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05-3 Official Statement
NEW ISSUE NO RATING BOOK-ENTRY-ONLY SYSTEM In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, pilings, and court decisions and assuming (among other things) compliance with certain covenants, interest on the Bonds is excluded from gloss incomo for federal tax purposes and is exempt from Slate of California personal income taxes. 1a the opinion of Bond Counsel, interest on the Bonds is no[ a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, aldrough Bond Counsel obse[ves that such imemst is included in adjusted currentearnings in caiculaling federal corporate alternative minimum taxable income. Bond Counsel expresses no opinion regazding any other tax consequences caused by ffie ovmership or disposition of, or the accmal m receipt of interest an, the Bonds. See "TAX MATTERS" 55,705,000 CITY OF BAKERSFIELD ASSESSMENT DISTRICT N0.05-3 (LIBERTY CI/VIL,LAGE GREEN/TESORO-ENCANTO/ LIN/RIDER/DIA;MOND RIDGE) LIlVIITED OBLIGATION IMPROVEMENT BONDS Dated: Date of DeOVery Dne: September 2, as showy below The Bonds described herein (the "Bonds") aze special, ]invited obligation bonds being issued try the City of Bakersfield, California (the "City"), to finance Ote acquisitor of certain public improvements specially benefiting properties located within the boundaries of the City of Bakersfield Assessment District No. OS-3 (Liberty II/Village Green/'i'esoro-Eneanto(Lin!RidertDiamond Ridge) (the "Assessment District"). The Assessment Disfaict was formed and the acquisition of Ore improvements will be undertaken as autlrodzed under the provisions of the Municipal ImprovementAct of 1913 (Division 12 of the California Sheets and Highways Code) and Section 13.08.070 of the Municipal Code of the City The Bonds aze being issued pursuam to the provisions of the Improvement Bond Ac[ of 1915 (Division 10 of the California Streets and Highways Code) (the "1915-Act"). The Bonds aze issuable Duly as fu0y-registered Bonds in the denomination of $S,ODO each or a~ integral multiple thereof. Principal, interest at maturity or upon eazlierredemption, as applicable, and premium, ifarry, with respect [o the Bonds will be payable upon p[esenEation and surrenderdrereof at the corporate Host office of U.S. Bank National Association, [he paying agent, registraz, and transfer agem for the Bonds (the "Paying Agem'0, ih St. Paul, Minnesota. Interest on the Bonds (other than the final payment ofinterest, which is payable upon surrender of the Bonds) wID be payable semiannua0y on Mazch 2 and September Z (each an "Interest Payment Date"), commencing September 2, 2005, by check of the Paying Agent mailed on each Interest Paymem Date m the persons in whose names such Bands aze registered at the close ofbusiness on me fifteenth day of the calendar month immediately priorm an Interest Payment Date (or, m the case of an owner of at leas[ $1,000,000 in principal amount of the Bonds who sa requests in writing prior to the close of business on the fifteenth day afthe month immediately preceding such Interest Payment Date, by wire transfer}. The Bonds willbeissued initially inbook-entryoniy form through the book-entry system of The DepositoryTkttst Company; NevrYOrk, NewYOrk. See"BOOK- ENTRY-ONLY SYSTEMY The Bonds are subject to redemption on any Inerest Payment Date in advance of maturity at the option of the City upon giving at least thirty (30) days prior notice and upon payment of the principal themof and interest accrued thereon to the date of redemption, plus any applicable redemption premium, as more fully described herein. The Term Bonds maturing on September 2, 2026, aze also subject [o mandatory redemption in part prior to their staled maturity, as more fully described herein, Further development of parcels within dre Assessmem District, transfers of property ownership, and other similar circumstances could result in prepayment of all or part of ma assessments. Such prepayment would result in mdempton of a portion of the Bonds prior ro their stated maauities. Under the provisions of the 1915 Act, installments of primipal and interest sufficient to meet annual debt service requirements with respect m the Bonds shall be included on Ore regvlaz tax bills of the County of Kern (the "County") sent to owners of property against which there are unpaid assessmens. The portion of me annual installments for the payment ofgrincipal of and interest on the Bonds is to be paid imo [he Redemption Fund, to beheld by the Finance Director, and will be used to pay debt service an the Bonds as it becomes due. To provide funds for payment ofdre Bonds sad the interest Otereon as a result of a~ delinquent assessment installmens, the City will establish a Special Reserve Fund and deposit therein Bond proceeds in the original amount of $699,771.26. Additionally, the City bas covenanted that, under certain cimumshances, by no later than October 1 in any year, i[ wi1151e an action in superior court to foreclose the lien on each delinquent assessment, as more particularly described herein. IF A DELINQUENCY OCCURS IN THE PAYMENT OFANY ASSESSMENT INSTALLMENT, THE CITY WILL HAVE A DUTY ONLY TO TRANSFER IN'T'O 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 1TIE EXTENT OF FUNDS AVAILABLE FROM THE SPECL4L RESERVE FUND, UNTIL REBVSTATEMENI; REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. THERE IS NO ASSURANCE THAT SUFFICIENT FUNDS WII.L BE AVAB.ABLE FROM THE SPECIAL RESERVE FUND FOR THIS PURPOSE. THEREFORE, ff DURING THE PERIOD OF DELINQUENCY, THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WTTH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT OBLIGATE ITSELF TO ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND. This cover page contains certaininformation for quiak reference only. It is not a summary ofthe issue. Investors mustread the entire Official Statement to obtain info[mation essential m the making of an informed hweatment decision. MATURIT'Y_SCHEDULE $5,695,000 Serial Bonds Maturity Principal Interest Maturity Principal Interest (September 2) Amount Rate Price CUSIP r'~No. (September2) Amount Rate Price CU3emNo. 2007 $275,000 3.650% 100.00% 057510 D63 2015 5385,000 4,850% 100.00% 057510 E62 . ~ 2008 285,000 3.950 100.00 057510 D71 2016 405,000 4.875 100.00 057510 E70 2009 300,000 4.050 100.00 057510 D89 2017 425,000 4.900 100.00 057510 E88 2010 31Q000 4.150 1x0.00 657530 D97 2018 445,000 4.950 100.00 051510 E96 2011 325,000 4.400 100.00 057510 E21 2019 470,000 5.000 100.06 057510 F20 2012 34Q000 4550 100.00 65751D E39 2020 49Q000 5.050 100.00 057530 F38 2013 351,000 4.700 100.00 057510 E47 2021 515,000 5.100 100.00 057510 F53 2014 370,000 4.750 100.00 051510 E54 $3,010,000 5.125%Term Boad Doe September 2, 2026-Price:100. 00%(CUSIP utNo.05751D F46} ~'rCopyright2006,AmedcanHankusAssociation. CUS1PdatahereinisprovidedbyS+andard &Poor'sCUSIP Service Bureau,adivision offbeMcGraw-Hill Companies,Inc. This dataismtintendedtocmateadafabaseanddcesnotserveinanywayasasubsdmmfortlreCUSIPservices. CUSIP isaregisteredhademarkoftheAmericanBankersASSOCia[ion. TF.Ri BONDS ARE NOT SECURED BYTHE GENERAL TAXING POWER OFTHE CITY, THE COUNTY, THE STATE OF CALIFORNIA (THE "STATE', OR ANY OTHER POLTTICAL SUBDMSION OF THE STATE, AND NEITHER THE CITY, NOR THE COUNTY, NOR 1TiE STATE, NOR ANY OTHER POLTTICAL SUBDMSION OF THE STATE HAS PLEDGED ITS FULL FAITH AND CREDTT FOR THE PAYMENT OF THE BONDS. The Bonds are being offered when, as, and if rssued by the City and received by ilia Underwriter, subject to prior sate acrd to the approval of validity by Orrick Herrington & Sutcliffe LLP. San Francisco, Catiforniq Bottd Counsel, and the approva! of ceHain matters forthe City by the City Attorney of the City ofBakersfrefd. Certain other legal matters wtl! be passed an by Pillsbury t~nthmp Shaw Pittman LLP, Century Ciry, California, as Disclosure Course[ to the Ciry. B is expected that the Bonds in defmtfrve form witt be available jar delivery in New Yorl~ New Park on or ¢bour M¢rch 2, 200A RBC :Capital .Markets Dated: February t5, 2006 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, sohcitatian, or sale. This Official Statement is not to be constmed to be a contract with the purchasers of the Bonds. Statements contained in this Official Statement that involve estimates, forecasts, or matters of opinion, whether or not expressly described herein, are intended solely as such and aze not to be construed as representations of fact. The information set forth herein has been obtained from the City and other sources that 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 circumstauces, 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 Statementrs submitted in connection with the sale of the Bonds refereed 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 TIffi SECUR.ITiES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTF.,RED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERAL,LOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABLLIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. CITY OF BAKERSFIELD Mayor and Citv Council Harvey L. Hall, Mayor Irma Carson, Councilmember First Ward Susan M. Benham, Councihnember Second Ward Mike Maggard, Vice Mayor, Councilmember Third Wazd David R. Couch, Councilmember Fourth Ward Hazold Hanson, Councihnember Fifth Ward Jacquie Sullivan, Councihnember Sixth Ward Zack Scrivner, Councilmember Seventh Wazd Ci Staff Alan Tandy, City Manager Virginia Gennazo, City Attorney Pamela A. McCarthy, City Clerk Raul M. Rojas, Public Works Director Nelson K. Smith, 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, Inc. Bakersfield, California DISCLOSURE COUNSEL Pillsbury Winthrop Shaw Pittman LLP Century City, California tlregon $an Pack Ocean The City of Bakersfield, California, the county seat of the Couaty of Kem, is located at the southern end of California's San Joaquin Valley. BaketsSeld is approximately 110 miles north of Los Angeles and ', 290 miles south of San Francisco. '. F5 Nevada Bakersfield ~~ V~ Q Los Rngeles 1 Meidoo TABLE OF CONTENTS Page INTRODUCTORY STATEMENT ....................................................... ........................................................................1 The Bonds ...................................................................................... ........................................................................ I The Assessment District ................................................................. ...............................................;.......................1 Property Ownership ........................................................................ ........................................................................ l Improvements ................................................................................. ........................................................................2 Assessments .................................................................................... ........................................................................2 Apgraisal ........................................................................................ ........................................................................2 Security for the Bonds .................................................................... ........................................................................3 Special Reserve Fund ..................................................................... ........................................................................3 Foreclosure ..................................................................................... ........................................................................ 3 Assessment Delinquencies ............................................................. ........................................................................4 Book-Entry-Only System ............................................................... ........................................................................4 Continuing Disclosure .................................................................... ........................................................................4 Forward-Looking Statements ......................................................... ........................................................................4 Miscellaneous ................................................................................. ........................................................................4 ESTIMATED SOURCES AND USES OF FUNDS ............................. ........................................................................5 THE BONDS----------.-_ Purpose of the Bonds ............................................................................................................................... ...............5 Authority for Issuance ............................................................................................................................. ...............5 General .................................................................................................................................................... ............... 6 Transfer and Exchange of Bonds ............................................................................................................. ...............7 Bonds Mutilated, Destroyed, or Lost ....................................................................................................... ...............1 Redemption ............................................................................................................................................. ...............7 Effect of Redemption; Defeasance .......................................................................................................... ...............8 Refunding Bonds ..................................................................................................................................... ...............8 Disposition of Surplus from the Improvement Fund ................................................................................ ..............8 Investment of Bond Proceeds ................................................................................................................... ..............9 Security for the Bonds .............................................................................................................................. ..............9 Special Reserve Fund ............................................................................................................................... ............10 Redemption Fvnd Deficiencies ................................................................................................................ ............11 Covenant to Commence Superior Court Foreclosure ............................................................................... ............11 Priority of Lien .........................................................................................................-.:.............................. ............12 Tax Covenants .......................................................................................................................................... ............13 Debt Service Schedule .............................................................................................................................. ............13 BOOK-ENTRY-ONLY SYSTEM .................................................................................................................. ............14 THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS ................................................................. ............16 General ..................................................................................................................................................... ............16 Description of the Community Areas and the Improvements ..................................................._.........................17 Estimated Improvement Costs ..............................................................................................................................22 Method of Assessment Spread .............................................................................................................................24 OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT......25 Ownership of Property in the Assessment District ........................................ ..25 ..................................................... C&C Califomia ....................................................................................................................................................25 Centex Homes ................................................................................................. ~ ...................................................26 Lennaz Homes .................................... 27 ..................................... Dunmore .................................................................................. ............................................................................. ............................................................................. 28 Development and Financing Plans .......................................... .............................................................................29 Assessment Roll ...................................................................... .............................................................................36 Urilities .................................................................................... ............................................................................. 3 6 Flood and Earthquake Zones ................................................... .............................................................................3b Zoning ..................................................................................... .............................................................................36 Tax Delinquencies ................................................................................ ................................................................36 Environmental Issues Affecting Assessment District Propeuty ............ ................................................................31 BullcVatue-to-Assessment Lien Ratio ................................................. ................................................................37 Direct and Overlapping Debt ................................................................ ................................................................39 SPECIAL RISK FACTORS ........................................................................ ..........:.....................................................40 General ................................................................................................. ................................................................ 40 Risks of Real Estate Secured Investments Generally ........................... ................................................................41 Concentration of Ownersbip ................................................................. ................................................................41 Property Values .................................................................................... .....................................cs........................41 Availability of Funds to Pay Delinquent Assessment Installments ...... ...............................................................A2 Hazardous Substances .......................................................................... ................................................................42 Endangered and Threatened Species .................................................... ....................:...........................................43 Factors That May Affect Land Development ....................................... ................................................................43 Private Improvements; Increased Debt ................................................. ................................................................43 Subordinate Debt; Payments by FDIC and other Federal Agencies ..... ................................................................44 Tax Delinquencies ................................................................................ ................................................................45 Limited Obligation of the City Upon Delinquency .............................. ................................................................45 BanlQoptcy and Foreclosure ................................................................. ................................................................45 Economic, Political, Social, and Environmental Conditions ................ ................................................................46 Articles XIIIA and XIIIB of the California Constitution ...................... ................................................................46 Articles X[IIC and XIIID of the California Consfitution ...................... ................................................................48 Future Initiatives ...............................................................:................... ................................................................49 Covenant to Commence Superior Court Foreclosure ........................... ................................................................49 Price Realized Upon Foreclosure ......................................................... ................................................................49 Priority of Lien ..................................................................................... ................................................................50 Refunding Bonds .................................................................................. ................................................................51 Absence of Mazket for Bonds ............................................................... ................................................................51 Loss of Tax Exemption ........................................................................ ................................................................51 ENFORCEABII,ITY OF REMEDIES ........................................................ ................................................................51 NO LTITGATION ........................................................................................ ................................................................Sl CERTAIN INFORMATION CONCERNING THE CITY ......................... ................................................................52 TAX MATTERS ......................................................................................... ................................................................52 APPROVAL OF LEGALITY ..................................................................... ................................................................52 UNDERWRITING ...................................................................................... ................................................................ 53 NO RATING ............................................................................................... ................................................................53 CONTINI,JING DISCLOSURE ................................................................... ................................................................53 MISCELLANEOUS .................................................................................... ................................................................ 54 APPENDIX A - CTI'Y OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION ..............................................................................................A-1 APPENDIX B -APPRAISAL ................................................................................................................................... B-1 APPENDIX C -FORM OF OPINION OF BOND COUNSEL ................................................................................ C-1 APPENDDI D -ASSESSMENT DIAGRAM ...........................................................................................................D-1 APPENDII{ E -ASSESSMENT ROLL AND VALUE-TO-LIEN DATA ............................................................... E-1 APPENDIX F -FORMS OF CONTINiJING DISCLOSURE CERTIFICATES ..................................................... F-1 OFFICIAL STATEMENT $8,705,000 CITY OF BAIOvRSFIELD ASSESSMENT DISTRICT NO. QS-3 (LIBERTY II/VII,LAGE GREEN/T'ESORO-ENCANTOt LINlRIDER/DIAMOND RIDGE} LIMITED OBLIGATION IMPROVEMENT BONDS INTRODUCTORY STATEMENT THIS IlVTitODUCTORY STATEMENT IS SUBJECT IN ALL RESPECTS TO TTlE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING TTIE COVER PAGE AND APPENDICES HERETO, AND THE OFFERAIG OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE EN'I'H2E 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 $8,705,000 in aggregate principal amount of its City of Bakersfield Assessment District No. OS-3 (Liberty IWillage Green/Tesoro-EncantolLintRiderlDiamond Ridge) Limited Obligation Improvement Bands {the "Bonds") for the City of Bakersfield Assessment District No. OS-3 (Liberty IIlVillage Green/Tesoro-Encanto/LinlRider/Diamond Ridge) (the "Assessment Districf~. The Bonds aze 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 Code of the City, and Resolution No. 018-06 adopted by the City Council of the City (the "City Council"} on January 25, 2006 (the "Bond Resolution"). The Assessment District The Assessment District was formed and the assessments aze being levied in accordance with the Municipal Improvement Act of 1913, being Division 12 of the Catifomia 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 Dishier were commenced by the City Council pursuant to property owner petitions filed by Castle 8r Cooke Catifomia, Inc., a Catifomia corporation ("C&C California"), Centex Homes, a Nevada general parhrership ("Centex Homes"}, Lennaz Homes of Catifomia, Inc., a California corporation ("Lennar Homes"), and Dunmore Homes, LLC, a Delawaze limited liability company, as the owners at the date of the filing thereof of more than 60%, collectively, of the assessable land within the Assessment District. Since the date of filing of the petitions, Dunmore Homes, LLC, merged into Dunmore Homes, a California corporation ("Dunmore Homes"), which hansferred title to its property to its subsidiary, Dunmore Diamond Ridge, LLC, a California limited liability company ("Dunmore"). See "OWNERSH~ AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Assessment District is comprised of approximately 450.60 gross acres of land located in the northwest and southwest areas of the City. The Assessment District has been divided into six separate community areas generally identified as (i) the "Liberty II Area," (ii) the "Village Green Area," (iii) the "Tesoro-Encanto Area," (iv) the "Lin Area," (v} the "Rider Area," and (vi) the "Diamond Ridge Area" (collectively, the "Community Areas"). The Assessment District boundaries aze 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 "'S'ITE ASSESSMENT DISTRICT AND THE 1MPROVEMEN'TS." Property Ownership As of the date of this Official Statement, the following entities own the property within the Assessment District subject to the lien of the assessments: C&C California owns all of the assessable land within the Liberty II Area and the Village Green Area; Centex Homes owns all of the assessable land within the Tesoro-Encanto Area; Lennaz Homes owns all of the assessable land within the Lin Area and the Rider Area; and Dunmore owns all of the assessable land within the Diamond Ridge Area. C&C California, Centex Homes, Lennaz Homes, and Dunmore are collectively refeaed to herein as the "Landowners." 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. Improvements Proceeds from the sate of the Bonds issued pursuant to the Assessment District proceedings will be used to finance (i) the acquisition of certain public infrastructure improvements for each of the six Community Areas, which improvements will be owned, operated, and maintained by the City (collectively, the "Improvements"), (ii) the cost to pay off an existing pazcel assessment in the Liberty II Area confirmed pursuant to the City of Bakersfield Assessment District No. 94-3 (Silver CreektBrimhall North/Seven Oaks/South Lautelglen) {"AD 94-3"), and (iii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the issuance of the Bonds, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2006. For a fiarther description of the Gommunity Areas and the Improvements, see "TIC ASSESSMENT DISTRICT AND 'ITS IMPROVEMENTS -Description of the Community Areas and the Improvements." The Improvements aze groposed to be financed by the City in accordance with the terms and conditions of (i) the Acquisition and Disclosure Agreement No. OS-361, effective November 9, 2005 (the "C&C California Acquisition Agreement"}, by and between the City and C&C California, {ii) the Acquisition and Disclosure Agreement No. OS-362, effective November 9, 2005 (the "Centex Homes Acquisition Agreement"), by and between the City and Centex I-comes, {iii) the Acquisition and Disclosure Agreement No. OS-363, effective November 9, 2005 (the "Lennaz Homes Acquisition Agreement"), by and between the City and Lennaz Homes, and (iv) the Acquisition and Disclosure Agreement No. OS-364, effective November 9, 2005 (the "Dunmore Acquisition Agreement" and together with the C&C California Acquisition Agreement, the Centex Homes Acquisition Agreement, and the Lennaz Homes Acquisiton Agreement, the "Acquisition Ageements"}, by and between the City and Dunmore. Upon their completion by the Landowners, the Improvements are proposed to be acquired by the City using Bond proceeds. Assessments The land within each of the six 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 financing costs related thereto. See "THE ASSESSMEN'T' DISTRICT AND TTIE IIvII'ROVEMENTS -Estimated Improvement Costs." 11te City Council, pursuant to Resolution No. 294-05, adopted on December 14, 2005, confirmed the amount of assessments for the Assessment District in the aggregate amount of $9,045,000. The Bonds aze secured by the assessments as hereinafter described under the heading "TIIE BONDS -Security for the Bands." The total assessment lien is not less than fire aggregate principal amount of the Bonds being issued. Appraisal Launer & Associates, Inc., Bakersfield, California (the "Appmiser'~, has prepared an appraisal dated December 15, 2005 (the "Appraisal"), appraising, as of December 7, 2005, the property within the Assessment District that is subject to the lien of the assessments. Such appraised property consists of approximately 407.25 net acres, which appraised pmperiy does not include major off-site street rights-of--way, future pazks, future storm drain sumps, future water well lots, and canal lots, none of which will be subject to an assessment levy. Based on the Appraisal, the ratio of the aggregate Bulk Value (as defined herein) of the Assessment District property to the aggregate assessment lien is 10.12:1. See "OWNERSHII' t1ND PLANNED FINANCING AND DEVELOPMENT OF TTY ASSESSMENT DISTRICT -Bulk Value-to-Assessment Lien Ratio." The assumptions and limitations regazding the appraised valuations aze 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 I the Appraisal. Set forth in APPENDIX E is the assessment roll, including Bulk Value to assessment lien ratio information, for the pazcels of property within the Assessment District that aze subject to the lien of the assessments. The assessment roll shows the amount of the total esfimated cost of the proposed Improvement acquisition, construction, and incidental cost that is assessed upon each of the lots and pazcels within the Assessment District based upon the alternate method and mte of assessment pemtitted under Section 13.08.070 of the Municipal Code of the City. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Method of Assessmenf'Spread." The assessment numbers that appear on the assessment roll correspond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D. 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. All the Bonds aze secured by the moneys in the Redemption Fund created pursuant to the Bond Resolution and by the unpaid assessments levied to grovide 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 pazcels of land assessed under the proceedings. They do not, however, constitute the personal indebtedness of the owners of said pazcels. Under the provisions of the 1915 Act, assessment installments sufficient to meet annual debt service on the Bonds aze to be collected on the regulaz tax bills of the County of Kem (the "County") sent to owners of property within the Assessment District against which there aze unpaid assessments. These annual installments aze to be paid into the Redemption Fund, which will be held by the Finance Duector 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 shaze of the total principal and interest coming due that yeaz, based on the percentage that the unpaid assessment against that property bears to the total of unpaid assessments within the Assessment District. The Bonds are not secured by the general tang power of the City, 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. Special Reserve Fund The City will establish a Special Reserve Fund (the "Special Reserve Fund") in the amount of $699,771.26 from Bond proceeds, which amount will be transfeaed to the Redemption Fund in the event of delinquencies in the payment of the assessment instalhnents 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 groceeds 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 transfeaed to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (the "Reserve RequiremenY~. See "THE BONDS -Special Reserve Fund." Foreclosure The City has covenanted that it will, no later than October 1 in any yeaz, 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 yeaz exceeds 5% of the assessment installments posted to the tax m(1 for that fiscal year and (ii) the amount in dte Special Reserve Fund is less than the Reserve Requirement. See "TIIE 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 period of delinquency, there aze 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 itself to advance available funds from its treasury to cure any deficiency that may occur in the Redemptian Fund by reason of the failure of a property owner to pay an assessment installment when due. If there are additional delinquencies after depletion of funds in the Special Reserve Fund, the City is not obligated to transfer into the Redemptian 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 Tmst Company (`T)TC"), New York, New York. 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 Each of the City, C&C California, Centex Homes, and Lennar Homes has covenanted in its respective Continuing Disclosure Certificate for the benefit of Bondholders to provide annual or semi-annual reports, as applicable, contiiving 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 -FORMS OF CON'TINU'ING DISCLOSURE CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(6)(5), as it may be amended from time to time. See "CONTINUING DISCLOSURE." Dunmore, 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 20% of the annual assessment securing payment of the Bonds, does not have an obligation to provide continuing disclosure information and has not entered into a continuing disclosure certificate. However, in the event Dunmore or any other person or entity should acquire property in the Assessment District that, when aggegated with all other property in the Assessment District owned by such owner or its affiliates, is subject to a lien of 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. See "CONTAr[TING DISCLOSURE." Forward-Looking Statements This Official Statement contains statements relating to future results that aze "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 similaz expressions identify forward-looking statements. Such statements aze subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forwazd-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, the Landowners, and certain other matters. Such descriptions and the discussions and information contained herein do not purport to be comprehensive ar definitive. All references in this Official Statement to documents, the Bonds, and the Assessment District proceedings aze qualified in their entirety by references to such documents and the City's resolutions 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 Tmxtun Avenue, Bakersfield, California 93301, Attention: Finance Director; telephone number (661) 326-3740. ESTIMATED SOURCES AND USES OF FUNDS The proceeds of the sale of the Bonds will be deposited with the Finance Director in trust pursuant to the terms of the Bond Resolution in the amounts set forth below. The moneys in the Improvement Fvnd established for the Bonds will be used to acquire or otherwise finance the Improvements, to pay off an existing pazcel assessment in the Liberty B Area confirmed pmauant to AD 94-3, 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, 2006, will be deposited into the Redemption Fund The estimated sources and uses of funds for the Bonds aze summarized as follows: TABLE 1 SOURCES AND USES OF FUNDS Sources of Funds Principal Amount of Bonds $8,705,000.40 Less: Underwriter's Discount (103.589.50) Total $8,601,410.50 Uses of Funds Improvement Fund $7,691,448.611't Special Reserve Fund 699,771.26 Redemption Fund 210.190.63 ~) Total $8,601,410.50 (i) Includes costs of issuance of approximately $331,444.26. (2} Represeata capitalized intemst on the Bonds from their dated date to September 2, 2006. TBE BONDS Purpose of the Bonds Proceeds from the sale of the Bonds will be used to finance {i) the Improvements, which comprise the acquisition of certain public improvements within the six Community Areas, and (ii) the cost to pay off an existing pazcel assessment in the Liberty R Area confirmed pursuant to AD 94-3, and (iii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the issuance of the Bonds, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2006. 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 1913 Act, Section 13.08.070 of the Municipal Code of the City, and a Resolution of Intenfion No. 1398, adopted by the City Council on August 17, 2005. 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 are estimated or are ascertained prior m the construction or acquisiton of the improvements, rights-of--way, or groperty involved. Under such proceedings, the assessments are then levied, cash collections are made, and bonds aze sold to represent unpaid assessments. The money obtained from cash collections and bond proceeds 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. Each of the Landowners has waived the cash collection period and no such cash collections were made. Assessment district proceedings can be initrated by either a petition or by the CityJCouncil without a petition. Petitions filed with the City Council and signed by C&C California, Centex Homes, Lennar Homes, and Dunmore Homes, respectively, as the owners of more than 60%, collectively, of the assessable land within the Assessment District at the time of such filing, initiated the proceedings for the Assessment District. The property owner petitions were accepted by Resolution No. 174-05, adopted by the City Council on August 17, 2005. After the proceedings were initiated, Wilson 8c Associates, Fresno, California (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 pazcels in the Assessment District The assessments were levied on the basis of the special benefit to be derived by such pazcels firm the Improvements. (See "TIC ASSESSM1iN'1' DISTRICT AND TFIE IMPROVEMENTS -Method of Assessment Spread."} The Assessment Engineer's written report was filed with the City Clerk on October 28, 2005, and was approved by the City Council in preliminary form on November 9, 2005. The Assessment Engineer's written report in final form was filed with the City Clerk on December 2, 2005. The public hearing required by law was held on December 14, 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 ~~ of the State Constitution, the property owners were also requested to submit ballots, weighted according to the proportional financial obliga5on of the affected property, in favor of or opposition m the assessment. All ballots submitted by property owners were in favor of the assessment. See "SPECIAL RISK FACTORS -Articles X1IiC and Xll ff) of the California Constitution." Upon conclusion of the hearing, the City Council tabulated the ballots and adopted its resolution confirming the assessments and ordering the acquisition of the 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"}. After confnmation, the assessments became liens against the assessed pazcels by rceordafion of a notice of assessment, which recording was made in the Office of the Superintendent of Streets on December 16, 2005, and in the Office of the County Recorder on December 16, 2005. No cash payments were made by the property owners. General 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 rotes 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 semiannually on Mazch 2 and September 2 (each an "Interest Payment Date"), commencing on September 2, 2006. Principal, interest at maturity or upon eazlier 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 gayable 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 principal amount of the Bonds who so requests in writing prior to the close of business on the fifteenth day of the month unmediately 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 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 Sond in exchange and substitution for the Band so mutilated, but only upon surrender by the owner of the Bond so mutilated. Every mutilated Bond so surrendered witTbe 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 ail costs of issuance of the new Bond. Redemption Optional Redemption and Prepayment of Bonds. Any Bond or portion thereof in the amount of $5,000 or any integral thereof outstanding maybe called for redemption prior to maturity on any Interest Payment Date upon payment of the principal, glus accrued 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 Redemption Premium September 2, 2006 through September 2, 2015 3.0% March 2, 2016 and September 2, 2016 2.0 Mazch 2, 2017 and September 2, 2017 I.0 Mazch 2, 2018 and thereafter 0.0 No 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 redemption3n such a way that the ratio of outstanding Bonds to issued Bonds will be approximately the same in each annual series insofaz as possible. Within each annual series, Bonds shall be selected for redemption by lot. Further development of the pazcels in the Assessment District, a transfer of property ownership, and other similaz 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 Bands. The Bonds maturing on September 2, 2026 (the "Term Bonds"), aze subject to mandatory advance redemption in part prior to their stated maturity, as authorised under the Bond Resolution. The redemption shall occur on September 2 in the following years and in the following principal amounts, together with interest accrued on such amounts to the date fixed for redemption, and shall be without premium: Year Principal Amount 2022 $545,000 2023 570,000 2024 600,000 2025 630,000 202b (maturity) 665,000 If the Bonds aze redeemed in part, as described under the subheading "Optional Redemption and Prepayment of Bonds" above, the principal of the Term 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 alter 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 Ute 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 beaz 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 Band 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 notce to and conducting a hearing for the owners of property in the Assessment Districk 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 sugplanted 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 gayment 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 that 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, or advance the maturity of the Bonds and pay the 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 Band 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 extent required by law, to the federal government. To the extent that moneys iri'the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance Duector as of June 30 of each year, such moneys shall be transferred 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 aze 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 aze further secured by the moneys in the Redemption Fund andthe Special Reserve Fund created pursuant to the Assessment District proceedings. Principal of and interest and redemption premiums, if any, on We Bonds aze payable exclusively out of the Redemption Fund. The assessments and each installment thereof and any interest and penalties thereon constiNte a lien against the parcels of land on which the assessments are levied until the same aze paid. Such lien is subordinate to all fixed special assessment liens previously imposed upon the same properly, 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 genernl property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Community Facilities Act of 1482 (being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Cade of the State of California) (the "Mello-Roos Act"), whenever created against the property. The property in the Liberty II Area is subject to an existing special assessment lien created by AD 94-3; however, such assessment wilt be paid in full upon the issuance of the Bonds from a portion of the proceeds thereof. Therefore, 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. See "THE BONDS -Priority of Lien." The property within the Liberty II Area is subject to an existing special tax lien created by Community Facilities District No. 96-1 of the Lakeside Union Elementary School District (`lakeside CFD No. 96-1'~ pursuant to the Mello-Roos Act. The amount of special taxes, if any, to which property within Lakeside CFD No. 96-1 is subject (the "Lakeside CFD No. 96-I Special Taxes") varies based upon the zoning, the entitlements, and the type and level of development of such property and on the date of issuance of the applicable building permits for such property. The property within the Village Green Area and the Lin Area is subject to an existing special tax lien created by Community Facilities District No. 92-I 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 groperty within RNR CFD No. 92-1 is subject (the "RNR CFD No. 42-1 Special Taxes") varies based upon the zoning, the entflements, and the type and level of development of such property. See "THE BONDS -Priority of Lien." The Bonds are not secured by the general taxing power of the City, the County, the State, or any other polifical 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 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 u~aid assessments will be collected in semi-annual installments, together with interest on the declining balance, on the County tax roll on which general taxes on real properly aze wllected, and are payable and become delinquent at the same time 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 are properties for noapaymerat of general taxes. The semi-annual assessment installments aze 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 to the assessments will be equal to the total principal and interest coming due on all of the Bonds that yeaz, plus, with respect to each pazcel in the Assessment District, an additional amount to cover the administrative chazges 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 $699,771.26. 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 ffie average annual debt service on the Bonds, less any amounts transfeaed to the Redemption Fund when assessments aze 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 aze insufficient funds in the Redemption Fund to pay the next maturing installment of principal of or interest on the Bonds, an amount necessary to make up such deficiency will be transferred from the Special Reserve Fund, to the extent of available funds, to the Redemption Fund. `I'he 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. Tn the event that Ute 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 that 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 Fund to the Redemption Fund. (c) All proceeds from the investrnent of moneys in the Special Reserve Fund will be deposited into ao Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in Ure 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 determined by the Finance Director as of June 30 of each yeaz, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal to, as of thedate of calculation, the Reserve Requirement. The remaining balance, if any, in the Investment Earnings Fund will be transferred, first, to the Improvement Fund until the Improvements aze completed and such fund is closed and, Utereafter, to the Redemption Fund to be used, in~tlre 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 - lnvestmentof Bond Proceeds." (d) When 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 10 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 the Special Reserve Fund at the time of liquidation exceeds the amount necessary to retire all Bonds then outstanding, the excess will be paid to the owners of the assessed pazcels 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 pmperty or delinquency redemptions. 1n that event, there could be a default in 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 detemtines 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 to the owners of the Bonds a proportionate shaze 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, similaz 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 wilt not be an ultimate loss to the owners of the Bonds, the Finance Duector is required toduect the Paying Agent to pay matured Bonds as presented and pay interest on the Bonds when due as long as there aze 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 Bonds are presented for payment. This procedure could result in some maimed 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 sale. 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 yeaz, 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 yeaz, and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement In the event such Superior Court foreclosure or foreclosures aze 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 FACTGRS - Covenant to Commence Superior Court Foreclosure." tl Priority of Lien Priority of Lien of Assessments. Each assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitutes 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 imposed upon the same property, but has griority over all private liens and over all fixed special assessment liens that 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 ptnsuant to the Me1lo-Roos Act, whenever created against the property. . ',. AD 94-3 Assessment Lien. The property within the LibertyII Area is subject to an existing special assessment lien created by AD 94-3; however, such assessment will be paid in full upon the issuance of the Bonds from a portion of the proceeds thereof Therefore, 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. Lakeside CFD No. 96-1 Special TaY Lien. The property within the Liberty II Area is subject to an existing special tax lien created by Lakeside CFD No. 96-1 pursuant to the Mello-Roos Act. The amount of Lakeside CFD No. 96-1 Special Taxes, if any, to which groperty within Lakeside CFD No. 96-1 is subject vanes based upon the zoning, the entitlements, and the type and level of development of such property and on the date of issuance of the applicable building permits for such property. A parcel within Lakeside CFD No. 96-1 with a commercial zoning '~, designation is not subject to the Lakeside CFD No. 96-1 Special Taxes. One future pazcel within the Liberty II Area I, is zoned for commercial development. For fiscal year 2005-06, all of the taxable property in the Liberty II Area that is zoned for residential development but for which no residential building permit has been issued as of Mazch 1 of the previous fiscal yeaz shall be subject to the levy of the Lakeside CFD No. 96-1 Special Taxes in the annual amount of $52.72 per pazcel. When a building permit is obtained for a parcel of undeveloped residential property, the levy of the Lakeside CFD No. 96-1 Special Taxes shall be increased, as described in the following sentence. For fiscal year 2005-06, all of the taxable property in Lakeside CFD No. 96-1 for which a residential building permit was issued before March I of the previous fiscal year shall be subject to the levy of the Lakeside CFD No. 96-1 Special Taxes in the annual amount of $93.74 per residential unit. The foregoing amounts shall be increased by 2% each fiscal yeaz. As of December 15, 2005, no building permits have been issued in connection with the development of the property in the Liberty II Area. RNR CFD No. 92-1 Speciat Tax Lien. The property within the Village Cneen Area and the Lin Area aze subject to an existing special tax lien created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. The amount of RNR CFD No. 92-1 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, and aze levied in accordance with the rate and method of apportionment of such RNR CFD No. 92-1 Special Taxes {the "RNR CFD No. 92-1 Rate and Method's previous approved by the qualified voters in RNR CFD No. 92-1. For fiscal yeaz ending Tune 30, 2006, the residential properties withitt the Village Green Area and the Lin Area aze subject to the following RNR CFD No. 42-1 Special Taxes: No RNR CFD No. 92-1 Special Taxes aze 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 Mazch 1, 2005, an annual special tax of $126.82 {which may be increased by 2% each fiscal yeaz) per subdivision lot acre of subject property is payable. Ugon the issuance of a residential building pernut for a lot or pazcel prior to March 1, 2005, none-time chazge of $1.25 (which maybe increased each fiscal year based upon the percentage change in the designated constmction cost index) per building squaze foot is payable, and such parcel is subject to an annual RNR CFD No. 92-1 Special Tax payment of $497.18 (which may be increased by 2% each fiscal yeaz). In the alternative, at the time of issuance of such residential building permit, the owner of such pazcel may pregay a specified amount, in which case the one-time chazge and annual RNR CFD No. 92-1 Special Taxes described above will not be levied on such parcel. The prepayment amount is currently $9,254.15 (which may be increased each fiscal yeaz based upon the percentage change in a designated construction cost index). There aze no properties within the Assessment District that are subject to the commercial or multi- family residential use RNR CFD No. 92-1 Special Tax rntes. Accordingly, the rates for the RNR CFD No. 92-1 Special Taxes for pazcels designated for commercial and multifamily residential development are not presented in this Official Statement. 12 C&C California has indicated that it does not intend to pay the specified prepayment amount of the RNR CFD No. 42-1 Special Taxes for any pazcel within the Village Green Area that lies within RNR CFD No. 92-I, but rather intends to pay the annual RNR CFD No. 92-1 Special Taxes, if any, levied against any such pazcel, in accordance with the RNR CFD No. 92-1 Rate and Method. Lennaz Homes has indicated that it does not intend to pay the specified prepayment amount of the RNR CFD No. 92-1 Special Taxes for any parcel within the Lin Area that lies within RNR CFD No. 92-1, but rather intends to pay the annual RNR CFD No. 92-1 Special Taxes, if any, levied against any such parcel, in accordance with the RNR CFD No. 92-1 Rate and Method Each of C&C California and Lennaz Homes has reported that the majority of the building permits required for the planned development in its respective Community Area has not been obtained as of the date of this Official Statement. As of December 15, 2005, no building pemrits have been issued in connection with the development of the property in the Village Green Area, and 34 building permits have been issued in connection with the development of the property in the Lin Area. Tax Covenants Pursuant to the Bond Resolution, the City has covenanted that it will not make any use of the proceeds of the Bonds that 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 to become "Federally-guaranteed 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 Departrnent of Treasury issued thereunder to the extent such requirements aze, at the time, applicable and in effect. Debt Service Schedule Set forth below is the debt service schedule for the Bonds. TABLE 2 ANNUAL BOND DEBT SERVICE Period Ending Principal Total Bond (September 2) Mamrine Interest - Debt Service 2006 -- $ 21 0,190,6~~ $ 210,190.63 2007 $ 275,000.00 420,381.26 695,381.26 2008 285,000.00 410,343.76 695,343.76 2009 300,000.00 399,086.26 699,086.26 2010 310,000.00 386,936.26 696,936.26 2011 325,000.00 374,07126 - 699,07126 2012 340,000.00 359,771.26 699,771.26 2013 355,000.00 344,301.26 699,301.26 2014 370,000.00 327,616.26 647,616.26 2015 385,000.00 310,041,26 695,041.26 2016 405,000.00 291,368.7b 696,368.76 2017 425,000.00 271,625.00 696,625.00 2018 445,000.00 250,800.00 695,800.00 2019 470,000.00 228,772.50 698,772.50 2020 490,000.00 205,272.54 695,272.50 2021 515,000.00 180,527.50 695,527.50 2022 545,000.00 154,262.50 699,262.50 2023 570,000.00 126,331.26 696,33126 2024 600,000.00 97,118.76 697,118.76 2025 630,000.00 66,368.76 ~ 696,368.76 2026 665 000 00 34.081.26 699 081 26 Total $8,705,000.00 $5,449,268.27 $14,t54,268.27 (1) Capitalized interest on the Bonds has been funded Ovough September 2, 2006. Source: Underwriter. 13 BOOK-ENTRY-ONLY SYSTEM DTC will act as securities depository for the Bonds. The Bonds will be issued asfully-registered Bonds, registered in the name of Cede Rr Co. (OTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. The following descripfion 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 far maintaining, supervising, or reviewing any records maintained by DTC relating to beneficial ownership, of interests in the Bonds. DTC, the world's lazgest depository, is alimited-purpose trust 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 System, a "clearing coxpomtion" within the meanvrg 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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money mazket instrument from over 100 countries that OTC's participants ("Direct Participants") deposit with OTC. 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 for physical movement of securtes certificates. Duect Participants include both U.S. and non-U.S. securities brokers and dealers, banks, tmst companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Mazkets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC}, as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Ina. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corpomtons that clear through or maintain a custodial relatronship with a Direct Participant, either duectly or indirectly ("Indirect Participants" and, collectively with Direct Participants, "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 (the "SEC's. More information about DTC can be found at www.dtcc.com aad www.dtc.org. The foregoing interne! addresses are included for reference only and the information on the interne! site is not a part of this O, f, ficial Statement or incorporated by reference into this Official Statement. No represenfatfon is made in this Official Statement as to the accuracy or adequacy of the information included in such interne! sites. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on OTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner's is in rum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation 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 Dtrect or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in dte Bonds aze to be accomplished by entries made on the books of Direct and Induect - Participants acting on behalf of Beneficial Owners. Beneficial Owners wiB not receive certificates representing their ownership interests in the Bonds except in the event that use of the book-enhy system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of OTC's partnership nominee, Cede & Co. 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 lmowledge of the actual Beneficial Owners of the Bonds; OTC'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 Induect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 1a Conveyance of notices and other communications by DTC to Drrect Participants, by Drrect Participants to Indirect Patticipants, and by Direct Participants and Indrect 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 transmission to them of notices of significant events with respect to the Bonds, such as redempfions, 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 lras agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses m the registraz and request that copies of the notices be provided duectly to them. REDEMPTION NOTICES SHALL BE SENT TO DTC. IF LESS THAN ALL OF THE BOND5 ARE BEING REDEEMED, DTC'S PRACTICE IS TO DETERMINE BY LOT TIIE AMOUNT OF THE INTEREST OF EACH DH2ECT PARTICIPANT IN 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 Dueet 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, redemption price, and interest payments with respect to the Bonds will be made to Cede & Co., ar such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Drrect Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Cily or the Paying Agent, on 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, redemption price, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indrrect Participants. DTC may discontinue providing its services as securities depository 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 not obtained, Bond certificates aze required to be printed and delivered in accordance with the terms of the Bond Resolution. The City may decide to discontinue use of Ure system of book-entry-only transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered to DTC as described in the Bond Resoluton. THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC'S BOO)£-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CITY BELIEVES TO BE RELL4BLE, BUT THE CITY TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE CITY CANNOT AND DOES NOT GNE ANY ASSURANCES THAT DTC WILL DISTRIDUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WII,L DISTRIBUTE PAYMENTS WffH 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 IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. is THE ASSESSMENT DISTRICT AND THE IlYIPROVEMENTS The information under this heading is taken primarily from the Engineer's Report for the Assessmenf District prepared by Wilson & Associates, Fresno, California, which Engineer's Report is on fate with the City, and from information provided by the Landowners, 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 ffie fomlation of the Assessment District were commenced by the City Council pursuant to properly owner petitions filed by C&C California, Centex Homes, Leaner Homes, and Dunmore Homes, which, at the time the petiions were filed, were the owners of over 60%, collectively, of the assessable land within the Assessment District. The petifions were accepted by Resolution No. 174-05, adopted by the City Counci] on August 17, 2045, and the petitions aze on file with the City Clerk of the City. The Assessment District is comprised of approximately 450.60 gross acres located in the northwest and southwest areas of the City. The Assessment District has been divided into six separate Community Areas generally identified as (i) the Liberty II Area, containing approximately 34.80 acres and generally bounded by Panama Lane on the south, Ashe Road on the west, and Arvin-Edison canal on rite northeast, and also identified as Tract No. 6475 ("Tract No. 6475"), (ii) Village Green Area, containing approximately 82.70 acres and generally located at the southwest comer of the intersection of Stockdale Highway and Renfro Road, and also identified as Tract No. 6448 ("Tract No. 6448"), (iii) Tesoro-Encanto Area, containing approximately 79.80 acres and generally bounded by Panama Lane on the south, Buena Vista Road on the east, and Pensinger Road on the north, and also identified as Tract No. 6349 {"Tract No. 6349"}, (iv) Lin Area, containing approximately 62.90 acres and generally located at the northwest comer of the intersection of Noriega Road and Allen Road, and also identified as Tract No. 6289 ("Tract '" No. 6289"}, (v) Rider Area, containing appmxhnately 113.60 acres and generally bounded by Stine Road on the east, McKee Road on the north, Mountain Ridge Drive on the west, and Taft Highway on the south, and also ', identified as Tract No. 6290 ("Tenet No. 6290"), (vi) and Diamond Ridge Area, containing approximately 76.80 acres and generally bounded by McKee Road on the south, Mountain Ridge Drive on the east, and McCutchen Road I on the north, and also identified as Tract No. 6332 ("Tract No. 6332"). The six irregulazly shaped Community Areas are located within a rectangular section of the northwest and southwest azeas of the City that has anorth-to- '.. south dimension of approximately ten miles as measured from the north end of the Lin Area to the south end of the Rider Area, and awest-to-east dimension of approximately six and one-quarter miles as measured from the west end ~, of the Village Green Area to the east end of the Rider Area. Each of the six Community Areas aze involved in various stages of the land development. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Assessment District boundaries aze shown on the assessment diagram, consisting of eight sheets, entitled "ASSESSMENT DIAGRAM OF CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO.OS-3 (LIBERTY II1VII,LAGE GREEN/I'ESORO-ENCANTO/LIN/ItIDER/DIAMOND RIDGE}, COT.1N'I'Y 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 infrastmcture improvements for each of the six Community Areas, which Improvements will be owned, operated, and maintained by the City, (ii) Ote AD 94-3 existing pazcel assessment in the Liberty II Area payoff casts, and (iii) the payment of certain incidental costs and expenses related to Ote acquisition of the Improvements, the Assessment District proceedings, and the issuance of the Bonds, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2006. The Improvements are purposed 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 Improvements aze to be constructed and installed by the Landowners, as applicable, and, upon their completion, acquired by the City using fiends provided through the Assessment District proceedings. 16 The scope of the Imgrovements includes the acquisition by the City of various "off-site" and "on-site" (in- tract) subdivision improvements and the payment of incidental costs that aze already required or that are expected by the respective Landowners to be required to be installed as conditions of final subdivision or site plan approvals within each Community Area. The costs financed by the Assessment District for the acquisition of the Improvements located within or adjacent to each of the six Community Areas have been allocated only to the parcels that aze located within the Community Area to be served by such Improvements. Bond proceeds are not expected to be used for the acquisition of land, easements, or rights-of--way. Description of the Community Areas and the Improvements The information under this subheading has been provided by the Engineer's Report or the Landowners, 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 liability with respecd thereto. Tke current development plans for the respective 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 capabt'h'ties and efforts of the Landowners, as applicable, and the other builders or persons to wham the parcels wit}dn the Assessment District are sold. There can be no assurance that suck development will occur as described herein, or that it will occur at all. Liberty II Area The Liberty II Area encompasses approximately 34.80 gross acres and is generally hounded by Panama Lane on the south, Ashe Road, on the west, and Arvin-Edison canal on the northeast. The Liberty II Area has been approved for subdivision into a combined total of 107 R-1 lots (as defined in the section entitled "OWNERSHIl' AND PLANNED FINANCING AND DEVELOPMENT OF TIC ASSESSMENT DISTRICT -Zoning"), one commercial lot, one storm drain sump lot, one water well lot, and several public landscape lots, all pursuant to Vesting Tentative Tmct Map No. 6475. C&C California is the subdivider of Tract No. 6475 and is responsilalc for constructing the Improvements therein. C&C Califomia intends to subdivide Tract No. 6475 into five phases and has recorded the following three subdivision maps with the County Recorder: (i} Tract No. 6475-Unit 1, with 22 R-1 lots and two public landscape lots, {ii} Tract No. 6475-Unit 2, with 28 R-1 lots, one storm drain sump lot, and two public landscape lots, and (iii) Tract No. 6475-Unit 3, with 20 R-1 lots. C&C Califomia has informed the City that subdivision maps for the remaining two phases of Tract No. 6475 are not expected to be recorded with the County Recorder prior to the issuance of the Bonds. No specific site development proposal has yet been approved for the commercial lot within Tract No. 6475. The Improvements to be constructed within the Liberty II Area aze related to the development of the Liberty II Area and are generally described as improvements in and along Ashe Road and Panama Lane that aze required to be constructed, or are expected by C&C California to be required to be constructed, as conditions of approval for the Liberty II Area subdivision. Also included in the scope of Improvements aze C&C California's incidental costs for design engineering, improvement bonds, construction staking, soIls and materials analysis and testing, plan check foes, and inspection fees. The general location and extent of the Liberty II Area planned Improvements are described below. Ashe Road {East Side) Residential Frontage Construction of the east side of Ashe Road along the frontage of Tract No. 6475 (between Panama Lane and the northerly bouadazy of the residential portion of Tract No. 6475), including grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, striping, approximately 60 feet of 8-inch diameter water line with appurtenances, and subdivision block wall. Ashe Road (East Sidef Sump Frantage Constmction of the east side of Ashe Road along the frontage of the storm drain sump located on the east side of Ashe Road (between the northerly boundary of the residential portion of Tract No. 6475 and the Arvin-Edison Canal}, including grading, paving, curb, gutter, sidewalk, striping, subdivision block wall, and chain link fence with slats along the portion of the storm drain sump perimeter not fronting on Ashe Road. 17 Panama Lane (North Side). Construction on the north side of Panama Lane along the frontage of Tract No. 6475 (between Ashe Road and the easterly boundary of Tract No. 6475), including grading -and paving for a right taro lane into Tmct No. 6475 at Declaration Way, curb, gutter, sidewalk, handicap ramps, street signs, striping, haffic signal box, 2-inch diameter interconnect conduit, approximately 60 feet of fl- inch diameter water line with appurtenances, subdivision block wall, and neighborhood sign monuments. C&C Califomia anticipates that all of the Improvements that it is constmcting within the Liberty II Area will be completed by July 2006. Village Green Area The Village Gteen Area encompasses approximately 82.70 gross acres aqd is generally located at the southwest comer of the intersection of Stockdale Highway and Renfro Road. The Village Green Area has been approved for subdivision into a combined total of 354 R-1 lots, one sewer lift station tot, one private park lot, and several public and private landscapelpocket pazk lots pursuant to Vesting Tentative Tract Map No. 6448. C&C California is the subdivider of Tract No. 6448 and is responsible for constmcting the Improvements therein. CB:C California intends to subdivide Tract No. 6448 into twelve phases and has recorded the following five subdivision maps with the County Recorder: (i} Tract No. 6448-Unit 1, with ID R-1 lots, one public landscape lot, and one private landscape lot, (ii) Tract No. 6448-Unit 2, with 36 R-1 lots and three private landscape lots, (iii) Tmct No. 6448-Unit 3, with 24 R-1 lots, one sewer lift station lot, two public landscape lots, and one private landscape lot, (iv) Tmct No. 6448-Unit 4, with 23 R-1 lots and one private pazk lot, and (v} Tract No. 6448-Unit 5, with 37 R-1 lots and three private landscape lots. CBcC California has informed the City that subdivision maps for the remaining seven phases of Tract No. 6448 are not expected to be recorded with the County Recorder prior to issuance of the Bonds. The Improvemets to be constmeted within the Village Green Area are related to the development of the Village Green Area and are generally described as improvements in and along Stockdale Highway and Renfro Road, sewer lift station improvements, and City developmenUfacilities fees for Tract No. 6448 that are or are expected by C&C California to be required to be constructed or paid, as wnditions of approval for the Vllage Green Area subdivision. Also included in the scope of Improvements aze C&C California's incidental costs for design engineering, improvement bonds, construction staking, soils and materials analysis and testing, plan check fees, and inspection fees. The general location and extent of the Village Green Area planned Improvements aze described below. Stockdale Highway (South Side). Constmction of the south side of Stockdale Highway along the frontage of Tmct No. 6448 (between the westerly boundary of Tract 6448 and Renfro Road), including grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, street lights, striping, interconnect conduit, median curb, 16-inch diameter water line with appurtenances, 21-inch diameter sanitary sewer line with manholes, and traffic signal at the intersection of Stockdale Highway and Renfro Raad. Renfro Road (West Side). Constmction of the west side of Renfro Road along the frontage of Tract No. 6448 (between Stockdale Highway and Culiacan Avenue}, including gmding, paving, curb, gutter, sidewalk, handicap ramps, street signs, street Lights, striping, interconnect conduit, median curb (both sides of the street), 12-inch diameter water line with appurtenances, and subdivision block wall. Also included in the Renfro Road scope of improvements aze demolition of existing Renfro Road along the Tmct No. 6448 frontage south of Culiacan Avenue, including removal of pavement, curb, gutter, sidewalk, handicap ramps, and street light. Sewer Lift Statia». Construction of a complete sanitary sewer lift station located at the southwest comer of Stockdale Highway and Renfro Road, including short sections of 18- and 21-inch diameter sewer line, manholes, lift stollen 120-inch diameter wet well with dischazge manifold and valuing, electrical service drop and switchgeaz, pumps and motors with rail system, valve box and wet well access doors, transformer pad, exhaust fan and foul air duct, and Pacific Gas & Electric utility fees for pre-engineering and improvements. Due to possible reimbursement for oversizing through a proposed planned sewer area, that is expected to cover the area of Tract No. 6448 and an area outside the Assessment District located west of TraM No. 6448, only certain components of the sewer lift station benefuing Tract 18 No. 6448 are included in tke scope of the Improvements to be acquired by the City. However, a final decision as to the scope ojthe sewer lift station improvements eligible for acquisition by the City wilt be made by the City's Public Works Department after the formation of suck planned sewer area and the determination of the true share of improvements benefiting Tract No. 6448. C&C California is responsible, however, for tke construction of a complete and operable sewer 1~ station as a eonditlon of final map approval jor Tracy No. 6448. City Facilities Fees. Payment of City water supply in-lieu fees for Tmet No. 6448. C&C Calfamia anticipates that all of the Improvements that it is constmcting within the Village Crreen Area will be completed by September 2006. Tesoro-Eneanto Area The Tesoro-Encanto Area encompasses approximately 79.80 gross acres and is generally bounded by Panama Lane on the south, Buena Vista Road on the east, and Pensinger Road on the north. The Tesoro-Encanto Area has been apgroved for subdivision into a combined total of 257 R-1 lots, one storm drain sump lot, one canal lot, and several public landscape lots pursuant to Vesting Tentative Tract Map No. 6349. Centex Homes is the subdivider of Tract No. 6349 and is responsible for constructing the Improvements therein. Centex Homes intends to subdivide Tract No. 6349 into five phases and has recorded We following two subdivision maps with the County Recorder. (i) Tmct No. 6349-Phase 4, with 42 R-1 lots and one storm drain sump lot, and (ii) Tract No. 6349- Phase 5, with 64 R-1 lots and 3 public landscape lots. Centex Homes has informed the City that subdivision maps for the remaining three phases of Tract No. 6349 aze not expected to be recorded with the County Recorder prior to issuance of the Bonds. The Improvements to be constructed within the Tesoro-Encanto Area aze related to the development of the Tesoro-Encanto Area and are generally described as improvements in and along Buena Vista Road, Pensinger Road, and Panama Lane that are required to be constructed, or aze expected by Centex Homes to be required to be constructed, as conditions of approval for the Tesoro-Encanto Area subdivision. Also included in the scope of Improvements are Centex Homes' incidental costs for design engineering and construction. The general location and extent of the Tesoro-Encanto Area planned Improvements are described below. Buena Pasta Road (West Side). Constmction of the west side of Buena Vista Road along the frontage of Tract No. 6349 (between Panama Lane and Pensinger Road), including grading, paving, crab, gutter, sidewalk, handicap ramps, street signs, street lights, striping, interconnect conduit and pull boxes, utility trenching, median curb, 8- and 12-inch diameter water line with appurtenances, and subdivision block wall. _ Pensinger Road (South Side}. Construction of the south side of Pensinger Road along the frontage of Tract No. 6349 (between the westerly boundary of Tract No. 6349 and Buena Vista Road), including grading, paving, curb, gutter, sidewalk, handicap tamps, street signs, street lights, striping, interconnect conduit and pull boxes, utility trenching, 12-inch diameter water line with appurtenances, and subdivision bock wall. Panama Lane (North Side}. Construction of subdivision block wall on the north side of Panama Lane along the frontage of Tmct No. 6349 (between the westerly boundary of Tract No. 6349 and Buena Vista Road}. Centex Homes anticipates that all of the Improvements that it is constructing within the Tesoro-Encanto Area will be completed by October 2006. Lin Area The Lin Area encompasses approximately 62.90 gross acres and is genernlly located at the northwest corner of the intersection of Noriega Road and Allen Road. t9 In January 2003, Lennaz Homes' predecessor-in-interest received a Phase I Site Assessment by A7 Environmental Inc. (the "Lin Phase I"}. The Lin Phase I covered all of Tract b289, as well as Tract Map 6453, which is not a part of the Assessment District. The Lin Phase I identified two abandoned oil wells located in Tract 6289 (i.e., the Lin Aroa that is part of the Assessment District). The Lin Phase I recommended abandonment of the two wells, and the iwo oil wells were abandoned in accordance with Department of Oil and Gas, County of Kem, and Ciry of Bakersfield policies. In addition, the Lin Phase I identified the following six items of environmental concern with respect to the property in Tract Map 6453: (i) an abandoned oil well on the property; (ii) an unlined earthen sump pump associated with an oil production facility; (iii) the presence of four aboveground production tanks that may be corroding and contaminating the underlying soil; (iv} the presence of a gas separator on the property, often used to blow off liquids resulting in the possible contamination of the soil; (v} building restrictions on the property not allowing the eonstmction of a building within ten feet of an abandoned well; and (vi) stained soil inside an agricultural water well enclosure located on the property. Because of these concerns, the Lin Phase I recommended conducting a Phase II analysis. All of the areas of concern identified in the Lin Phase I for which a Phase II site assessment was recommended aze located outside of the Assessment District. The Lin Area has been approved for subdivision into a combined total of 252 R-1 lots, one storm drain sump lot, two water well lots, and several public landscape lots pursuant to Vesting Tentative Tract Map No. 6289. Lennaz Homes is the subdivider of Tract No. 6289 and is responsible for constructing the Improvements therein. Lennaz Homes intends to subdivide Tract No. 6289 into three phases and has recorded all three subdivision maps with the County Recorder as follows: (i) Tract No. 6289 Unit One, with 112 R-1 lots, one storm drain sump lot, twe water well lots, and four public landscape lots, (ii) Tract No. 6289 Unit Two, with 58 R-1 lots and two public I landscape lots, and (ii) Tract No. 6284 Unit Three, with 82 R-1 lots and ane public landscape lot. The Improvements to be constructed within the Lin Area aze related to the development of the Lin Area and are generally described as improvements in and along Allen Road and Noriega Road that are required to be constructed, or are expected by Lennaz Homes to be requited to be consuucted, as condifions of approval for the Lin ', Area subdivision. The general location and extent of the Lin Area planned Improvements aze described below. Allen Road (H'est Side). Construction of the west side of Allen Road along the frontage of Tract No. 6284 (between the northerly boundary of Tract No. 6289 and Noriega RoadrVega Meadows Road), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, 8-, 10-, and 12-inch diameter sewer line with manholes, 18- and 30-inch diameter storm drain line with catch basins and manholes, and subdivision block wall. Pegs Meadows Road (North Side) (Westerly P,xtension of Noriega Road). Construction of the north side of Vega Meadows Road along the frontage of Tract No. 6289 (between the westerly boundary of Tract No. 6289 and Allen Road), including grading, paving, curb, gutter, decomposed granite equestrian trail, street signs, street lights, striping, interconnect conduit, 10-inch diameter sewer line with manholes, and subdivision block wall. Lennaz Homes anticipates that all of the Improvements that it is constructing within the Lin Area will be completed by Apri12006. Rider Area The Rider Area encompasses approximately 113.60 gross acres and is generally bounded by Stine Road on the east, McKee Road on the north, Mountain Ridge Drive on the west, and Taft Highway on the south. 1n April 2004, Lennaz Homes received a Phase I Site Assessment of Tract 6240 by AJ Environmental Inc. (the "Rider Phase I'~. The Rider Phase I was conducted to assess any "R@cognized Environmental Conditions" associated with the property. The Rider Phase I only observed surface features and did not drill for any subsurface samples. The Rider Phase I site investigation revealed one potential environmental concern. On the south side of McKee Road, the site investigators found an irrigation water well that had an azea of oil stained soil azound the well and azound the concrete slab that the engine was mounted on. Accordingly, a Phase II Environmental Site Assessment was required to test soil samples azound the abandoned imgafion water well. zo In May 2001, Lennaz Homes received a Phase II Site Assessment by A7 Environmental Ina (the "Rider Phase II"). The Rider Phase II was performed to detemrine if the area of oil stained sail was a hazardous environmental condition. Three shallow hand auger samples in the oil stained azeas adjacent to the water well were taken and examined. The results of the examination concluded that oil and grease were not a danger to the site because all of the heavy metal concenhutions were below State of California Action Levels. The Rider Area has been approved for subdivision into a combined total of 394 lots, one storm drain sump lot, one water well lot, two park lots, one canal lot, and several public landscape lots pursuant to Vesting Tentative Tract Map No. 6290. Lennaz Homes is the subdivider of Tract No. 6240 and is responsible for'"bonstmcting the Improvements therein. Lennaz Homes intends to subdivide Tract No. 6290 into four phases and has recorded the following subdivision map with the County Recorder: Tract No. 6290 Unit One, with 217 R-1 lots, one storm drain sump lot, one water well lot, two park lots, one canal lot, Five public landscape lots, and two "super" lots planned for future subdivision as Units Two and Three. Tract No. 6290 Unit Four is a remainder pazcel. Lennar Homes has informed the City that subdivision maps for The remaining three phases of Tract No. 6290 aze not expected to be recorded with the County Recorder prior to issuance of the Bonds. The Improvements to be constructed within the Rider Area are related to the development of the Rider Area and aze generally described as improvements in and along McKee Road, Stine Road, Mountain Ridge Drive, and Taft Highway that are required to be constructed, or aze expected by Lennaz Homes to be required to be constructed, as conditions of approval for the Rider Area subdivision. The general location and extent of the Rider Area planned Improvements aze described below. Mc%e Road (South Side). Constmction of the south side of McKee Road along the frontage of Tract No. 6290 (between Mountain Ridge Drive and Stine Road), including grading, paving, crab, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, 10- and 15-inch diameter sewer line with manholes, 18- and 24-inch diameter storm drain line with catch basins and manholes, and subdivision block wall. Stine Road (West Side). Construction of the west side of Stine Road along the frontage of Tract No. 6290 (between McKee Road and the southerly boundary of Tract No. 6290), including grading, paving, curb, gutter, sidewakc, street signs, street lights, striping, interconnect conduit, removal of existing pavement, and subdivision block wall. Mountain Ridge Drive (East Side). Construction of the east side of Mountain Ridge Drive along the frontage of Tmet No. 6290 (between McKee Road and the southerly boundary of Tract No. 6290), including grading, paving, curb, gutter, sidewalk, sheet signs, street lights, striping, interconnect conduit, and subdivision block wall. _ Taft Highway (North Srde). Construction of subdivision block wall on the north side of Taft Highway along the frontage of Tract No. 6290 (between the westerly and easterly boundaries of Tract No. 6290). Lennar Homes anticipates that all of the Improvements that it is constructing within the Rider Area will be completed by December 2006. Diamond Ridge Area The Diamond Ridge Area encompasses approximately 76.80 gross acres and is generally bounded by McKee Road on the south, Mountain Ridge Drive on the east, and McCuTCheq Road on the north. The Diamond Ridge Area has been approved for subdivision into a combined total of 318 R-I lots, one storm drain sump lot, and several public landscape lots pursuant to Vesting Tentative Tract Map No. 6332. Dunmore is the subdivider of Tract No. 6332 and is responsible for constructing the Improvements therein. Dunmore intends to subdivide Tract No. 6332 into three phases. Dunmore has not recorded any subdivision maps with the County Recorder, and has informed the City that no subdivision maps for any phases of Tract No. 6332 are expected to be recorded with the County Recorder prior to issuance of the Bonds. 21 The Improvements to be constructed within the Diamond Ridge Area are related to the development of the Diamond Ridge Area and are generally described as improvements in and along McCutchen Road, Mountain Ridge Drive, and McKee Road, and as Tract No. 6332 on-site storm drain improvements that are required to be constructed, or expected by Dunmore to be required to be constmcted, as conditions of approval for the Diamond Ridge Area subdivision: Also included in the scope of Improvements are Dunmore's incidental costs for design engineering, construction surveying and staking, soils and materials analysis and testing. The general location and extent of the Diamond Ridge Area planned Improvements aze described below. McCutcheu Road {South Side). Construction of the south side of McCutchon Road along the frontage of Tract No. 6332 (between the westerly boundary of Tract No. b332 and Mountain Ridge Drive), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, and subdivision block wall. Mountaiu Ridge Drive (West Side). Construction of the west side of Mountain Ridge Drive along the frontage of Tract No. 6332 (between McCutchen Road and McKee Road), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, and subdivision block wall. MciYee Road (North Side). Construction of the north side of McKee Road along the frontage of Tract No. 6332 {between the westerly boundary of Tract No. 6332 and Mountain Ridge Drive), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, and subdivision block wall. Tract No. b332 Orr-site Storm Drain. Constmction of the in-tract (on-site) 12-foot wide cross gutters fot Tract No. b332, and constmction of a complete in-tract (on-site} storm drain system for Tract No. 6332, including 18-, 24-, and 30-inch diameter pipelines with manholes and catch basins. Dunmore anticipates that all of the Improvements that it is constructing within the Diamond Ridge Area wilt be completed by August 2007. Estimated Improvement Costs Set forth below aze the confirmed assessment amounts with regazd to the estimated costs of the Improvements and other costs relating to the Assessment District proceedings, as described in the Engineer's Report. A copy of the Engineer's Report is on file with the City. [Remainder of Page Intenfionally Left Blank.] 22 TABLE3 ENGINEER'S ESTIMATE OF TOTAL COST AND ASSESSMENT CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO.05-3 (LIBERTY IIlVII.I.AGE GREEN/TESORO-ENCANTOI ' LIN/RIDERfDIAMOND RIDGE) ACTIVITY DFSCRD'T10N LIBERTY D AREA IMPROVEMENT COST A IMPROVEMENTS B. CONTINGENCY G INCIDENTALS D. TOTAL LIBERTYIIAREA IMPROVEMENT COST VILLAGE GREEN AREA IMPROVF.DIEN]' COST A. Bt3PROVEMENT$ B. CONFINGENCY C. DCIDENTALS D. TOTAL VD.CAGE CREENAREA RF[PROVEMENT COST TESOR0.ENCANTO AREA INSPROVEMENT COST A BvSROVEMENTS B. CONTINGINCY c. mcIDENTALs D. TOTAL TESORO-ENCANTO ARP.A IMPROVEMENT COST LINAREA7MPRO~EMENT COST A. IIvSROVEMEMS B. CONTINGENCY C. II4CIDENTALS D. TOTALZIN AREA IMPROVEMENT COST RIDER AREA BIIPROVEMENT COST A ENPROVEMENTS B. CONTINGENCY C. INCIDENTALS D. TOTAL RIDER AREA II4IP1 DIAMOND RIDGE AREA 1I42PROVEM A TMI'ItOVBMENT3 B. CONTINGENCY C. D7GIDENTALS D. TOTAL DIAMOND RIDr~E TOTAL COST OF IMPROVEMENTS, CONTINGENCY, AND INCIDENTALS A IMI~ROVEMENTS 'H. CONTINGENCY C. INCIDENTALS D. TOTAL COST OF APROVEMENTS,CONTINGENCY, AND INCIDENTALS TOTAL PAYOFF OF EXISTING A3SESSMENTDISTRICT N0.94J ASSESSMENT (IN LIBERTY R AREA) ESTIINATED ASSESSMENT DLSTRICT PROCEEDING COST AND EXPENSE A LIBERTY RAREA B. VII,LAGE GAEEN AREA C. TESORO-ENCANTO AR&4 D. LIN ARHA E. AIDER AREA F. DIAMOND RBIGE AREA G. TOTAL&STRFiATED ASSESSMENT DISTRICT YROCEEDINGCO 1915 ACT BOND ISSUANCE COST AND RESERVE A UBHRTYII AREA. B. VE,LAGE GREEN AREA C. TESOR0.INCANTO AREA D. LIN ARHA E. RIDER AREA F. DIAMOND RIDGH AREA G TOTAL 1915 ACT BOND LSSUANCE COST AND RESERVE TOTAL AMOUNT ASSESSED A. LBBRTY R AREA B. VD,LAGE GREEN AREA C. TESOR0.ENCANTO AREA D. LB9 AREA E. RIDER AREA F. DIAMOND RIDGE AREA G TOTAL AMIOUNT ASSESSED Source: Engineer's Report. coxFIRMIED ASSESSMENT $419,313.00 41931.00 71 .ao 5558,379.00 51,469967.00 130997.00 274.395 00 51,880,359.00 s1,42osos.oo 0.00 174976.00 51,593,584.00 5820,779.50 O.Op 0.00 $820,77950 $t,184,87L25 0.00 0.00 S1,t64,871.25 $ 991,380.50 o.oo 114396.64 $1,110,777.14 $6,3D6919.25 172928.00 610902.64 57,130,749.89 5203,71441 $ 34,759.81 85,765.00 72,77fi.14 37,43fi.55 54,043.13 50.663.fi3 5333,444.26 $ 140,418.95 346,46426 243,99324 151,232.17 218,317.64 204.665.48 $155,091.79 $ 937,271.87 2,312,588.26 1,962,353.38 1,009,448.22 1,457,232.02 1.366.106.25 $9,Ik15,000.00 23 Method of Assessment Spread Spread of theAssessment District Costs to Benefited Parcels Section 10204 of the 1913 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 method or formula that should be used in any particulaz 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 rewmmendations about the apportionment of the assessment obligation. For the proceedings with respect to the Assessment District, the City has 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 after hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public hearing, the City Council must take fmal action in determining the proportionality of the benefits received by the properties assessed. The financed costs will be spread to the assessed parcels in the Assessment District in the manner set forth in Municipal Code Section 13.08.070 -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 aze to be allocated or spread in accordance with the 1913 Act, which requires that the financed cost in a special assessment proceeding be allocated among the benefited pazcels of land in proportion to the estimated benefit each pazcel can be expected to receive from the work and improvement covered by the assessment. Municipal Code Section 13.08.070 authorizes the "reallocation" to alternate progerties of assessments initially allocated to pazcels in proportion to their estimated benefit (i. e., initial allocation made in accordance with the 1913 Act costPoenefit 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 aze reallocated and approval thereof by the City Council. The Assessment District individual parcel assessment amounts shown on APPENDIX E have been calculated or spread among the assessed pazcels pursuant to Municipal Code Section 13.08.070. The alternate method used by the Assessment Engineer to reallocate the benefit based assessment shazes initially allocated by the Assessment Engineer to each assessed pazcel has been provided by the Landowners. The Assessment Engineer has determined 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 or unpaired. Reallocation Spread Method 1n accordance with Municipal Code Section 13.08.070, the Landowners have submitted a proposed altemate method and rate of assessment. Further, the Landowners have stated that, as of the date of the approval of the altemate method and mte of assessment, the Landowners of their affiliates, as applicable, were the owners of all the property proposed to be reallocated a shaze of the assessment and, as of such date, such owners consented to the reallocation. The Assessment Engineer's estimates of the costs of the Improvements is presented above under the heading "TFIE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Estimated Improvement Costs." The altemate method (Ure "Reallocation Spread Method") is describCd as follows: The total improvement acquisition cost allocated within each Community Area is spread among the developed and undeveloped parcels within each area in duect proportion to parcel acreage and to each planned or existing R-1 lot within those developed and undeveloped parcels as an equal per R-1 lot cost share. There aze no exceptions in the Community Areas to the equal cost shaze per acre and equal cost per existing or planned R-1 lot Reallocation Spread Method. 2a In the Village Green Area, the R-1 lots are further classified into two different categories of lot sizes (called "Product Type Areas"}. However, C,4cC California desires that all R-1 lots in both Product Type Areas of Tract No. 6448 be assessed an equal assessment amount. In the Tesoro-Encanto Area, the R-1 lots aze further classified into two different Product Type Areas. The total Tesoro-Encanto Area assessment amount is fast apportioned between the two Product Type Areas in duet[ proportion to their assessable azeas. Each Product Type Area's total allocated shaze of the assessment is then apportioned as an equal shaze per existing or planned R-1 lot within such Product Type urea. OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Ownership of Property in the Assessment District As of the date of this Official Statement, property ownership within the Assessment District was as follows: • C&C California owns approximately 117.50 gross acres, all of which property is within the Liberty II Area and the Village Green Area. C&C California is developing the Liberty II Area and the Village Green Area, which Community Areas will beaz approximately 35.93% of the total ', assessment lien. Centex Homes owns approximately 79.80 gross acres, all of which property is within the Tesoro- Encanto Area. Centex Homes is developing the Tesoro-Encanto Area, which Community Area will beaz approximately 21.70% of the total assessment lien. Lennar Homes owns approximately 176.50 gross acres, all of which progeny is within the Lin Area and the Rider Area. Lennaz Homes is developing the Lin Area and the Rider Area, which Community Areas will beaz approximately 27.27% of the total assessment lien. Dunmore owns approximately 76.80 gross acres, all of which property is within the Diamond Ridge Area. Dunmore is developing the Diamond Ridge Area, which Community Area will beaz approximately 15.10% of the total assessment lien. None of the Landowners, or any other owner of properly 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 addition, there is no assurance that the Landowners or any other Property Owner will be able to pay the assessment installments or that the Landowners 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 the Landowners or any other Property Owner will have moneys available to complete or improve the development of the land within the Assessment District (other than the Improvements) in the manner described herein. Accordingly, no Property Owner's financial statements are included in this Official Statement. C&C California The information under this subheading has been provided by C&C California and has not been verged for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof. C&C California is a California corporation and a wholly oomed subsidiary of Castle &. Cooke, Inc., a Hawaii corporation ("Castle"). Castle was formed on October 1Q, 1495, to be the successor to 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 California was incorporated on November 16, 1495, and assumed some of Castle's real estate developments in the State. C&C California is currently engaged in the development of residential real estate groperties in the United States, primarily in the State. C&C California develops finished lots, builds homes for sale to third-party buyers, 25 and develops finished lots for sale to custom homebuilders. C&C California is currently undertaking the following real estate developments in the City: - - Seven Oaks. Seven Oaks is amaster-planned community located on approximately 1,700 acres in the City. Seven Oaks surrounds the Seven Oaks Country Club and Golf Course, which was also developed by C&C Cahfomia. Currently, C&C California has the exclusive right to sell memberships m the Sevon Oaks Country Club. C&C California intends to contribute and transfer its right, title, and interest in the Seven Oaks Country Club m a non-profit mutual benefit corporation on or before October 31, 2012. Development of the Sevon Oaks commttuity is being completed in phases, based on mazket demand. C&C California has developed neighbor}~,oods in the Seven Oaks community offering homesites from "move-up" to luxury homes. Current homesite prices in Seven Oaks range from $170,000 to $475,000. Prices for homes built by C&C California begin at $550,000, with custom homes priced at over $1,000,000. As of June 30, 2005, approximately 86°l0 of the project had been completed. Approximately 435 homesites and homes remain to be developed on approximately 330 acres. Silver Creek. Silver Creek is a masterplanned community encompassing approximately 642 acres in the City. As of Jvne 3Q 2045, approximately 183 homes remain to be developed on approximately 37 acres in Silver Creek. Home prices in this community currently average $327,000. Brighton. Brighton is amaster-planned community encompassing approximately 395 acres in the City. This Brighton community is currently under development and will comprise approximately 1,039 units. As of June 30, 2005, 712 homes and homesites remained to be developed in the Brighton community. Lot prices range from $175,000 to $230,000, and home prices range from $325,000 to $410,000. Southern Oaks. Southern Oaks is amaster-planned community located just south of the Seven Oaks community. Approximately 89°!0 of Ore Southern Oaks community has been completed. As of June 3Q 2005, approximately 19 units remained to be developed on eight acres within the Southern Oaks community, with an average price of $150,000. Mang Bc Gosford. Ming 8c Gosford is a planned community encompassing approximately 31 acres in Ote City. The Ming $c Gosford community is currently being planned and is expected to encompass approximately 221 units. The Ming 8r Gosford community is scheduled for constmcOvn in 2007, and home prices within such community aze expected to range from $285,000 to $310,000. Other California properties owned and being developed by C&C California include the following: Approximately 987 acres 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 (constructed with the fhst of the two existing courses in 1999}. Mountaingate, amaster-planned community located in Los Angeles County adjacent to the Mountaingate Country Club. Constmction is expected to commence for the Mountaingate community in mid 2006. Mountaingate is planned to include 24 custom lots, each of which aze expected to sell at an average price of approximately $1,700,000. C&C California, or an affiliate of C&C California, also owns and is developing land in Hawaii, Arizona, Georgia, North Cazolina, and Florida Centex Homes The information under this subheading has been provided by Centex Homes and has not been verified jar accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof. 26 Centex Homes is one of the nation's lazgest home builders, operating in more than 90 mazkets in 26 states. Centex Homes constructed approximately 30,000 homes in its fiscal yeaz ending Mazch 31, 2004, and approximately 33,000 homes in its fiscal yeaz ending Mazch 31, 2005. In general, Centex Homes buys and develops lots and land and builds single-family detached homes, townhomes, and low-rise condominiums for sale to both ',. first-time and move-up buyers. Centex Homes has operated in Southern California since 1987. '~~. Centex Homes, a Nevada general partnership, is the home building subsidiary of Centex Corpomfion ("Centex Corporaticn'~, a publicly-traded company whose stock is traded on the New York Stock Exchange ("NYSE"} under the symbol "CTX." Centex Corporation's Annual Report on form 10-K for fire fiscal yeaz ended Mazch 31, 2045, as filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, sets forth certain data relative to the consolidated financial position of Centex Corpomtion and its subsidiaries, including Centex Homes, as of Mazch 31, 2005. The SEC maintains an Internet website at http://wwwsec.gov that contains reports, proxy, and information statements, and other information regarding registrants that file electronically with the SEC, including Centex Corpomtion. Information may also be obtained from the company itself at Centex Headquarters, 2728 North Harwood, Dallas, Texas 75201, telephone number: (214) 481-5000. Additional information regazding Centex Homes is available from its website at htlpa(www.centexhomes.com. The Internet addresses of the SEC and Centex Homes and references to filings with the SEC are i»cluded for reference only, and the information on such Internet sites and on file with the SEC is not a pnrt of this CJJftcdal Stateme»t and is not incorporated by reference into this Official Statement, and no representations are made as to the accuracy or ~, adequacy ofsuch information. Recent or carrrent grojects completed or under active development by the Centex Homes in the City include the following: TABLE 4 CENTEX HOMES RECENT OR CURRENT PROJECTS IN THE CITY Proiect MontaraBelsera Hidden Oak Greystone Briarwood Number of Units Foxnm Cobblestone Eagle Crest Source: Centex Homes. Lennar Homes 258 294 194 238 262 112 314 Status Completed Active Active Active Active Active Active The information under this subheading has been provided by the Lennar Homes and has not been verged for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof. Lennaz Homes is a California corporation based in Aliso Viejo, California, that has been in the business of developing residential real estate communities in California since 1495. Lennar Homes is a wholly-owned subsidiary of Lennaz Homes Inc., a Florida corporaton, which is a wholly-owned subsidiary of Lennaz Corporation ("Lennaz Corporation"). Lennaz Homes develops residential communities both within the Lennaz family of builders and through consolidated and unconsolidated partnerships in which Lennar Homes maintains an interest. Lennar Corporation, founded in 1954, is headquartered in Miami, Florida, and has been publicly traded under the symbol "LEN" since 1971. Lennaz Corporation is one of the nation's leading builders of quality homes for all generations, building affordable, move-up, and retirement homes. Lennaz Corporation operates primarily under the Lennar and U.S. Home brand names and utilizes a Dual Mazketing strategy consisting of the Everythiug's Included and Design StudiosM programs. Lennar Corporation's Financial Services Division provides mortgage financing, title insurance, closing services, and insurance agency services for both buyers of Lennaz Corporation's 27 ~, homes and others. Its Strategic Technologies Division provides high-speed Internet and cable television services to residents of Lennaz Corporation's communities and others. Lennaz Corporation is subject to the information requirements of the Securities and Exchange Act of 1934 and, in accordance therewith, files reports, proxy statements, and other information with the SEC. Such filings, particularly Lennaz Corporation's Annual Report on Form 10-K for its fiscal year ended November 30, 2004, as amended on Form 10-KIA, and its most recent Quarterly Report on Form 10-Q, may be inspected and copied at the public reference facilifies maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rotes. Such files can also be accessed over the Internet at the SEC's website at wwwsec.gov., Irr ad&tion, the aforementioned material may also be inspected at the office of the NYSE at 20 Broad Street, New York, New York 10005. The Internet address of the SEC and references to filings with the SEC and the NYSE are included for reference only, and the information on the Internet site and on file with the SEC and the NYSE is not a part of this Official Statement and is not incorporated by reference into this Official Statement, and no representations are made as to the accuracy or adequacy ofsuch information. A representative sampling of projects recently or currently under active development by Lennar Homes and its related entities or affiliates in the City is sn,,,ma,;~ed in the chart below. Lennar Homes' development plan for each project listed below is to constmct residental lots and sell and convey such lots to individual homeowners. TABLE 5 LENNAR HOMES RECENT OR CURRENT PROJECTS IN THE CITY Project Number of Units Status Polo Fields 133 Completed Stockdale Ranch 147 Completed RiverOaks 734 Completed Stockdale Ranch Villas 75 Completed Casa Bella 84 Completed Nottingham 66 Comgleted Evansport 72 Active Tradewinds 165 Active Montelena 117 Active Terra Vista 292 Actve Artisan 237 Active Westlake 367 Active Somce: Le~az Homes. - Dunmore The information under this subheading has been provided by the Dunmore and has not been verged for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof. Dunmore is a California limited liability company and is a wholly-owned subsidiary of Dunmore Homes. Dunmore Homes is whotlyowned by the Sid Dunmore Trust. Currently, Dunmore Homes only operates in California, but has also built homes through affiliated entities in Nevada, Utah, and Colorado. Dunmore Homes is currently engaged in the development of residential real estate properties in California only. Dunmore Homes gurchases raw land or unimproved lots, develops them torn finished lots, and constructs homes for sale. In addition to its proposed development within the Diamond Ridge Area, Dunmore Homes is currently in the planning stages for a development in the City called Morning Sun, which is a 281-lot community that will commence construction in 2006. Morning Sun will be developed in multiple phases and offer two distinct product lines, including both entry-level and move-up products. zs Other properties owned and being developed by Dunmore Homes in California include the following: _ • Sundance IY Sundance N is a 97-lot community adjacent to the neazly-completed Dunmore Homes community of Sundance I-III in Livingston, California. • Silver Creek Silver Creek is a 175-lot community located in Merced, California, that is nearing completion. Only two homesites remain unsold in this community. • Copper Creek Copper Creek is a 279-lot community located in Merced, Califoinia, that is also nearing completion. Approximately 50 homesites remain unsold in the community. • Canterbury. Canterbury is a 401-lot community located in Yuba City, California, that is comprised of two distinct product lines called Kensington (269 lots) and Windsor (132 lots). Homes the Canterbury community began selling in 2005. • Stone Creek. Stone Creek is a 187-lot community located in Atwater, California. Homes in the Stone Creek community began selling in 2005. • Viscaya. Viscaya is a 304-lot community located in Dinuba, California. Dunmore Homes purchased the Viscaya community in October 2005, and site improvements aze currently underway, with homes expected to begin selling in early 2006. Development and Financing Plans The current development plans and financing plans of the Landowners for the development of the property within the Assessment District are subject to change. Furthermore, the current development plans and financing plans envisioned for the Assessment District are subject, in large part, to the financial resources and construction aad marketing capabilities and efforts of the Landowners and any other merchant builders and other persons to whom the parcels within the Assessment District may be said. 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 the Landowners, 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. C&C California Development Plan C&C Cahfomia is the developer of the Liberty II Area and the Village Oreen Area. C&C California plans to develop such Community Areas as follows: Liberty II Arerti The Liberty II Area encompasses approximately 34.80 gross acres, comprising Tract No. 6475, and is planned for subdivision into 107 R-1 lots, one commercial lat, one storm drain sump lot, one water well lot, and several public landscape lots. C&C California plans to construct 107 single-family homes on the Liberty II Area property for sale to third party buyers. C&C California intends to subdivide the Liberty II Area into five phases. C&C California has recorded the following three subdivision maps with the County Recorder: (i) Tract No. 6475-Unit 1, comprising 22 R-I lots and two public landscape lots, {ii) Trnct No. 6475-Unit 2, comprising 28 R-1 lots, one storm drain sump lot, and two public landscape lots, and {iii) Tract No. 6475-Unit 3, comprising ZO R-1 lots. C&C Califonua plans to record subdivision maps for Tract No. 6475-Unit 4, which is expected to comprise 16 R-1 lots, and Tract No. 6475-Unit 5, which is expected to comprise 21 R-1 lots and one commercial lot, by May 2006. C&C California expects to receive final mag approval for the remaining two phases of the Liberty II Area development by May 200b. C8cC California plans to construct 107 single-family homes of one product type in the Liberty II Area, ranging in size from 1,458 to 2,051 square feet and ranging in price from $290,000 to $335,000. Grading in the Liberty II Area has been completed, and home constmcfion is expected to commence in Febmary 2006. C&C California expects that all infrastmeture improvements in the Liberty II Area, including the applicable 29 Improvements, will be completed in July 2006. The fvst home sale is expected to close in July 2006, and C&C California expects to sell homes at an annual rate of approximately 100 units, with the final home sale occurring in June 2007. C&C California has constructed four model homes, which aze currently open to the public. Village Green Area. The Village Green Area encompasses approximately 82.70 gross acres, comprising Tract No. 6448, and is planned for subdivision into 354 R-1 lots, one sewer lift station lot, one private pazk lot, and several public and private Landscape or pazk lots. C&C California plans to construct 354 single-family homes on the Village Green Area property for sale to third party buyers. C&C California intends to subdivide the Village Green Area into 12 phases. C&G California has recorded the following five subdivision maps with the County Recorder: (i) Tract No. 6448-Unit 1, comprising 10 R-1 lots, one public landscape lot, and one private landscape lot, (ii) Tract No. 6448-Unit 2, comprising 36 R-1 lots and three private landscape lots, (iii) Tract No. b448-Unit 3, comprising 24 R-1 lots, one sewer lift station lot, two public landscape lots, and one private landscape lot, (iv) Tract No. b448-Unit 4, comprising 23 R-1 lots and one private pazk lot, and {v) Tract No. 6448-Unit 5, comprising 37 R-1 lots and three private landscape lots. C&C California plans to record subdivisien maps for Tract No. b448-Units 6 through 12, which aze expected to comprise a combined total of 224 R-1 lots, by May 2006. C&C California expects to receive final map approval for such seven phases of the Village Green Area development by 2007. C&C California plans to construct 354 single-family homes in two product types in the Village Green Area: 169 of the fast product type ("Village Green Product Type 1'~ and 185 of the second product type ("Village Green Product Type 2"}. The Village Green Product Type 1 homes aze expected to range in size from 1,450 to 2,200 squaze feet and to range in price from $300,000 to $340,000. The Village Green Product Type 2 homes are expected to range in size from 1,900 to 2,700 square feet and to range in price from $360,000 to $405,000. Grading in the Village Green Area has been completed, and home constmetion commenced in January 2006. C&C California expects that all infrastructure improvements in the Village Green Area, including the applicable Improvements, will be completed in September 2006. The first home sale is expected to close in third quarter 2006, and C&C California expects to sell homes at an annual rnte of approximately 60 units, with the final home sale occurring in 2009. C&C California will commence construction on four model homes for the Village Green Product Type 1 and four model homes for the Village Green Product Type 2 in February 2006, and expects such model homes to be open to the public in July 2006. C&C California Financing Plan C&C California expects the cost of the development for the Liberty II Area and the Village Green Area to total approximately $107,400,000, including the costs for all on-site and off-site improvements and all home construction. The following tables detail the constmction budgets for the development of the Liberty II Area and the Village Green Area. Such budgets have been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, and other matters. There can be no assurance that the actual development costs for the Liberty II Area or the Village Green Area will not be greater than projected or occur sooner than projected. TABLE 6 LIBERTY II AREA ESTIMATED CONSTRUCTION BUDGET Expenditures as of Description of Cost Item Estimated Cost 7anuary Y, 2006 land Acquisition $ 2,600,000 $2,600,000 Offsite Improvements (net of Bond-fmanecd Improvements) 1,400,000 187,39b Onsite Improvements 1,500,000 160,354 Home Cons[nrction (includvng fees) 16.000.000 0 Total $2Y,500,000 $2,947,750 Source: C&C California. 30 TABLE 7 VILLAGE GREEN AREA ESTIMATED CONSTRUCTION BUDGET I ~, Expenditures as of Description of Cost Item Estimated Cost January 1, 2006 Land Acquisition $ 1,100,000 $1,100,000 Offsite Improvements {net of Bond-Snanced Improvements) 7,800,000 ~ 728,352 Onsite Improvements 6,000,000 506,025 Home Constmction (including fees) 71.000.000 330.716 Total $85,900,000 $2,665,093 Source: C8rC California. In December 2003, Castle entered into an amended and restated credit agreement {the "Castle Credit Agreement") with a syndicate of banks (the "Credit Banks'. All Imgrovements in the Liberty II Area and the Village Green Area not financed with proceeds from the sale of the Bonds will be financed with moneys derived from the Castle Credit Agreement. Pursuant to the Castle Credit Agreement, the Credit Banks have agreed to provide athree-yeaz secured term loan of $125 million and athree-yeaz secured revolving line of aedit of up to $250 million, based on a percentage of the value of certain commemial properties, land holdings, and homebuilding inventory owned by Castle or its affiliates, and subject to certain limitations. The Castle Credit Agreement is secured by the properly within the Liberty II Area and the Village Green Area. Repayment obligations under the Castle Credit Ageement aze subject to interest at a variable mte per annum based on the London Interbank Offered Rate, or at an alternate rate based upon a designated Credit Bank's prime rate or the federal funds rate. The Castle Credit Agreement contains customary covenants, including, but not limited to, limitations on investments, sale of assets, limitation on other debt, fmancial covenants related to tangible net worth, leverage, interest coverage, and inventory levels. As of September 3Q 2005, the amount available under the Castle Credit Agreement was appmximately $116 million. Prior to expiration of the term of the existing Castle Credit Ageement, C&C California anticipates renewing the Castle Credit Agreement upon substantially similar terms. C&C California has represented that the funding sources described above will be sufficient to complete the development of the Liberty II Area and the Village Green Area as described hereht. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available fiom C&C California, the Castle Credit Ageement, or any other source when needed. Neither CBcC California nor any of its affiliated entities is under any legal obligation of any kind to expend funds for the development of the Liberty II Area or the Village Green Area. Any contributions by C&C California to fund the costs of such development aze entirely voluntary. Notwithstanding available sources of financing, neither C&C California nor any of its affiliates is under any obligation to apply such sources to the completion of development within the Liberty II Area and the Village Green Area. Centex Homes Development Plan Centex Homes is the developer of the Tesoro-Encanto Area. Centex Homes plans to develop such Community Area as follows: The Tesoro-Encanto Area encompasses approximately 79.80 gross acres, comprising Tract No. 6349, and is planned for subdivision into 257 R-1 lots, one storm drain sump lot, one canal lot, and several public landscape lots. Centex Homes plans to constmct 257 single-family homes on the Tesoro-Encanto property for sale to third party buyers. Centex Homes intends to subdivide the Tesoro-Encanto Area into five phases. Centex Homes has recorded the following two subdivision maps with the County Recorder: (i) Tract No. 6349-Phase 4, wmprising 42 R-I lots and one storm drain sump lot, and (ii) Tract No. 6349-Phase 5, comprising 64 R-1 lots and three public landscape lots. Centex Homes plans to record subdivision maps for Tract No 6349-Phases 1 through 3, which aze expected to comprise a combined total of 151 R-1 lots, by March 2006. Centex Homes expects to receive fmal map approval for all the remaining throe phases of the Tesoro-Encanto Area development by March 2006. 31 Centex Homes plans to construct 257 single-family homes in the Tesom-Encanto Area in two separate neighborhoods called `°I'esoro" and "Encanto." The Tesoro neighborhood is planned to comprise 154 homes ranging in size from 1,821 to 3,588 square feet and ranging in price from $334,000 to $417,000. The Encanto neighborhood is planned to comprise 103 homes ranging in size from 1,445 to 2,870 squaze feet and ranging in price from $350,000 to $473,000. Grading in the Tesoro-Encanto Area has been completed and home constuction in the Tesoro neighborhood began in October 2005. Home construction in the Encanto neighborhood is expected to commence in Mazch 2006. Centex Homes expects that all infrastructure improvements in the Tesoro-Encanto Area, including the applicable hmprovements, will be completed in October 2006. The fast home sale is expected to close in the Encanto neighborhood in September 2006 and in the Tesom neighborhood in March 20Q¢. Centex Homes expects to sell homes at an annual rate of approximately 120 units, with the final home sale in both neighborhoods occurring in July 2007. Centex Homes has commenced construction on eight model homes for the Tesoro neighborhood, which are expected to be open to the public in Febmary 2006. Centex Homes plans to commence construction on seven model homes for the Encanto neighborhood in March 2006, which model homes aze expected to be open to the public in June 2006. Cenrex Homes Financing Plan Centex Homes expects the cost of the development for the Tesoro-Encanto Area to total approximately $50,368,695, including the costs for all on-site and off-site improvements and all home construction. The following table details the construction budget for the development of the Tesoro-Encanto Area. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, and other matters. There can be no assurance that the actual development costs for the Tesom-Encanto Area will not be greater than projected or occur sooner than projected. TABLE 8 TESORO-ENCANTO AREA ESTIMATED CONSTRUCTION BUDGET Expendllares as of Description of Cost Item Estimated Cost January 1, 2006 Land Acquisition $ 4,015,582 $4,015,582 Demolition and Grading 411,674 316,352 Wet Utilities l,1b3,228 802,027 Dry Utilities 703,265 64,202 Paving, Concrete, Landscape 1,984,026 121,112 Block Wail 502,709 0 Home Constmciion 41.588.211 2 009 534 Total $50,368,695 $7,333,814 Source: Genres Homes. Centex Homes expects to finance the development of the Tesoro-Encanto Area, including all Improvements in the Tesoro-Encanto Area not financed with proceeds from the sale of the Bonds, with a combination of homes sales revenue and available cash, including funds provided by its pazent company, Centex Corporation. Centex Homes does not expect to request or obtain any tlilrd party loans or other external credit arrangements to provide such financing. Centex Homes has represented that the funding sources described above will be sufficient to complete the development of the Tesom-Encanto Area as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available firm Centex Homes, Centex Corporation, or any other source when needed. None of Centex Homes, Centex Corporation, or any other affiliated entity is under any legal obligafion of any kind to expend funds for the development of the Tesoro-Encanto Area. Any contribufions by Centex Homes or Centex Corporation to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, none of Centex Homes, Centex Corporation, or any other affiliates is under any obligation to apply such souroes to the completion of development within the Tesom-Encanto Area. 32 i _~ Lennar Hermes Deue%pment Plan Lennaz Homes is the developer of the Lin Area and Rider Area. Lennaz Homes plans to develop such Community Areas as follows: Lin Area. The Lin Area encompasses approximately 62.90 Boss acres, comprising Tract No. 6289, and is planned for subdivision into 252 R-1 lots, one storm drain sump lot, two water well lots, and several public landscape lots. Lennar Homes plans to construct 252 single-family homes on the Lin Area progeny in three phases, which entire project is called "Ashton Falls," for sale to third party buyers. Lennaz Homes intends to subdivide the Lin Amer into three phases, and has recorded all three subdivision maps with the County Recorder as follows: (i) Trnct No. 6289 Unit One, comprising 112 R-1 lots, one storm drain sump lot, two water well lots, and four public landscape lots, (ii) Tmct No. 6289 Unit Two, comprising 58 R-1 lots and two public landscape lots, and {iii) Tract No. 6289 Unit Three, comprising 82 R-1 lots and one public landscape lot, Lennaz Homes plans to constmet 252 single-family homes of one product type in the Lin Area, ranging in size from 1,647 to 1,856 squaze feet and ranging in price from $290,990 to $375,000. Grading in the Lin Area has been completed, and home construction commenced in September 2005. Lennaz Homes expects that all infrastructure improvements, including the applicable Improvements, will be completed by April 2006. The £ust home sale is expected to close April 2006, and Lennaz Homes expects to sell approximately 240 homes in the fast yeaz of sales and the remaining homes by Mazch 2007. Lennaz Homes has commenced construction of nine model homes far the Lin Area, which aze expected to be open to the public in March 2006. Rider Area The Rider Area encompasses approximately 113.60 Boss acres, comprising Tract No. 6290, and is planned for subdivision into 394 R-1 lots, one storm drain sump lot, one water well lot, iwo pazk lots, one canal lot, and severnl public landscape lots. Lennaz Homes plans to construct 394 single-family homes on the Rider Area property in four phases, which development phases are called "Weston Springs," "Weston Creck," and "Weston Falls," for sale to third party buyers. Lennaz Homes intends to subdivide the Rider Area into four phases. Lennaz Homes has recorded the following subdivision mag with the County Recorder: Tract No. 6290 Unit One, comprising 217 R-1 lots, one storm drain sump lot, one water well lot, two park lots, one canal lot, five public landscape lots, and two "super" lots planned for future subdivision as Units Two and Three. Tract 6290 Unit Four is a remainder parcel. Lennaz Homes plans to record a subdivision map for Tract No. 6290 Unit Two, which will comprise 36 R-1 lots, by May 2006, for Tract No. 6290 Unit Three, which will comprise 104 R-1 tots, by May 2006, and for Tract No. 6290 Unit Four, which will camgrise 37 R-1 lots, by September 2006. Lennar Homes exgects to receive final map approval for the remaining three phases of the Rider Area development by December 2006. Lennar Homes plans to constmct 394 single-family homes of one product type in the Rider Area, ranging in size from 1,647 to 2,987 squaze feet and ranging in price from $249,000 to $375,000. Grading in the Rider Area has been completed, and home construction has commenced. Lennaz Homes expects that all infrastructure improvements in the Rider Area, including the applicable Improvements, will be completed in December 2006. The first home sale is expected to close in April 2006 in the Weston Springs neighborhood, and Lennaz Homes expects to sell approximately 240 homes in the first yeaz of sales and the remaining homes by September 2007. Lennaz Homes has commenced construction of nine model homes for the Rider Area, most of which aze expected to be open to the public in Apri12006. Lennar Homes Financing Plan Lennar Homes expects the cost of the development for the Lin Area and Rider Area to total approximately $104,191,736, including the costs for all on-site and off-site improvements and all home construction. The following tables detail the constmction budgets for the development of the Lin Area and Rider Area. Such budgets have been prepared based upon assumptions of future sales revenues, development costs, operating costs, properly taxes, and other matters. There can be no assurance that the actual development costs for the Lin Area and the Rider Area will not be Beater than projected or occur sooner than projected. 33 TABLE 9 LIN AREA ESTIMATED CONSTRUCTION BUDGET Description of Cost I[em Estimated Cost Land Acquisition $ 4,453,326 Offsite Improvements (net of Bond-financed Improvements) 2,300,000 Onsite Improvements 6,616,031 Home Construction (including fees} 27.601.301 Total $40,976,658 Source: I.ennar Homes. TABLE 10 RIDER AREA ESTIMATED CONSTRUCTION BUDGET Description of Cost Item Estimated Cost Land acquisition $ 9,650,000 Offsite Improvements {net of Fond-financed Improvements) 4,000,326 Onsite Improvements 7,514,748 Home Constmction (including fees} 42.049.954 Total $63,215,078 Source: Lemuu Homes. Expenditures as of January 1.2006 $ 4,453,326 383,150 5,979,686 2:'194.572 $13,010,734 Expenditures as of Jannarv 1.2006 $ 9,650,000 113,558 z,uz,7s1 0 $11,876,309 Lennaz Homes expects to Seance the development of the Lin Area and the Rider Area, including all applicable Improvements not financed with proceeds from the sale of the Bonds, with available cash. Lennar Homes does not expect to request of obtain any third party loans or other external credit arrangements to provide such financing. Lennaz Homes has represented that the funding sources described above will be sufficient to complete the development of the Lin Area and the Rider Area as described herein. There is no assistance, however, that amounts necessary to finance any outstanding development costs will be available from Lennaz Homes, m any other source when needed. Neither Lennaz Homes nor any of its affiliated entities is under any legal obligation of any kind to expend funds for the development of the Lin Area and Rider Area. Any contributions by Lennaz Homes to food the costs of such development aze entirely voluntary. Notwithstanding available sources of financing, neither Lennaz Homes nor any of its affiliates is under any obligation to apply such sources to-the completion of development within the Lin Area and Rider Area. Dunmore Development Ptan follows: Dunmore is the developer of the Diamond Ridge Area. Dunmore plans to develop this Community Area as The Diamond Ridge Area encompasses approximately 76.80 gross acres, comprising Tmct No. 6332, and is planned for subdivision into 318 R-I lots, one storm draut sump lot, and several public landscape lots. Dunmore plans to construct 318 single-family homes on the Diamond Ridge Area property for sale to third party buyers. Dunmore intends to subdivide the Diamond Ridge Area into three ghases. Dunmore has not recorded any subdivision maps for Tract No. 6332 with the County Recorder as of the date of this Official Statement and does not expect to record any such subdivision maps prior to issuance of the Bonds. Dunmore plans to construct 318 single-family homes in two product types in the Diamond Ridge Area: 159 of the entry level product type {"Diamond Ridge Entry Level Product"} and 159 of fire move-up product type ("Diamond Ridge Move-Up Product"). The Diamond Ridge Entry Level Product homes are expected to range in 34 size from approximately 1,457 to approximately 2,100 squaze feet and to range in price from approximately $257,000 to approximately $31Q,000. The Diamond Ridge Mave-Up Product homes are expected to range in size from approximately 1,862 to approximately 2,847 squaze feet and to range in price from approximately $315,000 to approximately $405,000.. Dunmore plans to commence grading in the Diamond Ridge Area in March 2006, and plans to commence home constmction in July 2006. Dunmore expects that all infrastructure improvements in the Diamond Ridge Area, including the applicable Improvements, will be completed in August 2001. The fast home sale is expected to close in November 2006, and Dunmore expects to sell homes at an annual rate of approximately 96 units, with the final home sale occurring in 2009. Dunmore plans to commence constmc6on on six model homes for the Diamond Ridge Area in May 2006, and expects such model homes to be open to the public in September 2006. Dunmore Pfsanczrtg Plan Dnnmore expects the cost of the development for the Diamond Ridge Area to total approximately $69,822,210, including the costs for all on-site and off-site improvements and all home construction. The following table details the construction budget for the development of the Diamond Ridge Area Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating casts, property taxes, and other matters. There can be no assurance that the actual development costs will not be greater than projected or occur sooner than pmjected. TABLE 11 DIAMOND RIDGE AREA ESTIMATED CONSTRUCTION BUDGET Description of Cost Item Estimated Cost Land acquisition $13,040,000 Ofl'site Improvements (net ofBond-financed Improvements) 0 Onsite Improvements 6,782,210 Home Constmetion (including fees) 50.000.000 Total $69,822,210 Source: Dnnmore. Expenditures as of January1,2006 $13,040,000 0 0 0 $13,040,000 Dunmore Homes utilizes five main bank lines to finance all projects for itself and its affiliates. The development of the Diamond Ridge Area by Dunmore will be 5nanced using a credit line provided by RBC Builder Finance ("RBC"j in the amount of $75 million (the "RBC Credit Line"). The RBC Credit Line will provide acquisition, development, and home construction financing for the Diamond Ridge Area. In exchange for extending the RBC Credit Line, RBC holds a fast deed of trust on the property within the Diamond Ridge Area. As each home closes escrow, RBC's lien is removed with respect to the applicable lot, and the buyer takes title to the home and lot free of such encumbrance. The credit ageement between RBC and Dunmore Homes contains no restrictions on the financing of development within the Diamond Ridge Area by Duumore. All of the applicable Improvements in the Diamond Ridge Area not fmanced with proceeds from the sale of the Bonds will be financed with moneys derived from the RBC Credit Line. Dunmore has represented that the funding sources described above will be sufficient to complete the development of the Diamond Ridge Area as described herein. There is no assurance, however, that amounts necessary to fmance any outstanding development costs will be available from Dunmore, Dunmore Homes, the RBC Credit Line, or any other source when needed. Neither Dunmore nor any of its affiliated enfities is under any legal obligation of any kind to expend funds for the development of the Diamond Ridge Area. Any contributions by Dunmore or any of its affiliates to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, neither Dunmore nor any of its affiliates is under any obligation to apply such sources to the completion of development within the Diamond Ridge Area. 35 Assessment Roll Set forth in APPENDIX E is the assessment roll, including Bulk Value to assessment lien ratio infotmafion, for the pazcels of property within the Assessment District that aze subject to the lien of the assessments. The assessment roll shows the amount of the total estimated cost of the proposed Improvement acquisition, constmction and incidental cost that is assessed upon each of the lots and pazcels within the Assessment District based upon the alternate medrod and rate of assessment permitted under Section 13.08.074 of the Municipal Code of the City. See "'1'I-IE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Method of Assessment Spread" above. The assessment numbers that appeaz on the assessment roll correspond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D. Utilities For each Community 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 and electricity services are provided by Pacific Gas & Electric for all Community Areas; water service is provided by the City for the Liberty II Area, the Village Green Area, the Lin Area, the Rider Area, and the Diamond Ridge Area, and by California Water Service for the Tesoro-Encanto Area; sewer service is provided by the City for all Community Areas; telephone service is provided by SBC for all Community Areas; and cable television is provided by Bright House Networks for the Liberty II Area, the Village Green Area, the Lin Area, the Rider Area, and rite Diamond Ridge Area, and by SBC far the Tesoro-Encanto Area. Flood and Earthquake Zones Pursuant to the Appraisal, according to the maps prepazed by the Federal Emergency Management Agency, the Community Areas are situated in a Zone C flood azea. "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 gmperty within the Assessment District. Pursuant to the Appraisal, the Assessment District is not located within any Special Studies Zone, as defined in the Alquist-Priolo Special Studies Zone Act. Southern Calfona is a seismically active area. A major seismic event proximate to the Assessment District could result in substantial damage to properties in the Assessment District, which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their assessments. Zoning According to the Planning Department of the City, all of the pazcels in the Assessment District, other than the commercial parcel in the Liberty II Area, aze zoned R-1 for residental uses. An R-1 zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 squaze feet for each dwelling unit. The property in the Liberty II Area has an R-2 zoning designation, which allows for a higher density than the R-1 zoning. An R-2 zoning designation allows single-family residential land uses, with a minimum lot size of 2,500 squaze feet for each dwelling unit. For purposes of this Official Statement, the term "R-1 lots" refers to tots bearing either the R-1 or R-2 zoning designation. Tax Delinquencies The City has represented that, based upon the records of the office of the County Tax Collector, there aze no delinquent taxes or penalties owed against the pazcels in the Assessment District. Each of C&C California, Lennar Homes, and Dunmore has reported that none of its property within the Assessment District or elsewhere is delinquent in the payment of any special taxes, assessments, or ad valorem property tax obligations, and that such entity has never defaulted on any such payments, or lost any property to foreclosure as a result of not paying special taxes, assessments, or ad valorem property tax obligafions. Centex Homes has represented that it has been late, from time to time, in making such payments for various timing and logistical reasons; however, Centex Homes has 36 ' represented that it has never defaulted on any such payments or lost any properly to foreclosure as a resuit of a failure to pay special taxes, assessments, or ad valorem properly taxes. Environmental Issues Affecting Assessment District Property ',. Pursuant m the Charter and Municipal Code of the City, the formation of an assessment district is exempt ', firm compliance with the California Environmental Quality Act ("CEQA'~. Accordingly, a Notice of Exemption from CEQA was filed by the City with the Kem County Clerk for the Assessment District proceedings on September 20, 2005. The City reports that sepazate environmental review proceedings will be conducted for the improvement projects proposed to be financed within the Assessment District as part of the CEQA compliance associated with the land use enfitlement and subdivision approval process within each Community Area. Each of the Landowners has reported drat, 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 ~ this Official Statement. Balk Value-to-Assessment Lien Rario An Appraisal of the property within each of the six Community Areas in the Assessment District that is subject to the lien of the assessments has been prepazed 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 Lots or Land" and defined herein as the "Bulk Value") of each pazcel of property within the Assessment District. The "Aggregate Finished Lot Value When Complete" is described in the Appraisal as the value of each pazcel assnming file completion of the Improvements and taking into account the value added by existing improvements, a recorded subdivision map, and the "Completion Costs," which aze defined therein as the costs associated with the developer-funded improvements necessary to develop such gamel as a finished lot available for improving with new housing units T71e Completion Costs were presumed by the Appraiser to include direct and indirect costs for each lot, taxes during constme6on, 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 B -Appraisal." For a discussion of liens encumbering the Assessment Dishict property other than the assessments, see "D]rect 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 properly to the aggregate assessment lien is 14.12:1. The following table sets forth the Bulk Value of the Assessment District property and the applicable Bulk Value-to-assessment lien ratios. TABLE 12 APPRAISED VALUES AND BULK VALUE-TO-ASSESSMENT LIEN RATIOS CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO.OS3 (LIBERTY IIlVII,LAGE GREENPI'ESORO-ENCANTO! LIN/RIDER/DIAMOND RIDGE) Sulk Yalue Total of Recorded Assessment Value-to-Lien Assessment No. Develo ment Area Descri tion Ne[Laod Area Lets or Land Lien Ratio LIBERTY II AREA 1-22 Tract No. 6475-Unit 1 esidenfial Lots 1-22 3.69 $1,122,0011 $122,504.50 9.16 25-52 Trac[No. 6475-Unit2 Residential Lots ]-28 4.99 1,428,000 155,414.83 9.16 56-75 Tract No. 6475-Unit3 esidential Lots i-20 ~ 3.22 1,02Q,OIXt 111367.73 9.16 Futme Tract No. 6475-Unit 4 sidentiat Lms 1-1 2.16 693,078 84,044.18 7.78 76 Future Tract No. 6475-Unit 5 sidential Lore 1-21 3.18 909,665 116,935.11 7.75 Forme Trnct No. 6475-Unit 5 Lot 22 (Coutmercial Parcel y 88 2,653,414 341,454.52 7.77 Subtotal Assessment 76 Traet No. 6475 Paiute Units 4 and 5 15.22 4 256157 547 484.81 7.77 TOTALStAVERAGES FOR LIBERTY IIAREA 27.12 $7,826,157 $937,27Y.87 8.35 (Table contissssed on next page.) 37 (fable continued Gom previous page.) Assessment No. Develo meat Area Deacrt Hon Net Lsnd Area Bulk Value ofRecorded Lois or Land Total Assessment Lien - Vaiue-to-Lien Ratio VII,LAGE GREEN AREA 77-86 Tract No. 6448-Unit 1 esidential Lots I-10 4.15 $ 536,150 $ 65,327.35 9.74 90.125 Tmct No. 6448-Unit2 sid®tial Lots l-36 8.22 2 90,140 235,178.48 9.74 130.153 Trnct No. 6448-Unit 3 sidential Lots 1-24 5.84 1,526,760 156,785.65 9.74 ]59-181 Tract No. 6448-Unit4 sidential Lots l-23 6.2t 1463145 150 32.91 9.74 184-220 Tract No. 6448-Uvt 5 sidemial Lots 1-37 8.31 2,353,755 241,71-k19 9.74 Future Tract No. 6448-Unit6 esidentisl Lots l-39 9.27 1,767,158 254,776.67 6.94 Futme Tract No. 6448-Unit 7 esidential Lots 1-45 8.32 2 039 029 293 973.08 b.94 Future pact No.6448-Unit S sidential Lots 1-31 5.63 1,404,664 202 514.79 6.94 225 Fuhue Tract No.6448-Unit 9 esideatial Lots 1-21 4.87 951,547' 137187.44 6.94 Future Tract No. 6448-Unit 10 sideatial Lots 1-36 6.87 1,631,223 235 178.48 6.94 Fuhue Tract No. 6448-Unit 11 esideadal Lots 1-23 4.50 1042 170 150 252.91 6.94 Future Tract No. 6448-Unit 12 sidential Lots 1-29 5.17 1,314,041 189,449.31 b.94 Subtotal Assessment 225 Tract No. 6448 Fumre Units 6-12 44.63 10149 831 1463 32.68 6.94 TOTALStAVERAGESFQR VII.LAGE GREEN AREA 7736 518,419,782 $2,312,588.26 797 TESORO-ENCANTO AREA Encanlo 226 Future Tract No. 6349-Phase 1 esiden6al Lots ljt 1 ].79 $ 2 131 655 $ 309 501.77 6.89 Fufiux Tract No. 6349-Phase 2 esidenfial Lots 1-5 11.80 2,534,844 3b8,768.07 6.R9 Subtotal Encaoto 23.59 4 671499 S 5 2b9.84 6.89 Tesoro 227 Fuiure Tract No. 6344-Phase 3 sidendal Lots 1-48 13.84 2 45 424 $ 400 3.82 5.61 228-264 Tract No. 6349-Phase4 esidendal Lots 1-42 12.45 2,563,596 350 04.b0 7.32 271-334 Tract No. 6344-Phase 5 esidential Lots I-64 18.37 4,936,896 533,645.12 9.25 Subtotal Tesoro 44.66 9 745 1 184 08354 7.59 TOTALSiAVERAGES FOR TESORO-ENCANTO AREA 68.25 $14,417,420 $1,9b2,35338 735 LIN AREA 338-447, 451-452 Tract No. 6289 Unit One (Residential Lots 1-110 and 114115 28 52 $ 6,893,376 $ 448,643.65 15.36 457-S1d Tract No. 6289 Unit Two idealist Lots l-58 13.23 3,569,784 232,333.32 15.36 517-598 Tract No. 6289 Unit Three esidential Lots l-82 1955 5,046,936 328,471.25 15.36 TOTALSlAVERAGESFOR LIN AREA 6130 515,530,096 $1,009,448.22 15.36 RIDER AREA 6110.684, 687-754' 757-820 Tract No. 6240 Unit One (Residental Lots 1-85, 88- 155, and 158-221) 53.26 $13,960,044 $ 802,587.1? 17.39 827 Tract No. 6290 Unit One, "Super" Lot 222 (Forme Tract No. 6290 Unit Two, 36 Residential Lots 12.85 1,548,262 133,148.11 11.63 828 Tract No. 6290 Unit One, "$uper" Lot 223 (Future Tract No. 6290 Unit Three, 104 Residential Lots 27 75 4,472,758 384,650.07 11.63 829 Remainder Parcel per Tract No. 6290 Unit One (Future Tract No. 6290 Unit Four, 37 Residental Lots 9.07 1,591,270 136,846.67 11.63 TOTALS/AVERAGES FOR RIDER AREA 10294 $21,572,334 $1,457,232.02 14.80 DIAMOND RIDGE AREA 830 F T 33.64 $ 6,306 486 $ 622,9t0.09 10.12 831 uture ract No. 6332 (318 Residential Lots) 36.64 7 524,291 743 196.16 10.12 TOTALSIAVERAGES FOR DIAMOND RIDGE AREA 70.28 13,830,777 $1,3b6,106.25 10.12 ASSESSMENT DISTRICT TOTALS 407.25 $9Y,576,566 $9,045,000.00 10.12 Source: Appraisal. 38 ', The assumptions and limitations regazding the appraised valuations aze set forth in the Appraisal, a copy_ of which is attached hereto as APPENDIX B. See APPENDIX E for additional information regazding the appraised ', value of each assessed parcel and the ratio of such value to the amount of the assessment lien against such pazcel. 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 FACTORS: ' NO REPRESENTATIONS ARE MADE REGARDING THE APPRAISED VALUATIONS QUOTED IN APPENDIX B OR E, AND PROSPECTIVE PURCHASERS ARE CAUTIONED NOT TO RELY ON TFIE VALUATIONS IN DETERMINING WHETHER OR NOT TIIE BONDS DESCRIBED H);REIN ARE A ', SUITABLE IIVVESTMENT. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD NOT ASSUME THAT THE PROPERTY WiTIIIN 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 "Duect and Overlapping Debt Table"} details the duect and overlapping debt currently encumbering property within the Assessment District. The Duect and Overlapping Debt Table has been derived from data assembled and reported to the City by California Municipal Statistics, Inc., as of December 1, 2065. 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 Diect and Overlapping Debt Table does not include the special tax liens described under the heading "TTIE BONDS -Priority of Lien" herein. [Remainder of Page Intentionally LeR Blank. 39 TABLE 13 DIItECT AND OVERLAPPING DEBT CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO.05-3 (LIBERTY II(VILLAGE GREEN/TESORO-ENCANTOi LIN/RIDER/DIAMOND RIDGE) 2005-06 Local Secured Assessed Valuation: $22,898,091 DIl2ECT AND OVERLAPPING TAX AND ASSESSMENT DENT: Kem Community College District School Facilities Improvement District No. 1 Kem High School District Panama Union School District Rosedale Union School District City of Bakersfield Kem Delta water District Kem Community College District Assessment District City of Bakersfield Assessment District No. 05-3 TOTAL GROSS DB2ECT AND OVERLAPPING TAX AND ASSESSMENT DEHT Less: City of Haketsfieldwaterbonds TOTAL NET DHLECT AND OVERLAPPING TAX AND ASSESSMENT DEBT OVERLAPPING GENERAL FUND DEBT: Kem County General Fund Obligations Kem County Pension Obligafions Kem County Board of Education Certificates of Participation Kem Community College District Certificates of Patcipation Kem High School District General Fund Obligations City of Bakersfield Certificates of Participation TOTAL OVERLAPPING GENERAL FUND DEBT GROSS COMBINED TOTAL DEBT NET COMBIIdED TOTAL DEBT %A hpn cable Debt 12/1/05 0.046% $ 32,769 0.067 ~ 89,452 0.043 3,197 0.052 1,583 D.133 2,753 2.604 56,116 0.047 3,104 IOO.D00 - (1} $188,974 2 753 $186,221 0.043°f° $ 32,197 0.043 210,660 0.043 41,383 0.041 35,258 0.068 64,804 0.136 45.512 $429,814 $618,788 (2) $616,035 (1) Excludes 1915 Act bonds m be sold. (2)Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2005-06 Assessed Valuation Direct Debt ...........................».»......»....................................................... ............. - Total Gross Direct and Overlapping Tax and Assessment Debt ................ .............. 0.83°l0 Total Net Direct and Overlapping Tax and Assessment Debt ................... .............. 0.83% Gross Combined Total Debt ...................................................................... .............. 2.70°l° Net Combined Total Debt ......................................................................... ..............2.69% STATE SCHOOL HUII,DING AID REPAYABLE AS OF 6/30/05: $0 Somce: California Mrmicipal Starisdcs, lnc. 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 aze unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment installments are due and payable, and beaz the same penalties and interest for non-payment, as do regulaz property tax installments. Therefore, the unwillingness or inability of a property owner to pay regulaz property tax bills as evidenced by property tax delinquencies will likely indicate an unwillingness or inability to make regulaz 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 ]and within the Assessment District aze paid in a timely manner. Should the installments not be paid on time, the Ciiy has established a Special Reserve Fund in Ute initial amount of $699,771.26, which will thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of gazcels with assessment delinquencies, in the amount of the Reserve Requirement, to cover delinquencies in the gayment of assessments. a0 The assessments aze secured by a lien an the pazcels 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 pazcels to pay installments of assessments when due, depletion of the Special Reserve Fund, or the inability of the City to sell pazcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of assessments levied against such pazcels 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, nar the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment thereof. Unpaid assessments do not constitute a personal indebtedness of Ute 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 mazket conditions, such as changes in the mazket value of real property in and in the vicinity of the Assessment District, the supply of or demand for competitive properties in such azea, and the market value of residential property or buildings or sites in the event of sale or foreclosure; (H) changes in real estate tax rate and other operating expenses, governmental rules (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. Concentration ofthvnership As of the date of this Official Statement, C&C California owns approximately 117.50 gross acres, which property will beaz approximately 35.93% of the total assessment lien, Centex Homes owns approximately 79.80 gross acres, which property will bear approximately 21.70% of the total assessment lien, Lennaz Homes owns approximately 176.50 gross acres, which property will beaz approximately 27.27% of the total assessment lien, and Dunmore owns approximately 76.80 gross acres, which property will beaz approximately 15.10% of the total assessment lien. 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 any of the Landowners to 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 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 ffie 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 $, 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 "OWNERSHff AND PLt1NNED 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 six 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 a1 liens on such property that secure the Bonds. See also APPENDIX E for a listing of the ratio of the appraised value of each assessed pazcel to the amount of the assessment lien against such pazcel. 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 pazcel 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 the Landowners), 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 Agpraiser 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 Apgraiser not the City can give any assurance that any pazcel 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 Speciai Reserve Fund out of Bond proceeds in the amount of $699,771.26, 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 `S'HE 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 continuing 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 chazges aze a common claim against the value of an assessed pazcel, 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 hazazdous substances. In general, the owners and operators of pazcels 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, Compensafion, and Liability Act of 1484, sometimes referred to as "CERCLA" or the "Superfimd Act," is the most well-known and widely applicable of these laws, but California laws with regazd to hazazdous substances aze also stringent and similaz. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substances condition of a gmperty whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any pazcel within the Assessment District be affected by a hazardous substance, would be to reduce the mazketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may azise 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 fmancial and legal abifity of a property owner to develop the affected pazcel or other pazcels, 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 pazcels by reason of the possible liability of the owner (or operator) for the remedy of a hazazdous substance condition of the parcel. Each of the Landowners has represented to the City that it is not aware of any cuaent liability for hazardous substances with respect to any of its pazcels within the Assessment Disirict. 42 Further, it is possible that liabilities may arise in the future with respect to any of the pazcels within the Assessment District resulting from the existence, currently, on the pazcel of a substance presently classified as hazazdous but that has not been released or the release of which is not presently threatened, or may azise in the future resulting firm the existence, currently, on the pazcel of a substance not presently classified as hazazdous but that 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 gossibilities could significantly affect the value of an assessed pazcel that is realizable upon a delinquency of an unpaid assessment. See "OWNERSHIP AND PLt1NNSD FINANCING AND DEVELOPMENT OF 'I"IIE ASSESSMENT DISTRICT -Environmental Issues Affecting Assessment District Property." Endangered and Threatened Species No threatened or 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 pazcel 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 City 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 compensate for the effects of urban development on endangered species habitat. The lands acquired for the MBHCP program aze generally located outside the metropolitan Bakersfield azea. 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 That 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. The Landowners will each be obligated to pay alt of its costs in excess of the amount financed by the assessments. See "THE ASSESSMINT DISTRICT tIND T'I1E IMPROVEMENTS - Description of the Community Areas and the Improvements." Future development in the Assessment District may be affected by changes in the general economic condifions, fluctuations in the real estate mazket, and other factors. In addition, development may be subject to future federal, state, and local regulations. Approval may be required firm 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 aze anticipated, failure to meet any such future regulations or obtain any such approvals in a timely manner could delay or adversely affect any proposed development in the Assessment District. The development of property within the Assessment District could be adversely affected if ]awsuits or other ac&ons 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 groperty secured financing, will increase the gublic 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 FACTORS -Priority of Lien." 43 In addition to the assessments being levied to Seance the construction and acquisition of the Improvements, the City intends to include as a part of such levy an annual assessment upon each parcel of land in the Assessment District to cover all administative 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 Each of Centex Homes, and Lennar Homes has reported that none of its property within the Assessment District cnrrently serves as security for aoy of its obligations to third party lenders. C&C California has reported that its property within the Assessment District currently serves as security for certain of its obligations to third party lenders. Dunmore has reported that its property within the Assessment District currently serves as security for certain of its obligations to third party lenders. See "OWNERSHIl' AND PLANNED FINANCING AND DEVELOPMENT OF 1TIE ASSESSMENT DISTRICT -Development and Financing Plans: ' All or portions of the Assessment District properly may in the future secure additional loans of the owners thereof. Any such loans aze 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 Drug Enforcement Agency, the Internal Revenue Service, or other similaz 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, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"}. The 1491 Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject m state and local real property taxes only if those taxes aze 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 properly 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 groperly 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 pemrit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement is uncleaz as to whether the FDIC considers assessments such as those levied by the City to be "real property taxes" that 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 unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the gropery, nor will it recognize the validity of any lien m the extent it purports to secure the payment of any such amounts. The City is unable m 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 pazcel at a foreclosure sale. Owners of the Bonds should assume that the City will be unable to foreclose on any pazcel 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 January 1, 2006, the FDIC does not presently own any property within the Assessment District. The City expresses no view concerning the Itkelihood that the risks described above will materialize while the Bonds aze outstanding. a4 Tax Delinquencies ~. Assessment installnents, from which funds necessary for the payment of annual installments of principal of and interest on the Bonds aze to be derived, will be billed to each property against which there is an unpaid ' assessment on the regulaz property tax bills sent to the owner of such property. Such installments aze due and payable, and bear the same penalties and interest for non-payment, as do regulaz property tax installments. Under certain circumstances, assessment installment payments on pazcels of property in the County can be made separately firm regular property tax payments for such parcels. 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 regulaz property tax bills, as evidenced by property tax delinquencies, will likely indicate an unwillingness or inability to make regutaz property tax payments and assessment installment payments in the future. A Failure of property owners to pay installments of assessments when due could resultin 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 Kem County Tax Collector, none of the pazcels in 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 has a duty only to transfer into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund and to undertake, under certain circumstances, judicial foreclosure proceedings to recover such delinquencies. See `"1'IIE 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 aze insufficient funds in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. If there are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City is not obligated to transfer into the applicable Redempflon Fund the amount of such delinquency out of any other available moneys of the City. THE CITY'S LEGAL RESPONSIBILITIES V/ITH RESPECT TO SUCH DELINQUENT INSTALLMENTS ARE LIIvii1'ED 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 TTffi PERIOD OF DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAII,ABLE FROM THE SPECIAL RESERVE FUND UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. IN ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT TT WII,L NOT ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND. 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 enttled "SPECIAL RISK FACTORS -Covenant to Commence Superior Court Foreclosure," may be limited by banlauptcy, 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 delive~,y of the Bonds will be qualified, as to the enforceability of the various legal instruments, by reference to battkntptcy, insolvency, reorganization, arrangement, moratorium, and other similaz laws affecting the rights of credimrs generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in dte State. On July 30, 1492, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankntptcy case entitled In re Glaspdy Marine Industries. In that case, the court held that ad valorem property taxes as i ~~, levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for banlatrptcy 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 bankmrptcy petition as "administrative expenses" of the ', banlarrptcy 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 mling, as administrative expenses, post-petition taxes would Lave to be paid, assuming that the debtor has sufficient assets to do so. In certain cin;nmstances, 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 subject to current ad valorem taxes. Glaspiy is controlling precedent on bankmptcy 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 1 preceding the fiscal year for which the taxes aze levied. Therefore, under GJasply, a banlaaptcy petition filing would prevent the lien for general ad valorem property taxes levied in subsequent fiscal years from attaching so long as the property was a part of the estate in ban}mtptcy. Under current law, dre lien of an assessment, unlike dre lien for general 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 Kern County on December 16, 2005. Therefore, before applying Gtasply 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 the assessments as against property owners within the Assessment District who file for bankmptcy, 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)(IB), which added a new excepflon to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankmptcy petition. Pursuant to this new provision of law, in the event of a bankmptcy 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 bankuptcy estate. Bond owners should be awaze 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 deterniine that the assessments should be treated like ad valorem taxes for this purpose. Whether or not baukmptcy proceedings were to cause the assessment liens to become extinguished, bankmrptcy of a groperty owner in all likelihood would result in a delay in prosecuting superior court foreclosure 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 drat delinquent assessment installments might not be paid in full. Economic, Political, Social, and Environmental Conditions Prospective investors aze 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 environmental conditions on a local, state, federal, or international level may adversely affect investment risk generally. Such changes may also adversely affect the value of property within the Assessment District or the willingness or ability of the owners of land within dre Assessment District to pay their assessments. Such conditional changes may include (but aze not limited to) fluctuations in business production, consumer prices, or fmancial mazkets, unemployment rotes, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rote, political conflict, acts of war or terrorism, environmental damage, and natural disasters. Articles J~IIQA and XIILB of the California Constitution ' On June 6, 197$, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative} that added Article RIBA to the California Constitution. The effect of ArticleXIIIA is to limit ad valorem taxes on real property. On November 7, 1478, California voters approved Proposition 8, which made certain clarifications to Article XIIIA. 4d Article ItIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1 of "full cash value" as determined by the county assessor. Article RIIIA defines "full cash value" to mean "the county assessor's valuation of real property as shown on the 1975-76 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 compazable local data, m to reflect reductions in property value caused by damage, destruction or other factors. Article 7dIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 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 acquisifion 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-thirds of fire qualified electorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem, sales or transaction lax 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 to make any payments or to cure any deficiency in the Redemption Flmd, should the City, in the exercise of its discretion, choose to do so. If there aze 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, 1974, the Fifth District Court of Appeal rendered a 3-0 decision in the case of County of Fresno v. Malmstrom {44 Cal. Agp. 3d 1974) that determined that special assessments are not subject to the limitations of Article 7GIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XI[iA 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 aze 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 defmi6on of "special taxes" in Article JGIIA, 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 heaz an appeal of the lower court's decision. At the November 6, 1974, general election, Propositon 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution. Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other polirical subdivision of the State to the level of appropriations of the particulaz governmental entity for the prior fiscal yeaz, as adjusted for changes in the cost of living, populaton and services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the fiscal yeaz 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIlB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subvenflons, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insumnce funds. "Proceeds of taxes" include, but aze 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 yeaz exceed the amounts permitted 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 {113 Cal. App. 3d 443) that deternined that special assessments aze not subject to the limitation of a7 ', Article 1'II18 (Proposition 4). The Court held that the definition of `proceeds of taxes" imposed by California Constitution Article TIIIB does not apply to special assessments and improvement bonds issued pursuant to-the ', 1915 Act and the 1913 Act. The decision of the Court was not appealed. The enactment of Article JOIIA of the California Constitufion (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect 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 yeaz) if other funds aze not available to cover delinquencies. In eazly 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similaz properties. Since Article XIIIA provides that property may only be reassessed up to 2%, per year, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners of compambie groperty in a community. The Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article JJtIIIIA. Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article 7OIIA. 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 7OIIA'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 heaz the appeal in the challenge relating to commercial property, but the plaintiff subsequently decided to drop the case. On June 18, 1992, in the case ofNordlinger v. Lynch (112 U.S. 232, 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 tax assessment will have on the City's revenues or on the State's financial obligations to local governments. Articles XIQC and XI® of the California Constitution Proposition 218, a state ballot initiative lmown as the "Right to Vote on Taxes Act," was approved by California voters on November 5, 1996. Proposition 218 added Articles XIBC and ~ to the State Constitutlon, and, with the exception of certain provisions, Articles J~IIC and ~ became effective on November 6, 1996. Article ~, entitled "Assessment and Property Related Fee Reform," contains several new provisions making it generally mare difficult for local agencies to levy and maintain "assessments" for municipal services and programs. Article J~ requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the 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 confomuty with the provisions of Section 4 of Article }~. "Assessment" is defined to mean any levy of chazge upon real property for a special benefit conferred upon the real property. Article J'lIID additionally provides that in levying "assessments" a local government must sepazate the "general benefits" from the "special benefits" conferred on a parcel and may not impose on any parcel an assessment that exceeds the "reasonable cost of the proportional special benefit conferred on that parcel:' Article ~ID 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 XII)D 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 limited in matters of reducing or repealing any ... assessment" as 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 nat defined in Article XIIIC and it is not cleaz whether the definiflon of that term in Article J~ (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 County Auditor to post installments oa account of the unpaid assessments to the County property tax roll each yeaz while any of the Bonds are outstanding in aggregate amounts equal to the principal of and interest on the Sonds coming due in the succeeding calendaz 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 the unpaid assessments that aze pledged as security for payment of the Bonds or to otherwise interfere with dte mandatory, statutory duty of the City and the County Auditor with respect to the unpaid assessments that aze 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 determination. Future Initiatives Articles XIIIA., XIIIB, XIIIC, and XIIID of the Constitution were each adopted as measures that qualified for the ballot pursuant to California'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 Superiar 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 ben of assessment. In such an action, the real property subject to the unpaid assessment maybe 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 not paid when due, the City will, no later than October 1 in any year, file an action in the Superior Court of Kem County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessmem delinquencies for the preceding fiscal yeaz exceeds 5% of the assessment installments posted to the tax roll for that fiscal yeaz and (ri) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures aze 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 posstble that na bid for the purchase of the applicable property would be received at the foreclosure sale. Prior to July I, 1983, the right of redemption from foreclosure sales was limuted 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 maybe commenced by the delinquent groperty owner within ninety (90) days after 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 Price" 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 19]5 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: 49 (A) Sale at the lesser Minimum Price or without a Minimum Priee will not result in an ultimate loss to the owners of the Sonds. (B) Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to such petition by the City and the sale will not result in an ultimate loss to the 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 following apply: (1) By reason of determiuation pursuant to the 1915 Act, the City is not obligated to advance funds to cure a deficiency (the City made such a determination not to be obligated with respect to the Bonds). (2) 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. (4) The City has reasonably determined 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 that will, to the maximum extent feasible, minimize the ultimate toss 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 permit participation by the Bond owners in its consideration of the petition as necessary to its deterarinations. hnplementafion of the above-described Minimum Price provision by the court upon forecloswe could result in nonpayment of amounts due to Bond owners who aze not in agreement with the 75°fo of such Bond owners required to approve the sale at less than the Minimum Price. Reference should be made to the 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, 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 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 pwsuant to the Mello-Roos Act, whenever created against the property. The property within the Libertty II Area is subject to an existing special assessment lien created by AD 94- 3; however, such assessment will be paid in full upon the issuance of the Bonds from a portion of the proceeds thereof. Consequently, upon. the issuance of the Bonds, none of the property in the Assessment District will be subject to any special assessment lien created under the 1913 Act. The property within the Liberty II Area is subject to an existing special tax lien created by Lakeside CFI7 No. 96-1 pursuant to the Mello-Roos Act. The amount of Lakeside CFD No. 96-I Special Taxes, if any, to which property within Lakeside CFD No. 96-1 is subject varies based upon the zoning, the entitlements, and the type and level of development of such properly and on the date of issuance of the applicable building permits for such property. The property within the Village Green Area and the Lin Ama are subject to an existing special tax lien created by RNR CFD No. 92-1 pwsuant to the Mello-Roos Act. The amount of RNR CFD No. 92-I Special Taxes, so if any, to which property within RNR CFD No. 92-I is subject varies based upon the zoning, the entitlements, and the type and level of development of such property. See "TfIB BONDS -Priority of Lien." Refunding Bonds II Pursuant to the Refunding Act of 1954 for 1915 Improvement Act Bonds (Division 11.5 of the Califomia Streets and Highways Code), the City may issue refunding bonds for the gurpose of redeeming the Bonds. Afrer the ' making of certain required findings by the City Council, 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. See "THE BONDS -Refunding Bonds." Upon issuing reftmding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis that 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, or advance the maturity of the Bonds and pay the principal of and interest and redemption gremium 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 or in the future. There can be no assurance that there will ever be a secondary mazket for purchase or sale of the Bonds, and from tune to time there may be no market for them, depending upon prevailing mazket conditions and the financial condition ormazket position of fines that may comprise the secondary market. Loss of Tan 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 to the Paying Agent, the City, or the owners of the Bonds upon any nonpayment of assessment installments are in many respects dependent upon judicial actions, which aze often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title ] 1 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 instruments by limitations imposed by bankruptcy, reorganization, insolvency, or other similaz 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 of California. NO LITIGATION No litigation is pending concerning the validity of the Bonds of the Bond Resolution, and an opinion of the City Attorney to that effect will be furnished to the purchaser at the time of the original delivery of the Bonds. The City is not awaze 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 aze a number of lawsuits and claims pending against the City. 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. s~ CERTAIN INFORMATION CONCERNING THE CITY Certain general infomration concerning the City is included in APPENDIX A hereto. THE GENERAL FUND OF THE CTI'Y IS NOT LLABLE 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 Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and wort 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 fedeml individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted cuaent earnings in calculating federal corpomte alternative minhnum 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 fedeml income tax purposes of interest on obligations such as the Bonds. The City has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal Boss income. Failure to comply with those covenants may result in interest on the Bonds being included in fedeml gross income, possibly from the date of issuance of the Bonds. The opinion of Band Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to detemrine (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 status of the interest on the Bonds. Certain requirements and procedures wntained or referred to in the Bond Resolution, the tax certificate to be executed by the City at closing, and other relevant dwuments may be changed and certain actions (including, without limitation, defeasance of the Bonds} may be takes or omitted under the circumstances and subject to the terms and conditions set forth in such documwts. 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, Herrington & Sutcliffe LLP. However, without limiting the generality of the foregoing, the City has wvenanted in the Bond Resolution that, prior to malting any change to of taking or omitting to take any action with respect to any of the agreements, requirements, or procedures contained or referred to in the Bond Resolution, the tax certificate, or other relevant dowments pertaining to the Bonds, the City will do either of the following. {i} obtain a subsequent opinion of Orrick, Herrington & Sutcliffe LLP that such change, action, or omission will not adversely affect the exclusion from Boss income for federal income tax purposes of interest an the Bonds; or (ii) obtain an opinion of alternative nationally recognised 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 inwme tax purposes and is exempt from California personal income taxes, the ownership or disposition of, or the accrual or rewipt of interest on, the Bonds may otherwise affect a Bondholder's federal tax Lability. The nature and extent of these other tax consequences will depend upon the parkiwlaz tax status of the Bondholder or the Bondholder's other items of income or deduction. Bond Couosel expresses no opinion regazding any such other tax consequences. APPROVAL OF LEGALITY The validity of the Bonds and certain other legal matters aze subjwt to the approviug opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of bond counsel opinion is contained in APPENDDt C hereto and is printed on the Bonds. Bond counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain matters will be passed upon for the City by the City Attorney 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. 52 UNDERWRITING Pursuant to a Bond Purchase Contrnct between the City and RBC Dain Rauscher, Inc., acting under the trade name RBC Capital Markets {the "Underwriter"), the Bonds aze being purchased by the Underwriter at a purchase price equal to the principal amount of Bonds being issued less an Underwriter's discount of $103,589.50. 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 Conhact, 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 maybe 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. CON'T'INUING DISCLOSURE Each of the City, C&C California, Centex Homes, and Lennaz Homes has covenanted for the benefit of Bondholders to provide annual or semi-annual reports, 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 -FORMS OF CON"I'INUING DISCLOSURE CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule ISe2- 12(b)(5), as amended (the "Rule"). Each of the City, C&C California, and Centex Homes has represented that, in the past five years, neither it nor any entity providing annual financial infornation or notices of material events under its respective Continuing Disclosure Certificate has ever failed to comply, in all material respects, with any previous undertaking by it to provide annual or semi-annual reports, as applicable, and notices of material events set forth in a written contractor agreement specified in the Rule. Lennaz Homes has numerous affiliates consisting of various entities that aze developing or have been involved in the development of numerous different projects in states throughout the country over the last five years. It is possrble that some of such affiliates have failed to comply at one time or another with continuing disclosure undertakings in connection with an issuance of community facilities district or assessment district bonds. In connection with covenants relating to a 1998 financing for a project in the City of Temecula by the Winchester Hills Financing Authority Community Facilities District No. 98-1 (Winchester Hills) in which Lennar Homes was involved as the administrative member of the major landowner, Lennaz Homes filed audited financial statements for each fiscal year through its 1999 fiscal yeaz (the report filed in May 2000) but did not file the report due for the 2000 fiscal yeaz and did not include financial information regarding the development of the property owned by an affiliated entity in the 1999 report. In connection with covenants relating to financings in 1999, 2000, and 2002 by the Association of Bay Area Governments Windemere Ranch Assessment District 1999-1 for a project in the County of Contra Costa, California, continuing disclosure reports due on April 1, 2005, were not provided on a timely basis. Lennaz Homes, as a member of the master developer, filed the continuing disclosme reports with the dissemination agent on Octoberl0, 2005. Lennaz Homes is reviewing and updating its system for filing reports and expects to satisfy Lennaz Homes' obligations with regard to disclosure in the future. Dunmore, 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 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 Dunmore 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 of its affiliates, is subject to a lien of 20% or more of the aonual 53 assessment securing payment of the Bonds, such owner shall be required to enter into a Continuing Disclosure Certificate as described in the preceding paragraph. MISCELLANEOUS The foregoing summazies or descriptions of provisions of the Bonds, the Bond Resolution, and all references to other materials not purporting to be quoted m full aze only brief outlines of some of the provisions thereof and do not purport to summarize or describe al] of the provisions thereof, and reference is made to said documents for full and complete statements of their provisions. The appendices hereto aze a part of this Official Statement. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, aze intended as such and not as representations of fact. The Official Statement is not to be construed 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 .~:~o%%.J21a2~ By: /s/Nelson K. Smith Nelson K. Smith Finance Director sa APPENDIX A CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGI2APffiC 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 118.51 squaze miles of land and an additional 89 square miles of land azea 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 Kern 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, 2006, the estimated population of the County was 753,070 and the estimated population of the City was 295,893, according to the California Deparunent of Finance. The Bakersfield Standazd Metropolitan Statistical Area (SMSA) includes all of the County, as defined by the State Department of Employment Development. City Government The City was incorporated on January 11, 1898, under the general laws of the State of California (the "State"). The City is a charter city with acouncil/manager form of government. The City Council is comprised of seven council members, elected by wazd 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 aze approximately 1,325 permanent City employees, including 68 persons in management and 179 persons in supervisory positions. Fire protection is provided by 17S Firefighters, manning 13 stations. The police department has 321 Pofice Officers. Tax Levies and Delinquencies; Assessed Valuation of Taxable Property The 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 1. Unsecured taxes are assessed and payable on Mazch 1 and become delinquent August 31, in the next fiscal yeaz. Accordingly, unsecured taxes are levied at the rate applicable to the fiscal year preceding the one in which they aze 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 {10°f°) penalty is added to any late installment. On June 30, delinquent pmperties aze sold to the State. Property owners may redeem property upon payment of delinquent taxes and penalties. Tax-defaulted properties aze subject to a redemption penalty of one and one-half percent (1.50%) of the tax due, chazged 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 {i.e., July 1 through June 30) in which the property remains tax-defaulted, at a rate of one and one-half percent (1.50%) of the tax due for each such tax yeaz. PropBrties may be redeemed under an installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest accming at one and one-half percent (1.50%) per month on the unpaid balance. If 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 Collector as provided by law. A-1 The table below summarizes the City's property tax levies and total collections for fiscal years 1995-96 through 2004-05. Fiscal Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-O1 2001-02 2002-03 2003-04 2004-OS Table A-1 City of BakersSeld Property Tax Levies and Collections tty Fiscal Years 1995-96 through 2004-OS Total Tax Levy $16,856,805 17,175,495 17,289,200 17,864,445 18,554,717 19,093,149 zo,121,5z8 21,301,453 22,792,274 25,401,358 Total Tax Collections $16,975,278 17,464,195 17,430,365 20,488,683 19,123,448 18,199,426 20,675,415 23,523,106 23,926,768 27,692,409 Percent of Levy Collected 96.4°l0 97.5 47.4 111.7 99.5 92.9 99.4 107.4 101.7 105.8 (1) Excludes redevelopment taz increment. Somce: City of Bakersfield Comprehensive Annual Financial Report for the 5scal yeaz ended June 3Q, 2005. Percent of Current Tales Collected 100.7% 101.7 100.8 114.7 103.1 95.3 102.8 110.4 105.0 109.0 The table below summarizes the assessed and estimated actual valuations in the City for fiscal years 1995- 96through 2004-05. Table A-2 City of Bakersfield Assessed and Estimated Actual Value of Taxable Property (btiscalYears1995-96 through 2004-OS) Fiscal Year 1995-46 1996-97 1997-98 1998-44 1994-00 2000.01 2001A2 2002-03 2003-Q4 2004-OS Secured $ 8,068,506,294 8,213,247,086 8,407,516,746 8,628,532,571 9,268,454,616 9,809,567,800 10,111,103,449 10,820,926,740 11,947,359,805 13,441,149,790 Unsecured $356,616,991 350,499,835 374,446,012 453,535,838 423,862,659 432,049,903 462,192,054 481,183,430 483,752,532 512,720,306 Utility $13,232,785 13,971,013 15,497,196 11,719,409 19,424,138 19,039,560 18,851,231 18,614,866 26,993,919 16,541,510 Total Assessed Value $ 8,438,356,070 8,577,717,934 8,791,459,954 4,099,787,818 9,711,746,413 1Q,260,65?,263 10,592,146,134 11,320,725,086 12,458,106,256 13,970,411,606 Percent Increase (Decrease) N/A 1.65% 2.56 3.44 6.72 5.65 3.23 6.88 10.05 12.14 Saurce: City of Hakersfield Comprehensive Aanual Financial Report for [he Sscal yeaz ended June 30, 2005, citing County of Kem. [Remainder of Page Intentionally Left Blank.] A-2 The table below shows the assessed valuations of the principal taxpayers in the City as of June 30, 2005. - - Table A-3 City of Bakersfield Assessed Valuation of Principal Taxpayers (June 30, 2005) 2004-OS .Percentage of Assessed Total Assessed Taxpayer p) Type of Business Yalnafion Valuation Casde & Cooke Comm. Inc. Real Estate Development $ 155,246,097 1.11% Bakersfield Mall LLC Shopping Center 115,530,696 0.83 Chevron USA Inc. Oll Company 66,181,306 0.47 Ice Cream Partners, USA Manufacturing 61,617,198 0.44 Bear Mountain Limited Cogeneration 52,155,000 0.37 State Farm Iusnrance Company Insurance 43,500,000 0.31 Albertsons Inc. Groceries 37,157,672 0.27 Cox Communications Bakersfield Cable 14,111,150 0.10 Nakanogumi Corporation SBD Group Inc Real Estate Development 12,500,000 0.09 Columbus & Chester Partnership Real Estate 12.330.874 0.09 Total tazabte assessed value often (10) largest taxpayers $ 570,779,493 4.09% Total taxable assessed value of other taxpayers 13.344.631,613 95.91 Total taxable assessed value of aE taxpayers $13,970,411,606 100.00% (1) Rela[ed or affiliated parties aze grouped togedrer. Source: City of Baketafield Comprehensive Annual Financial Repon for the Sscal year ended Juoe 30 2005 citing Hdl Coren & Cone sad Caunty Assessor 2002-03 Combined Tax Rolls. , , Demographic Statistics The following table sets forth various demographic data regarding the City, including population, estimated median household income, elementary school enrollment, and estimated unemployment rate, from fiscal year 1995- 96 through 2004-05. Table A-4 City of Bakersfield Demographic Statistics (F1sca1 Years 1995-96 through 2004-OS) Fiscal Year 1995-96 1996-91 1947-98 1998-99 1994-00 2040.41 2001-42 2002-03 2003-04 2004-OS Popnlafion0l 212,715 214,554 221,689 230,771 237,222 254,368 257,414 266,784 279,612 295,843 Estimated Median Household IncometZ> Elemeotary Schoot Enrollment Estimated Unemnlovment Rate $31,852 31,888 33,339 33,754 34,343 37,573 35,153 42,800 46,000 46,600 26,903 27,126 27,370 27,668 27,783 28,499 28,267 28,179 28,315 28,234 12.4% 11.4 10.9 11.0 12.5 10.4 11.2 12.0 12.6 8.3 (1) State Departmem of Finance, (2) U.S. Department of Urbao Development 2004; Sgroes and estimates should be used for general proposes only. Source: City of Bakersfield Comprehensive Annual Financial Report for the fiscal year ended June 30, 2005. A-3 Employment The County's total labor force, the number of persons who work or are available for work, is estimated to be 317,104 for Febmary 2005, an increase of 0.63% over the preceding year. The number of employed workers in the labor force is estimated to be 284,000 for the same date. The following table sets forth information regazding the size of the labor force, employment and unemployment rates for the County, the State, and the United States for the calendar years 2000 dtrough 2005. Table A-5 Employment -Averages Calendar Years 2000 - 2005 2000 2001 2002 2003 2004 Feb 2005 Kern County Labor Force (OOOs) 287.1 292.0 249.1 305.4 315.1 317.1 Employment (OOOs) 254.7 260.9 264.0 267.9 284.5 284.0 Unemployment Rate 11.3% 10.6% 11.7% 12.32% 9.7% 10.4% State of California Labor Force (OOOs) 16,884.2 17,182.9 17,404.6 17,629.3 17,627 17,714 Employment (OOOs) 16,048.9 16,260.1 16,241.8 16,455.4 16,630 16,625 Unemployment Rate 4.9°l0 5.4% 6.7% 6.7% 5.7% 6.1% United States Labor Force (OOOs) 142,583 U1 143,734 144,863 146,5 10111 147,871 147,649 Employment (OOOs) 136,891 {'1 136,933 136,485 137,736 14Q,278 139,100 Unemployment Rate 4.0°10 4.7% 5.8% 6.0% 5.1% 5.8% (1) Not strictly comparable with data for prior years . Sources: Califemia Employment Development Department; U.S. Department of Labor Bureau of Labor Statistics. The following table sets forth the top twenty employers in the City as of 7uly 2005. Table A-6 CTPY OF BAI{ERSFIELD Principal Employers (As of July 2005) Ftirm Producf/Service Employees County of Kern Govemmeat 8,400 Giumatra Vineyards Agriwlture 5,000 Grimmway Enterprises Agriculture 4,000 Bakersfield City Schools Education 4,000 Kerr High School Ilistrict Education 3,600 Wm. Bolffiouse Famvc Agriculture 2,500 Catholic Healthcare West Healdt Care 2,500 $akesfield Memorial Hospital Health Care 1,400 City of Bakersfield Government 1,400 ARB Inc. Metal Fabrication 1,200 Kerr Medical Center Health Caro 1,200 State Fatm Insurance Insurance 1,400 Aem Energy Energy 1,150 Chevron Texaco tail Production 1,000 California State University Bakersfield Education 900 Dreyers Ice Cream Co I.LC. Food Processing 800 Frito Lay Food Processing 725 Target Distribution Center Retail Distribution 650 Clinics Sierra Vista Health Caze 600 ACS Call Center 600 Bakersfield College Education 450 Source: The City A-0 Building AMivily The following table summarizes the City's total annual building permit valuations since Fiscal Yeaz 1995- 96. Table A-7 CITY OF BAKERSFIELD Property Value, Coustruction, and Bank Deposits (tl Fiscal Years 1995-96 tkrough 2004-OS Commercial Residential Other Total Coostruction Construction Construction Construction Fiscal Number Number Numbei Bank Year of Units Value of nits Value Value of Units Value Deposits 1995-96 50 2b,287 1,909 179,127 41,462 1,954 247,376 1,678,075 1996-97 102 42,352 1,352 132,785 40,459 1,454 215,596 2,310,008 1997-98 147 49,241 1,983 197,773 67,281 2,130 314,295 2,438,004 1998-99 213 78,199 2,088 223,576 36,958 2,301 338,733 2,464,202 ]999-00 140 51,251 1,890 218,656 34,438 2,030 304,245 2,454,280 2000-O1 123 38,113 2,012 261,522 48,067 2,135 347,702 2,730,107 2001-02 143 70,874 2,445 311,639 57,983 2,588 440,496 2,865,985 2002-03 141 56,694 2,981 428,534 62,112 3,122 547,340 3,179,623 2003-04 130 82,003 3,677 568,413 65,878 3,807 716,294 3,357,220 2004-OS 103 62,202 4,291 675,804 115,348 4,394 853,354 (not available) (1) Property values and bunk deposits reported in tbousands. Source: City of Bakersfield Comprehensive Annual Financial Report far the fiscal year ended June 3Q, 2005. Commercial Activity Consumer spending in calendar year 2003 resulted in approximately $4,164,067,000 in taxable sales in ffie City, which is approximately g.77°/a above calendaz yeaz 2002. The following table sets forth informati on regazding taxable sales in the City for calendaz years 2000 through third quarter 2004. Table A-S CITY OF BAKERSFIELD Taxable Retail Sales 2000 - 2004 ttl (OOOs) 2000 2001 2002 2003 2004 t0 Apparel stores $ 109,847 $ 117,059 $ 12b,267 $ 124,457 $ 40,858 General merchandise smres 598,519 633,892 667,344 699,810 170,409 Food stores 176,986 181,300 146,060 215,506 59,738 Eatiug and drinking places 287,815 309,643 330,061 362,907 98,124 Home furnishings and appliances 123,510 126,841 142,014 154,731 40,737 Building materials and farm implmts. 244,146 256,506 286,088 344,528 114,445 Automobile dealers and auto supplies 716,804 845,904 850,364 913,717 272,677 Service stations 209,649 187,497 178,716 210,459 62,387 Other retail stores 372.930 384.538 413.285 464 338 124.962 Total Retail Outlets $2,840,206 $3,043,180 $3,190,204 $3,491,453 $ 984,337 All Other Outlets 657 574 701.212 637.989 672 614 204.095 Total All Outlets $3,497,780 $3,744,392 $3,828,193 $4,164,067 $1,188,432 (1) Information available as of third quarter 2004 only Source: California Slate Boazd of Equalization. A-5 There are three major shopping centers in the City. Major department stores with local outlets include Macy's, Mervyns, J.C. Penney, Sears, and Kohl's. The retail base includes three Wal-Marts, three Tazgets, three Home Depots, two Lowe's Home Improvement Stores, a Costco, and a Sam's Club. The number of sales pemtits issued and the valuation of taxable transactions for the years 2000 through third quarter 2004 is presented in the following table. Table A-9 CITY OF BAKERSFIELD Number of Permits and Valuation of Taxable Transactioas zooazooa f> Retail Stores Total All Outlets Year Na. of Permits Taxable Transactions No. of Permits Taxable Transactions 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 2003 3,899 3,491,453 6,709 4,164,067 20041'1 4,068 984,337 6,895 1,188,432 (1) lnfotmation available as of tiilrd quarter 2004 only. Source: California State Bnard of Equalization. Transportation Well-developed surface and air transportation facilities are available to City residents and business firms. Main lines of both the Unian Pacific and the Burlington Northern Santa Fe railroads traverse the azea. Amtrak service is available. State Highway 99, the main. north-south artery serving the most populous communities along the east side of the Central Valley, runs through the center of Ute City. State Highway 58 provides east-west linkage between Interstate 5, 20 miles west, and Interstate 15 at 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 Nafional Pazk. Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways. Golden Empire Transit provides local bus transportation. Meadows Field (Kern County Airport) adjoins the City to the north. Regularly scheduled passenger and air cargo service is available as well as charter service and general aviafion services. The stain runway is 11,000 feet in length. Anew airport terminal is currently being constructed at Meadows Field, which terminal is expected to be completed by the summer of 2006 and has been planned to accommodate international flights. 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. A-6 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 aze offered as well as academic courses designed to equip the student for transfer to a four-year college or university in the third yeaz. Bakersfield College attracts about half the local high school graduating class each yeaz. California State University, Bakersfield opened in 1970 and received its university status in 1988. It is on a 375-acre site lot;ated 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, opened in 2005. UC Merced serves the entire San Joaquin Valley, with the main campus located in the City of Merced and satellite centers located in the City and the Cities of Fresno and Modesto. The satellite centers in the Crty and Fresno have akeady opened. Financial Services Statewide banking systems serving the City include Bank of America, Washington Mutual Bank, Sanwa Bank California, Union Bank, Rabobank, and Wells Fazgo Bank. Their services aze 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 lazger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the lazgest 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, two cable TV companies, and iwo satellite TV companies. The City has 45 public pazks, covering a total of 433.27 acres. The Bakersfield Rabobank Arena, Theater, and Convention Center contains a 3,250-seat concert hall, an 11,000-seat arena, and 14 meeting rooms. Memorial Stadium hosts more National AAU track meets than any other city in the couniry. County-owned golf courses and five private courses offer year-round golf, and tennis is played throughout the yeaz at six private tennis clubs. Cultural advantages of the City include community theater, the Bakersfield Symphony orchestra, a community concert group, and the Cunningham Art Gallery. Bakersfield College and California State University, Bakersfield, sponsor plays, concerts, lechues, and special events throughout the yeaz. A-7 (THIS PAGE INTENTIONALi,Y I,F,FT RLANR) APPENDIX B APPRAISAL s-~ (TIIIS PAGE INTENTIONALLY LEFT BLANK} APPRAISAL REPORT OF Assessment District OS-3 LOCATED AT: Various Locations in Bakersfield, California Areas known as Liberty B, Village Green, Tesoro-Encanta, Lin, Rider and Diamond Ridge Areas AS OF: December 7, 2005 PREPARED FOR: City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301 PREPARED BY: Lauver & Associates, Inc. PO Box 564 ' Bakersfield, California 93302 (b61)399-0819 Lauver & Associates, Inc. Real Estate Appraisal Services PO Box 564 Bakersfield, California 93302 (661) 399-0819 FAX 399-4828 December I5, 2005 City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301 ATTN: Nelson Smith, Finance Director RE; Assessment District OS-3 Liberty II, Village Green, Tesoro-Encanto, Lin, Rider and Diamond Ridge Areas Bakersfield, California Gentlemen, In accordance with your request, I have inspected the real estate, specific plan documents, and other related data regarding the above real estate, in the incorporated area of the City of Bakersfield, California, as hereinafter described. The inspection was made for the purpose and as part of the process, of providing value estimates of the subject property, as of December 7, 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 Standazds of Professional Appraisal Practice, USPAP) of a Complete Appraisal performed under Standazds 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 l imposed by Assessment District OS-3 and school CFD bonded indebtedness (see the Engineer's 1 Report prepared by Wilson & Associates dated November 30, 2005, pages I 4 through I-8 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 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 05-3 are also covered in our estimate of variable indirect expense in the discounted cash flow analyses for each of the aeeas 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 number of developers immediately. No discounting is necessary for any of the parcels either 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 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 duect 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 Ls' market values of the subject properties, as defined, as of the effective date of this'appraisal, are as shown on Page 147 of this report and are summarized on the Consolidated Worksheet of the Assessment District OS-3 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 Lauver & 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 OS-3 bonds. Sincerely, !sl Michael Lauver Michael Lauver, MAI S12A Certified General Appraiser State of California Certificate I+Io. AG 002049 Title Page Letter of Transmittal Table of Contents DEFINITIONS TABLE OF CONTENTS Executive Summary ........................................... .................. Introduction .......................................................................... ' Purpose of Appraisal ............................................................ ' Use of the Appraisal ............................................................. Function and Objective of Appraisal ................................... Scope of Appraisal ............................................................... Property Identification ......................................................... Definition of Mazket Value .................................................. Date ofValuation ................................................................. Statement of Ownership ....................................................... Property Rights Appraised ................................................... DESCRIPTIONS General Area Analysis ....................................................... City Data ............................................................................ Neighborhood/Site Descriptions ........................................ Assessed Value and Taxes ................................................. Highest and Best Use ......................................................... VALUATION Valuation Methodology ............................................................... Valuation ...................................................................................... Subdivision Cost Estimate ........................................................... Reconciliation and Summary of Finished Lot Values ................. Certifications ................................................................................ ADDENDA Assumptions & Limiting Conditions Qualifications of Michael Lauver, MAI, SRA DCF Worksheets Consolidated Spreadsheet of AD OS-3 Values .... 15 .... 27 .... 49 ..112 ..113 .................... 116 .................... 120 .....................13 5 .....................13 9 .................... 145 ASSESSMENT DISTRICT OS-3 BOUNDARIES X61 ~ a~, ~ ~,• R ,. ,~ x F ~, .. xxE mucE cREEx AxEA I I (xRAtT N6. exrES «...,L. ~ '° 1 __ t>q E' _ __ t4[ tH R39L 1 f 0 QxP t • Q ~1 ." 31 i ~ IY t I~. 13 :' x , I ' RA' t ~ ~ y. .. "^t aw .. _ _ _~-_ _~~.. _..._~_ _ Y 5 ~ i i .3 w ~ ~ ' 11 `` p ip _ ~- _+ '$ ~ tRE xlE~RTx R . ~- ~ ~. I fi (~ ~ (,~~~ C,T6, .L 11 ~ ~ b g{~~ ""'"' ~ _ - _ THE 1'SSORO- ENf:AMO AREA 1 TT{E RlAxONO'RlYi6E AREA ' - (TRACT N6. B6<B) (TRACT X6. d332} I -awe~vr ~ . y~w iN£ RRJ6R AREA l (TRACT N6. 8186} - Laaner & Associates, Inc. Acs ccmnHt n'ctrirr n5 2 EXECUTIVE SUMMARY NamelIdentificafion Assessment District OS-3 - Various Locations in the Southwest and Northwest Quadrants of Bakersfield, California Owners of Record: Castle & Cooke California, Inc., Centex Homes, Lennar Homes of California, Inc. and Dunmore Diamond Ridge, LLC Highest & Best Use Develop with single-family residential Effective Date of Anaraisal December 7, 2005 Value Opinions -Assessment District OS-3 All the values developed within this report are presented on Page 147 and on the Consolidated Worksheet that can be found in the Addenda section of this report. Client Nelson Smith, Finance Director City of Bakersfield Finance Department Appraiser Michael Launer, MAI SRA CGREA No. AG002049 1 Lauver & Associates. Inc. q c cement Dictrir+ aS_4 INTRODUCTION PURPOSE OF THE APPRAISAL The purpose of this report is to estimate the "As Is" mazket values of the various properties identified and described herein, as part of Assessment District OS-3. 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 OS-3 involves several parcels of land in the Soutlwest and Northwest quadrants of Bakersfield and consists of distinct development areas, further described below. A map depicting their location is presented after the table of contents. The following descriptions of the various areas were taken from the Engineer's report prepazed by Wilson & Associates, Fresno, California dated November 3Q 2005. Assessment District 05-3 was formed for the purpose of providing financing for the offsite improvements and infrastructure as described. Liberty H Area The Liberty II Area is located in Southwest Bakersfield and contains approximately 34.80 gross acres of land that has been approved for subdivision into a combined total of 107 single-family residential (R I) lots, one commercial - C 1 parcel, one storm drain sump lot, landscape and water well lots pursuant to Tract 6475. The Liberty II area land is a triangular shaped gazcel located at the northeast corner of Ashe Road and Panama Lane and is bounded along the east by the Arvin- Edison Canal. The residential lots in the subdivision typically have 45 feet of street frontage and range in size from 4,500 to 6,600 square feet, with an average lot size of 4,921 square feet. The housing product will be similar to the previous phases of the Liberty development which is outside of the Assessment District 05-3 boundaries, with dwelling sizes ranging from about 1,458 to 2,051 squaze feet and pricing from about $290,000 to over $350,000. 2 File 4021 .Lauver & Associates. Ins. Accv cm nt Dictrirt 45 4 The Liberty II area has a 9.$8-acre commercial zoned parcel with frontage along the north line of Panama Lane and along the east line of Ashe Road. The hnpravement Acquisitions for the Liberty II Area are improvements related to the development of the subdivision. These are described as follows: ASHE ROAD (EAST SIDE) RESIDENTIAL FRONTAGE IMPROVEMENTS: Construction of the east side of Ashe Road along the frontage of Tract No. 6475 (between Panama Lane and the northerly boundary of the residential portion of Tract No. b475), including grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, striping, approximately 60 feet of 8-inch diameter water line with appurtenances, and subdivision block wall. ASHE ROAD (EAST SIDE} SUMP FRONTAGE IMPROVEMENTS: Construction of the east side of Ashe Road along the frontage of the storm drain sump located on the east side of Ashe Road (between the northerly boundary of the residential portion of Tract No. 6475 and the Arvin-Edison Canal), including grading, paving, curb, gutter, sidewalk, striping, subdivision block wall, and chain link fence with slats along the portion of the storm drain sump perimeter not fronting on Ashe Road. PANAMA LANE {NORTH SIDE) IMPROVEMENTS: Construction on the north side of Panama Lane along the frontage of Traci No. 6475 (between Ashe Road and the easterly boundary of Tract No. 6475), including grading and paving for a right turn lane into Tract No. 6475 at Declaration Way, curb, gutter, sidewalk, handicap ramps, street signs, striping, traffic signal box, 2-inch diameter interconnect conduit, approximately 60 feet of 8-inch diameter water line with appurtenances, subdivision black wall, and neighborhood sign monuments. 3 Loaner & Associates. Inc. Assessment District OS-3 Lot Recordation Status According to the developer, Tract 6475 Units 1 through 3 inclusive, a total of 70 single-family residential lots, have been recorded. The lots in the remaining phases are not scheduled for recordation until a later date. Village Green Area The Village Green area is a rectangular shaped parcel of land located in Northwest Bakersfield. It covers approximately 82.70 gross acres of land at the southwest corner of Stockdale Highway and Renfro Road. It is identified as Tract 6448 and has a total of 354 buildable lots to be constructed in 12 phases. The lots range in size from 4,950 to 8,000 square feet with an average lot size of 6,403 square feet. There are approximately 142 lots with 45 feet of street frontage and 195 that have SS feet of frontage. The developer, Castle & Cooke California, Inc., proposes to have two housing product types in the subdivision. The housing product designated for the smaller (mostly 45' x 110') lots range from about 1,458 to 2,200 square feet in size, with preliminary pricing in the $300,000 plus range. The larger (mostly 55' x 110') lots aze planned for improvement with dwellings in the 1,450 to 2,051 square foot range, with prices starting at about $360,000. The Assessment District financed improvements for the Village Green area aze described below. STOCKDALE HIGHWAY (SOUTH SIDE) IMPROVEMENTS: Construction of the south side of Stockdale Highway along the frontage of Tract No. 6448 (between the westerly boundary of Tract No. 6448 and Renfro Road), including grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, street lights, striping, interconnect conduit, median curb, 16-inch diameter water line with appurtenances, 21-inch diameter sanitary sewer line with manholes, and traffic signal at the intersection of Stockdale Highway and Renfro Road and subdivision block wall. 4 File 4021 Lauver & Associates. Inc. A meat Dictri~~ nS_3 RENFRO ROAD {WEST SIDE} IMPROVEMENTS: Construction of the west side of Renfro Road along the frontage of Tract No. 6448 (between Stockdale Highway and Culiacan Avenue}, including grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, street lights, striping, interconnect conduit, median curb on both sides of the street, and 12-inch diameter water line with appurtenances, and subdivision block wall. Also included in the Renfro Road scope of improvements is demolition of existing Renfro Road along the Tract No. 6448 frontage south of Gbliacan Avenue, including removal of pavement, curb, gutter, sidewalk, handicap ramps, and street light. SEWER LIFT STATION IMPROVEMENTS: Construction of a complete sanitary sewer lift station located at the southwest comer of Stockdale Highway and Renfro Road, including short sections of 18- and 21-inch diameter sewer line, manholes, lift station, 120-inch diameter wet well with discharge manifold and valving, electrical service drop and switchgear, pumps and motors with rail system, valve box and wet well access doors, transformer pad, exhaust fan and foul air duct, and PG&E utility fees far pre-engineering and improvements. CITY FACILITIES FEES: Payment of City water supply in-lieu fees for Tract No. 6448. Lot Recordation Status According to the developer, Tract 6448 Units I through 5 inclusive, a total of 130 single-family residential lots, have been recorded. The lots in the remaining phases are not scheduled for recordation until a later date. 5 Launer & Associates, Inc. As m nt Dictri~r n5 3 Tesoro -Encanto Area The Tesoro-Encanto area is a rectangular shaped pazcel of land covering approximately 79.80 gross acres located at the northwest corner of Panama Lane and Buena Vista Road. It is described as Vesting Tentative Tract Map No. 6349. The subdivision map indicates a total of five phases with a total of 257 buildable residential lots. The lots range in size from about 6,600 to 10,000 square feet in size and show an average lot size of 8,810 square feet overall. A spokesman for the developer, Centex Homes, stated the northerly portion of the pazcel, Phases 1 and 2 are scheduled for development with entry-level dwellings. These dwellings will range in size from about 1,445 to 2,870 square feet. Phases 3, 4 and 5 are slated for construction with move-up residences from 1,821 to 3,588 square feet in size. The developer estimates the lots in Phase 5, located along the frontage of Panama Lane are about 60% complete and Phase 4 located adjacent to the north of Phase 5 is approximately 15% completed. The completed house/lot combinations will be marketed on a pro-sold basis, which allows the purchaser to choose their own lot and interior finish elements of the dwelling. The Assessment District financed improvements in the Tesoro-Encanto Area Tract No. 6349 are described in the following paragraphs. BUENA VISTA ROAD {WEST SIDE) IMPROVEMENTS: Construction of the improvements on the west side of Buena Vista Road along the frontage of Tract No. 6349 {between Panama Lane and Pensinger Road}, will include grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, street lights, striping, interconnect conduit and pull boxes, utility trenching, median curb, 8- and 12-inch diameter water line with appurtenances, and subdivision block wall. PENSINGER ROAD {SOUTH SIDE) IMPROVEMENTS: Construction of the south side of Pensinger Road along the frontage of Tract No. 6349 (between the westerly boundary of Tract No. 6349 and Buena Vista Road), including grading, paving, curb, gutter, sidewalk, handicap ramps, street signs, street lights, striping, 6 File 4021 ~arttacr_ ~c Associate .Inc. Accecsmv.. Dictri f 0 -3 interconnect conduit and pull boxes, utility trenching, 12-inch diameter water line with appurtenances, and subdivision block wall. PANAMA LANE {NORTH SIDE) IMPROVEMENTS: Construction of subdivision block wall on the north side of Panama Lane along the frontage of Tract No. 6349 {between the westerly boundary of Tract No. 6349 and Buena Vista Road}. Lot Recordation Status According to the developer, Tract 6349 Units 4 and 5, a total of 106 single-family residential lots, have been recorded .The lots in the remaining phases are not scheduled for recordation until a later date. Lin Area The Lin Area is an irregular shaped parcel of land located in Northwest Bakersfield at the northwest corner of Allen Road and Noriega Road. It is identified as Tract 62$9 and is slated for construction in three phases. According to the subdivision maps submitted by the developer, Lennar Homes, the parcel covers a total of 62.90 gross acres and when subdivision land improvements are complete, will have 252 buildable lots. Typical lots range in size from around 6,000$,000 square feet although there are some premium lots in excess of 12,000 square feet located at the end of cul-de-sac streets in the subdivi sion. Overall, the average lot size is 7,396 square feet. According to a spokesman for Lennar Homes of California, Inc., they intend to improve the finished tots with entry level housing product similar to their previous Festival Series, located throughout Northwest and Southwest Bakersfield. The Assessment District fmancing in Tract 6289 will fund the following improvements: 7 ALLEN ROAD (WEST SIDE) IMPROVEMENTS: Construction of the west side of Allen Road along the frontage of Tract No. 6289 (between the northerly boundary of Tract No. 6289 and Noriega RoadlVega Meadows Road}, including grading, paving, curb, gutter, sidewalk, street signs; striping, interconnect conduit, 8-, 10-, and 12-inch diameter sewer line with manholes, 18- and 30-inch diameter storm drain line with catch basins and manholes, and subdivision block wall, VEGA MEADOWS ROAD, (WESTERLY EXTENSION OF NORIEGA ROAD) NORTH SIDE IMPROVEMENTS: Construction of the north side of Vega Meadows Road along the frontage of Tract No. 6289 (between the westerly boundary of Tract No. 6289 and Allen Road), including grading, paving, curb, gutter, decomposed granite equestrian trail, street signs, street lights, striping, interconnect conduit, 10-inch diameter sewer line with manholes, and subdivision block wall. Lot Recordation Status According to the developer, Tract 6289 Units One through Three inclusive, a total of 252 single- family residential lots, have been recorded. Rider Area The Rider area is an irregulaz shaped parcel covering approximately 113.60 gross acres. The parcel is in Southwest Bakersfield located at the southwest corner of Stine Road and McKee Road. The developer, Lennaz Homes has obtained Tract Map 6290 showing the land subdivided into a total of 394 lots. Unit One has been recorded, showing 217 buildable lots, a storm drain sump lot, a well lot, two park lots, five landscape lots, two super lots and a remainder lot. 8 File 4021 Launer & Assacfates. Inc. A ccmeniDi tract OS_3 The residential lots are generally in the 6,000-8,000 square feet size range although there are some premium lots in excess of 12,000 square feet Located at the end of cul-de-sac streets in the subdivision. Overall, the average lot size is 7,231 square feet. There are two `Super Lots' in Tract 6290. These are defined as acreage that is in an intermediate state of development between rough grade and finished lot stage. A `Super Lot' is prepared to smooth graded, terraced condition with all off-tract work completed and the streets and utilities brought to the perimeter of the super lot. Lots 222 and 223 are designated as super lots, covering 12.85 and 27.76 net acres, respectively. Tract 6290 also has a remainder parcel of 9.07 net acres. It is my understanding the subdivision is planned for improvement with the Festival and Celebrations series of dwellings; these are entry-level and move-up housing products respectively. Assessment District funding will be used to finance the following improvements in the Rider Area Tract 6290: McKEE ROAD (SOUTH SIDE) IMPROVEMENTS: Construction of the south side of McKee Road along the frontage of Tract No. 6290 (between Mountain Ridge Drive and Stine Road), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, 10- and IS-inch diameter sewer line with manholes, 18- and 24-inch diameter storm drain line with catch basins and manholes, and subdivision block wall. STINE ROAD (WEST SIDE) IMPROVEMENTS: Construction of the west side of Stine Road along the frontage of Tract No. 6290 (between McKee Road and the southerly boundary of Tract No. 6290), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, removal of existing pavement, and subdivision block wall. 9 Lauuer & Associates. Inc. Acc ccm of n;chlrf nS_3 MOUNTAIN RIDGE DR1VE (EAST SIDE) IMPROVEMENTS: Construction of the east side of Mountain Ridge Drive along the frontage of Tract No. 6290 (between McKee Road and the southerly boundary of Tract No. 6290}, including grading, paving, curb, gutter,. sidewalk, street signs, street lights, striping, interconnect conduit, and subdivision block wall. TAFT HIGHWAY (NORTH SIDE) IMPROVEMENTS: Construction of subdivision block wall on the north side of Taft Highway along the frontage of Tract No. 6290 (between the westerly and easterly boundaries of Tract No. 6290). Lot Recordation Status According to the developer, Tract 6290 Unit One, a total of 217 singlo-family residential lots, has been recorded. The lots in the remaining phases are not scheduled'for recordation until a later date. Diamond Ride Area The Diamond Ridge area is in the Southwest quadrant of Bakersfield. The parcel is irregular in ', shape, bounded on the north, south and the east by McCutchen, McKee, and Mountain Ridge Drive, respectively. Prior to subdivision the parcel was described as APN 497-050-10 &11, and ' covered a total of 76.80 grass acres. The ]and will be subdivided as Tract 6332 and contains a I total of 318 buildable lots in three phases. The lots range from about 6,000 to 7,500 square feet in size, with an average lot size of 6,861 square feet. The developer intends to build two housing product lines. The entry level product will range from around 1,457 to about 2,100 square feet, with pricing ranging from around $257,000 to $310,000. The move up product will have dwellings ranging from about 1,862 to 2,847 square feet, priced from around $315,000 to about $405,000. Assessment District financing will fund the following improvements in the Diamond Ridge Area Tract No. 6332: 10 File 4021 Lauver & Associates. Inc. Acc ccm nt Dic[ri t OS 3 McCUTCHEN ROAD (SOUTH SIDE) IMPROVEMENTS: Construction of the south side of McCutchen Road along the frontage of Tract No. 6332 (between the westerly boundary of Tract No. 6332 and Mountain Ridge Drive), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, and subdivision block wall. MOUNTAIN RIDGE DRIVE (WEST SIDE) IMPROVEMENTS: Construction of the west side of Mountain Ridge Drive along the frontage of Tract No. 6332 (between McCutchen Road and McKee Road), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit and subdivision block wall. McKEE ROAD (NORTH SIDE) IMPROVEMENTS: Construction of the north side of McKee Road along the frontage of Tract No. 6332 (between the westerly boundary of Tract No. 6332 and Mountain Ridge Drive), including grading, paving, curb, gutter, sidewalk, street signs, street lights, striping, interconnect conduit, and subdivision block wall. TRACT NO. 6332 ONSITE IMPROVEMENTS: Construction of the in-tract (on-site) 12-foot wide cross gutters for Tract No. 6332, and construction of a complete in-tract (on-site) storm drain system for Tract No. 6332, including 18-, 24-, and 30- inch diameter pipelines with manholes and catch basins. Lot Recordation Status According to the developer, none of the lots in this portion of the Assessment District are planned far recordation prior to confirmation of the Assessment District. USE OF THE APPRAISAL This report is for the exclusive use of the City of $akersfield (the client), the bond holders and prospective bond holders. No other parties shall have any right to rely on any services provided by Launer & Associates, Inc. without prior written consent. The client is authorized to publish the contents of this report far bond disclosure and mazketing. 11 Loaner & Associates. Ine. Ac ee m nt District ~~-3 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 December 7, 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 aze 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 mazket was researched for unimproved land sales with residential use potential that were considered similar or provided a reasonable alternative for a prospective purchaserldeveloper. PROPERTY IDENTIFICATION The subject properties are identified as follows: Area Description Liberty II Area Village Green Area Tesoro-Encanto Area Lin Area Rider Area Diamond Ridge Area AD OS-3 Residential Subdivisions Traet # R-I Lots Total Gross Acres Tract 6475 107 34.80 Tract 6448 3S4 82.70 Tract 6349 2S7 79.80 Tract 6289 2S2 62.90 Tract 6290 394 113.60 Tract 6332 318 76.80 12 File 4021 Lauver & Associates, Inc. Acc meet Dictrict OS_3 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 "I market under all conditions requisite to a fair sale, the buyer and seller, each acting pendently, 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; and E. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."~ DATE OF VALUATION The effective date of this appraisal, the date as of which the valuation applies, is December 7, 2005. STATEMENT OF OWNERSHIP To the best of my knowledge, titles are currently vested as follows: Castle & Cooke California, Inc., a California Corporation, as to the Liberty II and Village Green Areas, Tracts 6475 and 6448 respectively. Centex Homes., a Nevada general partnership, as to the Tesoro-Encanto Area, Tract b349. Title XI FIRRRA_ 32, 42 (f). 13 Lauver & Associates. Inc. Assessment Distriei 1)t_; Lennar Homes of Califomia, Inc, a California Corporation, as to the Lin and Rider Areas, Tracts 6289 and 6290 respectively. Dunmore Diamond Ridge, LLC, a California Limited Liability Company, as to the Diamond Ridge Area, Tract 6332. Full and complete details are includedtn 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 mazket value; 2. The final values reported are on an "all cash" basis, and 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": The T)ietionarv of Real Acrare A~nrn'cal, A,nerican Institute of Reel EstaCe Appraisers, Chicago, n.. 1986, pg. 123. 14 File 4021 GENERAL AREA ANALYSIS Location and Size 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 Kern 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 a » ., ~ ,`~ 1 a ME.ao ~ Sr-P ~t~s~° ~,, \. S 0.~\ H. ~ \ ~ ~ / ~E~ ~ •~ In size, Kern County is third largest among the State's 5$ counties, with an aggregate 8,064 squaze miles (5,160,960 acres). Included in the county's area are 11 incorporated cities and 32 unincorporated communities. is Launer & Associates. Inc. Acc ssm of nistr: f DS t Touoeraphv. 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 lazge 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 100-115 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 fallowing 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-electricai 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 recreation including hunting, fishing, mountain climbing, biking, boating, skiing and ether activities influenced by the County's varying topography. 16 File 4021 Laaner & Associates. Inc Assessment District OS-3 ', According to data published by the Kern County Council of Governments and the Economic Development Department, Kern County's population has grown 21.7% since the 1990 census, to approximately 661,653 in January 2000, more than California's growth rate in the same 10-year period. Kern County's growth was the 14`h largest in the state. hi terms of numerical growth, Kern County had a net population increase of 118,164 residents between the 1990 census and January 1, 2000. Current estimates show the total County population at 743,729 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 gopulatian is also shown. Kern's population was 661,653 according to the 2000 census. This represents a 21.7% 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 mfllion in the year 2009. 17 ~-ar~ner & Acc~ciatec Inc Acr ccm f nice > > nS 2 Economv The economy of Kem County has, historically been dependent an 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. Qit Kem is one of the nation's leading petroleum-producing counties, with nearly two-thirds of the oil production in California being extracted from Kem 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 far approximately 54% of Kem County's land area, or a total of 963,761 acres. Of this cropland, 736,217 acres are irrigated, according to the Kem 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-Kem Canal and the State Water Project's California Aqueduct. Water districts have been established in most of the agricultural areas, in an attempt to stabilize the irrigation water supply. 18 File 4021 7-anner & Associates. Inc. Ascossm nt birtrir~ /IS 3 Valuation of the County's top crops in 2004 crop totaled $3,142,481,400, underscoring the importance of agriculture to the local economy. The top crops, ranked according to their annual valuation, are presented in the following table: Kern County Top Crops Crop 2004 Valuation Fruit & Nut Crops $1,518,104,000 Field Crops & Rangeland $510,222,000 Vegetable GYops $470,687,400 Livestock & Poultry Products $405,487,000 Livestock & Poultry $104,263,000 Nursery Crops $101,850,000 Apiary Products $14,460,000 Seed Crops $12,598,000 Industrial & Wood Crops $4,810,000 Total $3,142,481,400 Agriculture provides employment to a lazge segment of the labor force, putting millions of dollazs 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 neazby. 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 19 ~.auner & Associates.lnc. Arc went Dictri t 0 - leisure activities. Nevertheless, the presence of the prisons has had a definite net positive effect on Kern County's economy. New Construction Total new building permitting in Kern County eclipsed the $1 billion mark for the second consecutive year. Kern County finished 2003 with $1,147,059,249 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 new construction totaled $94,111,923 in December- a 26.56-percent increase over the $74,363,963 recorded 12 months eazlier. 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 at $811,700,924 -- 29.49 percent higher than the previous year's $626,858,352. December boasted a gain of 17.58 percent as another $6b,236,290 worth of new home permits was issued, up 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 Kem. 20 File 4021 'i jQ/IJIPPR ASf/)fIR/Pf JHP A....___. T!_._n_. n~ ~ -" LLttlLCL l/7 Retail Sales Retail sales have grown at a steady pace over the past few yeazs. According to figures published by the California State Boazd 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 $6,438,238 $3,497,780 2001 $7,626,392 $3,744,392 2002 $7,565,892 $3,828,193 Sovrce: California State Board of Equalization, Febmary 2004 Retail acfivity 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 Kem County inolude at least one lazge retailer such as Kmart or Wal-Mart in addition to locally owned retail stores. Employment 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. 21 Lauver & Associates, Inc. A cescrnent Di irict ©-3 Employment -Averages 1990 Census 2000 Census 2004 Estimate 2009 Projection Kern County Labor Force (OOOs) 241.8 267.6 302.6 343.9 Employment (OOOs) 214.4 232.5 263.2 294.4 Unemployment Rate 9.60% 11.80% 11.70% 1 Lb0% State Labor Force (OOOs) 15,262.20 15,985.20 17,173.80 18,601 Employment (OOOs) 13,996.10 14,725.50 15,821.10 17,136 Unemployment Rate 6.50% 7.00% 6.90°l0 6.90% United States Labor Force (OOOs} 125,217 138,830 146,394 155,064 Employment(OOOs) 115,716 129,729 136,800 144,885 Unemployment Rate 6.20°l° 5.70% 5.7% 5.7°I° 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 of the seasonal agricultural employment conditions. Kern County's employment opporttmities have been bolstered however by a number of new business locations and expansions. State Farm's Regional Headquarters and the Ells 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 squaze 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 Kem County Labor Market, by employment sector, for the fiscal years 1996 through 2002. 22 File 4021 Lauver & Associates Ixc A S TsmynY Pi +ri t a; ? Nonagricultural Employment -Averages Calendar Years 1946.2002 by Place of Work Employment by industry 1998 1999 2000 2001 2002 Agrieultttre 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 10,$00 11,100 10,800 Trade, Transportation and Utilities 35,800 36,500 37,200 38,400 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 19,200 20,200 19,800 Leisure and Hospitality 15,900 16,500 16,500 17,200 17,400 Other Services 6,600 6,800 6,700 6,800 6,800 Government 48,800 50,300 51,600 53,600 55,200 IndustryEmp]oymentTotal* 230,800 233,800 242,400 244,000 244,500 *2D02 Benclmtark Source: California Employment Developm ent Department. Job growth in Kern County has improved according to the Califamia Employment Development Department (EDD}. Tn May 2005 Kern County's unemployment rate was 7.6 percent, down from 9.1 percent a year ago and the 12-15 percent rates common during the 1990's. In the past year, Kern has added 6,200 non-farm jobs, including 1,000 in construction, 1,700 in government (mostly education), 1300 in wholesalet retail trade, 600 in transportation/warehousingt utilities, and 200 in food manufacturing. These statistics indicate new houses, schools, and retail is the driving factor in the region's job growth. Over the past five yeazs, Kern has added approximately four new jobs far every seven households. 1n the 2000 Census there were 1.22 jobs per household in Kem County. Transportation Two major northlsouth arteries traverse Kern County. Freeway 99 anal 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 23 L,~uuer & Ass©ciates, Inc. Assessment District OS- 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 40 are major comdors 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 Barbaza. There are several commuter style airlines with service to various portions of the state including Los Angeles. The Santa FeBurlington Northern and the Union Pacific operate mainline rail service in Kem 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 oharter service), and Airport Bus of Bakersfield, a local bus line providing daily commuting service to Los Angeles International Airport. 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 County, the decade of the 1980s and 1990s saw the genesis of a trend destined to continue for years to come. Los Angeles area residents aze 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 24 File 4021 Launer & A.csnciatec, Inc. Acs s ment Dictri~+ tt5 ? 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 Califomia. There are preliminary discussions towazds the development of a high-speed rail system connecting Northern and Southern 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 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 Kem County. According to the Kern Council of Governments, the Kern County region has posted a growth rate greater than 3°to for the past two years. It is not likely that this growth rate is sustainable. As interest rates, housing prices, fuel costs and traffic congestion continue to rise; Kern will look less attractive to Los Angeles azea commuters. Moreover, new developments such as Centennial at Tejon Ranch may draw some of the spill-over from the Southland that is now being absorbed in Bakersfield's metropolitan area. Not all of the new residents locating in Kem County are doing so as a launching pad far a commute to Los Angeles. Kern County has some of the lowest costing real estate in Califomia; 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 neaz the population center of the state and the availability of adequate labor, 25 Laaner & Assnciatec. Inc. Acseccntent District OS_3 the primary impetus for many of the newly arriving manufacturing and distribution jobs is the low cost of land. Conclusion Kem 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 Kem County and the rest of California. 26 File 4021 L.auner & Associates. ]nc. Ass rsm ~~ nidri ~ n5 ? CITY DATA Location And Size The subject property is located in the City of Bakersfield. Bakersfield is located 111 miles north of the major metropolitan Los Angeles area, 108 miles south of Fresno, (the next neazest 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%. 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. Population City population has steadily increased. The city's growth and growth projections through the year 2010 is displayed in the following chart. BakQrsfield CYty Population 3~,~ ~,~ ~,aoa N Q t~~ __.__ _ _ _ L ttb~ -^S~ tt 1970 1975 I~ 19ffi 1990 1945 2000 ?065 2(}10 The population increased 2-''/z times in the 1970-1990 period, or an increase of 149%. The mean average annual rate is 7.49% 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 lazgest 27 Launer & Associates. Inc. A ersm nt Distri~r n5_7 city in California. The city's growth increase as of January 1, 2005, ranks 1't 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 and Projections -1994 - 2005 Population Populatio Population United Popularion Percent Percent State Percent States Percent Vear ~ Change County Change (000} Change {000) Change 1994 197,469 - 604,200 ----- 31,661 ---- 257,698 --- 1995 207,472 5.07 612,800 1.40% 31,410 0.18% 26Q244 0.98% ]996 212,715 2.53 620,400 1.23% 32,223 0.97% 262,753 0.95% ]497 214,554 0.86 629,200 1.40% 32,670 1.37% 265,310 0.96% 1498 221,b89 3.33 637,200 1.26% 33,226 1.67°l0 267,885 0.96% 1999 230,771 4.10 645,900 1.35% 33,766 1.60% 270,385 0.92% 2000 237,222 2.80 671,295 3.78% 33,572 0.31°/n 272,828 0.90% 2001 254,400 7.23 685,811 2.12% 34,483 1.77°fo 281,422 3.05% 2002 260,969 2.52% 694,OS9 1.19% 35,484 2.82°l0 240,810 3.23% 2003 267,029 2.27% 710,294 2.29% 36,442 2.63°Jo 243,718 0.99°10 2004 282,671 5.53% 732,401 3.02% 36,271 -0.47% 294,747 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 Area is displayed in the following chart. Bakersfield Metropolitan Area A50,000 400,000 ~` 330,400 F'e= 300,000 ~ 250,000 e 200,000 _e 150,000 0 e 100,000 0. 50,000 0 28 File 4021 7980 1981 1990 1495 2000 2005 2010 Laaner & Associate . In - Ac eccm ntDictri~* nS_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 DrivelRosedale), and northeast, (Rio Bravo), azeas. The GBMA is also referred to as the Immediate Bakersfield Trade Area. The GBMA captains the City of Bakersfield and nearby surrounding communities andlor areas. Geographically, the GBMA is an area measured for an approximate fivo-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. Bakersfield, the marketing, business, service and transportation center of the county, fmds 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 reason(s) 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 fums within the city aze characteristically of small to medium size. Major manufacturing activities include steel fabrication, plastic farm products, food and kindred products, and petroleum refining with related industries, and textiles. 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 jobs. 29 Lauver & Associates. Inc. A e sment District OS- Building Activitv Annual total building permit valuation since Fiscal Year 1942-93 is shown in the following tabulation. City of Bakersfield Property Value, Construction and Bank Deposits (1) Fiscal Years 1989-90 through 2002x03 Fiscal Year 1992-43 1993-94 1994-95 1995-96 1996-97 1997-98 1998-44 1999-00 2000-01 2001-02 2002-03 Commercial Construction #Units Value 38 37,785 30 70,472 39 65,891 50 26,287 102 42,352 147 49,241 213 78,199 140 51,251 123 38,113 143 70,784 104 78,868 Residential Construction # Units Value 2,022 181,998 1,581 154,577 1,571 150,429 1,909 179,127 1,352 132,785 1,983 97,773 2,088 223,576 1,890 218,656 2,012 261,522 2,445 311,639 3,626 544,534 Other Construction # Units Value 2,060 39,612 1,611 28,533 1,610 37,167 1,959 41,962 1,454 40,459 2,130 167,281 2,301 36,958 2,030 34,438 2,135 48,067 2,588 57,983 6,672 92,891 Total Value 265,395 253,582 253,487 247,376 215,596 314,295 338,733 304,245 347,702 547,340 716,294 p } Property values and bank 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 NorthetntSanta 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 from a number of truck carriers, several of which are major interstate lines. 30 File 4021 LatIL(PI_& Associates. Inc. Accvesmv..r 7)ictrirr I15 4 There are two airports within the GBMA. Bakersfield Airport, a private airport, is located in-the southeastern area of the city, and Kem 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 aze 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 b:30 p.m. The current rate is $0.75 for aone-way travel pass and no charge for transferring. Four fines provide taxi service, all of which are radio dispatched. As for automobile travel, the city lies astride two major all-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 council. 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 I}epartment has 288 personnel and the fire department has 160 fuemen 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 approximately 375 physicians and surgeons, 24 chiropractors, 19 optometrists and 86 dentists. 31 Launer & A.ssneiates. Inc. A e meat Di trio 5- 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. 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, cultural, 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, providing 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 Lahnr Market There is a stable labor force of men and women with diversified skills in fields ranging from agriculture to sophisticated equipment, assembly, and research. 32 File 4021 Loaner & Associate . Ine_ A es meet District OS 3 I Over the past two years, over 5,000 jobs have been added in Kern County each yeaz, 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 records. i ~ • Future labor 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 Development. As reported by the California Employment Development Department, the average unemployment rate for the Bakersfield labor market far 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. 33 Lauver & Associates. )n ~ c. Assessment District 0 - - City of Bakersfield Demographic Statistics ', Median Elementary Estimated Fiscal Household School Unemployment Year Population Income Enrollment Rate 1992-93 192,351 $34,420 26,505 14.8% 1993-94 197,469 $35,885 26,312 13.5°l0 1994-95 207,472 $37,449 26,350 12.8% "` 1995-96 212,715 $31,$52 26,903 12.4% 1996-97 214,554 $31,888 27,126 11.4% I 1997-98 221,689 $33,339 27,370 10.7% 1998-99 230,771 $33,754 27,668 11.0% 1994-00 237,222 $34,343 27,783 12.5% 2000-01 254,368 $37,573 28,099 10.4°l0 2001-02 257,914 $35,153 28,267 11.2% 2002-03 267,023 $39,982 29,398 12.3% The following table sets forth the top employers in the City as of January 1, 2003. EIBM Principal Employers PRODiICT/SERVICE Ek~tPI O~'EES Kem County Public Schools Ed°cation 15,500 Ccuny of Kem Government 7,000 Dole Bakersfield, Inc. Agriculture 2,360 Wm. Bolthouse Farms, Inc. Agriculture 2,000 City of Bakersfield G°vernmen[ 1,600 Cf-IW Central Califomia Medical Care 7,515 State Farm Insurance Insurance 1,500 ARB, Inc. Construction 1,200 Bakersfield Memorial Hospital Medical Carc 7,100 Texaco Exploration & Production Industrial 1,100 San Joaquin Hospital Medical Care 1,091 Aera Energy LLC Energy 870 Frito-Lay Food 750 Pool Califomia Energy Services Energy 700 Chevron Companies Industrial 540 Bechtel Petmleum Operations Industrial 525 Nestles Ice Cream Company Food 517 Wes[em Oilfields Supply industrial 450 Ken Small Construction Conswction 425 Pacific Bell Telephone 400 Bakersfield Californian Newspaper 380 Pacific Gas & Electric Utility 380 Continental Labor Resources Employment Agency 375 Bakersfield Family Medical Center Medical 370 Source: City of Bakersfield 34 File 4021 Lauver & Associates. Inc. A ec m nt Di tri t OS- 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 aparhnents.command rents ranging from $400 to $1,200 per month. Apartment communities within the city are relatively well defined, offering goods and services to apartment dwellers. Two and three bedroom, singlo- 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 $300,000 price range. Strengthening demand for residential housing has positively affected the building permit activity in the city. Most of the growth and constmction of dwelling units in Bakersfield has taken place subsequent to World Waz II. These dwellings typically have remaining lives. Consequently, there has been little need for in-fill in the older areas of the city. The availability of nearby land ready for construction has enabled a suburban sprawl. Residential growth tends to be primazily found in the northwest and southwest quadrants of Bakersfield. Since 198$, the permit activity was based lazgely on construction of new single-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, 35 Lauver & A.csacintes. Inc. Acceccment Dictri~t /l S z reducing the costs of development. The City also has a rather reliable water source from water rights to the Kem River. During the yeazs from about 1991 to 1995, the Bakersfield housing market was dominated to a large degree by large regional and national housing development firms. t~mong 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 1990'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 lazger 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 through the 3`d quarter of 2005 are displayed. City Building Permits Issued 1997 1998 1999 2000 2001 2002 2003 2004 2005 1,352 1,983 1,899 1,994 2,432 2,947 3,626 4,222 3,659 Saumw Kam County Hoard of7Yade 2003. 36 File 4021 Lauver & Associates. Inc. A ceccmenr J)icrri~r ns 3 Thus far in 2005 permit activity is averaging 457 per month. This represents a 30% over 2004 when the average monthly permits were being issued at a rate of 352 permits.. Current Residential Tr nds The residential mazket 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. ZIP CClDE YEAR 2003 SAT ## FS PRA $!S FT ygAR 20pq ' 43301 , , 43 $186,073 . . $121.94 #SA~F.4 33 p$j~ $194,881 !rtc(1 FT 150.95 %C, H 23 AN(1F .8% 93304 230 $114,3(3 $91.16 242 $154,114 131.83 44 .6% 43305 43 $104,287 $86.47 163 $158,261 128.98 49 .2% 43306 140 $134,663 $91.55 298 $186,884 131.84 44 .1% 93307 177 $115,390 $90.15 264 $161,825 130.14 44 .4% 93308 184 $]45,717 $103.86 312 $207,977 144.43 34 .5% 93309 219 $162,579 $102.19 245 $228,493 141.92 38 .4% 93311 137 $226,503 $121.58 284 $297,448 148.21 21 .9% 93312 203 $220,901 $122.79 486 $295,751 154.84 26. 1% 43313 183 $166,581 $105.30 301 $243,309 149.09 41. b% 93314 56 $279,348 $137.00 125 $342,025 162.48 18 .6% TotalstAverages 1,715 $168,760 $109.11 2,753 $225,088 $144.93 32 .8% Mean List to Sale Ratios 98.8% 98.30% It can be seen that existing single-family sales activity in the fourth quarter of 2004 was up 60.5°t° 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% above the same quarter 2003, according to records kept by the Bakersfield Multiple Listing Service. In the months January through July 2005, the resale market is showing a total of 4,147 sales, a rate of 592 dwellings per month. During the same period in 2004 the volume was 3,672 sales, an 37 Lauver&Assaciates.Inc. Asse smentDistrictOS_3 average monthly sales rate of 525 houses per month. The resale activity is up about 13%-over 2004. Resale prices have increased about 40% in 2005 compared with 2004. With regazd 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. Inanterviewing sales personnel in the sales offices of the major builders we obtained estimates of 25 to 40 percent of sales were from out of town buyers. The out of town buyer market is somewhat difficult to accurately measure however, since many occupy apartments white 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 azeas 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. As of September 1, 2005 a total of 3,659 permits have been issued in the city. This represents an average of 457 permits per month, up from the 352 permits per month rate during the same period in 2004. 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 c4c 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 in 2004. This is up 2.19°l° over the same period in 2003. This corresponds well with the total permit activity and demonstrates the lack of standing inventory available. Through the first eight months of 2005 there have been a total of 2,975 closings in the City of Bakersfield; an average of 372 closings per month. This compares with the average monthly closing rate of 376 new dwellings that took place during 2004. The following chart shows the top 6 builders in Bakersfield ranked by closed sales activity through August 31, 2005. 38 File 4021 Lttttner & Associates. Inc. Ac cem nt Dictrirt ~S_q 2005 Builder Closings' Rank Builder Sales 1. Lennar/Coleman 517 2 McMillin 264 3 Centex Homes 253 4 Castle & Cooke 192 5 Lenox Homes 148 6 ADH Corporation 134 Bakersfield's top three builders shown in the chart above aze selling the bulls 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 during calendar year 2004. New Residential Building 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 regazd to .residential development 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 mazket, and it will assist in forecasting future 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 pazagraphs we discuss the various elements of the demand side of the single family housing mazket. 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. ' Figures reflect activity between 7anuary 1 and August 31, 2005 39 Lauver 8c Assaciates. Inc. Assessor nt District /15-3 Tn examining the historical and projected growth rates for the city of Bakersfield', it was-noted that in the period from 2000 to October 2005, the population increased 20.07%. Projections from 2005 to 2010 indicate a further population increase of 17.5°ln as shown in the following chart. City of Bakersfield Population Year 2000 1 2005 2010 Populatio 247,OSb 296,663 348,579 ', The projected population growth rate from 2005 to 2010 is 51,916 persons, a projected compounded increase of 6.57% per yeaz. The projected growth is based on data from Demographics Now, a nationally recognized demographer, and was adjusted to take into account the recently approved master planned communities in the Northeast and the 1,600-acre planned Old River Ranch development in Southwest Bakersfield. We are also aware that an approximately 1.S square mile master planned development in the Northwest for which the City is processing preliminary studies and approvals. Bakersfield Population and Housing 2005' 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 Population 296,663 348,579 Total Detached Units 101,753 120,199 Owner Occupied 70,311 92,409 Renter Occupied 29,041 26,034 Vacant 2,350 1,756 Using the foregoing aoiual and projected population figures, an estimate of annual housing demand for the next five years is calculated as follows: d City of Bakersfield Planning Department, 2005, Demographics Now, Dice Files. s California Department of Finance, Danographic Research Unit. The above figures include population and housing within the corporate limits. 40 File 4021 Lauver & Assaciates. Inc, A s cement Di trict OS- Bakersfield Detached Housing Demand Forecast 2010 Housing Demand -Owner Occupied 92,409 Less 2005 Owner Occupied 70,311 Five Year Demand 22,098 Annual Housing Demand 4,420 The estimated housing demand estimate is above the 2004 annual permit rate of 4,222 new singlerfamily detached residential units. A total of 3,626 single family permits had been issued as of August 31, 2005, an average monthly rate of 453 units. Assuming the permits continue at this rate, we are projecting a total demand of 5,488 units. The new single-family closings were 2,976 within the City limits through August 2005. This represents an annualized demand of 4,464 units. Therefore the Housing Demand Forecast demonstrates that the sales and new permits are keeping pace with population growth. On this basis we aze forecasting an annual demand of 4,500 single-family housing units per year. SugRiv Characteristics The next step in the analysis of the residential housing market in 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 1980's with an oversupply of 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 constmeted 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. 41 Lauver & Assnciates.7ne. Accescment Dictrict D -? -,~ City Building Permits Issued 1997 199$ 1999 2000 2001 2002 2003 2004 2005* 1,352 1,983 1,899 1,994 2,432 2,947 3,626 4,222 5,436 ~~, 'Figures Mnualized 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 account for an ever- increasing number of sales. 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. Ghrrent Estimated Housing Supply 4,500 Plus Estimated Under Construction (3% flex margin) 135 Estimated Current Supply based on permits issued 4,635 Less: 90% pre-sold -4 172 Estimated Unsold hrventory 463 In the Bakersfield mazket we find that three or four larger corporations such as Castle & Cooke Homes, Centex Homes, Lennar Homes, and McMillin Homes control the supply of finished lots and housing product to a lazge degree. These companies will process unimproved land through the citylcaunty-required stages of entitlement, infrastructure construction and mapping. These developers complete their finished lots to fmished housetlot combinations or sell 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 guarantee 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 42 File 4021 Lauver & Associates. Inc. Acsessmo r A;ctrirr Its 2 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 Homes and US Homes, who sold subdivisions on apre-plotted basis, found that the local market preferred the pre-construction sale option and pwchased from the smaller local builders who were able to provide more flexibility in floor plans, lot selection, fntish options and amenity packages. In checking with some of the major builders, it was our fording that they typically have from 3 to 5 units under construction not sold in their various projects (spec homes}. For example, Lennar Homes may have 5-8 subdivisions selling in various areas in metropolitan Bakersfield. McMillin Homes has a similaz 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 mazket currently. This is due to the local building industry practice of starting housing construction only after acceptance of deposits from pretlualified 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 the extended constmc$on 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. In the pre-plotted scenario (which seems to be gaining some favor 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. i 1 3 i i 43 ~auner & A.csaciates. Inc. Assessment Dictri~r nS_; Interaction of Demand & Suoaly In the preceding examination of demand and supply conditions, it was determined that based on the past five years average annual permit activity, demand for single-family residential dwelling units is forecast at more than 4,500 units annually over the next five years. Analysis of supply conditions indicates that the supply is virtually equal with demand and there is very little standing inventory. We also checked with the Bakersfield Planning Department. They carnpile data with regard to active tentative tract maps and recorded maps. We reviewed their published figures as of September 1, 2005 and have reproduced them in the following chart. City of Bakersfield Active Tentative Tracts September 2005 Tentative Map Type No. Tracts Remaining Lots Recorded 86 14,440 Approved 18 2,426 Pending 8 912 Totals ] 12 17,778 Based on the data provided by the City Planning Department, there is a total of 17,778 lots in 112 developments that could be completed. We checked with the City and we teamed 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 15,111 lots. Accepting the published figure of 17,778 lots with potential for development represents an annual supply of 3,555 lots. Because of the developer's practice of constructing almost exetusively pre-sold units, the total potential lot supply is not a concern. It would be prudent however, to make periodic checks with the major builders to determine if they have placed any of their recorded or approved subdivision maps in the pro-plotted scenario. If builders begin to shift to the pre-plotted subdivision practice, and the number of houses under construction unsold combined with pr~sold starts substantially exceed the historical and forecast demand conditions, lenders will need to institute safeguards against the risk of an overbuilt situation. 44 File 4021 Laarzer & Assnciates. Inr Asr ~ m nt Distri t 0 - On the demand side, we cited the single-family residential permit activity over the past six yeazs. In general, permits have been issued at the mte of 1,500 to 5,000+/- units annually and have averaged 3,443 permits over the past five 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 neazly 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. HOllS1nE 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 $3.$ trillion in 2003, would decline to $1.9 trillion in 2004. The report went on to state that, while the volume of loans originated for home purchases will increase annually across the three-year forecast period of 2005-3006, the refinance shaze of originations will fall from 6b 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 2005 in the 5.75 to 6.0 percent range, increasing to over 6 percent by the end of 2006, according to MBA economists. MBA's outlook said home sales will slow slightly over the next two years after having set a third consecutive annual record in 2004. Home prices will continue to rise, but at a slower pace, the association said. Nationally, existing home sales would 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 were 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 would 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 45 ~auner & Ac aciates.7nc. Ac c ment Dictri t OS-3 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 howeger, 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 Bakersfeld 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 1,200 homes for sale on any given day. • Through the 3rd quarter 2005, home sellers received an average of 98.$°l0 of asking price. • New home construction permits total of 4,222 permits issued in 2004. This compares with 3,626 in 2003. The monthly permit rate in 2005 indicates annual permits of 5,448 at year-end • A study of the Bakersfield Metropolitan azea sales activity shows the average resale housing prices recorded by year end 2004 aze up 32.8% over 2003 existing home prices in the same period. • The price per squaze foot of a new construction home during 2004 was $144.93 compared with $109.11 for existing housing during 2003. • According to Ticor 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 Califomia, we are forecasting a continued strong market through year-end 2005, and addition of 3,600 to 4,150 new dwellings absorbed annually. Bakersfield Citv Conclusions Throughout the United States, the BakersfieldfKem 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 Califomia, with a population of more than 925,000 within the sphere of influence and more than 300,000 within the City limits. The expanding population and growth is 46 File 4021 Launer & Associates, Inc Asseccment Dirtriro I15 ? attributed to a strong economy that was traditionally tied to oil production and agricultwe 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 Califorriia's San Joaquin Valley. The city is the county seat of Kern County and is I10 miles north of Los Angeles via Interstate 5 and Highway 99 and 110 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. Kem 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 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 mark. 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 47 ~auner & Assoeiatec. Inc. Ascflscmv.+t n:cr.ier nS_3 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 tum to service, support and shopping space needs. There is sufficient entitled land available for rapid response in supply to meet the historical demand conditions. 48 File 4021 ~auner & Associates. Inc. Ass ssnxe~r n%striry nS ? NEIGHBORHOOD DESCRIPTIONS -LIBERTY II AREA Liberty II Neiehborhood Boundaries -'"' ~ The subject neighborhood is located in the southwest section of the City of Bakersfield, within the City Limits. The neighborhood covers roughly a two square mile area, bounded by the major streets as follows: North Side Boundary Ming Avenue Major East-West Arterial South Side Boundary Panama Lane Major East-West Arterial East Side $oundary Freeway 99 Interstate Freeway West Side Boundary Gosford Rd. Major North-South Arterial The physical boundaries of the neighborhood were selected because of the predominantly agricultural and residential land use patterns in the azea. The general neighborhood boundaries are shown on the map below. i~ c.ivnnvicnvt~L - - - i }._.,-,..i,_. >~~ I ~; i ~ 7 ' 3 ~. ~' ~~ ~ ~~ uaRxav - _ _ _ 49 ~auner & Associntes. Inc. A essm nt Dirtrict 0 -3 i @ e ~ ,. r 1 fl .._.m„ ' Y~a i ~ ~ ~ w w ~ N- r 1 xB y .~ N~i l } ~ ,AZ j j :.: RR Y 1 1 f e I - R.Milt~ N ~ Is { ~ 1 tt x. 1 ~' 10' sy z _ ~ ' 'sl(oif~` .. f _ ~ 1 ~ if~ - 1~ I ~ro Ste- - ~ y ~ 1 1 THL L(8p'RTr 7!'ARF:/ F u ~ *p~ ~~ I i ~ f f~ a b `~"~I aO. tutj ~ ~~ ~~ 1 I f{ THC TC50R0-ENfANi'O ARCR (TRACT N0. 8398) TRg bGXONb RiDCt ARCH' ~~ ~ L~3Y) 1 -_~ Innna.ien .eac THS R1DCR ARCA {TRAC7' X0. LL40 q M } 1 R ~ V 50 File 4021 Launer & Accnciates Tnc A eccm nt DicUict l15 3 General Neiehborhood Descriution The neighborhood is located in the southwest quadrant Bakersfield, approximately 11 miles south of the downtown civic center azea. Lazge portions of the area are cultivated, irrigated field and row cropland along with large parcels of unimproved underdeveloped land with natural vegetation cover. The overall chazacter of the neighborhood is transitional, from agricultural to urban uses. Since much of the vacant land in the planned areas of the city to the north of this neighborhood is approaching full build out, it is anticipated that urban development will continue ' to spread into this area. This would follow the Ciry's historical growth pattern that has steadily shifted to the south and west over the past twenty-five years The most recent improvements in the vicinity of the subject were the expansion of previous phases of the Campus Park and Silver Creek planned developments. These areas consist of homogeneous single-family dwellings ranging in size from about 1,100 to 2,000 square feet. These aze on smaller city lots of 4,500 to 6,000 square feet, in various tracts. The housing in the area ranges from new, to about 12 years of age. In these areas, the dwelling units aze of medium quality, consisting of Ranch, Spanish, Mediterranean and Contemporary styling in one and two-story design. Our studies indicate that sales activity in these nearby developments has been good, with absorption rates from 8 to IS units per month, depending on the builder, housing product and the time frame analyzed. hi general, pricing has been attractive to the first time and move-up homebuyer market segments. Access The neighborhood has goad access to all parts of the city via Panama Lane and White Lane, both with Freeway 99 an-off ramps two miles east of Ashe Road. Ashe, Gosford and Buena Vista Roads are major arterials providing access in the north and south directions to Stockdale Highway, White Lane and Panama Lane. 51 Lauver & Associates Inc Acc ssmenl District DS 3 White Lane from Freeway 99 to Ashe Road is a divided four-lane arterial. Panama Lane is a j divided four-lane arterial providing access to the west from Freeway 99. Panama Lane narrows to two-lanes at Gosford Road. Buena Vista Road is a divided four-lane, north-south arterial north of Pacheco Road; south of Pacheco it is a two lane secondary street. Community Services The Bakersfield Police and Fire Departments serve the neighborhood. A fire department substation serving the subject neighborhood is on Stockdale Highway between Ashe and Gosford Roads. 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 community shopping center, at White Lane and Coffee Road, is 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 retaii strip in the center. City, County and Administrative services aze in the downtown central business district, approximately 11 miles northeast of the general neighborhood. 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 overall character of the neighborhood is in a state of transition, from agricultural land, older residential, and outmoded commercial uses, to a very modern 52 File 4021 Lauver & Associates- Tnc. Ass s went Dictri t OS- I residential urban environment; including two rapidly developing master planned communities with desirable, attractive amenity feahues. 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 out of the area buyers who are relocating to Bakersfteld for affordable housing and the quality lifestyle available here. 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 particulaz. 53 Lanner & Associates. Inc. Ass cement ietriet OS- SITE DESCRIPTIONS - LIBERTY II AREA The subject parcel is accessed along its westerly boundary from Ashe Road and approximately 785 feet along its southerly boundary from Panama Lane. Size - Shaoe - Tono~raahv According to the Kern County Assessor's office, the subject is described as portions of Assessor's Parcel Number 499-Oll-Ol, showing gross acreage of 34.80 gross acres. The Tentative Tract Map 6475 prepared by McIntosh & Associates and the Engineer's report prepared for this portion of the Assessment District also indicates a land area of 34.80 gross acres. It is triangular in shape, with approximately 1,267 feet frontage along the north line of Panama Lane running easterly from the Corner of Ashe Road. It has approximately 2,567 feet frontage on the east line of Ashe Road. The reader may wish to refer to the schematic reductions of the tract maps shown in this report for a graphic representation of the subject's shape characteristics. It appears to be generally level with a slight natural gradient sloping downward from northeast to southwest. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Street Improvements Ashe Road is apublic-maintained four lane north south arterial. Off-site improvements consist of full width paving along Ashe Road with curb and gutter in place. At completion of the residential lot construction the interior streets will be 60'-wide City dedicated and maintained residential streets. 54 File 4021 Loaner & Ascaciatec. Inc. Acseccment DicYrirt OS 3 According to the Bakersfield Planning Department, the majority of the subject parcel is currently zoned R-2. This zoning designation allows single-family residential land uses, with a minimum lot size of 2,5Q0 square feet for each dwelling unit. A portion of this azea, 9.88 acres, is zoned for commercial uses. Easements and Encroachments The appraiser was not provided with a title report for review. No adverse easements or encroachments were observed on the site or on the plat and it is assumed that none exist; however, the appraiser makes no warranty to that effect. Utilities Electricity, water, gas and sewer are located at the subject's frontage along both Panama Land and Ashe Road and are connected to the site. Atl utilities are being placed underground in Phases 1-3 and utility trenching including stone sewers is underway in the remainder of the tract. 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 physicalinspection 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 55 Lauver & Associates. Inc. Acceccment Dictri t 11 S_3 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. Flood and Earthquake Zones According to the Federal Emergency Management Agency Federal Insurance Administration pane1060095-1015 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 is 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. Surrounding Area Improvements hnmediately east of the subject across Ashe Road to the west are prior phases of the subject's northerly property boundary are previous phases of Silver Creek residential developments. Land uses south of the subject to the east of Ashe Road comist of primarily field and row cropland with a few older farmhouses on 20-acre or larger parcels. East and West of the subject background land uses are residential in nature, consisting ofsingle-family tract housing. Lot Sizes The residential lots in the subdivision typically have 45 feet of street frontage and range in size from 4,295 to over 10,000 squaze feet, with an average lot size of 4,921 square feet. 56 File 4021 Lnuner & Ascocirrtes Inc Assessment District OS 3 The 107 buildable lots in Tract 6475 are generally rectangular in shape with typical street frontage of 45 to 50 feet. Depths vary, but aze generally a uniform depth of 95-feet. The lot sizes by phase are summarized in the following chart followed by a schematic lot diagram. Phase Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Number of hots 22 28 20 16 21 Smallest Lot 4,275 4,340 4,468 4,500 4,500 Largest Lot 5,922 10,277 5,869 5,095 5,857 Mean Lot Size 4,847 5,480 4,745 4,640 4,$92 6475 ~+ a{t mw sEC n t TIOSRS][ \ ~ \Cl t\\\ ` 1 1 t ~ \ ' ~$~` 4 1~\ \S`AS'~ `t\\~\` t MIb. MJa ~ ~ \ ~ wZ ~ R ` tl (', R< Ml ~ ~ +• \ \ W \ ~ T~~iw.ea~s ~ $ \ ~ wi ~ \ ' ~ ~~ 1 nq Np, W i6 lFl9 ue~xrrnnRea xwm+a w-Rir. ~]i ® ~ mrv~Ra r.m ra ~ iNRM MM~WRt \\\\ '~ ~ ..... . 'ice-JGTS t ,gyp S. R 1T E v/' ~E 9W~L i~ ~ C06~. 57 Lauver & Assnciates_ Inc. Ac es ment District (!5- The lots are smaller than typical of most other parcels that are being developed with residential housing in the City. The tract is well located in an area of Southwest Bakersfield that has established itself as a desirable area however, and the smaller lot sizes are not expected to deter demand nor absorption rates. The growth trends toward this area are a positive factor that will serve to enhance and maintain property values in this area. Conclusions• Na 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 subject tract is physically suitable for the type and density of development proposed, and is well located with reference to schools, shopping and other social economic establishments. Because of its location in proximity to the major arterials White Lane, Buena Vista Road, Ashe Road and Panama Lane, the subject will provide its resident's ease of access and short travel times to conveniences. A review of the lot sizes in the subject phases indicates that the average lot sizes are smaller than many subdivisions in the northwest and southwest Bakersfield azea but not without precedent. In other areas where small lots have been featured, the lower cost for finished housellot combinations has attracted many first time homebuyers and sales activity has been brisk. Therefore, the small lot subdivision is considered to have a necessary place in the local market and is likely to enhance the appeal of the subject lots and completed housing product competing for market share. The market niche supplied by these lots conforms to the area and the general development trends in the Southwest Bakersfield area. This should assist in the marketing of the finished lots with ar without housing units and demandlgrowth trends should aid in maintaining values into the future. 58 File 4021 Lauver & Asroeiate .Inc. Ascecsrnent Dictriet 0 - NEIGHBORHOOD DESCRIPTIONS -VILLAGE GREEN AREA Neighborhood Boundaries The subject neighborhood is located in the southwest section of the City of Bakersfield, within the City Limits. The neighborhood covers roughly a two square mile area, bounded by the major streets as follows: Location Border Description North Boundary Rosedale Highway Major East-West Arterial South Boundary Taft HighwaylPanama Rd Major East-West Highway East Boundary Coffee Road Intrastate Highway West Boundary Enos Lane/Highway 43 Major North-South Highway The physical boundaries of the neighborhood were selected because of the land use patterns in the area. A graphic representation of the. area is shown on the neighborhood map below. NEIGHBORHOOD MAP ~ ~ ~ n. __..._ _. ..~ ~ , ,.. . ><F __. ~ ~, _, ~ , a_ ~ -. _, ~ ~ .~. .ELF. AIN _._ _ ~~AW ° a a t ~ . - --.. _~ t ~ ~ ~ m - r1N we ~ ~ ~ .~ ~ ~. r~~ 6 i _ ~ ~ ~ ... '' ~ 59 Laurzer & Ass#zciater Inc Ass ment Di trio OS-3 me vutag(e green Area ~ ,. ~ I. w , w, ~ - w. ~ u. +wwc i R~ »la I w I~ w PIIF- °. w I Nfa YIGLtC$ CA$8N AA6A '' tTR.SCT N0. 6#a1J ~. ~.-'~ ~. ~~ I w n ... Air •zhinc . ^v a tf"/ T ~" I ~ ~ 1 ~ ~ I I a: , AN KR ___ _ I _'TKI:N_ _ ____ ____ I ~~ ~~ T I e I I 1 I ¢NnVd ~rt-~~ M I n w~R t~l' I I ' Y a ~. ( 1R { I t. ,fN Y . ~ ~ ~ S I aW TU2m'~ ~ ~~ _ ~ .. .t~~- ~ ~ ~1 V rb / I w I _ pS 9 n aa x ~8Y u ~fAdCf~ 00. ~#M~ q. ~~_ ~ ~ ~9 ~ lp 1 Y ~"- N ree rssoRO-ar+caNro sRea (TRACT N0: BS181 rxa ouwNO Amca ~ ` ~' I (7TZA6T Np, d188) uew~.wn _ _ ~,b.i THa 77ID$R ARAA I (TRACE N0. 6280 r w 4 x E I ~. File 4021 .Lauver & Associates. Inc. A ec rn nt District 0 General Neighborhood Description The neighborhood is located in the southwest quadrant of Bakersfield, approximately 1 mile southwest of the downtown civic center area. Large portions of the area are cultivated, irrigated field and row cropland along with large parcels of unimproved or underdeveloped land with natural vegetation cover. The overall character of the neighborhood is transitional, from agricultural to urban uses. Since much of the vacant land in the planned areas of the city to the northwest of this neighborhood is approaching full build out, it is anticipated that urban development will continue to spread into this azea. This would follow the City's historical westerly growth pattern that has steadily shifted to the west over the past twenty-five years. The most recent improvements in the general neighborhood consist of residential tracts located primarily in the northeast to central sectors of the neighborhood boundaries as described previously. Access The neighborhood has good access to all parts of the city via Rosedale Highway, Stockdale Highway, White Lane, Panama Lane and Panama Road, all with Freeway 99 on-off ramps. Coffee and Gosford Road, Calloway Drive, Old River Raad and Buena Vista Roads are major arterials providing access in the north and south directions to Stockdale Highway, White Lane and Panama Lane. White Lane from Freeway 99 to Buena Vista Road is a divided four-lane arterial. Panama Lane is a divided four-lane arterial providing access to the west from Freeway 99. Panama Lane narrows to two-lanes at Gosford Road. Buena Vista Road is a divided four-cane, north-south arterial north of Pacheco Road; south of Pacheco it is a two lane road. 61 Lauver & Associates. Inc. A s anent Dictricr n5_i Community Services The Bakersfield Police and Fire Departments serve the neighborhood.. Fire department substations serving the subject neighborhood are on Stockdale Highway between Ashe and Gosford Roads, on Rosedale Highway between Calloway and Coffee Road and on Buena Vista Road south of White Lane. 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. Community centers serve convenience shopping needs at Allen Road and Rosedale Highway and at White Lane and Coffee Road. The centers aze both anchored by an Albertson's store. Other notable retail uses in the centers include Auto Zone, Jack-in the Box, Roadhouse Grill and a Del Taco fast food restaurant: There are several other retail outlets in satellite retail strips within the centers. Other convenience and retaiUservice facilities are located along the major arterials and at the major intersections City, County and Administrative services are in the downtown central business district, approximately 11 miles northeast of the general neighborhood. Existing Improvements and Development Trends The general area is rapidly improving with urban land uses. The Rosedale Highway and the White Lane arterials have the majority of the commercial, retail, convenience and service land uses at the major intersections. Gosford Road is also notable with new commercial uses and a recently opened power center located along the west line south of the Sunset Rail tine. The power center known as Gosford Village is part of the master planned Gosford Business Park. The power center is anchored by a new Sam's Club, Wal Ivjart, Petco and Kohl's deparhnent store. Other .retail operations include Walgreen's, Radio Shack, Starbucks, Payless Shoes and 62 File 4021 Znuner & Assncintes. Inc. Acev~cment District 11 - several national chain fast food restaurants. Across Gosford is another center with a Home Depot home improvement warehouse and several independent commercial uses. Established residential developments at the easterly portion of the neighborhood are generally located west of Freeway 99 along White Lane. These consist of medium quality tract built dwellings constructed in the 1970's and 1980's. The central portion of the neighborhood is dominated by the Stackdale Industrial Park, which is fully built out. It is a campus style business/industrial park and contains the majority of Bakersfield's industrial land uses. In the south-central portion of the described neighborhood is the Campus Park planned development. This area consists of homogeneous single-family dwellings ranging in size from about 1,100 square feet to azound 1,600 square feet. These are sited on smaller city lots from 4,500 to 6,000 depending on the tract. The housing in this area ranges from 3 to 12 years of age. The most recent developments are in the southerly portion of the described neighborhood at Buena Vista Road and Panama Lane. Here, Centex Homes continues toward build out of a 125- acre parcel. This development, known as Buena Vista Ranch, is being improved with two product lines, Greystone and Hidden Oak. They are about'/4 of the way to completion of the 487 lot development. The development opened in Mazch 2003 and the housing ranges in size from 1,432 to 2,842 square feet. Current pricing for Hidden Oak ranges from $248,000 to $365,000. North of this development is a Lennar Homes development on a 165-acre pazcel that was subdivided as Tract 6156, known as Terra Vista. This tract was subdivided with the first phases containing 234 buildable lots in the 7,500 square foot size range. The dwellings range from 1,580 to 2,800 square feet in size and priced from $275,000 to $360,000. The sales office reports they are limiting releases to 5-lots per month and have about 150 persons on their waiting list. Other notable builders who aze actively marketing houseJlot combinations are DR Horton, with about 15 new dwelling sales to date and Fairway Oaks South, a Burlington Homes development, with about 25 closed sales by month ending April 2005. These developments are located just 63 Lnuuer & Assnezntes. Tnc. Assessment Di trio OS- south of Pacheco Road and east of Old River Road, northeast of the Centex and Lennar developments mentioned previously. There has been newspaper publicity recently about another master planned community that will affect the subject neighborhood. This planned development is known as "McAllister Ranch". The boundaries front on the west side of Allen Road and extend south from the Union Pacific railroad tracks to Panama Lane. The McAllister Specific Plan was approved in November 1993, to be developed in four phases. Of the total 2,070 acres within this development, 1,160 acres are planned for residential development to 6,000 units of varying densities to be developed in four phases. In addition, the plan allows for 355' acres of commercial development, with an 18-hole golf course and 31-acre lake, and public schools. Residential Lots range from 5,000 square feet for entry level housing, to 21,870 square feet for large custom homes. The developers are in the process of obtaining a conditional use permit for an on-site sewer treatment plant. Upon approval, urban development is anticipated to continue, with construction on the first house not anticipated for, at least, two years. We are also aware of a transaction that is currently underway that has implications for the subject property. This transaction involves the purchase of approximately 1,600 acres located along the east line of Allen Road (adjacent to the subject) extending from Panama RoadlTaft Highway at the south north to Panama Lane, with the easterly boundary of the project formed by Old River Road. This is to be a master planned development to be known as Old River Ranch. The buyers, Greg Petrini and Lehman Bros., who are buying the land from seven different owners, intend to develop the master planned community with a mix of high and low density residential and commercial uses. The land is in various stages of entitlement with the entire project slated for annexation into the City of Bakersfield. A hearing with the City Planning department was held and it will go before the City Council for final approval in December. Completion of the annexation is anticipated in March 2006. The contract for the purchase was executed in October 2003 at a reported price of $39,000 per acre. Other notable transactions in progress involving lazge parcels include an approximately 80-acre parcel at the Southwest corner of Old River Road and Panama Lane is being developed as a 64 File 4021 Lauver & AssoeinYes, )ne. Arc ssm n Dicrrier OS- residential subdivision as a joint venture between Lennar Homes and Antongiovanni Ranch. Adjacent to this is an approximately 300-acre parcel owned by Antogiovanni Ranch and being offered at $140,000 per acre. A 170-acre parcel along the east line of Old River Road extending from Panama L. ane to '/a mile north of McCutcheon Road was aaluired by S&S Homes and is now in the entitlement process. These data demonstrate the development trend to the southwest portion of the neighborhood and the City. It was also noted that there is a dramatic upward trend in pricing for land over the past year fueled by the rapid residential demands in the Bakersfield arearn general and the subject neighborhood in particular. 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 overall character of the neighborhood is in a state of transition, from agricultural land, older residential, and outmoded commercial uses, to a very modern residential urban environment; including two rapidly developing master planned communities with desirable, attractive amenity features. 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 out of the area buyers who are relocating to Bakersfield for affordable housing and the quality lifestyle available here. Barring any unforeseen negative economiclsocial occurrence, all of the discussed findings should assist in maintaining values in the area in general and for the subject in particular. 65 J~ttner & Associates.7nc. Acs ssment i trio ©5- Schematic Lot lliagram - Villa¢e Green Tract 6448 .. ~-' . ~ ~, ~..,~ .. .t~.. f ~~ , ~ m + ~ ~ ~ ~~ m ~; _ $ fig. ' f .. .. f.. ..~.. ~l ~ ~& ® , ale:' k § ~ ~ n~tr ao [r s,~ m r ` a c ` : ~ ~ l do ~ ~ . ~~~,t ~~I~~s. ~ AF',EA a ~ se.-oro-~j3 ~ 8t ~ R~utm:vu~ '~ ~ ~ tv wa.B ~~ ~ p _ @ X~ 1g ¢ iw ~ saw ~ N(tRRYYld j' $'AL& 1' _ E-0' 66 F1e 4021 Lnuner & Associates. Inc. Asses went District OS-3 SITE DESCRIPTIONS -VILLAGE GREEN AREA Location and Access The subject parcel is accessed along the entirety of its northerly boundary from Stockdale Highway, a distance of approximately''/a mile. Stockdale Highway is a publicly maintained four lane road. It also has frontage along the west line of S. Renfro Road, a distance of approximately'/< mile. S. Renfro Road is a publicly maintained road that is improved with two traffic lanes. The subject pazcel's frontages have neither sidewalk nor curb and gutter. Size - Shaoe - Topographv According to the Kem County Assessor's office, the subject covers $2.10 gross acres. It consists of a portion of Section 3, Township 30 South, Range 26 East, Mount Diablo Base and Meridian. It is also identified as portions of Assessor's Parcel 524-010-09. The reader may wish to refer to the reductions of the Assessor's maps shown in this report for a graphic regresentation of the subject's shape characteristics. The parcels appear to be generally level with a slight natural gradient sloping downwazd from northeast to southwest. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Proposed Lot Sizes The buildable lots in Tract 6448 are generally rectangular in shape with typical street frontage of 45 to 50 feet and range in size from about 5,700 to over 8,800 square feet, with an average lot size of 6,300 square feet. Depths vary, but are generally a uniform depth of 95-feet. The lot sizes by phase are summarized in the following chart followed by a schematic representation of the lot layout. 67 ~aaner Bz Associates. Inc. A se went District (/S_3 Tract 6448 Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10 Unit 11 Unit 12 No. Lots 10 36 24 23 37 39 45 31 21 36 23 29 Type 45 55 45 55 45 55 55 55 55 45 45 45 Avg Size $,$49 6,259 6,429 6,660 5,996 6,867 5,755 5,703 6,513 5,796 5,610 5,178 The lots are smaller than typical of most other parcels that aze being developed with residential housing in the City. The tract is well located in an azea of Southwest Bakersfield that has established itself as a desirable area however, and the smaller lot sizes are not expected to deter demand nor absorption rates. The growth trends toward this area are a positive factor that will serve to enhance and maintain property values in this area. Site Development As of the date of value the majority of the land is fallow agricultural land. As of the date of this report however, earthwork for development has begun on the parcel for its development with single-family residential lots. Physical Supaort Characteristics There were no signs of soil subsidence or cracking noted at the time of inspection. The appraiser was not furnished a copy of a Preliminary Geotechnical Engineering Report. It is assumed that a Geotechnical engineering study and report has been made however, and all site preparation has been or will be completed meeting with all recommendations contained in this report, and all governmental approval{s) with regard to support characteristics have been obtained. However, the appraiser cannot guarantee such an occurrence. Environmental haracteri ticc The appraiser has no knowledge concerning the presence or absence of any hazardous materials or wastes within, or in proximity to the subject property. Aphysical 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 68 File 4021 Lnuner & Associnter. ]nc. A cersment Di trio 0 - 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 hazazdous materials, existing or past soil contamination. If there is any question regazding the presence of any coptaminants, 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. ff such toxic conditions do exist, the property value may be adversely affected. Flood and Earthauake Zones According to the Federal Emergency Management Agency Federal Insurance Administration map panel 06007611275B, dated September 29, 1986, the site is situated within a mapped Zone C area. This designation indicates the subject is in an area of minimal flooding and flood hazard. According to Special Publication #42 of the California Division of Mines and Geology, Revised Edition, 1994, entitled "Fault-Rupture Hazard Zones in California", this parcel is not located within any Special Studies Zones, as defined in the Alquist-Priolo Special Studies Zone Act. Electrical and telephone service is in place along the subject's frontage Stockdale Highway. The electrical service is provided by Pacific Gas & Electric and telephone service is provided by Pacific Bell. Water service for domestic uses exists in the street an Stockdale Highway. Zonine According to the City of Bakersfield Planning Department, the subject is zoned R 1. This zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 squaze feet for each dwelling unit. 69 Zauner & Associates. Ine. Accescment Di tricl OS-3 Conclusion The subject land is typical of agricultural land in the surrounding area. No detrimental influences contiguous to any individual parcels in the subject property or in the general area of the subject tract were observed. The subject lies in the growth path of urban development trends and is well located with reference to schools, shopping and other sociaUeconomic establishments. Because of its location in proximity to major the subject will provide its resident's ease of access and short travel times to all services and conveniences. As evidenced by land sales cited previously and ongoing development to the north and east, overall trend in the neighborhood is demonstrating strong demand, with the surrounding land uses in the area considered transitional from agriculture to urban development. The general development trends in the Southwest Bakersfield area should assist in the mazketing of the subject land and demandtgrowth trends should aid in maintaining values into the future. 70 File 4021 ~auner & A.csociatec. Inc. A ceecment Distr;ro OS 3 NEIGHBORHOOD DESCRIPTIONS TESORO-ENCANTO AREA Neighborhood Boundaries The subject neighborhood is located in the southwest section of the City of Bakersfield, within the City Limits. The neighborhood covers roughly a two square mile area, bounded by the major streets as follows: Location Border Description North Boundary White Lane Major East-West Arterial South Boundary Taft Highway/Panama Rd Major East-West Highway East Boundary Freeway 99 Intrastate Highway West Boundary Enos Lane/Highway 43 Major North-South Highway The physical boundaries of the neighborhood were selected because of the land use patterns in the area. A graphic representation of the area is shown on the neighborhood map below. 71 NEIGHBORHOOD MAP Launer & AssUCiates. Inc. Assessment Di trio 04-? I @I i .. •• ~ ., ,. i ~ .omx ~ - -:, r' ~ ~ p~p s I pIR .. I gI i I YRS(~e7pfL~1Gt CRSSN AR&l '~- -7 _~ r y n I •'f _ _ __ I1II( ISO"f. [YSEZ+E • : : i 1 1 ~ ___ H ~ __'•Inl tLrt_ _ ' _ ___ _ i ~ bWlf;NS ~~[ ~ ~ ~ 1• 'N ~ ~ 1 i ,> , M ~ -~~_ i - I ~ I¢ • -THE Ll8$R1'Y R-AREA j-- -- ~ .. - ~ I m j~ (»~~ ~P. Jl7EJ e - fxA----~-- ---~-- - ~~ M ~~ tl tFlS TESOR6-SNCAN'M AREA (TRACT NC. 83iHJ TffB PGNOND RfDCS ARSA ' (TRACt N9 C33E) - ,wneo•xun wai d THE RPJER ARG (1TLtG7 NO. BE30 a w q, FF 1 6 72 File 4021 Lauver & Assr~ciatec. Jnc. Assescm nt Dictri t OS General Neighborhood Descri to ion The neighborhood is located in the southwest quadrant of Bakersfield, approximately I 1 miles southwest of the downtown civic center area. Large portions of the area are cultivated, irrigated field and row cropland along with large pazcels of unimproved or underdevelgped land with natural vegetation cover. The overall chazacter of the neighborhood is transitional, from agricultural to urban uses. Since much of the vacant land in the planned areas of the city to the northwest of this neighborhood is approaching full build out, it is anticipated that urban development will continue to spread into this azea. This woutd follow the City's historical westerly growth pattern that has steadily shifted to the west over the past twenty-five years. The most recent improvements in the general neighborhood consist of residential tracts located primarily in the northeast to central sectors of the neighborhood boundaries as described previously. Access The neighborhood has good access to all parts of the city via White Lane, Panama Lane and Panama Road, all with Freeway 99 on-off ramps. Stine Road, Gosford Road, ©ld River Road and Buena Vista Roads are major arterials providing access in the north and south directions to Stockdale Highway, White Lane and Panama Lane. White Lane from Freeway 99 to Buena Vista Road is a divided four-lane arterial. Panama Lane is a divided four-lane arterial providing access to the west from Freeway 99. Panama Lane narrows to two-lanes at Gosford Road. Buena Vista Road is a divided four-lane, north-south arterial north of Pacheco Road; south of Pacheco it is a two lane road. 73 Launer & Associates Inc Asse anent District OS Community Services The Bakersfield Police and Fire Departments serve the neighborhood. Fire department substations serving the subject neighborhood are on Stockdale Highway between Ashe and Gosford Roads and on Buena Vista Road south of White Lane. 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 community center serves convenience needs at White Lane and Coffee Road. The center is 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. Other convenience centers with supermarket anchors are along White Lane at the major intersections City, County and Administrative services are in the downtown central business district, approximately 11 miles northeast of the general neighborhood. Existin¢ Improvements and Development Trends The general azea is rapidly improving with urban land uses. The White Lane arterial has the majority of the commercial, retail, convenience and service land uses at the major intersections. Gosford Road is also notable with new commercial uses and a recently opened power center located along the west line south of the Sunset Rail line. The power center known as Gosford Village is part of the master planned Gosford Business Pazk. The power center is anchored by a new Sam's Club, Wal Mart, Petco and KohPs department store. Other retail operations include Walgreen's, Radio Shack, Starbucks, Payless Shoes and several naflonal chain fast food restaurants. Across Gosford is another center with a Home Depot home improvement warehouse and several independent commercial uses. 74 File 4021 Lnuner & Associates. ]nc. A e sment District OS 3 Established residential developments at the easterly portion of the neighborhood are generally located west of Freeway 99 along White Lane. These consist of medium quality tract built dwellings constructed in the 1970's and 1980's. The central portion of the neighborhood is dominated by the Stockdale Industrial Pazk, which is fully built out. It is a campus style businesstindustrial park and contains the majority of Bakersfield's industrial land uses. In the south-central portion of the described neighborhood is the' Campus Park planned development. This area consists of homogeneous single-family dwellings ranging in size from about 1,100 square feet to around 1,600 square feet. These are sited on smaller city lots from 4,540 to 6,000 depending on the tract. The housing in this area ranges from 3 to 12 years of age. The most recent developments are in the southerly portion of the described neighborhood at Buena Vista Road and Panama Lane. Here, Centex Homes continues toward build out of a 125- acre parcel. This development, known as Buena Vista Ranch, is being improved with two product lines, Greystone and Hidden Oak. They are about'/o of the way to completion of the 487 lot development. The development opened in March 2003 and the housing ranges in size from 1,432 to 2,842 square feet. Current pricing for Hidden Oak ranges from $248,000 to $365,000. North of this development is a Lennaz Homes development on a 165-acre parcel that was subdivided as Tract 6156, known as Terra Vista. This tract was subdivided with the first phases containing 234 buildable tats in the 7,500 square foot size range. The dwellings range from 1,580 to 2,800 squaze feet in size and priced from $275,000 to $360,000. The sales office reports they are limiting releases to 5-lots per month and have about 150 parsons on their waiting list. Other notable builders who are actively marketing housellot combinations are DR Horton, with about 15 new dwelling sales to date and Fairway Oaks South, a Burlington Homes development, with about 25 closed sales by month ending April 2005. These developments are located just south of Pacheco Road and east of Old River Road, northeast of the Centex and Lennar developments mentioned previously. 75 partner & Associates. Inc. qss ssm nt Distrir•t OS-i McMillin Homes, who purchased the Kyle Carter holdings in Bakersfield has three subdivisions under construction in the Panama LanelBuena Vista Road area and our records show There has been newspaper publicity recently about another master planned community that will affect the subject neighborhood. This planned development is known as "McAlister Ranch". The boundaries front on the west side of Allen Road and extend south from the Union Pacific railroad tracks to Panama Lane. The McAllister Specific Plan was approved in November 1993, to be developed in four phases. Of the total 2,070 acres within this development, 1,160 acres are planned for residential development to 6,000 units of varying densities to be developed in four phases. 1n addition, the plan allows for 355 acres of commercial development, with an 18-hole golf course and 31 acre lake, and public schools. Residential lots range from 5,000 square feet for entry level housing, tc 21,870 square feet for large custom homes. The developers aze in the process of obtaining a conditional use permit for an on-site sewer treatment plant. Upon approval, urban development is anticipated to continue, with construction on the first house not anticipated for, at least, two years. We are also aware of a transaction that is currently underway that has implications for the subject property. This transaction involves the purchase of approximately 1,600 acres located along the east line of Allen Road (adjacent to the subject) extending from Panama RoadlTaft Highway at the south north to Panama Lane, with the easterly boundary of the project formed by Old River Road. This is to he a master planned development to be known as Old River Ranch. The buyers, Greg Petrini and Lehman Bros., who are buying the land from seven different owners, intend to develop the master planned community with a mix of high and low density residential and commercial uses. The land is in various stages of entitlement with the entire project slated for annexation into the City of Bakersfield. A hearing with the City Planning department is scheduled for July 2005 and it will go before the City Council for final approval in December. Completion of the annexation is anticipated in March 2006. The contract for the purchase was executed in October 2043 at a reported price of $39,000 per acre. Other notable transactions in progress involving large parcels include an approximately 80-acre parcels at the Southwest comer of Old River Road and Panama Lane is being developed as a 76 File 4021 Lauver & Associates. Inc. Accessment Di trio OS-~ residential subdivision as a joint venture between Lennar Homes and Antongiovanni Ranch. Adjacent to this is an approximately 300-acre parcel owned by Antogiovanni Ranch and being offered at $140,006 per acre. A 170-acre parcel along the east line of Old River Road extending from Panama bane to '/ mile north of McCutchen Road was acquired by S&S Homes and is now in the entitlement process. These data demonstrate the development trend to the southwest portion of the neighborhood and the City. It was also noted that there is a dramatic upwazd trend in pricing for land over the past year fueled by the rapid residential demands in the Bakersfield area in general and the subject neighborhood in particular. 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 overall chazacter of the neighborhood is in a state of transition, from agricultural land, older residential, and outmoded commercial uses, to a very modern residential urban environment; including two rapidly developing master planned communities with desirable, attractive amenity features. 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 out of the area buyers who aze relocating to Bakersfield for affordable housing and the quality lifestyle available here. Barring any unforeseen negative economiclsocial occurrence, all of the discussed findings should assist in maintaining values in the area in general and for the subject in particulaz. 77 Launer & Associates. Inc, Accescm nt District 0 -3 78 File 4021 Lauver & Associates. Inc Assessment Distri 7 DS i SITE DESCRIPTIONS - TESORO-ENCANTO AREA Location and Access The subject parcel is accessed along the entirety of its southerly boundary from Panama Lane a distance of'! mile. Panama Lane is a publicly maintained two lane road. It also has frontage along the west line of Buena Vista Road, a distance of approximately %z mile. Buena Vista Road is a publicly maintained road that is improved with two traffic lanes along the easterly side. The easterly side has been improved with curb/gutter, sidewalks and street lights. The subject parcel's frontage along the west line of Buena Vista Road consists of a single traffic lane and na sidewalk nor curb and gutter exists. Size-Shage=Tapograohv According to the Kem County Assessor's office, the subject covers 79.80 gross and 68.25 net acres. It consists of a portion of Section 24, Township 30 South, Range 26 East, Mount Diablo Base and Meridian. It is also identified as Assessor's Parcel Number 524-170-28 and portions of 524-170-30 & 31. The reader may wish to refer to the reductions of the Assessor's maps shown iu this report for a graphic representation of the subject's shape characteristics. The parcels appear to be generally level with a slight natural gradient sloping downward from northeast to southwest. The soils aze classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Proposed Lot Sizes The buildable lots in Tract 6349 are generally rectangular in shape with typical street frontage of 60 feet and range in size from 6,599 to over 19,542 square feet. The average lot size is 8,711 square feet and the median size is 8,838 square feet. Depths vary, but are generally a uniform depth of 110' to 120'. 79 Lnuner & Ass~czntesJnc. AcsnssmentDir[r1~i OS_; Site Development As of the date of inspection the majority of the land is fallow agricultural land. Earthwork for development has begun on at the extreme southerly portion fronting along Panarna Lane. Physical Support Characteristics There were no signs of soil subsidence or cracking noted at the time of inspection. The appraiser was not furnished a copy of a Preliminary Geotechnical Engineering Report. It is assumed that a Geotechnical engineering study and report has been made however, and all site prepazation has been or will be completed meeting with all recommendations contained in this report, and all governmental agproval{s) with regazd to support characteristics have been obtained. However, the appraiser cannot guarantee such an occurrence. 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. &0 File 4021 Laurier & Assnczates. Ine. Assessua Hr Ai~~.:~1 nS-3 Flood and Earthquake Znnes According to the Federal Emergency Management Agency Federal Insurance Administration map panel 060076112758, dated September 29, 1986, the site is situated within a map91 ped Zone C area. This designation indicates the subject is in an azea of minimal flooding and flood hazard. According to Special Publication #42 of the California Division of Mines and Geology, Revised Edition, 1994, entitled "Fault-Rupture Hazazd Zones in California", this parcel is not located within any Special Studies Zones, as defined in the Alquist-Priolo Special Studies Zone Act. Utilities Electrical and telephone service is in place along the subject's frontage on both Panama Lane at the southerly boundary and along the east line of Buena Vista Road. The electrical service is provided by Pacific Gas & Electric and telephone service is provided by Pacific Bell. Water service far domestic uses exists in the street on Buena Vista Road. There is a deep well serving the parcel that is suitable for irrigation purposes. Irrigation water is also taken from the Buena Vista Canal. Zoning According to the City of Bakersfield Planning Department, the subject 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. 81 L[~uner & Associates. Inc. Aces meat Districr 5-3 Conclusion The subject land is typical of agricultural land in the surrounding area. No detrimental influences contiguous to any individual parcels in the subject property or in the general area of the subject tract were observed. The subject lies in the growth path of urban development trends and is well located with reference to schools, shopping and other sociaUeconomic establishments. Because of its location in proximity to the major arterials Panama RoadlTaft Highway, Buena Vista Road, White Lane and Old River Road, the subject will provide its resident's ease of access and short travel times to all services and conveniences. As evidenced by land sales cited previously and ongoing development to the north and east, overall trend in the neighborhood is demonstrating strong demand, with the surrounding land uses in the area considered transitional from agriculture to urban development. The general development trends in the Southwest Bakersfield area should assist in the marketing of the subject land and demandlgrowth trends should aid in maintaining values into the future. 82 File 4021 Lnuner & Asrncintes. Inc. Assessment District OS NEIGHBORHOOD DESCRIPTIONS - LIN AREA Selection of Neighborhood Boundaries The subject neighborhood is located in the Northwest section of the City of Bakersfield, within the City Limits. The neighborhood covers roughly a 13.5 square mile area, bounded by the major streets as follows: Location Border Street Description North Side Boundary Snow Road East-West Connector South Side Boundary Rosedale Highway Major East-West Arterial East Side Boundary Coffee Road Major North-South Arterial West Side Boundary Enos Lane North-South Arterial The subject neighborhood is located within portions of Census Tracts 5.01, and 38.01. The physical boundaries of the neighborhood were selected because of the predominantly residential land use patterns in the area. 83 Luuner & Associates. Inc. Acce ~ meat Dictrict 0 - i ne Lm area m I ~ \~w w ~ u 0 ~~ ~ ~~ c p RR n I r AIF d ~ ~ ~ ~ j TBE WrJ,aCE CR~N AREA '~- (T/7ACTN0. 8448) ~ - ...w .w ° n i _ 1 i»I~~»r rn nr i. ~ ~: : ~ ~ 1 R .-- A ~ -_~x.aw_ - Y ~ -__._ ~__-__'~ ~ i u £ i ! S [ Y i ~ ' (~N S ' I ffA~~~~41~1 ~~~~.'.y~ yrw ~n.n ~laa f~ r 1I ~.1 RS {{ T ~ , '/Ra 1.9 RTr /r.~RrA & ~ Y Y ~ ~ ~ (TIi4CT No. eaT9j --~--- w----~--- ----~------ II ---i- M ~~~ rNE rs9oRO-sxrwNro area (TRACT NC. 9349) iWE -UMBNA RlDC6 AR&i (TRACT NO. A49ej R "' i ~ ~ waua.oo . Y ! THE Rfdr$ AREA (TRACT NC. E298/ ~ d H e a , i F 84 File 4021 Laus¢r & Associates Inc A seccment Dictrict OS General Neiehborhood Description 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 communifies 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, a beach clublmulti-purpose facility and an 18-hole championship golf course. 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. High school and elementary school sites are incorporated into residential neighborhoods and are conveniently located to accommodate the student population. 85 Lnuner & Associates. Inc. Assessment District OS i 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 schoal and elementary school sites incorporated into residential neighborhoods throughout the planned community. Ultimately, the project will provide wer 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 north-south arterials in the neighborhood, Coffee Road and Calloway Drive in the area. New commercial developments along Rosedale Highway are also 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 goad, based on drive-by inspection, although many of the alder commercial-industrial type properties along Rosedale Highway are nearing the end of their economic lives and signs of deterioration and deferred maintenance is becoming evident. AccesstLinkages 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, Jewetta Avenue, a secondary north-south collector route and Allen Road a north-south street. Access to the State Highway system is via Rosedale Highway with ramps in 86 File 4021 Launer & Assaciates.7nc. Assessm nt District OS-3 both north and south directions and at Buck Owens Boulevard, approximately 4 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 $akersfield. The widening of Coffee Road to six lanes and a grade sepazation 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 subject neighborhood is on Rosedale Highway near Calloway Drive. 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. Elementary school aged students, grades Kindergarten to grade b, attend Almondale Elementary School located within % 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 comer 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, 87 Leuner & Assncirrtes, Inc. Arresrmi nr District d - FoodsCo, 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, 1-Hop, Roadhouse Grill, Wendy's, A&W and a Del Taco fast food restaurant. There aze 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 space. This power center has primary and secondary trade areas of 6 to 10 miles. The southeast comer 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 squaze 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 recent additions to this center. City, County 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 4way 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 conveniences. The overall character of the neighborhood is in a state of transition, from agricultural land, older residential, and outmoded commercial uses, to a very modern residential urban environment. 88 File 4021 Luuner & Assncintes. Inc. Ass ssntent District OS- 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 out of the area buyers who are relocating to Bakersfield for affordable housing and the quality lifestyle available here. 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. 89 Laerner & Associates. Inc. Ass ssm nt Distri 't OS-3 I ~ ~ NOHTTf 6YALS 1' + 160' r Schematic Lot Diagram -Lin Area 4 ~~ ~~. ~~ ~~:'~. ~ ~ ~ I $ ~ m a~ ~ `'~ ~~ ]~ ~~pp ~~yy~ "° ® ® q- ®. ~p ~ Ci ~y ~ fj ~ 9~ r : . ~ ~' wrap ~ L!N ARFJi i i~iL°. u a " ~~ ~ ~ Q 40 File 4021 ~.auner & A.rseciates. !nr, Arrerrment Di trio OS 3 ~ SITE DESCRIPTIONS - LIN AREA j Location and Immediate Area haracter The subject tract is located in the northwesterly portion of the subject neighborhood in the Northwest quadrant of the city of Bakersfield. It is situated at the northwest Corner of Allen Road and Noriega Road. The tract is an irregular shaped parcel bounded along the south by Vega Meadows Road, a curvilinear street. Immediate Area Land Usev and Economic Tn general, this area could be described as in a state of transition from agricultural land uses to residential subdivision developments. Across Allen Road east of the subject and along the north line of Noriega Road is a subdivision known as Hageman Ranch. The subdivision began construction about two years ago and sales have been brisk. New phases are under construction to the northeast along Reina Road where Lennar Homes is now offering their Montelena housing product. Along the east tine of Allen Road south of Noriega and extending south to Rosedale Highway, improvements consist of older single-family residences on large lots, typically 1 to 2 acres in size. These properties aze zoned allowing equestrian uses. Further east improvements consist of new and under construction subdivisions appealing to the entry-level to move-up residential market segments. South of the subject along the west line of Allen Road extending to Rosedale Highway aze mixed light industrial land uses that cover larger parcels of land To the west and north of the subject, land uses are primarily agriculture in nature, consisting of open field and row cropland and permanent plantings of almonds. Approximately 'la mile north of the subject a new high school, Frontier High School is under construction, scheduled for opening in the Fall of 2006. 91 Launer & Associates Inc Assessment Dictrict OS The overall character of the surrounding land use is transitional from established agricultural uses to new subdivisions of single-family residential housing. Size. Shape and Toooeraahv The subject is an irregular shaped pazcel bounded along the east by Allen Road. The southerly boundary is an extension of Noriega Road, which becomes Vega Meadows Road west of Allen. Vega Meadows Road is a curvilinear residential street providing two access points into the subject tract. According to the tract maps provided by the developer, the subject covers approximately 62.90 gross-acres per Assessor Parcel Number529-012-22. The reader may wish to refer to the reductions of the tract maps shown in the addenda section of this report for a graphic representation of the subject's orientation and shape characteristics. The topography is generally level with a slight natural gradient with drainage from north to south. On the date of inspection, all phases in the subject tract have been cleared and graded. Lot construction is well underway and models and production units are under construction. Utilities Utilities including gas, water, electricity, and telephone services are in place along Jewetta Avenue and are connected to the subject. Southern Califamia Gas Company provides natural gas service; water, sewer and storm sewers are serviced by the City of Bakersfield; electricity service is provided by Pacific Gas & Electric and telephone service is provided by Pacific Bell. Flood and Earthquake Zones According to the Federal Emergency Management Agency Federal Insurance Administration, the subject property is located in a Zone C azea, according to Federal Emergency Management Agency map panel 0600?5-0750B, with an effective date of September 29, 1986. This 42 File 4021 Lauver & Assaczates. Inc. Arsesrmerot Di triet OS-3 designation denotes areas of minimal flooding. According to Special Publication #42 of the Califomia Division of Mines and Geology, Revised Edition, 1494, entitled Fault-Rupture Hazard Zones in California, the subject property is not located within any Special Studies Zones, as defined in the Alquist-Priolo Special Studies Zone Act. of 'zes The lots in Tract 6289 Units 1, Z and 3 are generally rectangulaz in shape with typical street frontage of 70 feet. Depths vary, but are generally a uniform depth of 120 feet. A summary of the general lot characteristics is shown in the following chart. Phase Unit 1 Unit 2 Unit 3 Number of Lots 112 58 82 Smallest Lot 6,042 6,Q40 6,050 Largest Lot 15,391 17,039 32,094 Mean Lot Size 7,226 7,040 7,923 Zoning According to the Bakersfield Planning Department, the subject is currently 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 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 hazazd. 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 groperiy. The value presented in this 93 L~uner & Assncintes. lnc. Ass ssment Dictri t OS_3 i 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 deterrnine the potential environmental risks associated Physical Support Characteristics There were no signs of soil subsidence or cracking noted at the time of inspection. The appraiser was not furnished a copy of a Geotechnical Engineering Report. It is assumed that such a report will be obtained and ail site preparation will be completed meeting with all recommendations contained in such a report, and all governmental approval(s) with regard to support characteristics will be obtained. However, the appraiser cannot guarantee such an occurrence. Traffic Patterns Jewetta Avenue, a four lane north-south connector, forms the westerly boundary of the larger parcel Jewetta Avenue intersects with Snow Road at the 1-''/z miles to the north and with Hageman Road at the south. As shown on the tract map reductions, Reina Road forms the southerly boundary of Tract 6056 and Olive Drive forms the subject's north boundary. When all phases of the tract are complete, it will have 60' wide interior streets. Conclusions The subject is typical of other parcels that have been and will ultimately be developed with residential housing. It is well located in a rapidly growing area of Northwest Bakersfield. The growth trends to this area is a factor that will serve to enhance and maintain property values in this azea No detrimental influences contiguous to any individual pazcels in the subject property or in the general area of the subject tract were observed. The parcel's residential entitlement is consistent with the existing General Plan. As such, it will not cause substantial environmental damage or 94 File 4021 L toner & Associntec Inc Asse went Distri r nS 4 substantially and avoidably injure fish or wildlife or their habitat, nor is it likely to cause any serious health problems. The subject is physically suitable for the type and density of development as outlined in the general plan, and is well located with reference to schools, shopping and other sociaUeconomic establishments, Because of its location in proximity to the major arterials of Snow Road, Jewetta Avenue, Olive Drive, and Rosedale Highrxay, the subject will provide its residents ease of access and shorter travel times to conveniences. This should be a positive factor in the marketing of the parcel, both as is and when fully developed. 95 Laurrer & Associates. Inc, sse ment District OS- ine K)der Area Ma B LR! ARAd ~ ` ICf NO.. 8289 ~~ . i4 1 ~ , ar. ~.,_~ 1) a: p I r, a Y ~~ 9 ' 8 p p' 1 ' b' A g P I m ?)5 MIN m I ttA' Y1tiAGA'CARRA ARRA ~: I a I TTRACT ~XD: esra) -- ~.~ . °' I itl~i. •~y ~P( y I ..m . I .ws I ~ I .A F ~ j - .f R .~ _ _ ' N- R _ .. 1 1 wa Wr 1 Y S 1 ~ 1 1 e8n~_+w~ wac m~ i t i I 1 TAE LlBEFlY A A$&A d r v ¢ k n ~ m I~ n tiA.ICT N0. 80.7E) ( r n ,,,,,~,,~j1 i Ii 1 E 9 ~ ~~__~. TH6 TESORO-EXCANI'0 AREA (TRACT NO. 6918) THE DGMUND RNGS AREA (pRACT X0. @392J i y S THE ARf£R AREA ! tTAAf.T N0. 8290 ~, p v i 96 File 4021 Lnuner & Asmcintes Inc A ccac Went Di trio OS i ~~; NEIGHBORHOOD DESCRIPTIONS ', RIDER AND DIAMOND RIDGE AREAS These areas are located within the same southwest section of the City of Bakersfield, within the ;,,'. City Limits. The neighborhood covers roughly a two square mile area, bounded' by the major streets as follows: Location Border Description North Boundary White i.aue Major East-West Arterial South Boundary Taft Highway/Panama Rd Major East-West Highway East Boundary Freeway 99 Intrastate Highway West Boundary Enos Lane/Highway 43 Major North-South Highway The physical boundaries of the neighborhood were selected because of the predominantly agricultural and residential land use patterns in the area. The boundaries are shown on the neighborhood map below. NEIGHBORHOOD MAP ., _, .. . i.. „~,. ;`. .~~ 97 Lauver & Assaciates. Inc. Aseecsment District 0 -3 General Neighborhood Description The neighborhood is located in the southwest quadrant of Bakersfield, approximately 11 miles south of the downtown civic center azea. Large portions of the area are cultivated, irrigated field and row cropland along with large parcels of unimproved or underdeveloped land with natural vegetation cover. The overall character of the neighborhood is transitional, from agricultural to urban uses. Since much of the vacant land in the planned areas of the city to the northwest of this neighborhood is approaching full build out, it is anticipated that urban development will continue to spread into this area. This would follow the City's historical westerly growth pattern that has steadily shifted to the west over the past twenty-five yeazs. The mast recent improvements in the general neighborhood consist of residential tracts located primazily in the northeast to central sectors of the neighborhood boundaries as described previously. Access The neighborhood has good access to all parts of the city via White Lane, Panama Lane and Panama Road, all with Freeway 99 on-off ramps. Stine Road, Gosford Road, OId River Road and Buena Vista Roads are major arterials providing access in the north and south directions to Stoekdale Highway, White Lane and Panama Lane. White Lane from Freeway 99 to Buena Vista Road is a divided four-lane arterial. Panama Lane is a divided four-lane arterial providing access to the west from Freeway 99. Panama Lane narrows to two-lanes at Gosford Road. Buena Vista Road is a divided four-lane, north-south arterial north of Pacheco Road; south of - Pacheco it is a two lane secondary street. 98 File 4021 Launer&Asmciurer Inc Asses JnentDisiri +tIS 3 Community Services The Bakersfield Police and Fire Departments serve the neighborhood. Fire department substations serving the subject neighborhood aze on Stackdale Highway between Ashe and Gosford Roads and on Buena Vista Road south of White Lane. 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 community center serves convenience needs at White Lane and Coffee Road. The center is 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 aze several other retail outlets in a satellite retail strip in the center. Other convenience centers with supermarket anchors are along White Lane at the major intersections City, County and Administrative services are in the downtown central business district, approximately 11 miles northeast of the general neighborhood. Existing Imornve +s and D v loament Trends The general area is rapidly improving with urban land uses. The White Lane arterial has the majority of the commercial, retail, convenience and service land uses at the major intersections. Gosford Road is also notable with new commercial uses and a recently opened power center located along the west line south of the Sunset Rail line. The power center known as Gosford Village is part of the master planned Gosford Business Park. The power center is anchored by a new Sam's Club, Wal Mart, Petco and Kohl's department store. Other retail operations include Walgreen's, Radio Shack, Starbucks, Payless Shoes and several national chain fast food restaurants. Across Gosford is another center with a Home Depot home improvement warehouse and several independent commercial uses. 99 Luuner & Assariutes. ]nc. Assessnxent -tstri f 0 -3 Established residential developments at the easterly portion of the neighborhood are generally located west of Freeway 99 along White Lane. These consist of medium quality tract built dwellings constructed in the 1970's and 1980's. The central portion of the neighborhood is dominated by the Stoekdale Industrial Park, which is fully built out. It is a campus style businesslindustrial park and contains the majority of Bakersfield'stndustrial land uses. in the south-central portion of the described neighborhood is the Campus Park planned development. This azea consists of homogeneous single-family dwellings ranging in size from about 1,100 square feet to around 1,600 square feet. These are sited on smaller city lots from 4,500 to 6,000 depending on the tract The housing in this area ranges from 3 to 12 yeazs of age. The most recent developments are in the southerly portion of the described neighborhood at Buena Vista Road and Panama Lane. Here, Centex Homes continues toward build out of a 125- acre parcel. This development, known as Buena Vista Ranch, is being improved with two product lines, Greystone and Hidden Oak. They are about 3la of the way to completion of the 487 lot development. The development opened in March 2003 and the housing ranges in size from 1,432 to 2,842 square feet. Current pricing for Hidden Oak ranges from $248,000 to $365,000. North of this development is a Lennaz Homes development on a 165-acre parcel that was subdivided as Tract 6156, known as Terra Vista. This tract was subdivided with the firsfphases containing 234 buildable lots in the 7,500 square foot size range. The dwellings range from 1,580 to 2,800 square feet in size and priced from $275,000 to $360,000. The sales office reports they aze limiting releases to 5-lots per month and have about 150 persons on their waiting list. Other notable builders who are actively marketing house/lot combinations aze DR Horton, with about 15 new dwelling sales to date and Fairway Oaks South, a Burlington Homes development, with about 25 closed sales by month ending April 2005. These developments are located just south of Pacheco Road and east of Old River Road, northeast of the Centex and Lennaz developments mentioned previously. 100 File 4021 Lnmaer & Associates. Inc. ,4 s ccmertt Dictrict OS- McMillin Homes, who purchased the Kyle Carter holdings in Bakersfield has tluee subdivisions under construction in the Panama Lane/Buena Vista Road area. 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 overall chazacter of the neighborhood is in a state of transition, from agricultural land, older residential, and outmoded commercial uses, to a very modem residential urban environment; including two rapidly developing master planned communities with desirable, attractive amenity features. The locarional characteristics have generated strong market interest in housing in this area, resulting in strong sales activity. Although the local resident mazket demand has stabilized, there remains considerable demand for residential housing from out of the area buyers who are relocating to Bakersfield for affordable housing and the quality lifestyle available here. 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. 101 Lnuner & Assncintes, Inc. Ass ssnx nt District 0 Z SITE DESCRIPTIONS -RIDER AREA Location and Access The subject parcel is accessed along its easterly boundary from Stine Road and at McKee Road at the north. Stine Road intersects with Panama Road/Ta8 Highway approximately 450 feet south of the subject site The site also has frontage along the south line of McKee Road. Panama and Stine Roads provide access to the more urbanized areas of the City of Bakersfield. Size- Shane - Tonogranhv According to the tract map provided by the Assessment District Engineer, the subject covers a total of 113.60 gross-acres and is identified as Assessor's Parcel Numbers 532-010-03 and 532- 040-05 pursuant to Tentative Tract 6290. Overall, the parcel is irregular in shape and has approximately 2,188 feet frontage along the west line of Stine Road and approximately 2,645 feet along the south line of McKee Raad. The reader may wish to refer to the reductions of the tract maps for a graphic representation of the subject's shape chazacteristics. It appears to be generally level with a slight natural gradient sloping downward from northeast to southwest. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Street Improvements Panama RoadtT'aft Highway and McKee Road are publicly maintained twa-lane east-west traffic routes. The interior streets within the tract are planned to be asphalt paved 60-feet wide residential streets. 102 File 4021 Launer & Assncintes. Inc. Asse anent Distr%ct OS-j _.~ According to the Bakersfield Planning Department, the subject is currently 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. Easements and Encroachments The appraiser was not provided with a title report for review. No adverse easements or encroachments were observed on the site or on the plat and it is assumed that none exist; however, the appraiser makes no warranty to that effect. Utilities Electricity, water, gas, telephone, cable TV and sewer are located in the street at Stine Road. The utilities are to be stubbed to each lot in the subdivision. 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 gresence 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 103 Lnuner & Associates. Inc. Assessment District OS- of the subject property. If such toxic conditions do exist, the property value may be adversely affected. Flood and Earthquake Zones According to the Federal Emergency Management Agency Federal Insurance Administration panel 060075-1275 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 Califomia Department of Conservation, Division of Mines and Geology, revised edition, 1990, entitled Fauh-Rupture Hazard Zones in Califomia. the subject property is not located within a Special Studies Zone, as defined in the Alquist-Priolo Special Studies Zones Act. Surrounding Area Improvements Immediately north of the subject is agricultural field and row cropland, beyond which is Ridgeview High School. North of Ridgeview High is a new development by KB Homes. Land uses west of the subject also consist of primarily field and row cropland with a few older farmhouses on 20-acre or larger parcels. East of the subject are a few older farm houses and background development is on-going new constmction of single-family housing primarily in the Stonemeadows area. In the area to the south along Panama Road (also known as Taft Highway) improvements consist of mostly older commercial and roadside service land uses. South of Panama Road land uses aze devoted to intensive agriculture production. Lot Sizes The finished lots in Tract 6290 Units One through Three are generally rectangular in shape with typical street frontage of SS to 60 feet. Depths vary, but are generally a uniform depth of 110 104 File 4021 Laaner & Assaciates Ine Asseccm rrt Dictrirt 0 i feet. Overall, the finished lots have an average size of 7,262 square feet. A summary of the general lot characteristics is shown in the following chart. Phase Unit 1 Unit 2 Unit 3 Unit 4 ' Number of Lots 217 36 104 37 Smallest Lot 6,029 6,050 6,466 6,050` Largest Lot 14,985 21,146 10,910 9,245 Mean Lot Size 7,506 7,296 7,939 6,267 schematic Lot Diagram -Rider Area YCYLS. %4.0 C ~/~ IXM.' ~C M ' 5 ,~ Potmw n 1 ¢ ~ ~ _ q ' w:~ y x 2 ~ ' pe TRACT- 62Q0 ua-cro. a'i ~ UNIT DNE ° ~ : L r... y Y/^'' ~ s ~ i _ _ ~ ~. ~f - -~ 2m <. -.._ tiDAiH ~ ~ _ ~ SLXYd I` ~ Pb0' IM A ~ PIfMMitSI rwMt Pd - RWY N0, a'ea0 W> WF '~ g41pN aF 5It-OW-~ "~ ..._ . . • • • .... • ~ . .. • • _ ~ ~tAl1'~HJG((YIY . • - `SF ~! S{C t=giM]]E RIIJE'R AREA. 105 ,Lauver & Assaciaier Ise Acceccmest Dicirict OS 3 The proposed lots are typical of other parcels that will ultimately be developed with residential housing. The tract is well located in an emerging area of Southwest Bakersfield. The growth trends toward this area are a positive factor that will serve to enhance and maintain property values in this area. A review of the lot sizes in the subject tracts indicates that the average lot sizes are typical of many subdivisions in the northwest and southwest Bakersfield area, This is a desirable feature and is likely to enhance the appeal of the subject lots and completed housing product competing for market share. 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 subject tract is physically suitable for the type and density of development proposed, and is well located with reference to schools, shopping and other social/economic establishments. Because of its location in proximity to the major arterials White bane, Stine Road and Panama Road, the subject will provide its resident's 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 area should assist in the marketing of the finished lots with or without housing units and demandJgrowth trends should aid in maintaining values into the future. 106 File 4021 Luuner & Ass~cintec. Inc. Ace sm ntDictri * u5 3 SITE DESCRIPTIONS DIAMOND RIDGE AREA The subject pazcel is accessed along its northerly boundary from McCutchen Road approximately '/< mile east of Stine Road. Stine Road intersects with Panama RoadlTaft Highway approximately 'Iz mile south of the subject site. At completion the subdivision will also- have frontage along the west line of (future) Mountain Ridge Drive. Panama and Stine Roads provide access to the more urbanized areas of the City of Bakersfield. Size - Shaoe - ToooEra~hv According to the tract map provided by SmithTech Engineering and Surveying, the subject covers a total of 7b.80 gross and 70.28 net acres, according to Assessor Parcel Numbers 532- 010-10 & 11 pursuant to Tentative Tract 6332. Overall, the parcel is nearly rectangular in shape and has approximately''/e mile frontage along the west line of future Mountain Ridge Drive and approximately 1,100 feet along the south line of McCutchen Road. The reader may wish to refer to the reductions of the tract maps for a graphic representation of the subject's shape characteristics. It appears to be generally level with a slight natural gradient sloping downward from northeast to southwest. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Street Improvements McCutchen Road is publicly maintained two-lane east-west traffic routes. The interior streets within the tract are planned to be asphalt paved 60-feet wide residential streets. ]07 Lnuner & Assncintes. Inc. Assns rnent District OS-? i ne L~emona wage area 1v1ap i t~ ~y. ~ ~:. ;: y ,~ n ,' u ~ 3pn 1. wove 6 C F 44 p . r "~" . "{` r I I 7%S 4YLtAGS-CA6SN AREA ~- k (TRACi' N0: B4fB} I ~, we T -_ - j j n ~,~ ~ - b if [ ' ~ e ~ . y / Y . ~: ~ •~ I ~ l M A .f F I ~ y E ~ t 1 ~ 1 y'~~• ~~ n ~ l o u n Qw ~ ~E ~~ ~ 'tH6 (.ffi WARS,{ r ~- ~{ i I i. ~ m » ~~~ ~0 6A4E, ~^ _ ~ ' ~- -{{- TNS TSSY3R(J-SNG4NT0 AREA 77fd DfAXOMD NiUCa AREA I ~ (TRACT N0. 83 491 (TRA4T ND. B338j I TNS RfiSR ARG ~ (TRACT N0. 6880 ° y~ 108 File 4021 Lnuner & Associates. Ine. Asr rsment District 0 - nin According to the Bakersfield Planning Department, the subject is currently zoned R-l. This zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 squaze feet for each dwelling unit. Easements and Encroachments The appraiser was not provided with a title report for review. No adverse easements or encroachments were observed on the site or on the plat and it is assumed that none exist; however, the appraiser makes no warranty to that effect. Utilities Electricity, water, gas, telephone, cable TV and sewer aze located in the street at Stine Road. The utilities are to be stubbed to each lot in the subdivision. 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 109 L~uner & Assncirrter. Inc Asr anent District 0 -3 of the subject property. If such toxic conditions do exist, the property value may be adversely affected. Flood and Earthquake Zones According to the Federal Emergency Management Agency Federal Insurance Administration panel 060075-1275 B, dated September 24, 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. Surraundine Area Imarovements Immediately north of the subject is agricultural Feld and row cropland, beyond which to the northeast is Ridgeview High School. North of Ridgeview High is a new development by ICB Homes. Land uses west of the subject also consist of primarily field and row cropland with a few older farmhouses on 20-acre or larger parcels. Easi of the subject are a few older farm houses along Stine Road and background development is on-going new construction of single-family housing primarily in the Stonemeadows area. The area to the south along Panama Road (also known as Taft Highway), improvements consist of mostly older commercial and roadside service land uses. South of Panama Road land uses are devoted to intensive agriculture production. Lot Sizes As proposed, the finished lots in Tentative Tract 6332 Units One through Three are generally rectangular in shape with typical street frontage of 55 to 60 feet. Depths vary, but are generally a uniform depth of 110 feet. Overall, the finished lots will average 6,861 square feet in size. 110 File 4021 Lnnner & Ass~cntes. Inc. A sceccment District OS- There are a total of 318 lots planned, with 145 lots in Assessment No. 830 and 173 lots in Assessment No. 831. Diamond Ridge Area -Assessments 830 & 831 4 ,E r~Inceax ROAo PARCEL J PARCEL iMP H0. 3508 G 8 0 s~z_aio- DIAMOND fttD6E AREA PARCEL 1 PARCEL MAR Nd. 3508 8J1 aa-ara RORPH YofufH' ROAD ^~.AtB ~~ = a00~ The proposed lots are typical of other parcels that will ultimately be developed with residential housing. The tract is well located in an emerging area of Southwest Bakersfield. The growth 111 Lnuner & Assacintes. lnc. As escrnenl District trends toward this area are a positive factor that will serve to enhance and maintain property values in this area. A review of the lot sizes in the subject pacts indicates that the average lot sizes are typical of many subdivisions in the northwest and southwest Bakersfield area. This is a desirable feature and is likely to enhance the appeal of the subject lots and completed housing product competing for mazket share. 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 groblems. 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 subject tract is physically suitable for the type and density of development proposed, and is well located with reference to schools, shopping and other socialJecanomic establishments. Because of its location in proximity to the major arterials White Lane, Stine Road and Panama Road, the subject will provide its resident's 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 area should assist in the marketing of the finished lots with or without housing units and demand/growth trends should aid in maintaining values into the future. 112 File 4021 Luuner & A.rsrlcinxes.7ne. Acceccment District OS-3 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 reportedtn this appraisal report. According to a spokesman for the Kem County Tax Assessor and based on a review of the client supplied preliminary title report, there are no delinquent taxes or penalties owed nor were there any liens of record against the subject property. The details of the Community Facilities District special tax liens applicable to subject properties are outlined in the previously referenced Engineer's report, prepared by Wilson and Associates, dated November 30, 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 passible, appropriately supported, financially feasible, and which results in the highest land value...the most profitable use.' 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}? Real Fstate Appraisal Terminology. Published jointly by the American Institute of Real L•siate Appraisers and The Society of Reel Estate Appraisers. Chicago. 1971 Pg. 201. 113 Launer & Associates. Tne_ A ~s s ~ment Disirici OS-3 3. What uses are financially feasible (and appropriately supported)? A. What is the existing/future neighborhood land use pattern? B. What is the subject site's most probable use "as if vacant"? 4. What uses aze 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 an 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." What Uses Are Legally 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 squaze foot lot. An exception to this was made in the Liberty R Area where a portion is zoned for commercial use. What Uses Are Physically Possible From among the legally allowable ]and uses, the appraiser must determine the physically possible uses. Under 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 Tats 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 ihvestment. 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 114 File 4021 Lnuuer & Assncintes- luc As essm ut District OS- 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 immediate 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 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 supplyldemand 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 with single-family residential uses. ' I15 Lauver & Associates. Inc. As essment -istrict OS-3 Based on the foregoing analysis I have also concluded that at this point in time the highest and best use for the Liberty II commercial is for single-family residential development. It is my opinion that commercial development in this area should be deferred until there is more concentrated population in the immediate area to create commercial demand. Given the consideration of the time value of money and the immediate demand for single family residential land, the commercial land would have more value if it were improved with single-family dwellings. 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 supplytdemand 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. 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. 116 Fife 4021 Lrruner & Assoeiates.7ue. Arso~sment District OS 3 Methods Applied to the Subject Developments In appraising the subject parcels, which consist of vacant land, the Sales Gomparison 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 Gast 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 Aonroach Defined The cost approach is defined as: "A sei 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 profit. 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 studieslapprovals, 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 Comnarison 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 The Dldnnarv ofRe~l PSMte Ajy rn'c~I, ~ 993, Appraisal Institute, Page 81. 117 Lanner & Associates. lne. A sesvneni District OS-i 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 loeational 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 that is reflective of the current local market conditions. Income Aaaroach 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 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. 1t will be shown in subsequent sections of this approach that the income approach is not applicable in this instance since the mazket is not demonstrating a need for holding property to find a purchaser. Methods Applied to the Subject 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' ready for im rovement Income A roaches 16id Page 319. 118 File 4021 Loaner & Associates. Inc. Assessnt nt D'rtrict lI S_? )stimated Finished Lot Values `Ac omplete' 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 casting 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 ofvalues from which the subject's value is selected. 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 `As 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. Marketine 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 thne is detemtined by comparing the recent exposure time of 119 Launer & Associates. Inc: A essm nt District OS- 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 mazket 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 mazketing 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. VALUATION Value of the Unimproved Residential 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. 120 File 4021 ~nuner & Assacintes. Inc. Aececsmeaf 7); ~ ic7 OS 3 Land Sale No. 1 aa3-15 EI/2 SEC 21 T29S R26E _ scxao~msr. fl4-6 as3-15 /eT,ve .-+wa._ ~~ fi ,. I'1~1ac M s:v -zesX~ ® K¢~ I].~45C' ~ . s'L 'i4b0E./ ; (ij 6 •. :YSQAF. -. -j'tmS e~ M "~"~ an m 'a Li fl' ~ ~ ~ .t3' ' J6 v ~~~~~~ .__._.._._~uex_ ~ - .I »... iii«««~ /O / ~ W /9 I ~~ ~~ ~ ]P StBON/5/ON 4 - ~ X, ~ ~ ~ Zp </°^ ~ I? Property Identification Record ID 297 Property Type Residential Subdivision Land Property Name Residential Land Address SWC Heath and Meacham, Bakersfield, Kern County, California 93312 Location Northwest quadrant Tax ID 463-150-04 at Grantor Cartagena Group, LLC Grantee Heath 6301 LLC Sale Date June 23, 2004 Deed Book/Page 143294 Property Rights Fee Simple Financing Cash to seller Verification Castle & Cooke; October 04, 2004; Confirmed by Michael Lavner, MAISRA Sale Price $2,450,000 Cash Equivalent $2,450,000 Adjusted Priee $2,450,000 Land Data Zoning R-1, Single Family Topography Level at street grade Utilities Electricity, Water, Gas, Sewer Dimensions irregular Shape Flag rat Launer & Ascnciates Inc A cecstnent Dictrict DS Land Size information Gross Land Size Useable Land Size Planned Units '~ Indicators Sale PricelGross Acre Sale PricelGross SF Sale Price/ITseabte Acre Sale PricelUseable SF Sale PricelPlanned Units 35.070 Acres or 1,527,649 SF 35.070 Acres or 1,527,649 SF 49 $69,860 Actual or $69,860 Adjusted $1.60 Actual or $1.60 Adjusted $69,860 Actual or $69,860 Adjusted $1.60 Actual or $1.60 Adjusted $50,000 Actual or $50,000 Adjusted Remarks This represents a June 2004 transaction involving a 35-acre pazcel that has frontage on Heath and Meacham Roads. The sale price included a tentative map for 49 lots, approximately 20,000 square feet in size. 122 File 4021 Lrutner & Associates. Inc. Assessmarat District OS-3 Land Sale No. 2 TRRCT 6012 PH. l PTN- S1 f2. SEC-34 T-295. R.26E. 29 29 LEGE : D oaa_wN_ JVftI501GT10N $UBO. KEY Un 9L kNF. Ca BI6tWMER `i .we-23 ~.- BK. 49B Aa^'iE5aOR5 MAP NO. h06-23 COUNtt OF KERN Property Identification Reeord ID Property Type Property Name Address Location TaxID Sale Data Grantor Grantee Sale Date Deed Book/Page Property Rights Financing Verircation Sale Price Cash Equivalent Adjusted Priee Land Data Zoning 296 Residential Subdivision Land Vista Finestra Renfro Road N/O Stockdale Highway, Bakersfield, Kem County, California 93312 2480 G-1 408-230-02 Vista Finestra Towery Homes, Inc. September 20, 2004 2]3395 Fee Simple Cash to seller Castle & Cooke; October 04, 2004; Confirmed by Michael Launer, MAI SRA $1,060,000 $1,060,000 $1,060,000 R-1, Singie Fatuity 123 Lauver & A.rr~cintes. Inc. Asse anent Dirtrici OS 4 Topography Level Utilities Electricity, Water, Gas, Sewer Dimensions Slightly irregular Shape Rectangular (more or less} i.and Size informaNnn Gross Land Size ] 3.020 Acres or 567,151 SF Useable Land Size 13.020 Acres or 567,151 SF Planned Units 40.00 Front Footage 968 ft Total Frontage: 968 ft W est line of Renfro Road ILL111S3112CS Sale PricetGross Acre Sale PricelGross SF Sale PricelUseable Acre Sale PricelUseable SF Sale Priee/Planned Units Sale Price/Front Foot $81,413 Actual or $81,413 Adjusted $1.87 Actua! or $1.87 Adjusted $81,413 Actual or $81,413 Adjusted $1.87 Actual or $1.87 Adjusted $26,500 Acual or $26,500 Adjusted $1,095 Actual or $1,095 Adjusted Remarks This parcel was zoned C-1, Commercial at the time of sale. The seller had applied for a zone change to residential prior to closing. This parcel is adjacent to on-going single-family development to the west. In addition to the frontage along Renfro Road, Madison Michelle Way connects to the adjoining subdivision to the west. 124 File 4021 Launer & A ssociates. Inc. A ~ snIInent Disfri t 0 Land Sale No. 3 w~ -Ol T.30S. R.27E. see-01 eK. O .. _w.ramv~ _ mrs RR r~ i 1 q.m I ~ (j~ ~ tt~~ o.. 9~4 Y P ~^. ~- ~~ NM ~ ..~- nI r 1 Y { `k° _~ ~. ` ~ .u ") u ~ ~ ± ' ' - ~ Y O 14~.C . - - ~ -- ry~.. Yd. cN l"/~' 4 .s ue m ~ N Y IG y tt n ~n ~ /x ' - ------ t y 1 yyu! 1, Mp 1 Y 1~~ ,>~k r j II I V:~ [[~~ a ((yyam~ I i (~ (~ M~k l~^ ~ ~ I$ /' ~! /]~IC f /SII~YDIC IS_ - _ 1 ~ ~ i g ~ 1 C.: 1 ~/.4': I1)'~Gl _....... _ _ ]8}~C 4T ~ ~ ~ tv) 1 O oRc Uw LEGENiD `y k sc as V ~ a AMm L Mum ang~® JIIIGpCiV, ~`^: _ ASSESSORS 4W RO. A9]-DL R4MT Qi NEWV Pr r Identifi Record ID cation 301 Property Type Residential Subdivision Land Property Name Lennaz Homes Address Pacheco & 01d River, Bakersfield, Kern County, California 93312 Location 2481 D-7 Tax ID 497-010-01 & 02 Cale Dala Grantor Antongiovanni, et,al. Grantee Lennaz Homes Closing Date November 15, 2004 ' Property Rights Fee Simple Financing Cash to Seller Verification Lennar Homes; 326-i 141, October 28, 2004; Confirmed by Michael Launer, MAI SRA Contract Price $6,000,000 Cash Equivalent $6,000,000 Adjusted Price $6,000,000 Land Data Zoning R-1, Single Family Topography Leve] Utilities Electricity, Water, Gas Dimensions 1,329.75 x 2,620 125 Lauver & Assnciates.7ne. A sesstnent Di ~triet 0 -3 Shape [.and Size Information Gross Land Size Useable Land Size Planned Units Indicators Sale PricelCross Acre Sale PricelGross SF Sale Price/Useable Acre Sale Price/Useable SF Sala Price/Planned Units Rectangular __ 80.000 Acres or 3,484,800 SF 72.000 Acres or 3,136,320 SF 230.00 $75,000 Actual or $75,000 Adjusted $1.72 Actual or $1.72 Adjusted $83,333 Actual or $83,333 Adjusted $t.91 Actual or $1.91 Adjusted $2b,087 Actual or $26,087 Adjusted Remarks This sale represents two parcels located on the east line of Old River Road and along the south line of Pacheco Road. According to the purchaser, when they are successful in getting an abandonment of a Burlington Northern-Santa Fe right of way, the parcel will contain a total of 80-acres. The parcel was purchased for improvement to single family housing tracts. They expect to achieve a density of 3.2 units per acre. 126 File 4021 ,t.arrner & Associates. Inc. A ssessn:eat Di tri t ©5- Land Sale No. 4 *ix-01 ~ - - - T.305. R.27E. w>At ~`e ~ I- ~ ` n . { , . 1~~ . ~ „~" IARCi~I lip - iy,. ~q -- J n ~. <~ ~~I g } I a n? b' ' nl _ __ __ wy wt ,~i 1, ieia ~x . ~ a .tee, . :c I i ~ x.a ¢m €. I 1T~ +rc e _ i (~, A - 2s s ~, _ , a7Yrc D[~ ~ , _ ..i ~ ' } , EGEA'D weo. rn oxuwce L uslSSO.vS aeu w.ygZ-4.t_ calm ar ro7w Property Identification Record ID Property Type Property Name Address Location Tax ID APN: Sale Data Grantor Grantee Closing Date Property Rights Financing Verification Contract Price Cash Equivalent Adjusted Price Lnnd Data Zoning Topography 304 Residential Subdivision Land Residential Land Panama Lane and Old River Road, &akersfield, Kern County, California 93312 2481 D-7 497-010-16 497-010-16 Sterling Oaks Development Lennaz Homes December 01, 2004 Fee Simple Cash to Seller Lennar Homes; 326-1141, October 28, 2004; Confirmed by Michael Launer, MAI SRA $5,427,500 $5,427,500 $5,427,500 R-i, Single Family Level 127 Loaner & Associates. ]ne. A cc scnrent Di tri •t 0 -3 Utilities Shape i.and Size information Grass Land Size Useable Land Size Planned Units Indicators Sale PricelGross Acre Sale PriceJGross SF Sale Price/Useable Acre Sale PriceJUseable SF Sale PricelPlanned Units Electricity, Gas, Water, Sewer Irregular 65.000 Acres or 2,831,400 SF 65.000 Acres or 2,831,400 SF 225 $83,500 Actual or $83,500 Adjusted $1.92 Actual or $1.92 Adjusted $83,500 Actual or $83,500 Adjusted $ L92 Actual or $ L92 Adjusted $24,122 Actual or $24,122 Adjusted Remar This parcel has frontage along the north Tine of Panama Lane at Old River Road. It is an 80-acre parcel but [he 15-acre piece at Old River and Panama was reserved by the owner. The buyer intends to construct up- scaleresidential housing on ]arge lots. 128 File 4021 Z.aaner & Associates. Inc. A~cresrn nt District ©5- Land Sale No. 5 .sr-OS ~ T. 30 S. R27 E.. scxou~ a~sc1356lZ . °0J-08 ..a' - ~ OIi11PAi. ' ' ~P i 6 * t : a 1 I ~ ~ MAR S ~ W.m~ ~ ___ ~~ ~ 1 ~ ~ ~ ~~ .m ~ ~J g~ ~ 04 ~Z {{ 'S .. -~-~~C--~^- ~ ~ _ , ri~~ ~ ~\ f ~TnW YL 3 1°1 \/ Ii k 1 )-049.2 w. ' /.f6'iM ~< `~) ~ ~, m9Kk USA & ~~p ~ ;~ r ~ , I;,r __ _ ; .-- ~"'l ~ . ASSESSORS MAP FIO c97-99., Prooertv Identification Record 1D 328 Property Type Vac Land, Residential Acteage Property Name Vacant Land Address McCutchen Road, Bakersfield, Kem County, California 93311 Location 2511 B-1 Tax ID 497-050-09,10,11 Sale Data Grantor Ridgeview Estates II, LLC - Grantee Dunmore Homes Sate Date Apri129, 2005 Deed Book/Page OS-107645 Property Rights Fee Simple Financing Cash Verification Greg Petrini; March 04, 2005; Other sources : Michael Burger, MAI, ConSrmed by Michael Launer, MAI SRA Sale Price $12,869,020 Cash Equivalent $12,869,000 AdjostedPrice $12,869,000 Land Data Zoning R-1, Single Fatnily Topography Levei Utilities Full ]29 C,~tttner & Assncintes.7nc- Ascecstn nt Dictrict 0 - Dimensions Rectangular Land Size Information Gross Land Size 96.770 Acres or 4,215,301 SF Useable Land Size 96.770 Acres or 4,215,301 SF Planned Units 323 IndieaMrs Sale PricelGross Acre $132,986 Actual or $132,986 Adjusted Sale PriceJGross SF $3.05 Actual or $3.05 Adjusted Sale PriceJUseable Acre $132,986 Actual or $132,986 Adjusted Sale PricelUseable SF $3.05 Actual or $3.05 Adjusted Sale PricelP-anned Units $39,842 Bemarlst This is an irregular shaped holding consisting of three assessor's parcels east of Ashe Road on the south side of McCutchen Road. This sale will include an approved tentative tract map for 323 lots average 6,050 sq. ft. This results in a pricelpaper lot of $39,842, This is an all cash sale which was contingent upon the approval of the Tract Map and annexation. 130 File 402 ] Lanner & Assnciales. Jnc. Acs cement District OS-3 i i '.. Land Sale No. 6 w~-02 Lb05. R.27E. HB ~ ~.~.-_. _..... r.. s n - _ ~ _ ~ .. ... ' _ __ _ ~ ~ jm 0.wi. ~ ~ ~ y u ~ j ` i i '~^^'T ~ ~R~ 'SIK R y 9~-"P~n`r ' YSSK.'A rx'.t"x¢. 1 ~ / ' q~1y 7 / ' ~y+ %MS.c.R ~ ( 11 ~ ~ ~ ~ O c~~rr ~ _ - 1 3[ ~ry t Tj ~c £4. __ ~; ~ . ~ , E ~G it Sp~ ~C ,~ ~. ~' ~ .~ 1 ' L (/~~~~~1,,, 4 ASAc ~ , ~ ,. } r se 11~ ~ N I , ~ v :eyn ,,,, 6~ .,.. i ..... ~~~ '~ i ,. crrr - _.. ,.e.ia su ___.... _. .. .. sav-02 iDf G~ C BL. 5f6 7.RC€.Nf} uw xtr PsRxuw MMVO q[acit~ ~%i~ .Vkff!Cl1ii nsstssws uw an.~sL-n2 GdM1T OF NGW Proper Identification Record ID 362 Property Type Residential Land Property Name Residential Vacant Land Subdivision Acreage Address SEC Panama Lane &Ashe Road, Bakersfield, Kern County, Califamia Location 2511 H-2 APN: 497-020-30 Sale Data Grantor Ashe Road Development, LLC Grantee Lennar Homes of California, Inc. Sale Date August 25, 2005 Deed BooklPage 229907 Property Rights Fee Simple Verification Patty Poire; 395-3281, September 2Q 2005; Confirmed by Michael Launer, MAI SRA Sale Price $] ],124,500 Cash Equivalent $11,124,500 Adjusted Price $11,124,500 Land Data Zoning R-I, Single Family Topography Level Utilities Electricity, Gas, Water, Sewer Dimensions See Plat 131 Lauver & A,rmcinter, Inc. A rrer mertt Di 7rict OS- Shape Rectangular - Land Size information Gross Land Size 71.750 Acres or 3,]25,430 SF Useable Land Size 71.750 Acres or 3,125,430 SF Actual Units 298.00 indicators Sale Price/Gross Acre $155,045 Actual or $155,045 Adjusted Sale PricelGross SF $3.56 Actual or $3.56 Adjusted Sale PricetUseable Acre $155,045 Actual or $155,045 Adjusted Sale PricelUseable SF $3,56 Actual or $3.56 Adjusted Sale Price/Actual Units $37,331 Actual or $37,331 Adjusted This parcel was vaeant agricultural land at the SEC of Panama Lane and Ashe Road. According to the developer, they intend to construct a total of 298 single-family Pots that will appeal to the entry-level or first time home buyer. l.'Ollll)11'iI Land Safe 1, 6713494, SG9,8f ~, \ ~ w.~n t I~ Ig _... Salz 5 4. g { ~ ~~ i o~-~- - :+_:c.4id5nfF.: e 132 File 4021 Laurier & Assncia>es. Inc. Arserrna MDist rict OS_2 The characteristics of the land sales are summarized below. COMPARABLE LAND SALES SUMM ARY T ABLE Sale Location Date Priee Acres EDU $lAcre $lUnit 1 SWC Heath and Meacham Jun-04 $2,450,000 35.07 49 $69,860 $50,000 2 Renfro Road NIO Stockdale Sep-04 $1,060,000 13.02 40 $81,413 $26,500 3 Pacheco & Old River Nov-04 $6,000,000 80.00 230 $75,000 $26,087 4 Panama Lane and flld River Dec-04 $5,427,500 65.00 225 $83,500 $24,122 5 McCutchenRoad Apr-OS $12,869,020 96.?7 323 $132,986 $39,842 6 NWC Panama Lane & Ashe Aug-OS $11,124,500 71.75 298 $155,045 $37,331 ltt reviewing the data the reader will note that the selling price per unit is emerging as the more consistent value indicator for residential development land. The market is currently refleeting a selling price per buildable lot centering around $40,000 per dwelling unit. This is also the consensus of opinion of the many developers and land brokers I have interviewed during the data collection phase of the appraisal assignment who told me their primary purchase decision is based on the development intensity potential of the parcel. On the basis of the foregoing I have concluded a value of $40,000 per unit allowed or $135,000 per acre in all the areas of the assessment district. The resulting value indicators are shown in the summary below. AREA GrosslNet Ac EDU's Lot Size $JAc $JUnit Liberty II 35/27 107 5,000 135,000 40,000 Village Crreen 82177 354 6,400 135,000 40,000 Tesoro-Encanto 80168 257 8,800 135,000 40,000 Lin 63!61 252 7,400 135,000 40,000 Rider 1141103 394 7,200 135,000 40,000 Diamond Ridge 77170 318 6,900 135,000 40,000 Finished Lot Values -Cast Approach Indicators for Area $INet Acre $JUnit 3,645,000 4,280,000 10,395,000 14,160,000 9,180,000 10,280,000 8,235,000 10,080,000 13,905,000 15,760,000 9,450,000 12,720,000 The next step in the valuation process is to estimate the costs necessary 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 133 ~auner & Associates.7ne. Assessnr ant District OS-3 with developer's overhead and profit, are added to the land value estimated previously. The-final total is the estimated value of the fmished lots by the cost approach. We were not provided an engineer's cost breakdowns for the developments in the assessment district. We maintain an in house database of engineer's cost estimates on each. subdivision we appraise. We used data from a compilation of these estimates to estimate the cost to improve the vacant land to a fmished lot state. It was our finding that the smaller lot subdivisions such as those in this assessment district have lower overall development costs owing to economies of scale. This was confirmed with several developers who are currently producing lots for improvement with housing units. Using the data compiled from other subdivision cost estimates we were able to extract certain costs as a percentage of the total subdivision development cost. $y applying these percentages we have estimated the costs for the subdivision as summarized in the chart that follows. 134 File 4021 Lnuner & Associates. Lne. Ascessment District OS-3 Subdivision Cost Estimate Small Lot Subdivision Costs -October 2005 Estimates Direct Costs Per Lot % of T otal Site PrelRough Grading 4,171 6.97% Sewers 3,190 5.33% Storm Drains 1,228 2.05% Water Improvements 3,449 5,76% Street Improvements 17,569 2935% Landscape & Irrigation 163 0.27% Uitilities 4,467 7.46% Masonry Wall 4,767 7.96% Subtotal 39,003 65.16% Contingency IS% 5,850 9.77% Total Direct Cost 44,854 74.94% Indirect Costs Planning and Conceptual Drawings 3,021 5.05% Engineering Design, Topo & Surveying 3,658 6.11% Environmental 1,023 1.71 Permitting Fees 7,299 12.19% Total Indirect Casts $15,001 25.06% Total Construction Cost $59,855 100% Raw Land Value Per Lot $40,000 Proftit 10% 9,986 Estimated Finished Lot Value Via Cost Approach $109,841 Based on the forgoing, I formed the opinion the current cost for on-site construction for a subdivision with lot sizes similar to the subject is likely to be azound $60,000 per lat. This figure includes all off-site costs but does not include entrepreneurial profit. Our estimate of cost is within the parameters we are finding in our surveys of developer costs and these aze considered reliable in farming an opinion of lot value via the cost approach in this analysis. This figure also incorporates some cost escalations that have been experienced in the market since the competing subdivision costs were estimated. The indicated value per lot in the various areas from the Cost Approach consists of the unimproved land value of $40,000 per paper lot plus the lot construction costs of $59,855. The cost estimate should include an entrepreneurial incentive to the land cost, hard costs, indirect costs and offsite costs. We concluded a 10% profit motive is appropriate in this instance. 135 Lauver & Associate . Tnc. A sc c ~tn ni District t7 3 In conversations with developers actively engaged in lot and house production, it was my finding that a cost of $25,000 to $40,000 per lot to bring the raw land to a finished lot state is typical. The smaller lots cost somewhat less owing to shorter frontages and other factors and therefore are represented at the lower end of the range estimate. Based on the foregoing analysis I have concluded values for the subject finished lots using the cost approach to value are as follows: finished Lot Values by Cost Approach Lot Area Avg Lot Size Value Liberty II 4,921 $90,000 Village Green 6,400 $95,000 Tesoro-Encanto 8,800 $110,000 Lin 7,396 $I 10,000 Rider 7,231 $110,000 SALES COMPARISON APPROA H 1n researching the market for the data involving finished residential lot sales we found that developers are typically improving their vacant land holdings to a finished lot state and constructing housing product for re-sale. We did find one current sale of finished lots that can be used as an indicator far the subject. The transaction is currently in escrow. Although the details of the sale must be maintained as confidential, we have obtained certain details that can be disclosed. The parcel involved is described as Tentative Tract 6167,1ocated at Pacheco and Old River Road in Southwest Bakersfield. The tract map indicates the lots average 7,000 square feet each and the sale is scheduled to close in January 2006. The selling price of $45,000 per lot was negotiated in July 2005, requiring an upward adjustment. After adjusting for current market conditions, this sale data indicates that finished 7,000 square foot lots have a value of around $I1Q,000 each. We can also cite an older transaction wherein 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. 13b File 4021 L~rnner & Associates. Inc. A essment District OS-3 Adjusting this sale to current conditions requires a 3% per month appreciation adjustment. After adjusting for market conditions, this sale indicates an adjusted selling price $113,825 per lot or about $17.25 per square foot. After checking with our contact at Lennar Homes we were provided informatiorA.on three sales of larger fmished tots in Tract 6230, located at the South corner of Allen Road and Rosedale Highway. Lennar purchased 72 finished 10,000 square foot lots from Smith Tech for $112,000 each. Ron Roberson purchased 23 lots from the same seller in Tract 6230 for a price of $115,000 per lot and the other sale in this transaction is from Smith to Balfanz Homes. Balfanz purchased 10 lots for $118,000 each. After adjusting for time from April 2005 to present, these data reflect selling price per square foot of lot of $14.04 per square foot. Since we are aware that larger lots sell for less per square foot than do smaller ones, this data tends to indicate a value at the lower end of the range of selling prices per square foot. The lot sales in these tracts represent areas that were improved with move-up housing product. Therefore, it is reasonable to assume the lots in the assessment district with its smaller lot sizes, would be somewhat lower than the upper end of the market. It is the appraiser's conclusion the subject lots are best represented at about $15.50 per square foot for the typica17,000 square foot lot. Allocation Method As a check on the foregoing analysis we also applied another approach known as the allocation technique. This methodology uses market data to derive a contribution ratio of land to the total value of land and building. Ratios for this analysis were obtained from examination of the sales prices of housellot combinations in a tract of % acre lots that were marketed as fmished lots to local merchant developers. This subdivision is identified as Tract 6163 and is located approximately''/z mile south and east of the subject. The character of this subdivision is similar to that of the subject. The subdivision was developed by Calle Circa Investments and the sales program is being handled by Touchstone Realty in Bakersfield. The subdivision began lot sales in the second quarter of 2004 and the 99 lots were sold out by the end of the first quarter 2005. 137 Luuner & A.csoeiates. Inc. Assesanenl District 0 - Certain merchant builders purchased finished lots from the developer and entered-into construction contracts with housellot purchasers. In the chart below the relationship of the land to total property value is demonstrated. HouselLot Land to Sale No. Contract Price Land Price Improvement Contribufion 2 $614,000 $150,000 24.43% 12 $616,000 $154,000 25,00% 13 $600,000 $164,000 26.67% 14 $695,000 $175,000 25.1$% 15 $620,000 $155,000 25.00% 22 $533,000 $137,000 25.70% 24 $525,000 $155,000 29.52% 28 $616,000 $154,000 25.00% 32 $620,000 $155,000 25.00% Although the subdivision allocation study involved large lots, it has been my experience that these lot to-total value ratios ranging from about 24 to 29% aze typical with sales involving smaller lots as well. These ratios can be used as a check of reasonableness of the lot value conclusions developed from the lot sales data previously. in the table below are the characteristics and lot value indicators developed for the various areas in the assessment district. It should be noted that we are not valuing fmished lots in Diamond Ridge at this time. Finished Lot Value Indicators Proposed Indicated Avg Lot Lot Indicated Lot Finished Land Lot Area Size ValuelPSF Value House Price Allocation Value Liberty II 4,921 $16.00 $78,736 287,339 25°l0 $71,835 Village Green 6,400 $16.00 $102,400 410,000 27% $110,700 Tesoro-Encanto 8,800 $13.00 $114,400 400,000 27°l0 $108,000 Lin 7,396 $15.50 $114,638 400,000 27% $108,000 Rider 7,231 $16.00 $115,69b 400,000 27°l0 $108,000 138 File 4021 Lnunar .t Accnrintec 7»r Ascessnxent District OS-3 The two methodologies used produced a range of values for the lots in the subdivision. It is my finding that the finished lots have a value at the mid-point of the range shown by the two indicators. As a result of my analysis, the finished lots in the various assessment district areas have values as follows: )~7nished Lot Values Assessment District OS 3 Area Avg Lot Size Lot Value , Liberty II 4,921 $75,000 I Village Green 6,400 $95,000 Tesoro-Encanto 8,800 $110,000 Lin 7,396 $110,000 _ Rider 7,231 $110,000 Reconciliation and Summary of Finished Lot Values We employed two approaches to value in valuing the lots in the assessment district; the cost approach and the sales comparison approach to value. 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: Assessment District Area Liberty lI Village Green Tesoro-Encanto Lin Rider Value Indication Cost Sales Comparison 90,000 $75,040 95,000 $95,000 110,000 $110,000 110,000 $110,000 Ilo,ooo $llo,ooo The first step in estimating the value using the Cost Approach was to estimate 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 139 Lnuner & A.cenciatec. Ine. Arc cement Dictri + ~S 2 I ', ascertaining investor motivations, the profit margin we selected may not be representative of market conditions for residential lots. ii 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 mar~Cet 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. 140 File 4021 Loaner & Associates. Inc. A sessment District OS-3 BULK VALUE OF FINISHED LOTS Or PROSPECTIVE MARKET VALUE UPON COMPLETION OF CONSTRUCTION In the previous section of this report, the appraiser estimated the value of the. typical lot at completion, ready for construction of a housing unit. The aggregate of these values reflects the total value of the entire subdivision at completion in each assessment district area. Since it is not possible to complete the entire subdivision and sell out on ilre day of completion, the discounted cash flow analysis is used as a tool to recognize asell-out of the lots over time. We used a Discounted Cash Flow (DCF) analysis to estimate the prospective market value of the lots at completion. The Market Value DCF model that follows is calculated using the income and expense projections and assumptions described in the following paragraphs. The Market Value models represent the Prospective Market Value upon Completion of Lot Construction (PMVCC). The PMVCC assumes all development costs have been expended and the lots in the subdivisions are ready for marketing and sales. The process of providing these analyses requires the following steps: 1. Estimation of the retail value of the individual finished lots and the aggregate retail value of lots; 2. Estimation of the appropriate absorption or sell-out period required to market the finished lots; 3. Determination of the approximate sellinglholding expenses incurred during the mazketing of the lots; 4. Calculation of the indicated periodic cash flow from the projected sales; 5. Subtracting the costs (including selling expenses) and profit from the periodic cash flows, and 6. Determination of the present worth of the net cash flows generated during the absorption period. 141 Lauver & Associates. Inc. Ar ecsarent District d S-? AbsoraHon Analvsis The value of the typical tot was estimated in the previous section of this report. The next step is to estimate the time necessary to achieve a full sell-out of all the lots in the subdivision. Since we are not awaze of any phased sell-outs of lots in the Bakersfield metropolitan area, we examined the historical absorption of new dwelling units in similar tracts to gauge market demand and absorption. In making our surveys we found there is a direct relationship between housellot values and absorption time frames. The more expensive dwellings are typically built on larger lots and at times require extended marketing periods. The entry-level size and priced tracts surveyed reflect absorption rates of 8 to 12 units per month. Irt interviews with Centex Homes and other developers, it was our fording that they are projecting sales at a rate of 10 units per month and we aze using that figure in our forecast of absorption in each of the assessment district azeas. Income Our estimate of pricing structure is considered achievable based on the competing market. Adding the total potential income from sales yields an aggregate retail market value for each of the finished lot areas of the assessment district, if complete. These calculations are shown below. AREA Liberty II Village Green Tesoro-Encanto Lin Rider Location TRACT N0.6475-UNITS 1-3 TRACT NO. 6448 UNITS 1-5 TRACT NO. 6349-PHASES 4 & 5 TRACT NO. 6289 UNITS I-3 TRACT NO. 6290 UNIT I # Lots Lot Value Aggregate Value 70 75,000 5,250,000 130 95,000 12,350,000 106 1]0,000 11,660,000 252 110,000 27,720,000 217 110,000 23,870,000 Exuenses In our estimate of lot construction expenses, we referenced the cost data from our appraisals of subdivisions built by competing developers with similar lat sizes and product type. The costs developed from these sources are considered reliable for the subject project and therefore was included in each of our cash flow analyses. The costs studies included off-site costs, indirect costs and studies as well as the cost of the improvements which in this case will be financed by 142 File 4021 Lauver & Asraciates. ]nc. Assessaraeaat District OS-3 the assessment district proceeds. We have adjusted the costs in the discounted cash flow analysis to reflect the estimated constrnetion costs to each developer in the district. Costs already incurred such as studies, engineering and site work is shown as a separate line item in the respective analyses where applicable. Line items for profit and discount rate were selected from the lower end of the ranges we typically see owing to the lower risks in dealing with finished lots. A spreadsheet showing the monthly cash flows and expenses is contained in the Addenda section of this report. Discounted Lat AREA Location # Lots Value Bulk Vatue Liberty II TRACT NO. 6475-I1NIT1 22 SI,D00 1,122,000 TRACT NO. 6475-UNIT 2 28 51,000 1,428,000 TRACT NO. 6475-UNIT 3 20 51,000 1,020,000 Commercial Area* Portion of Assessment 76 - 9.88-acres NfA 2,653,414 Village Green TRACT NO. 6448 UNST 1 l0 63,615 636,150 TRACT NO. 6448 UNIT 2 36 63,615 2,290,140 TRACT NO. 6448 UNiT 3 24 63,615 1,526,760 TRACT NO. 6448 UNIT 4 23 63,815 1,463,145 TRACT NO. 6448 UNIT 5 37 63,615 2,353,755 Tesoro-Encanto TRACT NO. 6349-PHASE4 42 61,038 2,563,596 TRACT N0.6349-PHASES 64 77,139 4,936,896 Lin TRACT NO. 6289 UNITS 1-3 252 61,548 15,510,096 Rider TRACT NO. 6290 UNIT I 217 64,332 13,960,044 •As indicated in previous sections the current Highest and Best Use of the commercial zoned land in the Liberty n Area was concluded to be for Single-Family Residential. It wss valued on the basis of its potential yield of 61(+/-) lots. A complete summary of the findings and conclusions cited in this report is shown on the Consolidated Worksheet for Assessment District OS-3 in the Addenda Section of this report. 143 Luuner & Assneiates. Inc. As s meat Di trial nc_3 SUMMARY OF APPRAISAL The following is a summary of the various values developed in this report. A more complete summary, a Consolidated Worksheet, is in the Addenda Section. Summary of Values Assessment District OS-3 --. Area Liberty II 1-22 25-52 56-75 76 Commercial Land' 76 Village Grcen 77-86 90-125 730-133 154-181 184-220 225 Encanto 226 Tesoro 227 228-269 271-334 Lin 3381147 & 451-452 457-514 517-598 Rider 600-684,687-754 & 757-820 No. Acres EDU's 3.69 22 4.99 28 3.22 20 9.88 See Comment 15.22 37 4.15 10 8.22 36 5.64 24 6.21 23 8.31 37 44.63 224 23.59 103 13.84 48 12.85 42 18.37 64 28.52 112 13.23 58 19.55 82 Raw Land Value As Is I+tinished Value per Land w/AD OS-3 Lot Paper Lot Value Improvements Value 40,000 880,000 952,982 75,000 40,000 1,120,000 1,212,886 75,000 40,000 800,000 866,347 75,000 40,000 2,449,493 2,653,414 N/A 40,000 7,480,000 4,216,157 NIA 40,000 400,000 453,1]6 95,000 40,000 1,440,000 1,631,217 95,000 40,000 964,000 1,087,478 95,000 40,000 42Q,000 1,942,167 95,000 40,000 1,480,000 7,676,529 95,000 40,000 8,960,000 10,149,795 N/A 40,000 4,120,000 4,671,499 N/A 40,000 1,920,000 2,245,429 NIA 40,000 1,680,000 2,190,171 110,000 40,000 2,560,000 4,024,401 110,000 40,000 4,480,000 5,980,969 110,000 40,000 2,320,000 2,508,910 11Q000 40,000 3,280,000 3,547,079 110,000 Bulk Value 1,122,000 1,428,000 1,020,000 2,653,414 4,256,157 636,150 2,290,140 1,526,760 1,463,145 1,941.094 10,149,796 4,671,499 2,245,429 2,563,596 4,936,896 6,893,376 3,569,784 5,046,936 53 2b 217 40 000 8 680 00 0 I 4 0 9,332,58! I1 ,000 3,960,0 4 827 12.85 36 40,000 1,440,000 1,548,262 N/A 1,548,262 828 27.76 104 40,000 4,160,000 4,472,758 NIA 4,472,758 829 4.07 37 40,000 1,480,000 1.391,270 N/A 1,591,270 Diamond Ridge 830 33,64 145 40,000 5,8W,000 6,283,977 N/A 6,283,917 831 36.64 173 40,000 6,92Q,000 7,497,362 N/A 7,497,362 "As indicated in previous sections the current Highest and Best Use of [he commercial zoned land in [ he Liberty II Area was concluded to be for SingloFamily Residential If was valued on the basis ofits potential yield ofbl(+/-J tots. 144 File 4021 ~uuner & Acsociatec Inc Ass rsment District ©5 j CERTIFICATIONS The undersigned appraiser certifies the fallowing statements are tme 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. I 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. 145 Launer & Assneiater. Jne: Acce~san nt Dicrr;n~ p5_3 The compensation far appraisal services and future employment prosgects are not contingent ugon 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. $ased upon the study and investigations conducted, and after carefirL 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 shown in the following summary table. 146 File 4021 Luuner&Assnciuies.Inc. Acc csnx n>Dicrrict05- Summary of Values Assessment District 45-3 Raw Land Value As Is Finished No. Value per Land wlAD OS-3 Lot Bulk Area Acres EDU's Paper Lot Value Improvements Value Value Liberty ll l-22 3.69 22 40,000 880,000 952,982 75,000 1,]22,000 25-52 4,99 28 40,000 1,120,000 1,212,886 75,000 1,428,000 56-75 3.22 20 40,000 800,000 866,347 75,000 1,020,000 76 Commercial Land* 9.88 See Comment 40,000 2,449,993 2,653,474 N/A 2,653,414 ': 76 IS.22 37 40,000 1,480,000 4,256,157 N!A 4,256,157 ', Village Green 7l-86 4.15 10 40,000 400,000 453,116 95,000 636,150 90.125 8.22 36 40,000 1,440,000 1,631,217 95,000 2,290,140 ',. 130-153 5,84 24 40,000 960,000 1,087,478 95,000 1,526,760 159-181 6.21 23 40,000 920,000 1,042,167 95,000 1,463,145 184-220 ~ 83] 37 40,000 1,480,000 1,616,529 95,000 1,941,094 ~ 225 44.63 224 - 40,000 8,960,000 10,149,795 N(A 10,149,79fi Encanto 226 23.59 103 40,000 4,!20,000 4,671,499 N/A 4,671,499 '~ Tesoro227 13.84 48 40,000 1,92Q,000 2,245,429 N/A 2,245,429 228-269 12.85 42 40,000 1,680,000 2,190,171 110,000 2,563,596 '.. 271-334 18.37 64 40,000 2,560,000 4,024,401 110,000 4,936,896 Lin 338-041&451 A52 28.52 112 40,000 4,480,000 5,980,969 1]0,000 6,893,376 457-514 13.23 58 40,000 2,320,000 2,508,910 110,000 3,569,784 '. 517-598 19.55 82 40,000 3,280,000 3,547,079 110,000 5,046,936 Rider 600-684,687-754 & 757-820 33.26 217 40,000 8,680,000 9,332,581 110,000 13,960,044 821 12.85 36 40,000 1,440,000 1,548,262 N7A 1,548,262 828 I 27.76 104 40,000 4,160,000 4,472,158 N/A 4,472,758 , 829 9.01 37 40,000 1,480,000 1,591,270 N/A 1,591,270 Diamond Ridge 830 33.64 145 40,000 5,800,000 6,283,917 N/A 6,283,917 831 36.64 173 40,000 6,420,000 7,497,362 N!A 7,497,362 I *AS indicated in previous sections the curr ent Highest and Best Use of the com mercial zoned land in the Liberty n Area was concluded to be for Singlo-Family Residential. It was valued un the basis of its potential yield of 6I (+/_) lots. All the values developed within this report are presented an the Consolidated Worksheet that can be found in the Addenda section of this report. Please read the underlying Assumptions and Limiting Conditions, which aze an integral part of this appraisal. Michael Launer, MAI SRA Certified General Appraiser AG 002049 147 (THIS PACE iNTF.NTIONALLY LEFT BLANK) 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 natnre affecting the ', property appraised or the title thereto, nor does the Appraiser render any opinion as to the i~ title, which is assumed to be good and marketable. The property is appraised as though i under responsible ownership. 2. Any sketch in the report may show approximate dimensions and is included to assist the reader in visualizing the property. 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, unless arrangements have been previously made therefore. 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 ]and 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 fiunished to the Appraiser, and contained 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 famished the Appraiser. 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 fum 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 instnunentality 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. do 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 concemed about these factors. I L 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 apphances 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 concemed 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. I 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 j 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 apgroval has been granted by the City of Bakersfield. Consequen8y, any outstanding tentative maps and any subsequent maps may not accurately represent the final lot delineafion 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 house(lot 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. Date: December 15.2005 /s! Mtchael Lauver Michael Lauver, MAI, SRA Federal ID# 20-0317656 Certified General Appraiser State of California Certificate No. AG 002049 QUALIFICATIONS OF MICHAEL L. LAUNER, MAI SRA ', APPRAISAL EDUCATION SAN BERNA 1~IN0 VA EY OLLF , Advanced Residential Appraising Advanced Income Property Appraising SOCIETY OF REAL ESTATE APPRAISERS Year Completed. 1978 1978 Course 101- Intro to Appraising Real Property 1977 Course 201- Principles of Income Properly Appraising 1979 Course 202 - Applied Income Property Valuation 1984 R-2 Residential Proficiency Examination 1979 Narrative Report Writing Seminar 1979 Subdivision Analysis 1993 APPRAISAL INSTITUTE Basic Valuation Procedwes/ Income Capitalization Part A & B 1988 Real Estate Principles 1990 Standards of Professional Practice Course 410 1994 Standards of Professional Practice Cowse 420 1994 Highest & Best Use and Marketing Analysis Course 520 1994 OREA Required Update Seminar 1995 Environmental Risk and the Real Estate Appraisal 1995 Appraising Rwal Transitional Properties in 5. California Seminaz 1996 Litigation Loss Prevention Program for Real Estate Appraisers 1997 Federal and State Laws and Regulations 1997 The Appraiser's Role in the Redevelopment Process 1998 Valuation Considerations in Partial Acquisition 1998 Valuation of Detrimental Considerations in Real Estate 1999 Condemnation Appraising-Basic Applications Cowse 710 1999 Condemnation Appraising- Advanced Topics Course 720 1999 Standards of Professional Practice Part C Cowse 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 Subdivision Analysis 2005 Appraising Unusual Properties 2005 PROFESSIONAL DESIGNATIONS & AFFILIATIONS STATE OF CALIFORNIA CERTIFIED GENERAL APPRAISER License Number AG002049 Issued 1991 APPRAISAL INSTITUTE MAI -Member Appraisal Institute 1992 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. Aupraisal Institute Reaan VII Member, Regional Ethics and Counseling Panel Appraisal Institute Positions Held: Candidate Guidance Chairman -Appraisal Institute, Bakersfield Chapter 1991-2000 Admissions Ghairman -Appraisal Institute, Bakersfield Chapter 1991-1949 President, Society of Real Estate Appraisers Bakersfield Chapter 75, 1487-1989 President -Appraisal Institute, Bakersfield Chapter, 2001 President-Appraisal Institute, Bakersfield Chapter, 2002 BAKERSFIELD COLLEGE INSTRUCTOR - Real Estate 63 -Intro to RE Appraisal 1988-1998 Real Estate 68 -Advanced RE Appraisal 1943-95 PROFESSIONAL ASSIGNMENTS Valuation appraisals, feasibility studies, depreciation analysis and investment consultations regarding: hotel, motels, office projects, residential subdivisions, mobile home parks, mobile home subdivisions, restaurants, vacant acreage, commerciai 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. o~ a - - Z A x 8 ~ - ~~ i~ _ _ - z - _ s ~ a - - s s ~ d s £ = a s ~ ~ - - ~ m 2 '~ ~ ~ i ~ ~ f _ - - - - - - _ - 8 - ~ 0as - o ~ ~ o ~ $ ~ ~ ~ ~ ~ ~ ~ § ~~ am 3 3 ~ ~ '~ 3 ~ 3 2 3` 5 _ a ~ ~ _ ~ ' ~ $ ~~~~ ~ s £ ~ ~ = $ ~ ~ ~' 'a R 5 1~~° _ __ i g ~ ~ p .'t ~ ~O~ I y s ~ ~ € fr ~ S s & 8 ~ 5 ~ H 4 ~ $ ~ ~. ~ $ ~ ~. ~ § ~ o ~ x _ ~ ~j _ _ _ _ _ _ _ _ _ i ~ 4 ~ ~ ~~ i 3 a )~F ¢E ° GG )=D fu~ y~ E E' ~ F L ~ ~ t- ~ t_ F s t ' t E o F F t # e tt F. ~°- t__ a~ t Fe ia y 3~^ .. y 3 ; -`~ F Q ~ ~ ' ~c i;. ~ ~ ~ F. 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E .. ~ 4 V Yi a s = f 7 a - ~a ~ - _ ;_ ' _ ~ ~ _ 0 Periods Total Units Unit Appreciation Property Tax Rate Property Taxes Cost of Sales Overhead AdminlContingency ' HOA ', Other "per unit" Expense '. Unit Constmction Casts Site Development Coss Profit Discount Rate ', Absorption Presales Net Present Value Liberty II Tract 'As Is' Month 7 $51,000 ~ 0 1 2 3 4 S 6 Available 70 70 60 50 40 30 20 ption 0 ]0 10 10 10 10 10 fining Units 70 60 50 40 30 20 10 10 10 IO 10 10 10 10 Wing tnventory 70 70 60 50 40 30 20 g Inventory 60 60 50 40 30 20 70 10 10 10 IO 10 10 10 'rice $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 $75,000 Holding Costs & Expenses Property Taxes $0 $0 $0 $0 $0 $0 $0 $0 Cost of Sales 3.00°/ $22,500 $22,500 $22,500 $22,500 $22,500 $22,500 $22,500 verhead $0 $0 $0 $0 $0 $0 $0 min/Contingency 2.00% $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 HOA $0 $0 $0 $0 $0 $0 $0 $0 they "per unit" Expense $0 $0 $0 $0 $0 $0 $0 $0 nit Constmction Costs $2Q000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 Site Development Costs ($5,000) ($50.000) (SSQ000) (550,000) ($SO,000j ($50,000) ($50,000) ($50,000} otal $187,500 $187,500 $187,500 $187,100 $187,51X1 $1$7,500 $187,500 et Sales $562,500 $562,500 $562,500 $562,1011 $162,500 $562,500 $562,500 rofit 8.00% $60,000 $60,000 $60.000 $60,000 $64,000 $60,000 $60,000 Cash Plow $502 500 $502 500 $502,500 $502 500 $502 500 $102 500 $502 500 Discount Rate 10.00°t° 1.43% per period 70 $75,000 2.00%, per year 0.29% per period 1.27°J. $0 per unit per yeac 3.00%, tl.00%, 290%r $0 per unit per year $0 per unit per year $20,000 per unit (5,000) pu unit 8.00° 10.00% 120 per year l0 units per period 0 $3,570,000 Net Present Value $3,827,316 Bring hack 5 months a today $3,565,273 u U m 9 G e a _ _ g B i >V ~ v c G S ~ ~ °e w F o 0 3 2 t a= ~ F~'a'z °~= oe =a 6 0 ~' a != a¢ a` c U O K S O a U~ ~¢ c 2 M O N O G O O S d ~ G m O S n V v g O h O O O gp e~_.~_ I~m~a <~G_w~ mod __ a_ g g o g _ o g o _ o 0 0 0 _ _ _ _ ° ~` G~ _~~„° so~GGg~s„€„~ ao~ s~as~ ti yOj O wp ~ p~ ~ v~ .~. ~n w u, 8 W T~ w~ h~ N g gp O g o vOi g Q O g o =~~ ~ g G~GGg=88gg Leh Ng.N~~ B~~N~c ~w~w NBw~ go~o~h ~gf°„~$G °$o g o~ oog o ~°~. $.,, g g - o~,`~~ 9 h ~ w h x o S o g g~ o °a °~~ gg s S °' c €~ •'"• 'L s o [.t ~ U 'K O c ~ ~ .Q 4 ~ ~ ~ Y _ ~ ~ U 3 ~ a £ N 4 w ~ Z " 2 _ 4 C G o .. 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"ate"s. _^.F 9< ~ ~. w~ G G ~S rNe_~e p °S.fi _ ?R F p eBeEae~g94~ ~ ~. ~~~~ ____ _:e5,~ ~~~.~~~ ~ ~~ ~g~u ~A . .. G .. 6eyo ~S°~~ R~R»~g~~6 R^ . RYL ~~~° cae~g _ R`ESfr R.. Eee~~B~: 6tl:Y Fag F~5 a Ya€ ~~ „ es ~sRB~ a i C F G n ~~ Y Fg z€ >d r 9 z 9 a ~ % ~~ F F ~, ~ 2~ " €~ =:_' ~~ ~ E L p. i ~~~~ ~~~~=E~~~o< l 'c ~~ ~€s $g ~, ~o e_~~ s~s~.as~K_a a_~S~i g ~e .-_ _ a~fi o~~8s~ab~.~€~ - .. ., .. _..M ~R 8 - --- .» s~ ~€~gg ¢6 9 S $~~~~¢ -.-.,_ ..°O-~E SAS ~&«~„M'~°- = ~ U r _.., _= a .. ~.,.~,~aF = .. a ~~c.~G ~~ °5„2e p£ ____ __°¢~ o~&~& o~8S~n _ _ ~ o~kea - '- - a Ng ~~,.w SG 8~ eke ~ae~~E~~~~ ~~SDFo GG=~.~ ~ ~ ~~~~~& __ ___-E &~ ag w'~e - u .. ~"±~a~.. F .~'"s° F,a''~s e€e~e~~~g~~~~ _ ^ri'^ spa „x - .. ~e~ ~~ ~~~~~' ~N~ ~ S. ~~ e€ ~ ~ fr=%~6a ~S SaF~ b~a21~~~%e `ap 3 s Y E fi pE G w APPENDIX C FORM OF OPINION OF BOND COUNSEL Closing Date, 2006 City Council City of Bakersfield 1501 Truxtun Avenue Bakersfield, CA 93301 City of Bakersfield Assessment District No. OS-3 - (Liberty JWillage Green/Tesoro-Encanto/Lin/RiderlDiamond Ridge) 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 $8,705,000 aggregate principal amount of the City of Bakersfield Assessment District No. OS-3 (Liberty II/Village Green/Tesoro-Encanto/LinlRiderfDiamond Ridge) 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 No. 018-06, adopted by the City Council on January 25, 2006 (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 ternts 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 aher than ourselves. The opinions expressed herein aze based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions maybe affected by actions taken or omitted or events occumng after 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 paragaph hereof. Furthermore, we have assumed comgliance 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 Certificate may be subject to ban}nttptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws relating io 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-1 We express no opinion on the plans, specifications, maps and other engineering details of the proceedings, or upon the validity of the individual separate assessments securing the Bands which validity depends, in addition fo 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 bindin s ecial assessment obli ations of the Issuer g p g ,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 Bands is excluded from gross income for federal income tax purposes under Section 103 of the Internal 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 minimum taxes, although we observe that it is included in adjusted 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 accrual or receipt of interest on, the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLC per c-z APPENDIX D ASSESSMENT DIAGRAM D-1 (TfIIS PAGE INTENTIONALLY LEFT BLANK] ~, o ~ ~ o~ ~~ow~o o °~ e o ~Q~~Ww o~=W ~ ~oW~ o m ~ o W °o ° ~s o~ s~~~a I °o ~'3 W~ o ax ~s rz. 2 ~ ~ ~4 fx z sC, ~ ~~3 ~ ff ~~ 54 7w (~ ~~ ~y~~ x~~ d~O~ ~°` d o o _ V ~ w ~8 az9 w f ~~° uq Sx °° ~ a~G €~~~ I ~"°3$ os~~ ~'do C,7 [- ~ 8 0 ~ I w o V ¢ f u C~ ay N ~y 3 Z O a a o s~ r s €g ~ 5~a w~~ s~°p ~~ ~ o~ E-+ N r< O ~ ' b aa~ Y ~~€ ~~ (°~ m d~~ 8"'~ t '~~°. °°Cp ~ ~~D Q y ~ ~ `~ ° Q ~ w ° y ~ __~ ~~g ~°a~~~ ~zo m~~ W ~ ~ ~ x ~ rn w r~u G' ~° w I m°F~~Wp~~ is ~ ~ ~~~ ~ ~ q ~ 0 3 ~ c a o o~ €o '~g~~€~ ~ ~ j€$ I o 3~~i ~ w~ v V 1 w ~ e~ ° m6~u~~w ~ug ~~~Yu g ~o'zo W 0.al ~ ~ LL~ p~ ~°~~:~~G~ ~~~ 3 ~ oo ~~ r U '~$ $ LLm€$ ~W O wo ~~ I~ a \ Y ~¢~~ ~ m v6£gY _'~m~m¢$~L my°ed ivns mwo ~ /~ d~~ aY an ~~ m~S€S `e ^va`a v~Z mvo ^n° ~ ~ ~ a~ ^;, °m r es~ pie^. ae ~ po ~S ° EEE%n. ~pEEE^y E~~-`- Ea2E E3~-° ^A a' e8 °oae Ra~~°ee R, 9.^°.no °c^'e` x~n Ca }"' ~ C s: € 5.46= <zs"35 e= a~=a5: a" a ~:~ aoz w .o ~ a q ss ~ m_.:.r~ s-~...ho vg.,; . >~~~ so-Eq a & ~ a: Zo ¢ I ° "f a Ea^~~~y, o~~~~~~g ~~e€~`g a=~z ;z° eta c~zo ~' W WE"o "°~3 oa o "sEx »s-p 5"33m°? a~^'€@ f^m~ °a'~ egg ~yz° s7= ~'a ~yh ayz <`"emu ~ &°' ~ ~<° m= $`_' n)Yn Ee- €g£§ °e,iq~ e§o vIE wa8 ~yU h ~~EPs~ ~ _y a"t" 'e €Ra= s E3 :~$ ~yU d a~n^ WE- a ~ o~°=,_=~~~tea ae~~~eg 35~sa~z~~~.~xs .iaa ce ~a ~~ w~s~ w¢~ ~y>q? :cn°c= al ~ i.10A 5~ °.y .`. °f.E~n~ ~ _^a`°s~ ~. c~ ~s - ~ o w~ o- _<~° Oz ~ _ ~ a, F' U & ~~¢ ~ ~a ~~ ~ ~ ¢E-v' ~ Oq o P, ~ g ~ ~„ ,s~~ C~q ~ Uz _ d E.a 5 Zy'" OW 33 ~ a W wwE a~ ~ d y ~O K `? lye t/) R E° RWF. 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I-44. I.I~I~W 4.LL y`~"RIYgW WqW~ W ON~JR¢Q O¢¢ ¢ca444K U40 K U°vac>¢ati¢n~.o ~rce°c°.t~~~~~~~~~~~~R~icwiv APPENDIX F CONTINUING DISCLOSURE CERTIFICATES CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO.05-3 (LIBERTY II/VII,LAGE GREENITESORO-ENC'AN'I'Ol LINJRIDER/DIAMOND RIDGE} LEI~IITED OBLIGATION IMPROVEMENT BONDS CITY CONTINUIlV'G DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Bakersfield (the "City"} in connection with the issuance by the City of $8,705,OtI0 in aggregate principal amount of the above-referenced bonds (the "Bonds' for Assessment District No. 053 (LibertyII/Village Cneen/Tesoro- Encanto/LinlRiderlDiamond Ridge) (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 018-06 (the "Resolution', adopted by the City Council of the City an January 25, 2006. The City covenants amd agrees as follows: Section 1. Propose 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 ISc2-12(6)(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 shatl 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, dvectly 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 that 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 Nafional Repositories aze listed on the Securities and Exchange Commission website at httpa/wwwsec.gov/info/municipaUnrmsir.htm. "Official Statement" shall mean the final Official Statement, dated February 15, 2006, pertaining to the Bonds. "Participating Underwriter" shall mean RBC Capital Mazkets, and any other original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. F-1 "Repository" shall mean each Nafional Repository and each State Repository. _ "Rule" shall mean Rule ISc2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be 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 recognised as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, ffiere is na State Repository. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not htteYthan nine (9} months after the end of the City's Fiscal Yeaz {i.e., currently not later than April 1 of each yeaz), commencing with the report for the 2005-06 Fiscal Yeaz, provide to each Repository an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as sepazate documents comgrising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial 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 provided by the Texas Municipal Advisory Council at website http:l/www.disclosureusa.org. If the City's Fiscal Yeaz 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 (15) Business Days prior to the date required in subsecfion (a), the City shall provide the Annual Report to the Dissemination Agent (if other than the City}. If the City is unable io 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 yeaz, 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 City, 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 Reports. 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 Yeaz, prepazed in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to 6me by the Governmental Accounting Standazds Boazd. If the City's audited financial statements aze 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 similaz 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 Ute following or other similaz statement: THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED SOLELY TO COMPLY WITH THE SECLiRI'11ES AND EXCHANGE COMMISSION STAFF'S B~1TF..RPRETATiON OF RULE ISc2-12. NO FUNDS OR ASSETS OF THE CTTY OF BAKERSFIELD (O1TTIliR THAN TIIE ASSESSMENTS LEVIED IN THE ASSESSMENT DISTRICT) ARE REQUBtED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND TFIE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM TTIE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON TfTE FINANCIAL F-2 I CONBITION 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 Yeaz to which the Annual Report relates, which information may be provided by its inclusion in the audited financial 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 ffie end of such Fiscal Yeaz 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 chazges and monthly penalties for reinstatement); (B) the date (December 10 or April 10) of the first delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent pazcel and such complaint bas not yet been dismissed, the date on which the complaint was filed in the Kem County Superior Court; and (D) in the event a foreclosure sale has occurred respecting such delinquent pazcel, a summary of the results of such foreclosure sale. {iv) A current statement of the status of completion or progress toward completion of Use public improvements described in the Official Statement under the subheading "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Description of the Community Areas and the Ungrovements." {v} A current statement of the Umd-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 Columns 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 pamgmghs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to snake the specifically required statements, in the light of the circumstances under which they aze made, not misleading. Any or all of ttte 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 Boazd. The City slap cleazly 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 slap give, or cause to be given, notice of the occurrence of any of the following events (each, a "Listed Event"} with respect to the Bands, 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} mkng 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 financial difficulties; (ix) unscheduled draws on credit enhancements reflecting financial difficulties; {x) substitution of credit or liquidity providers, or their failure to performs 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 determine if such event would be material under applicable Federal securities law. (c} If the City determines 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 occurrence with either (i) the Municipal Securities Rulemakiug Boazd aad the State Repository or (ii} the Repositories. Such notice may be filed using the SEC-Agproved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at website http:!/www.disclosureusa.org. Notwithstanding the foregoing, na6ce of Listed Events described in subsections {a){iv} and (v} need not be given under this subsection any eazlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution. Section 6. Termination of Reporting Obli agation. The City's obligafions under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such temtination in the same manner as for a Listed Event under Section 5(c). Section 7. Disseminafion Agent. 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 discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. Section 8. Amendment: Waiver. Notwithstanding any other provision 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 aze 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 opirvon of nationally recognized bond counsel, have complied with the requvements 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 fonds 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 financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual 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. F-0 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 naztative 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 Giry. 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 satements or information prepared on the basis of the new accounting princigles and those prepazed 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 fire accounting principles on Ute presentation of the financial information, in order to provide infomtation 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 maunei as for a Listed Event under Section 5(c}. Secton 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City firm disseminating any other information, using the means of dissemination set forthtn this Disclosure Certificate or any oflter 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. Seotion 10. Default. 1n 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 ar 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 ll. Duties, Immunities, and Liabilities of Dissemination Agent. 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, harmless against any losses, expenses, and liabilities that it may incur arising out of or in the exercise or perfomtance 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 m the Dissemination Agent's negligence or willful misconduct. The obligations of Use City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter, and Holders and Beneficial Owners from time to time of the Bonds, and shall create no tights in any other person or entity. Date: [Closing Date] CITY OF BAKERSFiELD Finance Director F-5 EA'ffiBTT A NOTICE OF FAILURE TO FII,E ANNUAL REPORT Name of Issuer: City of Bakersfield, California Name of Bond Issue: City of Bakersfield Assessment District No- 45-3 (Liberty IWillage GreenlTesoro- EncantoJLin/Rider/Diamond Ridge) Limited Obligation Improvement'Bonds Date of Issuance: [Closing Date] NOTICE 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 flee City on [Closing Date]. The City anticipates that the Annual Report will be filed by Dated: CITY OF BAKERSFIELD Finance DirecWr F-6 CONTINUING DISCLOSURE CERTIFICATES CTTY OF BAKERSFIELD ASSESSMENT DISTRICT NO.OS-3 (LIBERTY IIlVII.LAGE GREEN/TESORO-ENCANTOI LINfRIDERlDIAMOND RIDGE) LIMITED OBLIGATION IIIIPROVEMENT BOND5 LANDOWNER CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Cerlificate (the "Disclosure Certificate's is executed and delivered by a (the "Landowner"), in connection with the issuance by the City of Bakersfield (the "City's of $8,705,000 in aggregate principal amount of the above-referenced bonds (the "Bonds"} for Assessment District No. OS-3 (Liberty IWillage GreenlTesoro-EncantotLinlRiderlDiamond Ridge) Limited Obligation Improvement Bonds (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 018-06 (the "Resolution"), adopted by the City '. Council of the City on January 25, 2006. The Landowner covenants and agrees as follows: ''~ SECTION I. Puroose of the Disclosure Certificate. '~~ This Disclosure Certificate is being executed and delivered by the Landowner for the benefit of the City, RBC Capital Markets, as Ore underwriter of the Bouds (the "Participating Underwriter"), and the Holders and Beneficial Owners (each as defined below) of the Bonds 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: "Affiliate" of another Person shall mean (a) a Person drectly or indirectly owning, controlling, or holding with power to vote, 5°!0 or more of the outstanding voting securities of such other Person, (b) any Person 5% or more of whose outstanding voting securities aze drectly or indirectly owned, controlled, or held with power to vote by such other Person, or (c) any Person directly or indrrectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, "control" means t(re power to exercise a controlling influence over the management or policies 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 Landowner, containing terms substantially similaz to this Disclosme Certificate, whereby such Successor Landowner shall agree to provide Semi- Annual Reports and notices of Listed Events with respect to the property is the Assessment District owned by such Successor Landowner and its Affiliates, if any. `Beneficial Owner" shall mean any person who bas the power, drectly or indreetly, to vote or consent with respect to, or to dispose of ownership of, any Bond or Bonds, including persons holding Bonds through nominees, depositories, or other intermediaries. "Development Plan" shall mean the specific improvements the Landowner intends to make, or cause to be made, in order for the property in the Assessment District owned by the Landowner to mach the Planned Development Stage, the time frame in which such improvements aze intended to be made, and the estimated costs of such improvements. The Landowner's Development Plan, as of the date hemof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." F-7 -, "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. "Dissemination Agent" shall mean the Landowner, or any successor Dissemination Agent designated in ~., writing by the Landowner and which has filed with the Landowner and the City a written acceptance of such I designation. "Event of Bankrttptcy" shall mean, with respect to a Person, drat such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankmptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, ar as a debtor, or in any similar capacity, wherein or whereby such Person asks, seeks, or pmt's to be adjudicated a banlnttpt, or is to be dischazged from any or all of such Person's debts or obligations, or offers to 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 for reorganization or to effect a plan of reorganization, or for a readjustment of such Person's debts, or for any other similaz relief, or if any such petition or any such proceedings of the same or similaz kind or chazactes is filed or instituted or taken against such Person and We same shall remain undismissed fora period of 60 days, 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 the Landowner intends to finance its Development Plan, including specific sources of funding for such Development Plan. The Landowner'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 financial statements, project operating statements, or other reports reflecting the financial position of the Landowner's pazent company or, if such financial statements are prepazed sepazately for the Landowner, reflecting the financial position of the Landowner, provided that, if such financial statements or reports are otherwise prepared as audited financial statements or reports, then "Financial Statements" means such audited financial statements or reports. The Financial Statements for the Landowner or its pazent 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 current National Repositories aze listed on the Securities and Exchange Commission website at http:l/www.sec.gov(info/municipaUnrmsir.htm. "Official Statement" shall mean the final Official Statement dated February I5, 200b, 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 uninwrporated organization, or a government or a political subdivision thereof. "Planned Development Stage" shall mean, with respect m any property in the Assessment District owned by the Landowner or its Affiliates, if any, the stage of development to which the Landowner or its Affiliate intends to develop such property, as descnbed in the Official Statement under the heading "OWNERSHB' AND PLANNED FINANCING AND DEVELOPMEN'P OF THE ASSESSMENT DISTRICT." "Repository" shall mean each National Repository and each State Repository. F-8 "Rule" shall mean Rule 15c2-12{b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same maybe amended from time to time. "Semi-Annual Report" shall mean any Semi-Annual Report provided by the Landowner 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 rite 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 Landowner" shall mean any property owner, other than the Landowner or its Affiliates, which purchases property in the Assessment District for the purpose of developing the property and not merely as an end- user. SECTION 3. Provision of Semi-Annual Reports. {a) So long as the Landowner is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, the Landowner shall provide, or shall cause the Dissemination 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 yeaz, as applicable), commencing with the report for the Disclosure Period ending June 30, 2006, to each Repository aSemi-Annual Report relating to the immediately preceding Disclosure Period that 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 sepazate 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 Statemems aze 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 Trausnrissiou Facilities provided by the Texas Municipal Adviwry Council at website http:l/www.disclosureusa.org. {b) So long as the Landowner is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, not later than fiReen (15) calendaz days prior to the date required in subsection (a) hereof, the Landowner shall provide the Semi-Annual Report to the Disseminaflon Agent. If the Landowner 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 that the Landowner's obligation hereunder has not been terminated pursuant to Section 6 of this Disclosure Certificate, and, if the Landowner 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) determine each yeaz, 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 the filing of the Semi-Annual Report with each Repository, file a certificate with the City and rite Landowner 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 SECITON d. Content of Semi-Annual Reports. So long as the Landowner is obligated hereunder and said obligation has not been terminated pursuant to Secfion 6 of this Disclosure Certificate, the Landowner shall provide aSemi-Annual Report for the preceding Disclosure Period with respect to property within the Assessment District then-owned by the Landowner or its Affiliates, if any, which Sena-Annual Report shall contain or incorporate by reference the following: (a) The Landowner shall provide a general description of progress made in the Development Plan, and any significant changes in the Development Plan, Financing Plan, or zoning since the date of the Official Statement (with respect to the first Semi-Annual Report only) or the prior Disclosure Period, as applicable. The Landowner 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 Landowner shall identify any material deviations in actual versus expected sale prices, and identify zoning changes, if any. The Landowner shall also include information concerning the recordation of final maps, if applicable, and information concerning the sale or transfer of property to Persons that aze not Affiliates of the Landowner. (b) The Landowner shall describe any material changes in the Financing Plan for its development project including, without limitation, changes in status of the Landowner's credit line {or the credit line of any Affiliates of the Landowner that own property within the Assessment District), if applicable. (c) The Landowner shall describe any material change in the legal structure of the Landowner or of any of its Affiliates that own property within the Assessment District. (d) Each fiscal yeaz, one Semi-Annual Report shall make reference to the quarterly and annual Financial Statements of the Landowner's parent company or the Landowner, as applicable, on file with the Securities and Exchange Commission (if apphcable). All such references may contain the following caveat: The quarterly or annual reports provided with this Sena-Annual Report are referred to far informational purposes only. 1n 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 Landowner to pay the unpaid assessment instalhnents does not constitute a personal indebtedness of the Landowner for which the funds or assets (other than the property in the Assessment District) of the Landowner maybe requited, 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 or annual reports provided with this Semi-Annual Report that such funds or assets (other than the properly in the Assessment District) aze available to cure any delinquencies in the payment of assessments. (e) To the extent that Financial Statements aze prepared sepamtely for the Landowner, Financial Statements prepazed in accordance with generally accepted accounting principles, as in effect firm time to time, shall be provided. To the extent that audited Financial Statements are prepazed separately for the Landowner, if audited Financial Statements are requted to be provided and such audited Financial Statements aze not available by the time the applicable Semi-Annual Report is required to be provided pursuant to Secfion 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 yeaz for the entity covered thereby. To the extent that audited Financial Statements of the Landowner aze prepazed, the Landowner shall include such audited Financial Statements in the applicable Semi-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 Landowner, if any, may contain the following caveat: The audited financial statements of the Landowner aze 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 properly in the Assessment District is the sole security for the Bonds. The obligation of the Landowner to pay the unpaid assessment installments does not constitute a personal indebtedness of the Landowner for which the funds or assets. (other than the property in dte Assessment District) of the Landowner may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be infected from audited financial statements F-10 i of the Landowner that such funds or assets (other than the property in the Assessment District) aze available to cure j any delinquencies in the payment of assessments. (f) In addition to any of the information expressly required to be provided under this Section, the Landowner shall provide such furdrer informaton, 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 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 Rulemaldng Boazd. The Landowner shall clearly identify each such other document so included by reference. SECTION 5. Landowner's Report of Listed Events. (a) So long as the Landowner is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, pursuant to the provisions of this Section 5, the Landowner shall promptly give, or cause to be given notice of the occurrence of any of the following events (each, a "Listed EvenY~ with respect to Landowner and any of its Affiliates that own property within the Assessment District: (i} Any conveyance by the Landowner or any of its Affiliates to a Successor Landowner or its Affiliates, if any, of property that, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner 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 Landowner or any of its Affiliates to pay prior to delinquency general property taxes, special taxes, or assessments with respect to its property within the Assessment District. (iii) Any temrination of a line of credit or loan, any temtination of, or uncured material default under, any line of credit ar loan, or any other loss of a source of funds that could have a material adverse affect on the Landowner's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of the Landowner or any of its Affiliates to pay assessment installments with respect to the Assessment District prior to delinquency. (iv) The occurrence of an Event of Banlauptcy with respect to the Landowner or any of its Affiliates that could have a material adverse affect on the Landowner's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of the Landowner or any of its Affiliates to pay assessment installments with respect to the Assessment District prior to delinquency. (v) Any amendments to land use enfitlements or environmental conditions or other governmental conditions that aze necessary to complete the development of the groperiy of the Landowner or its Affiliate in the Assessment District. (vi} Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the property of the Landowner or its Affiliate in the Assessment District, if material. {vii) Any previously undisclosed legislative, administrative, or judicial challenges to development of the property of the Landowner or its Affiliate in the Assessment District, if material. (viii) Any changes in the alignment, design, or likelihood• of completion of significant public improvements within or serving the property in the Assessment District, including major thomughfazes, sewers, water conveyance systems, and similar facilities that could have a material adverse effect on the ability to complete the development of the property of the Landowner or its Affiliates in the Assessment District. (ix) The assumption of any obligations by a Successor Landowner pursuant to Section 6 of this Disclosure Certificate. F-II '. (b) Whenever the Landowner obtains knowledge of the occurrence of a Listed Event, the Landowner ~~ shall gromptly notify the Dissemination Agent in writing, with a copy to the City. Such notice shall instmct the Dissemination Agent to report the occurrence pursttant to subsection (c) below. (c) If the Dissemination Agent has been instructed by the Landowner to report the occurrence of a -- Listed Event, the Dissemination Agent shall file a notice of such occurrence with either (i} the Municipal Securifies Rulemaking Boazd and each State Repository or (ii) the Repositories, with a cogy to the Participating Underwriter. Such notice may be filed using the SEC-Approved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at website http://www.diselosureusa.org. SECTION 6. Termination of Landowner's Reportine Obligation. ~', The Landowner'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 Landowner 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-owned by the Landowner and its Affiliates, if any, is subject to the lien of Beater than twenty percent (24%) of the annual assessment securing payment of the Bonds; provided, however, for purposes of determining the Landowner's ownership of property in the Assessment District, it shall be assumed that the Landowner owns all property for which the Landowner and its Affiliates, if any, hold an exercisable option to purchase such property, whether or not such option has been exercised, or {3) when the Landowner's property within the Assessment District has reached the Planned ', Development Stage. If the Landowner conveys to a Successor Landowner property in the Assessment District prior '.. to the time at which such groperty reaches the Planned Development Stage, and such property conveyed, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of greater than twenty percent (20°l°) of the annual assessment securing payment of the Bonds, then the Landowner shall require a Successor Landowner 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 Landowner 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 Ageni. As of the date of this Disclosure Certificate, the Dissemination Agent is the City. SECTION 8. Amendment: Waiver. Noiwithstanding any other provision of this Disclosure Certificate, the Landowner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the City ogees in writing and the following conditions aze 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 requirements 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. F-12 I If the annual financial information or operating data to be provided in the Semi-Annual Report is amended pursuant to the provisions hereof, the fast annual financial information filed pursuant hereto containing the amended operating data or financial infomration 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. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Landowner shall describe such amendment in the next Semi-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 Landowner. 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 yeaz in which the change is made shall present a comparison between the financial statements or information prepazed 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 ffie 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 Landowner 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. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Landowner 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 Landowner chooses to include any information 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 Landowner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Landowner to comply with any provision of this Disclosure Certificate, the Participating Underwriter, the City, or any Holder or Beneficial Owner of outstanding Bonds may take such actions as maybe necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Landowner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate 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 Landowner to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties, Lnmunifies and Liabilities of Dissemination Avent. The Dissemination Agent shall have only such duties as aze specifically set forth in this Disclosure Certificate, and the Landowner agrees to indemnify and save the City, the Dissemination Agent, and their respective officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities which either ar both of them may incur arising out of or in the exercise or performance of the Landowner'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 Disseminaton Agent's negligence or willful misconduct. The obligations of the Landowner under this Section shall survive resignation or removal of dte Dissemination Agent and payment of the Bonds. F-13 SECTION 12. Beneficiaries. This Disclosure Certificate shall be binding upon the Landowner and shall inwe solely to the benefit of the ~, Landowner, the Dissemination Agent, the Participating 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] [i,ANDOWNER] By: Name: F-14 (TIIIS PAGE INTENTIONALLY LEFT BLANK} E~LtBIT A NOTICE TO REPOSTTORIES OF FAILURE TO FILE SEMI-ANNUAL REPORT Name of Landowner: ~~ Name of Bond Issue: City of Bakersfield Assessment District No. OS-3 ¢ffierty BlVillage GreetJl'esoro- EncantolLinlRider/Diamond Ridge) Limited Obligation Improvement Bonds Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that , a (the "Landowner"}, has not provided aSemi-Annual Report with respect to the above-named Bonds as required by Section 3 of the Landowner Continuing Disclosure Certificate, dated [Closing Date]. The Landowner anticipates that the Semi-Annual Report will be filed by Date: [Dissemination Agent], as Dissemination Agent Name: Ca Landowner F-li iJ FOR ADUITIONAL HOOXS: ELAI3RA.COM OR{888)935-22'!2