina Road, and as in-tract I on-site street, sewer, and storm drain improvements that are required to be constructed, or are expected by this District Proponent to be required to be constructed, as conditions of approval for those subdivisions. The general. location and extent of the planned Improvement Acquisitions in Old Farm Road include completion of the northbound half of the street (east half of the street) to its full design width, along the frontages of TR 6153-3 and TR 6153-4, complete with excavation, paving, curb, gutter, multi-purpose bike trail, and subdivision block wall. The general location and extent of the planned Improvement Acquisitions in Reina Road include completion of the eastbound half of the street (south half of the street) to its full design width, along the frontage of TR 6153-3, complete with excavation, paving, curb, gutter, sidewalk, and subdivision block wall. The general location and extent of the planned in-traction-site street Improvement Acquisitions in the Cherry Hill II Area include completion of all in-traction-site streets in TR 6153-3 and TR 6153-4, complete with excavation, paving, curb, gutter, sidewalk, driveway approaches, and cross gutters. The general location and extent of the planned in-traction-site sewer Improvement Acquisitions in the Cherry Hill II Area include construction of the in-traction-site sewer system for TR 6153-3 and TR 6153-4, complete with I O-, 8-, and 6-inch diameter sewer lines, 4-inch diameter sewer laterals for all 119 R-1 lots in TR 6153-3 and TR 6153-4, manholes, and clean outs. The general location and extent of the planned in-traction-site storm drain Improvement Acquisitions in-the Cherry Hill II Area include construction of the in-traction-site storm drain system for TR 6153-3 and TR 6153-4, complete with 24- and 18-inch diameter storm drain pipelines with manholes and catch basins. Not included in the scope of the Cherry Hill II Area Improvement Acquisitions are this District Proponent's incidental costs for design engineering, improvement bonds, construction staking, soils and materials analysis and testing, plan check fees, and inspection fees, all as itemized in Table B-II-C in Engineer's ReporC Exhibit B and as generally shown on Map No. 2 in Engineer's Report Exhibit E, incorporated herewith by reference. 5 Lauver & Associates Assessment Distrdet 04-2 Lot Recordation Status -Brighton Parks Area Tract 6250 Units 1, 2 and 3 have final maps in place. Units 4 through 12 of Tract 6250 are not planned for recording prior to the June 8, 2005 City Council hearing and will be part of a Super Lot to be created by Tract 6281 in the Brighton Village Area. Brighton Village Area The three units in Tract 6281 obtained final map approval and were recorded in the Kern County Recorder's Office on Apri15, 2005. Unit 1 of Tract 6281 will create a Super Lot to be subdivided by Units 4 through 12 of Tract 6250 at a later date. Tract 6281 Unit 1 also establishes a remainder parcel to be subdivided by Parcel Map No. 11192 at a later date. Stockdale at Allen Commercial Area Parcel Map No. 11192 will not be recorded prior to the June 8, 2005 City Council hearing. This area will be assessed as a single commercial-use parcel, to be apportioned at a later date when Parcel Map No 11192 is recorded Tentative Parcel Map 11192 has been approved by the City Plamiing Commission. Cherry Hill II Area Tract 6153 Units 3 and 4 (the entire Cherry Hill II Area) are ready to be placed on the City Council agenda and are planned for Council approval no later than the May 25, 2005 meefing and recording with the Kern County Recorder on June 1, 2005. Suner Lot Defined - -~ A `Super Lot' is defined as acreage that is in an intermediate state of development between rough grade and finished ]ot stage. A `Super Lot' is prepared to smooth graded, terraced 6 File 3806 Lauver & Associates Assessment District 04-2 condition with all off-tract work completed and the streets and utilities brought to the perimeter of the super lot. USE OF THE APPRAISAL This report is for the exclusive use of the City of Bakersfield (the client}, the bond holders and prospective bond holders. No other parties shall have any right to rely on any services provided by Lauver & Associates, Inc. without prior written consent- The client is authorized to publish the contents of this report for bond disclosure and marketing. FUNCTION AND OBJECTIVE OF THE APPRAISAL It is the function of this report to provide the client with market value estimates to aid the City of Bakersfield and potential bond holders in their analyses of bonds for issuance or purchase; City issued bonds are to be secured by the real property described herein. It is the objective of this report to provide `As Is' and prospective values of the herein described residential lots and land as of April 25, 2005. SCOPE OF THE APPRAISAL The scope of this appraisal assignment involved standard elements of the valuation process, including definition of the problem, data collection, highest and best use analyses and implementation of the appropriate valuation approaches. Theory and application of each valuation approach utilized are discussed in their respective sections. Major research emphasis was placed upon the approach or approaches deemed most pertinent to the property under appraisal. Limitations to and assumptions of this appraisal are set forth near the end of this report, although redundancy occurs throughout the report body as needed for clarification. The market was researched for unimproved land sales with residential use potential that were considered similar or provided a reasonable alternative for a prospective purchaser/developer. 7 Lauver & Associates Assessment District 04-2 PROPERTY IDENTIFICATION The subject properties are identified as follows: AD 04-2 Residential Subdivisions Area Description Tract No. L ots Acres Brighton Parks Area Tract 6250 Units 1-3 118 34.15 Brighton Parks Area Tract 6250 Units 4-12 301 67`.28 Brighton Village Area Tract 6281 Units 1-3 95 22.28 Cherry Hill II Area Tract 6153 Unit 3 & 4 119 38.03 Stockdale at Allen Road Commercial Area . Tentative Parcel Map 11192 30.76-Acres DEFINITION OF MARKET VALUE The definition of market value, as herein used, is as follows: "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: A. Buyer and seller are typically motivated; B. Both parties are well informed or well advised, and each acting in what he considers his own best interest. C. A reasonable time is allowed for exposure in the open market. D. Payment is made in cash in U.S. Dollars or in terms of financial arrangements comparable thereto. E. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by ariyane associated with the sale."' TiCle X1 PIRREA 32, 42 {fl. 8 File 3806 Lauver & Associates Assessnaeut District 04-2 DATE OF VALUATION The effective date of this appraisal, the date as of which the valuation applies, is April 25, 2005. STATEMENT OF OWNERSHIP To the best of my knowledge, title is currently vested as follows: Castle & Cooke California, Inc., a California Corporation as to Brighton Parks, Brighton Village, and Stockdale at Allen Commercial Areas; Title to the Cherry Hill II area is vested in Cherry Hill, Inc., a California Corporation, Full and complete details are included in the preliminary policy of title insurance, to be forwarded to the Client by the title companies that are currently preparing the policies. PROPERTY RIGHTS APPRAISED The property rights appraised are the fee simple estates in the subject properties, modified or subject to the following: 1. The final values reported are on the basis of discounted and non-discounted market value; 2. The final values reported are on an "all cash" basis; 3. The value is exclusive of any furnishings, mineral rights, and subject to restrictions, reservations, easements and limitations of record including existing Community Facilities District bonded indebtedness and liens that may apply as a result of the formation of this proposed assessment district. A Fee Simple estate is: "Absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power and taxation".' z The Dictionary of Real Estate Appraisal, American Institute of Real Es[a[e Appraisers, Chicago, IL. 1986, pg. 123. 9 Lauver & Associates Assessment District 04-2 Location and Size GENERAL AREA ANALYSIS The subject property described in this report is located in Kern County. Kern County is located in the southern central portion of California, at the southern end of the San Joaquin Valley. The Kem County Economic Development Department has provided a graphic representation of the county's location within the state as shown below: K E R N C O U N T Y «~'~.~ Gam Ex" ~ ~s In size, Kern County is third largest among the State's 58 counties, with an aggregate 8,064 square miles (5,160,960 acres). Included in the county's area are 11 incorporated cities and 32 unincorporated communities. LO File 3806 Lauver & Associates Assessment District 04-2 Tonography, Weather & Recreation The County is divided into three distinct geographic and climatic zones. About one-third of it, including the area surrounding Bakersfield is located within the valley floor. The Mojave Desert covers another one-third and the remaining one-third is classed as mountainous. Bakersfield is situated near the geographic center of the valley floor, surrounded by the Temblor Mountain Range on the West, the Tehachapi Mountains on the South and the Sierra Nevada Mountains on the East. The topographical diversity creates large climactic variations within relatively short distances. In general, the area is characterized by a semi-arid, mild climate with warm-dry days during the summer, with high temperatures ranging from 100-I15 degrees. Winters are cool, with low temperatures ranging from 20 to 25 degrees and fog is common during the months from January through March. The following are statistical averages for the area Mean. Temperature, Valley Floor 64.9 degrees Annual Rainfall, Valley Floor 5.72 inches Annual Rainfall, Mountain Areas 10 to 40 inches On the valley floor rainfall is light, occurring mostly between December and March. Annual precipitation, even in the high ranges, is not heavy. However, run-off from the vast amount of mountains provides a large proportion of the water and hydro-electrical power needs of the county. Furthermore, the Lake Isabella Dam project, administered by the U. S. Army Corps of Engineers and the California State Water Project have greatly augmented water supplies. There are a wide variety of recreational facilities available to the public in Kern County, including mountains, parks, golf courses, lakes, and backpacking and riding trails. These resources provide many forms of recreafion including hunting, fishing, mountain climbing, biking, boating, skiing and other activities influenced by the County's varying topography. 11 Launer & Associates Assessn:ent District ©4-2 Population According to data published by the Kern County Council of Governments and the Economic Development Department, Kern County's population has grown 21°!o since the 1990 census, to approximately 658,935 in January 2000, more than California's growth rate (11.75%) in the same 10-year period. Kern County's growth was the 14°i largest in the state. In terms of numerical growth, Kern County had a net population increase of 121,635 residents between the 1990 census and January 1, 2000. Current estimates show the total County population at 753,050 persons. Following is a chart graphically demonstrating the County's growth from 1980 along with growth rate projections through the year 2010. The 2005 estimated population is also shown. Kern County Growth Trends p Metro t ^ Kem Kern's population was b58,935 according to the 2000 census. This represents a 21.24% gain from the 1990 census. Most of Kern's gain was due to people moving into the County, according to the Finance Department. The graph illustrates an optimistic .growth rate, as indicated by the ', rate of change, through the year 2010 that exceeds the growth rate for the previous fifteen-year period from 1985-2000. The projections, from the California Department of Finance, Population Research Unit, show Kern County reaching a population of one million in the year 2009. 12 File 3806 -1980 _.1940 1995 1998 .2000 .2005.2010 Lauver & Associates Assesssaent District 04-2 Economy The economy of Kern County has, historically been dependent on a combination of petroleum and agricultural production, fluctuating with the cyclical nature of these two industries. Kern County is number one in oil production and number three in the agriculture producing counties in the nation. Warehousing and processing are becoming more important to the county, both in terms of employment and diversification. Oil Kern is one of the nation's leading petroleum-producing counties, with nearly two-thirds of the oil production in California being extracted from Kern County oil fields, Oil production (and allied industry) provides a significant employment base to the county and is a major source of revenue to the county. Kern County oil fields produced 204,400,000 barrels of oil in 1999. Agriculture Owing to the favorable climate of the San Joaquin Valley with a long frost-free growing season, good supplies of reasonably priced irrigation water and good soil conditions, agriculture is a major industry in the county. Farmland accounts for approximately 54°l0 of Kern County's land area, or a total of 963,761 acres. Of this cropland, 736,217 acres are irrigated, according to the Kern County Farm Bureau. Overall, there are a total of 1,995 farms averaging 1,423 acres in size. There are 1,375 irrigated farms with a total of 736,217 acres. Much of the irrigation water to produce these crops is transported from the north by the Federal Central Valley Project's Friant-Kern Canal and the State Water Projects California Aqueduct. Water districts have been established in most of the agriculturaP~areas, in an attempt to stabilize the irrigation water supply. 13 Lauver X Associates Assessment District 04-2 Valuation of the top ten crops in 2003 crop totaled $2,004,945,000, underscoring the importance of agriculture to the local economy. These top ten crops, ranked according to their annual valuation, are presented in the following table: Kern County Top 10 Crops Rank Crop l Grapes 2 Almonds 3 Citrus, Fresh and Processing 4 Carrots 5 Milk, Market and Manufacturing 6 Cotton 7 Alfalfa 8 Nursery Crops 9 Potatoes 10 Cattle & Calves 2003 Valuation $402,802,000 $280,504,000 278,016,000 269,132,000 230,300,000 176,682,000 115,698,060 100,702,000 83,241,000 &7,868,000 Agriculture provides employment to a large segment of the labor force, putting millions of dollars in the local economy. On the average about 20% of the work force is engaged in farm work during the peak summer months and accounts for nearly 25% of the County's jobs. Industrial Trends Industrial growth in the County is also being experienced. This increased industrial interest is primarily a result of relatively inexpensive fully developed industrial sites and location of the County midway between Los Angeles and San Francisco distribution points. Municipalities in some of the smaller communities in Kern County have successfully lured state and federal prisons to their domain. Delano, Taft, Tehachapi and Wasco have seen a strengthening of their tax base as a result of nearby prisons: each of the communities had anticipated that most of the prison workers would retain domiciles and shop nearby. However, many of the workers in the valley communities of Delano, Taft, and Wasco have opted to locate their families in the larger community of Bakersfield due to the diversity of its recreational and 14 File 3806 Lauver d Associates Assessment District 04-2 leisure activities. Nevertheless, the presence of the prisons has had a definite net positive effect on Kern County's eeonorny. New Canstruction ',J Total new building permitting in Kern County eclipsed the $1 billion mark for the second consecutive year. Kern Caunry finished 2003 with $1,147,054,249 in new building permits, up 9.47 percent from the previous year's mark of $1,047,854,043 -- according to figures compiled by the kern County Board of Trade. Pushed upward by significant gains in Bakersfield, Wasco and unincorporated Kern, the qualifying vex construction totaled $94,111,923 in December - a 26.56-percent increase over the $74,363,963 recorded 12 months earlier. Activity in the commercial sector jumped by 53.68 percent in December comparisons, from $11,837,960 to $18,192,050. But for the year, the numbers were down 30.61 percent from $330,441,392 to $229,297,002. While the commercial sector in 2003 did contain a number of major projects, none were the size of the Target Distribution Warehouse in Shaffer, which helped boost the 2002 numbers. However, new housing in the County more than made up that gap. Residential construction in 2003 finished of$811,700,929 -- 29.49 percent higher than the previous year's $626,858,352. December boasted a gain of 17.58 percent as another $66,236,290 worth of new home permits was issued, ttp from $56,332,969 in December 2002. Final year-end total permit valuation figures for the county's 12 reporting areas were evenly split with six communities reporting gains for the year while six'had less activity. But overall, the gains in Bakersfield, California City, Delano, Maricopa, Tehachapi and Wasco were more than enough to offset declines in the rest of Kern. 15 Lauver & Associates Assessment District 04-2 Retail Sales Retail sales have grown at a steady pace over the past few years. According to figures published by the California State Board of Equalization, retail sales activity has stabilized at $7.56 billion in 2002. The increase in retail sales is attributed to inflation, increasing population and increasing household income. Retail sales figures are typically utilized as indicators for economic growth or decline. Taxable Retail Sales Year Kern County Bakersfield 1999 $6,324,261 $3,196,732 2000 $6,938,238 $3,497,280 2001 $7,626,392 $3,744,392 _ 2002 .$7;565,892 $3,828,193 Source: Cali fornia State Board of Equalization, February 2001 Retail activity within the county is concentrated at two regional malls in Bakersfield, Valley Plaza and East Hills Mall containing a total of eight department stores and numerous assorted specialty retail outlets. Other retail establishments in Kern County include at least one large retailer such as Kmart or Wal-Mart in addition to locally owned retail stores. Emaloyment The following table sets forth information regarding the size of the labor force, employment and unemployment rates for the Kern County Labor Market, the State of California and the United States for the calendar years 1997 through 2002. 16 File 3806 Lauver & Associates Assessrreent District 04-2 Employment -Averages 1990 Census 2000 Census 2004 Estimate 2009 Proieetion Kern County Labor Force (OOOs) 241.8 267.6 302.6 343.9 Employment{QOOs) 214.9 232.5 263.2 299.4 Unemployment Rate 9.60°10 11.80% 11.70% 11.60% State ' Labor Force(OOOs) 15,262.20 15,985.20 17,]73.80 18,601 Employment {OOOs) 13,996.10 14,725.50 15,821.10 17,136 Unemployment Rate 6.50% 7.00% 6.90% 6.90% United States Labor Force {OOOs) 125,217 138,830 146,394 155,064 Employment (OOOs) 115,716 129,?29 136,80p 144,885 Unemployment Rate 6.20°l0 5.70% 5.7% _ 5 7% Source: California Employment Development Department and Demographics Now. Kern County's unemployment rate is higher than that of the state and the nation. This is a result t of the seasonal agricultural employment conditions. Kern County's employment opportunities ', have been bolstered however by a number of new business locations and expansions. State Farm's Regional Headquarters and the Elk Corporation's asphalt shingle manufacturing facility added over 1,300 jobs. Frito Lay's recent expansion brought its total employment to 800 and Golden Valley Produce recently built a new facility that employs 300 people. Approximately 2 million square feet of industrial distribution warehousing has been constructed and occupied in the Tejon Business Park in the extreme southern part of the County. The following table sets forth the annual average nonagricultural employment within the Kern County Labor Mazket, by employment sector, for the fiscal years 1996 through 2002. 17 Lauver Bc Associates Assessment District 04-2 NonagriculturalEmployment-Averages Calend ar Years 1996-2002 by Pla ce of Work Employment try Indastry 1998 1999 2000 2001 2002 Agriculture 46,500 44,900 48,300 41,800 40,200 Natural Resources and Mining 8,600 7,300 8,200 8,600 7,800 Construction 10,000 10,700 11,600 13,000 13,600 - Manufacturing 10,500 10,700 ]0,800 11,100 10,800 Trade. Transportation and Utilities 35,800 36,500 37,200 3$,400 38,900 Information 2,500 2,400 2,500 2,500 2,500 Financial Activities 7,600 7,700 7,600 7,800 8,000 Professional and Business Services 20,900 21,900 22,200 23,000 23,500 Education and Health Services 17,100 18,100 19,20fl 20,200 19,800 Leisure and Flaspitality 15,900 16,500 16,500 17,200 17,400 Other Sen ices 6,600 6,800 6,700 6,800 6,800 Govemmeni 48,800 50,300 51,600 53,600 55,200 lndustn L:nmploytnent Total* 230,800 233,800 242,400 244,000 244,500 *2002 Benchmar4, '. Source: California Employment Developm ent Department. Tran$uorlation Two major northlsouth arteries traverse Kern County. Freeway 99 and Interstate 5, running northlsouth, cover the entire west cost meeting at Interstate 80 in Sacramento. Freeway 99 connects with Highway 46 that provides access to the central coast. Highway 58 traverses the County in an East-West direction and connects with Interstate 40 and 15, providing access to Arizona, Nevada Utah and other major east markets. Interstate 80 and 4D are major corridors across the United States. 13 public airports, two of which have jet runway capacity, and four private airports serve Kern County. In addition there are two airports operated by the military, Edwards Air Force Base and China Lake Naval Weapons Center. Major airlines presently serving the area are American Airlines, which operates a daily jet flight schedule to Dallas-Fort Worth and United Express with flights to San Francisco, San Diego, Las Vegas and Santa Barbara. There are several commuter style airlines with service to various portions of the state including Los Angeles. 18 File 3806 Launer & Associates Assessment District 04-2 The Santa FelBurlington Northern and the Union Pacific operate mainline rail service in Kern County with access to all parts of the United States. AMTRAK provides passenger train service north on its San Joaquin route and bus service south to Los Angeles. The county's bus facilities include Greyhound Bus Lines, Orange Belt Stages (a charter service}, and Airport Bus of Bakersfield, a local bus line providing daily commuting service to Los Angeles International Airport. Schools Public schools are available throughout the county with an excellent system of elementary and high schools. In addition to the numerous elementary, high schools and community colleges there is a four-year state University, California State University Bakersfield. The colleges are accredited and provide vocational and continuing education. Future Trends Irrespective of the natural mountainous boundary separating Los Angeles and Kern CoLmty, the decade of the 1980s and 1990s saw the genesis of a trend destined to continue for years to come. Los Angeles area residents are looking to the north in search of a less urbanized life style. There are residents commuting to Los Angeles on a daily basis from Frazier Park, Rosamond and Bakersfield. Additionally, many individuals with working situations requiring them to work several days at a-time, such as firefighters, are relocating their families to Kern County and to what they perceive as a safer and lower cost of living. Several "new towns" are planned for agricultural lands at the extreme south-end of the San Joaquin Valley between Bakersfield and Frazier Park. These new towns are being planned to take advantage of Los Angeles residents becoming disturbed with the emergence of urban problems in Southern California. There are preliminary discussions towards the development of a high-speed rail system connecting Northern and Southem California. The discussions have reached the point establishing the most feasible route. Factors to be weighed include geographic limitations (impassable mountain ranges}, ability to service population centers and certainly the political 19 Lauver & Associates Assessment District 04 Z clout of the local representation. At this time there are two routes being given the most consideration, including one in Kern County. The Kern County route would proceed north from Los Angeles to the San Joaquin Valley after a stop in the Antelope Valley. The other route being considered is a coastal route that somewhat approximates the current location of State Highway 101. Obviously there is anticipation that a valley route would provide a linkage to Southern California sufficient to further the retreat from Los Angeles and spur housing demand in Kern County. Not all of the new residents locating in Kern County are doing so as a launching pad for a commute to Los Angeles. Kern County has some of the lowest costing real estate in California; the typical homeowner can achieve more of the "American Dream" in Kern County. It is not merely individual homeowners benefiting from inexpensive property values. Beyond the County's location near the population center of the state and the availability of adequate labor, the primary impetus for many of the newly arriving manufacturing and distribution jobs is the low cost of land. Conclusion Kern County is continuing to experience steady growth patterns as a result of increased development of irrigated farmland, stable petroleum production and refining, along with a steady industrial growth trend. The economic base of the County that is centered on these resources should continue to be stable. The long-term trends are diversification and urbanization. The County has made considerable efforts to attract potential industrial and manufacturing firms in order to diversify the region's economic base. Some of this compliment the existing agricultural base and some have no relation to the industry. The second trend is the reclamation of farmland for urban or suburban development in the vicinity of Bakersfield. The growth pattern away from Bakersfield in a westerly direction is absorbing productive farmland for more intensive uses. This trend will continue for as long as the disparity in housing costs exists between Kern County and the rest of California. 20 File 3806 Lauver & Associates Assessment District 04-2 CITY DATA Location And Size The subject property is located in the City of Bakersfield. Bakersfield is located 111 miles north i of the major metropolitan Los Angeles area, 108 miles south of Fresno, (the next nearest large urban area}, and 290 miles south of San Francisco. Annual annexations to the city have taken place at a mean rate of approximately 6°l0. These annexations represent an average annual. addition of 3,344 acres to the city's landmass. Growth has primarily been in the southwest, northeast and northwest quadrants. Pouulation City population has steadily increased. The city's growth and growth projections through the year 2010 is displayed in the following chart. Bakersfield City Population 3~~~_ unrm _ - ~~ 200,00 150,00 IOgOa -`~~ 1 1970 1975 193 19ffi 1990 1935 ~ i005 2010 The population increased 2-''/Z times in the 1970-1990 period, or an increase of 149%. The mean average annual rate is 7.44% percent, non-compounded. Since the 1990 Census, Bakersfield has grown by 62,244 persons to 237,222 or 35.5% over the ten-year period It is now the 11th largest 21 Lauver & Associates Assessment Distr^iet 04-2 city in California. The city's growth increase as of January 1, 2005, ranks ls` in the top ten fastest growing cities in the state with a population under 300,000. Comparison of the City of Bakersfield with Kern County, the State of California and National growth trends indicates the city is growing at a substantially faster rate as reflected in the following table. Population an d Projections -1994 - 2005 Population Populatio Population United Population - Percent Percent State Percent _ StaCes Percent Year ~ Change founts Change (000) Change (000) Change 1994 147,469 ----- 604,200 ----- 31,661 ----- 257,698 ----- 1995 207,472 5.07 612,800 1,40% 31,910 0.78% 260,249 0.98% 1996 212,715 2.53 620,400 1.23% 32,223 0.97% 262,753 0.95% 1997 214,554 0.86 629,200 1.40% 32,670 137°l0 265,310 0.96% 1998 221,689 3.33 637,200 1.26% 33,226 1.67% 267,885 0.96% 1999 230,771 4.70 645,900 1.35% 33,766 ].60% 270,385 0.92% 2000 237,222 2.80 671,295 3.78% 33,872 0.31% 272,828 0.90% 2001 254,400 7.23 685,811 2.12% 34,483 1.77% 281,422 3.05% 2AQ2 260,969 2,52% 694,059 1.19% 35,484 2.82% 290,810 3.23% 2003 267,029 2.27% 710,294 2.29% 3b,442 2.63% 293,718 0.99% 2004 282,671 5.53°l0 732,401 3.02% 36,271 -0.47% 294,?47 0.35% 2005 295,893 4.47% 753,070 2.74% 36,810 1.46% 295,734 0.33% '; The historical and projected growth of the Greater Bakersfield Metropolitan Are a is displayed in the following chart. - Bakersfield Metropolitan Area a L F c .c 0 .W 0 a a° asa,ooo aoa,ooo 350,000 300,000 250,000 1 50,000 7 00,000 50,000 0 ~~ File 3806 1980 1985 1990 1995 2000 2005 2070 Lauver & Assoezat8s Assessment District 04-2 Even though the city has annexed huge areas since 1970, the population increase is tied in great part to new development in the southwest (Stockdale), northwest (Olive Drive/Rosedale), and northeast, (Rio Bravo}, areas. The GBMA is also referred to as the Immediate Bakersfield Trade Area. The GBMA contains the City of Bakersfield and nearby surrounding communities and/or areas. Geographically, the GBMA is an area measured for an approximate five-mile radius from the center of Bakersfield. The GBMA has grown from. a 1980 population of 227,968 to a current estimated population of around 510,000 persons. This represents more than sixty percent of the total county population. Economy _ Bakersfield, the marketing, business, service and transportation center of the county, finds its economy closely dependent upon the continued prosperity of the agricultural and petroleum industries. Economic functional classification for a city is generally based upon a city's primary economic base activities, i.e., its reasons} for existence. Bakersfield is classed into two categories: First, the city is a commerce center, (considering it is a farming center and the major county supplier of goods and services}; Secondly, it fits a classification commonly known as extractive, due to the large portion of economic activity created by the productions of minerals. Manufacturing firms within the city are characteristically of small to medium size. Major manufacturing activities include steel fabrication, plastic form products, food and kindred products, and petroleum refining with related industries, and textiles. y From an overall point of view, the Greater Bakersfield Metropolitan Area's economy is fairly stable. Manufacturing activities are diversified with no single industrial classification furnishing more than 25% of the area's jabs. 23 Launer & Associates Assessment District 04-2 Buildinff Activity Annual total building permit valuation since Fiscal Year 1992-93 is shown in the following tabulation. City of Bakersfield Property Value , Construction and Bank Deposits (I} Fiscal Years 1989-90 through 2 002-03 Fiscal Commercial C onstruction Residential Construction Other Construction Total Year #Units Value # Units Value # Units Value Value 1992-93 38 37,785 2,022 187,998 2,060 39,612 265,395 1993-94 30 70,472 1,581 154,577 1,611 28,533 253,582 1994-95 39 65,891 1,571 150,429 1,610 37,167 253,487 1995-96 50 26,287 1,909 179,127 1,959 41,962 247,376 ', 1996-97 102 42,352 1,352 132,785 1,454 40,459 215,596 1997-98 147 49,241 1,983 97,773 2,130 167,281 314,295 1998-99 213 7$,199 2,088 223,576 2,301 36,958 338,733 j 1999-00 140 51,251 1,890 218,656 2,030 34,438 304,245 2000-01 123 38,113 2,012 261,522 2,135 48,067 347,702 2001-02 143 70,784 2,445 311,639 2,588 57,983 547,340 2002-03 104 78,868 3,626 544,534 6,672 92,891 716,294 (I } Property values and ban k deposits are reported in thousands. ', (2} Sources: FDIC and City Building Department Transportation Transportation needs of a city are essential, requiring goods as well as people be moved to-from- and-within the urban environment. Within the Bakersfield Metropolitan Area the main lines of the Burlington NorthernlSanta Fe Railroad service freight needs. Amtrak provides passenger travel. Scheduling by Amtrak, on its "Valley Run", is currently operated seven days a week. All of Amtrak's northern travel on this route originates in Bakersfield, while all southern travel from Oakland terminates in Bakersfield. -- Truck transport is available fram a number of truck carriers, several of which are major interstate lines. 24 File 3806 Launer & Associates Assessment District 04-2 There are two airports within the GBMA. Bakersfield Airport, a private airport, is located in the southeastern area of the city, and Kern County's Meadows Field is located in the northwest portion of the GBMA. Meadows Field has jet runways and serves as a base for commercial air services. Meadows field is also used by private air traffic. Inter-city bus facilities are provided by the Golden Empire Transit system. Buses currently travel six days a week {not on Sunday}, providing service from 7:00 a.m. to 6:30 p.m. The current rate is $0.75 for cone-way travel pass and no charge for transferring. Four firms provide taxi service, all of which are radio dispatched. As for automobile travel, the city lies astride two major ail-weather highways, US Highway 99, (which runs north south}, and State Route 58, (which runs east west}. Government and Social Services The City of Bakersfield utilizes the City Manager form of government with an elected mayor and a seven-person cauncil. Professional administrators with well-supervised and well-trained staffs manage departments within the city. All departments have a good record. All utilities are available within most areas of the city. These include gas, electricity, water, sewage disposal, telephone, and garbage disposal. The Bakersfield Police Department has 288 personnel and the fire department has 160 firemen and officers. Health care services within the GBMA are provided by six general hospitals, with a combined capacity of 1,075 beds. Within the Metropolitan Area are app"roximately 375 physicians and surgeons, 24 chiropractors, 19 optometrists and 86 dentists. 25 Launer & Associates Assessment District OQ-2 The school districts, encompassing the Bakersfield Metropolitan Area, presently contain 59 elementary schools, 12 Junior High Schools, and 9 High Schools. In addition there is a parochial High School and 8 parochial grade schools. To fill higher educational needs, based in Bakersfield, are an accredited two-year Community College, Bakersfield College, and afour-year accredited school, California State University at Bakersfield, the newest of the State university campuses. Recreational and Cultural Activities - The city, due to its central location, offers close proximity to countywide recreational activities. Within the city itself, there are numerous parks, many of which contain public swimming pools and tennis courts. The community maintains a Philharmonic Orchestra, the Bakersfield Convention Center, which seats 3,250 persons, and a community theater. Also, there are college-sponsored lectures and artists, a wide variety of artistic, culhrral, and special interest organizations, numerous movie theaters. The new Bakersfield Centennial Garden Arena facilitates various sporting events and trade shows. The library system of the Bakersfield Metropolitan Area contains 10 branches and a bookmobile service, praviding access to over 570,200 volumes. Media sources include the Bakersfield Californian, a daily newspaper, two weekly newspapers, four television stations, three cable television companies, and twenty radio stations that are divided between AM and FM broadcasting. The Labor Market There is a stable labor force of men and women with diversifted skills in fields ranging from agriculture to sophisticated equipment, assembly, and research. 26 File 3806 Lauver & Associates Assessrrzent District 04-2 Over the past two years, over 5,000 jobs have been added in Kern County each year, mostly in the services, government, and retail, manufacturing and construction sectors. With the efforts to attract corporate and manufacturing operations to Kern County, this growth is expected to continue through the next decade. Other factors influencing the county's Labor market are: • A source of labor is always available to an employer whose operation permits short training phases during start-up. • Although the labor market is not considered heavily organized, the climate between management and labor is excellent. • The total environment employees and their families enjoy, including short driving distances to jobs and activities, results in excellent longevity recards. • Future Tabor requirements will be filled through coordinated training at high schools, community, and state colleges as a result of a continued evaluation of the job market. • Bakersfield is a participant in various state and federal programs including those with the California State Department of Human Resources Develapment. As reported by the California Employment Development Department, the average unemployment rate for the Bakersfield labor market for 2001-2002 was 11.2%. This was up from 10.4% the preceding year. Current figures from the EDD indicate an unemployment rate of 10.3% as of September 2004. Bakersfield is always likely to have an unemployment rate somewhat higher than California or the United States as a result of the seasonal characteristics of the agricultural industry. The following table cites the unemployment rate contrasted with demographic indicators. 27 Lauver & Associates Assessmetxt District 04-2 City of Bakersfield Demographic Statistics Median Elementary Estimated Fiscal Household School Unemployment Year Population Income Enrollment Rate 1942-93 192,351 $34,420 26,505 14.8% 1993-94 197,469 $35,885 26,312 13.5% 1994-95 207,472 $37,449 26,350 12.8% 1995-96 212,715 $31,852 26,903 12.4% 1996-97 214,554 $31,888 27,126 11.4% 1997-98 221,689 $33,339 27,370 10.7% 1998-99 230,771 $33,754 27,668 11.0°l0 1999-00 237,222 $34,343 27,783 .12.5% 2000-01 254,368 $37,573 28,099 10.4% 2001-02 257,914 $35,153 28,267 11.2°l° 2002-03 267,023 $34,982 29,398 12.3% The following table sets forth the top employers in the City as of January 1, 2003. Principal Employers FIRM PRODUCTISER V ICE Kern County Public Schools Education County of Kern Government Dole Bakersfield, Inc. Agriculture Wm. Bolthousc Farms, Inc. Agriculture City of Bakersfield Government CH W Central California Medical Care State Farm Insurance Insurance ARB, [nc. Construction Bakersfield Memorial Hospital Medical Care Texaco Exploration & Production Industrial San Joaquin Hospital Medical Care Aera Energy LLC Energy Frito-Lay -- Food Pool California Energy Services Energy Chevron Companies tndustrial Bechtel Petroleum Operations Industrial Nestles Ice Cream Company Food Western Oilfields Supply industrial Ken Sma11 Construction Construction Pacific BeII Telephone Bakersfield Californian Newspaper Pacific Gas & Electric Utility Continental Labor Resources EmploymenC Agency Bakersfield Family Medical Center Medical Source: City of Bakersfield. EMPLOYEES 15,500 7,000 2,360 2,000 1,600 1,515 1,500 1,200 1,100 1,100 I,a~l - 870 750 700 540 525 517 450 425 400 380 380 375 370 28 File 3806 Launer & Associates Assessment District 44-2 Housinzr Market Bakersfield (Kern County) has the most affordable housing in the State of California. The affordability is attributable to inexpensive land and cheap labor. Monthly rentals are available throughout the Bakersfield metropolitan area. One and two bedroom apartments command rents ranging from $400 to $1,200 per month. Apartment communities within the city are relatively well defined, offering goods and services to aparhnent dwellers. Two and three bedroom, single- family houses can be rented for $850 to $2,000 per month.. There is a good supply of luxury- homes priced from $350,000 to over one million dollars. However, the average residence is selling within the $150,000 to $300,000 price range. Strengthening demand for residential housing has positively affected the building permit activity in the city. Most of the growth and construction of dwelling units in Bakersfield has taken place subsequent to World War II. These dwellings typically have remaining lives. Consequently, there has been little need for in-fill in the older areas of the city. The availability of nearby land ready for construction has enabled a suburban sprawl. Residential growth tends to be primarily found in the northwest and southwest quadrants of Bakersfield. Since 1988, the permit activity was based largely on construction of newsingle-family dwelling units. This is due in part to the fact that Bakersfield is one of the most affordable urban areas in the western United States. Studies of the sales activity reveal that as much as 50% of the new tract homes are selling to out of the area buyers attracted to this area by the relatively inexpensive housing. New construction is the defining factor of the Bakersfield low-density housing market. The City of Bakersfield has historically been able to increase its physical area by incorporating surrounding areas previously used for agricultural purposes. These former agricultural lands are considered prime for development as the soil is of good quality and the sites are mostly level, 29 Lauver & Associates Assessment District 04 2 reducing the costs of development. The City also has a rather reliable water source from water rights to the Kern River. During the years from about 1991 to 1995, the Bakersfield housing market was dominated to a large degree by large regional and national housing development firms. Among these were Centex, U.S. Home, and Kaufman and Broad. This was a departure from the local area building norms from prior years. Previously, most of the builders were local and residential developments were constructed on a relatively small-scale basis. During the early 1490's, larger firms with access to capital entered the residential market, were able to complete subdivisions more quickly, and thus squeezed profit margins for production housing units. Local builders found it difficult to compete. _ Over a period of time however, the larger building firms found the local market prefers the option of selecting a lot location and having a particular model built on it. The larger builders typically were building full phases with house lot combinations already in place (pre-plotted), thus limiting buyer choice. The housing product was inferior in quality and finish compared with the local merchant builders and the large development firms found their expected sales rate much slower than anticipated. For the most part these larger builders left the Bakersfield housing market to concentrate their efforts in other locations where the market is more receptive to the mass built production housing. Since 1995 however, the local residential market has firmed up and is experiencing rapid growth in new housing starts. Because the merchant builders are for the most part limiting-their new housing starts to models and pre-sold units, there is little standing inventory at any time in the metropolitan area. In the following chart, the total numbers of building permits for single-family dwellings are displayed. City Building Permits Issued 1996 1997 1998 1999 2000 2001 .....2.002 2003_ 2004 1,909 1,352 1,983 1,899 1,994 2,432 2,941 3,626 4,222 Source: Kern County Board of Trade 2003. 30 File 3806 Launer & Associates Assessment District OA-2 As of December 31, 2004, the City had issued 4,222 new single-family building permits. This is up over 16% from year-end 2003. Current Residential Trends The residential market in the general Bakersfield area remains strong as is borne out by the following chart. The chart shows the number of units sold within the corporate limits sorted by zip code and includes new, resale and condominium housing units. YEAR 2003 YEAR 2004 ZIP CODE #SALES PRICE $lSO.FT. #SALES PRICE $JS .FT. °l° CHANGE 93301 43 $186,073 $127.94 33 $194,881 750.95' 23 .8% 93304 230 $114,313 $91.16 242 $154,714 737.83 44 .6% 93305 43 $104,287 $86.47 163 $158,261 728.98 49 .2% 93306 140 $134,663 $91.55 298 $186,889 131.89 44 .1% 93307 777 $115,390 $90.15 264 $767,825 730.74 44 .4% 93308 784 $145,717 $103.86 312 $207,977 744.93 39 .5% 93309 219 $762,579 $102.19 245 $228,493 741.92 38 .9% 93317 137 $226,503 $121.58 284 $247,448 148.21 21 .9% 93312 203 $220,901 $12299 486 $295,751 154.84 26 .1% 93313 ]83 $166,581 $105.30 301 $243,309 149.09 41 .6% 93314 S6 $279,348 $137.00 125 $342,025 162.48 ]8 .6% TotalslAverages 1,715 $168,760 $109.11 2,753 $225,088 $144.93 32 .8% Mean List to Sale R atios 98.8% 98.30% It can be seen that existing single-family sales activity in the fourth quarter of 2004 was up 60.5% over the same period in 2003 and all areas of the City are experiencing significant appreciation. The average sales price for single-family residences was $225,088, compared with $168,760 in the fourth quarter 2003. In 2004 the City-wide appreciation ,rate was 32.8°1°--above the same ' quarter 2003, according to records kept by the Bakersfield Multiple Listing Service. With regard to new housing product, our interviews with builders and sales offices indicate that the housing demand from both out of town and local buyers remains strong. The out of town 31 Lauver & Ass©eiates AssesstnentDistrict 04 2 buyer market is somewhat difficult to accurately measure however, since many occupy apartments while waiting for their dwellings to be completed, All subdivision sales offices surveyed indicated that buyers are relocating and/or commuting from the urban Southern California area and from the Central Coast areas such as Ventura and Oxnard. New home construction permits were at an all time high in 2004, with a total of 4,222 permits issued in the City. This is a 16.43% increase over 2003 when 3,626 permits were issued. The strength of the residential market is further borne out by reports from subdivision sales offices such as Kyle Carter Homes (a McMillin Company), Castle & Cooke and Coleman Homes {Lennar). These offices have reporting waiting lists of 100 to_ 300 pre-qualified purchasers waiting for lot releases. According to the Bakersfield BIA (Building Industry ~ Association} and Real Estate Solutions, Inc., total closings of new dwelling units by all builders was 4,519 within the City limits. This is up 2.19% over the same period last year. This corresponds well with the total permit activity and demonstrates the lack of standing inventory available. ', The following chart shows the top 6 builders in Bakersfield ranked by closed sales activity through December 31, 2004. 2004 Builder Closings Rank Builder Sales 1 ~~ Lennar/Coleman 562 2 McMillin 426 3 Castle & Cooke 352 4 Centex Homes 246 5 Lenox Homes 229 6 ADH Corporation 191 Bakersfield's top three builders shown in the chart above are selling the bulk of their housing ' product in Northwest and Southwest Bakersfield. It was my finding that more than 90% of all new residential construction and sale activity is in the Northwest and Southwest sectors of the City. According to our sources, a total of 4,157 new dwellings were completed and closed dur7ng calendar year 2004. 32 File 3806 Launer & Associates Assessment District 04-2 New Residential Buildine Development Potential and Timing During the data collection phase of this report preparation, the appraiser made an investigation of the growth rates, trends and patterns with regard to residential develapment in the city of Bakersfield. The study of demand, supply and absorption is fundamental to the valuation analysis and is a determinate factor in the potential for success in the local market. A study of the demand side of the housing market is the first step in analyzing the relative strength of the housing market and it provides necessary data in studying the interaction of the supply and demand characteristics of the market, and it will assist in forecasting futru~e housing needs. The demand side analysis of the residential housing market involves researching characteristics of population growth; occupancy and vacancy rates of single family housing stock; pricing levels; and market segmentation. In the following paragraphs we discuss the various elements of the demand side of the single family housing market. The sources utilized in our analyses are from the E-5 Report, Department of Finance, National Decision Systems, Kern Council of Governments, California Department of Finance, Demographic Research Unit, City of Bakersfield and Kern County Planning Departments. In examining the historical and projected growth rates for the city of Bakersfield', it was noted that in the period from 2000 to October 2004, the population increased 16.84%. Projections from 2004 to 2009 indicate a further population increase of 37.85% as shown in the following chart. City of Bakersfield Populafion Year 2000 2004 2009 Po elation 247,057 288,663 3$4,284 The projected population growth rate from 2004 to 2009 is 95,621 persons, a compounded increase of 6.63% per year- Just prior to 1998, the city's corporate hrnits were expanded by slightly more than 12 square miles. This was a contributing factor in the high growth rate. City of Bakersfield Planning Department, 2004, Demographics Now. 33 Lauver & Associates Assessment District 04-2 Bakersfield Population and Housing 2004' Using the published statistics and projections from the sources cited previously, the population and housing needs within the city are forecast as follows: Housing Demand Forecast Year 2004 2009 Po ulation 288,663 384,284 Total Detached Units 97,193 129,389 Owner Occu ied 57,179 77;931 Renter Occu ied 34,688 44,264 Vacant 5,326 7,194 Using the foregoing actual and projected population figures, an estimate of annual housing demand for the next five years is calculated as follows: Bakersfield Detached Housing Demand Forecast 2009 Housing Demand - Owncr Occupied 77,931 Less 2004 Owner Occupied 5?,179 Five Year Demand 20,752 Annual Housing Demand 4,150 The estimated demand side estimate is above the 2003 annual permit rate of 3,b26 new single- family detached residential units. The new single-family closings were 3,465 within the City limits through November 2004. This represents an annualized demand of 4,158. Therefore the Housing Demand Forecast appears to be representative of the market. SuAaly Characteristics The next step in the analysis of the residential housing market "iif the City of Bakersfield is to examine the supply side of the housing market. In this regard, Bakersfield is somewhat unique in its new home marketing strategy. Having suffered during the early 1480's with an oversupply of 4 California Department of Finance, Demographic Research Unit. ?he above figuros inolude population and housing within the corporate limits. 34 File 3806 Lauver & Associates Assessment District 04-2 standing housing inventory, the local financial institutions implemented a policy of restricting the number of unsold or unsold under construction units in subdivisions financed. Since that time, most of the local builders have voluntarily limited their housing starts to models and in some instances, a few speculative units. There are some exceptions to this however, and this is discussed in subsequent paragraphs. Owing to the fact that most dwelling units are constructed on a firm pre-sold basis, the standing inventory maintains a near state of equilibrium between supply and demand in Bakersfield. The building permit figures reflected in the following chart demonstrate this balance, City Building Permits Issued 1996 1997 1998 1999 2000 2001 2002 2003 2004 1,909 1,352 1,983 1,899 1,994 2,432 2,947 3,626 4,222 The permit activity shows a pattern of steady increases. This is due to the recovery of the Bakersfield economy (the Bakersfield economy tends to lag behind Southern California) and the favorable institutional lending rates available to homebuyers. Moreover, based on conversations with developers at residential sales offices, the out-of--area buyers now out number the local residents purchasing homes. The next step in the supply side analysis is to estimate the standing inventory and the potential supply from sources at the city Planning Department. The existing supply estimate is calculated below. Current Estimated Housing Supply (Total permits issued Year 2004} 4,222 Plus Estimated Under Construction (3% flex margin} 127 Estimated Current Supply based on permits issued 4,349 Less: 9Q°t° pre-sold _3 914 Estimated Unsold Inventory 435 __...._ In the Bakersfield market we find that three or four larger corporations such as Castle & Cooke Homes, DeWaltlFruitvale Properties, Leimar Homes, and McMillin Homes control the supply of finished lots and housing product to a large degree. These companies will process unimproved land through the city/county-required stages of entitlement, infrastructure construction and mapping. These developers complete their finished lots to finished housellot combinations ar sell 35 Lauver & Associates Assessment District 04-2 their land either as unimproved subdivision with final maps in place or contract with builders to sell them finished lots on an option basis. Options are often exercised on a quarterly basis where the builders purchase a given number of lots for a set price. This procedure serves to guazantee the builders a fixed finished lot price and reduces the developer's overhead and carrying costs and resulting financial exposure. The net result is that although there is a good supply of finished lots available, there is virtually no standing inventory of speculative housing. In the past, potential purchasers of single family housing in the Bakersfield market were accustomed to selecting housing units and waiting 90 to 120 days for completion. As a result, the local builders were able to allow many more custom features and amenities than what is typical on previously constructed production units. The larger builders such as Kaufman & Broad, Barrett Hornes and US Homes, who sold subdivisions on apre-plotted basis, found that the local market preferred the pre-construction sale option and purchased from the smaller local builders who were able to provide more flexibility in floor plans, lot selection, finish options and amenity packages. In checking with some of the major builders, it was our finding that they typically have from 3 to 5 units under construction not sold in their various projects {spec homes}. For example, LennarlColeman Homes may have 5-8 subdivisions selling in various areas in metropolitan Bakersfield. McMillinglKyle Carter Homes has a similar philosophy and have six on-going projects. We were unable to get precise figures from Ennis Homes Probuilt, BHA Properties or Centex Homes, but it was our impression that these builders have similar numbers of under construction-unsold units. Based on our examination of the market, we have estimated there are approximately 100 units unsold in the market currently. This is due to the local building industry practice of starting housing construction only after acceptance of deposits from pre-qualified buyers holding an approval letter from an acceptable financial institution. In speaking with some of the developers cited we learned that several have now begun to improve subdivisions on apre-plotted basis. This practice entails either improving acreage to finished lots or purchasing finished lots and essentially building the tract out prior to releasing housing units. The reason for implementing this practice is that builders have found that during 36 File 3806 Lauver & Associates Assessment District 04-2 the extended construction time, the market appreciation has overtaken the contract prices paid on a pre-sold basis, and the owner's have a substantial equity position without ever taking possession. Irr the pre-plotted scenario (which seems to be gaining some fauor locally) the market appreciation is captured by the developer since the purchases are made just prior to completion; the units need only carpet and the colors chosen by the buyers. The problem that has been encountered in the past is that there can be substantial risk with pre- plotted subdivisions when the market reaches equilibrium or an oversupply condition emerges. Interaction of Demand & Suoaly In the preceding examination of demand and supply conditions, it was deterrnined that based on the past five years average annual permit activity, demand for single-family residential dwelling units is forecast at more than 4,000 units annually over the next five years. Analysis of supply conditons indicates that there is potential for an estimated 4,150 new housing units based on tentative tracts and unsold-under construction lots in inventory. We also checked with the Bakersfield Planning Department. They compile data with regard to active tentative tract maps and recorded reaps. We reviewed their published figures as of December 8, 2004 and have reproduced them in the following chart. City of Bakersfield Active Tentative Tracts -December 2004 Tentative Map Type Recorded Approved Pending Totals No. Tracts Remaining Lots 65 9,689 23 3,179 7 1,304 95 14,172 Based on the data provided by the City Planning Department, there is a total of 14,172 lots in 103 developments that could be completed. We checked with the City and we learned that typically about 85% of the pending tentative maps reach the approved stage and ultimately become final mapped subdivisions. A more realistic number of pending maps would therefore be 37 Lauver & Associates Assessment District 04-2 12,046 lots. Accepting the published figure of 14,172 lots with potential for development represents an annual supply of 2,834 lots. Because of the developer's practice of constructing almost exclusively pre-sold units, the total potential lot supply is not a concern. It would be prudent however, to make periadic checks with the major builders to determine if they have placed any of their recorded or approved subdivision maps in the pre-plotted scenario. If builders begin to shift to the pre-plotted subdivision practice, and the number ofhouses under construction unsold combined with pre-sold starts substantially exceed the historical and forecast demand conditions, lenders will need to institute safeguards against the risk of an overbuilt situation. On the demand side, we cited the single-family residential permit activity over the past six years. In general, permits have been issued at the rate of 1,500 to 4,222+1- units annually and have averaged 3,924 permits in the past two years. There are few speculative-built homes unsold other than tract models. Our analysis of the market conditions in Bakersfield indicates supply and demand conditions are nearly in a state of equilibrium. The data also suggests that there is a steady demand for new housing product and there is sufficient entitled land available for rapid response in supply to meet the demand conditions. Housing Market Conclusions The Mortgage Bankers Association, in its "State of the Real Estate Finance Industry" report released January 22, 2004, said that the amount of new home mortgage money, which reached a record of $3.8 trillion in 2003, will decline to $1.9 trillion in 2004. The report went on t~ state that, while the volume of laans originated for home purchases will increase annually acres the three-year forecast period of 2004-2006, the refinance share of originations will fall fi~om 66 percent in 2003 to 34 percent in 2004, to 22 percent in 2005, and to 19 percent in 2006. Mortgage interest rates will likely end 2004 in the 6.3 to 6.5 percent range, increasing to over ~ percent by the end of 2005, according to MBA economists. MBA's outlook said home sales will 38 File 3806 Lanner & Associates Assessment District 04-2 slow slightly over the next two years after having set a third consecutive annual record in 2003. Home prices will continue to rise, but at a slower pace, the association said. Nationally, existing home sales will fall by 5.1 percent in 2004 and by 3.6 percent in 2005, with essentially no change in 2006, MBA added. New home sales are expected to fall by 7.2 percent in 2004 and by 3.3 percent in 2005, but remain unchanged in 2006, the forecast said. MBA predicted that real gross domestic product growth will average 4.7 percent during 2004, and 4.1 percent in 2005 and 2006. It expects the unemployment rate to decline from 5.7 percent now to 5.2 percent by mid-2006, partly because of re-entry of "sidelined" workers to the work force. The Bakersfield housing market will not be affected by the national conditions as they relate to pricing. We are not anticipating a decline in sales activity during 2005 however, owing to the steady in-migration of out of the area buyers. The Bakersfield new housing product is priced substantially below most other areas of the State and Bakersfield has a good reputation for a quality life style. The following fact summary lends support to the appraiser's forecast of a continued strong local housing market through the remainder of 2005: • Overall, the Bakersfield housing market is strong with about 400 homes for sale on any given day. • Through the 4th quarter 2004, home sellers received an average of 98.8% of asking price. • New home construction permits total of 4,222 permits issued in 2004. This compares with 3,626 in 2003. • A study of the Bakersfield Metropolitan area sales activity shows the average resale housing prices recorded by year end 2004 are up 32.8% over 2003 existing home prices in the same period. • The price per square foot of a new construction home during 2004 was $144.93 compared with $109.11 for existing housing during 2003. • According to Tieor Title Company, housing starts and appreciation are anticipated to stabilize and maintain at a 5 to 7% growth rate during 2005. • Because the local housing market is among the most affordable in the State of California, we are forecasting a continued strong market through year-end 2005, and addition of 3,600 to 4,150 new dwellings absorbed annually. 39 Lanner & Ass©eiates Assessment District 04-2 The following was from a article in the Bakersfield Californian. Bakersfield No. 2 in housing price jumps JENNIFER PLOTNICK, Californian staff writer, March 2, 2005 Home prices in Bakersfield soared at a higher rate over the past year than any other place in the country - -except Las Vegas. The average home price here increased 30.5 percent from the last quarter of 2003 to the last quarter of 2004, the Washington, a.C.-based Office of Federal Housing Enterprise Oversight reported Tuesday. "The past year has been extraordinary," said Patrick Lawler, chief economist for the federal office. "Price increases have accelerated very rapidly in Bakersfield." And over the past five years, Bakersfield's market appreciated 92.4 percent. Bakersfield's average home pride rose from $168,760 in the fourth quarter of 2003 to $225,088 during the fourth quarter of 2004, according to Gary Crabtree of Affiliated Appraisers, who tracks the local market. Nationally, homes appreciated nearly 11.2 percent during the time. Such dramatic price increases won't last forever, Lawler said. If prices escalate too high, people won't be able to afford a home and will move to a more affordable area, he said. Locally, it's a guessing game whether prices will continue to rise at such a whopping rate. "I think appreciation rates won't be as great in 2005 as they were in 2004," Crabtree said. He's seeing more 'For Sale' signs in peoples' yards and more homes listed far sale in the city, which indicates more supply. Many local real estate professionals attribute Bakersfield's soaring prices in the past year to greater demand for homes than available supply. Northern and Southern California residents are still flocking to Bakersfield for its relative affordability, said Realtor Leslie Walters, owner of Walters & Associates Inc. That shows demand is still driving this market and will continue to push prices up. Though she's heard other real estate agents say they think this market is slowing down, Walters sees that only in resale homes; new construction is still booming, she said. But city and county offices are so swamped with new bonstruction permits that she anticipates new homes will be delayed. "We'll continue to see an increase of properties being sold at inflated prices due to a lack of supply," Walters said. "There's no way around it." She anticipates the local housing market will be strong in 2005 but could face stumbling blocks in 2006 as new residents compete for the new homes that will be built. "In 2005, we're clearly sailing," Walters said According to statistics from the Multiple Listing Service, from Jan. 1 to March 1 of last year, 752 homes sold in greater Bakersfield at an average price of $174,242, Crabtree said. From Jan. 1 to Tuesday of this year, the average price of a home for sale on the Multiple Listing Service was $240,138, and on the Bakersfield Listing Service it was $266,310, according to Crabtree. Not only did prices soar in Bakersfield in 2004, but building activity increased as well. 40 File 3806 Lauver ~ Associates Assessment District 04-2 Just in Greater Bakersfield, about 5,000 permits were pulled to Build new homes during the year, according to Baynes Bank, executive vice president of operations for Lennar Homes in Bakersfield, who has gathered and compiled permit data since 1994 from city and county records. That's up from 4,328 in 2003. Nationally, the housing report showed prices decreased in 31 of 265 surveyed cities during the fourth quarter, such as a 2.5 percent decrease in the Blacksburg-Christiansburg-Radford area in southwestern Virginia. In stark contrast, prices in the Las Vegas-Paradise, Nev., market rose 36.2 percent for the year; Reno- Sparks was the third market in the nation in appreciation. Bakersfield was one of 14 California cities in the top 20; Florida had four. No other states were in the top 20. While the Washington, D.C., office reported appreciation in Bakersfield at 30.5 percent, Crabtree's research of local databases showed a 32.8 percent jump. The difference is likely due to the federal report ' using data based solely on homes purchased or secured by mortgage giants Fannie Mae and Freddie Mac. The data also doesn't include government loans, such as for veterans or first-time home buyers. Bakersfield Citv Conclusions Throughout the United States, the Bakersfield/Kern County area is well recognized as one of the fastest growing Standard Metropolitan Statistical Areas (SMSA} in the country today. It is the 11`h largest city in California, with a population of more than 725,000 within the sphere of influence and nearly 300,000 within the City limits. The expanding population and growth is attributed to a strong economy that was traditionally tied to oil production and agriculture but is now led by rapid diversification. Bakersfield's central location, low land costs and a strong employment base have helped it emerge as a major relocation alternative for major office users, national manufacturing and distribution industries. Improved and stabilized markets for oil and agriculture will only create additional benefits for the community, Bakersfield is centrally located in the south central portion of California's San Joaquin Valley. The city is the county seat of Kern County and is 110 miles north of Los Angeles via Interstate 5 and Highway 99 and 1 ] 0 miles south of Fresno via Highway 99. This central location along major national transportation arteries contributes to -the city becoming a regional headquarters location in the South San Joaquin Valley. Kern County is the largest oil-producing county in the nation. If it were a state, it would be the fourth largest in the production of oil. The county is also the third largest grower of agricultural 41 Lauver & Associates Assessrr:ent District D4-2 products in the state. In addition to these two major industries, Bakersfield maintains an extremely diversified manufacturing economy with over 300 manufacturing facilities within the city, highlighted by the existence of two major multi-million dollar manufacturing facilities; Frito Lay and Carnation Company, both of whom are now employing over 800 people. Bakersfield is a thriving metropolis, one of the fastest growing cities in the nation. In spite of this growth, the city has relatively little congestion and low median housing costs; the city has an excellent kindergarten through 12th grade school system as well as a community college and a California State University. Factors such as these are important. amenities to support the employment base and continue to provide an excellent choice for companies relocating to Bakersfield and Kern County. _ Robert Kleinhenz, deputy chief economist for the California Association of Realtors is predicting residential mortgage interest rates will be approaching 7 percent by the year's end, which will price some people out of the market. At that time, he predicts, only 16 percent of people in California will be able to afford to buy a home, since median prices will exceed $450,000 statewide. Bakersfield will continue to draw homebuyers from other areas of the state with a median price dwelling below $250,000. The overall trend for the city of Bakersfield appears to be stable with a forecast for steady-to- strong growth in the future= It is anticipated the Greater Bakersfield Metropolitan Area will contain a gradually increasing proportion of the county population. This is based on its location as a regional hub of business in the Central Valley, the steadily growing strength of the local economy, the city and county's pro-growthJpro-business attitude and plentiful supply of relatively inexpensive land. Therefore, it is anticipated that the Bakersfield area will continue to experience steady growth through the next decade, and continue to attract new households migrating from the urbanized areas of the San Fernando Valley and Los Angeles-basin. Our analysis of the residential market conditions in Bakersfield suggests that there is a strong demand for new housing product, which relates in turn to service, support and shopping space needs. There is sufficient entitled land available for rapid response in supply to meet the historical demand conditions. 42 File 3806 Lauuer & Associates Assessment District 04-2 NEIGHBORHOOD ANALYSIS Southwest Bakersfield Area Neighborhood Description The area shown in the southerly portion of the Assessment District boundary map is located in the southwest quadrant Bakersfield, approximately 11 miles south of the downtown civic center. The described neighborhood is steadily developing with new subdivisions consisting mostly of up-scale housing in planned communities. Since much of the vacant land remaining in this neighborhood is under construction with new residential enclaves or in the final planning stages, it is anticipated that urban development will shift to the west and southwest from this area. This would follow the City's historical westerly growth pattern that has steadily shifted to this area over the past twenty-five years. The subject neighborhood is dominated by the presence of the Seven Oaks master planned community. This planned area encompasses approximately 1,000 acres. It centers on a privately owned 27-hole championship golf course and country club. Seven C1aks is located south of the Kern River and extends south to White Lane. It is bounded on the North by Stockdale Highway, on the west by Allen Road (south of Ming Avenue) and on the east by Old River Road. In general, the land in the area west and south of the Seven Oaks community is considered to be transitional in nature, with agricultural uses giving way to residential hausing developments consisting of good to luxury quality dwellings. As a result of the master planning, this portion of Southwest Bakersfield contains the greatest concentration of up-scale housing product and generates more demand than in any other area of the City. Demographics According to the United States Census, conducted in 2000, the described neighborhood has a population of 21,839 persons. This is projected to grow to 24,000 persons by 2005. From the 1990 to the 2000 Census the population in this neighborhood area grew at a 51.6% rate. The 2000 Census shows there are a total of 7,814 households in this area and by 2005 this area is projected to grow to 8,595 households. 43 Lanner 8c Ass©ciates Assessment District 04-2 ASSESSMENT DTSTRTCT ti4-2 AREAS k,tX ~7 ~C v S{AE' C4E ~'1ttJt i~"5 SCUA1S3aR~k.~ UP` i;P"t` Rl' 1317 FI SHiF6U 1~zES;J~i3'\m II:°aTRI('3 M1© ©&'°7 ~.x ~~ ~' s~ ~x ~ CuMn ... .! 3> ~Xre ntA#Fkx Mfl:-Y . <_~ (2`' ~aOFW~d /..t+.. r ~ E, ~ ._..~ ... ... ~x ~ ~ F i ~y 3 4 :,wnn vJ 3 S ~ r s Ml#£MiF 4zU~RM4 h i f _. 7 . i 7. ` i 3 d ti^ RoSi .: i . :~ +kR}^+t¢9N SbVU3 aFP.t 45FdiR4 SYPJ £.4flK ~ ~~~~ M 4b" L"~YF'~A (a ;fir N llR./ E ' g.,„._ .,... _ ~ E ~ f w qTy nmMSeaY A ~ #' ~ rvvxrr un ns w~ :~[ ~ ` tJ p nL* r ~~~~ ~ 1 ~ ~ ~> ~`` ~ ~~ ,~R _ , ~ u '.. ,N - r ~~w ~:~. ~_ , I"12U1 ~ ~A rp±1~AP~S t tff~ ~ ~~ ~ ne. ~ a_ n n A V A `2" Of <A43sr;6L: SY-~trT~ MS AI'Y'~E 4`i^ t~ "^ rva va ~" x s im -' atot~ 3 % 51nap o Em ie i 44 File 3806 Launer & Associates Assessment District D4-2 In the 2000 Census, the neighborhood had a median income level of $61,484 and an average household income of $76,840. At this time the neighborhoods described have an estimated median income level of $68,862 and an average household income estimated at just under $86,000. Approximately 61.8°l0 of the households had an income in the $50,000 plus range. Of those in this bracket, roughly 213 had incomes in the $60,000 to $1255,000 range. The overall neighborhood income characteristics are well above those of the City of Bakersfield, which shows a median household income of $43,107, and Kern County with a median income of $35,486. Access The neighborhood has good access to all parts of the city via Ming Avenue, Stockdale Highway and White Lane, all with Freeway 99 on-off ramps two miles east of Gosford Road. Gosford, Old River and Allen Roads are major arterials providing access in the north and south directions to Stockdale Highway, White Lane and Brimhall Avenue. White Lane and Ming Avenue from Freeway 99 to Buena Vista Road are divided four-lane arterials. Stockdale Highway is a divided four-lane highway and commercial arterial providing access to the west fram Freeway 99 to Interstate 5. Brimhall Avenue is a connector accessing residential areas to the arterials to the east and west. Community Services The Bakersfield Police and Fire Departments serve the neighborhood. A fire department substation serving the subject neighborhood is on Stockdale Highway near EI Rio Road in the northeast sector of the neighborhood. ' Golden Empire Transportation Inc. provides public transportation, with numerous stops throughout the neighborhood. Convenience stores are located at the intersections of the major commercial arterials throughout the neighborhood. 45 Lauuer Bz Associates Assessment District 04-2 For convenience shopping, there are several shopping centers in the area. There is a large community center, located at White Lane and Coffee Road, anchored by an Albertson's store. Other notable retail uses in the center include Auto Zone, Jack-in the Box, Roadhouse Grill and a Del Taco fast food restaurant. There are several other retail outlets in a satellite retail strip in the center. The Town & Country shopping center located at Stockdale Highway and Coffee Road, also anchored by Albertson's serves the northerly portion of the neighborhood with all conveniences. A regional mall, Valley Plaza, is located at Ming Avenue and Freeway 99. This center is about 1- %z miles east of the subject neighborhood and it serves the entire Metropolitan Bakersfield area. Ming Avenue is the most populated corridor of retail land uses in the City. City, County and Administrative services are in the downtown central business district, approximately 11 miles northeast of the general neighborhood. Southwest Bakersfield Neiehborhood Conclusion The neighborhood is considered to have a good location in the Southwest sector of the Greater Bakersfield Metropolitan area. It is well served by conveniently located schools, shopping, services and conveniences. The averall character of the neighborhood is in the final stages of its growth cycle as the remaining land is being developed with mostly up-scale housing product. The subject neighborhood contains the greatest concentration of upper income level population, far exceeding any other sector of the City. Owing to the master planning concept introduced in the neighborhood by Tenneco Land and Castle & Cooke, the neighborhood is considered to be among the most desirable areas of the City. The locational characteristics have generated strong market interest in housing in this area, resulting in strong sales activity. Although the local resident market demand has stabilized, there remains considerable demand for residential housing from otYf of the area buyers who are relocating to Bakersfield for affordable housing and the quality lifestyle available here. Barring any unforeseen negafive economic/social occurrence, all of the discussed findings should assist in maintaining values in the area in general and for the subject in particular. 46 File 3806 Lauver & Associates Assessment District 04-2 Northwest Bakersfield Neinhborhood Area The area shown in the northerly portion of the Assessment District diagram, known as the Cherry Hill II Area, is located in the northwest sector of the City of Bakersfield. The general area improvements are predominantly low density residential in nature, consisting primarily of single-family tract and custom-built dwelling units. The area is suburban to semi- rural, with the typical lot size greater than in other portions of Bakersfield. Many of the home sites allow light agriculture uses to include keeping of horses or other livestock. Two major planned communities in Bakersfield's Northwest quadrant have influenced the subject property and general development in the subject's general vicinity, the 1,380-acre Riverlakes Ranch and the 1,400 plus acre Polo Grounds. These master planned areas have played a major role in the growth of the northwest over the past several years and will be likely to set the character of the northwest quadrant of Bakersfield into the indefinite future. The first planned community in Northwest Bakersfield was Riverlakes Ranch. This is a Master Planned Community with distinctive and varied residential neighborhoods, built around a golf course and water theme, interconnected by an extensive open space and greenbelt system with pedestrian and bicycle paths. There are a variety of residential housing types, on various lot sizes and configurations that appeal to the single-family market that is dominant in the northwest quadrant of Bakersfield. The open space and recreational portion of the development is integrated with the various commercial and residential land uses. Riverlakes Ranch water theme consists of two man-made lakes covering approximately 38 acres. These offer passive boating, a one-half acre swimming lagoon with a white sandy beach, and a beach club/multi-purpose facility. An 18-hole championship golf course opened on LaborDay 2001. The residential products in the area target all segments of the housing market including custom lots, semi-custom homes, single-family tract housing, and apartments. 47 Launer & Associates Assessazent District D4-2 High school and elementary school sites are incorporated into residential neighborhoods and are conveniently located to accommodate the student population. The other planned area, the Polo Grounds, is a 1,450-acre residential and equestrian development planned by developers Bentley Mooney and Robert E. Smith. This project is located north of Hageman Road and west of Calloway Drive. This area, like the Riverlakes Ranch area, has planned high school and elementary school sites incorparated into residential neighborhoods throughout the planned community. Ultimately, the project will provide over 4,500 dwelling units. The majority of the improvements along the neighborhood's major arterial,_ Rosedale Highway (State Route 58), consist of roadside business and industrial uses. Area build up is estimated to be approximately 40% at this time. The improvements range in age from new to 25 years. The most recent development in the general neighborhood has been new single-family tract housing in the Polo Grounds and Riverlakes Ranch areas north of Rosedale Highway. New commercial development is taking place along two recently widened and expanded north- south arterials, Coffee Road and Calloway Drive in the area. New commercial developments along Rosedale Highway are under way, to serve the needs of the regional population. Smaller, neighborhood retail nodes are located at the periphery of the community providing for local day- to-day needs Overall maintenance of the properties appears to be good, based on drive-by inspection, although many of the older commercial-industrial type properties along Rosedale Highway are nearing the end of their economic lives and signs of deterioration and deferred maintenance are becoming evident. Demoeranhics According to the United States Census, conducted in 2000, the described neighborhood has a population of 16,218 persons. This is projected to grow to 20,096 by 2005. From 1990 to the 48 File 3806 Lauver & Associates Assessment District 04-2 2000 Census the population in this neighborhood area grew at a 50.58°to rate. Currently, there is a total of 5,034 households in this area and by 2005 this area is projected to grow to 6,228 households. The 2000 average household size is 3.2 persons. In the 2000 Census, the neighborhood had a median income level of $56,059 and an average household income of $62,195. Approximately 61 % of the households had an income in the $35,000 to $100,000 range. Of those in this bracket, roughly half had incomes in the $50,000 to $75,000 range. The overall neighborhood income characteristics are well above those of the City of Bakersfield, which shows a median household income of $43,107. Access/Linkages The neighborhood has good access to all parts of the city via Freeway 99 (SR 99), Rosedale Highway, a major East-west commercial artery, Coffee Road, a primary North -South commercial arterial and Jewetta Avenue, a secondary north-south collector route. Access to the State Highway system is via Rosedale Highway with ramps in both north and south directions and. at Buck Owens Boulevard, approximately 2 miles east of the subject neighborhood. The widening of Calloway Drive and completion of the bridge over the Kern River provides six lanes of north-south vehicular traffic flow to the area, and effectively completes a major arterial loop connecting Northwest and Southwest Bakersfield. The widening of Coffee Road to six lanes and a grade separation over the AT & SF Rail lines has also enhanced traffic flow to the subject neighborhood. The alignment along the Kern River of the proposed freeway by-pass in this area will provide an additional cross-town expressway that will alleviate any future potential for traffic congestion on the surface streets. Community Services - -- ` The Bakersfield Police and Fire Departments serve the neighborhood. A fire department substation serving the neighborhood is on Rosedale Highway near Callaway Drive. 49 Lauver & Assoeiufes Assessment District 04-2 Golden Empire Transportation Inc. provides public transportation, with numerous stops throughout the neighborhood. Convenience stores are located at the intersections of the major commercial arterials throughout the neighborhood. A new community center, the Northwest Promenade, is located on the north line of Rosedale Highway and Coffee Road. This center is anchored by a Wal-Mart store. Other notable retail uses in the center include Auto Zone, Jack-in the Box, Roadhouse Grill and a Del Taco fast food restaurant. There are several other retail outlets in a satellite retail strip in the center. The southeast corner of Coffee Road. and Rosedale Highway is the site of a new center known as Rosedale Plaza. A newly constructed Lowe's Home Improvement Center (140,000 square foot do-it-yourself home retail center) serves as the anchor for this power center. An Arco AM-PM service stationlconvenience store and The Pizza Market occupy smaller sites in this center. A Coco's restaurant and a Niagara Car Wash were also recently completed in this center. Schools. ShoaainE and Conveniences Elementary school aged students, grades Kindergarten to grade 6, attend Almondale Elementary School located within Ih mile of the subject property. Junior High school students attend Rosedale Middle School, located on the south line of Rosedale Hwy. Freedom Middle School (grades 6 through 8} is the most recently added school in the neighborhood, located at the southwest corner of Noriega Road and Jewetta Avenue. High school students attend Centennial High School located near the center of the neighborhood. A major community center, known as the Northwest Promenade, is located on the north line of Rosedale Highway and Coffee Road. This center is anchored by Wal-Mart, Target, Office Depot, Foods Co, Office Depot, Linens `n Things and a Best Buy consumer electronics store. Other notable retail uses in the center include Auto Zone, Jack-in the Box, Chewey's, Red Lobster, Quizo's, I-Hop, Roadhouse Grill, Wendy's, A&W and a Del Taco fast food restaurant. There are several other retail outlets in a satellite retail strip in the power center. Recently completed expansion of the Northwest Promenade included the addition of 900,000 square feet of retail 50 File 3806 Lauver & Assaeiates Asssssraent District 04 2 space. This power center has primary and secondary trade areas of 6 to 10 miles. The southeast corner of Coffee Road and Rosedale Highway is the site of a center known as Rosedale Plaza. A newly constructed Lowe's Home Improvement Center (140,000 square foot do-it-yourself hame retail center) serves as the anchor for this power center. An Arco AM-PM service stationtconvenience store and The Pizza Market occupy smaller sites in this center. A Coco's restaurant and a Niagara Car Wash were also recent additions to this center. City, Caunty and Administrative services are in the downtown. central business district, approximately 6 miles southeast of the general neighborhood. Access The subject neighborhood is accessed from Rosedale Highway and Jewetta Avenue at the south and from the north at Snow Road and Jewetta Avenue. Jewetta is a divided 4-lane connector with protected turn lanes at the 4-way intersections. Conclusion The neighborhood is considered to have a good location in the Northwest sector of the Greater Bakersfield Metropolitan area. It is well served by conveniently located schools, shopping, services and coriveniences. The overall character of the neighborhood is in a state of transition, from agricultural land, older residential, and outmoded cornrnercial uses, to a very modern residential urban environment. The locational characteristics have generated strong market interest in housing in this area, resulting in strong sales activity. Although the local resident market demand has stabilized, there remahrs considerable demand for residential housing from out of the area buyers who are relocating to Bakersfield far affordable housing and the quality lifestyle available here. 51 Lauver & Assaezutes Assessment District D4-2 Barring any unforeseen negative economic/social occurrence, all of the discussed findings should assist in maintaining values in the area in general and for the subject in particular. SITE DESCRIPTIQNS Brighton Parks, Brighton Village and Stockdale at Allen Commercial Location and Access This portion of Assessment District 04-2 is located in Southwest' quadrant of the city of Bakersfield. At some point in the futLU•e, the planned Westside Parkway will form the northerly property boundary of the Brighton Parks and Brighton Village Areas. _ At completion the Westside Parkway will be an 8-mile, East-West, grade-separated, access- controlled transportation route beginning at Stockdale Highway near Heath Road and connecting to the City street system near State Route 99. The Westside Parkway runs generally north of the Kern River, but does cross the river near State Route 94 at its east end. Intermediate access connections will be provided through interchanges at Allen Road, Calloway Drive, Coffee Road and Mohawk Street. There will also be two bridge crossings at Jewetta Avenue and Renfro Road. Sound walls will be constructed where required to mitigate noise impacts adjacent to residential areas. The Parkway is planned to be heavily landscaped with many trees and will have a landscaped median island in the center of the facility. Special features- such as aesthetically enhanced bridges and lighting are also planned to be part of the project. The Westside Parkway project also includes the construction of Mohawk Street connecting from Rosedale Highway south to Truxtun Avenue. The Assessment areas will have a 12' high sound wall and will have additional buffering from the planned expressway by the Rio Bravo Canal provided by man made lagoons that were prepared for water percolation and recharge by the Kem Water Bank. 52 File 3806 Launer & Associates Assessment District 04 2 The Stockdale at Allen Commercial Area and the Brighton Parks Area will be bounded on the east by Jewetta Avenue and Stockdale Highway forms the southerly boundary of the Stockdale Commercial Area. Brighton Village Area has frontage along the east line of Allen Road and is adjacent to the proposed Westside Parkway at the north and the Brighton Parks and Stockdale at Allen Commercial area to the east and south, respectively. Surroundine Property Uses The subject is a part of the Brighton Place planned community. Previous phases of Brighton Place are nearly fully developed with single-family residential subdivisions located east of the Rio Bravo Canal. These subdivisions have housing characteristics summarized below. Brighton Place Development Area Tract Name No. Phases No. Lots Housing Type Cambridge Tract 6111 3 91 Large, Custom-Built Dwellings, 2,500+ SF- $375-5750+ Price Range Bedford Tract 6127 2 63 Large, Custom-Built Executive dwellings, 3,000+ SF - $450-650+ Camden Tract 6128 Custom-Built Dwellings, 2,000+ SF- 6 189 $250 to 375+ price Range South of the Brighton Parks and Brighton Village Areas, across Stockdale Highway, is a newly constructed Christian High School. To the west is unimproved land that lies between two subdivision developments that were constructed in the 1980's and 90's. To the north, northeast and east-northeast there is on-going new construction of new housing _._._ developments. The Cherry Hill II Area is surrounded by mostly newer single-family residential uses consisfing of custom built housing and tract production housing developments of various sizes. The surrounding area lots are generally larger lots, typically ranging from around 8,500 to over 10,000 square feet in size. 53 Lauver & Associates Assessment District 04-2 Size -Shape - Topography The various assessment areas have the following size characteristics: Area Description Brighton Parks Area Brighton Parks Area Brighton Village Area Cherry Hill II Area Stockdale at Allen Commercial Are Tract No. Lots Acres Tract 6250 118 34.15 Tract 6250 307 67.28 Tract 6281 95 22.28 Tract 6153. 119 38.03 NIA N/A 30.76 In its natural state the parcels were generally level with a slight natural gradient sloping downward from northeast to southwest. The sites are irregular in shape as shown in the Assessment Diagram. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Zoning According to the Bakersfield Plamring Department, except for the Stockdale at Allen commercial, alt assessment areas are zoned for residential uses. Tract 6250 Units 1-12 have a PUD (planned unit development) zoning. This designation allows for higher density than the typical R-1 zone. A total of 215 of the 5,000 square foot lots are plotted in the subdivision. Tentative Tract 6281 is zoned R-1. This zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square feet for each dwelling unit. The City has allowed a higher density of residential development in Tract 6281 to allow 5,000 square foot dwelling sites. The Stockdale at Allen Commercial Area has a C-2 zoning designation, which allows a wide variety of commercial land uses. 54 File 3806 Lauuer & Associates Assessment Distfzct 04-2 ', Easements and Encroachments The appraiser was not provided with title reports for review. No adverse easements or encroachments were observed on the sites or on the plats however, and it is assumed that none exist. The appraiser makes no warranty to that effect. Utilities Electricity, water, gas and sewer are located in the frontages along Allen Road, Stockdale Highway and Jewetta Avenue in the Brighton and Stockdale areas and along Old Farm Road and Reina Road in the Cherry Hill II Area. A11 parts of the assessed parcels can be connected to all utilities in the frontage streets. Environmental Characteristics The appraiser has no knowledge concerning the presence or absence of any hazardous materials or wastes within, or in proximity to the subject property. A physical inspection of the subject property revealed no atypical conditions that might contribute to a toxic hazard. It should be noted however, that this appraisal report was prepared strictly for the use of the client and does not constitute an expert environmental assessment of the subject property. The appraiser is not an expert in the field of hazardous materials, and this appraisal report should not be relied upon to determine whether environmental hazards exist on the property. The value presented in this report is predicated on the assumption that the site is free of any hazardous materials, existing or past soil contamination. If there is any question regarding the presence of any contaminants, the appraiser recommends that the client obtain an environmental assessment from a qualified environmental expert to determine the potential environmental risks associated with ownership of the subject property. If such toxic conditions do exist, the property value may be adversely affected. 55 Lanner & Associates Assessment District 04-2 Flood and Earthquake Zones According to the Federal Emergency Management Agency Federal Insurance Administration panel 060075-1015 B, dated September 29, 1986, the subject property is located in a flood plain area Zone C. This designation signifies areas of minimal flooding and no flood insurance in required. According to Special Publication 42 of the California Department of Conservation, Division of Mines and Geology, revised edition, 1990, entitled Fault-Rupture Hazard Zones in California, the subject property is not located within a Special Studies Zone, as defined in the Alquist-Priolo Special Studies Zones Act. _ Residential Lot Sizes Brighton Parks, Brighton Village The Brighton Parks Area, known as Tract 6250 Units 1-12, is planned for development into 425 single-family residential lots as a gated senior citizen community. This community development covers a total of 101.43-acres and will ultimately be developed with three product types. The lot sizes vary but in general consist of lots that are classified as follows: Product Type Lot Sizes 1 5,000 to 6,599 2 6,600 7,699 3 7.700 and above The Brighton Village Area is planned For development with a total of 95 lots and covers an area of 22.28-acres. The lot sizes are generally in the 5,000 to 8,000 square foot size range with an average lot size of around 7,700 square feet. According to the developer, there are four floor plans to be constructed with dwelling sizes ranging from 1,307 to 1,$12 square feet gross living area. Cherry Hill II Area There are a total of 119 lots in the Cherry Hill II Area. These are in Tract 6153 Units 3 and 4. The lots range in size from. 8,706 to 22,154 square feet, with an average lot size of 10,950 square 56 File 3806 Lauver & Associates Assessment District 04-2 feet and a median lot size of 10,160 square feet. These lots a=ill ultimately be developed with custom-built dwellings, typically from 2,200 to 3,500 square feet gross living area. Conclusions: No detrimental influences contiguous to any individual parcels in the subject property or in the general area of the subject tract were observed. The subdivision is consistent with the existing General Plan. Its design does not cause substantial environmental damage or substantially and avoidably injure fish or wildlife or their habitat, nor is it likely to cause any serious health problems. The design of this subdivision does not conflict with easements, acquired by the public at large, for access through or use of property within the subdivision. _ The various areas are physically suitable for the type and density of development provided by the zoning, and is well located with reference to schools, shopping and other social/economic establishments. Because of their locations in proximity to the major arterials and connectors, the subject's location allows ease of access and short travel times to conveniences. The conformity of the lots to the area and the general development trends in the Southwest Bakersfield and Northwest Bakersfield areas should assist in the marketing of the assessed parcels with or without housing units and demand/growth trends should aid in maintaining values into the future. PROPERTY HISTORY Uniform Standards of Professional Appraisal Practice and the Standards of Professional Practice of the Appraisal Institute require that an appraisal report must contain an analysis of any prior .___ sales of the property that occurred within athree-year period prior to the date of value. According to the Caunty Recorder of Kern County, title is vested in Castle & Cooke California, Inc., as to the Brighton areas and Stockdale at Allen Road Area. No transfers have been recorded in the past three year time frame investigated. 57 Lauver & Associates Assessment District 04-2 Title to the Cherry Hill II Area is vested in Cherry Hill, Inc. No transfers have been recorded in the past three years time frame investigated. ASSESSED VALUE AND TAXES Because it is the purpose of this report to determine market value, (which by definition presumes a ready, willing and able buyer}, it becomes necessary to allow for an increased or decreased tax liability for the subject property, based upon the valuation reported in this appraisal report. According to a spokesman for the Kern County Tax Assessor and based on a review of the client supplied prclitttinary title report, there are no delinquent taxes or penalties awed nor were there any liens of record against the subject property. The details of the Community Facilities District special tax Iicns applicable to subject properties are outlined in the previously referenced Engineer's report, prepared by Wilson and Associates, dated April 21, 2005, and made a part of this report by reference. HIGHEST AND BEST USE Definition The reasonable and probable use that will support the highest present value, as defined, as of the date of appraisal. _ Alternatively, that use, from among reasonably probable and legal alternative uses, found to be physically possible, appropriately supported, financially feasible, and which results in the highest land value...the most profitable use: z Real Estate Appraisal Terminology. Published jointly by the American Institute of Rca] Esta[e Appraisers and The Society of Real Estate Appraisers. Chicago. 1975 Pg.201. 58 File 3806 Lauver & Associates Assessrrtent District 04-2 Introduction The following highest and best use discussion will focus on the primary factors examined in determining highest and best use. 1. What uses are legally allowable? 2. What uses are physically possible (what can the site support)? 3. What uses are financially feasible (and appropriately supported)? A. What is the existingffutLUe neighborhood land use pattern? 13. What is the subject site's most probable use "as if vacant"? 4. What uses are maximally productive? 5. Conclusions Throughout the analysis, the valuation theories and principles of anticipation, balance, conformity, surplus productivity, and externalities are examined. These theories or value influences are defined on the facing page. The highest and best use analysis considers these_ principles as they apply to the site, first, "as if vacant," and then, "as improved." BRIGHTON PARKS, BRIGHTON VILLAGE AND CHERRY HILL II AREAS What Uses Are Leaally Allowable? The zoning for the subject areas are designated by the City of Bakersfield as R-1. This zoning allows development for single-family residential uses, with a minimum lot size of 6,000 square feet per dwelling unit. Therefore, the only legal permissible use possibility for the subject site under the zoning is for one dwelling on a minimum 6,000 square foot lot. An exception to this was made in Tract 6250, the Brighton Parks Area, since this is to be a gated community with ownership restricted to senior citizens age 55 and above. There are a total of 250 lots in this tract that will be less than 6,000 square feet of total lot area per lot --- 59 Lauver & Associates Assessment District 04-2 What Uses Are Physically Possible? From among the legally allowable land uses, the appraiser must determine the physically possible uses. Cinder the zoning code, the development of this parcel must consist of single family residences meeting the front, side and rear yard setback requirements set forth under the zoning code. It is thus physically possible and legally permissible to develop this site exclusively with residential lots with one housing unit on each lot. What is The Most Financially Feasible Use of The Site? Financial feasibility deals with the returns expected on an investment. Return implies that the idea proposed is marketable, 'rentable' or 'saleable', and is therefore capable of generating a cash flow, thus allowing for a return on, as well as return of, the dollar invested. Developments that were developed to their legally permissible and physically possible uses as single-family residential resulted in the most financially feasible use for the respective properties. Thus, development of the subject for single-family residential purposes is considered the most financially feasible use. Determining the highest and best use of the site as if vacant from the possible uses also requires examination of the existing and future land use patterns in the neighborhood. Historical and recent additions and proposed and under construction projects in the immediate area consist almost exclusively of residential uses. It was established that this neighborhood's location in the Southwest quadrant of the city is one of Bakersfield's more desirable residential locations, demonstrated by the amount of new residential growth during the past ten years. The latest surveys indicate strong market demand for single-family housing in the area. No evidence is available to suggest that the remaining vacant land in the imrYtediate neighborhood should not develop to single-family residential uses in keeping with the General. Plan. Likewise there is no reason to believe the land use pattern or character of the area should deviate from the uses described previously in the future. It was our finding that multi-family housing finds most market acceptance in areas proximate to entry-level housing and along arterials where these 60 File 3806 Lauver & Associates Assessment District 04-2 developments form buffers for single-family residential subdivisions. Therefore, it was my determination that the use that is most financially feasible and maximally productive while conforming to the character of the neighborhood is for single-family residential use. This use would be in harmony with the principle of balance and conformity with the historical and existing land use patterns in the neighborhood. The supply/demand characteristics were analyzed in a prior section of this report. It was concluded that there is sufficient demand existing to warrant development of single family housing in the general area. It was the appraiser's conclusion that, given the on-going development in the subject's general and immediate vicinity and the rapid absorption rates being experienced for the finished lots and finished house lot combinations, there is immediate demand for the subject's development. Conclusion The process of determining highest and best use relied upon examining zoning, surrounding land use patterns and a cursory investigation using observation of the growth of residential supply/demand in the subject area. The general neighborhood appears to be steadily improving with single-family residential developments. An examination of the residential housing market in Bakersfield indicates the demand and supply forces are in balance. Because of the practice of making finished lots available on an option basis, builders have less financial exposure and can immediately adjust to changes in the demand side of the market. It is the appraiser's opinion that the Highest and Best Use for the property appraised is the proposed use, for single-family residential housing. Development could commence immediately owing to the steady demand conditions existing at this time. "~ 61 Launer & Ass©ciates Assessment District D4-2 STOCKDALE AT ALLEN COMMERCIAL AREA Description The Stockdale at Allen Commercial Area of the Assessment District consists of a 30.76-acre parcel that fronts along the north line of Stockdale Highway from Jewetta Avenue at the east to Allen Road at the west. The zoning for this portion of the assessment district is designated C-O a commercial and professional office designation. VALUATION METHODOLOGY In the appraisal of real estate there are three traditional approaches to value. These are the cost, direct sales comparison and income approaches. Methods Applied to the Subiect Developments In appraising the subject parcels, which. consist of vacant land, the Sales Comparison approach is the primary value indicators used in the local market and is considered the most pertinent of the value indicators for the subject. The Cost Approach is pertinent in the sense that the land has been improved to varying degrees and the costs incurred to develop the parcels to their current state could be recaptured in the event of resale. Therefore the Cost Approach is considered in support of the value conclusions reached in the sales comparison approach. Cost Approach Defined The cost approach is defined as: b2 File 3806 Lauver & Associates Assessment District 04-2 "A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of, or replacement cost' and adding the estimated land value plus an entrepreneurial profzt. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised."~ The cost approach involves analysis of land sale data, engineering costs, the cost of city planning studies/approvals, in addition to the direct land improvement costs. Improvement costs are estimated and added to the land value estimate for a value indication for the subject. Sales Comparison Approach Defined The sales comparison approach is defined as: "A set of procedures in which an appraiser derives a value indication by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison, and making adjustments, based on the elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant; it is the most common and preferred method of land valuation when comparable sales data are available."~ Application of the sales comparison. approach involves gathering information on sales transactions involving properties with similar physical and locational characteristics. Since no two properties are exactly alike, adjustments are made to the comparable sales to reflect the characteristics of the subject property. After making the adjustments, a range of value is indicated for the subject drat is reflective of the current local market conditions. Income Approach In an analysis of land and lots, a value from the Income Approach is typically presented using a process known as a residual cash flow analysis. This methodology is based upon the principle of anticipation that affirms that value is created by the anticipation of future benefits. After concluding the value of the finished lots using the approaches described previously, deductions are made from the estimated periodic sales revenues. These deductions are estimates of the costs 'Che Dictionary of Real Estate Appraisal, 1993, Appraisal Institute, Page 81. z ]bid Page 319. 63 Laaner & Associates Assessment District D4-2 of sale, absorption, construction and profit to indicate net cash flow revenues to the developer. These periodic cash flows are discounted to indicate a net present value that represents the subject's value during the holding period. It will be shown in subsequent sections of this approach that the income approach is not applicable in this instance since the market is not demonstrating a need for holding property to find a purchaser. Methods Applied to the Suhieet All three approaches are pertinent to the appraisal of the subject property. Each approach will be independently applied in the following analysis. The values applicable to the subject and the method used are presented in the following chart. Value Definition Methodolo `As Is' Value of land & improvements as they exist on the Cost, Sales Comparison, effective date of re ort Income A roaches `As Retail Value of finished vacant lots and land when Cost, Sales Comparison, Com lete' read for im rovement Income A roaches Estimated Finished Lot Values `When Complete' The first method employed in valuing the tracts is the Cost Approach. This approach consists of estimating the value of the individual lots when finished and ready to be improved with single- family residences. This approach involves estimating the value of the unimproved land and adding the costs to produce finished lots. Costing sources used include Marshall Valuation Service, a recognized national costing service, cost estimates from a major bank cost estimating department and estimates from local developers actively involved in the subdivision process. Another method used in estimating the finished residential lot value is the Direct Sales Comparison Approach. To apply this technique, sales data pertaining to finished lots that have sold during the past year is analyzed. These data are compared to the subject and adjusted to represent the subject's characteristics. The adjusted values from this approach will provide a range of values from which the subject's value is selected. 64 File 3806 Lauver & Associates Assessment District 04-2 The cited methods are then reconciled and the total of the land and improvement values will represent the aggregate market value of the various tracts `When Complete'. It is understood that the on-site development of the subdivisions will require time to complete before any income is realized from lot sales. Consequently, the aggregate market value of the lots must be discounted to reflect the time period necessary to construct the tract and achieve a full sellout. Establishing an estimate of completion time for the subject tracts, and discounting for the time value of money is the methodology employed. This discounted cash flow analysis will provide the `As Is' value of the subject lots. Marketin~~ Time Marketing time is an opinion of the time to sell a property interest in real estate based on the opinion of market value during the period immediately after the effective date of value. An opinion of reasonable marketing time is determined by comparing the recent exposure time of similar properties and then taking into consideration current and future economic conditions and how they may positively affect marketing of the subject property. According to the brokerage firms involved in recent transactions, the total. time on the market varies. Some sales have consummated within six months or less of their offering others have required nearly three years. The most recent activity involving vacant land with residential entitlement indicated selling prices less than one month, another indicator of the strength of the market. Worst case scenario would suggest marketing times for residential land less than one year. Based on the market indicators and brokers interviewed, it was our finding that marketing time for the subject {in its present state) is under 3 months. 65 Launer & Associates Assessment District 04-2 VALUATION Value of the Unimproved Residential Land in Brighton Parks, Brighton Village and Cherrv Hill II Areas This appraisal report cavern parcels of land that are adjacent to tracts with lots under construction. The reader may wish to refer to the reduction of the assessment district boundaries for a graphic representation of these areas. In this section we will estimate the value of the subject land, as is on the date of our value estimate, April 25, 2005. Value of the Subject Land The first step in the valuation process involves analysis of land sales that have characteristics similar to those of the subject. The sales are presented on individual data sheets that follow and are graphically displayed on the sales map that follows the data sheets. 66 File 3806 Launer & Associates Assessment District 04-2 LAND SALE NO. i eae-02 S7/2 SEC.3a T.29S. R.2SE. }} +on-Q2 J a ~ ~---"'-_,.....ps ~ l._..............,.~ ~ _~ ~,. ~ 14' EE ~ I~iL _1_. ~,,.. ' ~~ ~ -m ssa +x a ~ lr ~ G[~~~; ~ ~ s i ~~ (dam sr7~u' c sa~+e ; , . L ~," '' i 1 :~ r r h¢ 5d>5 FM I b9 Ci x € 1~~~ ~ ~ 2S3 ~~? 3 ;i~ Ct ~~ ~2E1 s ta.9DaG. 39.'~C M '. W: t f~ s~ A + s fi~X W5415 PH1 ~ ~ ~ ~. ~ .. i...~ .... t1Y ... ,m ,.....=~: .i 1 . s, lSSESSORS 4W N6. <nw-OS GpuM.Y ~ NtRN Pronertv Identification Record ID 295 Property Type Residential Subdivision Land Property Name Celebrations Address Stockdale & Renfro, Bakersfield, Kem County, California 93312 Location Southwest Quadrant Tax ID 408-020-16 Sale Data --- Grantor Mahan Homes, Inc. Grantee Lennar Bakersfield, Inc. Sale Date July 3Q 2004 Deed BooklPage 179163 Property Rights Fee Simple Financing Cash to seller Verification Tony Hogg, 395-3282, October 4, 2004; Confirmed by Michael Launer, MAI SRA Sale Price _.._ $2,885,000 Upward Adjustment $200,000 Downward Adjustment $330,000 Adjusted Price $2,755,000 L.ssC.3:R`ID u a rctt xa ES oscuEw9x 67 Lauver & Associates Assessment District 04-2 Land llata Zoning Topography Utilities Dimensions Shape Land Size Information Gross Land Size Useable Land Size Planned Units Front Footage Indicators Sale PricelGross acre Sale Price/Gross SF Sale Price/Useable :1ere '. Sale Price/Useable SF I Sale Price/Unit LAND SALE NO. I (Cont.) R-1, Single Family Below street grade Eleetriciry, Water, Gas, Sewer 662 x 1,294 Rectangular 20.120 Acres or 876,427 SF 18.770 Acres or 817,621 SF 93.29% 75 1320 ft Stockdale Highway $143,390 Actual or $136,928 Adjusted $3.29 Actual or $3.14 Adjusted $153,703 Actual or $146,777 Adjusted $3.53 Actual or $3.37 Adjusted $38.467 Actual or $36,733 Adjusted Remarks This is the July 2004 sale of a parcel located at the NWC of Stockdale Highway and Renfro Road in southwest 13akersfield. The sale price included a tentative map for 75 residential lots averaging 7,200 SF. The buyer paid approximately $200,000 to the seller to reimburse for water connection fees, sewer improvements and storm drains. The sel]er had purchased this parcel on July 9, 2002 for the sum of $400,000 and spent an estimated $330,000 in improvements. The improvements included importing substantial fill material, engineering fees, partial installation of sewer mains azid Tentative mapping for 75 lots. 68 File 3806 Lauver & Associtttes Assessrraent District 04-2 LAND SALE NO. 2 .w-0t L305.. R,27E. ~i~1 SpJ.~ f`i.i'^ hR 661 A98 d CcuNn ,... r E:;Eh'L' was. uv c~~,w .Hd4..'OV ..... ASSES970.S'1uP t6F. a97-Dt_ GLtIXtY.~'I[tPN ~T-Y^ ~ ~ -1 ~ , .. ~° _ ` « ~ tA~ t 9 W.3: ~ ~, _~ _ ~ tai'' a ~ ' -ra'x ' s f._~ e2u 1 rx- _ ~ V ~ ~ s n:` 9 v.~ c '~ ~ #i ' e it ~ . j ~ _ i -~ f ; a i --.__ _ __ v~k ~ . __ aisa crv ~. ~ 1 i . t. ~ ~ 3 ` Prooertv identification ', Record ID ~ Property Type Property Name Address Location Tax ID - Sale Data Grantor Grantee Sale Date Property Rights Financing Contract Price Land Data Zoning Topography Utilities 300 Residential Subdivision Land Residential Land Mountain Vista south of Pacheco, Bakersfield, Kern County, California 93312 2481 D-7 497-010-14 Sterling Oaks Investments, LLC DR Horton July 2, 2004 Fee Simple Cash to Seller $6,435,000 __.. R-1, Single Family Level Electricity, water 69 Lauver 8c Assoeiates Assessment District 04-2 LAND SALE NO. 2 (Cont.) Land Data fCont.} Dimensions 1250.91 x 2655.81 ', Shape Rectangular Land Size Information Gross Land Size 74.790 Acres or 3,257,852 SF Useable Land Size 74.790 Acres or 3,257,852 SF 100.00°l0 ' Planned Units 277 indicators Sale Price/Gross Aere $8b,041 Sale PricetGross SF $198 Sale PricelUseable Acre $86,041 Sale PricetUseable SF $1.98 Sale Price(Unit $23,231 Remarks _ This is a Suly 2004 closing of a rectangular shaped parcel located approximately 1(4-mile sauth of Pacheco Road with frontage on the west line of Old River Road and on the east line of Mountain Vista Drive. The seller (Craig Garver} had acqui red the parcel in a sale from Antongiovanni about 6-months previously for ~ the sum of $45,000 per acre. ~~ File 3806 Lauver & Associates Assessment District 04-2 LAND SALE NO. 3 m-03 ~. _ asp !!'+SIC 4VAi ypa,y ~S+S+M I -~- _ ° ..~ O Rc'l~rC ~ ..m 6 u rn NYC un~/ ,S~C~ <,< ~U a _ ~~ ~+ u c. I . ^ ~. µ 1'1yR _... p _ C fj~ q i ~,~,. a ~ ~, ` ~ - ,C 3 1; I~ _ ~, ~J ~ i~ ~6 ~ ;~ .'n ~ i'~~ n+. ... 1111 p I ~y Ij~ $ Property Identifiea&on Record ID 'f Property Type I Property Name Address Location Tax ID Sale Data Grantor Grantee Sale Date Property Rights Financing Veriticalion Contract Price 304 Residential Subdivision Land Residential Land Panama Lane and Old River Road, Bakersfield, Kern County, California 93312 2481 D-7 497-010-16 B Sterling Oaks Development Lennar Homes November 15, 2004 Fee Simple Cash to Seller Lennar Homes, 326-1141, October 28, 2004; Confirmed by Michael Lauver, MAI SRA _ _.._ - $5,427,500 71 Lauver & Ass©ciates Assessment District D4-2 Land Data Zoning Topography Utilities Shape Land Size information Gross Land Size Useable Land Size Planned Units LAND SALE NO. 3 (Con[.) R-1, Single Family Level Electricity, Gas, Water, Sewer Irregular 65.000 Acres or 2,831,400 SF 65.000 Acres or 2,831,400 SF 100.00°1° 225 Indicators Sale PriceJGross Acre $83,500 ~- Sale PricefGross SF $1.92 Sale PricelUseable Acre $83,500 Sale PricelUseable SF $1.92 SalePriceJUnit $24,122 i Remarks ~ This parcel has frontage along the north line of Panama Lane at Old River Road. It is an 80-acre parcel but the 15-acre piece at Old River and Panama was reserved by the owner. The buyer intends to construct up- scale residential housing on large lots. I 72 File 3806 Lauver & Associates Assessment District 04-2 LAND SALE NO. 4 ~~ /-~t`,~ ~~ ~ '/.dS 4 $iS,AC 7~ f ~. ~~ 1? , ~° ~. ii r'-aod SJ C^_'J'"'R s~~. O r1 . r ~ ~. ~...,.._r..... ..c-...,.y., ....1 r, t-. .y...L. ~- ~. ~. rr ~.. ~ t.~ r .~c ~ f4 /~, /~~ VMR Y~1 d7.SlAG. Jl MR ~ ease 7 2 3/''~~`J ~DRA~ ~ IJ. /SAC. Pronertv Identification Record ID 294 Property Type Residential Subdivision Land Property Name Ridgeview Point Address Stine Road, Bakersfield, Kem County, California Location 2512 A-4 SW Quadrant Tax ID 497-080-01 Sale Data Grantor Ridgeview Point, LLC. ' ~~~'~ Grantee KB Homes Greater Los Angeles Sale Date June 30, 2004 Deed 13ooktPage 127495 Property Rights Fee Simple Conditions of Sale Price included $59,277 in taxes Financing Cash to Seller Verification Kenneth K. Phung, 661-295-3646, October 4, 2004; 73 Launer & Associates Assessment District 04-2 LAND SALE NO. 4 (Cont.) Sale Price $2,915,000 Upward Adjustment $59,277 Adjusted Price $2,974,277 Land Data Zoning R-1, Single Family Topography Level at street grade Utilities Electricity, Water, Gas, Sewer Dimensions Irregular Shape Irregular Land Size Information Gross Land Size 30.870 Acres or 1,344,697 SF Useable Land Size 30.870 Acres or 1,344,697 SF 100.00% Planned Units 110 Indicators Sale Price/Gross Acre $94,42$ Actual or $96,348 Adjusted Sale Price/Gross SF $2.17 Actual or $2.21 Adjusted Sale PricefUseable Acre $94,428 Actual or $96,348 Adjusted Sale PricetUseable SF $2.17 Actua] or $2.21 Adjusted Sale PricefUnit $26,500 Actual or $27,039 Adjusted Remarks This data describes the June 2004 sale of a 30.87-acre parcel located just west of Stine Road in Southwest Bakersfield. It has frontage along the north line of Ryzona Drive and along the south line of the fuhrre McCutcheon Road, just south of Hocking Road. The sale price included a tentative map for 110 buildable lots of approximately 7,500 square feet. 74 File 3806 Lauver & Associates Assessment District 04-2 LAND SALE NO. 5 T17AC°[" 6€312 Pt-1. 1 •oa-23 PTN„ S1 j2 SEC.34 T.29S. R.26E_ - 29 _ - r . _ ..- .s .. « i c ~ ~ ~ ~ ~ ~ 4 h a c H sa h p NY35 a . A H &S s ~ r ~ , n ~ ' ~ rev .,u ~ ~~ ~ * % .~ .~ ~ 2g ~ i ~ s ~ h~~ w ~ HK. tQ9 ~ ~ ~s 4 'N T: !' ( J - " 3 ~ d ~ * (24~ ~ '+ /' g 3 4y ~ ~ .. v h N - ~~~~~~ ~ . ^ 4 ORnWN ~` " N ~ ~ ~~~ JURrSpl l+{N4N - .w ~ r~rs s u ~ S4frD. KEY ssp~?. ~v a . ~ , RIStIAIMER ~i °~6 ° i . ..x 1. ASSESSORS MAP NO. 49 -23 CfAUNiY OF ICERk Property Identification Record ID 296 Property Type Residential Subdivision Land Property Name Vista Finestra Address Renfro Road N/O Stockdale Highway, Bakersfield, Kern County, California 93312 Location 2480 G-1 Tax ID 408-230-02 Sale Data Grantor Vista Finestta Grantee Towery Homes, Inc. Sale Date September 20, 2004 Deed BooklPage 213395 Property Rights Fee Simple Financing Cash to seller Verification Castle & Cooke, October 4, 2004; Confirmed by Iviichaei Launet, MAI SRA Sale Price $1,060,000 Land Data Zoning R-l, Single Family Topography Level 75 Lauver & Associates Assessment District 04-2 Land Data tContJ Utilities Dimensions Shape Land Size Information Gross Land Size Useable Land Size Planned Units Front Footage Indicators Sale PricelGross Acre Sale Price/Gross SF Sale Price/[Tseable Acre Sale PricetUseable SF Sale Price(Unit Sale PricetFront Foot LAND SALE NO. 5 (Cont.) Electricity, Water, Gas, Sewer Slightly irregular Rectangular (more or less) 13.020 Acres or 567,151 SF 13.020 Acres or 567,151 SF 100.00% 40 968 ft West line of Renfro Road $81,413 $1.87 $81,413 $1.87 $26,500 $1,095 Remarks This parcel was zoned C-1, Commercial at the time of sale. The seller had applied for a zone change to residential prior to closing. This parcel is adjacent to on-going single-family development to the west. In addition to the frontage along Renfro Road, Madison Michelle Way connects to the adjoining subdivision to the west. 76 File 3806 Lauver & Associates Assesstraent District 04-2 LAND SALE NO. 6 Property Identification Record ID Property Type Property Name Address Location Tax ID Sale Data Grantor Grantee Sale Date Deed BooklPage Property Rights Financing Verification Sale Price 306 Residential Subdivision Land Residential Land - Solera Country Club SWC Highway 178 and Miramonte Drive, Bakersfield, Kern Comity, California 93306 2404 F, G-7 3$7-020-49 + 360-02,03,04,08 JPMP-Sage Bakersfield, LLP Pulte Home Corp March 31, 2004 70147 Fee Simple Casb to Seller Diane Fradkin -For seller, November 26, 2004; Other sowces: Larry Wasbin, MAI; Confirmed by Michael Lauver, MAI SRA $13,869,478 77 Lauver & Associates Assessment District 04-2 LAND SALE NO. 6 (Cont.) Land Data Zoning R-1, Single Family Topography Undulating U6lides Electricity, Gas, Water, Sewer Shape Irregular Land Size Information Gross Land Size 163.900 Acres or 7,139,484 SF Useable Land Size 163.900 Acres or 7,139,484 SF 100.00% Planned Units 558 Indicators Sale Price/Gross Acre $84,622 Sale Price/Gross SF $1.94 Sale Price/[Tseable Acre $84,622 Sale PricelUseable SF $1.94 Sale PricefCTnit $24,856 j Remarks This transaction represents the assemblage of five parcels with frontage along the south line of Highway 178 and along the west line of Miramonte Drive in Northeast Bakersfield. The sale included Tentative Map 6182 for 558 lots averaging 8,000 square feet. The property previously sold in May of 2003 for $1,750,000. 78 File 3806 Lauuer & Associates Assessment District 04-2 LAND SALE NO. 7 (PENDING} ~-as r.2ss. R.zs~. cos O i c,, ~ ' ~~' S ~. ~rfi~` c t ~ `} ~ ~ V ii( A \\ (4 4 ~~~` ~j~} F J f ,~R ~ TS~S4l %i t } t 1 f r ~~ _, ~' i c~J--f'"" ~ ~ . - ---~.~ ;-~~ ~~~~~ reut;~n,` ~" ~ ~] ~ i tQUttt 9F KER4 Property Identification Record ID Property Type Property Name Address Location Tax ID Sale Data 305 Residential Subdivision Land Residential Land Hwy 178 E/O Miramonte Drive, Bakersfield, Kern County, California 93306 2404-G-6 387-020-18 & 386-050-09 Grantor LDC Mixamonte Investors Grantee __ Moreland Corporation Sale Date April 20, 2005 Property Rights Fee Simple Financing Cash to Seller Verification Purchase Agreement dated 3-8-05, March 29, 2005; Canfirrrted by Michael Launer, MAI SRA Sale Price $ 11,979,000 Land Data __ Zoning R-1, Single Family Topography Undulating Utilities Electricity, Water, Gas, Sewer 79 Lauver & Associates Assessment District t74-2 Land Data (Cont.1 Dimensions Shape Land Size Information Gross Land Size Useable Land Size Planned Units Indicators Sale PricetGross Acre Sale PricetGrvss SF Sale PricefUseable Acre Sale PricetUseable SF Sale PricetUnit LAND SALE NO. ~ (Cont.) See Plat Irregular 92.860 Acres or 4,044,982 SF 92.860 Acres or 4,044,982 SF 100.00% 361 $129,001 $2.9fi $129,00 t $2.96 $33,183 Remarks _ This represents thr R9areh 2005 agreement to purchase two parcels intersected by Highway 178 adjacent To the west line of C\iimmonte Dme in East Bakersfield. The buyer intends to develop with 3631ots averaging 65'x 110' or 7,150 square feet, It has a tentative map in place (6182) and after recordation the developer will ~~ proceed with the construction of their MiramonYe project. The sales agreement stipulates that the seller is in process of abandoning a well site on the parcel and if this is completed prior to COE (Apn120, 2005) the ~ price will be incremented by $33,000 to $12,012,000. 80 File 3$06 Launer & Associates Assessment Distrlet 04-2 ~aaes Street Atlas USA!?? 2U04 :! F. ,> ` _ ,~ayro _. ~i _ .~'wA,SNNrci ` °~~ ~ v Pnidrne 8xte T, 13`L~ii}t 9112.6U AC ~ ~~ _ > !y~ ... L,wd$nle3 7b#, ~SHI 11$ ' ~~~ ,~ ; = .a Leud &wle 1, '~I}1 b13b 7TH.),(' l ,~ ~ ~ e es ~ r ~'` ' _ ~~ ~ ~, t N pR . ~`" .. : ' ,~ -~ ~e1tl ' ,. ~ ^a,, A Iw~H 9nle 6, D ol"ob„&R, 7,6Y7-AC . ~~ "'~"' s '~~ ~: x, p , , w, ., aJ6 eo _ 5 ~ ~~~ Lwd Site 4 b Qt, 89G,Ck4$./.9C ~RaIQ1/NU[ _ UII]LI STIB-, iQ1. .9g~1.(tr111~e wnK "~. _ ~ J ~ ebd P~uolvnFavrtt We F ~ -~ •~ ~ 0 AGbrgio ~;. ,.e .~s..~ t u a • . ~ .-< Yin"s ~~~ _ L:4~as:~ _ ~ ~ ... _ ~ "am."rs~roxo, Fem City ' ,,.. t, ea, :ox, s t.sno oc p .........~-a ~ . ~. ~ ~ ~~rn ~ . . ,. 1 +~k?dp I ~i^~, ? Men0an / v 1 a( __. VMMJ.tl8~4f102.C9111 Q MNi13.9"E7 mi 9 2 4 6 8 10 t2 14 Dela Z44m 9~0 COMPARABLE LAND SALES SUMMARY Sale Locatian Sale Date Price Siae/Ac $IAc $/per DU 1 Stockdale Hwy & Renfro Road Jul-04 $2,755,040 18.77 $136,928 $36,733 2 Mountain Vista south of Pacheco Jul-04 $6,435,000 74.79 $86,041 $23,231 3 Panama Lane and Old River Road Nov-04 $5,427,500 65.00 $83,500 $24,122 4 Stine Road Jun-04 $2,974,271 30.87 $96,348 $27,039 5 Renfro Road Nt0 Stockdale Highway Sep-04 $1,060,000 13.02 $81,413 $26,500 6 SWC 178 & Miramonte Mar-04 $13,869,478 -163.90 $84,622 $24,856 7 Highway 178 eto Miramonte Pending $11,979,000 92.86 $124,001 $33,183 81 Launer & Associates Assessment Distrdct 04-2 The sales cited on the land sale data sheets are summarized above. Overall, the sales cited show of values from about $81,000 to $137,000 per acre. The selling price per unit ranges from around $23,000 to about $3b,000 per unit. Analysis In order to more precisely determine the subject's competitive position within the market ranges indicated by the data cited, we use an adjustment process to account for the various differences of the data compared with the characteristics of the subject. The comparison adjustment process identifies the similarities or differences in the subject relative to the comparables and adjusts an - appropriate amount which may be added to or subtracted from the selling price of the comparable. Such characteristics may include conditions of sale, time of sale (market conditions) location and physical characteristics. After adjusting for the differences the data provide a range of values applicable to the property being appraised. When sufficient sales are available, these adjustments are best determined by the actions of the market participants who are involved in the market for these type properties. There is some difficulty in precisely quantifying adjustments however. This is a result of real estate being unique in nature, with no two properties being identical. Additionally, not all differences require an adjustment. This is true if the market does not pay either a premium or a lower price far a difference between similar properties. It is virtually impossible to extract and quantify an adjustment for complex properties that have many adjustment considerations. The appraiser must rely on reason and experience to decide which differences should be adjusted, as well as the magnitude of any adjustment. Another problem we encounter is that some adjustments are sometimes overlapping. These adjustments are those that look like independent adjustments but may, in fact, be explaining the same market consideration for differences in price. For example, an adjustment for utility, location, zoning and traffic -count may be overlapping and may all be included in the market perception of location. In analyzing the data collected, we attempt to use the market to assist in determination of the direction and magnitude of adjustments for certain characteristics. After all adjustments are made, the comparable 82 File 3806 Launer & Associates Assessment District 04-2 property has theoretically been altered into a duplicate of the subject property. There are ten basic elements of comparison. These are: 1. Real property rights conveyed 2. Financing terms 3. Conditions of sale 4. Expenditures immediately after purchase 5. Market conditions (time) 6. Location 7. Physical characteristics 8. Economic characteristics 9. Use {zoning) 10. Non-realty components of value Real Property Rights Conveved _ The first element of comparison considers differences in property rights conveyed. All sales are fee simple transactions, transferring the full bundle of rights to the properties. Since the subject is also being appraised on a fee simple basis, no adjustment for property rights conveyed is necessary. Financin Tg erms To the best of my knowledge, all sales were on the basis of cash to the seller and no adjustments for financing terms were necessary. Conditions of Sale Analysis of the various data revealed no factors that influenced the purchase prices of the various sales. Consequently, there was no adjustment made for this factor. 83 Laureer & Associates Assessrraeta District 04 2 Expenditures immediately after purchase The reader will note that any adjustments for expenditures immediately after purchase were explained and adjustments were made on the individual data sheets presented. Appropriate adjustments for such factors have already been made. Market conditions ttime) All the sales were consummated this calendar year. Although we are .aware that appreciation is taking place in this market, there is-not sufficient data to quantify and support adjustments for this factor. Since the data are relatively current, we are not adjusting the comparable data for market conditions. Location Five of the comparable sales are in the Southwest and two are in the Northeast Bakersfield area. It is been our experience that the locational differences are economic rather than geographic. In other words, we don't perceive there are significant differences between these general locations, but it has been our finding that developers are willing to pay more for subdivision land where the dwelling prices are the highest. The dwelling prices tend to be highest in the areas of concentrated residential construction activity where the market has demonstrated demand for the more upscale housing product. Therefore, the areas that are on the periphery of the land development growth trends tend to have lower prices for completed houseJlot combinations. Adjustments for Economic Characteristics, Use (zoning) and Non-realty components of value were not necessary since they are similar for the subject and comparables, This leaves the Physical Characteristics as the most pertinent factor in explaining the market actions and the direction of value for the subject. 84 File 3806 Lauver & Associates Assessment District 04-2 Physical Characteristics We typically see an inverse relationship between selling price per acre and size. The larger parcels usually sell for less per acre than do the smaller ones. In this data set however, this expected relationship is not as obvious. Sale 4, which is only 13.02-acres sold for $81,413 per acre and Sales 3 and 6, at 65-acres and 163.9-acres, sold for $83,500 and $84,622, respectively. Sale 7, a pending sale, is the second largest in the data set and is selling for $129,000 per acre. Although the expected inverse size/price relationship patterrt does not emerge clearly, we were able to ascertain the market trend that is affecting residential land sales currently. In discussions with the developers in these and other transactions throughout the_Greater Bakersfield Metropolitan area, is our finding that developers are not emphasizing the traditional sales comparison technique. Instead, they are using what we call the subdivision technique or land residual. Their thought process focuses on the fact that they know what their end product (completed house with lot} will sell for. They know to within $500 what their total costs of production are, including selling costs. Each developer has targeted a distinct profit margin necessary to sustain and perpetuate their operation. Adding a contingency to the cost and profit requirements yields a total cost from which they subtract from their projected selling prices, leaving a residual to the land. This is their basis for acquiring land. The consensus of the developers interviewed was that they are not greatly concerned with what their competitors are paying for subdivision development land. They are capable of achieving their profit goals based on their market experience in selling their completed housing product. This is borne out by an analysis of lot yields. The lower density sales, those with larger lots, tend to sell for less than the sales allowing higher density of dwelling units per acre`. The data cited previously was sorted by allowable density and yielded the results shown in the following chart. Note: This does not apply to specialty or niche markets, esp. rural residential developments and large lot executive and luxury quality estates. 85 Lauver & Associates Assessmefat District 04-2 Sale Data Sorted by Allowable Density 5 $1,060,000 13 .02 $81,413 $26.500 40 3.1 6 $13,869,478 163 .90 $84,622 $24,856 558 3.4 3 $5,427,500 65. 00 $83,500 $24,122 225 3.5 4 $2,974,277 30. 87 $96,348 $27,039 110 3.b 2 $6,435,000 74. 79 $86,041 $23,231 277 3.7 7 $I ],979,000 92. 8b $129,001 $33,000 363 3.9 1 $2,755,000 ]8. 77 $136,928 $36,733 75 4.0 It can be seen that the residential land sales with the highest density are at the upper end of the selling price per acre and sale price per unit range. From this we have concluded that the subject would command selling price at the upper end of the range since they could be developed with densities of approximately 4.2 dwelling units per acre. Applying the selling price per unit allowed yields a value for the subject as follows: Acres Yield Total Unity $/Unit Value $lacre 101.43 4.2 425 35,000 14,875,000 $146,653 Since the indicated value tends to be on the leading edge of the residential development land trends, we canvassed several local brokers to determine if there are any additional pending andlor in escrow deals that can provide current market indicators. We found that a transaction is now in escrow involving Tentative Tract 6191, located at the SWC of Morning and Paladino Drives in Northeast Bakersfield. The land is 73.58-acres with a total of 308 Tats, a density of 4.2 units per acre. This sale is scheduled to close in February 2005 for a total price of $9,000,000, or $29,220 per lot. Another source allowed us to review some of the escrows they are handling. We were asked to maintain confidentiality with regards to the specifics of these sales. Without revealing the specifics however, we learned that one sale involves 184 net acres with a total sale price of $22,080,000, or $120,000 per acre. The sale is scheduled to close in three phases in the first half of 2005. The seller is also to receive 20% of the home price increases through the sell-out. The buyer tendered a $3,000,000 non-refundable deposit to the seller. 86 File 3806 Lauver & Associates Assessment District 04-2 In another transaction in the same general area involved a 75-acre parcel with a total consideration of $9,900,000 or $132,000 per acre. This will also close in three take-downs, although over a 24-month time frame. The buyer has passed through a $1.485 million non- refundablepayment to the seller. This sale also has a price participation clause. The third transaction examined involved a prominent builder who is purchasing 92-acre parcel that is part of the same parcel map. The total purchase price is $12,144,000, or $132,000 per acre. This sale also involved anon-refundable deposit. There is no price participation clause, however, the 3'~ phase price increases 6% per year, beginning with the:Phase 2 closing. These additional indicators support my finding that the current market far the subject is well supported at the upper end of the range. In summary, the subject is well located in proximity to prominent and active single-family residential developments that are commanding among the highest lot prices and finished dwellingllot combination prices in the City. Therefore, as a result of my analysis, and after consideration of all pertinent data, I have developed the opinion that the subject has a value of $35,000 per unit allowed. These unit indicators apply to the property in Brighton Parks, Brighton Village and Cherry Hill II areas. Lot Finishing Costs Since we have arrived at a value of the underlying unimproved land with residential entitlements in the previous paragraphs, it is necessary to estimate the costs to bring the unimproved land to a finished lot state, ready to be improved with dwelling units. The costs to bring the tract from a paper lot stage to completed, ready-to-build lots include direct and indirect costs along with developers overhead and profit, are added to the land value estimated previously. The final total is the estimated value of the finished lots by the cost approach. 87 Lauuer & Associtttes Assessrneut District 04 2 Several local independent civil engineers and land developers who have developed large subdivisions were interviewed to obtain their estimates of the costs to develop land to a finished lot stage. A spokesman for Castle & Cooke Homes, indicated cost to finish larger lot subdivision to a stage ready for development is approximately $20,000 to 28,000 per lot for lots in the 8,000 to 10,000 square foot size range. Costs have increased somewhat over the levels seen in years past when market activity was less than now. Large lot subdivision costs (typically 12,000-18,000 SF lots) are now ranging from around $28,000 to $35,000 per lot, depending on the amount and degree of off-site costs in place. These estimates compare well to subdivision costs incurred by Lennar Homes in development of lots in the Riverlakes Ranch area of Northwest Bakersfield. I learned that the overhead and profit for this type subdivision is typically in the 10-15% range. We also reviewed the lot development costs in several developments completed by McMillin homes. In-tract development costs ranged from $22,000 in the tracts with the smaller lots to slightly more than. $32,000 per lot in the tracts that were developed with large lots. In general, the typical in-tract lot development cost centered around $25,000 per lot. In addition to the on-site development costs, we learned that off-site costs can range from $5,000 to $10,000 per lot depending on location, pre-existing infrastructure and other factors In forming a value opinion for the residential lots in the assessment district we determined that on-site lot production costs of $25,000 are reasonable for the smaller lots in the Brighton Parks and Brighton Village areas. The Cherry Hill II area, with its larger lots will have higher ', development costs, which we have estimated at $35,000. °'~ The subject lot values based on the Cost Approach are summarized and presented as follows: 88 File 3806 Lauver & Associates Assessment District 04-2 COST APPROACH -SMALL LOT SUBDIVISION BRIGHTON PARKS AND BRIGHTON VILLAGE ITEM ESTIMATED COST Value per Paper Lot 35,000 On-Site lot development 25,000 Subtotal 60,000 OH/Profit @ 10% 6,000 Subtotal 66,000 Contingency @10% 6,600 Production CostfLot 72,600 Admin & Marketing Cost @ 6% 4,356 Indicated Finished Lot Value from Cost Approac: 76,956 Rounded to $77,000 COST APPROACH -LARGE LOT SUBDIVISION CHERRY HILL II ITEM ESTIMATED COST Value per Paper Lot 35,000 On-Site lot development 35,000 Subtotal 70,000 OFI1Profit @ 12% 8,400 Subtotal 78,400 Contingency @I S% 11,760 Production CostlLot _ 90,160 Admin & Marketing Cost @ 6% 5,410 Indicated Finished Lot Value from Cost Approac: 95,570 Rounded to $96,000 89 Lauver & Assaeiaies Assessrueut District 04 2 LOT VALUES -SALES COMPARISON APPROACH In order to estimate the Market Value of the lots in Brighton Parks, Brighton Village and the Cherry Hill II Areas both as is and as complete, we researched the market to obtain sales information about similar size lots that were recently improved with housing units that appeal to a similar market segment as the subject. This technique is known as the Sales Comparison Approach. The value indicators resulting from these approaches are reconciled to a final value indicator for the subject lots "When Complete". Lot Values -Residential Areas of Brighton Parks, Brlehton Villa a and Cherrv Hill H In researching the market for the most recent data involving finished residential lot sales we found sale data that provide indicators for the subject lots. These are discussed in the following paragraphs. We spoke with representatives of Castle & Cooke California Inc. and were informed that in their Brighton Estates -Cambridge tract there were a total of 30-lots purchased by merchant builders from the developer over the period of December 2003 through sell-out in January 2004. The average lot size in the tract was 15,100 square feet. The average selling price was $82,345, or $5.61 per square foot. This tract, 6111-1, sold out in two months. This represents an absorption rate of 1 ~ lots per month. In Tract 6111-3, also a Cambridge lot subdivision, a total of 34 lots sold to merchant builders during the period of April through July of 2004. These lots averaged 16,621 square feet in size and had an average selling price of $108,088, or $6.73 per square foot. The Bedford lot series in Tract 6127-1 had a total of 33 lot sale Transactions irr February 2004. These were large lots, averaging 21,052 square feet in size. The average selling price was $107,121 or $5.19 per square foot. In the Bedford 6127-2, there were 23 sales in the 3-month period from April to July, reflecting an average lot sale price of $136,304, or $6.16 per square foot for these 22,872 square foot lots. 90 File 3806 Launer & Associates Assessment District D4-2 In the Camden Tract 6128-4 we noted there were a total of 37 lots that sold between March and July of 2004. The average lot size was 12,015 square feet and the sale prices averaged $92,000 per lot, or $8.04 per square foot. In Tract 6128-6 there were 34 sales in the period from December 2003 through January 2004. These averaged $74,853 per lot or $5.59 per square foot for lots averaging 13,841 square feet. Soper Homes purchased 8 lots in Tract 6139 in March of 2004. The Southwest Bakersfield lots ranged from 11,922 to 17,754 square feet with an average-lot size of 13,354 square feet. The selling prices ranged from $90,000 to $110,000 each or from $6.20 to $7.15 per square foot. Mike Soper also purchased lots from Bryan Batey in Tract 6117-2 and 6117-3 in Northwest Bakersfield. The 17 lots, purchased in November 2004, ranged in size from 10,042 to 19,162 square feet with an average lot size of 12,994 square feet. The selling prices ranged from $90,000 to $120,000, with an average price of $96,176. This represents selling prices per square foot from $5.74 to $9.08 per square foot or an average of $7.63 per square foot. S&S Homes sold a total of 29 finished 6,600 square foot lots to Legacy Homes for $72,500 each. The sale reportedly closed in June 2004. This sale indicates a selling price of $10.98 per square foot. We checked with our contact at Lennar Homes and were provided information on three sales of finished lots in Tract b230, located at the Southwest corner of A11en Road and Rosedale Highway. Lennar is purchasing 72 finished 10,000 square foot lots from Smith Tech for $112,000 each. This represents a selling price of $11.20 per square foot. Escrow is scheduled to close by Aprill 5, 2005. Ron Roberson purchased 23 lots from the same seller in Tract 6230 for a price of $115,000 per lot, or $11.50 per square foot. The other sale in this transaction is from Smith to Balfanz Homes. Balfanz is purchasing 10 lots for $118,000 each, or $11.80 per square foot. 91 Lauver & Associates Assessment District 04-2 The data shows that there is an on-going increase in selling price per square foot. This has been most dramatic in the past twelve months as shown in the following tabulation of the preceding data. Sale Date Price PSF Dec-03 $5.61 Jan-04 $5.59 Feb-04 $5.19 Mar-04 $6.73 Mar-04 $7.15 Nov-04 $7.63 Jun-04 $10.98 Apr-OS $1 L20 Apr-OS $11.50 Overall, wr perceive there is an inverse relationship between size and selling price per square foot. It has been our experience that the smaller lots command more per square foot than do the larger ones even though the overall lot values may be lower. Based on the market data presented we estimated the lots in the Brighton Parks and Brighton Village areas as follows: Brighton Parks & Brighton Village Lot Value Conclusions Product Type Lot Sizes Est. $/PSF Rounded Lot Value 1 5,000 to 6,599 $13.00 $65,000 2 6,600 7,699 $10.50 $69,300 3 7,700 and above $10.00 $77,000 Cherry Hill II Area Lot Value Conclusions The large lots in Tract 6153 are best represented by the 10,000 square foot lot sales to Lennar, Roberson and Balfanz that ranged from $112,000 to $118,000 each. From these data we concluded a value of $115,000 per lot in the Cherry Hill II area for the typical interior lot. It should be understoad that the above valuation did not consider the characteristics of each individual lot in the assessment areas. Historically, in our market area, lots that are larger than the generic fats appraised command a lot premium for size, corner or cul-de-sac influence. An estimate of the lot premiums is beyond the scope of this assignment. At sale, the premiums for 92 File 3806 Lauver & Associates Assessment District D4-2 these lots are established by the respective developers and will vary based on the particular characteristics oPthe lots. Conclusion of Finished Lot Values from Sales Comuarison Aparoach Overall, the lot sales activity we investigated represented more than 250 finished residential lots that have sold in the past year. The summary presented in the previous paragraphs shows the high demand for new residential housing in the subject neighborhoods. These demand conditions have been citywide over the time frame indicated. After analyzing the data presented, the market indicators cited led me to the conclusion that the typical interior lots in the Brighton Areas have values of $65,000, $70,000 and $77,000 depending on size as presented previously. The premium lots, such as the large cul-de-sac lots and corner lots will have higher values, which are typically set by the developers after the models are constructed and the sales office opens. Therefore, based on the indicators yielded by the most recent lot sales activity cited in the foregoing Sales Comparison analysis, I have formed the conclusion the subject lots have values as shown in the following chart. Conclusion of Finished Lot Values -Sales Comparison Approach Brighton Park and Brighton Village Areas ` Product Type Lot Sizes Est. $tPSF Roanded Lot Value 1 5,000 to 6,599 $13.00 $65,000 2 6,600 7,699 $10.50 $69,300 ' 3 7,700 and above $10.00 $77,000 Cherry Hill II Area __ Typical Interior Lot $115,000 93 Lauver cP Ass©ciates Assessrnent-istrict 04-2 Reconciliation and Summary of Finished Lot Values We employed two approaches to value in the previous paragraphs of this report. The detailed analysis of all the pertinent facts and data that were considered to influence the value of the subject property have led to the following value estimates for the typical interior lot: Finished Lot Value by Cost Approach Brighton Areas $77,000 Finished Lot Value Sales Comparison Brighton Areas $77,000 Finished Lot Value by Cost Approach Cherry Hill II Area $96,000 Finished Lot Va]ue Sales Comparison Cherry Hill II Area $115,000 The first step in estimating the value using the Cost Approach was to estiinate the underlying land value using the Direct Sales Comparison Approach. The value from this approach was considered supportable and based on a sufficient number of reliable data. The direct and indirect costs were based on reliable costing sources supplemented by engineer's cost estimates from similar tracts. The lot construction costs were added to the land value to obtain an indication of the lot value "When Complete" under this premise. However, because of the difficulty in ascertaining investor motivations, the profit margin we selected may not be representative of market conditions for residential lots. The Sales Comparison approach was based on direct comparison with sales of lots sold to merchant builders. This method demonstrated the subject's value from the`market data available. The data from this approach was gathered from tracts in areas that are located in proximity to the subject and reflected the thinking of market participants who developed these tracts with housing product similar to that proposed for the subject. The Sales Comparison Approach was selected as the most reliable indicator of value since it is ___ - market driven. The Cost Approach relied on reliable although somewhat anecdotal information ', and profit estimates that vary from builder to builder. Therefore, based on the foregoing analysis, we have concluded the finished lot values from the Sales Comparison Approach as summarized previously. 94 File 3806 Launer & Associates Assessment District 04-2 BULK VALUE OF LOTS AND LAND As discussed previously, construction is well underway in Brighton Parks Units 1 through 3 and the final maps are recorded. The remaining land area in Tract 6250 Units 4 through 12, are being completed in conjunction with Tentative Tract 6281 and are being improved to a super lot state. A `Super Lot' is prepared to smooth graded, condition with all off-tract work completed and the streets and utilities brought to the perimeter of the super lot. Since it is the purpose of this appraisal to render an opinion of the "As Is" value of the lots and land if sold in entirety to a single purchaser, it is appropriate to make adjustments to the finished lot values reported. to reflect the actual condition as of the date of value. _ In conducting research for the analysis, it was my finding that the market demand for residential land in the Bakersfield area has been so strong that developers are willing to pay full value for lots, where there are developers that have or are willing to sell finished Lots. We learned that in many instances merchant builders who have recently acquired land for construction have immediately received multiple offers to purchase the ]and at substantially higher prices. In spite of the potential profits that could be realized on these affers, we are not seeing any being accepted since most developers prefer to improve the lots with housing units. Therefore, based on current market conditions that prevail in the general Bakersfield area, I have concluded the existing finished lots in Brighton Parks Tract 6250 Units 1 through 3 have an immediate market at the lot values established previously. Consequently, it is not necessary to apply a discount to consummate a sale of the lots or land to a single buyer. It has been demonstrated by the market data cited previously that there are a number of developers with sufficient funds to acquire the subject properties in their entirety. The remaining land in Brighton Parks and Brighton Village has been prepared to a super lot state. The value that applies to this land is comprised of the raw land value plus the improvement cost in the land to date that was incurred by the developer, plus the value of the Assessment District financed improvements. In the cost analysis presented previously, we concluded a value 95 Lauver & Ass©eiates Assessment District 04-2 ' for the lots in Tract 6250 at $77,000 using the cost approach. In this approach, the components of value were the raw land cost, direct and indirect production costs, contingency and entrepreneurial profit. Inherent in the finished lot cost from this approach is the enhancement value of the Assessment District financed infrastructure. The `As Is' value of the remaining land in Tract 6250 and 6281 consists of a super lot. The appropriate studies have been completed, certain permits have been acquired and the land is graded and infrastructure brought to the perimeter of the tract. According to the developer, they have incurred approximately 25% of the total finished lot production costs to date. We have calculated the cost of the improvements to the land as follows: ' Direct Lot Development Cost 25,000 ', Indirect Costs 30°l0 7,500 ' Average Lot Cost 32,500 Less Average AD Financed Improvements -4,260 Costs to Date 25% 7,060 ~ Cherry Hill II area has a total of 119 residential lots. These are larger fats and there are higher costs inherent in their production. In the cost approach we concluded a hard cost of $35,000 per lot for construction. In conversation with the developer we learned that they have incurred approximately 25% of the total lot production cost. Using the same methodology as was used in the cast to date estimate above, it was determined that there has been approximately $10,310 per lot expended to date in the Cherry Hill II area. Conclusion of `As Is' and Bulk Value In estimating the `As Is' values for the residential areas in Assessment District 04-2, we concluded the components of value include the raw land" value plus -the developer's improvements to the land and the enhancement of the infrastructure provided by the assessment district financed improvements. It was concluded that there are a number of developers with substantial financial resources that are seeking residential land in the Bakersfield area for immediate development who would readily purchase this land if available. It was my conclusion 96 File 3806 Lauver & Associates Assessrxent District 04 2 the subject's partially completed lots can at a minimum, command values at or above the raw land and improvement costs to date. Thus, the `As Is' value also represents the bulk, or discounted value of the land. The `As Is' value of the Brighton Parks Units 4-12 and Brighton Village areas are summarized on the following grids. Brighton Parks Area -Future Units 4 through 12 AS IS LAND VALUE DEVELOPMENT AREA DESCRIPTION DEVELOPER'S ASSESSMENT WITH AD FUNDED UNIMPROVED IMPROVEMENTS DISTRICT FUNDED IMPROVEMENTS IN LAND VALUE TO LAND IMPROVEMENT TOTAL PLACE FUTURH TRACT" NO. 6250-UNIT 4 LOTS 6 AND-9- 35 (RESIDENTIAL LOTS} 980,000 197,680 119,298.48 1,296,978 FUTURE TRACT NO. 6210-UNn 4 LOT"S 7, 3V ~ AND 37 (RESIDENTIAL LOTS) 105,000 21,780 14,352.64 142,533 FUTURE. TRACT NO. 6250-UNI"r 4 LOTS 1-5, R AND 38 (RESIDENT'lAL LOTS) 245,000 49,420 49,723.34 343,543 FUTURE TRACT NO.6250-L1NIT5 LOTS S, IS-19 AND 22-26 (RESIDENTIAL LOTS) 385,000 77,660 46,86726 509,527 - FUTURE TRACT N0.6250-UNfrS LOTS 2, 3, 9-12, 2Q 21, AND 29-32 (RESIDENTIAL LOTS) g2Q,000 34,720 -65,410.56 570,131 FUTURE TRACT NO. 6250-UNIT' S LOTS 7, 4, b-8, 13, I4, 27, 28 AND 33-37 (RESIDENTIAL LOTS) 490,000 98,840 98,246.68 687,087 FLJTIJRE'rRACT N0.6250-UNIT G LOTS 2-26 (RESLDENTIAL LOTS) 875,000 176,500 LOb,516.5A 1,158,017 FUTURE TRACT N0. 6250-UNIT 6 L,OT 30 (RESIDENTIAL LOTS) 35,000 7,060 - ~ iA50.88 47,511 FUTURE TRACT NO. 6'SO-UNITE LOTS 7, 27-29 & 3 t (RESIDENTIAL LOTS} 195,000 35,300 -. -'35,088:10 245,388 FUTURE TRACT N0.6250-UNIr7 LOTS I-16,19- 27 & 30.33 (RESIDENTIAL LOTS} 1,015,000 204,740 T23,i59.14 1,343,299 FUTURE TRACT NO. 6250-UNIT 7 LOTS 18, 28 & 34 (RESIDENTIAL LOTS} 105,000 21,180 Ib;3S2.64 142,533 FUTURE TRRCT NO. 6250-UNIT 7 LOT 17 AND 29 {RESLDENTIAL LOTS} 70,000 14,120 <14;035.24 98,155 97 Launer & Associafes Assessment District 04-2 Bri>?hton Parks Area - Future ilnits d thrnnssh 7 2 ASSESSMENT AS IS LAND VALUE DEVELOPMENT AREA DESCRIPTION DEVELOPER'S DISTRICT FUNDED WITH AD FUNDED UNIMPROVED IMPROVEMENTS TO IMPROVEMENT IMPROVEMENTS IN LAND VALUE LAND TOTAL PLACE FUTURE TRACT N0.6250-UNIT 8 LOTS 1-8, I3-]4 & 24-27 (RPSIDENTIAL LOTS) 490,000 98,840 59;649.24 648,489 FUTURE TRACT NO. 6250-UNIT 8 LOTS 15-22 & 29-37 (RESIDENTIAL LOTS} 595,000 120,020 92,b6496 807,685 FllTURE TRACT N0.5250-UNIT8LOTS 9-12, 23,28 AND 38 (RESIDENTIAL LOTS) 245,000 49,420 49,723.34 343,543 FUTURE TRACT N0.6250-UNIT 9 LOTS 12-15 & 24 (RESIDENTIAL LOTS} 175,000 35,300 21,303.30 231,603 FUTURE TRACT NO. 6250-UNIT 9 LOTS I1, 21 AND 22 {RESIDENTIAL LOTS) 105,000 21,180 1G,352.64 142,533 PU"fURE.TRACT NO. G250-UNIT 9 LOPS I-10, 16- 2Q 23 AND 25-37 {RESIDEN"ITAL LOTS) 1,015,000 204,740 203,570.98 1,423,251 FUTURETRACT NQ 6250-UNIT 10 LOTS 1-5 AND 6-30 (RESIDENTIAL LOTS) 700,000 741,200 85,213.20 926,413 FUTURE TRACT NO. 6250-UNIT 10 DOTS 6-9 AND 1 I-] 3 (RESIDENTIAL LOTS) 245,000 44,420 38,156.16 332,576 FUTURE TRACT N0.6250-UNIT 10 LOTS l0, 14 & 15 (RESIDENTIAL LOTS) 105,000 21,180 :21,052.86 147,233 FUTURE TRACT N0.6250-UNI"I~11 L0"IS 1, 4-I2 AND I S-l7 {RESIDENTIAL LOTS} 455,000 9],780 - 55,388.58 602,169 FUTURE TRAC-T N0.6250-IINPT II LOTS 2,13, 14, AND 19-22 (RESIDENTIAL LOTS) 245,000 49,420 ~ 38,156.16 332,576 FUTURE TRACT NO. 6250-UNIT it LOT53, 18 AND 23-25 {RESIDENTIAL LOTS) 175,000 35,300 35;088.10 245,388 FUTURE TRACT NO. 6250-UNIT 12 LOTS 7-l 1, 13- - 21 AND 28-37 {RESIDENTIAL LOTS) I,OSQ,000 211,800 .127;820.00 _ 1,389,620 FUTURE TRACT N0.6250-UNIT 12 LOTS 12,22 ~ ANU 24-27 (RESIDENTIAL LOTS) 210,000 42,360 :32,705:28 285,065 FUTURE TRACT N0.6250-UNIT 12 LOT 23 (RESIDENTIAL LOTS) 35,000 7,060 7;017.62 49,078 98 File 3806 Lauver & Associates Assessment District 04-2 Cherry Hill II Area ASSESSMENT AS IS LAND VALUE DEVELOPMENT AREA DESCRIPTION DEVELOPER'S DISTRICT FUNDED WITH AD FUNDED UNIMPROVED IMPROVEMENTS TO IMPROVEMENT IMPROVEMENTS IN LAND VALUE LAND TOTAL PLACE TRACT N0.6153 UNIT THREE (RES[DBNTIAL 1,960,000 577,360 342,039.99 2,879,400 LOTS) TRACT NQ 6153 UNIT EOUR (RESiDENT1AL 2,205,000 b4Q530 354,795.01 3,239,325 LOTS) STOCKDALE AT ALLEN COMMERCIAL AREA The portion of the Assessment Dist~eict identified as the Stockdale at A11en Commercial Area consists of a contiguous parcel of land that lies adjacent to the north line of Stockdale Highway extending from Jewetta Avenue at the east to Allen Road at the west. A portion also has frontage along the east line of Allen Road extending approximately 400' feet northerly from the Stockdale Highway IAllen Road intersection. This portion of the Assessment District has a total of 30.76- acres, gross. The parcel is zoned C-O, a commercial office designation. It is relatively level at street grade. It is proposed for development with commercial office development in accordance with the zoning. As of the date of value the parcel consisted of graded, unimproved land. During the course of our investigation we found that there are few sales of large commercial zoned parcels such as the subject. The sales of larger commercial zoned parcels with indicators for the subject that have sold recently are summarized below. Land Sale Location APN Date S.Price Size SP/SF 1 Wible Rd 404-010-23, 25 & 43 8/2712003 3,500,000 28.00 $2.87 2 3500 Coffee Rd 451-010-26 11/2112003-2,000,000 " 13.10 $3.50 3 Coffee Rd 494-040-40 8/23/2004 2,560,000 10.13 $5.80 In reviewing the sales it is noted there is a pattern of increasing prices over time and there is an inverse relationship between size and selling price per square foot. 99 Lauuer & Associates Assessmeut District 04 2 Sale I is located across the street from the Bakersfield Auto Mall on Wible Road. This location is considered to be inferior to that of the subject owing to the lower traffic counts and the character of the improvements and development trends in the area. Sale 2 is located at the southwest corner of Coffee Road and Riverlakes Drive in Northwest Bakersfield. It was acquired for future subdivision into smaller commercial sites. The parcel utility is affected by high voltage power lines that traverse the easterly portion of the parcel that fronts on Coffee Road. This parcel is considered inferior to the subject owing to the location and character of the area and the existence of the transmission. towers. Sale 3, located on Coffee Road, surrounds the McDonald's restaurant at the_eorner of Hagernan Road in Northwest Bakersfield. It was purchased as a speculative investment and is now being divided rota 8-10 parcels for development as office retail oriented center. The asking prices for the resale parcels are reported to be in the $15 per square foot range. At the time of sale the streets fronting the subject were fully improved. This parcel is considered slightly inferior to the subject based on its less prominent location and traffic counts. It is superior in size however; smaller parcels tend to sell. for more per unit than larger ones and in consideration of potential for near-term development. Overall, I have concluded the 30.76-acre parcel of commercial zoned land has a value of $5.00 per square foot. This recognizes its prominent location on the highly traveled Stockdale Highway and Allen Road, which is a major arterial. Using this economic value unit indicates a value of $6,699,528. 100 File 3806 Lauver & Associates Assessment District D4-2 SUMMARY OF APPRAISAL In the previous sections of this report we presented values for the various Assessment Areas in the Assessment District. Our findings were as follows: Brighton VillagelBrighton Parks Areas Value of Unimproved Residential Land (per paper or tentative mapped lot} Value of Product Type 1 when complete (5,000 square foot lots) Value of Product Type 2 when complete (6,600 square foot lots) Value of Product Type 3 when complete (7,700 square foot lots) Cherry Hill II Area Valuc of I I9 lots in Cherry Hill II when complete (10,000+ SF lots) _ Stockdale at Allen Commercial Area Value of Stockdale at Allen Commercial Land @$5 PSF $35,000 $65,000 $70,000 $77,000 $115,000 $7,461,625 The `As Is' and Bulk Value of the various assessment areas is shown individually on pages 97- 99. All the values developed within this report are presented on the Consolidated Worksheet that can be found in the Addenda section of this report. 101 Lauver & Ass©eiates Assessment District D4-2 CERTIFICATIONS The undersigned appraiser certifies the following statements are true and correct with respect to this appraisal report: That I personally inspected the subject property. That I have no interest, past, present or contemplated, in the real estate, which is the subject of this appraisal report. Employment to make this appraisal is in no manner contingent upon the final value herein reported. That to the best of my knowledge and belief the statements of fact contained in this report upon which the analysis, opinion and conclusions expressed herein-are based, are true and correct. That I have no personal bias with respect to the subject matter of this appraisal or the parties involved and that racial composition of the neighborhood was in no way considered. This appraisal report is made in conformity with and is subject to the requirements of the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute of which I am a member. The Appraisal Institute conducts a voluntary program of continuing education for its designated members. Members who meet the minimum standards of this program are awarded periodic educational certification. I am currently certified under this program through December 31, 2007. 1 certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. This appraisal report sets forth all the limiting conditions, imposed by the terms of the assignments or by the undersigned, affecting the analysis, opinions, and conclusions in this report. - That no one other than the undersigned prepared the analysis, conclusions, and opinions, (concerning the real estate which is the subject of this report), that are set forth in this appraisal report. This appraisal has been completed in compliance with the Uniform Standards of Professional Appraisal Practice {USPAP}, as developed by the Appraisal Standards Board of the Appraisal Foundation, and the Office of the Comptroller of the Currency's (OCC} minimum appraisal ' standards. This appraisal was performed in compliance with RTC regulations. The appraiser has the appropriate knowledge and experience to complete this assignment competently. As of the date of this report, I have completed the requirements of the continuing education program of the Appraisal Institute. 102 File 3$06 Launer & flss©ciates Assessment District 04-2 The compensation for appraisal services and future employment prospects are not contingent upon the reporting of a predetermined value of direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a stipulated event. The existence of hazardous materials, which may or may not be present on the property, was not observed during the physical inspection. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam, radon gas, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there are no such materials on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering required to discover them. Based upon the study and investigations conducted, and after careful consideration. of all pertinent factors affecting value, I have formed the conclusion that the values pertinent to the subject property as defined, as of the effective dates of this appraisal are as follows: Brighton VillagetBrighton Parks Areas Value of Unimproved Residential Land (per paper or tentative mapped lot) Value of Product Type 1 when complete (5,000 square foot lots} Value of Product Type 2 when complete (6,600 square faot lots} Value of Product Type 3 and Brighton Village when complete (7,700 SF lots) Cherry Hill lI Area Value of 119 lots in Cherry Hill II when complete (10,000+ SF lots} Stockdale at Allen Commercial Area Value of Stockdale at Allen Commercial Land @$5 PSF $35,000 $65,000 $70,000 $77,000 $115,000 $7,461,625 The `As Is' and Bulk Value of the various assessment areas is shown individually on pages 97- 99. All the values developed within this report are presented on the Consolidated Worksheet that can be found in the Addenda section of this report. Please read the underlying Assumptions and Limiting Conditions, which are an integral part of this appraisal. Michael Launer, MAI SRA Certified General Appraiser AG 002049 103 ADDENDA UNDERLYING ASSUMPTIONS & LIMITING CONDITIONS CONTINGENT AND LIMITING CONDITIONS: The certification of the Appraiser whose signature appears in this appraisal report is subject to the following conditions and to such other specific and limiting conditions as are set forth by the Appraiser in the report. 1. The Appraiser assumes no responsibility for matters of a legal nature affecting the property appraised or the title thereto, nor does the Appraiser render any opinion as to the title, which is assumed to be good and marketable. The property is appraised as though under responsible ownership. 2. Any sketch in the report may show approximate dimensions and is included to assist the reader in visualizing the properly. The Appraiser has made no survey of the property. 3. The Appraiser is not required to give testimony or appear in court because of having made the appraisal with reference to the property in question, unle§s arrangements have been previously madetherefore. 4. Any distribution of the valuation in the report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisal and are invalid if so used. 5. The Appraiser assumes that there are no hidden or unapparent conditions of the property, subsoil, or structures, which would render it more or less valuable. The Appraiser assumes no responsibility for such conditions, or for engineering, which might be required to discover such factors. 6. Information, estimates, and opinions furnished to the Appraiser, and cantained in the report, were obtained from sources considered reliable and believed to be true and correct. However, the Appraiser can assume no responsibility for`accuracy of such items furnished the Appraiser. 7. Disclosure of the contents of the appraisal report is governed by the Bylaws and Regulations of the professional appraisal organizations with which the Appraiser is affiliated. 8. Neither all, nor any part of the content of the report, or copy thereof (including conclusions as to the property value, the identity....of the Appraiser, professional designations, reference to any professional appraisal organizations, or the firm with which the Appraiser is connected, shall be used for any purposes by anyone but the client specified in the report, the borrower if appraisal fee paid by same, the mortgagee or its successors and assigns, mortgage insurers, consultants, professional appraisal organizations, any state or federally approved financial institution, any department, agency, or instrumentality of the United States or any state or the District of Columbia, without the previous written consent of the Appraiser; nor shall it be conveyed by anyone to the public through advertising, public relations, news, sales, or other media, without the written consent and approval of the Appraiser. 9. On all appraisals, subject to satisfactory completion, repairs, or alterations, the appraisal report and value conclusion are contingent upon completion of the improvements in a workmanlike manner. 10. The appraiser is not an expert in survey, soils, drainage, and geological or seismic conditions. The property is assumed to be free of such significant detrimental conditions. Unless otherwise noted in the report, the appraiser observed no noticeable problems in this regard. The client is urged to seek appropriate outside expert opinions however, if concerned about these factors. 11. The appraiser is not an expert in structural analysis. The property is assumed to be free of structural deficiencies, building code violations, and unsafe conditions. This includes the assumption that all heating, plumbing, electrical, and mechanical systems as well as the appliances and the roof are in adequate working order. Unless otherwise noted in the report, the appraiser observed no noticeable problems in this regard. The client is urged to seek appropriate outside expert opinions however, if concerned about these factors. 12. The appraiser is not an expert in the detection of potentially hazardous or toxic substances such as the presence of urea formaldehyde foam insulation, asbestos building materials fibers, radon gas, or any other harmful environmental substances. The appraiser observed no such substances and the property is assumed to be free of such substances. The client is urged to seek outside expert opinions however, if concerned about these factors. 13. This appraisal is predicated on the assumption that all improvements constructed will be of the size and materials represented in the developer supplied documentation. Any modifications or variations should be submitted to the undersigned to determine what effect, if any, the modifications will have on the final value estimate. 14. I certify that, to the best of my knowledge and belief, the reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute, of which I am a member. 15. 1 certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its authorized representatives. __. _ ~_ 16. The hypothetical sale referred to in the definition of Market Value, and thus any values in this report are on the basis of all cash to the seller, therefore, no consideration has been given to existing or proposed financing. 17. To the best of my knowledge, all pertinent information available to the appraiser is contained within this report. If, subsequent to the date of the report, should information become available or submitted to the appraiser that could materially affect the value reported herein, the appraiser reserves the right to modify the appraisal report. 18. The values assigned reflect value for the real estate only. No value consideration has been given to the in-use value of any equipment, personal property or fixtures. 19. This appraisal report is prepared for the sole and exclusive use of the City of Bakersfield (THE CLIENT}. No third parties are authorized to rely upon this report without the express written consent of the appraiser. 20. The Tentative Tract maps we reviewed are subject to change until final map approval has been granted by the City of Bakersfield. Consequently, any outstanding tentative maps and any subsequent maps -may not accurately represent the final lot delineation as determined by the City. 21. The reader is cautioned that we received no floor plans, elevations, description of materials nor cost breakdowns for the developer's proposed production units. The projected selling prices of the completed housellot combinations are those of the developer and we have not appraised the individual production models. To the best of the appraiser's knowledge however, the costs and projected selling prices are within market parameters. 22. The Bakersfield City Council has scheduled a hearing to approve final maps for Tract 6153 (Cherry Hill II Area) May 25, 2005. The fnv hed lot values presented in this appraisal are predicated on the assumption the maps will be approved and have a recording date of Tune 1, 2005. Date: Apri126, 2005 Michael Launer, MAI, SRA Federal ID# 20-0317656 Certified General Appraiser State of California Cerkificate No. AG 002049 QUALIFICATIONS OF MICHAEL L. LAUNER, MAI SRA APPRAISAL EDUCATION SAN BERNARDINO VALLEY COLLEGE - Advanced Residential Appraising Advanced Income Property Appraising SOCIETY OF REAL ESTATE APPRAISERS Year Completed 197& 1978 Course 101 - Intro to Appraising Real Property 1977 _ Course 201 - Principles of Income Property Appraising 1979 Course 202 - Applied Income Property Valuation 1984 R-2 Residential Proficiency Examination _ 1979 Narrative Report Writing Seminar 1979 Subdivision Analysis 1943 APPRAISAL INSTITUTE Basic Valuation Procedures/ Income Capitalization Part A & B 1988 Real Estate Principles 1990 Standards of Professional Practice Course 410 1994 Standards of Professional Practice Course 420 1994 Highest & Best Use and Marketing Analysis Course 520 1994 OREA Required Update Seminar 1995 Environmental Risk and the Real Estate Appraisal 1495 Appraising Rural Transitional Properties in S. California Seminar 1996 Litigation Loss Prevention Program for Real Estate Appraisers 1947 Federal and State Laws and Regulations 1997 The Appraiser's Role in the Redevelopment Process 1998 Valuation Considerations in Partial Acquisition 1448 Valuation of Detrimental Considerations in Real Estate 1999 Condemnation Appraising -Basic Applications Course 710 1999 Condemnation Appraising- Advanced Topics Course 720 1999 Standards of Professional Practice Part C Course 430 1999 Real Estate Fraud & The Appraiser's Role 2000 Highest and Best Use Applications Seminar 2002 Standards of Professional Practice Course 400 -- 2003 Scope of Work Seminar 2004 Reappraising, Readdressing and Reassigning 2004 Advanced Cost and Sales Comparison Approaches 2004 PROFESSIONAL DESIGNATIONS & AFFILIATIONS STATE OF CALIFORNIA CERTIFIED GENERAL APPRAISER License Number AG002049 Issued 1991 APPRAISAL INSTITUTE MAI -Member Appraisal Institute 1942 SRA -Senior Residential Appraiser 1986 Certified Administrative Instructor for: Appraisal Institute: Course 110 Appraisal Principles Appraisal Institute: Course 120 Appraisal Procedures Appraisal Institute: Course 210 Applied Residential Appraisal Appraisal Institute: Course 310 Basic Income Capitalization Appraisal Foundation: Uniform Standards of Professional Appraisal Practice Currently: Associates Guidance Chair -General Finance Chair, Appraisal Institute Region VII Member, Regional Ethics and Counseling Panel Appraisal Institute Positions Held: Candidate Guidance Chairman -Appraisal Institute, Bakersfield Chapter 1991-2000 Admissions Chairman -Appraisal Tnstitute, Bakersfield Chapter 1991-1999 President, Society of Real Estate Appraisers Bakersfield Chapter 75, 1987-1989 President -Appraisal Institute, Bakersfield Chapter, 2001 President -Appraisal Institute, Bakersfield Chapter, 2002 BAKERSFIELD COLLEGE INSTRUCTOR - Real Estate 63 -Intro to RE Appraisal 1488-1998 Real Estate 68 -Advanced RE Appraisal 1993-95 PROFESSIONAL ASSIGNMENTS Valuation appraisals, feasibility studies, depreciation analysis and investor€nt consultations regarding: hotel, motels, office projects, residential subdivisians, mobile home parks, mobile home subdivisions, restaurants, vacant acreage, commercial lots, rehabilitation projects and a variety of commercial properties. Special purpose assignments have included: manufacturing, processing and cold storage facilities, oil refinery, quarry, winery and rock crushing facility. Other assignments have included the appraisal of livestock and agricultural properties. APPRAISAL AND BUSINESS EXPERIENCE Presently Principal, - Launer & Associates, Real Estate Valuation & Consulting 1986 - 1988 Senior Vice President, Chief Appraiser, Paramount Bank 1985 - 1486 Commercial Appraiser - A.L. Appraisal Company 1977 - 1985 Commercial Appraiser -Bank of America NT & SA p o _ S 3 - .- £ _ _ 'ag ~ ? ~ g £ ~ 9 _ a ~ ~_ ~ $ _ °a 5 z = - _ 5 _ k'o' € _ - - - _ _ g _ ~ - a s 3 ~w 9 _ - - w ~u _ ws - g ` ~ ~ _ s _ € - ~ ~_ ~ - - _ - _ s`s s t ~ ~ _ ~ ~ ~ 3 3 S E s _ ~ A r R ~ ~ z Y Y '~ Q ~uuJ ~ ~" 5` - ~ - - a i P„ u% ~Sg D ~ 2 _ _ _ ~ 3 3 3 _ ~ 3 ~~o d~9 &a ~< ~ _ _ _ _ ~ _ _ _ _ _ °s ~ ~ g3~ J 3 'o ~~o n a ~ g _ _ _ _ _ _ %~° - ~a~^ _ _ _ _ _ _ _ _ _ 9c C~Ke n t K 9 So ~ -~ ~ ~K ~ § ~5 7~ 5 t .~ s ,. _~ ~ F 3 5 F p 5 Fv _ ~~ s~ C' a 4 t^ ~ ` a~ ~ t t. ~ ~ C 3 n ~ i t~ # ~ 2 ~ 3 Si d~ d :l ~ ~_~ ~ t c ~ '~ ~ ~x 3 S V: ~ ~ ~ t ~ t v 4 ~ d t G G - ~ '0 ~ ~ ~ 5 a ~ - . ~ ' . 5 E E a F r 6 ~ ~ ~ w < a % 6 C ~ 5 2 4 s o 6 ~ ~ ° - - ~ 3 ~ ~ $ ~ o 5 _ 'g ° ~ c __ _ _ R _ E = 4 3 A s ~ r ~ { 6 _ _ g~ - _ _ _ _ ~ _~ ~ z i. t ~ _ _ _ C O_ - a_ _ ~ d . .- _ G of Y _ _ _ § jz _ s = Y - & 3 ~ x = " ~ g ~ _ z °o~ ~ ~ _ _ .~ ~ S - ' C a _ _ _ _ ~ t g w T} w 3 L 8 ~ Rq -_ 8~ Y 3 m 3 3 Y Y 'y 5 rt - ~~Ca i - _ GG 3~ q ~. A 8- E A _ ~ 4 m ~ g ~. ., t z C S n ~~ # E S 6 ~p _ _ _ ~ 3 ]a~ x c 2 8 . ~ ~. 3 S 3 8- 8 8 - & ~ S F. -.. ^_y T ~uer a~wi ' 2 - _ - _ - = J e S who _ _ _ ~~5 ep °~ 3 4 ~ d = °s '_ _ °s _ a e s ~ ~ ~ ~ 's h _ ~ s _ _ _ _ _ _ _ _ _ &3 _ _ _ ~~o g a _ _ _ 9 ~ ~ _ m ~ gQ _ ~woC f R - s 3 _ $ _ ' a te" o a Rb - E_ ~ S _ ~ K ~ a ~ C q '~ ~E '~ e ~ ro c = s ~ K s _ s e _ '~ - _ _ _ ~ - p ~ _ S i ~ 3t 9 ~ 3 S '-3 c q`c $ _ ° a'~ a~ a s ' a ~t ~ ~ r G d ~" ~ & n ~ e ~ ~ a ` y d _ ~ t v a m C ~ . C C ' ~ a t o, ~ 9 2 r 2 J ~' ? ~ ms's : ~ `a s , ~ ~ 3 a F = ~ _ q a F c o O ~ c ~ V ~ ~ - o Z ' O L tl m ~ ~' 3 ~ V 6 W Q ~ ~ ~ ~ ~ Q % S _ _ 8 F E APPENDIX C FORM OF OPINION OF BOND COUNSEL Closing Date, 2005 City Council City of Bakersfield 1501 Trnxtun Avenue Bakersfield, CA 43301 City of Bakersfield Assessment District No. 04-2 (Brighton PaxksBrighton Village/Stockdale at Allen CommereiallCherry Hill I>) Limited Obligation Improvement Bonds (Final Opinion) Ladies and Gentlemen: -- We have acted as bond counsel in connection with the issuance by the City of Bakersfield (the "Issuer") of $4,915,064 aggregate principal amount of the City of Bakersfield Assessment District No. 04-2 (Brighton Parks/Brighton VillagelStockdale at Allen Commercial/Cherry Hill II) Limited Obligation Improvement Bonds (the "Bonds"} pursuant to the provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915 and Resolution Na. 125-05, adopted by the City Council on June 8, 2005 (the "Resolution"). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Resolution. In such connection, we have reviewed the Resolution, the Tax Certificate of the Issuer dated the date hereof (the "Tax Certificate") an opinion of counsel to the Issuer, certifications of the Issuer and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the Resolution, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. The opinions expressed herein are based on an analysis of existing laws, regulations, mlings and court decisions and covet certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occumng afrer the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this opinion. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies} and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinion, referred to in the second pazagraph hereof. Furthemwre, we have assumed compliance with all covenants and agreements contained in the Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Resolution and the Tax Cemficate may 6e subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California. C-t We express na opinion on the plans, specifications, maps and other engineering details of the proceedings, or upon the validity of the individual separate assessments securing the Bonds which validity depends, in addition to the legal steps required, upon the accuracy of certain of the engineering details. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute valid and binding special assessment obligations of the Issuer, payable solely from and secured by the unpaid assessments and certain funds held under the Resolution. 2. The Resolution has been duly adopted and constitutes a valid and binding obligation of the Issuer. 3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Interval Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative mirilmum taxes, although we observe that it is included in adjuated current earnings in calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accmal or receipt of interest on, the Bonds. _ Faithfully yours, ORRICK, HERRIIQGT4N & SUTCLIFFE LLC per G2 APPENDIX D ASSESSMENT DIAGRAM D-t (THIS PAGE INTENTIONALLY LEFT BLANK) ~ I _ I ~° I ~< j a~ ' ~ o rT O i ~ i ~~° °o I ~YWN i -~ iG i F'-1 I o ~ i ~ ~ o I b~ - _ _" i ~ ~ z m p o o ~ I c""~ 'o~~~ a a ~„om ~ p - s O ~. a .~ ~.1 c e5 i Tiw~ o ~ o~ p~ i~~„a~~~ iwo pe~u i pu c~'o I z rt .;; fZ m o j ¢~¢ owl ~ x~m o~ ~=rv~' 15: ~ z ~ _ ~ ~~ ~°j~~ U W ~ ~ rte"; x8. 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The Bonds ate being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 125-OS (the "Resolution"), adopted by the City Council of the City on June 8, 2005. The City covenants and agrees as follows: Section I. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended. Section 2. Definitions. In addition to the definitions set forth. above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean any person who has the power, dtreetly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories, or other intermediaries}. "Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Fiscal Year" shall mean the 12-month period beginning on July 1 and ending on the next following June 30, unless and until changed by the City. "Holder" shall mean either the registered owner of any Bond, or, if the Bonds are registered in the name of DTC or another recognized depository, any Beneficial Owner or applicable participant in its depository system. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The current National Repositories are listed on-the "Securities and Exchange Commission website at httpaJwwGVSec.govJinfotmunicipallmmsir.htm. "Official Statement" shall mean the fmal Official Statement, dated June 23, 2005, pertaining to the Bonds. "Participating Underwriter" shall mean RBC Dain Rauscher, and any other original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. F-I "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule ISe2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1434, as the same maybe amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. Section 3. Provision of Annual Renorts. (a) The City shall, ar shall cause the Dissemination Agent to, not later than nine {4) months after the end of the City's Fiscal Year {t.e., currently not later than Aprit 1 of each year), commencing with the report for the 2004-OS Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited fmancial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. The Annual Report may be filed using the SEC-Approved Electronic Transmission Facilities j provided by the Texas Municipal Advisory Council at website http:/1www.disclosureusa.or's. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) Not later than fifteen (IS) Business Days prior to the date required in subsection (a), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to each Repository an Annual Report by the date required in subsection (a}, the City shall send to each Repository a notice in substantially the form attached hereto as Exhibit A. (c} The Dissemination Agent shall: (i} determine each year, prior to the date for providing the Annual Report, the name and address of each Repository, and file the Annual Report with each Repository, and (ii) if the Dissemination Agent is other than the Ciry, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Renorts. The City's Annual Report shall contain or incorporate by reference the following: - (a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Notwithstanding the foregoing, each Annual Report or other filing containing the City's financial statements may include the following or other similar statement: THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED SOLELY TO COMPLY tb'ITH THE SECURITIES AND EXCHANGE COMMISSION STAFF'S INTERPRETATION OF RULE 15c2-12. NO FITNDS OR ASSETS OF THE CITY OF BAKERSFIELD {OTHER THAN THE ASSESSMENTS LEVIED IN THE ASSESSMENT DISTRICT) ARE REQUIRED TO $E USED TO PAY DEBT SERVICE ON THE BONDS, AND THE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL F-2 CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD, OR SELL THE BONDS. (b) The following information with respect to the City for the Fiscal Year to which the Annual Report relates, which information may be provided by its inclusion in the audited Snancial statements of the City for the prior Fiscal Year described in subsection (a) above: (i) The principal amount of Bonds outstanding, including principal amounts and years of maturity of Bonds, if any, called for redemption in advance of maturity. (ii} The balances as of the end of such Fiscal Year in each of the following funds established pursuant to the Resolution: (A} the Improvement Fund; (B) the Redemption Fund; and (C) the Reserve Fund. (iii) Identification of each parcel for which any installment of the unpaid assessment is delinquent, together with the following information respecting each such parcel: (A) the amount delinquent (exclusive of late charges and monthly penalties fox reinstatement); (B) the date (L?ecember 10 or April 10) of The First delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed in the Kern County Superior Court; and (D} in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale. - (iv} A current statement of the status of completion or progress toward completion of The public improvements described in the Official Statement under the subheading "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Description of the Community Areas and the Improvements." (v) A current statement of the land-secured public financing information summarized in the Official Statement under the subheading "THE BONDS -Priority of Lien." (vi) A current statement of the parcel information set forth in Cohtrtms 5 through 9, inclusive, of APPENDIX E to the Official Statement, for both existing and future parcels. (c) In addition to any of the information expressly required to be provided under pazagraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they aze made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause Yo be given, notice of the occurrence of any of the following events (each, a "Listed Event") with respect to the Bonds, if material: (i) principal and interest payment delinquencies; (ii) non-payment related defaults; (iii) modifications to rights of Bond Holders; (iv) optional, contingent, or unscheduled Bond calls; (v) defeasances; F-3 (vi) rating changes; {vii) adverse tax opinions or events adversely affecting the tax-exempT status of the Bonds; (viii) unscheduled draws on the debt service reserves reflecting fmancial difficulties; {ix) unscheduled draws on credit enhancements reflecting financial difficulties; (x) substitution of credit or liquidity providers, or their failure to perform; or (xi} release, substitution, or sale of property securing repayment of the Bonds. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible deternvne if such event would be material under applicable Federal securities law. (c) If the City detertnines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the City shall promptly file a notice of such ocwrrenee with either (i) the Municipal Securities Rulemaking Board and the State Repository or (ii) the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v} need not be given under this subsection any earlier than the notice {if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution. Section 6. Temunation of Re_portinQ Obli au tion. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasanee, prior redemption, or payment in full of all of The Bonds. If such temunation occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Aeent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may dischazge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. Section 8. Amendment: Waiver. Notwithstanding any other pmvision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 3(a}, 4, or 5{a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; {b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, afrer taking into account any amendments or interpretations of the Rule, as well as any change in circumstances: and (c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of Holders, or {ii) does not, in the opinion of nationally recognized bond counsel, materially impair the in[ere9ts~ of the Holders or Beneficial Owners of the Bonds. If the annual financial infomration or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual fmancial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendmenC and the impact of the change in the type of operating data or financial information being provided. F4 In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. If an amendment is made to the undertaking specifying the accounting principles to be followed In preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the.ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall-have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities, and Liabilities of Dissemination Aeent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees, and agents, harnrless against any losses, expenses, and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees} of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. - Section 72. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemnation Agent, the Participating Underwriter, and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] CITY OF BAKERSFIELD By: Finance Director F-5 '~ EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City ofSakersfield, California Name of Bond Issue: Assessment District No. 04-2 (Brighton Parks/Brighton VillagetStockdale at Allen CommerciallCherry Hill II) Limited Obligation Improvement Bonds Date of Issuance: [Closing Date] NOTICB IS HEREBY GIVEN that the City of Bakersfield, California (the "City), has not provided an Annual Report with respect to the above-named Bonds as required Section 4(a) of the Continuing Disclosure Certificate executed by the City on [Closing Date]. The City anticipates that the Annual ReparC wi17 be filed by Dated.: CITY OF BAKERSFIELD _ By: Finance Director F-6 CITY OF BAKERSFIELD ASSESSMENT DISTRICT N0.04-2 (BRIGHTON PARKSBRIGHTON VILLAGEI STOCKDALE AT ALLEN COMMERCIALICHERRY HILL II) LIMITED OBLIGATION IMPROVEMENT BONDS DEVELOPER'S CONTINUING DISCLOSi7RE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by Castle & Cooke California, Inc., a California corporation (the "Developer"), in connection with the issuance by the City of Bakersfield (the "City"} of $4,915,000 in aggregate principal amount of the above-referenced bonds (the `Bonds") for Assessment District No. 04-2 (Brighton ParksBrighton Village/Stockdale at Allen Commercial/Cherry Hill IT) (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 125-05 (the "Resolution', adopted by the City Council of the City on June 8, 2005. The Developer covenants and agrees as follows: SF.C'1'1O\ 1. Puroose of the Disclosure Certificate This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the City, RBC Dain Rauschrr. as the underwriter of the Bonds (the "Underwriter"), and the Holders and Beneficial Owners (each as deiincd brloivl of the Bonds in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(6)(5}, as amended. SECT'1O\ 2. Definitions. In addition to t17e definitions set forth above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Affiliate" of another Person shall mean (a) a Person directly or indirectly owning controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b} any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by such other Person, or {c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, "control" means the power to exercise a eontmlling influence over the management or palicies of a Person, unless such power is solely the result of an official position with such Person. "Assumption Agreement" means an agreement or certificate by a Successor Developer, containing terms substantially similar to this Disclosure Certificate, whereby such Successor Developer shall agree to provide Semi- Annual Reports and notices of Listed Events with respect to the property in the Assessment District owned by such Successor Developer and its Affiliates, if any. "Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of awnership of, any Bond or Bonds, including persons holding Bonds through nominees, depositories, or other intermediaries. :. "Development Plan" shall mean the specific improvements the Developer intends to make, or cause to be made, in order for fhe Community Area to reach the Planned Development Stage, the time frame in which such improvements are intended to be made, and the estimated costs of such improvements. The Developer's Development Plan, as of the date hereof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Disclosure Period" shall mean the six-month period beginning on July 1 or January 1 and ending on the next following June 30 or December 31, as applicable. F-7 "Disclosure Representative" shall mean the president, the managing member, any vice-president, or the ', chief financial officer of the Developer or his or her designee, or such other officer, employee, or agent as the Developer shall designate in writing to the Dissemination Agent and the City from time to Cime_ "Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Event of Battkntptcy" shall mean, with respect to a Person, that such Person files a petition or institutes a proceeding under any act ox acts, state or federal, dealing with or relating to the subject or subjects of banlauptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, oras a debtor, or in any similar capacity, wherein or whereby such Person asks, seeks, or prays to be adjudicated a banlavpt, or is to be discharged from any or all of such Person's debts or obligations, or offers m such Person's creditors to effect a composition or extension of time to pay such Person's debts or obligations, or asks, seeks, or prays fox reorganization or to effect a plan of reorganization, or for a readjustment of such Person's debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person, or if a receiver of the business, property, or assets of such Person is appointed by any court, or if such Person makes a general assignment for the benefit of such Person's creditors. "Financing Plan" shall mean the method by which Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan. The Developer's Financing Plan, as of the date hereof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT:' "Financial Statements" shall mean the full financial statements, special purpose fmancial statements, project operating statements, or other reports reflecting the financial position of the Developer's parent company or, if such financial statements are prepared separately for the Developer, reflecting the financial position of the Developer; provided that, if such financial statements or reports are otherwise prepared as audited fmancial statements or reports, Yhen "Financial Statements" means snch audited financial statements or reports. The Financial Statements for the Developer or its parent company shall consist of a balance sheet, an income statement, and a statement of cash flows, all prepared in accordance with generally accepted accounting principles. "Holders" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system. "Listed Event" shall have the meaning given to such term in Section 5 of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The omrent National Repositories are listed on the Securities and Exchange Commission website at httpalwwwsec.gov/infofmunicipal/nnnsix.htm. "Official Statement" shall mean the final Official Statement dated June 23, 2005, pertaining to the Bonds. "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a trust, any unincorporated organization, or a government or a political subdivision thereof. "Planned Development Stage" shall mean, with respect to any property in the Assessment District owned by the Developer or its Affiliates, if any, the stage of development to which the Developer intends to develop such property, as described in the Official Statement, and the Developer has completed constmction and/or development as described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Repository" shall mean each National Repository and each State Repository. F-x "Rule" shall mean Rule ISc2-12(6)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended fmm time to time. "Semi-Annual Report" shall mean any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. "Successor Developer" shall mean any property owner, other than the Developer or its Affiliates, which purchases property in the Assessment District for the purpose of develoging the property and not merely as an end- user. SECTION 3. Provision of Semi-Annual Reports. (a) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, the Developer shall provide, or shall cause the Dissennation Agent to provide, not later than three (3) months after the end of each Disclosure Period (i.e., not later than September 30 or March 31 of each year, as applicable}, commencing with the report for the Disclosure Period ending December 31, 2005, to each Repository aSemi-Annual Report relating to the immediately preceding Disclosure Period which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Semi- Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided, however, that if audited Financial Statements are required to be provided, such audited Financial Statements may be submitted separately from the balance of the Semi-Annual Report, and later than the date required above for the filing of the Semi-Annual Report, if not available by that date. The Semi-Annual Report may be filed using the SEC-Approved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at website h~:!lwww. disclosureusa.ore'. (b) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, not later than fifreen (15) business days prior to the date required in subsection (a) hereof, the Developer shall provide the Semi-Annual Report to the Dissemination Agent. If the Developer is unable to provide, or cause to be provided, to each Repository aSemi-Annual Report by the date required in subsection (a) hereof, the Dissemination Agent shall, first, confirm Yhat the Developer's obligation hereunder has not bean terminated pursuant to Section 6 of this Disclosure Certificate, and, if the Developer is still obligated hereunder, the Dissemination Agent shall send to each Repository a notice in substantially the form attached hereto as Exhibit A. - (c) The Dissemination Agent shall: (i) deterntine each year, prior to the date for providing the Semi-Annual Report, the name and address of each Repository, and file the Semi-Annual Report with each Repository, and (ii} following ffie filing of the Semi-Annual Report with each Repository, file a certificate with the City and the Developer certifying that the Semi-Annual Report has been filed with each Repository pursuant to this Disclosure Certificate, stating the date on which the Semi-Annual Report was filed, and listing each Repository (byname and address) with which it was filed. ----- - F-9 SECTION 4. Content of Sexni-Annual Reports. So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, The Developer shall provide aSemi-Annual Report for the preceding Disclosure Period with respect to property within the Assessment District owned by the Developer or its Affiliates, if any, which Semi-Annual Report shall contain or incorporate by reference the following: (a) The Developer shall provide a general description of progress made in the Development Plan, and any significant changes in the Development Plan, Financing Plan, or zoning during the prior Disclosure Period. The Developer shall track actual absorption relative to projected absorption according to the framework described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Developer shall identify any material deviations in actual versus expected sale prices, and identify zoning changes, if atty. The Developer shall also include information concerning the recordation of final maps, if applicable, and information concerning the sale or transfer of property to Persons that are not Affiliates afthe Developer. The Developer shall describe any significant changes in the Financing Plan for its development project including, without limitation, changes in status of the Developer's credit hne (ar the credit line of any Affiliates of the Developer thm own property within the Assessment District), if applicable. Thr Developer shall describe (i) any change in the legal stmcture of the Developer or of any of its Affiliates that own property within the Assessment District; (ii) any previously undisclosed amendments to the land use entitlements or environmental conditions or other governmental conditions that are necessary to complete its Developmem Plan: or (iii) any previously undisclosed legislative, administrative, or judicial challenges to the Development Plan. if known. (d) Each fiscal year, one Sena-Annual Report shall make reference to the quarterly and annual financial statements of the Developer, on file with the Securities and Exchange Cottunission (if applicable). All such references shall contain the following caveat: The quarterly and annual reports of the Developer are referred to for informational purposes only. ht the event of a failure to pay any installment of assessments, and afer depletion of the Reserve Fund, the real property in the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets (other than the property in the Assessment District) of the Developer may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from the reference to the quarterly and annual reports of the Developer that the funds of assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments. (e) To the oxtent that Financial Statements are prepared separately for the Developer, Financial Statements prepared in accordance with generally accepted accounting principles, as in effect from time to time, shall be provided. Ta the extent that audited Financial Statements are prepared sepamtely for the Developer, if audited Financial Statements are required to be provided and such audited Financial Statements are not available by the time the applicable Semi-Annual Report is required to be provided pursuant to Section 2(a) of this Disclosure Certificate, the applicable Semi-Annual Report shall contain unaudited Financial Statements, and the audited Financial Statements shall be filed in the same manner as the applicable Semi-Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby. To the extent that audited Financial Statements of the Developer are prepared, the Developer shall include such audited Financial Statements in the applicable Senti-Annual Report. To the extent that the provisions of this subsection (e) become applicable, the provisions of subsection (d) above shall cease to be applicable. All such audited Financial Statements of the Developer, if any, shall contain the following caveat: The audited fmancial statements of the Developer are included for informational purposes only. In the event of a failure to pay any installment of assessments, and after depletion of the Reserve Fund, the real property in the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets F-IO (other than the property in the Assessment District) of the Developer may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from audited financial statements of the Developer that the funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments. (f) In addition to any of the information expressly required to be provided under this Section, the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents that have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Developer shall clearly identify each such other document so included by reference. SECTION 5. Developer's Report of Listed Events .. (a) So long as the Developer is obligated hereunder and said obligation has not been temrinated pursuant to Section 6 of this Disclosure Certificate, pursuant to the provisions of this Section 5, the Developer shall promptly give, or cause to be given notice of the occurrence of any of the following events (each, a "Listed Event"} with respect to Developer and any of its Afftliates that own property within the Assessment District: (i) Any conveyance by the Developer or any of its Affiliates to a Successor Developer or its Affiliates, if any, of property that, when aggregated with all other property in the Assessment District then-owned by such Successor Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds. (ii) Any failure of the Developer or any of its Affiliates Yo pay when due general property taxes, special taxes, or assessments with respect to its property within the Assessment District. (iii} Any temaination of a line of credit or loan, any termination of, or micured material default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse affect on the Developer's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of the Developer or any of its Affiliates to pay assessment installments with respect to the Assessment District when due. (iv) The occurrence of an Event of Bankruptcy with respect to the Developer or any of its Affiliates that could have a material adverse affect on the Developer's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of the Developer or any of its Affiliates to pay assessment installments with respect to the Assessment District when due. (v) Any significant amendments to land use entitlements for the Developer's or its Affiliates' property in the Assessment District, if material. (vi) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Developer's or its Affiliates' property in the Assessment District, if material. (srii) Any previously undisclosed legislative, administrative, or judicial challenges to development on the Developer's or its Affiliates' property in the Assessment~District, if material. (viii} Any changes, if material, in the alignment, design, or likelihood of completion of significant public improvements, including major thoroughfazes, sewers, water conveyance systems, and similar facilities. (ix) The assumption of any obligations by a Successor Developer ptasuant to Section 6 of this Disclosure Certificate. F-11 (b} Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall promptly notify the Dissemination Agent in writing. Such notice shall instmct the Dissemination Agent to report the occurrence pursuant to subsection (c) below. (c) If the Dissemination Agent has been instmcted by the Developer to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with either {i} the Mrmicipal Securities Rulemaking Board and each State Repository or (ii) Che Repositories, with a copy to the Participating Underwriter. SECTION 6. Tertnination of Developer's Reporting Obli ag_tion. The Developer's continuing obligation to provide aSemi-Annual Report and notices of material Listed Events will terminate upon the earlier of (1) the legal defeasance, prior redemption, or payment in full of all of the Bonds, or (2) the date upon which the Developer and its Affiliates, if any, cease to own property in the Assessment District that, when aggregated with all other property in the Assessment District then-awned by the Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent {20%) of the annual assessment securing payment of the Bonds, or {3) when the Developer°s Community Area has reached the Planned Development Stage. If the Developer conveys to a Successor Developer property in the Assessment District prior to the time at which such property reaches the Planned Development Stage, and such property conveyed, when aggregated with all other property in the Assessment District then-owned by such Successor Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds, then the Developer shall require a Successor Developer to enter into an Assumption Agreement, but only to the extent and upon the terms, if any, required by the Rule. SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and the City may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosrre Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the City agrees in writing and the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 3{a), 4, or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the"undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the reguirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c} the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. , If the annual fmancial information or operating data to be provided in the Semi-Annual Report is amended pursuant to the pmvisions hereof, the first amoral financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. 1n the event of any amendment or waiver of a provision of this Disclosure Agreement, the Developer shall describe such amendment in the next Semi-Annual Report, and shall include, as applicable, a narrative explanation r-iz of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Developer. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide infomration to investors to enable them to evaluate the ability of the Developer to meet its obligatious. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change iu the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information using the means of dissemination set forth in this Disclosure Certificate or any other means of communication or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any infom~ation in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any fuhrre Semi-Amtual Report or notice of occurrence of a Listed Event. SECTION 10. Default. Itt the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Underwriter, the City, ar any Holder or Beneficial Owner of outstanding Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific perfurmanae by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Agreement shall not be deemed to be an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as axe specifically set forth in this Disclosure Certificate, and the Devoloper agrees to indemnify and save the City, the Dissemination Agent, and their respective officers, directors, employees, and agents, harniless against any losses, expenses, and liabilities which either or both of them may incur arising out of or in the exercise or performance of the Developer's powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the City's or the Dissemination Agent's negligence or willful misconduct. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. F-13 SECTION 12. Beneficiaries. This Disclosure Certificate shall be binding upon the Developer and shall inure solely to the benefit of the Developer, the Dissemination Agent, the Underwriter, the City, and the Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] CASTLE & COOKS CALIFORNIA, INC.; a California corporation By: _ Title: F-14 EXHIBIT A NOTICE TO REPOSITORIES OF FAILLJI2E TO FILE SEMI-ANN UAL REPORT Name of Developer: CASTLE & COOKS CALIFORNIA, INC., a California corporation Name of Bond Issue: CITY OF BAKERSFIELD, CALIFORNIA ASSESSMENT DISTRICT NO. 04-2 (BRIGHTON PARKS/BRIGHTON VILLAGEt STOCKDALE AT ALLEN COMMERCIAUCHERRY HILL II) LIMITED OBLIGATION IMPROVEMENT BONDS Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that Castle & Cooke California, Inc., a California corporation (the "Developer"), has not provided aSemi-Annual Report with respect to the above-named Bonds as required by Section 3 of the Developer's Continuing Disclosure Certificate, dated [Closing Date]. The Developer anticipates that the Semi-Annual Report will be filed by Date: THE CITY OF BAKERSFIELD, as Dissemination Agent, on behalf of CASTLE & COOKS CALIFORNIA, INC., a California corporation By: Finance Director F-IS {THIS PAGE INTENTIONALLY LEFT BLANK)