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06-1 Official Statement
NEW ISSUE NO RATING BOOK-ENTRY-ONLY SYSTEM In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based ^ponan analysis of existing laws, regulations, mlings, and court decisions and assuming (among other things) compliance with certain covenants, interest on the Bonds is excluded from Boss income for federal tax purposes and is exempC from State of California pusonal income nixes. In the opivion of Bond Counsel, interest on Iha Bonds is no[ a speei$e preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted eunene eaznings in calculating federal corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences caused by the ownership or disposition of, or the accrual or receipt of interesC oq the Bands. See "TAX MATTERS:' $s,olo,ooo CITY OF BAKERSFIELD ASSESSMENT DISTRICT N0.06-1 (ETCHEVERRYILIN IDUNPJERSITY PARK) LIMITED OBLIGATION IMPROVEMENT BONDS Dated: Date of Delivery Due: September 2, as shown below The Bonds described herein {the `Bonds"} are special, limited obligation bonds being issued by Che City of Bakersfield, California (the "City"), a portion of the proceeds of which will be used to finance the acquisiton of certain public improvements specialty benefiting progenies located within the boundaries of the City of Bakersfield Assessment District No.06-1 (Eteheveay/Lio IVUniversity Park) (the "Assessment District"}. The Asseasmen[ District was formed and the acquisition of the improvements will be undertaken as authorized under [he provisions of the Municipal Improvement Ac[ of 1913 (Division 12 of the California Streets and Highways Code) and Section 1308.070 of the Municipal Code of the City. The Bonds are being issued pursuant to Iha provisions of the Improvement Bond Act of 1915 (Division l0 of the California Streets and Highways Code) (the "]915 Aef~. The Bonds are issuable only asfully-registered Bonds in the denomination of $5,000 each orany integ[al multiple thereof. Principal, interest at maturity or upon eazlier redemption, as applicable, and premium, if any, with inspect to the Bonds will be payable upon presentation and surrender thereof az the corporate trust office of U.S. Bank National Association, Che paying agent, registrar, and transfer agent for [he Bonds (the "Paying Agent"}, in St. Paul, Minnesota. Interest on the Bonds (other than the final payment of interest, which is payable upon surrender of [he Bonds} will be payable semiannually on Marcb 2 and September 2 (each an "Interest Payment Dam 7, eommertcing September2, 20(17, by check of the Paying Agent mailed on each Interest Payment Date to thepersons in whose names such Bonds are regismred at the close of business on the fifteenth day of the calendar month immediately prior to an Inmmst Payment Date (oq 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 alone of business on the fifteenth day of rite month immediately preceding such Interest Payment Date, 6y wire transfer). The Bonds will be issued initially inbook-eonyonly form through the book-entry system of The Depository Trust Company, New York, New York. See "BOOK- ENTRY-ONLY SYSTEM:' The Bonds am subject to redemption on any Interest Payment Daze in advance of maturity at the option of [he City upon giving at least 30 days' prior notice and upon payment of [he principal [hereof 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, 2027, are also subject to mandafory redemption in pan prior to their stated maturity, as<more fully described herein Purther development oBpamels within the Assessment District, Craasfers of property ownership and other similar circumstances covld~result in prepayment of aB or part of the assessments. Such prepayment would msulC in redemption of a portion of the Bonds prior m their stated maturities. Under the provisions of the 1915 Act, installments of principal and interest suffioient Co meet annual debt service requirements with respect to the Bonds shall be included on the regular [ax bills of the County of Kem (the "County's sent to owners of property against which there are unpaid assessments, The portion of the annual installments for the payment of principal of and interest on [he Bonds is to be paid into the Redemption Fund, to be held by the Finance Director, and will be used to pay debt service on the Bonds as it becromea due. To provide funds Sur payment of the Bonds and the interest thereon as a result of any delinquent assessment installments, the City will establish a Special Reserve Fund and deposit therein Bondproeeeds in the original amount of $399,027.50. Additionally, the Ciry has covenanted that, under cenain circumstances, by no later than.. October 1 in any year, it will Fite an action in superior coon m foreclose the lien on each delinquent assessment, as more particularly described herein. IF A DELINQUENCY OCCURS IN THE PAYMENT OF ANY ASSESSMENT INSTALLMENT, THE CITY WII.L HAVE A DUTY ONLY TO TRANSFER INTO THE REDEMPTION FUND THE AMOUNT OF THE DELINQUENCY OUT OF THE SPECIAL RESERVE FUND, TIIIS DUTY OP THE CITY IS CONTEViIING DURING THE PERIOD OF DELINQUENCY, ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND, UNTR. REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. TT-IERE IS NO ASSURANCE THAT SUFFICIENT FUNDS WII,L BE AVAILABLE FROM THE SPECIAL RESERVE FUND FOR THIS PURPOSE. THEREFORE, I$ DURING THE PERIOD OF DELINQUENCY, THERE ARfi INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMIlVED THAT If WILL NOT OBLIGATE ITSELF TO ADVANCE FUNDS FROM ITS TREASURY TO CURE RNY DEFICIENCY IN THE REDEMPTION FUND. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire ~cial Statement to obtain information essential to [he making of an informed investment decision. MATURITY SCHEDULE $3,295,6110 Serial Bonds MatoNty Prirtcipai Interest Maturity Principal Interest iSeptembtr 2) Amount Rate Price CUSIP (n No. (September 2) Amount Rate Price CI16IP ut No. 2008 $160,000 3.900% 100.000% 057510 F61 2016 $225,000 4,600°,6 IOD.000% 057510 G60 2009 165,000 4.000 100.000 051510 F79 2017 235,000 4.650 100.000 057510 G78 2010 175,000 4.150 100.000 057510 F87 201.8 245,000 4.700 100.000 OS7510 G86 2011 180,000 4.250 1W.000 057510 F95 2019 255,W0 4.750 IOD.000 OS7510 G94 2012 190,000 4.350 ]00.000 051510 G29 2020 270,000 4.800 100.000 057510 H28 2013 (95,000 4.450 ]00.000 057510 G37 2021 285,000 4.850 100.000 057510 H3b 2014 205,000 4.500 ]00.000 057510 G45 2022 295,000 4.900 100.000 0575(0 H44 2015 215,000 4.550 ]00.000 057510 G52 $1,715,000 5.000% Term Bond Dae September 2, 2627- Price: IOUJ78ro, Yield: 4.950Po (CUSIP m No. 057510 HSD (p Copyright 2007, Amesiean Bankers Association. CUSIP data is provided by Standard & Poor's CUSIP Service Bureau, a division of The McCrcaw-Hill Companies, Inc. ("CUSIP Service Bureau"1. Such CUSIP datais provided only for the convenience of the reader atM is no[ intended to create a database and does oo[ suvein any way as a su6stimte for the services and information provided by the CUSIPService Bureau CUSIP is a registered aademark of [he American Bankers Association The Citytakea no responsibility for the accuracy of any CUSIP data set forth herein or for any changes or errors in such data. (2) Rived to optional redemption date of March 2, 2017; callable at par. THE BONDS ARE NOT SECURED BY THE GENF.RALTAXING POWER OF THE CITY, THE COUNTY, THE STATE OF CALIFORNIA (THE "STATE"), OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITfIER THE CITY, NOR THE COUNTY, NOR THE STATE, NOR ANY OTHER POLTTICAL SUBDIVISION OF THE STATE HAS PLEDGED ITS FULL FAITH AND CREDTT FOR THE PAYMENT OF THE BONDS. The Bonds are being offered when, as, and df issued by the City and received by the Underwriter, subject to prior sale and to the approval of validity by Orrick, Herrington & SutediffeLLl; San Francisco, California, Bond Counsel, and the approvadofcertain mattersforthe Ciry by the CityAftorney ofthe City afBakeraf:eld Certain otherlegal matters will be passed on by Goodwin PmcierL.LF, LosArtgeles, California, as Disclosure Counsel to the Ciry. It is expected thatthe Bonds in defindtivefonn will be available for delivery rhmugh the facilities of The Depository Trust Company, New York, New Yank on or about May 2, 2007. STONE StYOUNGBERG LLC The date of this Official Staremevt is April 12, 2(N17. No dealer, broker, salesperson, or other person has been authorized by the City or the Underwriter to give any information onto 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 Bands, by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. This Official Statement is not to be construed to be a 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 are 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 circumstances, create any implication that there has been no change in the affairs of the City or the Assessment District since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed The information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. CITY OF BAKERSFIELD Mayor and City Council Harvey L. Hall, Mayor Iona Carson, Councilmember First Ward Susan M. Benham, Councilmember Second Ward Ken Weir, Councilmember Third Ward David R. Couch, Councilmember Fourth Ward Harold Hanson, Vice Mayor, Councilmember Fifth Ward Jaequie Sullivan, Councilmember Sixth Ward 7.ack Scrivner, Councihuembex Seventh Ward City Staff Alan Tandy, City Manager Virginia Gennaro, City Attorney Pamela A. McCarthy, City Clerk A'elson K. Smith. Finance Director Raul M. Rojas, Public V/orks Director BOND COUNSEL Orrick, Herrington & Sutcliffe LLP San Francisco, California ASSESSMENT ENGINEER Wilson & Associates Fresno, California PROPERTY APPRAISER Launer & Associates, Inc. $akersfield, California DISCLOSURE COUNSEL Goodwin Procter LLP Los Angeles, California PAYING AGENT, REGISTRAR, AND TRANSFER AGENT U.S, Bank National Association Los Angeles, California (THIS PAGE INTENTIONALLY LEFT BLANK} 4regoo I-5 Pacific 6rewrr The City oFBakersfield, California, the county seat of the County of Kern, is located at the southern end of California's San Joaquin Valley. Bakersfield is approximately 110 miles north of Los Angeles and 290 miles south of San Francisco. i-5 ~' tos Angeics ~~ Ncv~da Mexloa ASSESSMENT DISTRICT 06-1 BOUNDARIES TAe.Efcheverry Area Tract No. 6361 ---` .mow. Lnw_::. _. ~; The Lin !t Brea ;&'' ~,;~ ` Trct No 6453 'tea - - ~ ~ ~ - ~ - --`- „ ~;..~ > . ~ ~ ~ f ~ ~ R i w ! ~» [ , ,a ~ ~, ~ ~~ ~~- ,~~~: ~tA st ~ ~~ 9F. ~ I. n ~ 3 rriversityParkArea 799 TABLE OF CONTENTS Pagc INTRODUCTORY STATEMENT ...............................................................................................................................1 The Bonds ..............................................................................................................................................................1 The Assessment District ......................................................................................................................................... l Property Ownership ........................................................................................................................................... ..... l Improvements .................................................................................................................................................... ..... 2 Assessments ....................................................................................................................................................... ..... 2 Appraisal ........................................................................................................................................................... ..... 2 Security for fhe Bonds ....................................................................................................................................... .....3 Special Resen°e 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 ............................................................................................................................................................ .....5 Purpose of die Bonds ......................................................................................................................................... .....5 Authority for Issuance ....................................................................................................................................... .....5 General .............................................................................................................................................................. ..... 6 Transfer and Exchange of Bonds ....................................................................................................................... .....6 Bonds Mutilated, Destroyed, or Lost ................................................................................................................. .....7 Redemption ....................................................................................................................................................... .....7 Effect of Redemption; Defeasance .................................................................................................................... .....8 Kefunding Bonds ............................................................................................................................................... .....8 Disposition of Surplus from the Improvement Fund ......................................................................................... .....8 Investment of Bond Proceeds ............................................................................................................................ .....8 Security for the Bonds ....................................................................................................................................... .....9 Special Reserve Fund ........................................................................................................................................ ...10 Redemption Fund Deficiencies ......................................................................................................................... ...11 Covenant to Commence Superior Court Foreclosure ........................................................................................ ... l 1 Priority of Lien .................................................................................................................................................. ...11 Tax covenants ......................................................................................................................._.......................... ...12 Debt Service Schedule ....................................................................................................................................... ...13 BOOK-ENTRY-ONLY SYSTEM ........................................................................................................................... ...13 THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS .......................................................................... ...15 General ................................................................................................. _........................................................... ...15 Description of the Conununity Areas and the Improvements ........................................................................... ...16 Estimated Improvement Costs ........................................................................................................................... ...19 Method of Assessment Spread .......................................................................................................................... ...20 OGVNERSHIP AND PLANTED FINANCING AND DEVELOPMENT OF TIIE ASSESSMENT DISTRICT... ...22 Ownership of PropetTy in the Assessment District ............................................................................................ ...22 LO Land ............................................................................................................................................................ ...22 Lennar Homes ................................................................................................................................................... ...23 C&C California ................................................................................................................................................. ...25 Development and Financing Plans .............................................................................._.................................... ...26 Assessment Roll ................................................................................................................................................ ...31 Utilities .............................................................................................................................................................. ... 32 Flood and Earthquake 7,ones ............................................................................................................................. ...32 Zoning ............................................................................................................................................................... ...32 Tax Delinquencies ............................................................................................................................................. ...32 Environmental Issues Affecting Assessment District Property ............................................... .............................32 Bulk Value-to-Assessment Lien Ratio .................................................................................... .............................34 Direct and Overlapping Debt ................................................................................................... .............................36 SPECIAL RISK FACTORS ........................................................................................................... .............................37 General .................................................................................................................................... .............................37 Risks of Real Estate Secured Investments Generally .............................................................. .............................37 Concentration of Ownership .................................................................................................... .............................37 Property Values ....................................................................................................................... .............................38 Availability of Punds to Pay Delinquent Assessment Instalhnents ......................................... .............................38 Hazardous Substances ............................................................................................................. .............................39 Endangered and Threatened Species ....................................................................................... .............................39 Factors That May Affect Land Development .......................................................................... .............................40 Private Improvements, Increased Debt .................................................................................... .............................40 Subordinate Debt; Payments by FDIC and Other Federal Agencies ...................................__ ..........______.._...40 Tax Delinquencies ................................................................................................................... .............................41 Limited Obligation of the City Upon Delinquency ................................................................. .............................41 Bankruptcy and Poreclosure ........................................................:........................................... .............................42 Economic, Political, Social, and Environmental Conditions ................................................... .............................43 Articles XIIIA and XII1B of the California Constitution ......................................................... .............................43 Articles XIIIC and XIIID of the California Constitution ......................................................... .............................45 Future Initiatives ...................................................................................................................... .............................45 Covenant to Commence Superior Court Foreclosure .............................................................. .............................4G Price Realized Upon Foreclosure ............................................................................................ .............................46 Priority of Lien ........................................................................................................................ .............................47 Refunding Bonds ..................................................................................................................... .............................47 Absence of Market for Bonds .................................................................................................. .............................47 Loss of Tax Exemption ........................................................................................................... .............................47 ENFORCEABILITY OF REMEDIES ........................................................................................... .............................48 NO LITIGATION ........................................................................................................................... .............................48 CERTAIN INFORIviATION CONCERNING THE CITY ............................................................ .............................48 TAX MATTERS ............................................................................................................................ .............................48 APPROVAL OP LEGALITY ........................................................................................................ .............................49 UNDERWRITING ......................................................................................................................... ............................. 49 NO RATING ............................................................................................................................_.... .............................49 CONTNUING DISCLOSURE ...................................................................................................... .............................49 MISCELLANEOUS ....................................................................................................................... ............................. 5 0 APPENDIX A -CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION ................................................................... ...........................A-1 APPENDIX B -APPRAISAL ........................................................................................................ ...........................B-1 APPL^NDIX C -FORM OF OPINION OF BOND COUNSEL ..................................................... ........................... C-1 APPENDIX D -ASSESSMENT DIAGRAM ................................................................................ ...........................D-I APPL^NDIX F. - ASSF,SSMFNT ROLL AND VALUE-TO-LIEN DATA .................................... ........................... E-1 APPENDIX F -FORMS OF CONTINUING DZSCLOSURE CERTIFICATES ...........,__ .......... ........................._ F-I OFFICIAL STATEMENT' $5,010,000 CTPY OE BAKERSFIELD ASSESSMENT DISTRICT NO. Ob-1 (ETCHEVERRYILLN IIIi7NIVERSITY PARK) LIMITED OBLIGATION IlYIPROVEMEN'L BONDS INTRODUCTORY STATEMENT THIS INTRODUCTORY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE COVER PAGE AND APPENDICES HERETO, AND THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. The Bonds The purpose of this Official Statement, which includes the cover page and the appendices pereto, is to set forth certain information concerning the issuance and sale by the City of Bakersfield, California (the "City"), of $5,010,000 in aggregate principal antount of its Ciry of Bakersfield Assessment District No. 06-1 (EtcheverrylLin IWniversity Park) Limited Obligation Improvement Bonds {the "Bonds") for the City of Bakersfield Assessment District No. 06-1 (ECeheverryiT.in IIlUniversity Park) (the "Assessment District"). Tho Bands are issued pursuant to the Improvement Bond Act of 1915, being Division 14 of the California Streets and Highways Code (the "1915 Act"), the Chartar and Municipal Code of the City, and Resolution No. 056-07 adopted by the City Council of the City (the "Ciry Council"} on March 28, 2007 (the "Bond Resolution"). The Assessment District The Assessment District was farmed and the assessments are baing levied in accordance with the Municipal Improvement Act of 1913, being Division 12 of the California Streets and Highways Cade (the "1913 Act"), and Section 13,08.070 of the Municipal Code of the Ciry. Proceedings for the formation of the Assessment District were eonunenced by the City Council pursuant to property owner petitions filed by LO Land Assets, LP, a Delaware limited partnership ("LO Land"), Lennar Homes of California, Inc., a California corporation ("Lennar Homes"}, and Castle & Cooke California, Inc., a California corporation ("C&C California"), as the owners at the date of Che filing thereof of more than 60°l0, collectively, of the assessable land n~thin the Assessment District. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSIYIENT DISTRICT." Tha Assessment District is comprised of approximately 274.70 grass sores (or approximately 243.21 net acres) of land located in Che northwest and southwest areas of the City. The Assessment District has been divided into three separate community areas generally identif ed as (i} the "Etcheverry Area," (ii) the "Lin 1I Area," and (iii) the "University Park Area" (collectively, the "Community Areas"}. The Assessment District boundaries are shown on the assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further description of the Assessment District and the Community Areas, see "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS." Property Ownership As of March 30, 2007, the Following entities own the property within the Assessment District subject to the lien of the assessments: LO Land owns all of the assessable land within the Etcheverry Arca; Lennar Homes owns all of the assessable Land within the Lin II Area; and C&C California ohms all of the assessable ]and within the University Park Area. LO Land, Lennar Homes, and C&C California are collectively referred to herein as Che "Landowners." Although LO Land currently owns all of the property within the Etcheverry Area, Lennar Homes is expected to purchase the lots within the Eteheverry Area in discrete takedowns pursuant to the Option Agreement (as defined herein). Pursuant to die takedown schedule set forth in the Option Agreement, on March 15, 2007, Lennar Homes exercised its option to purchase the first group of lots of the takedown, consisting of 451ots. Each of Lennar Homes and LO Land has fidfilled its respective obligations to accomplish such takedown; however, the final map for Tract No. 6343, which contains such 45 lots, has been submitted m the City's planning deparitnent for plan check and, notwithstanding the anticipated recordation date of early April 200'7 stated in the Preliminary Official StatemenC, Lennar now expects that such f"mal map will not be recorded until after the issuance of the Bonds. After the recordation of such map, LO Land will deliver a grant deed transferring the 45 lots to Lennar Homes. Thorefore, as of Mazeh 30, 2007, tifle to such property is held by LO Land. The Option Agreement obligates Lennar Homes to pay all real property taxes, including, without limitation, the assessments, duo and payable for all of the property owned by LO Land within the Etcheverry Area, irrespective of whether Lennar owns such property, during the term of the Option Agreemene. This contractual arrangement does not otherwise alter the security for the Bonds. There can be no assurance, however, that the transfer and sale of any additional property to Lennar Homes by LO Land under the Option Agreement will occur. See "OWNERSHIP AND PLANNED FPVANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Lennar Homes -The Option Agreemenx." 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- Development and Financing Plans" for a description of the planned development of the respective Community Areas. Improvements Proceeds from the sale 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 three Cotmmunity Areas, which improvements will be owned, operated, and maintained by the City (collectively, the "Improvements"), and {ii) 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, 2007. For a further description of the Community Areas and the Improvements, see "TAE ASSESSMENT DISTRICT AND TAB IMPROVEMENTS -Description of the Community Areas and the Improvements." The hmprovements are proposed to be financed by the City in accordance with the terms and conditions of (i) the Aequisifion and Disclosure Agreement No. 06-249, effective August 30, 2006 (the "LO Land Acquisition Agreement"), by and among the City, LO Land, and Lennar Homes, (ii) the Acquisition and Disclosure Agreement No. 06-250, effective August 30, 2006 (the °Lennar Homes Acquisition Agreement"), by and between the City and Lennar Homes, and (iii) the Acquisition and Disclosure Agreement No. 06-251, effective August 30, 2006 (the "C&C California Acquisition Agreement" and together with the LO Land Acquisifion Agreement and the Lennar Homes Acquisition Agreement, the "Acquisition Agreements"), by and between the City and C&C California. Lennar Homes, not LO Land, has agreed to complete the Improvements described in the LO Land Acquisition Agreement. Upon their completion by Lennar Harnes or C&C California, as applicable, the Improvements are proposed to be acquired by the City using Bond proceeds. Assessments Tho land within each of the three respective Community Areas in the Assessment District specially benefited by the Improvements has been assessed to pay the estimated cost of the Improvetents and certain financing oosts related thereto. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Estimated ImprovemenC Costs." The City Council, pursuant to Resolution No. 053-07, adopted on March 14; 2007, confirmed the amount of assessments for the Assessment District in the aggregate amount of $5,070,000. The Bonds are secured by the assessments as hereinafter described under the heading "THE BONDS -Security for the Bonds." The total assessment lien is not less than the aggregate principal amount of the Bands being issued. Appraisal Launer & Associates, Inc., Bakersfield, California (the "Appraiser"), has prepared an appraisal, dated March 7, 2007 (the "Appraisal"), appraising, as of March 7, 2007, the property within the Assessment District that is subject to the lien of the assessments, which appraised property consists of approximately 243.21 net acres 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 approximately 11:1. See "OWNERSHIP AND PLAA'NED FINANChti'G AND DEVELpPMENT OF THE ASSESSMENT DISTRICT --Bulk Value-to-Assessment Lien Ratio." The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, a copy of which is attached hereto as APPENDIX B. Certain considerafions relating to the Appraisal are discussed under the heading "SPECIAL RISK FACTORS." Neither the City nor Che Underwriter makes any representation as to the accuracy or completeness of the Appraisal. Set forth in APPENDIX E is the assessment roll, including Bulk Value to assessrent lien ratio information, for the parcels of property within the Assessment District that are subject m the lien of the assessments. The assessment tall shows the amount of the total estimated cost of the proposed hnprovement acquisition, constmction, and incidental cost thax is assessed upon each of the lots and parcels within the Assessment District based upon the alternate method and rate of assessment permitted under Section 73.08.070 of the Municipal Code of the City. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Method of Assessment 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 Far 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 are secured by the moneys in the Redemption Fund created pursuant to the Bond Resolution and by the unpaid assessments levied to provide for payment of said acquisition of the Improvements, and, including principal and interest, are payable exclusively out of the Redemption Fund The unpaid assessments represent fixed liens on the parcels of ]and assessed under the proceedings. They do not, however, constitute the personal indebtedness of the owners of said parcels. Under the provisions of the 1915 Act assessment installments sufficient to meet annual debt service on the Bonds are to be collected on the regular tax bids of the County of Kern (the "County") sent to owners of property within the Assessment District against which there are unpaid assessments. These annual installments are to be paid into the Redemption Ftmd, which will be held by the Finance Director and used to pay Bond principal and interest as they become due. The installments billed against each parcel of property each year represent a pro rata share of the total principal and interest coming due that year, based on the percentage that the unpaid assessment against that property bears to the total of unpaid assessments within the Assessment District. Phe Bonds are not secured by the general taxing power of the City, the County, the State of California (the "State"), or any ether 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 Fnnd The City will establish a Special Reserve Flmd (the "Special Reserve Fund") in the amount of $399,027.50 from Bond proceeds, which amount will be transferred to the Redemption F1md in the event of delinquencies in the payment of the assessment installments to the extent of such delinquencies. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the Reserve Requirement (as defined herein). See "THE BONDS - Special Reserve Fund" Foreclosure The City bas covenanted that it will, no later than October I in any year, frle an action in tle Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5%~ of the assessment installments posted to the tax roll for that fiscal year and (ii} the unount in the Special Reserve Fund is less than the Reserve Requirement. See "IHE BONDS ~~~~ Covenant to Commence Superior Comt 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 Pund the amount of the delinquency out of the Special Resete 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 are insufficient moneys in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. As autharized 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 Redemption 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 Redemption Fund the amount of such delinquencies out of any other available moneys of the City. Book-Entry-Only System The Bonds will be initially issued and registered in the name of Cede & Co., as nominee of The Dopository Trust Company {"DTC"), New York, New York. Payment of principal of and interest on the Bonds to the Beneficial Owners (as defined below) will be mado in accordance with the procedures of DTC described below. Seo "BOOK-ENTRY-ONLY SYSTEM:' Continuing Disclosure Each of the City, Lennar Homes, and C&C California has covenanted in its respective Continuing Disclosure Certificate for the benefit of Bondholders to provide annual or semi-annual reports, as applicable, containing certain fmaneial information and operating data relating to the Assessment District and the property in the Assessment District and to provide notices of tho occurrence of certain enumerated events, if material. The form of each such Continuing Disclosure Certificate is attached hereto as "APPENDIX F -FORMS OF CONTINUING DISCLOSURE CERTIFICATES.° These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule ISc2-12(b}(5), as amended from time to time. See "CONTINUING DISCLOSURE." Forward-Looking Statements Certain statements included or incorporatcd by reference in this Official Statement constitute "fotvaard- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1495, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 21A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "intend," "expect," "propose," "estimate," "project," "budgek," "anficipate," or other similar words. The achievement of certain results or other expectations contained in such forward-]caking statements involves known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, ar achievements described to be matnrially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Na updates or revisions to these forward-Looking statements are expected to be issued if or when the expectations, events, conditions, or circmnstanees on which such statements are based change. The forward-looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such forward-looking statements. READERS ARE CAUTIONED NOT 'TO PLACE UNDUE RELIANCE ON SUCH FORWARll-LOOKING STATEIIIENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. 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 or definitive. All references in this Official Statement to documents, the Bands, and the Assessment District proceedings are 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 abtained from the City. The City's address for such purpose is: City of Bakersfield, 1501 Truxtun Avenue, Bakersfield, California 93301, Attzntion: Finance Director; telephone number (661) 326-3740. ESTIMATED SOURCES AND USES OE FUND5 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 Fund established for the Bonds witl be used to acquire the Improvements and to pay certain casts associated with the issuance and delivery of Che 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, 2007, will be deposited into the Redemption Fund. The estimated sources and uses of funds for the Bonds are summarized as follows: TABLE 1 SOURCES AND USES OFFUNDS Sources of Funds Principal Amount of Bonds $5,010,000.00 Ptus: Net Original Issue Premium 6,482.70 Less: Underwriter's IJiscount (44.538.90) Total $4,971,943.80 Uses of Funds Improvement Fund $4,494,384.63t'~ Special Reserve Fund 399,027.50 Redemption Fund 78,531.67t'~ Total $4,971,943.80 (1) Includes costs ofissnanee of appeoximaCaly ^5268,905.63. {2) Represents capitalized interost on the Bonds from their dated date to September 2.2007. THE BONDS Purpose of the Bonds Proceeds from the sale of the Bonds will be used eo finance (i) the Improvements, which comprise the acquisition of certain public improvements within the three Community Areas, and (ii) the paymenC 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 Bands and the funding of capitalized interest on the Bonds through September 2, 2007. 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 1398.070 of the Municipal Code of the City, and a Resolution of Intention tic. 1473, adopted by the City Council on August 16, 2006. The Bonds, which represent the unpaid assessments levied against privately owned property in the Assessment District, are being issued prrsuant 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 ro the Assessment District, all costs either are estimated or are ascertained prior to the constmction or acquisition of the improvements, rights-af--way, or property involved. Under such proceedings, the assessments arc then levied, cash collections are made, and bonds are sold to represent unpaid assessments. The money obtained from cash collectons and bond proceeds is used bq 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 initiated by either a petition or by the City Council without a petition. Petifions filed with the City Council and signed by LD Land, Lenuax Homes, and C&C California, respectively, as the owners of more than 60°/0, 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. 096-06, adopted by the Ciry Council on April 5, 2006. After the proceedings were initiated, Wilson & Associates, Fresno, California (the "Assessment Engineer"), prepared a written report, which contains, among ether things, the list of improvement costs and the amount of the assessments to be levied against the parcels in the Assessment District. The assessments were levied on the basis of the special benefit to be derived by such parcels from the Improvements. (See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Method of Assessment Spread.") The Assessment Engineer's written report was filed with the City Clerk on January 5, 2007, and was approved by the City Council in preliminary form on Jauuaty 17, 2007. The Assessment Engineer's written report in final form was filed with the Ciry Clerk on March 2, 2007. The public hearing required by law was held on March 14, 2007. 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 bearing and to be heard at the hearing. No such protests were made. In accordance with ArticIeXIIID of the State Constitution, the property owners were also requested to submit ballots, weighted according to the proportional financial obligation of the affected property, in favor of or opposition to the assessment. All ballots submitted by property owners were in favor of the assessment. See "SPECIAL RISK FACTORS -Articles XIIIC and XIIID of the California Constitution." upon conclusion of the hearing, the City Council tabulated the ballots and adopted its resolution canfirming 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 confirmation, the assessments became liens against the assessed parcels by recordation of a notice of assessment, which recording was made in the Office of the Superintendent of Streets on March I5, 2002 and in the Office of the County Recorder on March 20, 2007. 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 he dated the date of delivery, and will bear interest at the rates per annum, will mature on the dates (each a "Principal Payment Date"), and will mature in the amounts set forth on the front cover pages of this Official Statement. Interest on the Bonds is payable semiannually on March 2 and September 2 (each an "Interest Payment Date"), commencing on September 2, 2007. Principal, interest at maturity or upon earlier redemption, if applicable, and premium, if any, with respect to the Bonds will be payable at the corporate trust office of U.S. Bank National Association, as paying agent, registrar, and transfer agent (the "Paying Agent"), in St. Pau], Minnesota, upon presentation and surrender of the Bonds. Interest (other than at maturity or upon earlier redemption) on the Bonds will be payable by check of the Paying Agent mailed on each Interest Payment Date Yo the owners of record at the addresses shown on the registration books maintained by the Paying Agent for such purposes (the "Registration Baoks'~ 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 immediately preceding such Interest Payment Date, by wire transfer}. Transfer and F,xchange of Bonds Any Bond may be transferred or exchanged upon surrender of such Bond for cancellation, accompanied by delivery of a written instrmnent of transfer or authorisation 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 charge required to be paid with respect to such transfer or exchange. Bonds Mutilated, Destroyed, or Lost If any Bond becomes mutilated, the City, at the expense of the Owner of such Bond, will execute, and the Paying Agent will authenticate and deliver, a new Bond in exchange and substitution for the Bond so mutilated, but only upon surrender by the owner of the Bond so mutilated. Every mutilated Bond so surrendered will be canceled. If any Bond becomes lost or destroyed, evidence of such loss or destruction may be submitted to the City and, if such evidence is approved by the City and indemnity satisfactory to the Ciry is given, the City, at the expense of the Owner, will execute,. and the Paying Agent will authenticate and deliver, a new Bond in lieu of and in replacement for the Bond so Lost or destroyed The owner must pay all costs of issuance of dte new Bond. Redemption Qptional Redemption and Prepayment of Bonds. Any Bond or portion thereof in the amount of $5,000 or any integral thereof outstanding may be called for redemption prior to maturity on any Interest Payment Date upon payment of the principal, plus accmed interest to the date of redemption, together with a redemption premimn (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, 2007 through September 2, ZO15 2.0% R4arch 2, 20] 6 and September 2, 2016 1.0 March 2, 20] 7 and thereafter 0.0 No interest will acerne 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 ser~9ce at least 30 days prior to the redemption date, as provided in the 1915 Act. In accordance with the 1915 Act, the Finance Director wilt select Bonds for redemption in such a way thax the ratio of outstanding Bonds to issued Bonds will be approximately the same in each annual series insofar as possible. Within each annual series. Bonds shall be selected for redemption by lot. Further development of the parcels in the Assessment I?istrict, a transfer of property ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of the Bonds prior to their stated maturities. Mandatary Redemption of Term Bonds. The Bonds maturing on September 2, 2027 {the "Term Bonds"}, are subject to mandatory advance redemption in part prior to their stated maturity, as authorized under the Bond Resolution. The redemption shall occur on September 2 in the following years and in the following principal amounts, together with interest accrued on such amounts to the date fixed fox redemption, and shall be without premium: Year Principal Amount 2023 $310,000 2024 325,000 2025 345,000 2026 3bQ000 2027 (maturity) 375,000 If the Bonds axe redeemed in part, as described trader the subheading "Optional Redemption and Prepayment of Bonds" above, the principal of the Teen 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 55,000 increments as proportionally as practicable from the principal amounts set forth above. Effect of Redemption; Defeasance Frotn and after the date fixed for redemption pursuant to the Bond Resolution, if funds available for the payment of the principal of and interest (and redemption premium, if any) on the Bands or portion of Bonds so called for redemption have been duly provided, then Bonds or portion of Bonds sa called for redemption will become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price or interest) such Bonds or portions of Bands shall be defeased and shall cease to be entitled to any benefit or security under the Bond Resolution (other than the right to receive payment of the redemption price and interest) and shall cease to bear interest. Receipt of notice of redemption by the owner of a Bond shall not be a condition precedent to redemption and failure by the owner of a Bond to actually receive such notice of redemption shall not affect the validity of the proceedings for the redemption of such Bond or the cessation of interest. Refunding Bonds Pursuant to the Refunding Act of 1984 far 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 Ciry may issue and sell refunding bonds without giving notice to and conducting a hearing For the awners of pmperiy in the Assessment District, or giving notice to the awners of the Bonds, if the City Council Finds that: (A) Each estimated annual installment of principa( and interest on the reassessment W secure the refunding bonds is less than the corresponding annual installment of principal and interest on the portion of the original assessment being superseded and supplanted by the same percentage for all subdivisions of land within the Assessment District. Any amount added to the annual installments on the reassessment due to a delinquency in payment on the original assessment need not be considered in this calculation; (B) The number of years to maturity of all refunding bonds is not more than the number of years to the last maturity of the Bonds; and (C) The principal amount of the reassessment on each subdivision of land within the Assessment District is less than the unpaid principal amount of the portion of the original assessment being superseded and supplanted by the same percentage for each subdivision of land within the Assessment District. Any amount added to a reassessment because of a delinquency in payment on the original assessment need not be considered in this calculation. L'pon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis that the Ciry 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 seal the refunding bands 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 hnprovements and payment of all claims shall be applied as a credit to the assessments or to call Bonds, all as provided in the 1913 Act. Investment of Bond Proceeds Moneys held in the Improvement, Redemption, and Special Reserve Funds created pursuant to the Bond Resolution shall be invested by the Finuice 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 in the InVesttxtent Earnings Fund are not required for rebate to the federal government, as determined by the Finance Director as of Tune 30 of each year, such moneys shall be transfered 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 uuti] the Improvements are completed and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Director, as a credit upon the annual installments of assessments or for the advance retirement of Bonds. Security for the Bonds The Bonds are issued upon and secured by the unpaid assessments against the property in the Assessment IJistriet, together with interest thereon, and said unpaid assessments, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. The Bonds are further secured by the moneys in the Redemption Fund and The Special Reserve Fund created pursuant to the Assessment Distnet proceedings. Principal of and interest and redemption premiums, if any, on the Bonds are payable exclusively out of the Redemption Fund. The assessments and each installment thereof and any interest and penalties thereon constitute a lien against the parcels of land on which the assessments are levied until the same are paid. Such lien is subordinate to all fixed spacial assessment liens previously imposed upon the same property, but has priority over all existing and future private liens and over all fixed special assessment liens that may thereafter be created against the property. Such lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without ]imitation, special taxes created pursuant to the Mello-Roos Conununity Facilities Act of 1982 (being Chapter 2.5, Part 1, Division 2, Title 5 of the Govermnent Code of the State of California) (the "Mello-Roos Act"}, whenever created against the property. The property within the Etcheverry Area and the LinII Area is subject to an existing special fax lien created by Community Facilities Disaiet No. 92-1 of the RNR School Financing Authority ("RNR CFD No. 92-1"} pursuant to the Mello-Roos Act. The amount of special taxes, iF any, to which property within RNR CFD No. 92-I is subject (the "RNR CFD No. 92-1 Special Taxes") varies based upon the zoning, the entitlements, 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 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 fnll faith and credit foe the payment thereof. Alt6augh the unpaid assessments constitute fixed liens on the parcels assessed, they do not eonsfitute the personal indebtedness of the owners of said parcels. Furthermore, there can he no assurance as to the ability or the willingness of such owners to pay the unpaid assessments. In addition, there can be no assurance that the present owners will continue to own all or any of said parcels. The unpaid 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 property are collected, and are payable and become dolinquent 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 comxection 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 nonpayment of general taxes. The semi-annual assessment installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay the principal of and interest on the Bonds as they become due. The installments billed against all of the parcels of property in the Assessment District subject Yo the assessments will be equal to the total principal and interest coming due on all of the Bonds that year, plus, with respect to each parcel in the Assessment District, an additional amount to cover the administrative charges of the City. Special Reserve Fund Out of the proceeds of the sale of the Bonds, the City Council will set aside into a Special Reserve Fund the amount of 5399,027.SQ. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption ox sale of parcels with assessment delinquencies, in an amount equal to the Least of (i) 10% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (Yhe "Reserve Requirement'). The Special Reserve Fund will constitute a tmst fund for the benefit of the owners of the Bonds. The Special Resetve Fund will be maintained, used, transferred, reimbursed, and liquidated as follows: (a) Whenever there are insufficient funds in the Kedemption Fund to pay the next maturing installment of principal of ar interest an the Bonds, an amount necessary to make up such deficiency will be transferred fram the Special Reserve Fund, to the extent of available funds, to the Redemption Fund. The amounts so advanced will be reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments of the assessments and interest thereon has been made from the Special Reserve Fund. In the event that the Special Reserve Fundis completely depleted from such advances prior to reimbursement from resales of praperty or delinquency redemptions, payments to the owners of the Bonds will be dependent upon xeimbursetnent 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 azi 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. (e) All proceeds from the investment of moneys in the Special Reserve Fund wilt be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund axe not required for rebate to the federal government, as determined by the Finance Director as of June 30 of each year, such moneys shall be transferred to the Special Resetve Fund until the balance therein is equal to, as of the date of calculation, the Reserve Requirement The remaining balance, if any, in the Investment Earnings Fund will be transferred, first, to the Improvement Fmid 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 Direcwr, as a credit upon the annual installments of assessments or fox 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 "TFIE BONDS - Inveshnent of Bond Proceeds." (d) When the balance in the Special Reserve Fnud is sufficient to retire all Bonds then outstanding (whether by advance retirement or otherwise), the amount of the Special Reserve Fund will be transferred to the Redemption Fund, and the remaining installments of principal and interest not yet due from the assessed pxoperiy 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 parcels in the Assessment District provided, however, that, if the excess is less than $],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 Resetve Fund may result in its Total depletion prior to reimbursement from resales of property or delinquency redemptions. In that event, there could be a default in payments to owners of the Bonds, the curing of which wauld be dependent upon reimbursement of the Special Reserve Fund. to Redemption Fund Deficiencies If there are not sufYieient funds in the Special Reserve Fund to fully cover a Redemption F1md deficiency and the Ciry Council determines that there is a deficiency in the Redemption Fund to pay the principal of and interest on the Bonds such that there will be an ultimate loss accruing to the owners of the Bonds, the City will pay to the owners of the Bonds a proportionate share of the principal and interest due on the Bonds based on the percentage that the amount on deposit in the Redemption Fund is of the total amount of the unpaid principal of the Bonds and the interest thereon. Thereafter, as moneys representing payments of the assessments are periodically deposited into the Redemption Fund, 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 will not be an ultimate loss to the owners of the Bonds, the Finance Director is xequieed to direct the Paying Agent to pay matured Bonds as presented and pay interest an the Bonds when due as long as there are available funds in the Redemption Fund, in the following order of priority: {l) a]] 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 matured Bonds not being redeemed and interest on the Bonds not being fully paid on the due dates. Such matured Bonds would not be fully redeemed and such delayed interest would not be paid until funds are available from a foreclosure sale of the property having the delinquent assessmett installments. Covenant to Commence Superior Covrt Foreclosure The 1915 Act provides that in the event any assessment or installment thereof ar 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 year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax call for that fiscal year, arrd (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bond owners pending proseeurion of the foreclosure proceedings and receipt by the Ciry 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 rho foreclosure sale. See "SPECIAL RISK FACTORS -Covenant to Commence Superior Court Foreclosure." Priority of Lien Priority of Lies 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 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-egital to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property. RNR CPI) No. 92-I Special Taz Lien. The property within the Etcheveny Area and the Lin II Area is subject to an existing special tax lien created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. The amount of RNR CFD No. 92-1 Special Taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon [he zoning, the entitlements, and the type and Level of development of such property, and are leafed 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") previously approved by the qualified voters in RNR CFD No. 92-1. Fox fiscal year ending June 30, 2007, the residential properties within the Etcheve>zy urea and the Lin II Axea ue subject to the I1 following RNR CFD No. 92-1 Special Taxes: No RIQR CFD No. 92-I Special Taxes are collected from property for which no final tract map has been recorded. Upon recordation of a final tract map and if no building permit has been issued for a subdivision lot prior to March I, 2006, an annual special tax of $129.36 (which may be increased by 2% each fiscal year} per subdivision lot net acre of subject property is payable. Upon the issuance of a residential building permit for a lot or parcel prior to March 1, 2006, aone-time charge of 51.25 (which may be increased each fiscal year based upon the peroentage change in the designated construction cost index) par building square foot is payable, and such parcel is subject to an annual RNR CFD No. 92-1 Special Tax payment of $507.12 (which may be increased by 2°lo each fiscal year). In the alternative, aY the time of issuance of such residential building permit, the owner of such parcel may prepay a specified amount, in which case the one-time charge and annual RNR CFD No. 92-1 Special Taxes described above will not be levied on such parcel. The prepayment amount is cusently 59,974.26 (which may be increased each fiscal year based upon the percentage change in a designated construction cost index}. There are no properties within the Assessment District that are subject to the commercial or multi-family residential use RNR CFD No. 92-1 Special Tax rates. Accordingly, the rates For the 121~iR CFD No. 92-1 Special Taxes foz parcels designated for commercial and multifamily residential development are not presented in this Official Statement. Lennar Homes has indicated that it does not intend to pay, #or itself or on behalf of LO Land, as appfieable, the specified prepayment amount of the RNR CFD No. 92-1 Special Taxes for any parcel within the Etcheverry Area or the Lin B Area that lies within RNR CFD No. 92-1, but rather intends that the obligation shall be levied against the property in both the Eteheverry Area and the Lin II Area in accordance with the RNR CFD No. 92-I Rate and Method. Lennar Homes has reported that, as of March 30, 2007, no building permits have been issued in connection with the development of the property in the Etcheverry Area and the Lin II 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(x) 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 Department of Treasury issued thereunder to the extent such requirements are, at the fime, applicable and in effect. [Remainder of Page Intentionally Left Blank.] tz Debt Service Schedule Set forth below is the debt service schedule for the Bonds. TABLE 2 AiVNI7AL BOND DEBT SERVICE Period Ending Principal Total Bond (September 2) Maturing Interest - Debt Service 2007 $ - $$ 783 $ 78,531. 67 2008 160,000 235,595.00 395,595. 00 2009 165,000 229,355.00 394,355. 00 2010 175,000 222,755.00 397,755. 00 2011 180,000 2]5;492.50 395,492. 50 2012 190,000 209,842.50 397,842 50 2013 195,000 (99,577.50 394,577. 50 2074 205,000 (90,900.00 395,90Q 00 2015 215,000 181,675.00 396,675. 00 2016 225,000 1'71,892.50 396,892. 50 2017 235,000 161,542.50 396,542. 50 2018 245,000 150,615.00 395,615. 00 2019 255,000 139,100.00 394,100. 00 2020 270,000 126,987.50 396,98'7. 50 2021 285,000 114,027.50 399,027. 50 2022 295,000 100,205.00 395,205. 00 2023 310,000 85,750.00 395,750. 00 2024 325,000 70,250.00 395,250. 00 2025 345,000 54,000.00 399,000. 00 2026 360,000 36,75000 396,950. 00 2027 375 000 18,750.00 393,750. 00 Total $5,010,000 (1) Capitalized interest on the Donds has been funded thro ugh September 2, 2007. Source: Undatwrifet. BOOK-ENTRY-ONLY SYSTF,iVI DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered Bonds, registered in the name of Cede & Co. (OTC's partnership nominee) or such other name as may be requested by an authorized representative of OTC. 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 follawing description of DTC and its bank-entry system has bean 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 oP the records maintained by DTC relating to or payments made on account of beneficial ownership, or for maintaining, supervising, or reviewing any records maintained by DTC relating to beneficial ownership, of interests in the Bonds. DTC, the world's largest depository, is alimited-purpose 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 corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Sectuities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U'.S. and non-ti.S. equity, corporate and municipal debt issues, and money market instrument from over 100 oountries that OTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other secmites transactions in deposited securities through electronic computerized bock-entry transfers and pledges bebveen Direct Participants' accounts. This eliminates the need fox physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("llTCC°). DTCC, in turn, is owned by a number of Direct Participants 13 of DTC and Members of the National Securities Clearing Corporation, Fixed Tncome Clearing Corporation, and Emerging Markets 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, Inc. Access to the DTC system is also available to others such as both U.S. and non-U. S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants" and, collectively with Direct Participants, "Participants"). DTC has Standard & Paor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission (the "SEC"). More information about DTC can be found at www.dtcc.com and www.dtc.org. The foregoing internet addresses are included for reference only and the information on the internet site is not a part of this Official Statement or incorporated by reference into skis O~eiat Staternenz. No representation is made in this Official Statement as fo the accuracy or adequacy of the information included in such internet 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 DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner's is in turn ro 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 fcansaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entcies made on the hooks of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners wilt not receive certificates representing their ownership interests in the Bonds except in the event that use of the book entry system for the Bonds Is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & 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 knowledge of the actual Beneficial Owners of Che Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to I?irect Participants, by Direct Participants to Indirect Participants, and by Direct Participants and htdirecY Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as tnay be 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 redemptions, tenders, defaults, and proposed amendments to the security documents. Pox example, Beneficial Owners of Bonds tnay wish to ascertain that the nominee holding the Bonds for their benefit has agreed m obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. REDEMPTION NOTICES SHALL BE SENT TO DTC. Ir LESS THAN ALL OF THE BONDS ATtE BEING REDEEMED, DTC'S PRACTICE IS TO DETERiMINE BY LOT THE AMOUNT OF THE INTF,REST OF F,ACH DIRECT 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 Direct Parkicipant 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 Omnibns 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., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of hinds and con~esponding detail information from the City or to [he Paying Agent, on payable date in accardance 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 Beazer 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 CitS~ or the Paying Agent, disbursement of such paymeuts 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 Indirect 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 are required to be printed and delivered in accordance with the terms of the Bond Resolution. The City may decide to discontinue nse of the system of book-entry-only transfers through DTC (or a successor securities depositary}. In that event, the Bonds will be printed and delivered to DTC as described in the Bond Resolution. THE INFORMATION IN THIS SECTION CONCERI~IING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CITY $ELIEVES TO BE RELIABLE, BUT THE CITY TAKES NO RESPONSIBILITY FOR TAE ACCURACY THEREOF. THE CITY CANNOT AND DOES NOT GIVE ANY ASSURANCBS THAT DTC WILL DISTffiBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBGTE PAYMENTS WITH RESPECT TO THE BONDS RECEIVED BY DTC OR ITS NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES, OR OTAER NOTICES TO TAE BENEFICIAL OW~'ERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL SBRVE AND ACT 1N THE MAr\'IvTER DESCRIBED IN THIS OFb~ICIAL STATEMENT. THE ASSESSMENT DISTRICT AN'D'I'HE IMPROVEbIENTS The infornation under this heading is taken primarily from the Engineer's Report for the Assessment District prepared by Wilson & Associates, Fresno, California which Engineer's Report is nn ftle with the City, and from information provided by the Landowners, as applicafile. General The Assessment District was fornted in accordance with the 1913 Act and Section 13.04.070 of the Municipal Code of the City. Proceedings for the formation of the Assessment Distnet were commenced by the Ciry Council pursuant m property owner petitions filed by LO Land, Lennar Homes, and C&C Califomia, which, at the time the petitions were filed, were the owners of over 60°l0, collectively, of the assessable land within the Assessment District. The petitions were accepted by Resolution No. 096-06, adopted by the City Council on April 5, 2006, and the petitions are on file with the City Clerk of the City. Tho Assessment District is comprised of approximately 274.70 gross acres (or approximately 243.21 net acres} of land located in the northwest and southwest areas of the City. The Assessment District has been divided into three separate community areas generally identified as (i) the Etcheverry Area, containing approximately 156.10 gross acres and generally bounded by Calloway Drive and Verdugo Lane on the east, Snow Road on the south, and Friant-Kem canal on the west, and also identfied as Tract No. 6343 ("Tract No. 6343'°) and Tract No. 6361 ("Tract No. 6361"), (ii) the Lin II Area, containing approximately 85.10 gross acres and generally bounded by Allen Road on the east, Reina Road on Che north, Renfro Road on the northwest, and Vega Meadows Road on the southwest, and also identified as Tract No. 6453 ("Tract No. 6453"}, and (iii) the University Park Area, containing approximately 33.50 gross acres and generally located at the southwest corner of the intersection of Ming Avenue and Gosford Road, and also identified as Tmct No. 6799 ("Tract No. 6799'x. The Assessment Districk boundaries are shown on the assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further descripfion of the Assessment District and the Community Areas, see "THE ASSESSMENT DISTRICT is AND THE IMPROVEMENTS." The three irregularly shaped Community Areas are located within a rectangular section of the northwest and southwest areas of the City that has anorth-to-south dimension of approximately seven miles as measured from the north end of the Eteheverry Area to the sauth end of the University Park Area, and a west-to-easy dimension of approximately three and three-quarters miles as measured from the west end of the Lin II Area to the east end of the university Park Area Each of the three Conununity Areas is involved in various stages of land development. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Development and Financing Plans." The Assessment District boundaries are shown on the assessment diagram, consisting of five sheets, entitled "ASSESSMENT DIAGRAM OF CITY OF BAKERSEIELD ASSESSMENT DISTRICT NO. Q6-1 (ETCHEVERRY/LINIUtTNIVERSITY PARK, COUNTY OF KERN, STATF. 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 wilt be used to finance (i) the Improvements, which are generally described as the acquisition of certain public infrasU.ucture improvements for each of the three Connnunity Areas, which Improvements will be owned, operated, and maintained by the City, and (ii) the payment of certain incidental costs and expenses related to the acquisition of the hmprovements, 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 Bands through September 2, 2007. The Improvements are proposed to be financed by the City in accordance with the terms and conditions of the Acquisition Agreements, as applicable. The Acquisition Agreements set forth the procedure by which the Improvements are to be constructed and installed by Lennar Homes or C&C California, as applicable, and, upon their completion, acquired by the City using funds provided through the Assessment District proceedings. The scope of the Improvements includes the acquisition by the City of various `bff-site" and "on-site" (in- tract) subdivision improvements and the payment of incidental costs that are already required or that are expected by Lennar Homes or C&C California, as applicable, to be required to be installed as conditions of final subdivision or site plan approvals within each Community Acea. The costs financed by the Assessment District for the acquisition of the Improvements located within or adjacent to each of the three Community Areas have been allocated only to the parcels that arc located within the Commtuvty Area to be served by such Improvements. Bond proceeds are not expected to be used fox Che acquisition of land, easements, or rights-of--way. Description of the Community Areas and khe Improvements The information under this snbheadtng has heen provided by the Engineer's Report or the Landowners, as applicable, and has not been verified for accuracy or completeness 6y the City or the Underwriter, and neither the City nor the Undernriter shall have liability wfth respect thereto. 'The 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 capabilities and efforts of the Landowners, as applicable, and the other builders or persons Yo whom the parcels within the Assessment District are sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. Etcheverry Area The Etcheverry Area encompasses approximately 156.10 gross acres and is generally bounded by Calloway Drive and Verdugo Lane on the east, Snow Road on the south, and Friant-Kern canal on the west. A portion of the Etcheverry Area, identified as Tract No. 6343 and consisting of approximately 80.60 gross acres, has been approved for subdivision into a combined total of 22b R-I lots (as defined in the section entitled "OWNERSHIP ANll PLANNED FINAivTCING AND DF,VELOPMBNT OF THE ASSESSMENT DISTRICT - 7.oning"), one storm drain sump lo[, and several public landscape lots, all pursuant to Vesting Tentative Tract Map No. 6343. Another portion of the Etcheverry Area, identified as Tract ATO. 6361 and consisting of approximately 75.50 gross acres, has been approved for subdivision into a combined total of 204 R-1 lots (plus one residential lot t~ with an existing home on it, which will not be assessed a share of the total assessment amount), one stann drain sump lot, one cell tower lot, and several public landscape Lots, all pursuant to Vesting Tentative Tract Map No. 6361. Although LO Land owns the property within the Etcheverry Area, Lennar Homes is the developer of Tract No. 6343 and Tract No. b361 and is responsible for constructing the Improvements benefiting the Etcheverry Area. Lennar Homes intends to subdivide Tract No. 6343 into two phases. Lennar Homes has informed the City that subdivision maps for the two phases of Tract No. 6343 are not expected to be recorded with the County Recorder prior to the issuance of the Bonds. Lennar Homes intends to subdivide Tract No. 6361 into three phases and has recorded the following subdivision map with the County Recorder as follows: Tract No. 6361 unit One, with 75 R-I lots and three public landscape lots. Lennar Homes has informed the City that subdivisian maps for the remaining two phases of Tract No. 6361 are not expected to be recorded with the County Recorder prior to the issuance of the Bonds. The Impravements to be eonstnrcted within the Etcheveny Area are related to the development of the Etcheverry Area, as set forth below. Tract No. 6343. The Improvements to be constructed in connection with Tract No. 6343 are related to the develapment of Tract No. 6343 and are generally described as improvements in and along Verdugo Lane, Etchart Road, and Calloway Drive, and as Tract No. b343 storm drain improvements that are required to be constructed, or are expected by Lennar Homes ttr be required to be eonstmeted, as conditions of approval for the Tract No. 6343 subdivision. The general location and extent of the Tract No. 6343 planned Tmpxovemenis are described below. Verdugo Lane (East Side). Construction of the east side of Verdugo Lane along the frontage of Tract No. 6343 (between Etchart Road and the northerly boundary of Tract No. 6343); including grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Etchart Road {North Side). Construction of the north side of EtcharC Road along the frontage of Tract No. 6343 (between Verdugo Lane and Calloway Drive), including grading, paving, curb, gutter, sidewallc, handicap ramps, street lights, survey monwnent encasements, interconnect conduit, street signs, striping, and subdivision block wall. Calloway Drive (West Side). Construction of the west side of Calloway Drive along the frontage of Tract No. 6343 (between Etchart Road and tho northerly boundary of Tract No. 6343}, including, grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Tract No. 6343 Storm Drain. Constmction of a complete storm drain system for Tract No. 6343 (in-traction-site and small sections in ECChart Road and Calloway Drive), including ] $-, 24-, 30-, and 36- inch diameter pipelines with manholes, catch basins, and antler structures, and, around the sump, subdivision block wall with a 14-foot wide gate. Lennar homes anticipates that all of the Improvements that it is constructing in connection with Tract No. 6343 will be completed by April 20(18. There can be no assurance that the actual construction of the Improvements in connection with Tract No. 6343 will occur as projected. Tract No. 6361. The Improvements to be constmcted in connection with Tract No. 6361 are related to the develapment of Tract No. 6361 and are generally described as improvements in and along Verdugo Lane and Snow Road, and as Tract No. 6361 storm drain improvements that are required fo be constructed, or are expected by Lennar Homes to be required to be constructed, as conditions of approval for the Tract No. 6361 subdivision. The general location and extent of the Tract No. 6361 plannod Improvements are described below. Verdugo Lane (YVest Side). Constmetion of the west sido of Verdugo Lane along the frontage of Tract No. 6361 (between Snow Road and the northerly boundary of Tract No. 6361), including grading, t~ paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Snow Road (North Side). Construction of the north side of Snow Road along the frontage of Tract No. 6361 (between Verdugo Lane and the westerly boundary of Tract No. 6361), including grading, paving, curb, gutter, sidewalk with class lI bike path, handicap ramps, median, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Tract No. 6361 Sturrn Draiu. Construction of a complete storm drain system for Tract No. 6361 (on-sitelin-tract and in Verdugo Lane), including 18- and 24-inch diameter pipelines with manholes, catch basins, and outlet structures, and, around the sump, subdivision block wall with a 14-foot wide gate. Leerier Homes anticipates that all of the Improvements that it is constructing in connection with Tract No. 6361 will be completed by April 2008. There can be no assurance that the actual construction of the Improvements in connection with Tract No. 6367 will occur as projected. Laa IZArea The Lin II Area encompasses approximately 85.10 gross acres and is generally bounded by'Allen Road on the east, Reina Road on the north, Renfro Road on the northwest, and Vega Meadows Road on the southwest. The Lin II Area has been approved for subdivision into a combined total of 317 R-'1 lots, one storm drain sump lot, one sewer lift station lot, and several public landscape Lots pursuant to Vesting Tentative Tract Map No. 6453. Leerier Homes is the subdivider of Tract No. 6453 and is responsible for constructing the Improvements benefiting the Lin II Area. Leerier $omes intends to subdivide Tract No. 6453 into two phases and has recorded the following subdivision map with the County Recorder as follows: Tract No. 6453 Unit One, with 192 R-I lots, one storm drain sump lot, one sewer lift station lot, and six public landscape lots. The Appraisal states that the subdivision map for Tract No. 6453 Unit One was recorded on March 6, 2007; such map was instead recorded on March I3, 2007. Lennac Homes has informed the City that the subdivision map for the remaining phase of Tract Ato. 6453 is not expected to be recorded with the County Recorder prior to the issuance of the Bonds. The Improvements to be constructed in connection with the Lin II Area are related to the development of the Lin II Area and are generally described as improvements in and along Allen Road, Reina Road, Renfro Road, and Vega Meadows Road, and as Tract No. 6453 on-site sewer improvements that are required to be constmcted, or are expected by Lennar Homes to be required to be constructed, as conditions of approval for the Lin II Area subdivision. The general location and extent of the Lin II Area planned Improvements are described below. Atleu Road {West Side). Construction of the west side of Allen Road along the frontage of Tract No. 6453 {between the southerly boundary of Tract No. 6453 and Reina Road), inchiding grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Reina Road (South Side). Construction of the south side of Reina Road along the frontage of Tract No. 6453 (between Renfro Road and Allen Road), including grading, paving curb, getter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, sheet signs, striping, and subdivision block wall. Renfro Road (East Side). Construction of the east side of Renfro Road along the frontage of Tract No. 6453 (between Vega Meadows Road and Reina Road), including grading, paving, curb, gutter, sidewalk with class II bike path, handicap ramps, street lights, survey monument encasements, interconnect conduit, stceet signs, striping, and subdivision block wall. Vega Meadows Road (North Side). Construction of the north side of Vega Meadows Road along the frontage of Tract No. 6453 (between Renfro Road and the easterly boundary of Tract No. 6453), including, grading, paving, curb, gutter, sidewalk with multi purpose trail, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. to Tract No. 6453 On-Site Sewer. Construction of a complete on-sitelin-tract sewer system for Tract No. 6453, including 6-, 8-, and 10-inch diameter pipelines with manholes and clean outs, 4-inch diameter sewer laterals for all residential Lots in Track No. 6453, and a complete sewer lift station located in Tract No. 6453. Lennar Homes anticipates that all of the Improvements that it is constructing in connection with the Lin II Area will be completed by February 2008. There can be no assurance that the actual construction of the hnprovernents in connection with the Lin II Axea will occur as projected University Park Area The University Park Area encompasses approximately 33.SQ gross acres and is generally located at the southwest corner of the intersection of Ming Avenue and Gosford Road. The L'nivexsity Park Area has been approved for subdivision into a combined total of 217 R-I lots, one private park lot, four common area lots, and eight private landseapelpocketpnrk tots pursuant to Vesting Tentative Tract Map No. 6799. C&C California is the subdivider of Tract No. 6799 and is responsible for constructing the Improvements therein. C&C California intends to subdivide Tract No. 6799 into one phase and has recorded the subdivision map far Tract No. 6794 with the County Recorder. The Improvements to be constructed in connection with the University Park Area are related to the development of the University Park Area and are generally described as improvements in and along Ming Avenue and Gosford Road and as City developmentlfactlities fees for Tract No. 6799 that are required to be constructed or paid, as applicable, or are expected by C&C California to be required to be constructed or paid, as applicable, as conditions of apprQVal for the University Park Area subdivision. Also included in the scope of Improvements are C&C California's incidental costs for design engineering, construcrion staking, soils and materials analysis and testing, plan check fees, and inspection fees. The general location and extent of the University Park Area planned Improvements are described below. Ming Avenue (South Side) and Gosford Road (West Side}. Construction of the south side of Ming Avenue and the west side of Gosford Road along the frontages of Tract No. 6799 (between, respectively, the westerly boundary of Tract No. 6799 and Gosford Road, and between Ming Avenue and the southerly boundary of Tract No. 6799}, including paving at right turn lanes, curb, gutter, sidewalk, handicap ramps, street signs, street lights, interconnect conduit and pull boxes, monument encasements, fl- inch diameter water line road bore with fire hydrants and gate valves, 8-inch diameter sanitary sewer fine road bore with manholes, 18-inch dianeter storm drain pipeline with catch basins and manholes, subdivision block wall with major and neighborhood corner sign monuments, and landscaping. Also included in the Ming Avenue and Uosford Road scope of improvements arc demolition and removal of existing pavement, ettrb, gutter, and storm drain catch basins and manholes. City Facilities Fees Payment of City Regional Transportation Impact fees (the "City Facilities Fees") for Tract No. 6799. C&C Califomia anticipates that all of the Improvements that it is constructing in connection with the University Park Area will be completed by July 2007. There can he no assurance that the actual construction of the Improvements within the University Park Area will occur as projected. Estimated Improvement Costs Set forth below are the confirmed assessment amounts with regard to the estimated costs of the Improvements and other costs relating to the Assessment District proceedings, as described in the Engineer's Report. A copy of the Engineer°s Report is on file with the City. [Remainder of Page Intentionally Luft Blank.] 19 TABLE 3 ENGINEER'S ESTIMATE OF TOTAL COST AND ASSESSMENT CTTY OF BAKER3FIELD ASSESS.'bIENT DISTRICT Nt). 06d (ETCFIEVERRYiLIN IIlI7NIVERSITY PARK ACTT VITY DESCRIYT[ON ONFIRMED ASSESSMENT ETCHE VERRY AREA - YORTSON (TRACT N0.6343) LM1iPROVEMEN'C COST A. LMPROVEMENTS $996,139.110 B. COiVTNOPNCY 0.00 C. INCIDENTALS 0 00 D. TOTAL ETCHEVERRY AREA-PORTION (TRACT N0.6343)1.MPROYEMENT COST $996,139.00 ETCHE VERRY AREA-POR'CION (TRACT NO. S36p IMPROVEMENT COST A IMPROVEMENTS $904,463.00 R. CONTINGENCY 0.00 C. INC7DEN'rALS 0.00 D. TOTAL ETCHEVERRY AREA-PORr10N (TRACT NO.6361pMPROVEMENT COST 9404,463.00 L[N H AREA (TRACT NO. 6453)]MPROVEMEN'C COST A. IMPROVEME'.*ITS 51,347,95 L00 B. CON'CINGEN(:Y 0.00 c. rnctnENrncs o00 D. TOTAL LIN II AREA (TRACT NO, 6453) IMPRO VEMEtiT COST 51,}97,951.00 UNIVERSI9Y PARK AREA (TRACT N0.6799} IMPROVEMEN9' COST 3. IMPROVCMEN?S 5796,419.00 B. CONTINGENCY 48,828.00 C. ItiCIDENTALS 9R.64A00 D. TOTAL ^NIVERSITY PARK AREA ('T'RACT NO. 6799)1MPROYEDIEST COS9' 9923y26.00 TOTAL COST OF IMPROVEMENTS, CONTINCENCY, AND INCIDENTALS A. ]NPROVEMENTS 94,097,972.90 B. CONTINGENCY 48,828.00 C. INCNFNTAIS 78.679 00 D. TOTAL COST ON LMPROVER9E'.QTS, CONTINGENCY, AND INCIDENTALS $4,225,479A0 ESCIA'L4TED ASSESSMENT DISTRICT PROCEEDING COST ANU EXPENSE A. ETCHEVERRY AREA ~~~PORTION (TR.lCT N0.6343) 5 b3;637 A2 R. fiTCHF,'VERRY AREA--PORT70N (TRACT N0.636p 57,966.91 C. LIN H AREA (TRACT N0.6453) g9,29g39 D. UNIVRRSITY PARK AREA (TRACT NO, s79Yj 59.01A59 E. TOTAL ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE $269,915.37 1915 AC C ROND ISSDANCE COST AND RESERVE A ETCHEVERRY AREA-PORTION (TRACT NO. 6343) $135,46087 B. ETCHRVERRY AREA -PORTION CtRACT NO. 6361) 123,402.19 C. LIN II AREA (TRACT 80.6453) 190,101.65 D. UNNERSITY"PARK AREA (TRACT NO. 6199) 12564D 92 E. TOTAL 1915 ACC RONb ISSUANCE COST AND RESERVE $574,605.63 'LO'CAL AMOUNT ASSESSED A. ETCHEVERRY AREA-PORTION (TRACT NQ fi343) $1,145,29129 A. ETCHEVERRY AREA-PORTION ('IRACTNO. 6361) 1,088,892.76 C. L1NnAREA (TRACCNO. 6453) 7,677,351.04 D. IIIdIVER917Y PARK AREA (TRACT NO. 6749) 7.108.58551 E. 9Y)TAI: AMOUNT ASSESSED 55,070,000.00 Source: Engineer's Report. Method of Assessment Spread Spread of'the Assessment Distriet Costs to Benefited Pttrcels 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 particular special assessment district proceeding. That responsibility rests initially with the Assessment Engineer, who is retained by the City for the purpose of making an independent analysis of the facts and recommendations about the apportionment of the assessment obligation. For the proceedings with respect to the Assessment I?istrict the City has retained Wilson ~& Associates, Fresno, California, to serve as the Assessment Engineer. 20 The 1913 Act provides that tkte Assessment Engineer makes his recomtnendatians 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 final 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 Apri15, 1995, by City Council adoption of Ordinance No. 3643. The parcel assessment shares for City assessment districts are to be allocated or spread in accordance with the 1913 Act, which requires thaT the financed cost in a special assessment proceeding be allocated among the benefited parcels of land in proportion to the estimated benefit each parcel can be expected to receive from the work and improvement covered by the assessment. Municipal Code Section 13.08.070 authorizes the "reallocation'° to alternate properties of assessments initially allocated to parcels in proportion to their estimated benefit (t. e., hiitial allocation made in accordance with the 1913 Act costlbenefit requirement), when such reallocation is so requested by the owner of all property to be assessed and upon the written consent of the owner of the property to which assessments are reallocated and approval thereof by the City Council. The Assessment District individual parcel assessment amounts shown on APPENDIX E Gave been calculated or spread among the assessed parcels pursuant to Municipal Code Section 13.08.070. The alternate method used by the Assessment Engineer to reallocate the benefit based assessment shares initially allocated by the Assessment Engineer to each assessed parcel has been provided by 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 agprove the same only if the security for the Bonds is not reduced or impaired. Reallocation Spread Method In accordance with Municipal Code Section 13.08.070, the Landowners have submitted a proposed alternate method and rate of assessment. Further, the Landowners have stated that, as of the date of the approval of [he alternate method and rate of assessment, the Landowners or their affiliates, as applicable, were the owners of all the property proposed to be reallocated a share 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 "THP ASSESSMENT DISTRICT AND THEIMPROVEMENTS -Estimated Improvement Costs " The alternate method (the `Reallocation Spread Metktod") is described as follows: The total itrtprovement acquisition cost allocated within each Commnnity Area (with the Etcheverry Area divided into two separate subareas, Tract No. 6343 and Tract No. 6361) is spread among the developed and undeveloped parcels within each area in direct proportion to parcel acreage and to each planned or existing R-I [ot within those developed and undeveloped parcels as an equal per R-1 ]ot cost share. There are na exceptions in the Community Areas to the equal cost share per acre and equal cost per existing or planned R-1 lot Reallocation Spread Method. 7n the University Park Area, the R-1 lots axe further classified into two different categories of lot sizes (called "Product Type Areas"). Except for the City Facilities Fees, which are assessed to all R-1 lots in Tract No. 6799 as an equal-per-R-l-lot charge, the total University Park Area assessment amount is first apportioned between the two Product Type Areas in direct proportion to their assessable areas. Each Product Type Area's total allocated share of the assessment is then apportioned as an equal share per existing R-1 lot within such Product Type Area. [Remainder of Page Intenfionatiy Left Blank.] 2t OWNERSHIP AND PLANNED FINANCPi IG AND DEVELOPiVIENT OF THE ASSESSMENT DISTffiCT Ownership of Property in the Assessment District As of Maroh 3Q 2007, property ownership within the Assessment District is as follows: LO Land owns approximately 156.10 gross acres, all of which property is within the Etcheverry Area. The property within the Etcheverry Area, which is owned by LO Land but expected to be developed by Lennar Homes, will bear approximately 45.05% of the total assessment lien. Lennar Homes owns approximately 85.10 acres, all of which property is within the Lin II Area. Lennar Homes is developing the Lin I1 Area, which will bear approximately 33.08% of the total assessment lien. C&C California owns approximately 33.50 gross acres, all of which property is within the University Park Area. C&C California is developing the University Park Area, which will bear approximately 21.87°l° of the total assessment lien: Pursuant to the takedown schedule set forth in the Option Agreement, on March 15, 2007, Lennar Homes exercised its option to purchase the first group of lots of the takedown, consisting of 45 lots. Each of Lennar Homes and LO Land has fulfilled its respective obligations to accomplish such takedown; however, the final map for Tract No. 6343, which contains such 45 lots, has been submitted to the City's planning department for plan check and, nohvithstanding the anticipated recordation date of early April 2007 stated in the Preliminary Official Statement, Lennar now expects that such final map will not be recorded until after the issuance of the Bonds. After the recordation of such map, LO Land will deliver a grant deed transferring the 45 lots to Lennar Hnrnes. Therefore, as of March 30, 2007, title to such property is held by LO Land. There can be no assurance, however, that the transfer and sale of any additional property to Lennar Homes by LO Land under the Option Agreement will occur. None of the Landowners, or any other subsequent owner of property within the Assessment District (each, a "Property Owner"), will be personally liable for payments of the assessments to be applied to pay the principal of and interest on the Bonds. In 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 if is financially able to do so. Furthermore, except to the extent expressly set Earth herein, no representation is made that the Landowners or any other Property Owner wilt 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. LO Land The information under this subheading has been provided by LO Land and has not been verifaed for accuracy or completeness vy the City ar the Underwriter, and the City and the Underwriter shall have no tiabitiiy in respect thereof. LO Land is a Delaware limited partnership formed in 2004. The general partner of LO Land is LE Land Assets, LLC ("LE Land Assets', and the sole member of LE Land Assets is Lowe Enterprises Residential Investors, LLC ("LERI"). The managing member of LERI is TriPacific Capital Advisors, LLC ("TriPacific"). TriPacific is a real estate investment company that currently manages an approximately 5300 million revolving invesnnent fund that provides mezzanine financing, equity funds, and land banking for residential land development and home construction. Additionai informaton on TriPacife may be obtained at www.tripacificllacom. The foregoing intereet address is included for reference only and the information on the intereet site is not a part of this O~ciaZ Statement and is not incorporated by reference into this Offreial Statement. No representation is made in this Official Statement as to the accuracy or adequac3~ ofthe information included in such intereet site. 22 Lennar Homes The informaxion under this subheading {rus been provided by the Lennar homes and has not been verified for accuracy or- completeness by ttae City or^ the Underwriter, and the City and the underwriter shall have no Iiahiliry in respect thereof The Option Agreement. Pursuant to an Option Agreement, dated as of January 13, 2006, as amended by that certain Etcheverry Option Agreement Modification, dated March 14, 2006, and as further amended by that certain Etcheverry Option Agreement Modification, dated March 5, 2007 (collectively, the "Option AgreemenP'}, by and between LO Land a,Yd Lennar Homes, Letmar Homes has retained the exclusive option to purchase all of the lots that comprise the property within the Etcheverry Area in consideration of, among other things, (a} the delivery of a letter of credit by Lennar Homes as payment for the initial option payment and (b) the monetary consideration and obligations of Lennar Homes described in the Option Agreement. Under the Option Agreement, Lennar Homes has an option and not the obligation to purchase all or any number of the lots in the Etcheverry Area. At or near the completion of the development of the tots to finished lot condition, such Int. will be transfen'ed to Lennar Horner for development of residential units. At any time, if Lennar Homes fails to exercise the option for any portion of the property pursuant to the Option Agxeernent, the option will be terminated, and the entire amount of the letter of credit delivered by Lennar Homes to LO Land will be drawn. As a condition to Lennar Homes' preservation of its option to purchase lots, the Option Agreement requires that Lennar Homes must purchase a specified number of lots from LO Land during each of nine specific option periods, as set forth in the table below. The Option Agreement allows for a total of three one-month extensions to the takedown dates set forth in the Option Agreement. The original takedown date was December 2006, and Lennar Homes exercised its ability to extend the takedown of the first set of lots for three months. Accordingly, no further extensions are permitted under the Option Agreement absent an amendment thereto. The date.. on which the lots are scheduled to be purchased by Lennar Homes remain subject to change by further amendment ro the Option Agreement, and, therefore, the scheduled purchase of lots set forth in Table 4 below may be changed by Lo Land and Lennar Homes subsequent to the date of this Official Statement. Pursuant to the takedown schedule set forth in the Option Agreement, on March 15, 2007, Lennar Homes exercised its option to purchase the first group of lots of the takedown, consisting of 45 lots. Each of Lennar Homes and LO Land has fitlfilled its respective obligations to accomplish such takedown; however, the final map far Tract No. 6343, which contains such 45 lots, has been submitted to Che City's planning department for plan chock and, notwithstanding the anticipated recordation date of early April 2007 stated in the Prelhninary Official Statement, Lennar now expects that suck final map will not be recorded until after the issuance of the Bonds. After the recordation of such map, LO Land will deliver a grant deed transferring the 45 lots to Lennar Homes. Therefore, as of March 30, 2007, title to such property is held by LO Land. There can be no assurance, however, that the transfer and sale of any addltional property to Lennar Homes by LO Land under the Option Agreement will occur. Concurrently with the execution of the Option Agreement, LO Land and Lennar Homes also entered into a Construction Agreement, dated as of January 13, 2006, as amended by that certain Etcheverry Construction Agreement Modification, dated March 5, 2007 (collectively, the "Construction Agreement"}, under which LO Land engaged Lennar Homes as its contractor to cause certain improvements, including the Improvements, to be canstmeted in order to improve the undeveloped Lots into finished lot condition. The development work needed to develop the property within the Etcheverry Area to finished lot condition consists of, among other things, the construction of certain roads, fencing, sewer, curbs, gutters, grading, relocation of pipelines, water lines, and utility linos within and adjaeenY to the property owned by or under option to Lennar Homes. Under the Construction Agreement, LO Land has agreed to reimburse Lennar Names for all costs expended by Lennar Homes in its performance of the work in an amount not to exceed $ ] 6,642,000. Any and all of the costs expended to fulfill its obligations under the Construction Agreement will be the responsibility of Lennar Homes and any costs in excess of the contract amount will not be reimbursed by LO Land. If Lennar Homes fails to perform its obligations in accordance with the terms of the Construction Agreement, LO Land may order Lennar Homes to stop work and may (i} terminate the Option Agreement and/or (ii) terminate the Construction Agreement and take possession of the site and bid out the remaining work and contact with another contractor. 23 TABLE 4 LOT PURCHASE SCHEDULE Option Number Cumulative Period Option Date of Lots Total 1 March 20071 ~ 45 45 2 June 2007 45 90 3 September 2007 75 165 4 December 2007 68 233 5 March 2008 45 278 6 June 2008 45 323 7 September 2008 4S 368 8 Deeember2008 38 406 9 March 2009 24 430 Totals 430 {I) As stated above, Lennar Homes exercised iLc ability to extend tfie takedown of the first set of lots. The original takedown data was December 200b. Each of Lennar Homes and LO land has falf lied its respective obligations to awomplish the takedowu of the first 45 tots; however, the final map for Tract No. 6343, which contains such 45 lots, bas been submittod [o the City's planning department for plan check and, notwithstanding the anticipated rewrdation date of early April 2009 stated in the Preliminary Official Statement, Le,mar now expects that such finer map will not be recorded until affer the issuance of dre Bonds. After the recordation of such map, LO Land will deliver a grant deed transferring the AS tots to Lennar 13omea. Therefore, as of March 3Q, 2007, title to such property is held lry LO Land. There can be no assurance, however, that the transfer and sale of any additional property to Lennar homes by LO Land under the Option Agreement wi0 occur. Source: Lennar Homes. The Option Agreement also obligates Lennar Homes to pay all real property taxes, including, without limitation, the assessments, due and payable for all of the property within the Etcheverry Area, irrespective of whether Lennar Homes owns such property, dtuing the term of the Option Agreement. This contractual arrangement does not otherwise alter the security for the Bonds. General Information Regarding Lennar Hontes. Lennar Homes is a Califomia 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 owned by U.S. Home Corporation, a Delaware corporation {80.73% interest), Lennar Land Partners, Sub, Inc., a Delaware corporation (7.34% interest), azid Lennar Land Partners Sub II, Inc., a Nevada corporation (17.93% interest). U.S. Horne Corporation, Lennar Land Partners, Sub, Inc., and Lermar Land Partners, Sub, Inc. II ace each wholly-owned by Lennar Corporation, a Delaware corporation ("Lennar Corporation"). Lennar Corporation, founded in 1954 and publicly traded under the symbol "LEN" since 1471, is one of the nation's largest home builders, operating under a number of brand names, including, in Califomia,, Lonnar Homes. Lennar Homes develops residential communities both within the Lennar family of builders and through consolidated and unconsolidated partnerships in which Lennar FIomes maintains an interest. In its SEC filing on Form 10-Q, filed October F0, 2006, Lennar Corporation reported a decrease in new home orders to ] 1,056 home orders from ll,614 home orders for the three months from June 1, 2006, through August 31, 2006, in comparison to the same three months in 2005. New orders during the nine months ended August 31, 2006, were 32,606 homes, down from 33,169 new orders during The nine months ended August 31, 2005. Par Lennar Corporation's west region (California and Nevada}, Lennar Corporation reported over a 9% decline in new home orders for the nine months ended August 31, 2006, in comparison to the same time period in the prior fiscal year. Lennar Corporation's fiscal year runs from December I m November 30 of each year. Lennar Corporation also reported signs of a slowing homebuildiug industry in many geographic markets, including lower new orders and higher cancellation rates. Lennar Corporation is subject to the infonnarional requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports, proxy statements, and other information with the SEC. Such filings, may be accessed over the Internet at the SEC's website at w~wsec.gov. The Internet addresses and za references to fildngs with the SEC are included for reference only, and the information on these inzernet sites and on file with the SEC is not a part of this Official Statement and is not incorporated by referencce into this Official Statement. A representative sampling of projects recently or currently under active development by Lennar Names and its zelated entities or affiliates in the City is summarized in the chart below. Lennar Homes' development plan for each project listed below is to construct residential lots and sell and convey such lots ko individual homeowners. 'FABLE 5 LENNAR HOMES RECENT OR CURI2I+:NT PROJECTS 1N 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 Completed Evansport 72 Active Tradewinds 165 Active Montelena 117 Completed Terra Vista 242 Completed Artisan 237 Active Westlake 367 Active Ashton Falls (Lin Area) 252 Active Weston Communities 395 Active Source: Len~u Homes C&C California The information under this subheading has been provided by C&C California and has not been verifted.for accuracy or eompteteness by the City or the Clnderw7~izer, and the City and the Underh+riter shad have no liability in respect thereof. C&C California is a California corporation and a wholly owned subsidiary of Castle & Cooke, Inc., a Hawaii corporation ("Castle"). Castle was formed on October 10, 1995, 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, 1995, 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 properties in the United States, primarily in the State. C&C Califomia develops finished lots, builds homes for sale to third-pasty buyers, 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 amasser-planned community located on approximately 1,700 acres in the City. Seven Oaks surrounds the Seveu Oaks Country Club and Golf Course, which was also developed by C&C California. CurrenCly, C&C California has the exclusive right to sell memberships to the Seven Oaks Country Club. C&C Galifonria intends to conuibute and transfer its right, title, and interest iv the Seven Oaks Country Club to a non-profit mutual benefit corporation on or before October 31, 2012. Development of the Seven Oaks cottununity is being completed in phases, based on market demand. CSC California has developed neighborhoods in the Seven Oaks community offering homesites from "move-up' to luxury homes. Current homesite prices in Seven Oaks range from 5215 000 to $475,000. Prices For homes built by C&.C California begin at $600,000, with custom homes 25 in the neighborhood prised at over $1,000,000, As of December 31, 2006, approximately 90% of the project had been completed and approximately 308 hotnesites and hames remained to be developed on approximately 7 75 acres. Silver Creek. Silver Creek is amaster-planned community encompassing approximately 642 acres in the City. As of December 31, 2006, approximately 1$4 homes remained to be developed on approximately 46 acres in Silver Creek. Home prices in this community currently average $290,000. 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 December 31, 2006, 349 homesites and homes remained to be developed in the Brighton community. Lot prices range from $130,000 to $200,000, and home prices range from $350,000 to $450,000. Southern Oaks. Southern Oaks is amaster-planned community located just south of the Seven Oaks community. Approximately 99% of the Southern Oaks eornmunity has been completed. As of December 31, 2006, two units remained to be sold on less than one acre within the Southern Oaks community, with an average price of $1 oa,ooo. Seven Oaks Expansian. Seven Oaks Expansion is a planned community encompassing approximately 1,908 acres. This community is just west of Seven Oaks and. is currently being planned to compriseapproximately 6,200 units. C&C California currently owns 160 acres of this community and is under option to purchase the remaining land. Land development is expected m begin in late 200? with the first closings expected in 2008. Village Greett. Village Green is amaster-planned community encompassing approximately 81 acres in The City. The Village Green community is currently under development and will comprise approxhnately 354 units. As of December 31, 2006, all 354 units remained to be completed. First closings occurred in the first quarter of 2007. Home prices range from $337,000 to $400,000, Other California properties owned and being developed by C&C California include the following: Approximately 1,148 acres of open space in the City of San Jose. Coyote Creek Golf Course, ]oeated approximately 2.5 miles south of the City of San Jose. The Coyote Creek Galf 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 fnst of the two existing courses in 1999). Mountaingate, amaster-planned community located in Los Angeles County adjacent Co the Mountaingate Country Club. Construction is expected to commence for the Mountaingate community in rnid 2002 Vlountaingate is planned to include 29 custom lots, each of which are expected to sell at an average price of approximately S 1,825,000. C&C California, or an affiliate of C&C California, also owns and is developing land in Hawaii, Arizona, Georgia, North Carolina, and Florida. Development and Financing Plans The current development plans and financing plans of fhe 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 and 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 sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. The information under this section has been provided by 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. 26 LO Land Development Plan LO Land currently owns all of the property within the Etcheverry Area. Pursuant to the takedown schedule set forth in the Option Agreement, on March 15, 2007, Lennar Homes exercised its option to purchase the first group of lots of the takedown, consisting of 45 lots. Each of Lennar Homes and LO Land has fulfilled its respective obligarions fo accomplish such takedown; however, the final map for Tract No. 6343, which contains such 45 lots, has been submitted to the City's planniag department for plan check and, notwithstanding the anticipated recordation date of early Apri12007 stated in the Preliminary Official Statement, Lennar now expects that such final map will not be recorded until after the issuance of the Bonds. After the recordation of such map, LO Land will deliver a grant deed transferring the 45 lots to Lennar Iiotnes. Therefore, as of March 30, 2007, title to such property is held by LO Land. The Option Agreement obligates Lennar Ilomes to pay all real property taxes, including, without limitation, the assessments, due and payable for all of the property within the Etcheverry Area, irrespective of whether Lennar Homes owns such property, during the term of the Option Agreement. This contractual urangement does not otherwise alter the security for the Bonds. Moreover, there can be no assurance, however, that the transfer and sale of any additional property to Lennar Homes under the Option Agreement wilt occur. In the event that Lennar Homes does not purchase property within the Etcheverry Area fram LO Land in accordance with the terms of the Option Agreement, IA Land would have the right to sell such property within the Etcheverry Axea to another merchant builder or develop or contract with third parties to develop the property it owns within the Etcheverry Area. If the Option Agreement is terminated for any reason, LO Land will pay all real property taxes, including, without limitation, the assessments, due and payable for all of the property owned by LO Land within the Etcheverry Area. L©Land FinancingPtan LO Land has financed the cost of the acquisition and development of the Etehevery Area through a revolving line of credit from Comerica Bank (the "Credit Facility"). The Credit Facility, which has a credit limit of $ISQ000,000 and expires on August 31, 2008, is secured by a deed of trust on the property owned by LO Land in the Etcheveny Area,, together with other deeds of trust on other property owned by LO Land and other related entities. Collectively, these deeds of trust secure the repayment of amounts drawn on the Credit Facility regardless of the project for which funds are drawn, and these deeds of trust are partially reconveyed upon lot sales. The Credit Facility and Che deeds of Host contain numerous and varied events of default. Those events of default also include events associated with projects other than the development of finished lots in the Etcheverry Area. In the event of a default under such agreements, there ace several remedies available to Comerica Bank, including a termination of further credit, acceleration of amounts due (including all amounts under the Credit Facility for all projects secured by the Credit Facility), and foreclosure under the deeds of trust. Because the Credit Facility secures several projects, the loan is cross-collateralized and cross-defaulted. Accordingly, events occurring with respect to projects outside of the Etcheveny Area could trigger the exercise of remedies by Comerica Bank on the property in the Etcheverry Area. LO Land is Hat aware of any defaults under the Credit Facility, nor has it received any notice of default under the Credit Facility that could result in the acceleration of the Credit Facility or the foreclosure of the deeds of trust, including the deed of trust encumbering the Etcheverry Area. Lennar Homes Development Plan Lennar Homes is the developer of the Etcheverry Area and Lin II Area. Lennar I-Tomes plans to develop such Community Areas as follows: Etcheverry Area. The Etcheverry Area encompasses approximately 156.10 gross acres, comprising Tract No. 6343 and Tract No. 6361, and is planned for subdivision into 430 R-I lots (plus one residential lot with an existing home on it, which will not be assessed a share of the total assessment amount), two storm drain sump lots, ane cell tower lot, and several public landscape lots. Lennac Homes plans to construct 430 single-family homes on the Etcheverry Area property in Five phases fox sale to individual homebuyers. 2~ A portion of the Etcheverry Area, identified as Tract No. 6343 and consisting of approximately 80.60 gross acres, has been approved for subdivision into a combined total of 226 R-1 lots, one stone drain sump lot, and several public landscape lots, all pursuant to Vesting Tentative Tract No. 6343. Lennar Homes intends to subdivide Tract No. 6343 into two phases. Lemrar Homes bas informed the City that subdivision maps for the two phases of Tract No. 6343 are not expected to be recorded with the County Recorder prior to the issuance of the Bonds. The remainder of the Etcheverry Area, identified as Tract No. 6361 and consisting of approximately 75.50 gross acres, has been approved for subdivision into a combined total of 204 R-1 lots (plus one residential lot with an existing home on it, which will eat be assessed a shaze of the total assessment amount), one storm drain sump lot, one cell tower lot, and several public landscape lots, all pursuant to Vesting Tentative Tract Map No. 6361. Lermar Homes intends to subdivide Tract No. 6361 into three phases and has recorded the following subdivision map with the County Recorder as follows: Tract No. 6361 Unit One, with 75 R-I lots and three public landscape lots. Lennar Homes has informed the City That subdivision maps for the remaining two phases of Tract No. 6361 are not expected to be recorded with the County Recorder prior to the issuance of the Bonds. Lennar Homes plans to construct 430 single-family homes of the Everything Included' product type in the Etcheverry Area, ranging in size from 1,753 to 2,603 square feet and ranging in price From $290,990 to $395,000. Grading in the Etchevexry Area has been completed and Lennar Homes expects that all infrastructure improvements, including the applicable Improvements, will be completed by AprIl 2008. Home construction is scheduled to commence in September 2007 with six model homes, which are expected to open to the public in November 2007. Construction on production homes is scheduled to commence in October 2007. The first hame sale is expected to close in March 2008, and Lennar Homes expects to sell approximately 144 homes in the first full year of sates and the remaining homes by Apri120ll. Lin JI.4rea. The Lin II Area encarnpasses approximately 85.10 gross acres, comprising Tract No. 6453, and is planned for subdivision into 317 R-1 lots, one storm drain sump lot, one sewer lift station lot, and several public landscape lots. Lennar Homes plans to construct 317 single-family homes on the Lin II Area property in two phases for sale to individual homebuyers. Lennar Homes intends to subdivide the Lin II Area into two phases, and has recorded the following subdivision map with the County Recorder as fallows: Tract No. 6453 Unit One, with 192 R-I lots, one storm drain sump lot, one sewer lift station lot, and six public landscape lots. Lennar Homes has informed the City that subdivision maps for the remaining phase of Tract No. 6453 is not expected to be recorded with the County Recorder prior to the issuance of the Bonds. Lennar Homes plans to constrict 317 single-family homes of the Everything Ineluded`~ product type in the Lin II Area, ranging in size from 1,647 m 2,422 square feet and ranging in price front $265,990 to $329,000. Grading in the Lin II Area has been completed and Lennar Homes expects that all infrastructure improvements, including the applicable hnprovements, wIll be completed by Febniary 2008. Lennar Horner is scheduled to begin home construction on the 40 smaller lots within Tract No. 6453 Unit One on cul-de-sac lots adjacent to Tract No. 6289, known as "Ashton Falls" and located outside of the Assessment District, in June 2002 These 40 smaller Lots will havo the same product type that was constructed and sold in the Ashton Falls neighborhood. Lennar Homes expects to begin closing escrow on such 40 Lots in September 2007. The pricing of these 40 homes will range from $285,990 to $302,555, and the homes will range in size from 1,647 to 1,856 square feet. For the remainder of Tract No. 6453 Unit One, home construction is scheduled to commonce in November 2007 with three model hmnes, which axe expected to open to the public in January 2008. Constmction on production homes is scheduled to commence in December 2007. The first home sale is expected to close in March 2008, and Lennar Homes expects to sell approximately 40 homes in the first full year of sales and the remaining homes by December 2011. Lererrar Homes Piaaaciag Plaa Etcheverry Area. Lennar Hamer expects the cost of the development for the Etcheverry Area to total approximately $102,765,899, including the costs for all an-site and off-site improvements, land acquisition, and all home construction. The following tab]e details the construction budget for the development of the Btcheveny Area. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating 2s costs, property taxes, and other matters, all of which are subject to change. There can be no assurance that the actual development costs for the Etcheverry Area will not be greater than projected. TABLE 6 ETCHEVERRY AREA ESTIMATEll CONSTRUCTION BUDGET Expenditures as of Description of Cost Item Estimated Cost Rebruary 1, 2007 Land Acquisition $ 22,065,000 $ 0 Option Costs 6,813,000 3,D05,513 Offsite Improvements 2,135,400ttt 394,327 Onsite hnprovements 14,507,209t~t 2,335,037 Home L'onstmction (including fees) 57245 290 0 Total $102,765,899 $5,734,877 (1) Approximately $],903,602 of the offsita improvement e nsts are expected to be financed with Bond prooeads. Under the Constmction Agreement' Lennar E3omes is espocted to be reimbursed Yor Che balance of the offsite improvement costs by LO Land. (2) Under the Construction Agreement Lennar Homes is expected to be reimbursed for its onsite improvement costs by LO Land. Source: Lennar Homes. Lennar Homes expects to finance the development of the Etcheverry Area, including all applicable Improvements not financed with proceeds from the sale of the Bonds, with available cash and home sale revenues. Lennar Homes does not expect to request or obtain aziy third party loans or other external credit arrangements to provide such financing. Lennar Homes has retained the exclusive option to purchase all of Che lots that comprise the property within the Etcheverry Area as well as the right and the obligation to complete the development within such property from LO Land. See "Lennar Homes -The Option AgreemenP' above. There can be no assurance, however, that the transfer and sale of any additional property to Lennar Homes by LO Land under the Option Agreement will occur. Lennar Homes has represented that it currently expects the funding sources described above will be sufficient to complete the development of the Etcheverry Area as described herein. There is no assurance, however, that amounts necessary to finance auy outstanding development costs will be available from Lennar Homes, or any other source when needed. Other than the obligations of Lennar Homes in the Constuction Agreement, neither Lennar Homes nor any of its affiliates is under any legal obligation of any kind to expend funds for the development of the Etcheverry Area. Any contributions by Lennar Homes to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, neither Lennar Homes nar any of its affiliates is under any obligation to apply such sources to the completion of development within the Etcheverry Area. Lin II Area. Lennae Homes expects the cost of the development for the Lin II Area to total approximately $58,87I,951, including the casts for all on-site and off=site improvements, land acquisition, and all home eonsuuction. The follawing table details the construction budget for the development of the Lin II 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 Lin II Area will not be greater than projected. [Remainder of Page Intentionally Left Blank.] 29 TABLE 7 L1N II AREA ESTIMA TED CONSTRUCTION BUDGET Expenditures as of Description of Cost Item Estimated Cost February 1, 2007 Land Acquisition $ 5,665,978 b5,665,978 OffsiteImprovements 1,856,730t~t 312,622 Onsite Improvements 7,197,115 2,272,839 Home Construction (includvrg fens) 43.552,128 0 Total $SS,S71,951 $8,251,439 (]) Approximately $1,397,951 o{8ie offsitc improvement costs ere expected to be financad with Band proceeds. Source: Lennar Homes. Lennar Homes expects to fmance the development of the Lin II Area, including a1L applicable Improvements nat financed with proceeds from the sale of the Bonds, with available cash and home sale revenues. Lennar Homes does not expect to request or obtain any third party loans or other external credit arrangements to provide such financing. Lennar Homes has represented that it cunentiy expects the funding sources described abave will be sufficient to complete the developmem of the Liu II Area as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available from Lennar Homes, or any other source when needed. Neither Lennar Homes nor any of its affiliates is under any legal obligation of any kind to expend funds for the development of the Lin II Area. Any contributions by Lennar Homes to fund the costs of such development are entirely voluntary. Notwithstanding avaIlable sources of fmaneing, neither Lennar Homes nor any of its affiliates is under any obligation to apply such sources to the completion of development within the Lin lI Area. C&C Calijorsda DevelnpmenY Ptan C&C California is the developer of the University Park Area. C&C California plans to develop such Community Area as follows: The University Park Area eneotnpasses approximately 33.50 gross acres, comprising Tract No. 6799, and is planned for subdivision into 217 R-1 lots, one private park lot, four cotmnon area lots, and eight private landscape/pocket park lots. C&C California plans to construct 217 single-family homes in one phase on the University Park Area property for sale to third parry buyers. C&C Califomia intends to subdivide the Universiy Park Area into one phase and has recorded the subdivision map for Tract No. 6794 with the County Recorder. Tract No. 6794 is expected to comprise 217 R-1 Lots, one private park lot, four cowman area lots, and eightprivafe landscapelpocketroark lots. C&C California plans to construct 217 single-family homes in two product types in the 77niversiry Park Area. The first product type, "Cambridge Gardens," is expected to consist of 120 units that will range in size from approximately 1,371 to 1,791 square feet and in base sales price from approximately 5270,000 to $305,000. The second product type, "Oxford Cottage," is expected to consist of 97 units that will range in size from approximately 1,660 to 2,191 square feet and in base sales price from approximately $300,000 to $330,000. C&C Califomia is constructing three model homes in each of Cambridge Gardens and Oxford Cottage product types, all of which are expected to open to the public in July 2007. Grading in the University Paxk Area has been campleted and home construction has commenced. C&C California expects that all infrastructure improvements in the University Paxk Area, including the applicable Improvements, will be completed in July 2007. The fu~st home sale is expected to close by September 2007, and C&C California expects to sell homes at an annual rate of approximately 60 units, with the final home sale occurring in 2010. 30 C&C California Flntancirtg Plan C&C California expects the cost of the development for the University Park Area to total approximately S47,SOQOOQ, including the costs for al] an-site and ofd site improvements and all home construction. The following table details the construction budget for the development of the University Park 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 University Paxk Area will noY be greater than projected. TABLE S UNIVERSITY PARK AREA E5TI11ATED CONSTRUCTION BUDGET Expenditures as of Description of Cast Item Estimated Cost February 1, 20U7 Land Acquisition $ 9]8,000 $ 918,000 Offsite Improvements 1,741,OOOt~1 ~ 317,000 Onsite Improvements 6,582,000 2,062,000 Borne Construction (including fees} 38.305.000 384,000 'Cote] 547,546,000 $3,681,000 (1) Approx3mateJy $923,926 of the ofF-site impcovameiit costa aze expected to 6e financed with Bond pxoceeda. Sou[ce: C&C Califontia. In January 2007, Castle entered into a Third Amended and Restated Credit Agreement (the "Castle Credit Agreement") with a syndioate of banks (the "Credit Banks"). All Improvements in the University Park Area not financed with proceeds from the sale of the Bands will be financed with moneys derived from the Castle Credit Agreement Pursuant to the Castle Credit A~ Bement, the Credit Banks have agreed to provide athree-year secured term loan of $250 million and athree-year secured reti~olving line of credit of up to $350 million, based on a percentage of the value of certain commercial properties, land holdings, and homebuilding inventary owned by Castle ox its affiliates, and subject to certain limitations. The Castle Credit Agreement is secured in part by the property within the University Park Area. Repayment obligations under the Castle Credit Agreement are subject to interest at a variable rate per annum based on the London Interbank Offered Rate, or at an alternate rate based upon a designated Credit Bank's prime rate ox the federal funds rate. The Casfle Credit Agreement wntains customary covenants, including, but not limited to, ]imitations on investments, sale of assets, limitation on other debt, financial covenants related to Tangible net worth, leverage, interest coverage, and inventory levels. As of January 31, 2007, the amount available under the Castle Credit Agreement was approximately S 157 million. C&C California has represented that the funding sources described above wIli be sufficient to complete the development of the University Park Axea as described herein. There is no assurance, however, that amounts necessary to finance any outstandine development costs will be available from C&C California, the Castle Credit Agreement, or any ether source when needed. Neither C&C California nor any of its affiliated entities is under any legal obligation of any kind to expend funds far the development of the University Park Area. Any contributions by C&C California to fund the costs of such development are entirely volmitary. 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 University Park Area. Assessment Rolt Set forth in APPENDIX E is the assessment roll, including Bulk Value to assessment lien ratio information, for the parcels of property within the Assessment District that are subject to the lien of the assessments. The assessment roll shows the amount of the total estimated cost of the proposed Improvement acquisition, construction and incidental cost that is assessed upon each of the lots and parcels within the Assessment District based upon the alternate method and rate of assessment permitted under Section 13.08.070 of the Municipal Code of the City. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Method of Assessment Spread" above. The 31 assessment numbers that appear on the assessment roll eor~espond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D. Utilities For each Corrununity 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. Electricity services axe provided by Pacific Gas & Electric for all Community Areas; natural gas service is provided by Pacific Gas & Electric far the Lin II Area and the University Park Area and by Southern California Gas for the Eteheverry Area; water service is provided by the City for the Lin II Area and by California Water Service for the Eteheverry Area and the University Park Area; sewer service is provided by the City for the Lin II Area and the University Park Area and by North of the River Sanitation Company for the Etcheverry Area; telephone service is provided by AT&T for all Community Areas; and cable television is provided by Bright House Networks for all Community Areas. Flood and Earthquake Zones Pursuant to the Appraisal, according to the maps prepared by the Federal Emergency Management Agency, the Community Areas are situated in a Zone C flood area. "Zone C" denotes an area that is not considered a flood hazard zone. No flood insurance is required for property in a Zone C flood area, and no flood insurance has been obtained for any property within the Assessment District. Pursuant to the Appraisal, the Assessment District is not located within any Special Studies Zone, as de£med in the Alquist-Priolo Special Studies Zone Act. Southern California is a seismically active area. A major seisnvc 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. 'Coning According to the Platming Department of Cho City, all of the parcels in the Assessment District are zoned R-I for residential usos. An R-1 zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square feet far each dwelling unit. Tho property in the University Park Area has planned unit development ("PliD") zoning, ivhieh allows fox a higher density than the R-I zoning. PUD zoning provides for lot sizes of less than 6,000 square feet of total lot area. For purposes of This Official Statement, the term "R-1 tots" refers to lots bearing either the R-1 or PUD zoning designation. Tax Delinquencies The City has represented that, based upon the records of the office of the County Tax Collector, them are no delinquent property taxes or penalties owed against the parcels in the Assessment District. Each of Lznnar Homes and C&C California has reported that none of the property it owns or holds an opflon to purchase within the Assessment District ox any property owned by such entity in California is delinquent in the payment of any special taxes, assessments, or ad vatoren¢ property tax obligations, and that such entity has never defaulted on any such payments for which such delinquency was not cured within the same fiscal year, or lost any property to foreclosure as a result of not paying special taxes, assessments, or ad valorem property tax obligatimvs. Environmental Issues Affecting Assessment District Property Pursuant to the Municipal Code of the City, the formation of an assessment district is exempt from compliance with the California Enviromnental Quality Act {"CEQA"}. Accordingly, a Notice of Exemption from CEQA was filed by the City with the County Clerk for the Assessment District proceedings on November 14, 2006. The City reports that separate environmental review proceedings wilt be conducted for the improvement projects proposed to be financed within the Assessment District as part of the CEQA compliance associated urith the land use entitlement and subdivision approval process within each Community Area. Each of C&C California and Lennar Homes has reported that, to its knowledge, except as set forth below, there are no additional environmental issues sz affecting its respective property within the Assessment District or any property it holds an option to purchase within the Assessment District that would materially adversely affect the development of such property as described in this Official Statement. A description of the enviromnental assessments that have been conducted with respect to the Etcheverry Area and the Lin II Area is set forth below. C&C California has reported that no environmental assessments were conducted with respect to the University Park Area. Etcheverry Area A Phase I Enviromnental Site Assessment was conducted by AJ Environmental in December 2005 (the "Etcheverry Tract No. 6343 Phase I"). The Etcheveny Tract No. 6343 Phase I covered all of Tract No. 6343 and revealed the following environmental conditions of concern in connection therewith: (i) two abandoned exploratory oil wells; (ii) an abandoned core hole; (iii) buIlding restnetions related to the oil wells and core hale; {iv) two abandoned water wells; (v} an oil pipeline; and (v-i) a high pressure gas line. No Phase II report to address the collection and analysis of soil samples was required. The two abandoned exploratory oil wells and abandoned core hole were all re-abandoned pursuant to requirements of the California Department of Conservation, Division of Oil, Gas and Geothermal Resources (the "DOGGR"), the County, and the City. Such oIl wells and care hole are located in areas where no built structures will be located within the ten-foot radius non-built area. The high pressure gas line is located within the street right-of-way of Calloway Road located on the eastern boundary of the subject property. Setback requirements pertaining to the high pressure gas line are expected to be met prior to the recordation of the fine( map for Tract No. 6343. The oil pipeline belonged to Chevron Oil Company ("Chevron"} and has since been removed by Chevron. At the time of removal, soil sampling was conducted, which reflected no soil contamination. The oil pipeline, as it pertains to property within Tract No. 6343, was located within the street right-of--way of Etchart Road. A separate Phase I Environmental Site Assessment was conducted by AI Environmental in December 2005 (the "Etcheverry Tract No. 6361 Phase I"). The Etcheverry Tract No. 6361 Phase I covered all of Tract tin. 6361 and revealed the following environmental conditions of concern in connection therewith: (i) two water wells; (ii} an abandoned water well; (iii) an oil pipeline; (iv) a high pressure gas line; (v) abandoned dwellings with the possibility of presence of lead paint; (vi)a leaking ground diesel tank; (vii) leaking transformers; and (viii) possible contamination at a pestcide storage area. With regard to the concerns associated with the passibility of soil contamination from the leaking ground diesel tank, the leaking transformers, and the pesticide storage area, a Phase II Site Assessment was recommended (the "Etcheverry Tract No. 6361 Phase Il"). Six borings were hand augured on December 14, 2Q05, in comphanee of the Etcheverry Tract No. 6361 Phase II. The soil samples presented no action levels and no existence of environmental degradation. Pursuant to their respective requirements, the ground diesel tank, transformers, and pesticides were removed from the site. As for the two watch' we1Ls and the abandoned water well, their abandonment and re-abandonment, respectively, were conducted pursuant to the standards set forth by the County and the City. The high pressure gas line is located within the street right-of--way of Snow Road, which borders the southern portion of the Etcheverry Area. The oil pipeline is the same pipeline discussed in the Etcheverry Tract ATO. 6343 Phase I. As stated above, the oil pipeline has since been removed by Chevron, and soil sampling conducted at the time of removal reflected no soIl contamination. The abandoned dwellings, which showed a possibility of the presence of lead paint, were removed and disposed of in accordance with standards set forth by the State, the County, and the City. Zin II Area In January 2003, Lennar Homes' predecessor-in-interest rueived a Phasel Site Assessment by AJ F,nvironmenta] Inc. (Yhe "Lin Phase I"). The Lin Phase I cowered all of Tract No. 6453, as well as Tract Map 6289, which is oat a part of the Assessment District. The Lin Phasel identified the following seven items of environmental concern wide respect to the property in Tract No. 6453 (i. e., the Lin II Area that is part of the Assessment District): (i} an abandoned oil well, KCL 42-14, on the property, which was originally abandoned by Shell Oil Company on March 20, 1962; (ii) oil well KCL 53-14, which had not produced since Inne 22, 1986, and was classified with DOGGR under its idle well program; (iii) an unlined earthen sump pump associated with an oil production facility, which appeared on a 1975 aerial photograph; {iv) the presence of four aboveground production tatilcs that may be corroding and contaminating the underlying soil; {v) the presence of a gas separator on the 33 property, often used to blow off liquids resulting in the possible contamination of the soil; (vi) building restrictions on the property not allowing the construction of a building within ten feet of an abandoned well; and (vii) stained soil inside an agricultural water well enclosure located on the property. Because of these concerns associated with the unlined earthen sump, production tanks, separator, and oil well KCi_ 53-14, the Lin Phasel recommended conducting a Phase II analysis. Oil well KCL 53-14 was abandoned in accordance with the standards set by DOGGR, the County, and the City. Oil well KCL 42-14 was re-abandoned, also in accordance with the standards set by DOGGR, the County, and the City. The location of oil well KCL 42-14 is within the Community Area and is located within aten-feet radius building restriction. The Lin Phase I identified two abandoned oil wells located in Tract Map 6289, which is not a part of the Assessment District. The Lin Phase I recommended abandonment of the two wells, and the two oil wells were ab<urdoned in accordance with policies of DOGGR, the County, and the City. All of the areas of cancers identified in the Lin Phase I for which a Phase II was recommended were addressed in the Phase II Enviromnental Site Assessment by AJ Environmental Inc,, dated April 2003 (the "Lin 2003 Phase lI"), and in two follow-up assessments, dated January 2006 and February 2006 (collectively, the "Lin 2006 Phase II"). Pursuant to the Lin 2003 Phase II, six borings were drilled and cored with respect to the areas of concern Site clean-up was conducted pursuant to the Work, Health and Safety Plan, dated March 2003. The Lin 2006 Phase II reported no contamination present at the site. Bulk Value-to-Assessment Lien Ratio An Appraisal of the property within each of the three Community Areas in the Assessment District that is subject to the lien of the assessments has been prepared for the City by the Appraiser. The Appraisal, subject to the various limitations. and assumptions set forth therein, provides an estimate of the as-is market value (designated in the Appraisal as the "Bulk Value of Recorded Lots or Land" and defined herein as the "Bulk Value") of each parcel ofproperty within the Assessment District. The "Aggregate Finished Lot Value When Complete" is described in the Appraisal as the value of each parcel assuming the completion of the Improvements and taking into account Che value added by existing improvements, a recorded subdivision map, and the "Completion Costs," which are defined therein as the costs associated with the developer-funded improvements necessary to develop such parcel as a finished loC available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indireeC costs for each lot, taxes during constniction, profits, commissions, administrative and miscellaneous expenses, and other direct and indirect overlapping debt. See "APPENDIX B -Appraisal." For a discussion of liens encumbering the Assessment District property other than the assessments; see "Direct and Overlapping Debt" below and "THE BONDS -Priority of Lien" herein. [Remainder of Page Intentionally Leff Blank.] sa Based on the Appraisal, the ratio of the aggregate $ulk Value of the Assessment District property to [he aggregate assessment lien is approximately 11:1. The table below sets forth the Bulk Value of the Assessment District property and the applicable Bulk Value-to-assessment lien ratios. TABLE 9 APPRAISED VALUES AND BULK VALUE-TO-ASSESSMENT LIEN RATIOS CI'PY OP BAKERSFIELD ASSESSMENT DISTRICT NO. 06-I (ETCHEVERRYJLIN II/UNIVERSITY PARK) Bulk Value Total Nef Land oP Recorded Asaesement Value-to-Lien Asaesement No- Deveto men[Area Deacri lion Area Lots or Land Lien Ratio ETCHEVERRY AREA - TRACT NO. 6343 Fltmre Traef No. 6343 Unif One 113 Residental Lots 36.78 5 6,353,410 S 597,615.65 10.63 1 Future Tract No. 6343 Unit Two (113 Residental 7654 6,357,410 597,615.64 10.63 Lots) TOTALS/AVERAGES L'OR ETCHEVERRY AREA (TRACT 73.32 $12,766,820 51,195,231.29 10.63 NO. 6343} ETCHEVERRY ARNA - TRACT NO. 636] 2-76 Tract No. 6361 T7nit One (75 Residential Lots) 2450 $ 9,420,000 F 400,305.93 ~_-- 1854 Furore Tract No. 6361 Unit Ttivo {62 Residential Lots) 19.48 3,805,410 330y 19.58 IL50 SO Fbmre Tract No. b361 Uuit Thro© (67 Residential Leta 24.67 4,112,2)8 351,fi06.65 11.50 TOTALSlAVERAGESEOR ETCHEVERRY AREA {TRACT 08.65 $15,337,709 51,088,832.16 14.09 NO. 6361) LIN II AREA 81-123, 125-271, Tract No. 6453 unit One (19Z Residential Cass) 46.L7 $17,910,000 $1,015,935.01 11.72 511-512 279 Future Tract Nn. 6453 Unit 1'wo {125 Residential Lots) 3(258 6,057,438 661,416.03 9.15 TOTALS/AVERAGES POR LIN IIAREA (TRACT NO.6453) 96.75 $19,96],438 51,697,351A0. 10.71 UNIVERSITY PARK AREA ?80-376 Bract No. 6799 (97 Residential Lots, Lots I throu8h li.17 5 5,300,000 $ 562,606.08 A42 377-496 ~ ra ti'I°. 6799 (120 Residential Z-ota, Lots 98 through 1132 6,440.000 545,979.43 11.80 TOTALSiAVERAGESHOR UNIA'ERSITY PARK AREA (TRACT Zq,49 $] 1,740,000 51,10H,585,51 10.59 NO. 6799) ASSESSMENT DISI'RICT'rOTALS 243.21 557,745,967ut $6,070,000.00 11.39 (1) Totals may not edd due to rounding. Soorce:.4ppraisal. The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, a copy of which is attached hereto as APPENDIX S. See APPENDIX F for additional information regarding the appraised value of each assessed parcel and the ratio of such value to the amount of the assessment lien against such parcel. The City makes no representations as to the accuracy or completeness of the Appraisal. Certain considerations relating to the Appraisal are discussed under the heading "SPECIAL RISK FACTORS." NO REPRESENTATIONS ARE MADE REGARDING THE APPRAISED VALUATIONS (~UOTF.D Pi I APPENDIX B OR E, AND PROSPECTIVE' PURCHASERS ARE CAUTIONED NOT TO RELY OiV TFIE VALUATIONS IN DETERMNING WHETHER OR NOT THE BONDS DESCRIBED HEREIN ARE A SUITABLE INVESTMENT. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD NOT ASSUME THAT THE PROPERTY WITHIN THE ASSESSMENT DISTRICT COULD BB SOLD FOR THfi VALUATION AMOUNT AT A FORECLOSURE SALE FOR DELNQUENT ASSESSMENTS. 35 Direct and Overlapping Debt The following table (the "Direct and Overlapping Debt Table's details the direct and overlapping debt currently encumbering property within the Assessment District. The Direct and Overlapping Debt Table has been derived from data assembled and reported to the City by California Municipal Statistics, Inc., as of March 1, 2007. Neither the City nor the Underwriter has independently verified the information in the Direct and Overlapping Debt Table and neither the City nor the Underwriter guarantees its completeness or accuracy. The Direct and Overlapping Debt Table does not inchide the special tax liens described under the heading "TIIE BONDS -Priority of Lien" herein. TABLE 10 DIRECT AND OVERLAPPIlVG DEBT CITY OF BAKERSEIELll ASSESSMENT llISTRICT NO.06-1 (ETCAF.VERRY/LIN IIIiINIVERSITY PARK 2006-07 Local Secured Assessed Valuation: $8,972,370 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: °lo Applicable Debt 311107 Kern Community College District Safety Repair and Improvement District 0.014% 514,894 Kern High School District 0.022 43,481 ATOrris School District 0927 962 Panama Union School District 0.039 2,360 Rosedale Union School District 0164 4,223 Kern Community College District Assessment District 0.001 61 City of Bakersfield Assessment District Na. 06-1 100.000 - {l ) TOTAL .DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 565,981 OVERLAPPING, GENERAL FUND DEBT Kern County General Fund Obligations 0.013% $ 7,177 Kern County Pension Obligations 0.013 62,609 Kern County Board of Fducation Certificates of Participation 0.013 7,567 Kean Community College District Certificates of Participation O.Ol3 11,052 Kern High School District General Fhnd Obligations 0.022 25,344 City of Bakersfield Certificates of Participation 0.044 15,314 TOTAL OVERLAPPING GENERAL FUND DEBT $129,063 COMBINED TOTAL DEBT $195,044 (2} (1) Excludes 1915 Act bands to 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 2006-07 Assessed Valuation: llirectDebt ....................................................................................... - Total Direct and Overlapping Tax and Assessment Debt ................... 0.74% Combined Total Debt ......................................................................... 2.17% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6!30/06: 50 Source: Califonua Municipal StaSsties, tno. [Remainder of Page Intentionally Left .Blamlc.] 36 SPECIAL RISK FACTORS General Under the provisions of the 1915 Act, assessment installments, froth which funds for the payment of annual installments of principal and interest with respect to the Bonds are derived, will be billed to properties against which there are unpaid assessments on the regular property Tax bills sent to owners of such properties, Such assessment installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property ear instalments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies will likely indicate an unwillingness ar inability to make regular property tax payments and assessment installment payments in the finure. In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land within the Assessment District axe paid in a timely manner. Should the installments not be paid on timo, the City has established a Special Reserve Ftmd in khe initial amount of .~399,027.SQ 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, to cover delinquencies in the payment of assessments. The assessments are secured by a lien on the parcels of land and the Ciry can institute foreclosure proceedings to sell land in the Assessment District with delinquont installments for the amount of such delinquent installments in order To obtain funds to pay debt service on the Bonds. Failure by owners of The parcels to pay installments of assessments when due, depletion of the Special Reserve Fund, or the inability of the City to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of assessments levied against such parcels may result in the inability of the City to make full or punctual payments of debt service on the Bonds, and Bond owners would therefore be adversely affected. The Bonds ace not secured by the general taxing power of the City, the Connty, the State, or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other polifical subditi4sion of the State has pledged its full faith and credit for the payment thereof. Unpaid assessments do not eonstimte a personal indebtedness of the owners of the lots and parcels within the Assessment Iistrict. There is no assurance the owners will be able to pay The assessment installments or that they will pay such installments even though financially able to do so. Risks of Real Estate Secured Investments Generally Owners of the Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in and in the vicinity of Che Assessment District, the supply of at demand for competitive properties in such area, and the market value of residential property or buildings ox sites in tho event of sale or foreclosure; (ii) 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 of Ownership As of March 30, 2007, LO Land owns approximately 156.10 gross acres within the Stehevecry Area, which property will hear approximately 45.05% of the total assessment lien, Lennar Homes owns approximately 85.10 gross acres within the Lin lI Area, which property will bear approximately 33.08% of the total assessment lien, and C&C California owns approximately 33.50 gross acres within the university Park Area, which property will beat approximately 21.87% of the total assessment lien. Pursuant to the takedown schedule set forth in the Option Agreement, on March I5, 2007, Lemlar Homes exercised its option to purchase the first group of lots of the takedown, consisting of 45 lots. Each of Lehner Homes and L.O Land has fulfilled its respective obligations to accomplish such takedown; however, the final map for Tract No. 6343, which contains such 45 lots, has been submitted to the City's planning department fox plan check and, notwithstanding the anticipated recordation date of 37 early April 2007 stated in the Preliminary Official Statement, Lennar now expects that such final map will not be recorded until after the issuance of tho Bonds. After the recordation of such map, LO Land will deliver a grant deed transferring the 45 lets to Lennar Homes. Therefore, as of March 30, 2007, title to such property is held by LO Land. There can be no assurance, however, that the transfer and sale of any additional property to Lennar Homes by LO Land under the Option Agreement wilt occur. The Option Agreement obligates Lennar Homes to pay all real property taxes, including, without limitation, the assessments, due and payable for all of the property within the Eteheverry Area, irrespective of whether Lennar Homes owns such property, during the term of the Option Agreement. This contractual arrangement daes not otherwise alter the security for the Bonds. 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 Landawners to pay its respective assessment instalhuents when due could result in the rapid total depletion of the Special Reserve Fund prior to reimbursement thereof froth 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 the Bonds prior to the resales of foreclosed property or delinquency redemptions. In that event, there could be a default in payments of the principal of and interest on the Bonds. Property Values Reference is made to APPENDIX B, which contains the Appraisal and the Appraiser's opinion with respect to the value of the property that is subject to the lien of the assessments and the assumptions made by the Appraiser in connection therewith. Reference is also made to "OWNERSHIP AND PLANNED FINTANCING AND DEVELOPMENT OF TAE ASSESSMENT DISTRICT -Bulk Value-to-Assessment Lien Ratio" fox a summary of the value of the property within each of the three 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 tho assessment liens on such property thaC secure the Bonds. See also APPENDIX E for a listing of the ratio of the appraised value of each assessed parcel to the amount of the assessment tien against such parcel. Na assurance can be given that this appraised value-to-lien ratio will not decline should subsequent liens be planed on property within the Assessment District. Further, there is no assurance that in the event of a foreclosure sale for a delinquent assessment installment, any bid will be received for any such property within the Assessment District or that any bid received or resale price will be sufficient to pay such delinquent installments (plus costs and penalties). The 1915 Act provides that a parcel be sold far the delinquent installment(s) amount {plus costs and penahies) 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 Distict to be assessed. See APPENDIX B for an explanation of methodology and a statement of contingent and limiting conditions and assumptions used by the Appraiser to derive the aggregate value of the property. Although these contingent and limiting conditions and assumptions were considered reasonable by the Appraiser based on information available to the Appraiser, neither the Appraiser nor the Ciry can give any assurance that any parcel will be developed in accordance with the uses that the Appraiser has projected. Availabi-ity of Funds to Pay Delinquent Assessment Installments The City will establish a Special Reserve Fund out of Bond proceeds in the amount of $399,027.50, which will thereafter be maintained, from assessment installment payments and from proceeds of redamptian or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement. As discussed herein under the heading "THE BONDS -Special Reserve Flmd,°' 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 khnd will always be adequate to pay all delinquent installments and if, during the period of delinquency, there are insufficient funds in 38 the Special Reserve Fund to pay all delinquent installments, a delay may occur in payments to the owners of the Bonds. Haaardous Substances Although governmental taxes, assessments, and charges are a common claim against the value of an assessed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the unpaid assessments is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the Assessment District may be zequired by law to remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, sometimes referred to as "CERCLA" or Cho "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner {or aperator) is obligated to remedy a hazardous substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the Assessment District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated m remedy the condition. Further, such liabilites may arise not sitxtply from the existence of a hazardous substance but from the method of handling or disposing of iC. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable open 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 pareeks by reason of the possible liability of the owner (or operator} for the remedy of a hazardous substance condition of the parcel. Each of C&C Catifornia and Lennar Homes has represented to the City that, to its respective knowledge, there is no current liability for hazardous substances with respect to any property it owns or holds an option to purchase within the Assessment Bistrict that would materially adversely affect the development of such property as described in this Official Statement. Further, it is possible that liabilities may arise in the future with respect to any of the parcels within the Assessment District resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that has not been released or the release of which is net presently threatened, ox may arise in the future resulting fmm the existence, currently, an the parcel of a substance not presently classified as hazardous 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 possibilities could significantly affect the value of an assessed parcel that is realizable upon a delinquency of an unpaid assessment. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Environmental Issues Affecting Assessment District Property." Endangered and Threatened Species Each of C&C California and Lennar Homes has xeparted Chat, Yo its respective knowledge, no threatened or endangered species (or their respective habitats) have been identified in any of its parcels within its respective Community Areas or in any parcels that it holds an option to purchase within a Community Area. If, however, any threatened or endangered species (or their respective habitats) were to be diseaveced on a parcel within the Assessment District prior to or during development, the ability of the then-current landowner to develop the affected parcel could be severely limited. In such an event, the then-current landowner's willingness or ability to pay assessment installments could be adversely affected. The property within the Assessment District is subject to the Metropolitan Bakersfield Habitat Conservation Plan ("ivIBHCP"), a joint program of [he 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 are generally located outside the metropolitan Bakersfield area. In exchange for the MBHCP mitigation fee, the appiicant is relieved of the obligation of demonstrating compliance 34 with the endangered species laws by prepariug biological reports, securing compensation lands, and undertaking other measures to avoid impacts to the species. Factors That itlay 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. Lennar Homes and C&C California, as applicable, will each be obligated to pay all of its costs in excess of the amount financed by the assessments. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMBNTS -Description of the Community Areas and the Improvements." Fumre development in the Assessment District may be affected by changes in the general economic conditions, fluctuations in the real estate market, and other factors. In addition, development may be subject to future federal, state, and local regulations. Approval may be required from various agencies from time to time in cannection with the layout and design of any proposed development in the Assessment District, the nature and extent of public improvements, land use, zoning, and other matters. Although no such delays are anticipated, failure to meet any such future regulations or obtain any such approvals in a timely manner could delay ar adversely affect any proposed development in the Assessment District. The development of pxogerty within the Assessment District could be adversely affected if lawsuits or other aadons were commenced to restrict or prevent further development within the Assessment District. Private Improvements; Increased Debt The development of the property within the Assessment District depends upon both public and private improvement of land within the Assessment District. The cost of additional private improvements within the Assessment District, together with public improvements financed with any additional property secured financing, will increase the public and private debt fox 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 rerluee the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against (heir property. See "SPECIAL RISK FACTORS -~-Priority of Lien." In addition to the assessments being levied to finance 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 administrative costs of the City with respect to the Assessment District. These additional administrative assessment amotmts could redace the ability or willingness of the property owners within the Assessment District Co pay the annual assessment installments levied against their property. Subordinate llebt; Payments by FDIC and Qther Federal Agencies Lennaz Homes has reported that none of its property within the Assessment District currently serves as security for any of its obligations to third party lenders. Each of LO Land and C&C California has reported that its property within the Assessment District currently serves as security for certain of its obligations Yo third party lenders. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRTCT -Development and Financing Plans °' All or porfions of the Assessment District property may in the future secure additional loans of the owners thereof. Any such loans aze subordinate Yo the lien of the assessments. However, in the event that any of the financial institutions making any loan that is sectued 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 Dnig Enforcement Agency, the Internal Revenue Service, or other similar federal governmental agency, and, prior thereto or thereafter, the loan or loans go into default, the ability of the City to collect interest and penalties specified by state law and to foreclose the lien of a delinquent unpaid assessment may be ]united. Specifically, with respect to the FDIC, on June 4, 1941, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "194 L Policy Statement'). The 1991 Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if 40 those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value, According to the Policy Statement, the FDIC wIll pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the insfihition's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nahtre of Fines or penalties and will not pay nor recognize liens far 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 germit a lien or security interest held by the FDIC to be eliminated by foreclosure withouC the FDIC's consent. The Policy Statement is unclear as to whether the FDIC considers assessments such as those levied by the City to be "real property taxes" drat they intend to pay. Ilowever, the Policy Statement states that the FDIC generally will not pay non-all 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 property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. The City is unable to predict what effect the application of the Policy Statement would have its 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 rA be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the City will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Special Reserve Fund and perhaps, ultimately, a default in payment on the Bonds. Based an the secured tax roll as of January 1, 2007, the FDIC does not presently own any property Fvithin the Assessment District. The City expresses no view concerning the likelihood that the risks described above will materialize whIle the Bonds are outstanding. Tax Delinquencies Assessment installments, from which funds necessary for the payment of annual installments of principal of and interest on the Bonds are to be derived, will be billed to each property against which there is an unpaid assessment on the regular property tax bills sent to the owner of such property. Such installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. tinder certain circumstances, assessment installment payments on parcels of property in the County can be made separately from regular property tax payments for such parcels. Property tax payments will net be accepted, however, unless the assessment installments for such parcels have also been paid. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills, as evidenced by property tax delinquencies, will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the future. A failure of property owners to pay installments of assessments when due could result in a default in payments of the principal of and interest on the Bonds. The City reports that, based upon the records of the office of Che Kern County Tax Collector, none of the parcels in the Assessment District shows delinquencies in the pa}nnent of fiscal year 2002-03, 2003-04, 2004-05, or 2005-06 property tax installments. Limited Obligatian 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 "THE BONDS- Covenant to Commence Superior Court Foreclosure." This duty of the City is continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for this purpose and it; during the period of delinquency, there are insufficient funds in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. If there are additional delinquencies after ai exhaustion of funds in the Special Reserve Fund, the City is not obligated to transfer into the applicable Redemption Fund the amount of such delinquency out of any other available moneys of the City. THE CITY'S LEGAL RESPONSIBILITIES WITH RESPECT TO SUCH DELINQUENT INSTALLMENTS ARE LIMITED TO ADVANCING TILE AMOUNT THEREOF SOLELY FROM ANY AVAILABLE MONEYS LN THE SPECIAL RESERVE FWD AND TO UNDERTAKING, UNDER CERTAIN CIRCUMSTANCES, JUDICIAL FORECLOSURE PROCEEDINGS TQ RECOVER SUCH DELINQUENCIES. THIS DUTY OF THE CITY TO ADVANCE FUNDS IS CONTINUING DURING THE PERIOD OF DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. IN ACCORDANCE WITH SECTION 8764(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT ADVANCE FUNDS FROM ITS TREASURY TO CURE Ah'Y DEFICIENCY IN THE REDEMPTION FUND. Bankruptcy and Foreclosure The payment of assessment installments and the ability of the Ciry to foreclose on the lien of a delinquent unpaid assessment, as discussed below in the section entitled "SPECIAL RISK FACTORS -Covenant to Commence Superior Court Foreclosure," tnay be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various Iega1 opinions to be delivered concurrently with the delivery of the Bonds will be qualified, as to the enforceability of the various Legal instruments, by reference to bankmptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitatians on legal remedies in the State, On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its oginion in a bankruptcy case entitled In re Glasply Marcie Indusb-ies. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for banl¢vptey were not entitled to priarity over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as "administrative expenses" of the battla~uptey estato, 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 antount of the pre-petition taxes. According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. Iu cectain circumstances, payment of such administrative expenses may be allowed to be deferred Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current ad valorem taxes. Glasply is controlling precedent on bankruptcy courts in the State of California. Pursuant to statute, the lien date for general ad valoreirz property taxes levied in the State of California is the January 1 preceding the fiscal year for which the taxes are levied. Therefore, under Glasply, a bankruptcy petition filing would prevenC 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 bankruptcy. Under currant law, the lien of an assessment, unlike the lien for general ad valorem property taxes, attaches upan 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. Therefare, before applying Glasply to a banknuptcy situation involving assessments rather than general ad vatoreen property taxes, a court would need to oonsidex the differences in the statutory provisions fox 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 respoet to post petition levies of the assessments as against property owners within the Assessment District who file for bankruptcy, collections of the assessments from such property owners could be redueod. It should also be notod that on October 22, 1994, Congress enacted 11 U.S.C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes unposed by a political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy pettion filed az on or after October 22, 1944, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bond owners should be aware that the potential effect of IL U.S.C. Section 362(b)(18) on the Assessment District assessments depends upon whether a court were to determine that the assessments should be treated like ad valorem taxes for this purpose. Whether or not bankruptcy proceedings were to cause the assessment liens to become extinguished, bankruptcy of a property owner in all likelihood would result in a delay in prosecuting superior court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds, and the possibility that delinquent assessment installments might not be paid in full. Economic, Political, Socfal, and Environmental Conditions Prospective investors are encouraged to evaluate currene and prospective e~,onomiq 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 tnay 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 the Assessment District to pay their assessments. Such conditional changes may include (but are not Ihnited to) fluctuations in business production, consumer prices, or financial markets, unemployment rates, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters. Ar6etes XIIIA and XIIIB of the California Constitution On Sune 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the 7arvislGann Initiative) that added Article XIIIA to the California Constitution. The effect of Article XIIIA is to limit ad valorem taxes on real property. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA. Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to l% of "full cash value' as determined by the county assessor. Article XIIIA defines "full cash value" to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under `full cash value' or, thereafter, the appraised value of real property when purchased, newly wnstmcted, or a change in ownership has occurred after the 1975 assessment" The "full cash value" is subject to annual adjusnnent to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect seductions in property value caused by damago, destruction or other factors. Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and allows looal governments to raise their property tax rates above the constitutionally mandated 1% ceiling for the purpose of paying off certain new general obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualifted electorate. Article XIIIA requires a vote of hvo-thirds of the qualified electorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorene, sales or txansacrion tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State Laws resulting in increased tax revenues. Bnactment 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 Che Special Reserve Fund, with which to advance funds to make any payments or to cure any deficiency in the Redemption Fund, should the City, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Special Keserve 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 Tuly 2, 1979, the Fifth District Court of Appeal rendered a 3-0 decision in the case of Courtry of Fresno v. Holmstrom (94 Cal. App. 3d I974) that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13}. The Court held the one percent tax limitation imposed by California a3 Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within the definition of "special taxes" in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a hvo-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court's decision. At the November 6, 1974, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIII13 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 political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population, and services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the fiscal year 1978-79 and the limit is to be adjusted annually to reflect changes in population, eonsmner prices, and certain increases in the cast of services provided by these public agencies. _ Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance, and disability insurance funds. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the unounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by ret~ ing tax rates or fee schedules over the subsequent two years. On December 17, 1980, the Third District Court of Appeal rendered a 3-0 decision in the case County of Plaeer v. Corin (113 Cah App. 3d 443) that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of "proceeds of taxes" imposed by California Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court lvas not appealed. The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsetpient legislative enactments effectively repeal The otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special,inx. (in an amount uecessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any one year) if other funds are not available to cover delinquencies. In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in WesC Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be reassessed up to 2°l0, per year, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners of comparable property in a community. The L`.S. Supreme Court in the West Virginia case expressly declined to comment in any way on the constimtionality of Article XIIIA. Based on this decision, however, property oknters in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involved residential property and one case involved commercial property. In all three cases, State trial and appellate courts upheld the constitutionality of Article XIIIA's assessment rules and concluded that the West Virginia case did not apply to California's laws. The U.S. Supreme Court agreed to hear the appeal in the challenge relating to eommexcial property, but the plaintiff subsequently decided to drop the case. On June 18, 1992, in the case of Nordlinger v. Lynch (112 U.S. 2326), the U.S. Supreme Court affirmed the decision of the California Court of Appeal, Second Appellate District, which lower court previously held that Article XIIIA does not violate the U.S. Constitution. 44 The City cannot predict whether any other pending ox future challenges Co 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 Che State's financial obligations to local governments. Articles XIIIC and XIIID of the California Constitution Proposition 218, a state ballot initiative known as the "Right to Vote on Taxes Act," was approved by California voters on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996. ArCiele XIIID, entitled "Assessment and Property Related Fee Reform," contains several new provisions making ie generally more difficult for local agencies to levy and maintain "assessments" for municipal services and programs. Article XIIID requires that, beginning July I, 1997, the proceedings fox the levy of any assessment by the City under the 1913 Aat (including, if applicable, any increase in such assessment or any supplemental assessment under the 1913 AcC) must be conducted in conformity with the provisions of Section 4 of Article XIIID. "Assessment" is defined Co mean any levy ox charge upon real property for a special benefit conferred upon the real pxoperry. Article XIIID additionally provides that in levying "assessments" a local govermnent must separate the "general benefits" from the "special benefits" conferred on a parcel and may not impose on zany parcel an assessment that exceeds the "reasonable cost of the propartional special benefit conferred on'that parcel." Article XIIlD also contains various notice requirements and a public hearing requirement and prohibits the imposition of an assessment if ballots submitted by property owners, weighted according to the proportional financial obligation of the affected property, in opposition to the assessment exceed the ballots submitted in favor of the assessment. The City believes that it has complied with all provisions of Article XIIID applicable to the Assessment District proceedings described herein. All ballots submitted by property owners were in favor of the assessment. Article XIIIC, entitled "Voter Approval for Local Tax L©vies," provides, in Section 3 thereof, that the initiative power shall "rat be prohibited or otherwise limited in matters of reducing or repealing any ... assessment" of the City. Therefore, Article XIIIC removes limitations on the initiaCive power in matters of, among other things, assessments. Consequently, the voters of the City could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any assessment. "Assessment" is not defined in Article XIIIC and it is not clear whether the definition of that term in Article XIIlD (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 ar increase of auy 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 Che City and the County Auditor to post installments on account of the unpaid assessments to the County property tax roll each year while any of the Bands are outstanding in aggregate amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year. Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid assessments that axe pledged as security fox payment of the ]3onds or to otherwise interfere with the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid assessments that are pledged as security for payment of the Bonds. The interpretation and application of Proposition 218 will ultimately be deternined by the courts with respect to a number of Che matters discussed above, and it is not possible at this Cime to predict with cerCainty 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. Yrom time to Clmo other initiative treasures could be adopted, which may affect the abllity of the City to levy and maintain assessments. as 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 assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted that, in the event any assessment or installment thereof,tneluding 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 Kern County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure ar foreclosures are necessary, there may be a delay in payments to the owners of the Bonds, pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also passible 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 fYom foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 140 days must elapse after a court adjudges and decrees a lien against the let or parcel of land covered by an assessment or reassessment before the sale of such parcel can be given. Furthermore, if the purchaser at the sale is the judgment creditor, i.e., the City, an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale. Price ReaBzed Upon Foreclosure The 1415 Aat provides that, under certain circumstances, property may be sold upon foreclosure at less than the Minimum Ptiee ar 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 1915 Act. The court may authorize a sale at less than the Minimum Price if the court determines, based on the evidence introduced at the required hearing, any of the following: (A) Sale at the lesser Minimum Price or without a Minimum Price will not result in an ultimate loss to the owners of the Bonds. (J3) 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 deternrination 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). sale, (2} No bids equal to or greater than the Minimum Price have been received at the foreclosure (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 uhimate lass 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. as 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 behveen 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 determinations. Implementation of the above-described Minimum Price provision by the court upon foreclosure could result in nonpayment of amounts due to Bond owners who are not in agreement with the 75% of such Bond owners 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 insNaltment 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 priority over all private lions and over all fixed special assessment liens that may thereafter he created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Aet, whenever created against the property. The property within the Etcheverry Area and the Lin II Axea is subject to an existing special tax lien created by RNR CFD No. 92-1 pm'suant to the Mello-Roos Act. The amount of RNR CFD No. 92-1 Special Taxes, if any, to which property within RNR CFD No. 921 is subject varies based upon the Toning, the entitlements, and the type and level of development of such propery. See "THE BONDS -Priority of Lien." Refunding Bonda Pursuant to the Refunding Act of 1984 for 1415 Improvement Act Bonds (Division 11.5 of the California Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. After the making of certain required findings by the City Council, the 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 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 far 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. Absence of Market for Bonds No application has been made for a rating far 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 asstuanee that there u91] eves be a secondary market for purchase ar sale of the Bonds, and $om time to tape there may be no market for them, depending upon prevailing market conditions and the fmaucial condition or market position of finus that may comprise the secondary market. Loss of Tax Exemption As discussed under the heading "TAX MATTERS," interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive m the date the Bonds were issued, as a result of future acts or omissions of the City. [Remainder of Page Intentionally Left Blank. ~~ 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 are often subject fo discretion and delay. Under exisfing eonstitu6onal and statutory law and judicial decisions, including specifically Title I I 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 similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State of California. NO LITIGATION Na litigation is pending concerning the validity of the Bonds or 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 aware of any litigation pending or threatened questioning the political existence of the City or contesting the City's ability to pay interest on the Bonds. There are a number of lawsuits and elairus 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 orself-insurance program. CERTAIN INFORMATION CONCERNING THE CITY Certain general information concerning the City is included in APPENDIX A hereto. THE GENERAL FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OP 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 court decisions, interest on the Bonds is excluded tcom gross income for federal income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. A complete copy of the opinion of Bond counsel is set forth in APPENll1X C hereto. The Internal Revenue Code of 1986 (the "Code") imposes various restrictions, conditions; and requirements relating to the exclusion from gross income fox federal 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 wilt not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or kr 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 proceduzes contained or referred to in the Bond Resolution, the tax certificate to be executed by the City at closing, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be Yaken or omitted under the circumstances and subject to the terms and conditions set faith in such documents. Bond Cotmsel expresses no opinion as to any Bonds or the interest thereon if any such change occurs or actions are taken or omitted upon tho advice or approval of bond counsel other than (brick, Herrington & Sutcliffe LLP. However, without limiting the generality of the foregoing, the City has covenanted in the Bond Resolution that, prior to making any change to or taking or emitting to take any action with respect to any of the agreements, requirements, or procedures contained or referred to in the Bond ns Resolution, the tax certificate, or other relevant documents pertaining to the Bonds, the Ciry 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 gross income for federal income tax purposes of interest on the Bonds; or (ii) obtain an opinion of alternative nationally recognized bond counsel to the effect originally delivered by Bond Counsel that, noavithstanding such change, action, or omission, interest on the Bonds is excluded from gross income for federal income tax purposes. Although Bond Counsel will rendor an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder's federal tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or rho Bondholder's other items of income ox deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. APPROVAL OF LEGALITY The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of bond counsel opinion is contained in APPENDIX C hereto and is printed on the Bonds. Bond counsel undertakes no responsibility foz 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 Goodwin Procter LLP, Los Angeles, California, as disclosure counsel to the Ciry. Pursuant to a Bond Purchase Contract between the City and Stone & Youngberg LLC (the "Underwriter"}, the Bonds are being purchased by the Underwriter at a purchase price equal [o the principal amount of Bonds being issued plus a net original issue premium of 56,482.70, less an L`nderwriter's discount of $44,538.90. The Bond Purchase Contract provides that the underwriter teiIl purchase all of the Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and conditions set forth in the Bond Purchase Contract, the approval of certain legal matters by counsel, and certain other conditions. The Underwriter may offer and sell Bonds to certain dealers and others at a price other than the offering price. The offering price may be changed from time to tune by the Underwriter. NO RATING The City has not made and does not contemplate making application to any rating agency fox the assignment of a rating to the Bonds. CONTINUING DISCLOSURE Each of the City, Lennar Homes, and C&C California 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 ox 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 CONTINUING DISCLOSURE CERT.IFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15e2-12{b)(5}, as amended from time to time (the "Rule"}. Each of the City and C&C California has represented that, in the past five years, neither it nor any entity providing annual financial information or notices of material events under its respective Continuing Disclosure Certificate has ever failed to comply, in all material respects, with any prev7ous ay undertaking by it to provide annual orsemi-annual reports, as applicable, and notices of material events set forth in a written contract or agreement specified in the Rule.. Lennar Homes has numerous affiliates consisting of various entities that are developing or have been involved in the development of numerous different projects in states throughout the country over the last five years. It is possible that some of such affiliates have been in default at one time or another in compliance with continuing disclosure covenants undertaken in connection with an issuance of community facilities district or assessment district bonds. Lennaz Homes has certified that in the previous five years, neither Lennar Homes nor any entity providing annual financial information or notices of material events under its Continuing Disclosure Certificate has ever failed to comply, in all material respects, with any previous undertaking to provide annual reports, semi-annual reports, and notces of material events set forth in a written contract or agreement specified in the Rule, except that in connecfion with covenants relating to a 2001 fmancing for a project in the City of Mutrieta by Community Facilities District No. 2000-1 of the Murrieta Valley Unified School District, continuing disclosure reports due on September 15, 2002 were not provided on a timely basis. Greystone Homes, Inc., a Delaware corporation, which is now owned by Lennar Homes, as successor to Pacific Century Homes Inc., a California corporation, filed the continuing disclosure report with the dissemination agent on May 15, 2003. In connection with covenants relating to financings in 1999, 2000, and 2002 by the Association of Bay Area Governments Windemere Ranch Assessment District 1999-I 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. Lennar Homes, as a member of the master developer, filed the continuing disclosure reports with the dissemination agent on October 10, 2005. MISCELLANEOUS The foregoing summaries or descriptions of provisions of the Bonds, the Bond Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summazize or describe all of the provisions thereof, and reference is made to said documents for full and complete statements of their provisions. The appendices hereto 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 By: 1st Nelson K. Smith ~`i~~,,%~~'~"~J Nelson K. Smith Finance Duector so APPENDIX A CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC LNFORriIATION General The City of Bakersfield (the "City") is lacat~d in Kem County, California (the "Connt}~'), 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 120 square mhos of land and an additional 183 square miles of land area is located within the City's sphere of influence. The City is a regional center for industry, government, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabricafion, plastic foam products, food products, petroleum refining, and textiles. Takersfield is one of the leading convention centers in the state and is the commercial hub of the County. As the Caunry seat, it is the location of many county, state, and federal offices. The metropolitan area has expanded considerably beyond the City limits. As of July 2006;,according to California Department of Finance records, the estimated population of the County was 796,31 I and the estimated population of the City was 311,824. Citv Government The City was incorporated on January ll, 1898, under the general laws of the State. The City is a charter city with a eouncillmanager form of govermnent. The Ciry Cotmcil is comprised of seem council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected for afour-year term. The council appoints the City Attorney and the City Manager, who also serves as the Executive Director of the Bakersfield Redevelopment Agency (the "Agency"). There are approximately 1,485 permanent City employees, including 237 general governmental employees, 271 public works employees, 52 employees who work in wastewater or water services, 180 firefighters, 27 civilians who work in fire protection, 324 police officers, 132 civilians who work with the police department, 133 employees w$o work in refuse collection, and 129 employees who wank with culture and recreation services. Investment Policy of the City The City Council annualiy adopts and approves a policy with respect to the invesnnent activities of the City and its related entities. Idle cash in all fiords is pooled Sor investment purposes except tax-exempt bond proceeds, which are separated for arbitrage record keeping as required by federal tax law, and the Fireman's Relief and Pension Fund, which is administered separately by the City. Tho investment policy is intended to provide guidelines for the prudent invesnnent of the City's temporary idle cash, and outline the policies fox maximizing the efficiency of the City's cash management system. The ultimate goal is to enhance the economic status of the City while protecting the safety of its financial assets. The City's present investment policy (the "Investment Policy'), which was adopted by the City Council on November 29, 2006, pursuant to Resolution iQo. 301-06, as summarized below: Introduction. The Investment Policy is intended tt> provide gnidelines for the prudent investment of the City's temporary idle cash, and outline the policies for maximizing the efficiency of the City's cash management system. It is the policy of the City to invest public funds in a manner which will provide safety of principal and at least a market rate of return while meeting the daily cash flow demands of the City. Investments will conform to all stanrtes governing the investment ofpublic funds. The primary goals of this policy are: • To assure compliance with all federal, State and local laws governing the invesnnent ofpublic frds under the control of the Ciry Treasurer. A-1 To maintain the principal value of financial assets and ensure ample liquidity to meet operating expenditures. assets. • Within the constraints of safety and liquidity, and within the parameters of the Investment Policy, generate a market rate of return. The ultimate goal is to enhance the economic status of the City while protecring the safety of its financial Serape. The Investment Policy applies to the investment activities of the City and related entities. Idle cash in all funds is pooled for investment purposes except tax exempt bond proceeds, which are separated fox arbitrage record keeping as required by federal tax law, and the Firemen's Disability and Retirement Fund, which is administered separately under the City of Bakersfield Municipal Code Seotion 2.92. Investments made on a pooled basis include moneys of the City, the Agency, and the Authority. The pooled funds are accounted for in the City's Comprehensive Annual Financial Report ("CAFR") and include: OXX General Funds 1 XX Special Revenue Funds 2XX Debt Service Funds 3XX Capital Project Funds 4XX Enterprise Funds SXX Internal Service Funds 6XX Fiduciary-Agency Funds Any new fund created, unless specifically exempted. All debt issue proceeds will be invested in accordance with the associated trust indenture, and in such a manner that facilitate.. arbitrage rebate calculations. Prudence. Investments shall be made in the context of the "prudent person" standard: Investments shall be made with judgment and care, under circumstance then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The prndent investment diversification for the City's temporary idle cash vs. the Firemen's I?isability and Retirement Fund ("FDRF") is different. L'p to 40% of the retirement fund may be invested in securities of a single agency of the four triple-A rated United States Government Agencies authorized in this policy. This exception to investment diversification among the highest quality securities is deemed prudent and necessary in order to increase the available options for keeping retirement funds fully invested at or above the six percent actuarial rate of return. Objective. Criteria far selecting investments and the order of priority are: • Safety -Safety of principal is the foremost objective of the investment program. The City only operates in those investments that are considered very safe. The City shall seek to preserve principal by mitigating the two types of risk, credit risk and market risk. • Credit Risk- Potential loss due to the failure of an issuer of a security. • Market Risk -Potential decrease in the value of securities due to changes in the general level of interest rates. • Liquidity -Liquidity refers to the "ability to easily sell" at any moment in time with a minimal risk of losing sane partion of principal and interest. Liquidity is an important investment quality should the need I'or cash occur unexpectedly. A-2 • Yield -Yield is the potential dollar earnings an investment can provide and is sometimes described as the rate of return. Delegation of Authority. In accordance with the City's Charter, Municipal Code, and subsequent resolutions, the City 'Treasurer is authorized to invest the City's funds in accordance with California Government Code Section 53600 et seq. The City Treasurer shall be responsible fox all transactions undertaken and shall establish a system of conh'ols to regulate the activities of subordinate officials. Ethics and Conflicts of Interest. All officials involved with the City's investment program shall exercise their fiduciary responsibly as custodians of the public trust. The City Treasurer; or when appropriate the Treasury Supervisor, shall avoid any transactions that might impair public confidence in the City's ability to manage the investment of public funds in an effective manner. The City Treasurer, Treasury Supervisor, or any other official charged with the responsibility of making investment decisions, shall have no vested interest in any investment being made involving public funds of the City, and shall gain no financial benefit from such investment decisions. Authorized Broker-Dealers and Banks. All financial institutions that desire to do business with the City shall be evaluated by the City Treasurer to determine if they are adequately capitalized, meet California Government Code requirements, and agree to abide by the conditions set forth in the Investment Policy. Whenever reasonable and in keeping with Government Code, investments are placed locally. Broker-dealers are investigated to determine if there is pending legal action against the fine or the individual broker who would be the City's contact and that the firm offers securities appropriate to the City's needs. All broker-dealers, which may include "primar-}~' dealers or regional dealers that qualify under Securities & Exchange Commission Rule I Sc3-1 {Uniform Net Capital Rule}, who desire to become authorized bidders for City investment transactions must supply the City Treasurer with the following: • Current audited financial statements Account authorization forms • Proof of National Association of Securities Dealers certification Completed brokerldealer questionnaire Certification of having read and agreement to abide by the City of Bakersfield Investment Policy All banks that desh~e to became authorized bidders for time certificates of deposit ("TCD"} must be a qualified public depository as established by State ]aw and supply the City Treasurer with the following: Current audited financial statements • Depository contracts A copy of the latest Federal Deposit Insurance Corporation ("FDIC"} call report Certification of having read az1d agreement to abide by the City of Bakersfield Investment policy Broker-dealer account authorizations and depository contracts will be executed by the City's Finance Director as required by Ciry Chatter. The City Treasurer will tnaintain a list of authorized bmkex-dealers and banks that are approved to do business with the City. An annual review of the financial condition of authorized financial institutions will be conducted by the Ciry Treasurer. Authorized and Suitable Investments. The City's investment program is governed by California Government Code Sections 53606 ek seq. Within the context of these limitations, the following investments are A-3 authorized, as futther limited herein (Single Asterisk * denotes term ar percentage imposed by State statute; Double Asterisk ** denotes term or percentage utilized by the City, which is more restrictive than stamte): United States Treasury Bills, Notes, and Bonds United State Treasury Bills, Notes, and Bonds are securities which have the full faith and credit of the United States pledged for payment of principal and interest. Although there is no percentage limitation of the dollar amount that can be invested in these categories, the "prudent person" standard shall apply. Maturities are limited to five* years from settlement date. Treasury B111s ("T-Bills") are short-term debt obligations of the United States Government, issued weekly with mamrities up to one year. T-Bills are considered to have virtually no credit risk and to be the most liquid short- term fixed income instrument. Prices on T-Bills are quoted on a discount basis. The difference between The discount price and the full face value paid at maturity equals the total return. Treasury Note ("T-Notes ") are initially issued by the auction process with two, five and ten year maturities. T-Notes like Bills have virtually no credit risk and have liquidity through an active secondary market. T-Notes axe issued at Par ($1,000) with a coupon or fixed rate of interest. The price or market value will fluctuate above or below par depending on the coupon rate and whether interest rates are rising or falling. T-Notes mature at par. Treasury Bonds ("T--bonds ") are initially issued by the auction process with thirty yeaz maturities and have characteristics similar to T-Notes. United States Government Astencies United States Government agencies include the Federal Farm Credit Bank System ("FFCB"), the Federal Home Loan Bank ("FHLB"), the Federal Home Loan Mortgage Corporation ("FHLMC"), and the Pederal National Maxtgage Association ("b`NMA"). Govemment agencies issue debt in the form of discount notes, much like T-Bills, and notes and bonds similar to T-Notes and T-Bonds. While agency debt is not a direct obligation of the U.S. government, it is rated AAA, the highest rating. At the rime of purchase no more than 20°l0** of the portfolio may be invested in any single agency name. Maturities are limited to five* years from settlement date, Bankers Acceptance Bankers Acceptance ("BA") is a time draft or bill of exchange, issued from a letter of credit, and is normally used to finance internatianal trade. When the accepting bank stamps "accepted" on the draft the bank guarantees gayment of the draft at a specified future date and thereby creates an acceptance. BA's are considered extremely safe in that there has never been a default an a BA. BA's trade on a discount basis and may not exceed 180* days to maturity. No more than 10°/ * * of the portfolio may be invested in BA's issued by any one bank, No more than 40%* of the portfolio may be investod in this-category. Eligible BA's are those issued by banks with a short ternt debt rating of at least A-1 ** by Standard & Poor's Ratings Services ("S&P'~ or P-1 ** by Maody's Investors Service, Ina ("Moody's"}. Commercial Paper Commercial Paper ("CP'°) is a short-term promissory note. CP is sold on a discount basis. The maximmn maturity is 270 days with most issued in the 30-50 day maturity range. Eligible CP is "prime" quality ranked A-1 by S&P or P-1 by Moody's. CP is issued by domestic corporations having assets in excess of $500 million and having an A or higher rating on its debt, other than CP, as provided by S&P or Moody's. Purchases of eligible CP may not exceed 270* days to maturity. No more than 10%* of ttte portfolio may be invested in CP issued by any one corporation. No more than 25%* of the portfolio maybe invested in this category. A-4 Renurchase Aereetnents Repurchase Agreements, commonly called "Repos," consist of two simultaneous transactions. One is the purchase of securities by an investor (City) from a bank or dealer. The other is the commitment by the bank or dealer to repurchase the securities at the same price plus interest at some mutually agreed future date. Normally the securities are U.S. Treasury pates or bonds and are held by a Federal Reserve Bank. Repos can be done with banks or dealers with which the City has entered into a master reptuchase contract that specifies terms and conditions of repurchase agreements. The maturity of Repos shall not exceed 90** days. No more than 30%** of the portfolio maybe invested in this categary. Local AQenev Investment Fund Local Agency Investment Fund {"LAIF"} is aState-managed investment pool for local agencies within the State. Investments maybe up to the maximum permitted by State law or 46%* * of the portfolio whichever is less. Due diligence will be exercised in monitoring the performance of LAIF on a continual basis. Time Certificates of Deposit TCD's are similar to a savings certificate that anyone can purchase at a bank where there is a_fixed rate of interest and a specified maturity date. In the public funds area, TCD's are collateralized in accordance with California Government Code and are non-negotiable. At the time of purchase na mare than 10%** of the portfolia may be in TCD's of any one institution. Maturity is limited to five* years. No more than 40%"* of the portfolio may be invested in this category. Section 53652 of the California Government Code also specifies that the City will have a deposit contract with ©ach depository. Public A¢ency Savings Accowtt -Demand Deposits Public Agency Savings Account -Demand Deposits are similar to a savings account that anyone can open at a bank. The interest rate is specified at the time of deposit, but is subject to change. All funds can be withdrawn on demand. Like pub]ie TCD's, public agency savings accounts are collateralized in accordance with California Government Code requirements. No more than 30%** of the portfolio tnay be invested in this category. Muwal Funds Mutual Funds are money market funds meeting criteria prescnl~ed in California Government Code Section 53601 and related legislation. Investnent in this category is limited to funds that invest in United States Government Securities and maintain a net asset value of one (daily liquidity). The purchase price of shares shall not include any commission that these companies may charge. No more than 10%* of the portfolio may be invested in the shares of any one mutual fund. No more than 20%* of the portfolio may be invested in this category. Mutual funds are used for the investment of band proceeds subject to arbitrage reporting. Due diligence will be exercised in the selection and perfortnanee monitoring of muwal funds on a continual basis. [Remainder of Page Intentionally Left Blank.] A-s Citv of Bakersfield Summary Of Maximum Percent and Term Limitations By Investment Type: Percent Term U.S. Treasur Bills, Notes and Bonds 0 to 100% 5 Years U.S. Government Agenc Obli ations 20% er a enc 5 Years Bankers Acre tances ~ 40% ~ 180 Days Convnexeial Pa er 25% 270 Da s Re urchase A reements 30% 90 Da s Local A ency Investment Fund 40% NlA Time Certificates of De osit 40°l0 ~ 5 Years Public A enc Demand Accounts 30% ~'/A Mutual Funds 20% N/A (1} Shocuterm dobt eating of ai least A-1 by S&P or P-1 by MIoody's. (2) No more than 10% of theportfolio may ba invested is aRy one entity float these eategodes. (3) A-1 S&P cztiag or Pd Moody's rating Should any investment percentage and portfolio limitation be exceeded due to the unexpected fluctuation in portfolio size, the affected securities may be held to avoid losses. When market values are such that no loss is indicated, the City Treasurer shall consider restructuring the portfolio basing the decision in parC on the expected length of tune the portfolio will be imbalanced. Any State legislative action that further restricts allowable maturities, investment type, or percentage allocations, wip be incorporated into the Investment Policy and supersede any and all previous applicable language. Unauthorized Investments. Ineligible investments are those that are not described in the Investment Policy, including but not linuted to, negotiable time certificates of deposit, non-government agency medium term corporate notes, and reverse repurchase agreements. Collatera4zation. Collateralizaeion will be required on two types of investtents, time certificates of deposit and repurchase agreements. Investment in time certificates of deposit shall be insured up to $100,000 by the FDIC. investments in tune certificates of deposit in excess of $100,000 shall be properly collateralized When a depository pledges government securities as collateral,. section 53652 of the California Government Code requires the securities to have a market value of at least 10% in excess of the City's deposit or 50% in excess of the City's deposit when mortgages are pledged as collateral Repo collateralization will be at least 102% of market value of principal and accrued interest, Safekeeping and Custody. All security Transactions entered into by the City shall be conducted on a delivery versus-payment (`°DVP") basis. Securities shall be delivered to the City by book entry, physical delivery or by third party custodial agreement. Dlversifacarion. To reduce credit and market risk in the overall portfolio, the Ciry will diversify its investments by security type, maturity date and issuer. With the exception of U.S. Treasury securities, diversification is also achieved by the portfolio percentages and maturity limitations indicated in the "Authorized and Suitable Investments" section of the Investment Policy. Mrcein:urn Maturities. To the extent possible, and within the five year maximum mamrity required by California Govermnent Code, the City will attempt to match investrnent maturities with anticipated cash flow requirements. As required by California Government Code Section 53601, any investment teen longer than five years requires express authority by the City Council to make that investment. This authority must be granted no less than three months prior to making the investment. Im~estments with terms ]onger than five years will be limited to the least of S 10 million or 10°/o of the portfolio at the time the investment is made. A-( Inter~aad Control. Investment transactions are reviewed by the City's external auditor as part of the annual audit. This review verifies compliance with the Invesnnent Policy and the California Government Code. Performance Standards. The cash management system is designed to accurately monitor and forecast expendihires and revenues, thus ensuring the investment of moneys to the fullest extent possible, including the estimated float fox the Active Account and the Payroll Account. The City attempts to obtain the highest interest yields possible as long as investments meet the criteria required for safety and liquidity, do not exceed a term of five years (unless otherwise authorized by the City Council) and are within portfolio percentage limitations. The City strives to maintain the level of investment of all funds as near 100°/o as possible through daily and projected cash flow determinations. The basic premise underlying the Investment Policy is, and will continue to be, to ensure that the money is always safe and available when needed Because the investment portfolio is designed to operate on a "hold-to-maturity' premise (or passive investment style} and because of the safety, liquidity, and yield priorities, the benchmark that will be used by the City Treasurer to determine whether market yields are being achieved shall be the yield on the U.S. Treasury Bill or Note maturing closest to the weighted average rnaturiry of the City'svverall portfolio. Reporting. The City Treasurer shall provide the City Council monthly investment reports which provide a clear pichrre of the status of the current investment portfolio. The monthly investment report shall include the following: A Listing of individual securities held at the end of the reporting period by authorized investment category • Final maturity of all investments listed • Coupon, discount, or earnings rate • Par value and market value • Transactions completed during the month • Percentage of the portfolio represented by each invesnment category Invesan:ent Policy Adoption. The Investment Policy shall be reviewed a~mually by City staff and adopted by resolution of the City Council. Indemniftcatum of Investment Dfficials. The standard of care to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing the overall portfolio. The City Treasurer and his designees acting in accordance with established procedures and the Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. Tax Levies and Delinquencies; Assessed Valuation of Taxable Property The County Tax Collector collects ad valorem property tax levies representing taxes leviod for each fiscal year on taxable real and personal property that is situated in the County as of the preceding March 1. Unsecured taxes are assessed and payable on March 1 and become delinquent August 31, in the next fiscal year. Accordingly, unsecured taxes are levied at the rate applicable to the fiscal year preceding the one in which they are paid. One half of the secured tax levy is due November 1 and becomes delinquent December 10; the second installment is due February 1 and becomes delinquent April 10. A 10% penalty is added to any late installment. a-~ Property owners may redeem property upon payment of delinquent taxes and penalties. Tax-delinquent properties are subject to a redemption penalty of LS°/n of the delinquent amount every month commencing on July 1 following the date on which the property be-came tax-delinquent. Properties may be redoemed under an installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest accruing at t.5°/n 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 property may thereafter be conveyed m the County Tax Collector as provided bylaw. The table below summarizes the City's property tax levies and total coliections for fiscal years 2001-02 through 2005-06. City of Bakersfield Property Tax Levies and Collections tt1 (Fiscal Years 2001-02 through 2005-Ofi) Fiscal Total Total Tax Percent of Levy Year Tax Levy Collections Collected 2001-02 S2QI21,528 $20,695,415 102.R% 2002-03 21,301,453 23,523,106 110.4 2003-04 22,792,274 23,92fi,768 105.0 2004-OS 25,401,358 27,692,409 109.0 2005-06 29,296,779 32,631,424 111.4 (1) Hxeludes redevelopment tax increment. Sovrce: City of Bakerffield Coo~preHensive Annual Financial Report Fiscal Year Ended bore 30, 2006. The table below summarizes the assessed value of taxable property in the City for ftscal years 2001-02 through 2005-06. City of Bakersfield Assessed Value of Taxable Property (Fiscal Years 2001-02 through 2005-06) Total Less Tax- Taxable Fiscal Residential - Commercial - Other - Exempt Real Assessed Year Secured Secured Sectved Unsecured Property Value 2001-02 5 7,148,500 $1,981,027 $1,736,960 $513,535 8601,905 $IQ778,ll? 2002-03 7,713,3Q3 2,117,2&3 1,809,671 532,SA2 6A5,761 11,529,338 2003-04 8,760,686 2,341,432 1,879,013 546,353 644,175 12,833,869 2004-OS 9,9b6,804 2,463,503 1,943,657 565,311 680,115 14,259,160 2005-06 72,170,090 2,727,174 2,200,212 582,995 931,597 16,888,874 Source; City of Bakersfield Comprehensive Amoral Financial Report Fiscal YeN Ended Sune 3Q 2006 [Remainder of Page Intentionally Left Blank.] s-s The table below shows the assessed valuations of the principal taxpayers in the City as of .Tune 30, 2006. City of Bakersfield Assessed Valuation of Principal Taxpayers (June 30, 2006) 2005-06 Percentage of Assessed Total Assessed Taxnaver w Tvue of Business Valuation Valuation Castle & Coake Comm. Inc. Real Estate Development $ 136,155,602 0.83°l0 Dreyers Gland Ice Cream Inc. Manufachuing 131,771,778 0.80 Bakersfield Mall LLC Shopping Center 116,057,765 0.70 Chevron USA Inc, Oil Company 67,905,338 0.41 State Farm Insurance Company Insurance Company 57,700,000 0.35 GSF Properties Inc. Real Estate Development 56,663,032 0.34 Bear Mountaiu Unlimited Cogeneration 43,657,000 0.26 Albertsons Inc. Groceries 39,124,165 0.24 Mac Duff Living Trust Real Estate 31,356,291 0.19 Nakanogmni Corporation SBD Group Inc Real Estate Development 17,$00,000 ~ 0.11 Tatal triable assessed value of ten largest ta xpayers $ 697,890,971 4.23% 'Dotal taxable assessed value of other taxpayers 16.190,982,437 95.77 Total taxable assessed value of all taxpayers $16,888,873,408 100.00% (1) Related ox a~7iated purlieu are grouped together. Source: City ofBakeratield Comprehensive Annual Financi®I Report Fiscal Year ended Juno 3Q 2006 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 2001- 02 thxongh 2005-06. City of Bakersfield Demographic Statistics {Fiscal Years 2001-02 through 2005-06) Percentage of Population Who Estimated Per Capita Graduated high t;nemployment Fiscal Year Population Personal Income School or Bigher Rafe 2001-02 257,914 22,567 70.6% 11.2% 2002-03 266,784 23,215 72.t 12.0 2003-04 279,672 24,335 72.8 ]2.6 2004-OS 295,893 24,94] 72.2 8.3 2005-06 311.824 Not Available Not Available 7.6 Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2006 Employment The County's total labor force, Che number of persons who work or are available for work, has been estimated to be 328,800 for calendar your 2005, an increase of 3.6% over the preceding year. The number of employed workers in the labor force is estimated to be 301,600 for the same period. The following fable sets forth information regarding the size of the labar force, employment rates, and unemployment rates for the County, the State, and the United States fox calendar years 2001 through 2005. n-9 Employment -Averages Kern County, State of California, and United States (Calendar Years 2041 - 2005) 2001 2002 ~ 2004 2005 Kern County Labor Farce (QOOs) 296.5 307.4 314.4 3173 328.8 Employment (OOOs) 273.0 2772 28 L9 285.9 301.6 Unemployment Rate 8.6% 4.8°fo 103% 9.40 8.3% State of Californ9a baba[ Fozce (OOOs) 17,152.1 17,330.7 17,403.9 17,499.6 17,696.6 Employment (OOOs) 16,220.0 16,1582 16,212.6 16,4079 ]6,746.9 Unemployment Rete 5.4% 6.71 6.8 %~ 6.2°/ 5.4% Un9ted SCaCes labor Force {OOOs) I43,734A 144,863A 10.6.510.0 147,401.0 149,320.0 Emptayment (OOOs) 136,933.0 136,485.0 137,736.0 139,252.0 141,730.0 Unemployment Rutc 4.71 5.8% 6.6% 5.5% S.l Saurce: California Employment Development Depaament The following table sets forth the top twenty employers in the City as of July 2005. City of Bakersfield Principa- Employers (As of July 2005) Firm ProducUService Employees County of Kern Government 8,400 Giumasa Vineyards Agriculture 5,000 Grimmway Enterprises Agriculture 4,000 Bakersfield City Schools Education 4,000 Kern High Sehooi District Education 3,600 Wm. Bolthouse Farms Agriculture 2,500 Catholic Healthcare West Ilealth Care 2,500 Bakersfield Memorial Hospital Health Care 1,400 City of Bakersfield Government 1,400 ARBInc. Metal Fabrication 1,200 Kern Medical Center Health Care 1,200 State Farm Insurance Insurance 1,400 AeraEnergy Energy 1,150 Chevron Texaco Oil Production 1,000 California State University Bakersfield Education 900 Dreyers Ice Cream Co LLC. Food Processing 800 Prito Lay Food Processing 725 Target Distribution Center Retail Distribution 650 Clinica Sierra Vista Health Care 600 ACS Call Center 600 Bakersfield College Education 450 Source: The Citv [Remainder of Page Intentionally Left Blank.] A-10 Building Activity 97. The following table summarizes the City's total annual building permit valuations since fiscal year 1996- City of Bakersfield Property Value, Construction, and Bank Deposits((! (Fiscal Years 1996-97 through 2005-06) Commercial Residential Other Total Consfracfion Construction Construction Consfructian fiscal Number Number Number Sank Year ofU its Value of Units Value Value of Units Value Deoosits 1996-97 102 42,352 1,352 132,785 40,454 1,454 315,596 2,310,008 1997-98 147 49,241 1,983 ]97,773 67,231 2,130 314,295 2,438,604 1998-99 213 78,194 2,088 223,576 36,958 2,301 338,733 2,464,202 1999-00 140 5],251 1,890 218,656 34,438 2,030 364,345 2,454,280 2000-01 123 38,1!3 2,072 261,522 48,D67 2,135 347,702 2,'730,107 2001-02 143 7QR94 2,445 311,639 57,983 2,588 440,496 2,865,985 2062-03 141 56,694 2,981 428,534 62,112 3,122 541,340 ~ ..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 t 15,348 4,394 853,354 4,027,043 2005-06 99 35,691 2,196 350,699 50,677 2,275 437,067 A,376,b91 (1) Property values end bank deposits reported in thousands. Source: Cary of Bakersfield Comptc6ensive annual Financial Report Fiscal Yeer Ended June 30, 2066 Commercial Activity Consumer spending in calendar year 2005 resulted in approximately 55,447,738 in taxable sales in the City, which is approximately 14.9°lo above calendar year 2004. The following table sets forth information regarding taxable sales in the City for calendar years 2001 through 2005. City of Bakersfield T'asable Retail Sales 2001- 2005 (OOOs) 2001 20(12 2003 2004 2005 Apparel stores 5 117,059 $ 126,267 $ 129,457 $ 171,095 $ 195,598 General merchandise stores 633,892 667,344 699,810 743,850 833,104 Fond stm~es 181,300 146,060 215,506 234,243 254,023 Eating and drinkingplaces 309,643 330,061 362,907 40Q,270 438.772 Home furnishings and appliances 126,841 142,019 154,731 169,943 191,230 Building materials and farm implmts. 256,506 286,088 346,528 442,536 516,991 Automobile dealers and auto suppbes 845,904 850,364 9(3,717 994,342 1,120,770 Service stations 187,497 178,716 210,459 244,337 314,589 Other retail stores 384.538 413285 464 338 534379 620 099 Total Retail Outlets 5"3,043,180 53,190,204 $3,491,453 53,934,804 $4,485,156 All Other Outlets 701 212 637 989 672.614 807.48 t 962,582 Total All Outlets 53,744,392 53,828,193 54,164,067 54,?42,385 55,447,738 Solace: Caiifomia State Board of Equalization There are three major shopping centers in the City. Major department stores with Ioca1 outlets include Mary's, Mervyns, J.C. Penney, Sears, and Kohl's. The retail base includes three Wal-Maas, three Targets, three Home llepots, two Lowe's Home Improvement Stores, a Costco, and a Sant's Club. The number of sales permits issued and the valuation of taxable transactions for the years 2061 through 2005 is presented in the following table. net City of Bakersfield Number of Permits and Valuation of Taxable Transactions 2001.-2005 Retail S[ares Total All Outlets Year Na. of Permits Triable 17ansacdons No. of Permits Taxable Transaetians 2001 3,422 $3,043,180 8,213 $3,744,392 2002 3,552 3,190,20A 6,359 3,828,193 2003 3,899 3,491,453 6,709 4,184,067 2004 4,088 3,934,804 6,895 4,742,285 2005 4,140 4,485,116 7,024 5,447,738 Sonroe: California Stato Soard of Equalira.[ion. Transportation Well-developed surface and air transportation facilities are available to City residents and business 'firms. Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the 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 the Ciry. 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 Kern River Valley. Highway 65, to the north, provides access to communities east of Highway 99 and to Sequoia National Park. Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways, Golden Empire Transit provides Iooal bus transportation. The Meadows Field Airport adjoins the City to the north. Regularly scheduled passenger and air cargo service is available, as well as charter service and general aviation services. The Meadows Field Airport includes the William M. Thomas Terminal, a 64,800 square foot, state-of-the-art terminal facility completed in November 2005 that is cuaently equipped with three jet-boarding bridges, buY that may be expanded to aeeommadate up to nine gates. A second, older terminal is currenfly being converted to accommodate international flights. The llirector of Airports is appointed by the County Board of Supervisors. The County Board of Supervisors meets at 1115 Truxtun Avenue in Bakersfield, California, on Monday and Tuesday of each week. Department of Airports agenda items ace usually heard on Tuesday at 9:00 a.m. Utilities Electricity throughout the City is supplied by Pacific Gas and Electric Company. This company, along with Southern California Gas Company, else supplies natural gas. Telephone service is by AT&T. Fifteen private water companies serve the City. The City provides sewer and water services. 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 atso a number of private schools, nursery schools, and pre-schools within the City. The City lies within Kern Community College District, which administers Bakersfield College. This two year institution is located on a 150-acre site in northeast Bakersfield. Vocational and technical courses aee offered as well as academic courses designed to equip the student for transfer to a four-year college or university in the third year. Bakersfield College attracts about half the local High school graduating class each year. A-12 California State University, Bakersfield, opened in 1970 and received its university status in 19R$. It is located on a 375-acre site located in the western portion of the City. Majors offered include anthropology, art, earth sciences, phllosaphy, 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, L`C 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 Ntodesto. The satellite centers in the City and Fresno have already opened. Financial Services Statewide banking sysrems serving the Gity include Bank of America, Washington Mutual Bank, Sanwa Bank California, Union Bank, Rabobank, and Wells Fargo Bank. Their services are supplemented 6y local and regional banks and carious savings and loan associations. Community Facilities - Tho City has six general hospitals with a total bed capacity of 1,075. The City is a primary inedieal center of a region larger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the largest employers in the City. Kern Medical Center, administered by the County, is affiliated with UCLA Medical Centex of Los Angeles. The daily `Bakersfield Californian" and two weekly newspapers provide regional news coverage. Bakersfield has twenty radio stations, four television st<tions, two cable TV companies, and two satellite TV companies. The City has 45 public parks, 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 mare National AAU track meets than any other city in the country. County-owned golf courses and five private courses offer year-round golf, and tennis is played throughout the year 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, lectures, and special events throughout the year. A-13 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX I3 APPRAISAL a-i (THIS PAGE INTENTIONALLY LEFT BLANK) APPRAISAL REPORT OF Assessment District 06-1 LOCATED AT: Various Locations in Bakersfield, California Areas known as >;tcheverry (Tracts No.6343 & 6361), Lin II, And University Park Areas AS OF: March 7, 200'J PREPARED FOR: City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301 PREPARED SY: Lauver & Associates, Inc. PO Box 564 Bakersfield, California 93302 (661}399-0819 Lauver & Associa>res, Inc. Real Estate Appraisal Services PO Box Sb4 Bakerstleld, California 933Q2 (661) 399-0819 FAX 399-9828 March 7, 2007 City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301 ATTN: Nelson Smith, Finance Director RE; Assessment District 06-1 Etcheverry (Tracts No.6343 & 6361), Lin II, And University Park 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 incorparated 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 March 7, 2007. The hypothetical sale referred to in the defnitian 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 twelve and fourteen of this report. The function of this appraisal report is to assist the client in ascertaining their collateral position that is to be secured by the herein-described property. In accordance with our agreement, this appraisal report is a Summary Report (under Standards Rule 2-2, as defined in the Uniform Standards of Professional Appraisal Practice, USPAP) of an Appraisal performed under Standards Rule 1 of the USPAP. Based upon the study and investigations conducted, and after careful consideration of all pertinent factors affecting value, I have formed the opinion 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. Summary of Values Assessment District 06-1 Paper Value As Is Finished Net Lot TT Land wlAD 06-I Lot Area Acres EDU's Value Value Improvements Value Bulk Value Bteheverry'IT 6343-1 36.78 113 A5,000 5,085,000 6,353,410 NIA 6,353,410 LYcheverzyTT 63432 36.54 113 45,000 5,085,000 6,353,410 N/A 6,353,A10 Etchevemy'I'R 6361-1 24.50 75 45,000 3,375,000 4,603,319 $]y5,000 7,420,000 EYChevenryTT 6361-2 19.48 62 45,000 2,790,000 3,805,410 Nrh 3,805,410 Etcheveacry 1T b35r3 24.6? 67 45,000 3,015,000 4,112,298 NIA 4,112,298 Len R TR 6453 Unit I 46.17 J 92 36,000 6,9(2,000 9,295,008 585,000 11,910,000 Lin II'I"C 6453 L'niY2 30.58 125 36,000 4,500,000 6,08,438 N/A 6,057,438 University Yark 6799 I-97 13.17 97 25,000 2,425,000 3,572,892 $80,000 5,300,000 Uuicersity Pack 6799 98 217 11.32 120 25,000 3,000,000 4,295,034 57Q,000 6,440,000 'TOTALS $48;442,220 N/A $57,745,967 Nora: The reader may not e minor math discrepancies dne to internal xou nding All values for the subject properties that were estimated in this report are subject to the liens imposed by Assessment District 06-1 bonded indebtedness (see the Engineer's Report prepared by Wilson & Associates dated February 28, 2007, and made a part hereof by reference). It was our finding that the Assessment District bond payments represent a minor fraction totaling in most cases less than 1l10 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 06-1 are also covered in our estimate of variable indirect expense in the discounted cash flow analyses for each of the areas addressed in this appraisal. The Appraisal, subject to the various limitations and assumptions set forth therein, provides an estimate of the `As-Is' market value (also designated in the Appraisal as the "Bulk Value of Recorded Lots or Land" 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 such that the subject lots and land have a ready market and could be Bald to any number of developers within the stated reasonable exposure and marketing time stated herein. 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 firushed lot available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indirect costs for each lot, taxes during construction, profits, commissions, administrative and miscellaneous expenses, and other direct and indirect overlapping debt. Our research indicates the subject properties have no natural, cultural, recreational or scientific value. The appraiser observed no apparent environmental hazards during the visits to the site. Also, in this regard, please read the Underlying Assumptions and Limiting Conditions, and Certifications sections of this report both of which are important parts and govern the use and validity of this appraisal report. Based on the studies and investigations conducted, and, after careful consideration of all pertinent factors affecting value, I have formed the conclusion that the `As Is' market values of the subject properties, as defined, as of the effective date of this appraisal, are as shown above and are summarized on the Consolidated Worksheet of the Assessment District 06-1 contained in the Addenda. This report is for the exclusive use of the City of Bakersfield, prospective bond holders and bond holders. No other parties shall have any right to rely on any service provided by Launer & Associates, Inc. without prior written consent. The appraiser has granted permission to publish this appraisal in the Preliminary Official Statement and the Official Statement and consented for its use in marketing of the Assessment District 06-1 bonds. Sincerely, tsl Stacy Launer Stacy Launer, President Launer & Associates, Inc. Federal ID# 20-0317656 Isl Michael Launer Michael Launer, MAI SRA Certified General Appraiser California Certificate AG 00201 Expires 12-07-200$ TABLE OF CONTENTS Title Page Letter of Transmittal Table of Contents Executive Summary ............................................................................... ..........................................1 Introduction ............................................................................................ ..........................................2 Hypothetical Conditions ........................................................................ ..........................................2 The Appraisal Process and its Limitations ............................................. ..........................................2 Purpose of the Appraisal ........................................................................ ..........................................3 Descriptions of Assessment Areas ......................................................... ..........................................3 Use of the Appraisal ............................................................................... ........................................10 Function and Objective of the Appraisal ............................................... ........................................10 Scope of the Appraisal ......................................................:.................... ........................................1 l Property Identification ........................................................................... ........................................12 Definition of Market Value .................................................................... ..........................:.............12 Date of Valuation ................................................................................... ........................................13 Statement of Ownership ......................................................................... ........................................13 Property Rights Appraised ..................................................................... ........................................14 Opinion. of Reasonable Exposure Time ................................................. ........................................14 Opinion of Reasonable Marketing Time ................................................ ........................................15 General Area Analysis ........................................................................... ........................................16 City Data ................................................................................................ ........................................25 Bakersfield Housing Market .................................................................. ........................................36 Eteheverry Area Descriptions ................................................................ ........................................56 Assessed Value and Taxes ..................................................................... ........................................66 Highest and Best Usc - Etcheverry & Lin II Areas ............................... ........................................66 Lin. II Descriptions ................................................................................. ........................................70 Property History ..................................................................................... ........................................78 The University Park Area Descriptions ................................................. ........................................79 Property History University Park Area .................................................. ........................................88 Assessed Value and Taxes University Park Area .................................. ........................................89 Highest and Best Use University Park Area .......................................... ........................................89 Valuation Methodology ......................................................................... ........................................92 Valuation ............................................................................................... .........................................96 Reconciliation. of Finished Lot Values ................................................. .......................................114 Bulk Values ........................................................................................... .......................................115 Certifications of Appraiser .................................................................... .......................................119 ADDENDA Assumptions & Limiting Conditions Qualifications of Michael Launer, MAI, SRA Land Sale Sheets DCF Worksheets Cansolidated Spreadsheet of AD 06-1 Values ASSESSMENT DISTRICT 06-1 BOUNDARIES 7'he Etcheverry Are2 TrieY No,. 83H2 ___._ ~s.4-wn:_.. _ _. ~ri-en ?he Crn 71 Tract No i Tracf No.. 6343 The EtGheGerryAre _~ ..~..:.~ LL .... .. ......... ,~4, ___.... y ~, ~ t ~ ' ` x_ ~ ~ 3 j ~,. ~E # j r - ~ + ~ .. ~-.-E._... ' }~ xz~ ,; ~ ~ ,~ i .. niuersity ParkArea- i799 Lauver & Associates, Inc. Assessment District 06-1 EXECUTIVE SUMMARY Name/Identification Owners of Record: Hiehest & Best Use Effective Date of Appraisal Assessment District 06-1 - Southwest and Northwest California Various Locations in the Quadrants of Bakersfield, LO Land Assets, LP, I,ennar Homes of California, Inc. and Castle & Gooke California, Inc. Develop with single-family residential March 7, 200'1 Value Opinions -Assessment District 06-I Paper Value As Is Finished Net Lot TT Land wIAD 06-1 Lot Area Acres EDU's Value Value Improvements Value HtcheverryTT6343-1 36.78 113 45,000 5,085,000 6,353,410 NIA Rtchevetry TT 6343-2 36.54 113 45,000 5,085,000 6,353,410 N/A BtchevgiryTR 6361-1 24.50 75 45,000 3,375,000 4,603,319 $725,000 Titcheveray TT6361-2 IR48 62 45,000 2,790,000 3,805,410 N(p 6tehevenry'rr 6361-3 24.69 67 45,000 3,015,000 4,112,298 NiA Lin ^ 7R 6453 Unit 1 46.17 192 360000 6,972,000 9,295,008 $85,000 I,in II1"P b453 L'nit 2 30.58 125 36,000 4,900,000 6,051,436 NIA University Park 6799 1-97 13.ll 97 25 000 2,425,000 3,5?2,892 680,000 Urvversity Park 6999 98-217 l 1.32 120 25,000 3,000,000 4,295,034 S7Q,000 TOTALS $48,442,220 N/A NOTE: The reader may N ote minor math discrepancies due To internal rou nding Client I~telson Smith, Finance Director City of Bakersfield Finance DepartlnenY Appraiser Michael Lauver, iVIAI SRA CGREA Certification AG002049 Expires 12!0712008 Bulk Value 6,353,0.10 6,353,410 7,420,000 3,805,4(0 4,I 12,298 ll,91Q,000 G,OS1,438 5,300,000 6,440,000 $59,745,96? 1 Lauver & Associates, Iue. Assessment District 06-1 INTRODUCTION This report will present the appraiser's opinions regarding various parcels of vacant residential entitled land in Northwest and Southwest Bakersfield as described in the succeeding pages. The reader's attention is directed to the following definitions and descriptions regarding this report and the properties described herein. HYPOTHETICAL CONDITIONS AND ASSUMPTIONS This appraisal report is subject to hypothetical conditions and assumptions; the use of which might have affected the assignment results. 1n this case, the references to the appraiser's opinions of lot values `As Complete' is considered Hypothetical since the improvements did not exist in that state on the effective date of the value opinions. The `As Complete' value opinions refer to a date in the future. THE APPRAISAL PROCESS AND ITS LIMITATIONS Appraising is not an exact science. Therefore, any reported conclusions are opinion(s). The appraisal process involves many steps and the necessity to examine a great deal of information including examination of the subject property. The reported opinions and conclusions in the attached report are based on: • Professional judgmentJopinion uld observations about the subject property; • Professional judgrnentJopinion and observations about the marketplace; • The availability of information customarily available to appraisers in the normal course ofbusiness; and, • Facts, judgments, opinians, and observations contained in the attached report. This report must be considered in its entirety for a complete understanding of the valuation. This appraisal is as of the effective date(s) stated in the report. 2 File iVumber 4166 Lauver & Associates, Inc. Assessment District 06-1 No long-term predictions are offered. Long-term predictions are beyond the scope of this appraisal and are beyond typical appraisal expertise. Any opinion of future market conditions is subject to significant variance because of unforeseen economic or physical changes. PURPOSE OF THE APPRAISAL The purpose of this report is to present the appraiser's opinion of the "As Is" market values of the various properties identified and described herein, as part of Assessment District 06-1. Assessment District 06-1 was formed for the purpose of providing financing far the on-site and offsite improvements and infrastructure for each of the_assessed areas described. 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 fmanced by the assessment district funds. A consolidated warksheet summarizing these values will be found in the Addenda Section. Assessment District 06-1 involves several parcels of land in the Southwest and Northwest quadrants of Bakersfield and consists of distinct development areas, further described in the documentation that follows. 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 prepared by Wilson & Associates, Fresno, California dated February 28, 2007. DESCRIPTIONS OF ASSESSMENT AREAS ETCHEVERRY AREA -PORTION (TRACT NO. 6343) The Etcheverry Area boundaries which are designated as Assessment Number 1 encompass an approximately 80.6-acre block of land that is planned. for subdivision into a combined total of 226 R-1 lots, 1 storm drain sump lot, and six public landscape lots pursuant to Tentative Tract 6343. Assessment Number 1 (future Tract 6343}, is a rectangular shaped parcel bounded on the south by Etehart Raad, on the east by Calloway Drive and on the west by Tract 6361. This portion of the Assessment District is now being developed to a super lot state. 3 Launer & Associates, Fne. Assessment District 06-I The tentative tract maps we examined indicate that when completed, the lots in this subdivision will be constructed in two phases of 1'13 lots each and will range from 10,000 to slightly more than 15,000 square feet in size, with an average lot size of about 10,600 square feet. These lots will be improved with up-scale residential dwellings in the 2,000 to 3,500 square foot size range, with pricing starting the mid 5300's. The lots in Tract 6343 will not be recorded until some time subsequent to the effective date of this appraisal. Improvement Acquisitions for this portion of the Etcheverry Area are improvements related to the development of that subdivision and are generally described as improvements in and along Verdugo Lane, Etchart Road, and Calloway Drive, and as Tract 6343 storm. drain improvements that are required to be constructed, or are expected by this District Proponent to be required to be constructed, as conditions of approval for that subdivision. These improvements are further described as follows: Verdugo Lane (East Side Construction of the east side of Verdugo Lane along the frontage of Tract 6343 (between Etchart Road and the northerly boundary of Tract 6343), including grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block walk Etchart Road (North Sidel: Construction of the north side; of Etchart Road along the frontage of Tract 6343 (between Verdugo Larre and Calloway Drive}, including grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. 4 File Number 4166 Lauver & Associates, Inc. Assessment District 06-1 Callowav Drive (West Side): Conshuation of the west side of Galloway I?rive along the frontage of Tract 6343 {between Etchart Road and the northerly boundary of Tract 6343), including grading, paving, curb, grrtter, sidewalls, handicap ramps, street lights, survey monument encasements, interconnect conduit, sheaf signs, striping, and subdivision black wall. Tract No. 6343 Storm Drain: Constmction of a complete storm drain system for Tract 6343 (in-tract/on-site aaid small sections in Etchart Road and Calloway Drive), including 18-, 24-, 30-, and 36-inch diameter pipclines with mvtholes, catch basins, and outlet structures, and, around the sump, subdivision block wall with a 14-foot wide gate. ETCHEVERRY AREA -PORTION (TRACT NO. 63611 The Etcheverry Area boundaries encompass an approximately 75.5-acre block of land that is planned for subdivision into a combined total of 204 R-1 lots, 1 storm drain sump lot, 1 cell tower lot, and 8 public landscape lots pursuant to Tentative Tract 6361. The parcel is generally described as being an irregular rectangle, bounded at the south by the north line of Snow Road, along the west by the Friant Kern Canal and at the east by Verdugo Lane. Unit One of Tract 6361 has a total of 75 residential lots (Assessment Numbers 2-76). Lots in Unit One range from 10,000 to 34,138 square feet in size, with an average lot size of 12,300 square feet (more or less}. According to a spokesman for the developer, the subdivision will be improved with detached single-family dwellings ranging from arowtd 2,000 to 2,600 square feet, with prices starting in the low $300's. The lots in Usut One recorded March 6, 200'7. Units Two and Three of Tract 6361 are being improved with 62 and 67 residential lots of the same general size characteristics as described in Unit One and with similar ultimate dwelling 5 Laurier & Associates, Inc. Assessment District ©6-I product type. These lots will not be recorded until some time subsequent Yo the effective date of this appraisal The Improvement Acquisitions for this portion of the Eteheverry Area are improvements related to the development of that subdivision and are generally described as improvements in and along Verdugo Lane and Snow Road, and as Tract 6361 storm drain improvements that are required to be constructed, or are expected by this District Proponent to be required to be constructed, as conditions of approval for that subdivision. These improvements are described in the following paragraphs Verdugo Lane tWest Side Assessment District financing will provide funds for construction of the west side of Verdugo Lane along the frontage of Tract 6361 {between Snow Road and the northerly boundary of Tract 6361), including grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, sn~eet signs, striping, and subdivision block wall. Snow Road Q~'orth SideZ Assessment District financing will provide funds for construction of the north side of Snow Road along the frontage of Tract 6361 (between Verdugo Lane and the westerly boundary of Tract 6361}, including grading, paving, curb, gutter, sidewalk with Class R bike path, handicap ramps, median, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Tract No. 6361 Storm Drain: AD 06-1 financing will provide funds for construction of a complete storm drain system for Tract 6361 (on-sitefin-tract and in Verdugo Lane}, including 18- and 24-inch diameter pipelines with manholes, catch basins, and outlet structures, and, around the sump, subdivision block wall with a 14-foot wide gate. 6 File Number 4166 Lauver & Assoeiafes, Inc. Assessment District Ob-1 LIN II AREA (TRACT NO. 6453) The Lin II Area boundaries encompass an approximately 85.1-acre block of land that is planned for subdivision into a combined total of 31'7 R-1 lots, 1 storm drain sump lot, 1 sewer lift station lot, and seven public landscape lots pursuant to Tentative Tract 6453. This portion of the Assessment District is an irregular shaped parcel bounded on the east by Allen Road and at the north by Reina Road. The southerly boundary is funned by Vega Meadows Road, which is a westerly extension of Noriega Road. The parcel is bounded on the west by Renfro Road. Unit One consists of 192 residential lots (Assessment Numbers 81-123, 125-271 and 511-512). The lots in Unit One Tract 6453 range from about (,000 to over 28,000 square feet in size, with an average lot size of just over 8,].00 square feet. Our contact with Lennar Homes statefl the lots will ulfimately be improved with medium-plus quality residences ranging in size from about 1,600-2,400 square feet Frith pricing from the upper $200's to low $300's at completion. The 1921ots in Unit One recorded on March 6, 2007. Unit Two of Tract 6453 (125 lots} is being developed as a super lot that will record at some time subsequent to the effective date of this report. According to the Assessment District Engineer, the Improvement Acquisitions for the Lin II Area are improvements related to the development of that subdivision and are generally described as improvements in and along Allen Road, Reina Road, Renfro Road, and Vega Meadows Road, and as Tract 6453 on-site sewer improvements that are required to be constructed, or are expected by this District Proponent to be required to be constructed, as conditions of approval for that subdivision. These improvements are described in the following paragraphs. Allen Road {West Side): Assessment District financing will provide funds for construction of the west side of Allen Road almig the frontage of TR 6453 {between the southerly boundary of Tract 6453 and Reina Road), including grading, paving, curb, gutter, sidewalk, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision black wall. 7 Lauver & Associates, fnc. Reina Road (South Side): Assessment District 46-.I AD 06-1 financing will provide funds for construction of the south side of Reina Road along the frontage of Tract 6453 (between Renfro Road and Allen Road), including grading, paving, curb, gutter, sidewallc, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Renfro Road (East Side, Assessment District financing will provide funds for construction of the east side of Renfro Road along the frontage of Tract 6453 (between Vega Meadows Road and Reina Road), including grading, paving, ourb, gutter, sidewalk with class II bike path, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Vega Meadows Road (North Side): Assessment District funding will provide for construction of the north side of Vega Meadows Road along the fi-ontage of TR 6453 (between Renfro Road and the easterly baundary of Tract 6453), including grading, paving, curb, gutter, sidewalk with multi purpose trail, handicap ramps, street lights, survey monument encasements, interconnect conduit, street signs, striping, and subdivision block wall. Tract No. 6453 C)n-Site Sewer: AD 06-1 financing will provide for construction of a complete on-sitelin-tract sewer system for Tract 6453, including 6-, 8-, arzd 10-inch diameter pipelines with manholes and clean outs, 4-inch diameter sewer laterals for ail residential lots in Tract 6453, and a complete sewer lift station located in Tract 6453. 8 File Number 4166 Lauver & Associates, Inc. Assessment District Q6-1 UNIVERSITY PARK AREA (TRACT NO. 67991 The University Park Area boundaries encompass an approximately 33.5-acre block of land that is planned for subdivision into a combined total of 217 R-1 lots, 1 private park lot, 4 common area lots, and 8 private landscapelpocket park lots pursuant to Tentative Tract b799. This portion of the Assessment District is nearly square in shape, bounded along the east by the west line of Gosford Road and along the north by the south line of Ming Avenue. This portion of the Assessment District has been graded and, according to the developer, they had spent approximately $1.5 million in on- site development through December 2006. University Park is divided into two areas which have two distinct product types. The northerly portion of The site; 13.17-acres, is to be known as Oxford Cottages (Assessment Numbers 280- 376). This portion of Tract 6749 will have a total of 97 lots. These will uhimately be improved with freestanding single-family writs on small lots. These lots range in size from 3,312 to 5,163 square feet, with an average let size of 3,533 square feet. The developer intends to develop the finished lots with three housing types. The smallest model is 1,660 square feet with pricing projected to begin at $300,000. Oxford Cottages will also offer an 1,881 square foot model priced at $315,000 and a 2,191 square foot model priced at $330,000. The southerly portion of the site covers 11.32 acres (Assessment Numbers 377-496). The tract map shawl there will be a total of 120 Tats. The lots in this area, known as Cambridge Gardens, are smaller, ranging in size from 1,404 to 2,840 square feet, with an average lot size of 1,794 square feet. The houses will all be two-story detached, ranging in size from 1,371 to 1,791 square feet. Pricing will range from $270,000 to $305,000. The lots in Tract 6799 were recorded on March 6, 2007. All of the Improvement Acquisitions for the University Park Area are improvements related to the development of that subdivision and are generally described as improvements in and along Ming Avenue and Gosford Road, and as City development/facilities fees for Tract 6799 that are required to be constructed andlor paid, or are expected by this District Proponent to be required to be constructed andlor paid, as conditions of approval for that subdivision. These improvements are described in the following paragraphs. 9 Launer & Associates, fnc. Assessment District 06-Z Mini Avenue (South Side) and Gosford Road Nest Sidel: Assessment District funding will provide for construction of the south side of Ming Avenue and the west side of Gosford Road along the frontages of TR 6799 (between, respectively, the westerly boundary of TR 6799 and Gasford Road, and between Ming Avenue and the southerly baundary of TR 6799), including paving at right turn lanes, curb, gutter, sidewalk, handicap ramps, street signs, street lights, interconnect canduit and pull boxes, monument encasements, 8-inch diameter water line road bore with fire hydrants and gate valves, 8-inch diameter sanitary sewer line road bore with manholes, 18-inch diameter storm drain pipeline with catch basins and manholes, subdivision block wall with major and neighborhood corner sign monuments, and landscaping. Also included in the Ming Avenue and Gosford Road scope of improvements are demolition and removal of existing pavement, curb, gutter, and storm drain catch basins and manholes. The funding includes the City Facilities Fees, which are described as CSty Regional Transportation Impact fees. USE OF THE APPRAISAL This report is for the exclusive use of the City of Bakersfield (the client), the bond holders and prospective bond holders. No other parties shall have any right to rely on any services provided by Launer & Associates, Inc. without prior written consent. "I'he client is authorized to publish the contents of This report for bond disclosure and marketing. FUNCTION AND OBJECTIVE OF THE APPRAISAL It is the function of this report to provide the client with market value estimates to aid the City of Bakersfield and potential bond holders in their analyses of bonds for issuance or purchase; City issued bonds are to be secured by the assessment on 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 March 7, 2007. 10 File Number 4166 Lauver & Associates, Iae. Assessmelzt Distric106-1 SCOPE OF THE APPRAISAL The appraisal process reflected in this report is intended to follow the appraisal guidelines as defined by USPAP. An appraisal is the act ar process of estimating value where all appropriate steps in the appraisal process are completed. This is a summary appraisal report as defined by USPAP. It is delivered as a written report and prepared in accordance with Standards Rule 2- 2(b). The scope of this appraisal assignment required collecting primary and secondary data, relative to the subject property. The depth of the analysis was intended to be appropriate in relation to the significance of the appraisal. The data used in this report have been analyzed and confirmed, leading to the opinions set forth in this report. The valuation process involved the utilization of all techniques and procedures eansidered appropriate to the appraisal. The first step in the analysis involved conducting a preliminary survey of the subject properties and surrounding areas in order to define the appraisal problem and identify the methods and techniques necessary to provide credible value opinions. Interviews were held with City officials documents to determine the legal land uses that apply to the subject and surrounding neighborhood, including any proposed land use changes that might affect the use of the appraised properties. The general areas were personally inspected by the signing appraiser in order to define the market areas within which we were likely find pertinent market indicators for the respective parcels. During the property inspections we also sought to identify any physical conditions, neighborhood development trends, or other factars that could affect our opinion of value. The analysis presented will demonstrate that we have thoroughly examined the general economy of the region and community to determine trends 'in population, housing, employment, fnancing, and market condifions that influence the real estate described in this report. The subject properties were inspected to ascertain physical features such as topography, access, drainage, street improvements, utilities, and current status of the land improvements to date. ll Lauver & Associates, Irzc. Assessment District D6-I The primary valuation technique used in this report is the Sales Comparison Approach; supplemented with a developmental analysis to estimate the value of the lots if completed and sold in bulk to a single entity. This is a residual analysis that recognizes the time value of money (also known as a discounted cash flow analysis, or DCF}. We also estimated the cost of lot production to bring the land from a raw state to a finished lot basis. Where appropriate, we examined sales ofsingle-family dwellings and sales of land plamred for subdivision development in competing market locations. These data were useful in analyzing value ratios and value anal absorption trends. Wherever possible the data was confirmed with principals, their representatives, or agents. Sources of data included the County Recorder's office, various market data services, published reports, and personal contacts. Relevant market factors were weighted and their influence on the subject was considered in both approaches to value. The data generated from these investigations were then analyzed for the purpose of forming market value opinions of the properties appraised. The final step in the appraisal process entailed the organizafion and drafting of the appraised report. PROPERTY IDENTIFICATION The subject properties are identified as follows: AD 05-I Residential Subdivisions Area Description Tract #i R-1 Lots Etcheverry Area Tract 6343 226 Btcheverry Area Tract 6361 204 Lin II Area Traet6453 317 University Park Area Tract 6799 217 DEFINITION OF MARKET VALUE The definition of market value, as herein used, is as follows: Net Land Area 73.32 68.65 76.75 24.49 12 File Number 4166 Launer & Associates, Inc. Assessment District 06-1 "The most probable price which a property should bring in a competitive and open market under all eanditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: A. Buyer and seller are typically motivated; B. Both parties are well informed or well advised, and each acting in what he considers his own best interest; C. A reasonable time is allowed for exposure in the open market; D. Payment is made in cash in U.S. Dollars or in terms of financial arrangements comparable thereto; 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 March 7, 2007. STATEMENT OF OWNERSHIP To the best of my knowledge, titles are currently vested as follows: LO Land Assets, LP, a Delaware Limited Partnership, Tract 6343 and Tract 5361. Lennar Homes of California, Inc., a California Corporation, Tract 6453. Castle & Cooke California, Inc., a California Corporation, Tract 6799. Full and complete details are included in the preliminary policy of title insurance, to be forwarded Yo the Client by the title companies that are currently preparing the policies. The title report is included herein by reference Title XI PIRRI,A,y 32, 42 (t). 13 Lauver & Associates, Inc. Assessment District 06-1 PROPERTY RIGHTS APPRAISED The property rights appraised are the fee simple estates in the subject properties, modified or subject to the following: 1. The final values reported are on the basis of discounted and non-discounted market value; 2, The final values reported are on an "all cash" basis, 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 ar estate; subject only to the limitatians of eminent domain, escheat, police power and taxafion".' OPINION OF REASONABLE EXPOSURE TIME Per USPAP, Statement on Appraisal Standards (SMT) No_ 6: "Exposure time may be deftned as: the estimated length of ttrxe the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date opthe appraisal, a retrospective opinion based upon an analysis o/past events assuming a competitive and open market. " Exposure time, defined as the length of time that a property would have been offered on the market prior to the hypothetical consummation of a sale at market value, is a retrospective opinion of time based on an analysis of past events and assuming a competitive and open market. Exposure times of land sales with residential development potential in the subjects market area, as well as surrounding areas were found to be in the six to twelve month range. Additionally, brokers active in the market area were contacted with regard to the exposure time that they have experienced over the recent past for various prajects. Based on these conversations, an estimated exposure time of less than one year was determined reasonable, considering the stage of development readiness of the subject. The Dictionary of Real Estate Appmisal, Ameaican Tnstitnte or Real Estate Appraiseas, Chicago, lL. 198b, gg. 123. 14 File Number 4166 Launer & Associates, Ine. Assessment District ©6-1 OPINION OF REASONABLE MARKETING TIME Per USPAP, Advisory Opinion (AO) 7: "The reasonabCe marketing time is an opinion ojthe amount o} time it might take to sell a real or personal property interest at the concluded market value during the period immediately after the effective date of an appraisal. " The reasonable mazketing time opinion is provided in the attached appraisal report is based upon current market conditions and assumes aggressive marketing unless otherwise stated in the attached appraisal report. However, because market conditions change, the marketing time opinion is not and camrot be guaranteed. A marketing time estimate is dependent upon: (1} market conditions remaining at the level in effect as of the effective date of the attached appraisal OR (2) forecasts of items, if such are offered in the attached report, (e.g. supply/demand, rents, etc.} being accurate. Long-term predictions are however beyond the scope of the appraisal and outside typical appraisal expertise. Marketing time is an opinion of the time to sell a property interest in real estate based on the opinion of market value during the period immediately after the effective date of value. An opinion of reasonable marketing time is determined by comparing the recent exposure time of similar properties and then taking into consideration current and future economic conditions and how they may positively affect marketing of the subject property. According to the brokerage firms involved in recent transactions, the total time on the Znazket varies. Sorne sales have consmnmated within six months or less of their offering others have required nearly three years. The most recent activity involving vacant land with potential for residential use indicated marketing times from one month to as much as a year, depending on size, location and price. Based on the market indicators and brokers interviewed, it was our finding that mazketing time for the subject is 6 to 12 months. 15 Launer & Associates, Inc. GENERAL AREA ANALYSIS Location and Size AssessmeatDistrict ©6-I The subject of this report is real property located in Kern County, California. Kern County is located in the south central portion of California, at the southern end of the San Joaquin Valley. In size, Kern County is third largest among the State's 58 counties, with an aggregate 8,064 square miles (5,160,960 acres}. Included in the county's area are 11 incorporated cities and 32 unincorporated communities. Population In terms of numerical growth, Kern County had a net population increase of 121,623 residents between the 1990 census and January 1, 2000. Current estimates show the total County population at 779,869 persons. A breakdown of the County's population by City is shown in the following chart. KERN COUNTY POPULATION BY CITY City 2006 Population 1 Arvin 15,027 Bakersf eld 311,824 California City 12,048 Delano 49,359 Maricopa 1,137 McFarland 12,538 Ridgecrest 26,515 ShaBer 14,501 Taft 9,147 Tehachapi 12,610 Wasco 24,288 Unicorporated Areas 290,875 Kern County 779,869 According to data published by the Kern County Council of Governments and the Economic Development Department, Kern County's population has grown 21% since the 1990 census, to approximately 661,245 in January 2000, more than the State of California's growth rate (11.75%) in the same 10-year period. Kern County's growth was the 14u' largest in the state. 15 File Number 4166 Lauver & Associates, Inc. Assessment District 06-I As forecast by the Kern Council of Governments (Kerncog) the projected growth for Kern County by decade is shown below. Kern County Growth Projections Year Population 2000 664,694 2010 808,808 2020 950,112 2030 1,114,878 2040 1,325,648 2050 1,549,594 Economy The economy of Kern County has, historically been dependent on a combination ofpetroleum and agricultural production, fluctuating with. the cyclical nature of These two industries. Kem 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. We have seen evidence of emerging industrial growth trends demonstrating movement towards a more diversified self-sustaining economy. Oil Kern is one of the nation's leading petroleum-producing eRUnties, with more than three-fourths of the oil production in California being extracted froze Kern County oil fields. Oil production (and allied uidustry} provides a significant employment base to the county and is a major source of revenue to the county. According to the Greater Bakersfield Chamber of Commerce: Kern County produces 77 percent of California's crude oil, approximately 570,000 barrels of oil per day, and 82 percent of the state's onshore production. This represents ten percent of the nation's oil production and one percent of the total world's proiiuetimi. 33,000 of Californa's 43,000 oil-producing wells are located in Kern County. 17 Launer & Ass©ciates, Inc. Assessment Districf 06-1 The sale of the federal government's 78 percent interest in the Elk Hills Naval Petroleum Reserve to Occidental Petroleum Corp. for $3.65 billion in 1998 is the largest private acquisition of federal property. About 2,500 wells were drilled in Kern County in 2000, more than in any county in the nation. Recent development in the East Lost Hills, Semitropic and North Shaffer areas, signify the potential for deep oil and gas discoveries and an economic benefit for Kern County. Five of Califomia's 22 refineries are Located in Kern County. Kern County is expected to have an important role in refining and processing petrolewn in the future due to the limited potential expansion of refining capacity in Los Angeles and the Bay Area. California's 5 largest fields are all in Kent County. Agriculture Owing to the favorable climate of the San Joaquin Valley with a long frost-free growing season, good supplies of reasonably priced irrigation water and good soil conditions, agriculture is a major industry in the county. Farmland accounts for approximately 54°l0 of Kern County's land area, ar a total of 963,761 acres. Of this cropland, 736,217 acres are irrigated, according to the Kern County Farni 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. Kern County alone outranks the agricultural production of 20 states. Kern County produces aver 250 different crops: over 30 types of fruits and nuts, over 40 types of vegetables and more than 20 field crop varieties. Other notable agricultural commodities include lurnber, nursery stock, livestock, poultry and dairy products. The total value of these agricultural products annually exceeds $1.5 billion. Much of the imgation 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. 18 File Number 4166 Launer & Associates, Inc. Assessment District ©6-I Water districts have been established in most of the agricultural areas, in an attempt to stabilize the irrigation water supply. Valuation of the top ten crops in 2005 crop totaled $2,617,121,400, underscoring the importance of agriculture to the local economy. These top ten crops, ranked according to their annual valuatian, are presented in the following table: Kern County Top 10 Crops Rank Crop 2005 Valuation 1 Grapes $521,870,000 2 Ahrionds 442,703,000 3 Milk, Market and Manufacuu-ing 382,617,000 4 Citms, Fresh and Pracessn~g 248,260,000 5 Cotton 232,833,000 6 Carrots 222,455,000 7 pistachios 215,955,000 g Al~~ 165,273,000 9 Potatoes 94,231,x00 10 Cattle & Calves 90,924,000 Agriculture provides employment to a large segment of the labor force, putting millions of dollars in the local economy. On the average about 20% of the work force is engaged in farm work during the peak summer months and accounts for nearly 25% of the County's jobs. Industrial Trends Industrial growth in the County is also being experienced. This increased industrial interest is primarily a result of relatively inexpensive fully developed industrial sites and location of the County midway between I,os 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 Bakersfield have seen a strengthening of their tax base as a result of nearby prisons. Each of the communities had anticipated that most of the prison workers would retain domiciles and shop nearby. However, many of the workers in the valley communities of Delano, Taft, and Bakersfield have opted to 19 Lanner & Associates, Inc. Assessment District D6-1 locate their families in the larger community of Bakersfield due to the diversity of its recreational and leisure activities. Nevertheless, the presence of the prisons has had a definite net positive effect on Kern County's economy. Retail Sales Retail sales have grown at a steady pace over the past few years. Accarding to figures published by the California State Board of Equalization, retail sales activity has stabilized at $9.1 billion in 2004. 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 Sates Year Kern County Bakersfield 1999 $6,324,261 $3,196,732 2000 $6,938,238 $3,497,780 2001 $7,626,392 $3,744,392 2002 $7,565,892 $3,828,193 2003 $8,021,143 $4,164,067 2004 59,129,915 $4,742,285 Retail activity within the county is concentrated at two regional malls in Bakersfield, Valley Plaza and East Hills Mall containing a total of eight departrnent stores and numerous assorted specialty retail outlets. Other retail establishments in Kern Comity include at least one large retailer such as Kmart or Wal-Martin addition to locally owned retail stores. Emoloyment 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 based on Census data and projections. 20 File Number 4166 Lauver & Associates, Inc. ,9ssessment District 06-1 Employment -Averages Calendar Years 2000-2004 Kern County 2000 2001 2002 2003 2004 Labor Farce (OOOs) 2871 292 2991 305.4 315.1 Employment (OOOs) 254.7 260.4 264 267.9 284.5 Unemployment Rate 11.30°l0 10.60% 11.70% 12.32% 9.70% State of California Labor Force(OOOs) 16,884.20 17,182.90 17,404.60 17,629.30 17,627 Employment (OOOs) 16,048.90 16,2b0.10 16 241.80 16,455.40 16,630 Unemployment Rate 4.90% 5.40% 6.70% 6.70% 5.70% United States Labor Borce (OOOs) 142,583 (1} 143,734 144,863 146,510 (1) 147,877 Employment (OOOs) 13b,891 (1) 136,933 136,485 137,736 140,278 Unemployment Rate 4.00% 4.70% 5.80% 6.00% 5.10% Source: Califonua Employment Development Deparhnent. Kern County's unemployment rate is o$en higher than that of the state and the nation. This is a result of the seasonal agricultural employment conditions. Kern County's employment opportunities have been bolstered however by a number of new business locations and expansions. Approximately 2 million square feet of industrial distribution warehousing has been constructed and occupied in the Tejon Business Park in the extreme southern part of the County. The following table sets forth the annual average employment within the Kem County Labor Market, for the fiscal years 2000 through 2004. Nonagricultural Employment -Averages Employment by Industry 2000 2001 2002 2003 ZOQ4 Agriculture 48,300 41,800 40,400 41,900 39,300 Natural Resources and Mit>ing 8,200 8,600 7,900 8,000 8,200 Construction 11,600 13,000 13,300 13,600 15,200 Manufacturing 10,800 11,100 11,600 12,500 12,700 Ttade, Transportation and Utilities 37,200 38,400 39,000 39,700 40,900 Information 2,500 2,500 2,500 2,500 2,600 Financial Activities 7,600 7,$00 8,000 8,300 8,600 Professionatand Business Services 22,200 23,000 22,400 21,700 21,4G0 Education and Health Services 19,200 20,200 20,700 21,300 21,700 Leisure and Hospitality 16,500 17,200 17,600 18,000 18,700 Other Sen-ices 6,700 6,800 6,400 6,900 6,800 Government 51,600 53,600 55,240 54,500 54,000 Industry Emplo}anent'Ibtal 242,400 244,000 245,500 248,900 250,1Q0 Source: Califunfla Employment Development Deparhnent zl Lauver & Associates, Inc. Assessment District 06-I Transportation Two major northlsouth arteries Traverse Kern County. Freeway 99 and Interstate 5, running northlsouth, cover the entire west cost meeting at Interstate 80 in Sacramento. Freeway 99 connects with Highway 46 that provides access to the central coast. Highway 58 traverses the County in an East-West direction and connects with Interstate 40 and 15, providing access to Arizona, Nevada Utah and other major east markets. Interstate 80 and 40 are major corridors across the United States. 13 public airports, two of which have jet runway capacity, and four private airports serve Kern County. In addition there are two airports operated by the military, Edwards Air Farce Base and China Lake Naval Weapons Center. Major airlines presently serving the area are American Airlines, which operates a daily jet flight schedule to Dallas-Fort Worth and United Express with flights to San Francisco, San Diego, Las Vegas and Santa Barbara. There are several commuter style airlines with service to various portions of the state including Los Angeles. The Santa FeBurlington Northern and the Union Pacific operate mainline rail service in Kern County with access to all parts of the United States. AMTRAK provides passenger train service north on its San Joaquin route and bus service south to Los Angeles. The county's bus facilities include Greyhound Bus Lines, Orange Belt Stages (a charter service), and Airport Bus of Bakersfield, a local bus line providing daily commuting service to Los Angeles International Airport. Schools Public schools are available throughout the county with an excellent system of elementary and high schools. In addition to the numerous elementary, high schools and community colleges there is a four-year state University, California State University Bakersfield. The colleges are accredited and provide vocational and continuing education. 22 File Number 4166 Lauver & Associates, Inc. Assessment District 06-1 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 far years to come. Los Angeles area residents are looking to the north in search of a less urbanized life style. There are residents commuting to Los Angeles on a daily basis from Frazier Park, Rosamond and Bakersfield. Additionally, many individuals with working situations requiring them to work several days at a time, such as firefighters, are relocating their families to Kern County and to what they perceive as a safer and lower cost of living. Several "new towns" are plamred for agricultural lands at the extreme south-end of the San Joaquin Valley between Bakersfield and Frazier Park. These new towns are being planned to take advantage of Los Angeles residents becoming disturbed with the emergence of urban problems in Southern California. There are preliminary discussions towards the development of a high-speed rail system connecting Northern and 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 Comity route would proceed north from Los Angeles to the San Joaquin Valley after a stop in the Antelope Valley. The other route being considered is a coastal route that somewhat approximates the current location of State Highway 101. Obviously there is anticipation that a valley route would provide a linkage to Southern California sufficient to further the retreat from Los Angeles and spur housing demand in Kern County. Not all of the new residents locating in Kern County are doing so as a launching pad for a commute to Los Angeles. Kern County has some of the lowest cost real estate in Califonva; the typical homeowner can achieve more of the "American Dream" in Kern Caunty_ It is not merely individual homeowners benefiting from inexpensive property values. Beyond the County's location near the population center of the state and the availability of adequate labor', the primary 23 Lauver & Associates, Inc. Assessment District Dfr7 impetus for many of the newly arriving manufacturing and distribution jobs is the low cost of land. Conclusion Kern County is continuing to experience steady growth patterns from increased development of irrigated farmland, stable petroleum production and refining, along with a steady industrial growth. trend. Kern County's economic 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. This trend will continue for as long as the disparity in housing costs exists between Kern County and the rest of California. 24 File Number 4166 Lauver & Associates, Irac. Assessment District ©6-I CITY DATA The map above shows the City of Bakersfield corporate limits (shown in light orange) and the Greater Metropolitvi area of Bakersfield that shows the Bakersfield's sphere of influence. The Greater Bakersfield Metropolitan Area as shown above is defined by the Bakersfield Zip Codes 93301 through 93314. 25 Lauver & Associates, Ine. Assessmext District 06-T Location And Size The subject properties are all located in the City of Bakersfeld and within Bakersfield's sphere of influence. Bakersfield is located 111 miles north of the major metropolitan Los Angeles area, 108 miles south of Fresno, (the next nearest large urban area), and 290 miles south of San Francisco. Annual annexations to the city have taken place at a mean rate of approximately 6%. 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. The City covers approximately 118.5 square miles. Current Population and Protections' Greater Bakersfield Metropolitan Area Population Statistics 2000 Total Population 397,161 2000 Group Quarters 7,342 2006 Total Population 473,997 2011 Total Populatian 552,175 2006 - 2011 Annual Rate 3.1 In the identified market area, the current year population is 473,997. In 2000, the Census count in the study area was 397,161, which represents an annual rate of change 4.06%. The five-year prajection far the population in the study area is 552,175, representing a change of 3.3°l0 annually from 2006 to 2011. Currently, the population is 49.3% male and 50.7% female. Demographic projections indicate that the average household size will grow substantially from the Census count in 2000. At that time the average household had a total of 2.98 persons. That is expected to grow to 3.57 persons between 2006 and 2001. These demographic statistics are summarized in the following chart. Demographic Information from STB-On Line ESRI Statistical Database 26 File Number 4166 Lauver & Associates, Inc. ftssessment Distrzet ft6-1 i.naracceris~ics Greater BakersField Metropolitan Area 2000 Households 130,755 2000 Average Household Size 2.48 2006 Households 152,858 2006 Average Household Size 3.06 2011 Households 176,894 2011 Average Household Size 3.08 2006 - 2011 Annual Rate 2.96% 2000 Families 96,869 2000 Average Family Sizc 3.46 2006 Families 113,812 2006 Average Family Size 3.54 2011 Families 131,776 2011 Average Family Size 3.57 The household count in GBMA study area has changed from 130,755 in 2000 to 152,858 in the current year, an increase of 14.46°l0. The five-year projection of households is 176,894, a change of 3.13 percent annually from the current year total. Average household size is currenfly 3.06, compared to 2.98 in the year 2000. The number of families in the current year is 113,812 in the market area. nousmn umrs GBMA Stndy Area 2000 Housfng Units 139,724 Owner Occupied Housing Units 57.5% Renter Occupied Housing Units 36,1% Vacant Housing Units 6.4°l0 2006 Housing Units 162,815 Owner Occupied Housing Units 59.9% Renter Occupied Housing Units 33.9% Vacant Housing Units 6.1 2011 Hausing Units 188,260 Owner Occupied Hausing Units 60.5% Renter Occupied Housing Units 33.5°l0 Vacant Housing Units 6.0% 27 Launer & Associates, Inc. Assessment District 06-I Currently, 59.9 percent of the 162,815 housing units in the Greater Bakersfield Metropolitan area are owner occupied; 33.9 percent, renter aceupied; and 6.1 percent are vacant In 2000, there were 139,724 housing units of which 57.5% were percent owner occupied, 36.1 percent renter occupied and 6.4 percent were vacant. The rate of change in housing units since 2000 is 16.53 percent. owner Total < $10,000 $10,000 - $14,999 $15,000 - $19,999 ,$20,000 - $24,999 $25,000 - $29,999 $30,000 - $34,999 $35,000 - $39,999 $40,000 - $49,999 $50,000 - $59,999 $60,000 - $69,999 $70,000 - $79,999 $80,000 - $89,999 $90,000 - $99,999 $100,000 - $124,999 $125,000 - $149,999 $150,000 - $174,999 $175,000 - $199,999 $200,000 - $249,999 $250,000 - $299,999 $300,000 - $399,499 $400,000 - $499,999 $500,000 - $749,999 $750,000 - $999,999 $1,000,000 + Census 2000 Number % 80,324 100.0% 1,095 1.4% 570 0.7% 515 0.6% 713 0.9°/a 51G 0.6% 565 0.7% 764 1.0% 1,964 2.4% 3,890 4.8% 6,009 7.5% 8,648 10.8% 9,766 12.2°l0 8,709 10.8°l0 13,155 16.4% 8,995 11.2% 4,92$ 6.1% 3,154 3.9% 2,652 3.3% 1,656 2.1°l0 1,253 1.6% 448 0.6% 219 0.3% 74 0.1% 71 0.1% units py vatue 2006 Number 97,606 49i 140 237 221 277 241 189 427 484 501 486 414 473 1,885 4,094 6,197 9,141 22,499 13,245 20,845 6,646 5,483 1,687 1,303 % 100.0% 0.5% 0.1% 0.2% 0.2% 0.3% 0.2% 0.2% 0.4% 0.5% 0.5% 0.5% 0.4% 0.5% 1.9% 4.2% 6.3% 9.4% 23.1 13.6% 21.4% 6.8% 5.6% 1.7% 1.3% 2011 Number 113,863 436 162 126 220 212 217 233 339 372 376 416 362 359 893 1,829 3,031 5,058 17,520 20,669 28,119 17,602 10,285 2,829 2,198 oi° 100A% 0.4% 0.1% 0.1% 0.2% 0.2% 0.2% 0.2°l0 0.3% 0.3% 0.3°l0 0.4% 0.3% 0.3% 0.8% 1.6% 2.7% 4.4% 15.4% 18.2% 24.7% 15.5%' 9.0% 2.5% 1.9% Median home value in the GBMA study area is $251,533, compared to a median home value of $181,127 for the U.S. In five years, median home values in the study area are projected tp 28 File Number 4166 LauneY & Associates, Inc. AssessmentDisfrict 06-I change by 25 percent annually to $314,586. From 2000 to the current year, median home value increased by 32.45 percent annually. T7,..,EOh..ld~ by Tnrnmr . f raster RAIZP.rRt7C~(1 ~ICtr011011taII AYea Year 2000 2006 2011 Income Bracket Nmnber Percent Number Percent Number P ercent <$15,000 25,553 19.5% 23,751 15.5% 23,075 13,0% $15,000-$24,999 19,569 15.0% 18,673 12.2°l0 19,636 11.1°l0 $25,000-$34,999 77,184 13.1% 17,995 11.8% 17,146 9.7% $35,000 - $49,999 21,334 16.3% 22,961 15.0°/v 25,204 14.2% $50,000 - $74,999 22,749 17.4°l0 27,42`1 17.9°/a 31,903 7 8.0% $75,000 - $99,999 12,403 9.5% 1$,190 119% 19,522 11.0% $100,000 - $149,999 8,352 6A°lo 16,252 10.6% 25,845 14.6% $150,000 - $199,999 1,785 1,4% 4,052 2.7°l0 7,695 ~- 4.4°l0 $200,000+ 1,790 1.4% 3,557 2.3% 6,868 39% Median Household Income $36,829 $45,369 552,161 Average Household Income $48,779 $60,415 $71,'745 Per Ca its Tneome $16,358 $19,766 $23,252 Income Levels The disposable income characteristics in the Greater Bakersfield Metropolitan Area are Shawn in the following table. Income Levels naKersuera, ~;aurornra cuvu Total Number of I3ouseholds Percent Disposable Income Range 152,858 100.0% $15,000 26,226 17.2% $15,000 - 524,999 22,437 14.7% $25,000 - $34,999 21,601 14.1 535,000 - $49,999 26,773 17.5% $50,000 - $74,999 31,811 20.8% $75,000 - $99,999 11,727 7.7°l0 5100,000 - $149,999 8,919 5.8°/a $150,000 - $199,999 1,477 1.0% $200,000 + 1,887 1.2°l0 Median Disposable Income $37,561 Average Disposable Income $49,175 29 Lauver & Associates, Inc. Assessment District Ob-I The preceding demographic data becomes more meazungful when the Greater Bakersfield Metropolitan Area is compared with the State of California. This is shown in the following chart. 5 Yr Percent Median Median Projected Owner HH House Location I Area Growth Occupied Income Value Bakersfield 3.10% 59.90% $45,369 $251,533 State of California 1.55% 55.20% $51,'176 $498,615 This data shows that: • Bakersfield is projected to grow at twice the statewide rate over the next five years • Owner occupancy in Bakersfield exceeds the statewide average by more than 8% • Median housing value in Bakersfield is anly about half that of statewide housing The relationship of Bakersfield vs. Statewide housing prices is Shawn on the graphic below. Housing Price Comparisons ~ 40.00% ~ - -- ~~ -- ~ 35.00% ~ 30.00% ~ 2 ~~, ~` 5.00% 0 2 ~-- r ~ ___gtate 0.00% ~" ~ 15.00% - -Bakwafield ~ 10.00% s, 5.00% _ - - ... - Oy I i 0.00% o'~ p,9 ~°~ ~~ °'~ ~~ ~~ ~~? p,9 ~~ ~g x © ~ ~ v~1 s9'ti agti ~ ~ g ~ ~ ~ ~ es~ ~~ sy`ti sg`ti e9^~ cgs' sg^ s9~ ~ ~ ss~ ~~~,o ~s~~h ~~~o ~~oo ~~~~ ~,~oo ~~o shoo ~,ho ~~n I ._ Price Range - $1t10k-$1M + _ _ In reviewing the data from which the chart was compiled it was noted that 28.8% of the statewide housing is priced above $750,000. The $750k plus has a 3% market share in Bakersfield. Statewide, 50% of the dwellings are priced above $500,000 and in Bakersfield 50% of the housing is priced below $250,000. 30 Fiie Number 41(6 Lauver & Associates, Inc. Assessment District 06-I Economy Bakersfield, the marketing, business, service and transportation center of the Kern County, finds its economy closely dependent upon the continued prosperity of the agricultural and petroleum industries. A City's economic functional classification is generally based upon a city's primary economic base activities, i.e., its reason(s) for existence. Bakersfield has two categories: • First, the city is a commerce center, (considering it is a farming center and the major county supplier of goods and services); • Secondly, it fits a classification commonly known as extractive, due to the large portion of economic activity created by the productions of minerals, Manufacturing firms within the city are characteristically of small to medium size. Major manufacturing activities include steel fabrication, plastic form products, food and kindred products, and petrolemn refining with related industries, and textiles. From an overall point of view, the Greater Bakersfield Metropolitan Area's economy is stable. Manufacturing activities are diversified with no single industrial classification furnishing more than 25% of the area's jobs. Transportation Transportation needs of a city are essential, requiruig goods as well as people be moved to-from- and-within the urban environment. Within the Bakersfield Metropolitan Area the main lines of the Burlington NorthernlSanta Fe .Railroad service freight needs. Amtrak provides passenger travel. Scheduling by Amtrak, on its "Valley Run", is currently operated seven days a week. All of Amtrak's northern travel on this route originates in Bakersfield, while all southern travel from Oakland terminates in Bakersfield. Truck transport is available fram a number of truck carriers, several of which are major interstate lines. 31 Lauver & Associates, hoc. Assessment District 06-Z There are two airports within the GBMA. Bakersfield Airport, a private airport, is located in the southeastern area of the city, and Kern County's Meadows Field is located in the northwest portion of the GBMA. Meadows Field has jet runways and serves as a base for commercial air services. Meadows field is also used by private air traffic. Inter-city bus facilities are provided by the Golden Empire Transit system.. Buses currently travel six days a week (not on Sunday), providing service from 7:00 a.m. to 6.30 p.m. The current rate is $Q.75 for aone-way travel pass and no charge for transferring. Four firms provide taxi service, all of which are radio dispatched. As for automobile travel, the city lies astride two major 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 Department has 288 personnel and the fire department has 160 firemen and officers. Health care services within the GBMA are provided by six general hospitals, with a combined capacity of 1,075 beds. Within the Metropolitan Area are approximately 375 physicians and surgeons, 24 chiropractors, 19 optometrists and 86 dentists. 32 File Number 4166 Launer & Associates, Inc. Assessment District 06-I The school districts, encompassing the Bakersfield Metropolitan Area, presently contain 59 elementary schools, 12 Junior High Schools, and 9 High Schools. In addition there is a parochial High School and 8 parochial grade schools. To fill higher educational needs, based in Bakersfield, are an accredited two-year Community College, Bakersfield College, and afour-year accredited school, California State University at Bakersfield, the newest of the State university campuses. Recreational and Cultural Activities The city, due to its central location, offers close proximity tc> 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 cmnmunity 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 aze divided between AM and FM broadcasting. 33 Lauver & Associates, £ne. Assessmentl3istrict 06-1 The Labor Market There is a stable labor force of men and warren with diversified skills in fields ranging from agriculture to sophisticated equipment, assembly, and research. Over the past two years, over 5,000 jobs have been added in Kern County each year, mostly in the services, government, and retail, manufacturing and construction sectors. With the efforts to attract corporate and manufacturing operations to Kern County, this growth is expected to confinue 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. • 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 for 2003-2004 was 12.6%. This was up from 12% the preceding year. Current figures from the EDD indicate an unemployment rate of 8.6% as of September 2005. Bakersfield is always likely to have an unemployment rate somewhat higher thalr California or the United States as a result of the seasonal characteristics of the agricultural industry. The following table cites the unemplo}nnent rate contrasted with demographic indicators. According to the City of Bakersfield, the following are tope employers as of June 30, 2005. 34 File Number 4166 f_ttuner & Associates. Inc. Assessment District 06-1 FIRM County of Kern Giumarra Vineyards Grumnway Enterprises Bakersfield City Schools Kern High School District Wm. Bolthouse Farms Catholic Healthcare West Bakersfield Memorial Hospital City of Bakersfield ARB Inc. Principal Employers PRODUCT/SERVICE Government Kern Medical Center State Farm Insurance Aera Energy Chevron Texaco California State University Bakersfield Dreyers Ice Cream Co LLC. Frito Lay Target Distribution Center Clinica Sierra Vista ACS Bakersfield College Agriculture Agriculture Education Education Agriculture Health Care Health Care Government Metal Fabrication Health Care Insurance Energy Oil Production Education Food Processing Food Processing Retail Distribution Health Care Call Center Educaton EMPLOYF,ES 8,400 5,000 4,000 4,000 3,600 2,500 2,500 1,400 1,400 1,200 1,200 1,400 1,150 1,000 900 800" '725 650 600 600 450 35 Lauver & Associates, Inc. Assessn:eaf Ddsfriet 06-1 BAKERSFIELD METROPOLITAN AREA HOUSING MARKET OVERVIEW Bakersfield (Kern County) has among the most affordable housing in the State of California. The affordability is attributable to inexpensive land and inexpensive labor. Presented in the chart below is a comparison of the median pricing of single-family dwellings in various California metropolitan areas. Region 2005 2006 High Desert $324,560 $320,490 Bakersfield $292,200 $344,000 Central Valley $342,166 $355,830 Palm SprslLwr Desert $369,090 $369,330 Sacramento $362,660 $379,010 RiversidelS. Bernardino $410,160 $394,790 Northern California $385,570 $441,540 No. S. Barbara County $431,710 $468,890 San Luis Obispo $537,740 $534,930 Los Angeles $584,600 $552,760 San Dicgo $585,970 $603,680 Northern Wine Country $604,820 $618,420 Ventura $670,830 $675,670 Monterey County $665,000 $699,000 Orange County $692,980 $702,290 Monterey Region $702,300 $712,500 San Francisco Bay $725,900 $712,940 Santa Clara $738,000 $734,950 Santa Cruz. County $710,000 $742,000 Santa Barbara County $581,250 $753,790 S. Barbara So. Coast $1,250,000 $1,200,000 Source: California Board of Realtors. The affordability of housing in Bakersfield has been a factor in the in-migration to the City over the past five years. The affordability is attributable to inexpensive laud and cheap labor. Monthly rentals are available throughout the Bakersfield metropolitan area. One and two bedroom apartments command rents ranging from $400 to $1,300 per month. Apartment communities within the city are relatively well defined, offering goods and services to apartment dwellers. Two and three bedroom, single-family houses can be rented for $850 to $2,500 per month. There 36 File Number 4166 Lauver & Associates, Inc. Assessment District 06-1 is a good supply of up-scale to luxury quality dwellings priced from $350,000 to over one million dollars. However, the most recent surveys indicate the average residence is selling within the $250,000 to $350,000 price range. Strengthening demand for residential housing has positively affected the building permit activity in the city. Most of the growth and construction of dwelling units in Bakersfield has taken place subsequent to World War 1I. These dwellings typically have remaining lives of more than 100-years. Consequently, there has been little need for in-fill in the older areas of the city. The availability of nearby land ready for construction has enabled a suburban sprawl. Residential growth tends to be primarily found in the northwest and southwest quadrants of Bakersfield. Since 1988, the permit activity was based largely on construction of 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. The most recent studies of the sales activity that about 20% of the new tract homes sales are 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 since the sails are of good quality and the sites are mostly level, reducing the costs of development. The City also has a rather reliable water source from water rights to the Kent River. During the years from about 1991 to 1495, the Bakersfield housing market was dominated to a large degree by large regional and national housing development firms. Among these were Centex, U.S. Home, and Kaufman & 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, 37 Lauver & Associates, Ine. AssessmentDistriet 06-I and thus squeezed profit margins for production housing units. Local builders found it difficult to compete. Over a period of time however, the larger building firms found the local market prefers the option of selecting a let 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. Until about two years ago merchant builders limited their new housing starts to models and pre-sold units, resulting in little standing inventory at any time in the metropolitan area. During the past two years however, some of the national firms have reverted to the pre-platting programs and they have begun using incentives and concessions to divest the non-contracted (spec} housing. Existinsr HOUSInE Market Existing housing sales information for 2005 and 2006 was obtained from the Golden Empire Assaciation of Realtors (GEAR). The statistical information displayed covers the Greater Bakersfield Metropolitan Area and includes areas within and outside the City of Bakersfield corporate limits. The year ending December 31, 2006 is compared with sales for the same period in 2005 in the chart below. Existing Housing Market Sale Data Year 2005 2006 % Change Units Sold 5,031 5,318 5.70°l0 Average List Price 284,074 325,354 14.53% Average Sale Price 282,674 320,330 1332% Average Days on Market 25 48 92.00°l0 Median Days on Ularket 15 37 146.6'7% of List Price Received 99.51 % 98.46% -1.06% 38 File Number 4166 Lauver & Associates, Inc. Assessment District Ob-1 Based on the Foregoing data, we see that the existing housing market remained strong throughout the year. As the year progressed however, we found there were an ever-increasing number of dwellings available for sale each month. This is demonstrated in the average and median days on market indicators as well as The percentage of list price received at sale. In our study of the existing market we found another interesting fact. The average dwelling size in 2005 was 1,337 square feet compared with the 2006 average size of 1,230 square feet. We concluded the market is seeking and buying more of the entry-level and lower cost housing and we expect to see this trend continue in 2007. New Residential Housing Market The following chart summarizes the new housing sales activity. The summary reflects only closed sales in Bakersfield as recorded by the Kern County Assessor's office. According to our sources, a total of 4,512 new dwellings were completed and closed escrow during 2006. New Housing Sales Activity Summary Period 2005 2406 Percent Change Total Closings 4,724 4,512 -4.49% Average Sale Price $325,776 $366,36$ 12.46°/n Our interviews with builders and sales offices indicate that the housing demand from both out of town and local buyers dropped off during the last quarter of 2006. Sales office staff personnel are reporting substantially less foot traffic in the models compared with the historically highs experienced in 2005. The subdivisions offering entry-level product are an exception to the reports from the move-up and larger dwelling tracts. The smaller size-lower cost housing continues to attract buyers. The out of town buyer segment of the market is somewhat difficult to accurately measure however, since many occupy apartments while waiting for their dwellings to be completed and a number commute to places of employment elsewhere. This was borne out from our surveys wherein all subdivision sales offices commented that there continue to be buyers who are 39 Lauver & Associates, Inc. Assessment District 06-Z relocating here and some intend to eammute to the urban Southern California area. According to some sales offices and interviews with builders the most significant in-migration is from the Central Coast areas such as Santa Barbara, Ventura and Oxnard and from the north central coast areas around Salinas. Housine Market Proiections One measure of the potential new housing in the pipeline is the permit activity. Bakersfield's new single family permitting activity is shown in the table below. Bakersfield City Buildin g Permits Issued Year PermiYS Issued % Change 1997 1,352 NfA I998 1,983 46.67% 1993 1,899 -4.24% 2000 1,994 5.00% 2001 2,432 21.47% 2002 2,947 21.18% 2003 3,626 23.04% 2004 4,222 16.44% 2005 5,216 23.54% 2006 3,368 -35.43% Our figures that we obtain from Ticor Title are more comprehensive than those shown in the chart above because their numbers reflect all permits with a Bakersfield address. A year by year comparison of the Ticor permits follow. Greater Bakersfield Metropolitan Area Permits Issued Year Permits Issued % Change 2002 3,563 NIA 2003 4,328 21.47% 2004 4,997 15,46% 2005 6,061 21.29% 2006 4,238 -30.08% In comparing the two data sets we note that the City and Metro area trends tend to follow the same general pattern. It is unlikely that the permitting activity will return to the unprecedented high it reached in 2005 for some time. Based on our interviews with the major builders it was our 40 File Number 4166 Launer & Associates, Inc. AssessmentFistrict 06-Y finding that they will likely revert to the pre-sald pattern that has historically made the Bakersfield market one of the, if not the, most stable market in the State. Several of the most active builders indicated they had obtained permits for and eanstructed an unprecedented number of `spec' houses in 2005 and they have now sold much their standing inventory through incentive programs and other concessions. Most expect their permitting activity to mirror their sales during 2007 and intend to maintain a sales rate shnilar to the permitting rates in 2003, 2004 and 2006. Those 3 years are considered to be indicators of a normal Bakersfield new housing market that is sustainable by the natural population growth rate- The following chart ranks the builders based on Ticor Title compilation of permits taken out during 2006. Top Ten Builder Permit Activity Rank Builder Perm its Taken 1 Lennar 1,033 3 Centex Homes 391 7 Pulte Homes 283 2 DR Horton 288 4 Lenox Homes 199 6 McMillin 228 5 Castle & Cooke 181 8 ADH Corporarion 149 9 K. Hovanian 107 10 Beazer Homes 97 Owner builder single-family permit activity accounted fora 12% share of permit activity, a total of 511 permits issued in 2006. It is noted that the primary focus of Lenox Homes and ADH Hennes are the entry-level product line. New Residential Building Develapment Potential and Timing We also made an investigation of the growth rates, trends and patterns with regard 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. As shown in the introduction section of this shzdy, there were a total of 4,'724 new dwelling sales recorded between Januaryl and December 31, 2005 in the Bakersfield Metropolitan Area. "fhe 41 Launer & Associates, Inc. Assessment District 06-1 2006 closings during the same period totaled 4,512. This represents a decrease of (- 4.4'3° ~,) in total closings from year to year. The same 2005-2006 year end comparison indicates the average selling price in 2006 was up 12.46% over 2005; $366,368 vs. 325,776 in 2005. New Residential Bufldin~ Development Potential and Timine We also made an investigation of the growth rates, trends and patterns with regard 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 and profitability in the local market. A study of the demand side of the housing market is the first step in atlalyzing the relative strength of the housing market and it provides necessary data in studying the interaction of the supply and demand characteristics of the market, and it will assist in farecasting future housing needs. The demand side analysis of the residential housing market involves researching characterisfics of population growth; occupancy and vaeatlcy rates of single family housing stock; pricing levels; and market segmentation. In the following paragraphs we discuss the various elements of the demand side of the single family housing market. The sources utilized in our analyses are from the California Department of Finance E-5 ReporC, National Decision Systems, ESRI, Kehl Council of Governments, California Department of Finance-Demographic Research Unit, City of Bakersfield and Kern County Planning Departments. In examining the historical and projected growth rates for the city of Bakersfield, it was noted that in the period from January 2000 to January 2006, the population increased 19.3%. Projections from 2006 to 2011 indicate a further population increase of 16.49% as shown in the following chart. 42 File Number 416b Lauver & Associates, Inc. AssessmentDisfrict 06-1 Bakersfield Metropolitan Area Populationk Year 2000 2006 2011. Population 397,161 473,997 552,175 The projected population growth rate from 2006 to 2011 is 78,178 persons, a projected increase of 3.3% per year. The projected growth is based on data from E5RI, a nationally recognized demography publisher. Bakersfield Population and Housing 2006-2011-Demand Characteristics Using the published statistics and projections from the sources cited previously, the population and housing needs within the city are forecast as follows: 5 Year Housing Demand Forecast Year 2006 2011 Bakersfield Metropolitan Area 473,997 552,175 Total Detached Units 162,815 188,260 Owner Occupied 97,606 113,863 Renter Occupied 55,252 63,031 Vacant 9,957 11,366 Using the foregoing actual and projected population figures, an estimate of annual housing demand for the next five years is calculated as follows: Bakersfield Detached Housing Demand Forecast 2011 Housing Demand - Otvuer Occupied 113,863 Less 2006 Owner Occupied 97,606 Five Year Demand 16,257 Annual. Housing Demand 3,251 Based on the growth projections from the demographics and census studies we perceive there is a demand for approximately 3,250 new units per year in the Metropolitan Bakersfield area. The population figures include Zip Codes 93301 du'ough 93314, some of which are unincorporated areas. 43 Lauver & fJssociates, Inc. Assessmentl?istrict 06-I The next step is to compare the demographic demand indicators with what is actually taking place in the City. A total of 3,368 single funny permits had been issued within the corporate limits of the City of Bakersfield during 2006. This is down about 35% from 2005. City of Bakersfield Permit Activity Comparison Year Permits Issued 2005 5,216 2006 3,368 Change -:?5.~3't~ Ticor Title reports a total of 4,238 permits haue been issued in the Greater Bakersfield Metropolitan Area. Their figures include the unincorporated areas with Bakersfield addresses/zip codes. The Ticor surveys reflect an approximately 30% decline in total permits issued. Therefore, in comparing the most current permitting figures with those in 2005 for the same time frame we see a decline in permits 30% to 35%, depending on the source or reference point. Permit Activity Greater Bakersfield Metropolitan Area Year Permits Issued 2005 6,061 2006 4,238 Change - ~;).fj~°, o As discussed previously the new single-family closings within the Metro area attained a total of 4,512 new units during 2006. Comparison of the sales and permitting activity demonstrates there is standing inventory of housing Based on our analysis of permitting data, it is clear that there is standing inventory. Comparing the permitting and sale data within the City limits indicates that the permit activity outpaced the sales activity by 1,337 units in 2005. In contrast, the 2006 figures show the roles to have reversed, with the sales rate exceeding permit issuances. The preliminary numbers indicate a standing inventory reduction of just over 20°l0. 44 File Niunber 4166 Lauver & Associates, Irzc. Assessment District Ob-I It was our finding that around the end of the first quarter builders have been taking extraordinary measures to boost sales. Builders and developers have significantly increased and expanded their advertising budgets to include television and radio spots as well as billboard and print media. Most builders offered incentives and concessions to buyers through the remainder of the year. These buyer advantages enable the builders to retain their selling prices at previous levels but builder margins have declined. Builders bringing on new developments are now pricing their product at lower price per square foot levels to encourage and stimulate sales. However, in spite of some standing inventory, the Metro area has shown strong population growth and has aself-sustaining economy, the demographers projections of a 3.1°In annual growth rate appears realistic In the appraiser's opinion, the sales and permitting indicate a real demand somewhere between the sales and permitting activity. A constant annualized demand of between 3,000 to 3,500 units is reasonable based on the population growth rate. Supply Characteristics The next step in the analysis of the residential housing market in 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. This practice has served to enable the local builders to weather the market fluctuations without the burden of supporting unsold inventory. This is borne out by the fallowing study. We checked with the Bakersfield Planning Department to obtain their estimates of potential supply. They compile data on active tentative tract maps and recorded maps. We reviewed their published figures as of January 3, 2007 and have reproduced them in the following chart. 45 Lauver & Associates, Ine. Assessment District D6-I City of Bakersfield Active Subdivision Tract Activity Map Type No. Tracts Remaining Lots Active Tentative Mapped 172 26,410 ActivefRecorded 28 3,247 Pending 4 2,772 Totals 209 32,429 Based on the data provided by the City Planning Department, there are a total of 32,429 lots in 209 developments that could be completed- Sources at the City and our figures are projecting that about 70% of the active, active recorded and pending tentative maps will reach the approved stage and ultimately become final mapped subdivisions. A more realistic number of pending maps would therefore be 22,7001ots with a potential for being completed. Using this figure for the total number of lots with a potential for development represents an annual supply of 4,510 lots over the next five years. Because of the developer's resumption of the practice of constructing new housing on a pre-sold basis however, the total potential lot supply is not a concern. iVloreover, it has been our fording that over the past five years, developers do not have their tentative maps recorded unless they intend to begin housing construction immediately thereafter. Therefore the AetivefRecorded mapped lot inventory of 3,247 units is considered to be a better guide in estimating the one year supply side. The next step in the supply side analysis is to estimate the standing inventory and the potential supply from sources at the city Planning Department, The existing supply estimate is calculated below. Current Potential Housing Supply (Lot Availability) 3,274 Plus Esthnated under Construction (5% flex margin) 164 Total Annual Supply 3,438 Estimated Current Supply based on excess 2005 permitting activi 2,035 Estimated Standing Inventory 5,473 Less: 4Q% pre-sold -4,925 Estimated Unsold Housing Under Construction 547 46 File Number 4166 Laurier & Associates, Inc. Assessment District 06-I Based on the foregoing, it is the appraiser's conclusion that there is some standing inventory from speculative housing that will be reduced during 2007. We are estimating the developers in the City will produce housing at a rate of 3,000 to 3,500 units per year based on the historical permitting activity and the permits issued to date. In the past two years some of the major builders constructed some of their subdivisions on a pre- plotted basis. This practice entails either improving acreage to fizushed lots or purchasing finished lots and essentially building out the entire tract prior to releasing housing units. The reason for implementing this practice is that builders found that during the extended construction time while the market demand was at unprecedented highs, the market appreciation overtook the contract prices paid on a pre-sold basis, and the purchasers ended up with a substantial equity position without ever taking possession. In the pre-plotted scenario 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. Our interviews with the developers who had implemented the pre-plotting sale strategy indicate that they experienced a slowdown in foot traffic in their sales offices and found it necessary to offer some sales incentives to reduce standing inventory. Most indicated they will sell off all standing inventory and revert to the practice of housing starts on a pre-sold basis. They recognize that there can be substantial risk with pre-plotted subdivisions when the market reaches equilibrimn or an oversupply condition emerges. Interaction of Demand & Supply Our analysis of the market conditions in Bakersfield indicates supply acrd demand conditions are slightly over-built but we are forecasting that the supply side will achieve a state of equilibrium with the demand side during 2007. The data and demographic studies also demonstrates that there is a steady demand for new housing product from natural growth and there is sufficient entitled land available for rapid response in supply to meet the demand conditions. These facts, coupled with the competitive 47 Launer & Ass©ciates, Inc. Assessment District ©6-I position in pricing that Bakersfield holds in the State are indicators the Bakersfield new housing market will likely maintain a relatively stable sales pace and experience the seasonal variations in demand we typically experience in this market. We are aware that during the time the new housing market reached its peak in demand, many developers were busy acquiring land to develop with lots to meet the demand that was in place at that time- Many of these developers have now produced inventories of finished Tats that they must improve with housing units in order to recapture the lot development costs incurred. These developers continue to bring new subdivisions to the market and are engaged in massive advertising campaigns to attract buyers. Most of these are national developers who have the available capital to reduce their margins and still remain viable using incentive programs and reductions in pricing from previous phases of similar product. It is possible that the marketing strategies and strength of the national builders in this market will serve to force price reductions unacceptable to smaller local builders who will not be able to compete. Market Segmentation In order to visually conceptualize what type product has been in demand we made a study of the sales volume of all. the builders who have closed new home sales during 2006. We compared these data with the sales activity from the previous year and prepared the following graphs for comparison. 48 File Number 4166 Lauver & Associates, Inc. Assessrreent District 06-1 Market Segmentation by Price 2005 25.0% ,-~ - , ~ ,,~ ~""" , , / 20.0°/0 4 i ` =~nh.M-~ti~ 3 4`~`~ ~~~' ~ t ~ ~ 1 ~ `~~ 15.0% ~ , ` ®2nd Q 10 0% ~~ ' ~ ~ ~ -- ~ ^ 3rd Q . ~.i 4 'i O4thQ °' t i ~ I k ~ ~ (~ O.l/% ~ <200k 200- 250- 300- 350- 400- 450- 500+ 250k 300k 350k 400k 450k SOOk Market Segmentation by Price 2006 30.00% ~ ~ ~. -,~~`~,~ .~«.,~ ~~ 1 25.00% ~ -----~"`_~ ~.,~.~_ ~ ~..... ' `~ ,~ ~1stQ 00% 20 ... ~_~-, - ,~ . I 2ndQI E ~ 15.00% ~ `' ~ :x ~ O 3rd Q 10 00% = ~~ . ~` :: t th Q ^4 . (~° 00 /o 5 44 to ' ' . ;~ ~ :, f" I ~ ': :' .~ VYi .::. r" .' x': . ::.a 0.00°{0 . . ': .: <200k 200- 250- 300- 350- 400- 450- 500+ 250k 300k 350k 400k 450k SOOk These graphs demonstrate that the sales activity moved steadily from 2005 through 2006 to the higher priced (and larger dwellings) in the most recent quarters. Our studies show during 2005, the below $350,000 selling price accounted for 63.7% of the market and the dwellings priced below $300,000 captured a 45.2% market share. Overall activity in 2005 demonstrated the 44 Lauver & Associates, Inc. Assessment District 06-I strength of the market was based on entry level and first time mave-up buyers. A dramatic shift took place in 2006 as the following graphics show. Analysis of sales activity through 2006 Shaw a dramatic shi8 in the market price segmentation compared with 2005. In 2006 the market segment priced below $350,000 has slipped to 52.2% of the total market, down from 63.7% in 2005. During 2006 housing units priced below $300,000 50 File Number 4166 Lauver & Associates, faze. Assessment District 06-1 captured substantially less market share; 27.4% compared with a 45.2% share in 2005. Sales of new housing units in 2006 priced below $250,000 accounted for only 9.98% compared with 25.7% in 2005of the total market in 2005. The second move-up and upper end to luxury priced market segment dominated the new home sales activity in 2006. The $450,000 plus market accounted for 17.6% of the market compared with only I1% in 2005. The sales activity for new housing priced in excess of $500,000 captured 1 l% of the tatal market in 2006, contrasted with a 6.8% share the previous year. Bakersfield Housing Market Conclusions From an overall perspective, the Bakersfield new housing market sales activity was down slightly; down 4.45% fram 2005. It was the appraiser's finding that a contributing factor was the market shift to the move up and upper end market priced dwellings. This was demonstrated in market share with the bulk of the 2006 selling prices being over $350,000. Overall the average selling price in 2006 was $366,368 up 12.46°l0 from 2005, which ended with an average selling price of $325,766. It is the appraiser's finding that natural population growth has created aself-sustaining demand for new single-family housing product. The new housing market continues to benefit from the strong employment climate in Bakersfield. In 2006 we also experienced additional in-migration from other areas by commuters, retirees and those relocating and the downsizing `empty-nester' market. An important factor in Bakersfield's attraction to the `commute' and `telecommunte' market since that the average new home price is $100,000 below the average new home price in the Antelope Valley and $400,000 below that of the Santa Clarity Valley. Neither of these `commute' market areas have significant economic base and have a very high population of commuters. 51 Lauver & .9ssociates, Inc. Assessment District ©6-I Appraiser's Conclusion The Bakersfield housing market has traditionally and historically been somewhat isolated from the State and National price swings. In the past twenty five years Bakersfield has always had a lag-time in price increases and decreases compared with other parts of the State, most notably Southern California. Moreover, when the other market areas have had new housing market slumps, the new housing market here has remained near static, with minor price appreciation or declination based on location within the City. We are anticipating stable to slightly slower new housing sales volume during 2007. Natural population growth within the City and the steady in-migration of out of the area buyers, will continue to create demand for new housing because the Bakersfield new housing product is still priced below most other areas of the State and Bakersfield has a good reputation for a quality life style and affordable housing. Not only are the Kem County market fundamentals strong but favorable interest rates, quality of housing product being produced by local builders, the abundance of relatively inexpensive land and the continued strength of the oil and agriculture industries will continue to insulate the Bakersfield market from the market fluctuations in other high-growth areas. Expansion of the industrial sector and Bakersfield's location along major transportation routes will be factors in sustaining and expansion of the local economy. It should be remembered that the past four years of appreciation represents an unprecedented spike in appreciation, which created wealth among the Local homeowner population. This wealth, created by equity and enhanced by historically low mortgage interest rates enabled a large segment of the population to `mave up' to new, larger and higher price units (see market segmentation charts). Although we expect to see some decline in new home pricing and sales volumes this is a perspective based on histarically unprecedented market peaks. The year 2001 is is expected to demonstrate what we anticipate a normal market state in both sales volume and average new dwelling pricing. 52 File Number 4166 Lauver & Dissociates, Inc. Assessment -istrict 06-.1 We expect to see a number of the national builders using advertising directed statewide to attract potential buyers to their projects in Bakersfield. Already priced below most other areas of the State, these builders will likely continue to offer various cancessions/incentives such as financing options, interest rate buy downs, delayed payment programs and consumer goods incentives. These are not reported in the selling prices so it is difficult to make a precise measure of the fluctuation (if any} of the selling prices we wiII be seeing in the upcoming months. We perceive there is a definite demand for entry-level product in Bakersfield. Although we are seeing strong sales activity for entry level product in the Delano, McFarland and Arvin areas, the Bakersfield market has been dominated by move up to up-scale housing; both custom and tract built dwellings. We anticipate that as the builders recognize the lack of entry-level priced product a number of them will re-evaluate their marketing and production strategies to better appeal to the Metropolitan Bakersfield area's income demographic. We have seen that builders targeting the below $300k market are continuing to find a niche in Southeast Bakersfield, bath north and south of Freeway 58, generally east of Mt Vernon. Arvin is experiencing a surge in production ofsub-$300k demand; with K. Hovanian reporting waiting lists averaging 130 prospective buyers for each release of their entry-level product in that location. They are produeinglselling at a rate of about $-units per month. Another reputable builder in the Southeast Bakcasfield area, Tom Hardt (ADH Advantage Homes -Tyner Ranch) has always been very successful in marketing his entry level product and is maintaining an average of around 15 units per month for their below-$274,000 product line. We are aware that a number of builders who have traditionally focused on producing high-end and up-scale housing product on large lots are now "re-tooling" their operation to make a foray into the entry-level market. We anticipate the Northeast and Southeast Bakersfield market sectors will capture more market share in 2007 than ever, owing to the availability of entry-level housing. 53 Lauver & Associates, Inc. Assessment District 06-I We expect that a number of national builders will be campleting finished lot subdivisions during 200? and bring these to the market for sale to local merchant builders to improve with new housing. Small lots have not been available for sale in Bakersfield for six or seven years. We also are forecasting an emerging trend toward smaller lot subdivisions, PUD and zero-lot- line or patio homes; these may well become a force in the market as developers recognize and seek to capture the pent up demand for lower cost housing product. The fundamentals are still in place in the local market to attract new housing buyers. Interest rates are still below 6.5°!o and there are a number of programs available to assist the first time homebuyer. Builders who have long histories in Bakersfield and other areas of the Central Valley are aware that the entry-level sales activity and volume has historically fueled the move-up and other market segments in Bakersfield. There has not been much entry-level housing production because the builders have targeted the second move-up and higher priced segments during the past two years. While we do not expect to see another price spike of the magnitude seen from 2002 through 2005, the overall average prices will be affected by the resurgence of the entry-level housing market in 2007. The builders who are producing high-quality lower-price dwelling units located in the northwest and sauthwest quadrants are likely to achieve good sales volume in spite of growing competition, since there continues to be equity wealth in the general population and these areas have traditionally held appeal to the move-up housing market.. Housing product in the $350k to $450k range is plentiful Throughout the City however, and this is the market segment in which we expect to see price reductions. 54 File Number 4166 Lamer & Associates, Inc. Assessment District 06-1 Sales of the high-end housing product is expected to slow significantly since there are a growing number of up-scale and executive type housing areas in the City and there is a large inventory of large lot subdivisions available for new oustom-built housing product. In general, the Bakersfield housing market is returning to what we expect in a `normal' mazket. We do not anticipate the appreciation rate of 30% to 35% per year that we have experienced over the past three or four years. Building and sales activity are fikely to correspond with the projected populatimt growth rate. We expect a slow new home sales activity to have a slow start during the first quarter, owing to the normal seasonal winter sales activity decline and the public perception of price declination promoted by news media. 55 Launer & Associates, Inc. Assessment District 06-I NEIGHBORHOOD DESCRIPTIONS - ETCIIEVERRY AREA (TRACTS 6343 & 6361) Introduction L,ocational features are the items which make real estate productive and valuable. These value generating characteristics are perhaps more important than the physical attributes of the land or man-made improvements which make land useful for urban purposes. Analyzing the neighborhood involves a study of change, (if any} the protections offered against change, the area's land use pattern and the occupancy status, among other items. A neighborhood is defined as: "A group of complementary land uses; a cangruous grouping of inhabitants, buzldings, or business ertterprlses." Market Area Analysis Definition: " The objective ataatysis of observable and/or quantifiable data indicating discernible patterns of urban growth, str-ueture, and change that may detract from or enhance property values; focuses on four sets of cofzsideratiorts that influence value: social, economic, governmental, and environmental factors. "~ The process of defining neighborhood bomrdaries involves considering physical barriers, social, political and economic characteristics, and the type and quality of buildings located therein. Area LocationlUrban influence We chose a one, three, and Five mile radius to illustrate the lacational and urban growth trends in this portion of Bakersfield where the subject is located. These radii are shown on the following map. ~ The Dictionarv of Rea[ Estate AonTaisal Fourth Edition. Appraisal Ins$fute, Chicagq IL, Pg 193. ` Ibid; Pg 175. 56 File i~tumber 4166 Laurier & Associates, Inc. Assessment District P6-1 .Silo lltl~tp $naw Fed AT GaOoway Dr Launer 8 As~ocsiatas, ictc. Lalifude: 35,4271 Bakersnettl.. CA.933i4 Januacy30; 200? Longitude; -199:1101 ~ 7 r 1: I '' "~ ~ ti ti ~ 3 ma-'1st~azr~ae~f:ia' E ~- :'~- v. $. +..~ a r~ ~ r Asa ~,p ~, " i r? _ " 4~ f i S +~" Y - 1:~ _.....i ti 3 4~' i T r' f # ._..... L 'x d' v • ~..... pX y .. ~ m ..... ,. .-a : r .. - ~ _~ ~ I 4 ~ ~ 4 ~ 4 c ,. ; ~ 3 ~ ~ ;~ -( ~i : ~ ~ ~ .MFG e ~ .., s :. ~. ~ a ~,~, ^~' ~ { ,. ~~ 1 3 Y iF~~ f k t{~ 3~ 6 ~ ~ $3 ~m`/ t ~ ~ ~ 1 ,, i E v ~ s~ ~~ ~ ~ t ~ A ~ 4 ~r a~. r "~ ~ ~ x .,~ `•, w ~x `~. S F ~, aqL •..z r t;•~y' ~ ~ < ~ t r... n~ a .~ ~ ~r x~~ > ~• ~ r s ~ ty. ~ 7- k~ ~y'.x5 ~:r n 2~lY ~b g* yd.~ " ~' {r ? F ,err ~ ~ w ~5 ,~r,-~ r,~ ~ y„~e ~ ~' r ~ c ~ .{ 4;, y, ~ Fg i ...~ a ~ -, a i$ d6 `-~ d ~ t ~ (C'y $v1.^`tS~'a4~+`x~Y, ~ Y <~},~"5~ frt~ ~ '.i _z~ `. '~ ~ t t' ~ *3x ~x ~ ¢ ~ x~" c o ~~'+~ .mac ~rs A 5 At t ~ ~.. t ?. .;~ • N t d3:* i - s t ~ ~ ~~ ~~~ ~ ~ ~ t C "Y t ~, fr rv o t e t j'~ L ~F. ,~ { ~ ~ ~ 4T a A ~• $ - k ~ g ~" y .S3c'~#,.~5' 3.q~ , ~ ~'r ~ ~` ,~ ~ s~"r``-`ass ~ ~ ~ ~f ~ ~i+ ~ ~ c . ~', x "" ~ ~~ ~~ ~ 3sv > LbJf es~ Y~;e'R[irrc ... .. = ~' ', 5 ..;: ~~~ ..t~~.~i~ ^;., r« iz.~.~m"~t"~..,-~. 4id 4 ~ P .:. ~~..,, a .. Location and General Land Uses As shown on the general area location map, the neighborhood is located in the northwest quadrant Bakersfield, approximately about 8 nines northwest of the downtown civic center area. Large 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 character 57 Lauver & Associates, Ine. Assessment District D6-1 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 east and south of this neighborhood is appraaching full build out, it is anticipated that urban development will continue to spread into this area. This would follow the City's historical growth pattern that has steadily shifted to the west and northwest over the past twenty-five years. Access/Linkages The neighborhood has good access to all parts of the city via Seventh Standard Road and Olive Drive, both with Freeway 99 an-off ramps four miles east of Calloway Drive. Calloway Drive and Allen Road are major arterials providing access in the north and south directions to Rosedale Highway and Seventh Standard Road. Olive Drive from Freeway 99 to Calloway Drive is a divided four-lane arterial. Seventh Standard Road is a divided two-lane arterial providing access to the east from Freeway 99. Zerker Road is a two-lane, north-south secondary connector north of Hageman Road; south of Hageman Road it is a two Lane arterial street. Communitv Services The Bakersfield Police and Fire Departments serve the neighborhood. A fire deparhnent substatian serving the subject neighborhood is on Fruitvale Avenue between Knudsen Street and Coffee Road. 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 Coffee Road and Hageman Road, is anchored by a Vons store. Other notable retail uses in the center include Blockbuster Video, Carl's Jr, Long's Drugs and a Starbucks Coffee Shop. There are several other retail outlets in a newly built satellite retail strip 58 File Number 4166 Lautaer & Associates, Inc. Assessment Disttzet (l6-I adjacent to the center at the south. Another community sized center that serves the neighborhood is located at Allen Road and Rosedale Highway and is anchored by an Albertson's supermarket. City, County and Administrative services are in the downtown central business district, approximately 8 miles southeast of the general neighborhoad. Conclusion The neighborhoad 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 modem residential urban environment. The locational characteristics have generated strong market interest in housuig 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. 59 Lauver & Associates, Inc. Assessment Ddstrict 06-I SITE DESCRIPTIONS Location and Access The subject parcel is accessed along its southerly boundary from Snow Raad and Etchart Road, from Calloway Drive the east (Tract 6343} and the future phases of Tract 6361 along the west line of Verdugo Lane. The Etcheverry (Tract 6343 & 6361) Area 3 ~ N _p ~dteF WH \`'y~ '~ i ~. ,. i s S •qpR ~_ r e. p ~~ S M 60 File Nmnber 4166 Lauver & Associates, Fna Assessment District D6-i Size - Shage - Topoaraghy According to the Kern County Assessor's office, Tract 6343 and Tract 6361 consist of various parcels within County Assessor's Books 492 and 529 as showrr in the Consolidated Spreadsheet in the Addenda. These tracts have a total of 156.1-gross and 141.97-net acres, respectively. The Tentative Tract Map 6343 prepared by SmithTech USA and the Engineer's report prepared by Wilson & Associates for this portion of the Assessment District indicates a net land area of 36.78-net acres in Unit One and 36.54- net acres in Unit Two. These figures will be used in this report for valuation purposes. Tract 6343 is rectangular in shape, with approximately 2,662 feet frontage along the north line of Etchart Road extending the distance between Calloway Drive at the east and Verdugo Lane at the wort. It has approximately 1,320 feet frontage on the west line of Calloway Drive and 1,320 feet along the east line of Verdugo Lane. The reader may wish to refer to the schematic representations shaven in this report fora graphic representation of the subject's shape characteristics. Tract 6361 is adjacent to the west and south of Tract 6343. It is an irregular rectangle bordered along the enfirety of its westerly boundary by the Priant Kern Canal and along the south by Snow Road, a distance of approximately 493 foot. Verdugo Lane forms the entire easterly boundary of this tract, with a distance of approximately 1,642 lineal feet. This tract has a net acreage of 68.65-acres according to the Tract Map prepared by SmithTech USA. Both parcels were formerly a part of a farnvng operation and the gradient appears to be generally level with a slight natural slope downward from northwest to southeast. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Street lmgrovements Snow Road is apublic-maintained two Lane east west connector. Curb and gutter was not in place at time of inspection. 61 Lattr:er & Associates, Inc. Assessment District 06d At completion of the residential lot construction Snow Road will be improved to full half width along the subject's southerly border and Verdugo lane will be improved to full width to a 90' wide street. The interior streets will be 60'-wide City dedicated and maintained residential streets. Zonine According to the Bakersfield Planning Department, the subject parcel is currently zoned R-l. This zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square feet. 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 Calloway Drive and Snow Road and are being connected to the site. All utilities are being placed underground in and utility trenching including storm sewers is underway in both tracts. Environmental Characteristics The appraiser has no knowledge concerning the presence or absence of airy 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 62 File Number 4166 Launer & Associates, Inc. AssessmentDistrict Q6-I 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 asswnption 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 awnership 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 lnsurance Administration panel 0600?5-510000 B, dated September 29, 1986, the subject property is located in a flood plain area Zone C. This designation signifies areas of low flood risk. Flood insurance is not required. According to Special Publication 43 of the California Department of Conservation, Division of Mines and Geology, revised edition, 1994, entitled Earthquake .Fault 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 Immediately east of Tract 6343 across Calloway Drive is an up-scale subdivision of large custom built dwellings on large lots. This gated community is known as Stonebrooke Estates. The dwellings range in size from about 2,700 to 4,500 square feet in size and have values from the high $300's to over $700,000. Immediately south of Stonebrooke Estates and southwest from the subject construction is underway of a new subdivision known as Sterling Ranch. This tract will have a total of 289 lots and is sited on 78-acres. The subdivision is in the grading stage and underground utilities are being installed. South of this subdivision extending to Snow Road is field and row cropluid. West of Tract 6343 is Unit One of Tract 6361, which is part of this 63 Launer & Associates, Inc. Assessment District Q6-1 Assessment District. Further west the land is devoted to plantings of almond trees. Tentative Tract Maps 6766, 6858 and 6861 are north of the Tracts 6343 and 6361 and consist of open field and row aropland extending to Seventh Standard Road and beyond. Land uses south of Tract 6361 along the south line of Snow Road are subdivisions Madison Grove and Hampton Woods, built by Kyle Carter and other developers in the mid 1990's through 2002. These tracts consist of medium quality dwellings from 1,300 to 2,500 square feet with values in the $275,000 to $350,000 range. Lot Sizes and Proaosed Improvements The residential lots in Tract 6343 and 6361 are mostly rectangular in shape typically have around 80 feet of street frontage with depths of about 125 feet. They range in size from 10,000 to over 15,000 square feet, with an average lot size of 10,675 square feet. There is a percolation reservoir on Lot 6 of Tract 6343. Tract 6361 has lots reserved for a cell tower and for a percolation reservoir. The lot sizes and a schematic of the lot layout are displayed in the addenda section of this report. The lots are typical of most other parcels that are being developed with residential housing in this area of the City. The developer plans to improve the finished residential lots in the tracts with singlesfamily residential housing, which will be accomplished in phases. The dwellings are planned to be in the 2,000 to 2,600 square foot size range with pricing beginning in the low $300,000 range. Presently, the underground utilities, storm drains and sewr~rs are in place in both tracts. The develaper reports expenditures of approximately $2,400,000 in tract improvements to date. The costs of these improvements are considered to be saleable and increment the raw land value on a dollar to dollar basis. 64 File Number 4166 Launer & Associates, Inc. AssessmentDistriet 06 1 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 subdivisian. 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 socialleconomic establishments. Because of its location in proximity to the major arterials Rosedale Highway, Calloway Drive, Coffee Road and Ofive Drive, the subject will provide its residents 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 large lots and conform well to the large lot subdivisions in the surrounding vicinity. This is likely to enhance the appeal of the subject lots and completed housing product compethrg for market share. The market niche supplied by these lots conforms to the area and the general development trends in the Northwest Bakersfield area. This should assist in the marketing of the finished lots with or without housing units and demandlgrowth trends should aid in maintaining values into the future. PROPERTY HISTORY Uniform Standards of Professional Appraisal Practice and the Standards of Professional Practice of the Appraisal Institute require that an appraisal report must contain an analysis of any prior sales of the property that occurred within athree-year period prior to the date of value. 65 Launer & Associates, Inc. Assessment District 06-I According to the information provided to the appraiser, the subject was purchased by the present owner on January 13, 2006. Tt was part of a transaction involving a total of 430 tentative mapped lots pursuant to TT Numbers 6343 and 636] .The total purchase price was $21,996,00(1. On the date of the most recent inspection, it was my finding that the subject consists of graded entitled land and street cuts, utilities, storm drainage and sewer installation is underway ASSESSED VALUE AND TAXES Because it is the purpose of this report to determine market value, (which by definition presumes a ready, willing and able buyer), it becomes necessary to allow for an increased or decreased tax liability for the subject property, based upon the valuation reported in this appraisal report. According to a spokesman for the Kern County Tax Assessor and based on a review of the client supplied preliminary title report, there are no delinquent taxes or penalties owed nor were there any liens of record against the subject property. HIGHEST AND BEST USE DefinfCion "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity."~ Alternatively, the highest and best use of land or a site as though vacant "Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumptian that the parcel of land is vacant or can be made vacant by demolishing any improvements."' The Dictionaiv of Real Estate Appraisal Fourth Edition. Appraisal Institute, 2002, Chicago, IL. Pg 135. Ibid.; Page 135 66 File Number 4166 Lauver & Associates, Ir:e. Assessment District 06-1 Introduction The following highest and best use discussion will focus on the primary factors examined in determining highest and best use. 1. What uses are legally allowable? 2. What uses are physically possible (what can the site support)? 3. What uses are financially feasible (and appropriately supported)? A. What is the existing/future neighborhood land use pattern? B. What is the subject site's most probable use "as if vacant"? 4. What uses are maximally productive? 5. Conclusions Throughout the analysis, the valuation theories and principles of anticipation, balance, conformity, surplus productivity, and externalities are examined. These theories or value influences are defined on the facing page. The highest and best use analysis considers these principles as they apply to the site, first, "as if vacant," and then, "as improved." What Uses Are Leeallv Allowable? The zoning for the subject is R-1. This zoning allows development for single-family residential uses, with a minimum lot size of 6,000 square feet per dwelling unit. Therefore, the only legal permissible use possibility for the subject site under the zoning is for one dwelling on a minimum 6,000 square foot lat. What Uses Are Physically Possible? From among the legally allowable land 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 frmrt, side and rear yard setback requirements set forth under the zoning code. It is thus physically possible and legally permissible to develop this site exclusively with residential lots with one housing unit on each lot. 67 Lauver & Associates, Inc. Assessment District 06-1 What is The Most Financially Feasible Use of the Site? Financial feasibility deals with the returns expected on an investment. Return implies that the idea proposed is marketable, 'rentable' ar 'saleable', and is therefore capable of generating a cash flow, thus allowing for a return on, as well as return of, the dollar invested. Developments that were developed to their legally permissible and physically possible uses as single-family residenfial resulted in the most financially feasible use for the respective properties. Thus, development of the subject far 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. 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 harnony with the principle of balance and conformity with the historical and existing land use patterns in the neighborhood. The supplyldernand 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 hausing in the general area. It was the appraiser's canclusion 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. 68 File Nwnber 4166 Lauver & Associates, Ine. Assessment District 06-1 Maximally Productive The proposed use meets all criteria in the foregoing analysis as the highest and best use. The proposed use is therefore the maximally productive use. Conclusion The process of determining highest and best use relied upon examining zoning, surrounding land nse patterns and a cursory investigation using observation of the growth of residential supplyJdemand 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 nearly at a point of equilibrium. Because of the developer's intent to begin construction of individual housellot combinations on a pre-sold basis, we do not expect to see additional standhrg inventory when this housing project comes on line. Moreover, builders using the pre-sold contracting program have less financial exposure due to holding costs 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 subject property is its current proposed use, for single-family residential housing. Development could commence immediately owing to the demand conditions existing at this time. 69 Lauver & Associates, Inc. Assessment District D6-1 NEIGHBORHOOD DESCRIPTIONS - LIN II AREA (TRACT 6453) Area LocationlUrban Influence We chose a ova, three, and five mile radius to illustrate the lacational and urban growth trends in this portion of Bakersfield where the subject is located. These radii are shown on the following map. ~lt~ lifd~p AktenRdATReina.Rtl LaunerB.Associates;lmc.: Latdude: 35".4124 Bakersfield, CA 933~d ~ebhiaty-5, 2007 Longituda: d M18.1455 F m ~ r i ~ ~' k ~ ~ : ~ i f E 4 ^x `yr-n.`.~]v E . +^34 '~~ l:?4~5'1'~i+Y,Y. Y-.~= ~ ~~ .a» aa....~{i.S~'~$3{`t.=...m«iw wvw .. .......... .......`r , 2 9 ~ t~ $ c ~ §: 's ~: m - ~ E ? fi ~~ ~.~ ~ 3 ~ ~ ~ ~k t ~ ~~ 4 '~' 3 f ~` 3 n . k- ~ ~ ~ ~ ~ ~ ~~ ~ f ~ ~~ ~~. .. ~ ~ ~ ..._ la p ; ~ ~ 1 k ~ .; III i ~~ k ` E ~ _ ( t i ~ ~f ~ ~ .. . ~ ~.. j(( 3 ,, d t`.,, m, ~~ ~ ~ i ~ ~ d ~-~- _ S ~`" { . ~ - -"~ k,. ( k f~ ° ~ ~ II b 4 w a Y 3Z2$„iX~i4 [ k t ~.`~ ^`P ~ ~ ~ ~ ~ ~ ~ ~ ~ k . ~ 2 a 1 k v ~x t ~t if~i~' 5 .5 i k a ~ ~ Y...H, 1S. ,k.iak3'r 5 k~ ~ ~,..~ ? a V l k t9S 4, t '~l~^~. f { ~ 'S ~ ; v ~ ~ 'S ~ ~ fT r ; ~'G d ~ ..~, 1 d - Alien 3*~ Rznaa`~' ~~ ~~ '~ .~'.~- ~ # ..., •i.'3:€1€tx~{t#.,~ ` ~" is sr,.~ ; s t * * ~",„ y~" ~+ ' ~ ; ~t , "*~ ,~ h... L t '' ~ ~ . ~ sr~SSa ~ r ~ ~ q ~ 3 ~ .< ~~ F "~. r) t `~ Y j-a s 2 t s Y p ~.,, t ~ ~ ~ rf' ~`'x "X'.. a 4 4 .. l ~+k' 4 v E k,'SxV~r'~ '.' a. m~' ~ ~ ~ ~ ~ t . ] 3 t h k~~ S ^ ,1e, ~ x ~, ^,~ ~ v 21 ~ ~ [ 2 t p :. ' { x Nv.L ` ~h ~ ~ ~ ~ k ~ ~~ 'k Ye} `e ~.p .Y t j t ~ "+~ ntS ~ *t 4 ~ ~ . Wi'G"{~ ~ Sd~iT~ t~k` ~~~:~ % ~ ~ Ro S r 7 ~ ~ k ~ 7 ~.~ C k, . k.V ~~~,$t's ~~ i'k S ~ ~ ~ sk ~ .a ~~ "3 R,i ' ~ .'.L61 5R~;'.' ~s At+as s . . 70 File Number 4166 Lauver & Associates, Inc. fissessrraent District 06-1 Location and General Land Uses As shown on the general area location map, the neighborhood is located in the northwest quadrant Bakersfield, approximately about 9 miles northwest of the downtown civic center area. Large portions north and northwest portions of the general area are cultivated with permanent plantings and irrigated field and row cropland along with large parcels of unimpraved mrdeveloped 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 east and south of this neighborhood are approaching full build out, it is anticipated that urban development will continue to spread into this area, This would follow the City's historical growth pattern that has steadily shifted to the west and northwest over the past twenty-five years. AccesslLinkaEes The neighborhood has good access to all parts of the city via Seventh Standard Road and Olive Drive, both with Freeway 99 on-off ramps four miles east of Calloway Drive, Calloway Drive and Allen Road are major arterials providing access in the north and south directions to Rosedale Highway and Seventh Standard Road. Olive Drive fram Freeway 99 to Calloway Drive is a divided four-lane arterial. Seventh Standard Road is a divided two-lane arterial providing access to the east from Freeway 99. Reina Road is a four-lane, east-west connector from Calloway I?rive to the future Renfro Road. Community Services The Bakersfield Police and Fire Departments serve the neighborhood. Afire department substation serving the subject neighborhood is on Rosedale I-Tighway between Calloway Drive and Coffee Road. 71 Launer & Associates, Ine. Assessment Distrdet ©6-1 Golden Empire Transportation lnc. 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 Coffee Road and Hagernan Road, is anchored by a Vons store, Other notable retail uses in the center include Blockbuster Video, Cares Jr, Long's Drugs and a Starbucks Coffee Shop. There are several other retail outlets in a newly built satellite retail strip adjacent to the center at the south. Another community sized center that seraes the neighborhood is located at Allen Road and Rosedale Highway and is anchored by an Albertson's supermarket. Major shopping is in the Rosedale Promenade located on the north line of Rosedale Highway between Calloway Drive and Coffee Road. This is a subregional mall with mare than one million square feet of retail, including Wal Mart, Home Depot, Best Buy, Kohls and many national chain restaurants and stores. City, County and Administrative services are in the downtown central business district, approximately 9 miles southeast of the general neighborhood. Conclusion The neighborhoad 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 transifion, from agricultural land, older residential and outmoded commercial uses, to a very modern residential urban enviromnent. 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. ~~ File Number 4166 Lauver & Associates, Inc. Assessment District D6-1 Barring any unforeseen negative economic/social occurrence, all of the discussed findings should assist in maintaining values in the area in general and for the subject in particular. SITE DESCRIPTIONS - LIN II AREA Location and Access The subject parcel is accessed along its northerly boundary from Reina Road, Allen Road at the east, and along its southerly boundary from Vega Meadows Road. Lin II Area Tract 6453 ~._ ~~~ i N, zre;rr. n~s,sarst w 3[ „._ ~~ 14 ~Hb EIS ti t ~x ~ 6 i ~~ 7 ~_.~~ t 'ry i ~w r *~ ~° > { ~= ~ i i ~: v' ~ ~ ~ ~ ~ ~-' .~-- l ~ ~~ ~ ~ ~ ~ < ~ ~ a ~ ~ YI i- ~ c -. st € or. i- .,, -i- ±a ray rv,ve ssas roar aP=.: ~~+. -. RPnLT '+' rs i9j. ~~,-., I ~~~. C _~ y __,r ._.~-~~ i @ 73 Lauver & Associates, Iize. Assessment District OG-1 Size -Shane - Topography According to the Kern County Assessor's office, the subject is described as portions of Assessor's Parcel Numbers 520-170-O1 and 529-012-20. The Engineer's report prepared for this portion of the Assessment District indicates the Lin II land area as 76.75-acres. It is irregular in shape, with approximately 940 feet frontage along the west line of Allen Road running northerly to the Corner of Reina Road. It has approximately 2,752 feet frontage on the south line of Reina 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. The parcel is irregular in shape as shown on the tract map and the schematic diagram. It appears to be generally level with a slight natural gradient sloping downward from northwest to southeast. The soils are classed as average for agricultural cultivation, with generally sandy and sandy loam soil. Street Improvements Reina Road is a recently completed public-maintained fully improved 4-lane east west connector. It has landscaped medians, protected left turn lanes, sidewalks and curb and gutter in place. At completion of the residential Iot construction the interior streets will be 60'-wide City dedicated and maintained residential streets. Zoninn According to the Bakersfield Planning Department, the subject parcel is currently zoned R-1. This zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square feet. 74 File Number 4166 Launer & Associates, Ine. Assessment Dzstrzet 06-I 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 Reina and Allen Roads and are connected to the site. All utilities are underground and utility trenching for storm is nearly complete. 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 enviromnental assessment from a qualified environmental expert to determine the potential environmental risks associated with o~vership of the subject property. If such toxic conditions do exist, the property value may be adversely affected. 75 Launer & Associates, Inc. Assessment District 06-Z Flood and Earthauake Zones According to the Federal Emergency Management Agency Federal Insurance Administration panel 060075-1000 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 43 of the California Department of Conservation, Division of Mines and Geology, revised edition, 1994, entitled Earthquake Fault 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 East of the subject across Allen Road the area is nearing full build out consist of nearly new, new and under construction single-family subdivisions, Immediately across Allen Road to the east are the Hageman Ranch, Homestead Ranch by Bearer Homes and Nottingham Estates, all medium to good quality residential developments. South of the subject is a Lennar Homes residential tract development known as Ashton Falls. North of the subject a new custom lot subdivision is nearing lot completion. This custom lot development known as Northwood Ranch {Tract 6364} will ultimately consist of 302 large lots (10,000+ SF} and the lots are being sold to custom builders who will be improving the lots with mostly large, up-scale custom built dwellings of various sizes. North of the Northwood Ranch development is Frontier High School, completed in 2006. West of the subject is mostly irrigated field and row crop and plantings of trees and vineyards. Lot Sizes and Proposed Improvements The residential lots in the subdivision typically have 60 to 65 feet of street frontage with depths typically around 125 to 135. The lots range in size fram 7,290 to 22,000 square feet, with an 76 File Number 4166 Lauver & Associates, fac. Assessment District 06-.1 average lot size of £3,056 square feet. The lots are typical of most other parcels that are being developed with residential housing in this area of the City. The developer plans to improve the finished residential lots in the tracts with single-family residential housing, which will be accomplished in phases. The dwellings are planned to be in the 1,600 to 2,400 square foot size range with pricing beginning in the high $200,000 to low X300,000 range. Presently, the underground utilities, storm drains and sewers are in place, roads are graded and curb and gutter is in place in Phase One. The developer reports expenditures of approximately X2,500,000 in tract improvements to date. The costs of these improvements are considered to be saleable and increment the raw land value on a dollar to dollar basis. 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 ofproperty 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 proxhnity to the major arterials Rosedale Highway, Allen Road, Reina Road, Calloway Drive, and Seventh Standard Road, the subject will provide its resident's ease of access and short travel times to conveniences. 77 Laurier & ~1 ssociates, Irae. Assessment District 06-1 A review of the lot sizes in the subject phases indicates that the average lot sizes will conform well to the subdivisions located immediately to the south and those to the east of the subject. This 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 Northwest Bakersfield area. This should assist in the marketing of the finished lots with or without housing units and demandlgrowth trends should aid in maintaining values into the future. PROPERTY HISTORY Uniform Standards of Professional Appraisal Practice and the Standards of Professional Practice of the Appraisal Institute require that an appraisal report must contain an analysis of any prior sales of the property that occurred within athree-year period prior to the date of value. According to the Kehl County Recorder, the subject has been maintained under the present awnership for more than three years. On the date of the most recent inspection, it was my finding that the subject consists of graded entiTled land and street cuts, utilities, storm drainage and sewer installation is underway ASSESSED VALUE, TAXES AND HIGHEST AND BEST USE The comments applied to the Lin II Area's assessed value and taxes and its Highest and Best Use are as stated in the Etcheverry Area comment section. 78 ~ File Number 4166 Lauver & Associates, Inc. Assessment District 06-1 NEIGHBORHOOD DESCRIPTIONS -UNIVERSITY PARK AREA Area LocationlUrban Influence We chose a one, three, and five mile radius to illustrate the locational and urban growth trends in this portion of Bakersfield where the subject is located. These radii are shown on the following map. [q iVf13 Ming AveRTGgsfardRd Iauner&Associates,.inc.Latitude, 36.33375 Bakersfield:; CA 93301 Fe6ruan~ 6, 2007 Longitude.: -1'F9..09225 ~t i~ 1 ~ r~ y.. t i t I i ~ F d.. ~` d{t~( ~ ~ ~~ ~ f ~ ~ ~ v ~~ e`YY} ,} ~ } Y ~~f?vf`'~v, i.'t`.~ i( e?p~ti` ~ }S.~ r t `fig 4"~a ".* y `{.+„ v' 1 «1fi,3~ §i;x ~ ~ ~ ~ t ~ v ' i ~ y K , p . } { 5 t 5 ~iA L S Yi •~'d'°Y ~ ~ i~ I` ~~~ 2` ~~~ Z it t j ~; ~ ;,,~ '~¢' ) „1"'p' P ~ 5~<4 +ut'{K `vy ~ IY 4Xj d. ~ ~ r # trp ~ ~. F~ ae _ £ u I ~ f ~ k x h <. ~ t t `'~i~~ ~ ~ ~' ~ x s.a;~~ t, 8 L`~`.g, &~ t,~~z ~~ ~ ~ i ~ i ~ ' -Sy ~`,- -~', i x` P-~irv.'~i~,--h.~f 4 i ~ p ~~ R T~ ~ # 5 ~..~W>1 `MMxfi'..# ~ j i~W } ti. ~ ~ '~§ J'~yS' ~ #'*Y~''~1 "f'}ppyy~ 4~5 iy. I` ? b'i~ ~ ~3s t . t~ ~ 5~ Liu ~ ii pi. * $ 'emu ~~ } E ~ ~ ' ~ 'M ~ t ux $ l t :: ,~ 3 ~ k y ay¢ p Y~y ip Si ' ~ ~ § . } m c~trv4j~~ ~ 4 .~ i.2,{'RN IAY ~.$ gib '~ ~, ~rviS4£~"y„ ~ ~ , , r ,~ e- x t L s 3 S ; E x ~ x, t ,<.: ~ n ~ w ` ~ 4 r~, 3S fi G '~~ ~ ' § j s~ ` 5 ~` " ~ kc + 1 ~. ~s. ~ t i { .~ X ~.^,x F vii``}f L~f r y ( ~ ~ ~ 44 ~~ . l ~ ~ ~ ~ ' ~ ~ . S } i t h Yt p `. F ~1...@ 1 t~ ~lli ' M p ~ ~y {{ ka- } i,"". vx" =F.tS{" p ~ 8t {{~ 2 }},, '~ ~ ~ uE! .. fzcaWYui: X* ~# ...n t :. ~ ..~. '1~ ~ c~'v4g xi~4 ~ ,...... ~., _+..... .. ....~~., s S .~ .Sri,. i t zd `~ t .x i ;,. ~ .m 1 ~.. .. ~~ ~~ Y { o- ~ t ~; { y_ f 5 [ L ~ ~ ' d ..... n~§...'..~ a}..}} k.-`iu.n.. ~..+.. @$` ~. ALA E } ~ ~. .?ain~'S{ 2 E .: .... .... ~ L ~ X6X6X6f ~ k ..... ~ q !< i _ ~ ~ .ti ~. S ~~. 3 ~1 y J j{~ ~ y S i ~ ~ ~ -. I € £ ~' 260a kt. Fe k ktEaz' 79 Lauver & Associates, Iitc. Assessment District Q6-l General Neighborhood Description The neighborhood is located in the southwest quadrant of Bakersfield, approximately 4 miles southwest of the downtown civic center area. As can be seen in the Site map on the previous page, the neighborhood is nearly fully built up within the three mile radius surrounding the intersection of Ming Avenue and Gosford Raad. The majority of the improvements in immediate area within the one-mile ring is part of a Master- Planned Community ariginally begun by Tennaco Land Development Company, which was later purchased and continued by Castle & Cooke. The area was designed as clusters of communities of residential tracts with commercial land uses along the major arterials and connectors. The single-family residential areas are buffered from the major traffic routes by multi-family or higher-density single-family developments. Both California State University and the Valley Plaza Mall are located near the center of the radii that describe the general neighborhood. Access The neighborhood has good access to all parts of the city via, Stockdale Highway, Ming Avenue, and White Lane, all with Freeway 99 on-off ramps. North-South major arterials include California Avenue, New Stine Road and Gosford Road. Ming Avenue, a divided 6-lace arterial provides access to Freeway 99 and to the Valley Regional Mall, 3-miles east of the intersection of Ming and Gosford, White Lane, also a major arterial from Freeway 99 to Buena Vista Road is a divided four-lane arterial. Stockdalc Highway is an east-west major highway also serving as a commercial arterial connecting from Freeway 99 to Interstate 5, about 7 miles west of the Ming/Gosford intersection at the center of the described neighborhood. 8~ File Number 41 b6 Launer & Associates, Inc. Assessment District 06-I Community Services The Bakersfield Police and Fire Departments serve the neighborhood. A Fire Department substation serving the area is on Buena Vista Road between Ming Avenue and Stockdale Highway. 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 and retail land uses serve convenience shopping needs along both sides of Ming Avenue east of Ashe Road and along Gosford Road in the vicinity or White Lane. Valley Plaza Mall, a regional size mall is located near Freeway 99 and Ming Avenue. Other convenience and retail/service facilities are located along the major arterials and at the major intersections. California State University campus is located about '/ mile northwest of the Ming/Gosford intersection and extends along the south line of Stockdale Highway from Old River Road at the west to within 'l mile of Gosford Road. Numerous elementary, junior high and high schools are located throughout the area, many are walking distance to the residential areas. City, County and Administrative services are in the downtown central business district, approximately 8 miles northeast of the general neighborhood. Existing Improvements and Development Trends The general area is nearly fully built up with urban land uses. T'he Stockdale Highway, Ming Avenue and the White Lane arterials have the majority of the commercial, retail, convenience and service land uses for the entire Southwest sector of the City. 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 81 ' LauneY & Assaciates, Inc. Assessment Distrzct 06-1 planned Gosford Business Park. The power center is anchored by a new Sam's Club, Super Wal Mart (future), 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. In general, the development trend is expected continue to expand to the southwest portion of the described neighborhood. Our studies show that this area contains the greatest concentration of high priced residential developments and the highest income level demographics in Bakersfield. 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 stability, having been improved with clusters and enclaves of residential communities in a modern residential urban environment; these master planned communities all have good reputations as desirable areas, 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 far affordable housing and the quality lifestyle available. Barring any unforeseen negative economicfsoeial occurrence, all of the discussed findings should assist in maintaining values in the area in general and for the subject in particular. 82 File Number 4166 Lauver & Associates, Inc. Assessment District Q6-1 SITE DESCRIPTIONS -UNIVERSITY PARK AREA Location and Access The subject parcel is accessed along its northerly boundary from Ming Avenue and Gosford Road at the east. ~nrversi[y rarx rvrea r race o iy7 l~ R„ t ~.;~ ~ ~ i - ,~ - - ~ ~:.. ~.. ,_ . ~z,~. # ' :-- t, E N 4 ~ ~ ~ _. n { x'. .F y °y3 t F~. _ , ~ ~ . i^ ~ , _1 , ~ ~.~ _ l, ~_« ~ ,~ vx~ f ~~ ~ , 83 Launer & Associates, Inc. Assessment District 06-1 Slze -,~h1pC - TOAOEYaphy According to the Kern County Assessor's office, the subject is described as Assessor's Parcel Numbers 389-300-04 and O5, showing gross acreage of 30.63-gross acres. The Engineer's report prepared for this portion of the Assessment District indicates a net buildable land area of24.49- acres. It is basically rectangular in shape, with the northwest corner (324 x 363) reserved as a future library site and not a part of the University Park Area. The parcel has approximately 924 feet frontage along the south line of Ming Avenue and 1,188 feet along the west line of Gosford Road. The southerly boundary is approximately 1,340 feet in width. 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. The parcel appears to be generally level with a slight natural gradient sloping downward from north to south. The soils are classed as average, with generally sandy and sandy loam sail. Street Improvements Ming Avenue and Gosford Roads are both public-maintained fully improved 6-lane arterials. They have landscaped medians, protected IefC turn lanes, sidewallcs urd curb and gutter in place. At completion of the residential lot construction the interior streets will be 56 feet wide City dedicated and maintained residential streets. Zoning According to the Bakersfield Planning Department, the subject is currently zoned P.U.D. The Planned Unit Development zoning designation allows single-family residential land uses ranging from R-1 to R-4 multi-family uses. The uses allowed for land classified as being within a PUD cane or a PUD combining zone. Among the permitted uses are: 1. One-family dwellings; 84 File Number 4166 Launer & Associates, Inc. Assessment District 06-I 2. Multiple-family dwellings; 3. Condominiums; 4. Cluster developments; 5. Parks and playgrounds, public and/or private; According to the municipal code, land may be classified as being solely within a PUD zone (exclusive zone), or the PUD zone maybe used as a combining zone in a R-1, R-2, R-3 or R-4 zone to assign a base zone defining allowable uses and ensure future site development will be compatible with surrowlding development and/or to recognize unique site characteristics. The minimum azea for a PUD zone is one acre. The subject has been approved by the City for development with 217 buildable lots, 1 private street, 8 private landscaped lots, 1 private park and 4 common lot areas. The approved PIID plan indicates a density of 8.86 dwelling units per acre. Easements and Encroachments The appraiser was not provided with a tide 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 Ming Avenue and Gosford Road and are eannected to the site. Within the tract all utilities are in place underground, curbs/gutters are complete and streets are all graded. Final lot preparation is nearly complete and footings/forms are in place for the first of the dwelling units (we assume sales models). 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 85 Lauver & Associates, Inc. Assessment District 06-I 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 abtain 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. Flood and Earthquake Zones According to the Federal Emergency Management Agency Federal Insurance Administration, 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 Publicafion 43 of the California Department of Conservation, Division of Mines and Geology, revised edition, 1994, entitled Earthquake Fault 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 Imnrovements East of the subject across Allen Road the area is a fully built-out subdivision of single-family subdivisions known as Laurelglen. This is amaster-planned community that was built in the early 1980's and wnsists of rnedium to good quality dwellings of various sizes and ages. Immediately across Ming Avenue to the north is an upscale gated community of apartments known as The Springs. Directly east of The Springs is another gated master planned community 86 File Number 4166 Laurier & Associates, Inc. Assessme~:t District 06-I known as Stockdale Estates. Stockdale Estates was begun in the 1980's and was fully built out by 1994. Background development is single-family residential buffered from the commercial streets and districts by multi-family developments, parks and schools Proposed Improvements and Lot Sizes University Park is divided into Two areas which have two distinct product types. The northerly portion of the site; 13.17-acres, is to be known as Oxford Cottages (Assessment Numbers 280- 376), This portion of Tract 6799 will have a total of 97 lots. These will ultimately be improved with freestanding single-family units on small lots. These lots range in size from 3,312 to 5,163 square feet, with an average lot size of 3,533 square feet. The developer intends to develap the finished lots with three housing types. The smallest model is 1,660 square feet with pricing projected to begin at $300,000. Oxford Cottages will also offer an 1,881 square foot model priced at $315,000 and a 2,191 square foot model priced at $330,000. The southerly portion of the site covers 11.32 acres (Assessment Numbers 377-496}. The tract map shows there will be a fatal of 120 lots. The lots in this area, known as Cambridge Gardens, are smaller, ranging in size from 1,404 to 2,840 square feet, with an average lot size of 1,794 square feet. The houses will all betwo-story detached, ranging in size from 1,371 to 1,791 square feet. Pricing will range from $270,000 to 5305,000. At the most recent inspection, all utilities are in place underground, curbslgutters are complete, and streets are all graded. Final lot preparation is nearly complete and footings/forms are in place for the first of the dwelling units. The developer reports expenditures of approximately $1,500,000 in tract improvements through December 2006. The costs of these improvements are considered to be saleable and increment the raw land value on a dollar to dollar basis. 87 Lttuner & Associates, Inc. Assessment District 06-1 Canclusions• 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 sociaUeconomic establishments. Because of its location in proximity to the major arterials and highways including Gosford Road, New Stine Road, Ming Avenue, White Lane, Stoekdale Highway and Freeway 99, the subject will provide itsresident's ease of access and short travel fimes to conveniences. The developer's development now underway is both unique and unprecedented. This corner parcel has long been sought by various potential purchasersldevelopers for development. Although the parcel could be developed to an even higher density, the proposed density and product type will have good market appeal to those seeking a detached dwelling without the negative aspects of condominium ownership. It is considered to be the 100% location for young professionals that are also first-time homebuyers. This is market niche that has not been addressed in Bakersfield area. Its proximity to Cal-State, majar shopping, good schools, all conveniences, will assist in the marketing of the project as planned and will maximize the value of the site. PROPERTY HISTORY Uniform Standards of Professional Appraisal Practice and the Standards of Professional Practice of the Appraisal Institute require that an appraisal report must contain an analysis of any prior sales of the property that occurred within athree-year period prior to the date of value. 88 File Number 4166 F.a„ner ~ Associates. hza Assessment District 06-I According to the Kern County Recorder, the subject has been maintained under the present ownership for more than. three years. On the date of the most recent inspection, it was my finding that the subject consists of graded entitled land and street cuts, utilities, storm drainage and sewer installation is underway ASSESSED VALUE AND TAXES Because it is the purpose of this report to determine market value, (which by definitian presumes a ready, willing and able buyer), it becomes necessary to allow fox an increased or decreased tax liability for the subject property, based upon the valuation reported in this appraisal report. According fo a spokesman for the Kern Comity Tax Assessor and based on a review of the client supplied preluninary title report, there aze 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 February 28, 2007, and made a part of this report by reference. HIGHEST AND BEST USE Definition "The reasonably probable and legal use of vacant land or an unproved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity."~ Alternatively, the highest and best use of land or a site as though vacant: "Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based mr the ~ The Dictionary of Real Estate Appraisal Fourth Cditiop. Appraisat Institute, 2002, Chicago, IL. Pg 135. 89 Lauver & Associates, Znc. Assessment District 06-Z assumption drat the parcel of land is vacant or can be made vacant by demolishing any improvements."` IntroducCion The following highest and best use discussion will focus on the primary factors examined in determining highest and best use. 1. What uses are legally allowable? 2. What uses are physically possible (what can the site support)? 3. What uses are financially feasible (and appropriately supported)? A, What is the existing future neighborhood land use pattern? B. What is the subject site's most probable use "as if vacant"? 4. What uses are maxhnally productive? 5. Conclusions Throughout the analysis, the valuation theories and principles of anticipation, balance, conformity, surplus productivity, and externalities are examined. 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 Leuallv Allowable? The zoning for the subject areas are designated by the City of Bakersfield as a Planned Unit Development. According to the municipal code, land maybe classified as being solely within a PUD zone (exclusive zone), or the PUD zane may be used as a combining zone in a R-1, R-2, R- 3 or R-4 zone to assign a base zone defining allowable uses and ensure future site development will be compatible with surrounding development and/or to recognize unique site characteristics. The minimum area for a PUD zone is one acre. The permitted number of dwelling units may be distributed within the planned residential development zone in accordance with the conditions and terms established provides for the specific parcel to be developed with 217 buildable lots as shown in the recorded Tract Map 6799. ~ Ibid.; Page 135 9~ File Number 4166 Launer & Associates, Inc. Assessment District 06-1 What Uses Are Physically Possible? From among the legally allowable land 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 lots with one housing unit an each lot as provided by Tract 6799. What is The Most Financially Feasible Use of The Site? Financial feasibility deals with the returns expected on an investment. Return implies that the idea proposed is marketable, 'rentable' or 'saleable', and is therefore capable of generating a cash flow, thus allowing for a return on, as well as return of, the dollar invested. Developments that were developed to their legally permissible and physically possible uses as single-family residential resulted in the most financially feasible use for the respective properties. Thus, development of the subject for single-family residential purposes is considered the most financially feasible use. Determining the highest and best use of the site as if vacant from the possible uses also requires examination of the existing and future land use patterns in the neighborhood. Historical and recent additions and proposed and under construction projects in the immediate area consist almost exclusively of detached single-faanily residential uses. It was established that this neighborhood's location in the Southwest quadrant of the city has historically been ane of Bakersfield's mast desirable residential locations. The latest surveys also indicate strong market demand for entry-level 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. 91 Lauver & Associates, Inc. AssessmeratDistrict 06-1 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 directed to the first time buyer (entry level product). 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 supplyfdemand characteristics were analyzed in a prior section of this report. It was the appraiser's conclusion that, given the lack of entry-level housing product in the subject's area, there is immediate demand for the subject's development. It was therefore concluded that there is sufficient demand existing to warrant development of entry-level single family housing in the general area. Conclusion The process of determining highest and best use relied upon examining zoning, surrounding land use patterns and a cursory investigation using observatian of the growth of residential supply/demand in the subject area. The easterly portion of the general neighborhood is beginning to develop with single-family residential subdivisions. An examination of the residential housing market in Bakersfield indicates there is a shortage of entry-level housing in the Metropolitan area. All well located parcels of land that is appropriately zoned have immediate marketability. Because the subject has such a versatile zoning, it is my opinion that the subject parcel is desirable and marketable. Development could commence immediately owing to the steady demand conditions existing at this time. VALUATION 1VIETHODOLOGY In the appraisal of real estate there are three tradifional approaches to value. These are the Cost, Direct Sales Comparison, and Income Approaches. 92 File Number 4166 Lauver & Associates, fnc. Elssessment District d6-I Methods Applied to the Subiect Developmeufs In appraising the subject parcels, which consist of vacant land, the Sales Comparison approach is the primary value indieatars used in the local market and is considered the most pertinent of the value indicators for the subject. The Cost Approach is pertinent in the sense that the ].and 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. Cosy Approach Defined The cost appraach is defined as: "A set of procedures through which a value Indication is derived for the fee simple interest in a property by estitraating the current cost to construct a reproduction of (or replacement for} the existing structure, including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the estimated Iand value. Adjustments may then be made to the indicated fee simple value of the saabject 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 Comparison Approach Defined The sales comparison approach is defined as: "A set of procedures In which a value Indication is derived by comparing the property being appraised to similar properties that have been sold recently, then applying appropriate units of comparison and making adjustments to the sale prices of the comparabtes based on the elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant; it is the most contm~n and preferred The Dictiovarv of Real Estate Appraisal, 4"' Edition, Appraisal Institute, Chicago, IL, 20Q2, Page 67. 93 Lauver & Associates, Inc. Assessment District Q6-I method of land valuation when an adequate supply of comparable sales are avaa"lafile."~ Application of the sales comparison approach involves gathering information on sales Transactions involving properties with similar physical and locational characteristics. Since no two properties are exactly alike, adjustments are made to the comparable sales to reflect the characteristics of the subject property. After making the adjustments, a range of value is indicated for the subject that is reflective of the current local market conditions. Income Approach In an analysis of land and lots, a value from the Income Approach is typically presented using a process known as a residual cash tlow 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. This approach recognizes the time value of money and it applies to those areas identified in this report as having final mapped or finished lots. Methods Applied to the Suhiect 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, Complete' ready for improvement Income Approaches Ibid Page 255. 94 File Number 4166 Lauver & Associates, Ine. Assessment District 06-1 Estimated `As Is' Value of land The sales comparison approach used is used for all parcels to establish the underlying land value with tentative maps in place, prior to commencement of improvements to the land. This value technique is pertinent to each parcel in the Assessment District. Estimated Finished Lot Values `As Complete' The first methodology used in valuing the lots that are recorded in the various tracts is the Cost Approach. This approach involves estimating the value of the unimproved land in their tentative mapped state and adding the costs to produce finished lots. Costing sources used include Marshall Valuation Service, a recognized national costing service, cost estimates frpm a major bank cost estimating deparhnent 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 are analyzed. These data are compared Yco the subject's lots and adjusted to represent the subject's characteristics. The adjusted values from this approach provide a range of values 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 recorded tracts `As Complete'. Income Approach 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 far 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. This technique is also referred to as the Bulk' value. 95 Lanner & Associates, Inc. Assessment District 06-I VALUATION Value of the Unimproved Tentative Mapped 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 in the Addenda. A summary of the pertinent data is on the following page in a grid and each of the data is graphically displayed on the following sales map. I' L.anu cares i.ocanon $fiIC :. La~ut S31e R, lr„tit:.Gt Lrud S+Ic L ~ (x"_QG~ ~__ r?,51ft OUi Lo~npu~ s ..~ ~. ~ ' `~ ]. .. I. .. The characteristics of the land sales are summarized on the following page 96 File Number 4166 Launer & Associates, Inc. Assessment District Q6-1 COMPARABLE LAND SALES SUMMARY Sale Location Date Price Size SP/DU SPI$ Acre 1 SIS Hosking Rd., E/O Union Ave 5/6/2005 $5,813,500 35.53 $38,500 $163,622 2 Hosking Road & Monitor Street 5/10/2005 $4,200,000 27.83 $33,333 $150,916 3 NEC Panama & 01d River Road 5/17!2005 $5,614,000 38.29 $35,758 $146,618 4 S/S Panama Lane, W/O Stine Road 7/2212005 $9,660,000 60.79 $42,000 $158,908 5 SEC Panama Lane & Ashe Road 8/2512005 $11,124,500 71.75 $37,331 $155,045 6 SEC McKee & Hughes Lane 6116J2006 $8,214,000 39.13 $52,318 $209,916 7 SEC Glenn Street & Calloway Driv 1 012 7/2 0 0 6 $7,712,000 51.32 $38,560 $150,273 8 E. Panama E/O S. Union Avenue 1126/2007 $7,626,000 55.98 $41,000 $136,227 4 Hageman & Renfro Roads 10/10t2006 $8,480,000 66.15 $40,000 $728,193 Sale 1 is a May 2005 sale of a site generally located on the south side of Hosking Road, cast of Union Avenue, in South Bakersfield, purchased by McMillin Homes. The proposed homes range in size from 1,200 to 1,827 sq. ft. Regional access is provided by State Highway 99 and local access is provided by Hosking Road. The site was purchased on a paper lot basis of $38,500 per lot. The site finishing costs total $40,103 per lot, resulting in a finished lot cost of $78,603 per lot. Sale 2 was purchased from FHC & Associates (Floyd Hinsely) by Moreland Corporation. The selling price was the sum of $4,200,000, calculated on the basis of 126 buildable lots at $33,333 each. The agreement was entered on March 9, 2005 and the purchaser taok title as Val Verde LLC on May 10, 2005. The purchase price included tentative mapping for 126 lots pursuant to Tentative Tract 6368. At the time of sale the parcel consisted of vacant tunimproved acreage with a single family dwelling located on the north property line along Hosking Avenue. The dwelling did not contribute to the negotiated selling price. Sale 3 is an unimproved parcel at the northeast corner of Old River Road and Panama Lane. Both roadways require widening, and utility lines require relocation and undergrowrd installation. Zoning is in place, with the parcel planned for development to 157 residential lots averaging 7,200 sq. 8. This transaction entered into escrow to Ennis Homes on March 1, 2005 and escrow closed on 5/17/2005. 97 Lauver & Associates, Inc. Assessment Z?istrict 06-1 Sale 4 is a July 2005 sale of a 230-lot site generally located on the south side of Panama Lane, west of Stine Road, in South Bakersfield. The site abuts the Farmer Canal and the Arvin Canal to the east. The proposed homes range in size from 1,500 to 2,700 sq. ft. Regional access is provided by State Highway 99 and local access is provided by Panama Lane, The site was purchased on a cost basis of $95,000 per finished lot. Sale 5 was vacant agricultural land at the time of sale It is located at the SEC of Panama Lane and Ashe Road. According to the developer, they intend to construct a total of 298 single-family lots that will appeal to the entry-level or first time home buyer. Sale 6 is a parcel of unimproved land located on the Southeast corner of McKee Road and Hughes Lane. The property is accessed along its northerly boundary from McKee Road, atwo- lane east-west residential street. The parcel also fronts on the east line of Hughes Lane and along the west line of the future Ellashosh Street. The sale price included an approved tentative map for 157 buildable lots pursuant to TT 6362. The lots range from 6,720 to 14,293 SF, with an average lot size of 7,513 SR A canal at the SWC of the parcel has to be relocated at a cost estimated at $314,000 ($2,000JLot) Sale 7 was purchased by John Balfanz Homes as EI Toro Viejo, LLC. The parcel is located immediately north of the BN&SF main rail line at Calloway Drive in Northwest Bakersfield. Acearding to the escrow instructions, the seller entered into a purchase agreement with Jahn Balfanz Development, LLC. The terms of the sale were a down payment of $1,000,000 to the seller (non-refundable} and the buyer loaned the seller $3,500,000 for the seller to complete acquisition from Nancy Lea Jackson Trust {former owner). John Balfanz recorded a First Trust Deed to perfect and secure his interest. The sales agreement stipulated the seller obtain a General Plan Amendment changing the designation from ER to LR, a zone change from A to R-1 and an approved tentative map for at least 2001ots. The total purchase price was agreed to be the sum of $7,712,000. The closing date was agreed to be not later than January 10, 2007. Sale 8 covers approximately 55.98 gross-acre parcel of land according to the Agreement of Sale that was submitted to the appraiser and upon which this appraisal is based. The Tentative Map 98 File Number 4166 Lauver & Associates, Inc. AssessmerzE District 06-1 No. 67'12 submitted is a tentative map prepared by SmithTech USA, Inc. dated 11-I 1-2005. It shows a gross and net acreage of 48.01 and 36,01-acres, respectively, with a total of 190 buildable Tots and one retention basin. The property is located in Southeast Bakersfield on the south line of Panama Lane between S. Union Avenue and Panama Lane. Sale 4 represents the October 2006 sale of an irregular shaped parcel of land located along the north line of Hageman and the west line of Renfro in Northwest Bakersfield. It involved the southerly portion of recorded Tentative Tract 6252; 212 buildable lots. The remainder of the tract's 241 lots adjacent to the north is offered for sale. At the time of sale the land was fully graded and ready to commence with the installation of utilities. The lots range from 8,280 to nearly 18,000 square feet, with an average lot size of 9,600 square feet. The seller has agreed to take the lots from its rough graded state to a finished let state for the swn not to exceed $33,000 per lot. The purchaser intends to develop the lots with detached single-family residences ranging in size from 1,600 to 2,200 square feet in size. All the sales are located within the City's corporate limits and are representative of current market conditions for residential entitled Land with tentative maps in place. The purchasers of each of these parcels were similarly motivated, ie., all were selected and purchased for construction of entry-level to first and second time move-up housing product. With regard to date of sale, it was our finding that the unimproved and tentative mapped land prices peaked mid-to-late 2005 and we believe the market has receded to the levels we wore seeing in early 2005. Recent sales of undeveloped residential land are virtually non-existent throughout the Metropolitan area. Tentative mapped vacant land sales activity overall in the Bakersfield (and San Joaquin Valley) has slowed signi'cantly during the past year according to the sources consulted. It was the consensus of the real estate professionals interviewed that all the major developers still have plenty of ]and available to continue their respective developments and will proceed when the market rebounds. Those developers who have sizeable land holdings and who entered the market while prices were lower can afford to hold and wait until demand catches up with inventory. Therefore, we do not consider it necessary to make adjushnents to the data presented to reflect market conditions over time. 99 Lauver & Associates, Inc. Assessment District 06-1 In studying the data we found the following statistical information descriptive of current market conditions and trends; Indicator Sale Prfee Size SP per Lot $/Acre Low $4,200,000 27.83 $33,333 $136,227 High $11,124,500 71.75 $52,318 $209,916 Median $7,669,000 45.23 $38,530 $152,981 Average $7,495,500 4758 $39,850 $158,941 Selling prices per acre range from $136,227 to X209,916, which represents a spread of about 43% from law to high. The selling price per unit shows a range of $33,333 to $52,318 per unit, a spread of 57%. It was the appraiser's finding that the sale price variances are almast entirely dependent on buyer motivations. In general, the buyers are experienced developers who are well aware of their particular strengths in this market and know their market niche. They typically make their purchase decisions on the basis of a residual approach on what they can afford to pay for land. Developers know usually to the nearest $500, the cost of the vertical construction. They have certain profit targets that they must meet to make any project feasible. The remaining variables are the costs to construct the lots (dirt work) and the cost of the land itself. Their purchase decisions then, are based on the question, what can I pay for the land and still meet my profit and overhead requirements? As Shawn in the statistical indicators in the previous summary; the selling price per acre and per dwelling unit vary somewhat but buyer motivation far the purchase is the most significant factor in the selling price. This factor of buyer motivation is readily apparent in the data set_ Sale 6 involved a 39-acre parcel that was located directly across the street from the developer's previous phase, which had sold out. His (entry level) pricing was quite campetitive and he had a waiting list for houses. It made sense for his firm to pay what seemed an anamaly for the land in this instance. If this item were not in the data set, the range of selling price per acre would show a spread of only 19% from low to high. 100 File Number 4166 Lauver & Associates, Inc. dssessment District 06-I From this data we concluded that the value of the entitled residential land in Assessment District is well within the range shown in the data set. It was our fording however, that there were not any small lot subdivisions represented in the data set. Therefore, our value opinion is an estimate based entirely on the appraiser's judgment and experience. In the northwest sector, the Etcheverry Area lots are generally 11,000 square feet in size. The data cited indicates the tentative mapped lots would command values at or near the upper end of the range of the data set. It is the appraiser's opinion these lots have a value of $45,000 prior to any improvements to the land. Also in the Northwest sector of the Ciry, the Lin II Area lots average around 8,000 square feet. This land has an estimated value with tentative maps in place of $36,000 per paper lot prior to any improvements to the land- We also determined that, in general, the smaller lot tentative mapped land is selling for more per acre than the larger lot subdivisions. We estimated the small lot subdivisian University Park Tract 6749 has a value of about $25,000 per paper lot. While this seems to be a low figure, it represents more than $220,000 per acre, compared with values from around $130,000 to $150,000 per acre for the large and medium size lots. Based on our analysis of the market, our value opinions are presented in the following grid. 101 Lanner & Associates, Ine. Assessment District ©6-1 SUMMARY OF TENTATIVE MAPPED LAND VALUE OPINIONS PRESENT nE~T~LOPMENT AREA NET LAND VALUE PER ASMT NO. ATN! DESCRIPTION DESCRIPTION AREA # LOTS PAPER LOT FUTLRE TRACT NO. 6343 UNIT ONE PORTIONS OF 492-060-13 (113 KESIDENTIAL LOTS) 36.78 113 41,000 - I (PARCEL B IN LOT LINE ADJUSTMENTN0.28-0Sj FUTURE TRACT NO. 6343 UNIT TWO (ll3 RESIDENTIAL LOTS) 36.54 113 45,OW PORTION OF 442-060-14 2 76 (PORTION OF PARCEL A IlV TRACTNO. 6361 UNIT ONE LOT LINE ADNST.MENT (75 RESIDENTIAL LOTS) 24,50 75 AS-000 NO. 28-DS) PORTIONS OF 492-090-02; F01'URP. TRACTNO. 6361 UN1TTW0 492-040-14, 492-090-16, AND (62 RESIDENTIAL LOTS) 1948 62 45,000 80 492-090-55, AND PORTION - OF 492-060-I4 (PORTION' OP PARCEL A A7 LOT LINE FUTURE TRACT NO. b361 UNIT THRE ADJUSTMENT NO. 28-OS) C67 RESIDENTIAL LOTS ) 24.67 69 45,000 529-17D-0I AND A PORTION 8]-123, 125-271 OF 529-012-20 (L.OT 83 IIJ TRACT N0.6453 UNn'ONE(142 &51I-512 TRACT N0.6289 ANDA RESIDENTIAL LOTS) 46.17 192 36,OOD PORTION OF PARCEL2 QV PARCEL MAP NO. 10930) PORTION OP 529-012-20 279 (SUPER LOT 191 IN TRACT ~ FLTURE TRACTNO. 6453 UNTITWO 30.58 125 36 000 NO. 6453) (125 RESIDENTIAL LOTS) , 280-376 TRACT NO. 6794 (97 RESIDENTIAL 389-300-04 AND 389-30D-OSD LOTS. LOTS 1 TEIROUGn 97) 1317 97 25,000 (PARCELS I AND 2 IN 377 - 496 PARCEL MA.P NO. 10313) TRACT NO. fi749 (120 RESIDEN"I'IAL LOTS. LOTS 98'CHROliflH 217) I l 32 120 25,OD0 Finished Lot Values -Cost Approach The next step in the valuation process is to estimate the costs necessary to bring the unimpraved land to a finished lot state, ready to be improved with dwelling units. The costs to bring the tract from a paper lot stage to completed, ready-to-build lots include direct and indirect costs along with developer's overhead and profit, are added to the land value estimated previously. The final total is the estimated value of the finished lots by the cost approach. As of this writing, the following Tracts have final recorded maps on the date of value: Tract 6361 Unit One in the Etcheverry Area, 75 lots, Tract 6453 Unit One in the Lin li Area, 192 lots, and 102 File Number 4166 Lauuer & Associates, Inc. Assessment District D6-1 Tract 6799 in the University Park Area, 2171ots. These are the only lots that will be processed to a finished value opinion in this report. 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 finished lot state. We have considerable data large lot develapment cost. Examples of these are shown in the following summaries. It was our finding that the smaller lot subdivisions such as those in the University Park Area have lower overall development costs owing to the small lot sizes resulting in greater 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 casts as a percentage of the total subdivision development cost. By applying these percentages we have estimated the costs for the subdivision as summarized in the chart that follows. 103 Lauver & Associates, Inc. .9ssessn:ent District 06-1 Subdivision Cost ComparableslComparison Direct Costs Tract 6310 L arge Lots Tract 6182 L arge Lots Cost % of Total Cost % of Total Site PrelRough Grading 70,400 6.97% 733,725 16.82% Sewers 53,841 5.33% 243,900 5.59% Storm Drains 20,730 2.05% 227,180 5.21°l0 Water Improvements 58,214 5.76% 518,075 11.87°t° Street Improvements 296,575 29.35% ],034,315 23.71% Landscape, Irrigation & Site Imp. 2,756 0.27% 58,200 1.33°l° Uitilities 75,401 7.46% 327,275 7.50% Masonry Wall 80,472 7.96% 75,400 1.73% Subtotal 658,389 65.16% 3,218,010 73.76% Contingency 98,758 -9.77% 482,711 11.06% Total Direct Cost 757,147 74.94% 3,700,781 84.82% Indirect Casts 0.00% Planning and Conceptual Drawings 51,000 5.05°l0 98,800 2.26% Engineering Design, Topo & Survey 61,747 6.11% 120,700 2.77% Environmental 17,273 1.71°l0 0 0.00% Permitting Fees 123,207 12.19% 442,895 10.15°l0 Holding Costs, Contingency & Mise 0 0.00% 0 0.00% Totals 253,227 25.06% 662,395 15.18% Number of Lots in Tract $1,010,374 $4,363,176 Estimated Cost Per Lot 27 123 37,421 35,473 Based on the forgoing, I formed the opinion the current cast for on-site construction for a subdivision with average 10,000 square foot lot sizes subject in the Etcheverry Area is likely to be around $37,000 per lot and slightly less for the 8,000 square foot lots in the Lin II Area. In our interviews with subdivision developers we found that the development costs quoted typically are for on-site development. Oft=site costs for road widening, block wallslentries, bringing water, sewer and gas to the parcel is in addition to the on-site costs. The consensus of opinion from developers indicated these costs are typically in the range of $5,000 to $10,000 per lot, depending on the frontage and the City's improvement requirements. In this instance, we have allowed $10,000 per lot since there are rather long public street frontages requiring improvement. The lot values for the subject U-acts using the cost approach are summarized below. 104 File 1Vumber 416b Lauver & Associates, Inc. Assessment District 06-1 Tract 6361Unit One Land ValuelTentative Mapped Lot 45,000 Lot construction Costs 37,000 Subtotal 82,000 Offsite road improvements 10,000 Contingencies @ 10% 9,200 Subtotal 101,200 Developer Profit 15% $ 15,180 Subtotal $116,380 Selling, Admin, Holding @ 8% 9310 Indicated Finished Lot Value 125,690 Rounded to $126,000 Based an the foregoing cost analysis, the typical interior lot in Tract 6361 Unit One `As Complete' on March 7, 2007 is estimated to be the sum of $126,000 from the Cast Approach. Tract b453 Unit One Land ValuelTentative Mapped Lot 36,000 Lot construction Casts 30,000 Subtotal 66,000 Offsite road improvements 10,000 Contingencies @ 10% 7,600 Subtotal 83,600 Developer Profit 15% $12,540 Subtotal $96,140 Selling, Admizl, Holding @ 8% 7. 691 Indicated Finished Lot Value 103,831 Rounded to $104,000 Based on the foregoing cost analysis, the typical interior lot in Tract 6453 Unit One `As Complete' on March 7, 2007 is estimated to he the sum of $104,000 from the Cost Approach. In conversations with developers actively engaged in lat and hawse 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 awing to shorter street frontages and other factors associated with economies of scale and therefore are represented at the lower end of the range estimate. 105 Lauver & Associates, Ine. Assessment District 06-1 Tract 6799 Land Value/Tentative Mapped Lot Lot construction Costs Subtotal Offsite road improvements Contingencies @ 10% Subtotal Developer Profit 15% Subtotal Selling, Admin, Holding @ 8% Indicated Finished Lot Value Rounded to Lots 1-97 Lots 98-217 25,000 25,000 23,500 16,500 48,500 41,500 lo,ooa Io,ooo 5,850 5,150 64,350 56,650 $9 653 $8,448 $74,003 $65,148 5920 5212 79,923 70,359 $$0,000 $70,000 In conversations with developers actively engaged in lot and house production, it was my finding that a cast of $20,000 to $30,000 per lot to bring the raw land to a finished lot state is likely for the very small lots. The smaller lots cost somewhat less owing to shorter street frontages and other factors associated with economies of scale 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: EYnished LoC Values by CosC Approach Area Avg Lot Size Lot Etcheverry6361-1 11,000 $126,000 Linn II 6453-1 8,000 $104,000 University Park 1-97 3,533 $80,000 University Park 98-217 1,794 $70,000 SALES COMPARISON APPROACH Citywide we fmd that lot development consist of developers acquiring parcels of unimproved land and building the lots for construction of their own product lines. Therefore, in our search far finished lot sales we found that the only areas where there was any substantial lot sale activity were in custom home communities or those around golf courses in Bakersfield. 106 File Number 4166 Lauver & Associates, Inc. Assessment District d6-I The golf course locations are considered superior to most other locations because of the resort- like environment with homeowner associations providing such amenities as club houselrecreation buildings, tennis facilities and swimming in the common areas. On the other hand, most other locations are flat land with no view amenity potential. The subject is located in an area of low hillsides or gently sloping terrain that offers a view amenity to some of the lots when complete. Therefore, the golf course locations with their view amenity have some application in comparison with the subject. Since the subject has same potential view amenity we studied market conditions in the Seven Oaks and Rio Bravo Country Club areas. In our analysis of the lot and new housing market we concluded that the view amenity and golf course frontage amenity are quite similar if not synonymous and can be used interchangeably. The readers' attention is directed to the table below showing closed sale data compiled from the Seven Oaks Grand Lakes area. The lots with on golf course frontage are contrasted with interior lots to demonstrate the value of the view amenity. 107 Lauver & Associates, Inc. Assessment District Q6-1 SEVEN OAKS LOT SALES -Grand Lakes Sate ADDRESS LEGAI. PRICE DATE SIZE NSF Influence 1 2409 Tiverton Dr. 716150!2 $325,000 3121!2006 13,939 $23.32 On GC 2 2431 Tiverton Dr. 6/6150/2 $325,000 3!2312006 13,503 $24.07 On GC 3 12704 Bickerstaff Dr 2f6055D $203,000 212412006 11,324 $17.93 Inside 4 12610 Bickerstaff Dr. 416055D $203,000 211712006 11,325 $17.92 Inside S 2218 Ribble Valley Dr. 12I6055D $200,000 2117/2006 10,890 $18.37 Inside 6 2222 Ribble Valley Dr. 13/60SSD $203,000 2/17/2006 11,761 $17.26 Inside 7 12511 BickerstaffDr. 15l60SSD $200,000 212412006 10,890 $18.37 Inside 8 12607BickerstaffDr. 17160SSD $203,000 2/2412006 11,325 $17.92 Inside 9 12709 Bickerstaff Dr. 21/6055D $200,000 2/1712006 10,890 $18.37 Inside 10 12702 Eversham Dr. 816199 $219,000 212412006 20,037 $10.93 Inside 11 12712 Margate Ct. 2616199 $212,000 4/26/2006 11,761 $18.03 Inside 12 12701 Margate Ct. 35t6199 $232,000 4127!2006 21,780 $10.65 inside 13 2608'I'ivertonDr. 15/6150/2 $226,000 5!1512006 14,810 $15.26 Inside 14 2210 Ribble Valley Dr. 1416055D $236,000 311512006 13,068 $18.06 Inside 15 12611 Harrington St. 40/6199 $230,000 412612006 20,473 $11.23 Inside 16 12304 Chessington St 1/615012 $300,000 311512006 18,730 $16A2 Inside 17 2601 Tiverton Dr. 2216150/2 $355,000 3!15/2006 28,749 12.35 Inside Mean Golf Course Lot $23.69 Mean Inside Lot $15.91 Premimnm $7.78 48.9% In reviewing sales of lots in the Rio Bravo arca which is closer to the subject, we found a similar dispersion of data in contrasting interior to golf course frontage lots as shown below. RIO BRAVO LOT SALES DATA Sale ADDRESS ~ PRICE 1 5501 ViaSorento 387-341-02 $180,004 2 5413 Via Venezia 387-342-01 $200,000 3 14800 Vista Grande 387-081-01 $340,000 4 5400 Via Vienza 387-334-02 $400,000 5 5910 De La Guerra 387-141-10 $389,000 6 11108 Wilkeboro Ct. 533-070-10 $110,000 7 11109 Wilkesboro Ct 387-430-15 $105,000 8 5307 Donaldo St. 387-280-26 $182,OOp 9 14912 Vista Florida 387-410-17 $140,000 10 11112 Wilkesboro Ct 533-070-ll $110,000 11 15412 Casa Ciub Dr 387-333-01 $251,000 12 15408 Casa Club Dr 387-333-02 $200,107 DATE 3/9/2005 513 0120 0 6 10(12!2005 3!27/2005 Listing 516/2006 2 /1 012 00 6 3/2112006 6/572006 51512006 3129/2006 3/17/2005 13,939 Mean Golf Course Mean Non-Course Median Golf Course SIZE 10,890 11,761. 20,473 27,007 32,234 6,403 6,534 b,534 7,405 8,842 14,375 $16.53 $17.01 $16.61 $14.81 $12.07 $17.18 $16.07 $27.85 $18.91 $12.44 $17.46 $14.36 $15.40 $17.75 $] 6.53 Arnenl GC GC GC GC GC No No No No No No No 108 File Number 4166 Lauver & Associates, Inc. AssessmentDistriet 06-1 It was interesting to note the selling prices per square foot off golf course were higher than for those with the golf course (view) amenity. This was not unexpected however, since we typically find that smaller parcels sell for more per square foot than do larger ones. The non-amenity tots are all what we consider small lots; ie., less than 8,500 square feet. Because of the physical diversity of the Tats on and off golf course, it was not passible to make a reliable estimate of the view amenity from the lot sales in the Rio Brava area. Another area of note with premium and view lots is now under construction around the 1 lm green at the Rio Bravo Country Club. There are a total of 223 lots in the development known as The Heights at Rio Bravo. Many of these lots offer a view of the golf course or a panoramic view of the surrounding mountains. The lots are classified as Standard, Premium and Super Premium. Standard lots are off golf course with typical street view although there are one or two with limited views. Pricing of these lots varies with size and orientation but generally ranges fram $225,000 to $275,000 depending ou size and location. The Premium lots are typically large lots; some have limited views or golf course frontage. These range from $250,000 to $290,000; also depending on location or orientation on the golf eaurse. The super premium lots as the Warne implies, are the most desirable lats in the subdivision. These have golf course frontage, view, or are of larger size than the standard or premium lots. Super premium lots are priced from $250,000 to $380,000; depending on the particular amenity. The developers intend to offer these lots to selected builders on a rolling option basis. The contracts typically stipulate the builder must purchase 5 or more lots during specified time frames, usually quarterly. There may be price adjustments on a quarterly or semi-azmual basis. We also investigated some lot sales in a custom builder's subdivision located at Palm & Jenkins in West Bakersfield. These are 'large lots that were developed by Don Judkins. Some he retained for eonstructian with his own custom models the others he sold to merchant (custom builders}. The custom builders built up-scale housing ranging in price from about $650,000 to $750,000, A list of sales is shown in the following chart. 109 Launer & Associates, Inc. Assessment District 06-I Tract 6036 -Phoenix Palm Court -NEC Palm & Jenkins Lot Date Size Price SP/SF Buyer 1 11/09/05 12,000 $200,000 $16.67 Legacy Homes 2 11/09/05 ] 2,000 $200,000 $16.67 Legacy Homes 3 11109/05 13,500 $202,000 $14.96 Jolm Balfanz 4 11/09105 12,000 $200,000 $1.6.67 Cal Homes 5 11/09105 13,500 $202,000 $14.96 Barbara Smith 6 08/09106 12,197 $175,000 $14.35 Private Party 7 11109f05 13,500 $202,000 $14.96 Legacy Homes 8 11109!05 12,000 $200,000 $16.67 John Balfanz 9 11109/05 13,500 $202,000 $14.96 Cal Homes 10 11109/05 12,000 $200,000 $16.67 John Balfanz 11 11f09t05 13,500 $202,000 $14.96 Legacy Homes 12 11109/05 12,000 $200,000 $16.67 John Balfanz 13 11f09105 12,000 $200,000 $16.67 Cal Homes 14 11/09!05 12,000 $202,000 $16.83 John Balfanz 15 11/09/05 13,500 $202,000 $14.96 Legacy Homes 17 11109105 13,500 $202,000 $14.96 John Balfanz 19 11109105 13,500 $202,000 $14.96 Cal Homes 20 11/09/05 12,000 $200,000 $16.67 Legacy Homes 21 11109/05 13,500 $202,000 $14.96 John Balfanz 22 11/09105 13,504 $200,000 $16.67 Cal Homes 22 08/15/06 13,504 $206,000 $15.25 Matthew Delmer 23 llf09f05 13,500 $202,000 $14.96 Barbara Smith 24 11f09f05 12,000 $200,000 $16.67 Legacy Homes Legacy Homes (Roberson) sold his 7 lots to McMahan Custom Builders on May 3, 2006 for $215,000 each. This equates to $15.931SF for the 13,500 square foot lots and $1792 per square foot for the 12,000 square foot lots. These are level lots with no views. One other indicator of lot value based on closed lot sale data involved lots in the Fairways at Riverlakes Tract 6050 in Northwest Bakersfield. These sold to merchant builders and there were lots with golf course (view} amenity and others with no golf course influence. These are listed below. 110 File Number 4166 Lauver & Associates, Jnc. Assessment -istrict 06-i The Fairways at Riverlakes Lot APN Date Size Price SP/SF View 14 494-792-06 1!13!2006 13,567 244,990 $18.06 GC 1S 494-792-07 1/1312006 13,312 244,990 $18.40 GC 16 494-792-08 116!2006 10,888 234,990 $21.58 GC 17 494-792-09 11612006 10,110 234,990 $23.24 GC 21 494-801-01 1212112005 10,995 gal&4,920 16.82 None 22 494-801-02 1118!2006 10,945 $184,920 16.82 None 23 494-801-03 1!12!2006 10,995 $184,920 16.82 None 24 494-801-04 1/4/2006 10,995 5184,920 16.82 None 25 494-801-OS 11412006 10,995 $184,920 16.82 None 26 494-801-06 1!412006 10,994 $184,904 16.82 None 27 494-801-07 3!15/2006 11,483 $193,833 16.88 None 30 494-802-03 1/17/2006 10,955 $184,920 16.88 None 48 494-803-02 1!5!2006 10,694 $1'79,990 16.83 None 49 494-803-03 312t2006 12,231 $189,990 15.53 None 50 494-803-04 3!212006 15,203 $214,990 14.14 None 51 494-803-03 312!2006 14,820 $209,990 14.17 None 33 494-642-04 10!1712006 13,068 5180,000 13.'77 None Mean Off Golf Coursa 16.09 Mean On Golf Course 20.32 We are finding that the sales activity has slowed in 2006 compared to the 2005 activity. We found some indicators that owners of finished lots are more willing to discount their selling prices to achieve a quicker sale. In general, when we can find them, these discounts are running from about 10-15% depending on the motivation of the seller. In forming an opinion of value for the subject lots `When Complete' we considered the relatively sluggish market for land and lots that is due partly to the normal seasonal slowdown and the "wait and see" attitude taken by many who have expected a crash landing from the exaggerated media coverage. Zt was our finding that the large lots without amenity (non-golf course or non-view lots) are showing fairly tight value ranges. In Sevan Oaks the average non-amenity lot is around $16.00 per square foot. Rio [3ravo area lots are averaging around $17."75 per square foot {although the mast recent sale indicates around $14.35). The Phoenix Palms area of custom homes in the westerly portion of the City are averaging $14.00 to $15.00 per square foot based on the most 111 Launer & Associates, Inc. Assessment District 06-I recent data. Lets in the Riverlakes Ranch area are selling for an average of about $14.00 to $16.00 per square foot. Since most of the lots examined involved larger lots thus the subject, we investigated the offering of a finished lot subdivision located east of Fairfax off Highland Knolls in Northeast Bakersfield. This tract, 6463 has a total of 56 lots available. These range in size from 7,588 to 31,407 square feet in size with a mean and median size of 12,182 and 11,084 square feet, respectively. Asking prices range from $12'7,500 to $205,000 based on size and the asking price per square foot ranges from $683 to $12.52 per square foot depending on size and orientation. In our study of these lots we found that the lots that were in the 9,000 to 9,600 range are being offered at $13.00 to $14.00 per square foot. Based on the foregoing data it was concluded that in order to effect a sale of a finished lot in the current market environment, it is likely that the offering prices as shown in our data tables would likely have to be discounted from present levels. We believe this is a temporary condition however, recognizing there is some standing inventory in the City and we are presently in the slow sales season that is typical for this time of year we formed the opinion the lots in the Assessment District have a value of $9.00 to $12.00 per square foot for the standard 8,000 to 11,000 square faot lot, depending on location and area character. We are aware that there are premium lots in The subdivisions that will command higher values. Estimation of lot premiums however, are beyond the scope of this assignment however and the value opinion range is well supported in the market by closed sales and listed finished lots throughout the Metropolitan Bakersfield area. Allocation Method As a cheek 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. We have retained the empirical data for the Allocation Methodalogy in our office files. 112 File Number 4166 Lauver & Ass©ciates, Inc. Assessment District 06-I In our allocation studies involving subdivisions throughout the Metropolitan area, it has been my experience that these lot-to-total value ratios ranging from about 24% to 30°!o are 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 far The various areas in the Assessment Listrict. The lot values in the University Park Area are estimated solely an the allocation method and the value opinion per square foot is based on extraction from this method. It should be noted that we are only valuing finished lots in the phases that have recorded final maps on March 7, 2007. Finished Lot Value Indicators Proposed Indicated Avg Lot Lot Indicated Finished Land Lot Area Size ValuelPSF Lot Value House Allocation Value Eteheverry6361-1 11,000 $11.50 $126,500 450,000 28% $126,000 Lin II 6453-1 8,000 X11.00 $88,000 300,000 28% $84,000 CTniversityPark 1-97 3,533 $23.00 X81,259 315,000 25% $78,750 University Park 98-217 1,794 $28.00 $50,232 290,000 24% $69,600 The two methodologies used produced a range of values for the lots in the subdivision are supported by market indicators. As a result of my analysis, the finished lots in the various assessment district areas have values as follows: Finished Lot Values Assessment District Ob-1 Area Avg Lot Size Lot Value Etcheverry 6361-I 11,000 $125,000 Lin II 6453-1 8,000 $85,000 University Park 1-97 3,533 $80,000 University Park 9&-21.7 1,794 $70,000 113 Lanner & Associates, Inc. Assessment District OS-1 Reconciliation and Summarv 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 Etcheverry 6361-1 Lin II 6453-1 University Park 1-97 University Park 98-217 Value Indication Cost Sales Comparison $126,000 $125,000 $104,000 $85,000 $so,ooo $8o,aoo $70,000 $70,000 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 ascertaining investor motivations, the profit margin we selected may not be representative of market conditions for residential lots. The Sales Comparison approach was based on direct comparison with sales of lots sold to merchant builders. This method demonstrated the subject's value from the market data available. The data from this approach was gathered from tracts in areas that are located in reasonable 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 more 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. 114 Eile Number 4166 Lauver & Associates, Inc. Assessment District ©6-1 Therefore, based on the foregoing analysis, we have concluded the finished lot values from the Sales Comparison Approach as summarized previously. BULK VALUE OF FINISHED LOTS Or PROSPECTIVE MARKET VALUE UPON COMPLETION OF CONSTRUCTION In the previaus 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 the 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 selling/holding expenses incurred during the marketing of the fats; 4. Calculation of the indicated periodic cash flow from the prajected sales; 5. Subtracting the costs (including selling expenses) and profit from the periodic cash flows, and 115 Iauner & Associates, Inc. Assessfnent District D6-I 6. Determination of the present worth of the net cash flows generated during the absorption period. Absorption Analysis We found that the major builders such as Castle & Cooke, Lennar and McMillin Homes all marketed and sold their dwellings in several tracts and communities throughout the Greater Metropolitan area. Overall, these builders indicate the typical $300 + dwellings have experienced sales rates of 6 to 8 units per month throughout 2006. Most sales offices noted the foot traffic has slowed somewhat in November and December. Other sales offices also report a slowing of sales activity. The slowdown is a result of seasonal slowing, traditional for this time of year and it must also be kept in mind that we have had an unprecedented spike in demand and sales volume in the past two to three years. During more normal marketing years we typically see tract sales rates of three to five units per month. Custom-built have typically been somewhat slower owing to a smaller market pool. Based on the fact that the market seems to be reverting to a more sustainable pace of demand and absorption, I have formed the opinion the subject is capable of selling at a rate of 5 to 6 units per month.. This estimate assumes the developer will present housing product of good to very good quality and be attractively priced in order to compete with the housing that is under construction in the surrounding tracts. 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 calculatians are shown below. ARF~1 # Lots Lot Value Aggregate Value Etcheverry 6361-1 75 125,000 9,375,000 Lin II6453-1 19~ 85,000 16,320,Ot)D University Fark 1-97 97 80,000 7,760,000 University Park 98-217 120 7Q000 8,400,000 Expenses 116 File Number 4166 Lauver & Ass©ciates, Inc. AssessmentDistriet 06-1 In our estimate of lot construction expenses, we referenced the cost data from our appraisals of subdivisions built by competing developers with similar lot sizes and product type. The costs developed from these sources are considered reliable far 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 the assessment district proceeds, We have adjusted the costs in the discounted cash flow analysis to reflect the estimated construction costs to each developer in the district. Costs already incurred such as studies, engineering and site wank 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. &ulk Value Number of Aggregate Discounted at Age Lots Lot Valve Value Lot Value Completion Etebeveiry 6361-1 15 125,000 9,315,000 X98,933 ~"7,42Q,000 LinII6453-1 19~ 85,000 16,320,000 $61,146 $11,740,000 University Park 1-97 97 80,060 7,760,000 $54,639 $5,300,000 University Park 98-211 120 70,000 8,400.000 $53,667 $6,440,000 A complete summary of the findings and conclusions cited in this report is shown on the Consolidated Worksheet for Assessment District 06-1 in the Addenda Section of this report. 117 Lauver & Associates, Inc. Assessment District Dtrl SUMMARY OF APPRAISAL The following is a summary of the various values developed in this report. A mare complete summary, a Consolidated Worksheet, is in the Addenda Section. Paper Value As Is Finished Net Lot TT Land wlAD 06-I Lot Area Acres EDU's Value Value Improvements Value Bulk Value Ete]~everryTT6343-I ?6.78 R3 45,000 5,085,000 6,353,410 N/A 6,353,410 F.tcheve~ryTT 6343-2 36.54 lI3 45,000 5,085,000 6,353,410 N/A 6,353,410 Etehevemy TR 636L-1 24.50 75 45,000 3,373,000 4,603,319 $125,000 7,420,000 Pxchevexrzy TT63GI4 19.48 62 45,000 2,790,000 3,805,A10 N/A 3,805,410 EmhevearyTT63613 24.67 67 45,000 3,0[5,000 4,112,298 N/A 4,112,298 Lin II TR 6453 L'nit 7 46.17 192 3b,000 6,912,000 9,295,008 $85,000 I t,91Q,000 Lin IITT 6453 Unit 2 30.58 l25 36,000 4,500,000 6,051,438 NiA 6,051,A38 Gniversity Park 6999 1-97 13.17 97 25,000 2,425,000 3,572,892 $80,000 5,300,000 University Park 6799 98-217 L1.32 120 25,000 3,000,000 4,295,034 $7Q,000 6,440,000 TOTALS $48,442,220 NIA $57,745,961 NOTF,: The reader may not e minor math discrepancies due to internal rounding 118 File Number 4166 Lauver & Associates, Inc. Assessment District 06-1 CERTIFICATIONS The undersigned appraiser certifies the following statements are true and correct with respect to this appraisal report: That I personallyinspecfed 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 oar the parties involved and that racial eompasition 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. Michael Lauver, MAI SRA personally inspected the subject property on February 6, 2007. Michael Lauver, MAI SRA and Stacy T. Lauver have made a personal inspcc6on of the property that is the subject of this report on February 6, 2007. This appraisal has been campleted in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP}, as develaped by the Appraisal Sturdards 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. 119 Lauver & Associates, Irze. Assessment District 06-1 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. 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. The compensation for appraisal services and future employment prospects are not contingent upon the reporting of a predetermined value of direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a stipulated event. The existence of hazardous materials, which may or may not be present on the property, was not observed during the physical inspection. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam, radon gas, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there are no such materials on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering required to discover them. Based upon the study and investigations conducted, and after careful consideration of all pertinent factors affecting value, I have formed the opinion 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. Summary of Values Assessment District 06-1 Paper Value As Is Finished Net Lot TT Land wlAD 06-1 Lot Area Acres EDU's Value Value Improvements Value Bulk Value Fxcheverry i"r 630.3-1 36.78 t I3 45,000 5,085,060 6,353,410 NlA 6,353,410 Eteheverzy TT 6343-2 36.54 113 45,000 5,085,000 6,353,410 ~r/p b,353,410 E[chevcrrryTR 6361-1 24.50 75 45,000 3,375,000 4,603,319 5125,000 7,420,000 Etchevcmy TT 6361-2 19.0.8 62 45,000 2,79p,000 3,805,410 NSA 3,805,410 BtchevemyTT6361-3 24.67 67 45,000 3,015,000 4,112,298 N!0. 4,112,298 Lin II TR 6453 Onit 1 46.17 192 36,000 6,912,000 9,295,008 $85,000 11,910,000 [an [ITT 6453 Unit2 30.58 125 36,000 4,500,000 6,05 t,438 N/A 6,051,438 University Park 67991-97 13.17 99 25,000 2,425,000 3,572,392 58Q,000 5,30Q,000 University Park 6799 98-2t7 11.32 120 25,000 3.000.000 4,295,034 57Q000 6,440,000 20TAL9 54$442,220 N!0. $19,745,967 NOTE: The reader may note minor ma th discrepancies due to internal rou nding 120 File Number 4166 Lauver & Assoctates, Inc. Assessment Dlstrfet d6-I All the values developed within this report are presented on the Consolidated Worksheet that can be found in the Addenda section of this report. Please read the underlying Assumptions and Limiting Conditions, which are an integral part of this appraisal. Certification Date: March 7.2007 !s! Stacy Lauver Stacy Lauver, President Lauver & Associates, Inc. Federal ID# 20-0317556 lsf Michael Lauver Michael Lauver, MAi SRA Certified General Appraiser California Certificate AG 0020 Expires 12-0?-2008 121 (THIS PAGE INTENTTONALLY 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 nature affecting the property appraised or the title thereto, nor does the Appraiser render any opinion as to the title, which is assumed to be good and marketable. The property is appraised as though under responsible ownership. 2. Any sketch in the report may show approximate dimensions and is included to assist the reader in visualizing the 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 madetherefore. 4. Any distribution of the valuation in the report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisal and are invalid if so used. 5. The Appraiser assumes that there are no hidden or unapparent conditions of the property, subsoil, or structures, which would render it more or less valuable. The Appraiser assumes no responsibility for such conditions, or for engineering, which might be required to discover such factors. 6. Information, estimates, and opinions furnished to the Appraiser, and 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 furnished the Appraiser. 7. Disclosure of the contents of the appraisal report is governed by the Bylaws and Regulations of the professional appraisal organizations with which the Appraiser is affiliated. 8. Neither all, nor any part of the content of the report, or copy thereof (including conclusions as to the property value, the identity of the Appraiser, professional designations, reference to any professional appraisal organizations, or the firm with which the Appraiser is connected, shall be used for any purposes by anyone but the client specified in the report, the borrower if appraisal fee paid by same, the mortgagee or its successors and assigns, mortgage insurers, consultants, professional appraisal organizations, any state or federally approved financial institution, any department, agency, or instrumentality of the United States or any state or the District of Columbia, without the previous written consent of the Appraiser; nor shall it be conveyed by anyone to the public through advertising, public relations, news, sales, or other media, without the written consent and approval of The Appraiser. 4. On all appraisals, subject to satisfactory completion, repairs, or alterations, the appraisal report and value conclusion are contingent upon completion of the improvements in a workmanlike manner. 10. The appraiser is not an expert in survey, soils, drainage, and geological or seismic conditions. The property is assumed to be free of such significant detrimental conditions. Unless otherwise noted in the report, the appraiser observed no noticeable problems in this regard. The client is urged to seek appropriate outside expert opinions however, if concerned about these factors. 11. The appraiser is not an expert in structural analysis. The property is assumed to be free of structural deficiencies, building code violations, and unsafe conditions. This includes the assumption that all heating, plumbing, electrical, and mechanical systems as well as the appliances and the roof are in adequate working order. Unless otherwise noted in the report, the appraiser observed no noticeable problems in this regard. The client is urged to seek appropriate outside expert opinions however, if concerned about these factors. 12. The appraiser is not an expert in the detection of potentially hazardous ar toxic substances such as the presence of urea formaldehyde foam insulation, asbestos building materials fibers, radon gas, or any other harmful environmental substances- The appraiser observed no such substances and the property is assumed to be free of such substances The client is urged to seek outside expert opinions however, if concerned about These factors. l3. 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 fmal 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 fmancing. 17. To the best of my knowledge, all pertinent information available to the appraiser is contained within this report. It; subsequent to the date of the report, should information become available or submitted to the appraiser that could materially affect the value reported herein, the appraiser reserves the right to modify the appraisal report. 18. The values assigned reflect value for the zeal estate only. No value consideration has been given to the in-use value of any equipment, personal property or fixtures. 19. This appraisal report is prepared for the sole and exclusive use of the City of Bakersfield {THE CLIENT). No third parties are authorized to rely upon this report without the express written consent of the appraiser. 20. The Tentative Tract maps we reviewed are subject to change until final map approval has been granted by the City of Bakersfield. Consequently, any outstanding tentative maps and any subsequent maps may not accurately represent the final lot delineation as determined by the City. 21. The reader is cautioned that we received no floor plans, elevations, description of materials nor cost breakdowns for the developer's proposed production units. The projected selling prices of the completed housellot combinations are those of the developer and we have not appraised the individual production models. fio the best of the appraiser's knowledge however, the costs and projected selling prices are within market parameters. Date: March 7, 2007 Jsl Stacy Launer Stacy Launer, President Launer & Associates, Inc. Federal ID# 20-0317656 !sf Michael Launer Michael Launer, MAI SRA Certified General Appraiser California Certificate AG 00201 Expires 12-07-2008 QUALIFICATIONS OF MICHAEL L. LAUNER, MAI SRA APPRAISAL EDUCATION SAN BERNARDINO VALLEY COLLEGE Year Completed Advanced Residential Appraising 1978 Advanced Income Property Appraising 1978 SOCIETY OF REAL ESTATE APPRAISERS Course 101 - Intro to Appraising Real Property 1977 Course 201 - Principles of Income Property Appraising 1979 Course 202 - Applied lneome Property Valuation 1984 R_2 Residential Proficiency Examination 1979 Narrative Report Writing Seminar 1979 Subdivision Analysis 1993 APPRAISAL INSTITUTE Highest & Best Use and Marketing Analysis Course 520 1994 OREA Required Update Seminar 1995 Environmental Risk and the Real Estate Appraisal 1995 Appraising Rural Transitional Properties in S. California Seminar 1996 Litigation Loss Prevention Program for Real Estate Appraisers 199? 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 Course 710 1999 Condemnation Appraising- Advanced Topics Course 720 1999 Standards of Professional Practice Part G Course 430 1999 Real Estate Fraud & The Appraiser's Role 2000 Highest and Best Use Applications Seminar 2002 Standards of Professional Practice Course 400 2003 Scope of Work Seminar 2004 Reappraising, Readdressing and Reassigning 2004 Advanced Cost and Sales Comparison Approaches 2004 Subdivision Analysis 2005 Appraising Unusual Properties 2005 Market Analysis and Site to do Business 2006 USPAP 7-Hour Update 2006 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 Professianal Appraisal Practice Appraisal Institute Positions Held: Candidate Guidance Chairman -Appraisal Institute, Bakersfield Chapter 1991-2000 Admissions Chairman -Appraisal Institute, Bakersfield Chapter 1991-1999 President, Society of Real Estate Appraisers Bakersfield Chapter 75, 1987-1989 President-Appraisal Institute, Bakersfield Chapter, 2001 President -Appraisal Institute, Bakersfield Chapter, 2002 Associates Guidance Chair -General Finance Chair, Appraisal Imstitute Region VII Member, .Regional Ethics and Counseling Panel BAKERSFIELD COLLEGE INSTRUCTOR - Real Estate 63 -Intro to RE Appraisal 1988-1998 Real Estate 68 -Advanced RE Appraisal 1993-95 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, commercial tots, rehabilitation projects and a variety of commercial properties. Special purpose assignments have included: manufactru-ing, processing and cold storage facilities, oil refinery, quarry, winery and rock crushing facility. Other assignments have included the appraisal of livestock and agricultural properties. APPRAISAL ANI) BUSINESS EXPERIENCE Presently Principal, -Lauver & Associates, Real Estate Valuation & Consulting 1986 -1988 Senior Vice President, Chief Appraiser, Paramount Bank 1985 - 1986 Corrunereial Appraiser - A.L. Appraisal Company 1977 - 1985 Commercial Appraiser -Bank of America NT & SA Land Sale No. 1 5i9-~J SSG ~2 ~[~~ ~ ~ 2$ E, SCti00i 6,ST T4.2 7Q c'3 Si B-~JJ .~w '~ -tea'-'-}-° -tr ~ u , , rm I} y Yl i r $ r '=' ~ l ~ i ~~ a~ E S s ( ~ ~ ~ 5i9 ( ;A s ~ ~~ ~ i .. ~ .. .. r 6.. ` ~ p ( ioe, ap ~ :,+:, -- f ~sl zua K . ~, oN.9L }. . + -~-. -£Aa 1 TR~ 1 , Yil ~ ` ~~ f ~~ ~ 1 `,q~ f ~ (MAC , M1: nii ~ ira%iw p. C`M1° 4n «n. wwwa w. ~.. .rv 3 .iC (~. ~ V ~ w•w...w ~. ~ 33.1 r I v szn ,m __ ~__ rx. _. d.ne 'P _ -.. _. _ _._- _ w 1 q :_ ' '~' ASSESSORS NAP NO~V l r Sl~-05 U CQUNTY OF KER N Pronertv Identification Record ID 4?8 Property Type Residential Subdivision Land Address S/S Hasking Kd., EJO Union Ave., Bakersfield, Kern County, Cali tornia 9330 Location 2512-H4 APN: 518-050-33 Sate Data Grantor Robert E, Smith Grantee McMillin FInmes Sale Date May 06, 2005 Deed BookiPage 116560 Property Rights Pee Simple Financing Cash to seller Verification David McSwain; October 20, 2006; Canfirmed by Michael Launer, MAI SKA Sale Price $5,813,500 Cash Equivalent $5,813,500 Adjusted Price $5,813,500 Land Data 'Coning K-1, Single Family Topography Level at street grade Utilities Blee[rieity, water, gas, sewer Dimensions Shape Landscaping Land Size Information Gross Land Size Useable Land Size Planned Units Front Footage Indicators Sale PrieelGross Acre Sale PricelGross SF Sale Price/Useable Acre Sale Price/Useable SF Sate PricelPlanned Units 761' X 1794' Rectangular Natural brush 35.530 Acres or 1,547,687 SF 35.530 Acres or 1,547,687 SF , 100.00% 151. 761 ft Hocking Road $163,622 Actual or $163,622 Adjusted 53.76 Actual or $3.76 Adjusted $163,672 Actuator $163,622 Adjusted $3.76 Actual or 53.96 Adjusted $38,500 Actual or 538,500 Adjusted Remarks This is a May 2005 sale of a site generally located on the south side of Hocking Road, east of Union Avenue, in South Bakersfield. The proposed homes range in size from 1,200 to 1,827 sq. ft. Regional access is provided by State Highway 99 and local access is provided by Hocking Road. The site was purchased on a paper lot basis of 538,500 per lot. The site finishing costs total $40,103 per lot, resulting in a finished lot cost of $98,603 per lot. Land Sale No. 2 sir-0t NWlf4 SEC:31 T.305. R.28E. eK,: a,r-41 ~ ii ) 4_.. ~ 5t6 1 6 v 1 7RitET 8782 ~ '~ 7k4CT 8152 , ..... 3.iw. .l q ~ l ] t. ~. .M.93ti> tt S 1 mx. i t UMF ~ UN,? 574 ~, i t ' 1 ~ l2 ~ I3'GE,:V~3 1 TRACT ~ ~ i TRACT i . IRAGT R~"1'S-R i ~ ]s d~?RRwsT9N F~L l - I t I sveo ~ ~ _ i ~ a j c if 0i ~ i6Tr ~~OSi i~i -6 WuEa~ ~ i ~~ t ~ .~b]S ~ ~ f ~ ~ 1092 tS ! F ~ i I N a ' w ~""" `- ~ _ - --~ -_._ ~ ' ~ C R ~ (_.'- ~ ASSESSO~~ AMW N6. 517-0! Property Identification Record ID 348 Property Type Residential Land Property Name Val Verde Address Hosking Road & Monitor SCreet, Bakersfield, Kern County, California Location 2512 F-3 APN: 517-010-06 S'c 07 Sale Data Grantor FHC ~& Associates (Floyd Hinesely) Grantee Moreland Corporation Sale Date May 10, 2005 Deed Book/Page 118546 Praperty Rights Fee Simple Financing Cash To Seller Verification Sales Contract; July 27, 2005; Confirmed by Michael Laoner, MAI SRA Sate Price $4,200,000 Cash Equivalent 54,200,000 Adjusted Price $4,200,000 Land Data Zoning R-I, Kesidential Topography Level Utilities Electricity, Gas, Rater, Sewer Shape Land Size Information Gross Land Size Useable Land Size Actual Units Indicators gale Price/Gross Acre Sale Price/Gross SF Sale PricefUseable Acre Sale Pricettiseable SF Sale PricelActual Units Rectangular 27.830 Acres or 1,212,275 SF 27.830 Acres or 1,212,275 SP , 100.00% 126 $150,916 Actual or $150,916 Adjusted $3.46 Actual or $3.46 Adjusted $150,916 Actualor $150,916 Adjusted $3.46 Actual ar $3.46 Adjusted $33,333 Actual or $33,333 Adjusted Remarks Based on the sales agreement submitted for our review, the subject property was purchased from FFIC & Associates (Floyd Hinsely) by Moreland Corporation. The selling pricz was the sum of $4,200,000, calculated on the basis of 126 buildable lots at $33,333 each. The agreement was entered on March 9; 2005 and the purchaser took title as Val Verde LLC on May 10, 2005. The purchase price included tentative mapping for 126 lots pursuant to Tentafive Tract 6368. At the time of sale the parcel consisted of vacant unimproved acreage with a single family dwelling located on the north property line along Hocking Avenue. The dwelling did not contribute to fhe negotiated selling price. Land Sale No. 3 Property Identification Record ID 339 Property Type Residential, Residential Acreage Property Name Subdivision Acreage Address I~~EC Panama Lane & Old River Road, Bakersfield, Kern County, California 93311 APN: 497-010-OS Sale Data Grantor Geri L. Carlson, ET AL Grantee Enuis Homes Sale Date May 17, 2005 DeedBooWPage 125165 .Property Rights Fee Simple .Financing Cashto seller Verification Eimis homes; Other sources: Michael I3urger & Associated, Confirmed by Michael Lauver, MAI SRA Sale Price $5,614,000 Cash Egni~~alent $5,614,000 Adjusted Price $5,614,000 Land Data Toning R- 1, Single Family Topography Level i7filifiea Full Dimensions 1,319 x 1,320 Shape Rectangular Land Size Information Gross Land SSze 38.290 flares or 1,667,912 SF Useable Land Size 38.290 Acres or 1,667,912 SF , 100.00% Planned IInits 157 Indicators Sale PricelGrosa Acre $146,618 Actual or $145,618 Adjusted Sate PrieelGross 5F $337 Actual or $337 Adjusted Sale PrieelUseable Acre $146,618 Actual or $146,618 Adjusted Sale PrieelUseable SF $337 Acmal or $337 Adjusted gale PrieelPtanned Units $35,758 Actual or $35,758 Adjusted Remarks The parcel is at the northeast corner of Old River Road and Panama Lane. Both roadways require widening, and utility lines require relocation and underground installation. Zoning is in place, with the parcel planned for development to 157 residential lots averaging 7,200 sq. & This transaction entered into escrow to Ennis Homes on March 1, 2005 and escrow closed on 5!1712005. Land Sale No. A .s~-02. T.30S'. R.27£. vn-02 e~ hse ~ 1 ~ _-- ..~ w.._.~._ ti JJ i ll~Td U ~t r~ :.x t OS {~ 'f tbc. 515 F ~ ~ Q r 552 t.,h (, ~.,vr,}sueoreu uEY oecwu[a' kEl~ £P J~HSa~'rlp4 0.~ESSVRS V.qP N0. 497-02 c ourt/TY r -tir-,-,~{}{}~ Property Identification RecordlD 479 Property Type Residenfial Subdivision Land Address S(S Panama Lane, W/O Stine Road, Bakersfield, Kern County, California Location 2512 APN: 497-020-23 Sale Data Grantor Stine Road Development Grantee McMillin Hones Sale Date July 22, 2005 Deed BooklPage 216782 Property Rights Fee Simple P}nancing Cash to seller Verification David McSwain; October 20, 2006; Confirmed by Michael Launer, MAI SRA Sale Price $9,660,000 Cash Equivalent $9,660,000 Adjusted Price 59,660,000 i.and Data Toning R-1, Single Family Topography Level at street grade Utilities Electricity, water, gas, sewer m ~ ~~t`f e;,. ~r..s x t ~ ~ ~ '~--tom i 'i ~~ v f i ~x ypA, ~ ~ F„ d l s e ~ 1 '. X , •A~G S 3~AC '~ '' ulr~ y+~y~~~'~ ~P •t iMC ~ ~ ~ }J ~ + ~ ' ' ' ~ ~ ' r , ~ Y l ~ . 1€G . i ~ / a ~ ~ ~~ y V' ~J I ~ ~ / 38fifA „iE ~ ~ ty~ y{ ~ ~~ t --- - ,- 1 1 '. J ~C j ' f3 ' Gl ~ ~ F R~ ,•• o ~~~. S ~ ` 9S iC 3915'. N 1C , .=xW~ a ~ `' 1 & f9.iWC $1' \x ~ _ ` ~ ~ 5E ~n t4~.. .R, " ~ I ,. ~ r.- ~,~_ ~ ~.~. ~., I ~ ,. N r ., .,,,. x r ....:,.. -_ Dimensions Shape Landscaping Land Size Information Gross Land Size Useable Land Size Planned Units Indicators Sale PricelGross Acre Sale PricelGross SF Sale PricelUseable Acre Sale Price/Useable SF Sale Price/Planned Units See plat map Irregular Natural bnish 60.790 Acres or 2,648,012 SF 60.790 Acres or 2,648,012 SF , 100.00% 230 $158,908 Actual or $158,908 Adjusted $3.65 Acmal or $3.65 Adjusted $158,908 Actual or $158,908 Adjusted $3.65 Acmal or $3.65 Adjusted $42,000 Actual or $42,000 Adjusted Remarks This is a July 2005 sale of a 230-lot site generally located on the south side of Panama Lane, west of Stine Road, in South Bakersfield. The site abuts the Farmer Canal and the Arvin Canal to the east The proposed homes range in size from 1,500 to 2,700 sq. ft. Regional access is provided by State Highway 99 and local access is provided by Panama Lane. The site was purchased on a cost basis of $95,000 per finished lot. Land Sale No. 5 .sa-02 T.30S. R.27E. .9~-02 BK 9K. 4~P 498 n ,~,~ ~ ,a~ { / I t~ 4 7 aK ~ t a &f YSS:'34': RkTnG ~ i!""K p+ = li~^.4 3A39t~ T3" ~ ~ j w 1 i ~~ ~ S~r~e )g Y ~ ' u ~ S 1~..: `t'ea[ ' ~ f{ a 9 ~ p± ~'' 9~i3.a~ ' 3~K ~ ~ ..~/yt' \~ /.wSLVY ~~f ~~ ~' rY:S1H 1 ~~ ~~ n 7~ ( µ J i~ l~C j ` Y +y {} ~~ J _..._ ~ w .i r =x ~,. eu. A 533 .C. ~{'.~5~'.AV~ $Jef. K(T J'$~L41M[2 i eflNff^ dUA Slbt0.`}N bSS:S50R5 IxkP N0. 497-02 Property Identification Record ID 362 Property 'Type Residential Land Property Name Residential Vacant band Subdivision Acreage Address S.F_C Panama Lane &Ashe Road, Bakersfield, Kern County, California Location 2511 H-2 APN: 497-020-30 Sale Data Grantor Ashe Road llevelopment, LLC Grantee I_ennar Homes of California, Inc. Sale Date Angust 25, 2005 Deed Book/Page 224907 Property Rights Fee Simple VeriRcation Patty Poire; 395-3281, September 20, 2005; Confirmed by Michael Launer, MAI SRA Sale Price $11,124,500 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 Shape Land Size Information Gross band Size Useable Land Size Planned tinits Indicators Sale PricelCross Acre Sale Price/Cross SF Sale Priceftiseable Acre Sale PriceNseable SF Sale PricelPlanned Units Rectangular 71.750 Acres or 3,125,430 SF 71.750 Acres or 3,125,430 SF , 100.00% 298 $155,045 Actual or $155,045 Adjusted $3.56 Acrual or $3.56 Adjusted $155,045 Actual or $155,045 Adjusted $3.56 Actual or $3.56 Adjusted $37,331 Actual or $37,331 Adjusted Remarks This parcel was vacant 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 tots that will appeal to the entry-level or first time home buyer. Land Sale No. 6 su-O6- SE 1/4 SEC , 36 ?.305. R27E. ~as-06 A3 ' CfIY ~ l CJVYJ~ i _ j xr c t ~ ' ,f ~ ~. t ~Y 11` i y. ' y ~ 1 m ~~„ } ¢P W W ~ § ~.. _ 9~ __. ~ t ~ 1 n r f _++ta+ __ ~ ~ gi ._" c, rt " d 31 Y ~6 y ~ Fl3t~C ~65~:. ~t}9.M ( ~ ` I ~ ~Afw x` ~~ LF.6~?:D nEV13EO ~y Ll ~ ~~fc ~r "t r ar. -. - } r . $ `' ~ _. ~ ~ ~ ~ { Kfl ^^r~ ~ P ~~ 5 ~ sJ6a xEx ~ ~ ~?~ ~ {5} r ~... a I .~ v n. ~ ~J F •. ' ~' •• 9A'fZXF Yry j -.m B5 UNER ~ ~. rai .- r +css I ..rs~ I ASSE559R5 iNP NO.~i9_Q@_ Pronertv Identification Record ID 406 Properly Name Residential Subdivision Land Address SEC McKee & Hughes Lane, California 93312 Location 2512 D-5 APNe 514-060-01 Sale Data Grantor AWS Realcor & HMA Development Grantee Moreland Corporation Sale Date June 16, 2006 Property Bights Fee Simple Financing Cash to Seller Verification Moreland Corporation; 322-1080, June Ol, 2006; Sale Price $7,900,000 Cash Equivalent 57,900,000 Upward Adjustment 5314,000 AdJusted Price $8,214,000 Land Data 'Coning R-1 Topography Level Utilities Electricity, Gas, Water, Sewer Dimensions See Plat Shape Syuare Land Size Information Gross Land Size Useable Land Size Actual Units Front Footage Indicators Sale Price/Gross Aere Sale PricelGross SF Sale PricelUseable Acre Sale PricelUseable SF Sale PricelActual Units 39,130 Acres or 1,704,503 SF 39.130 Acres or 1,704,503 SF , 100.00% 157 1320 ft McKee Road $201,891 Actualar $209,416 Adjusted $4.63 Actual or $4.82 Adjusted $201,891 Actual or $209,916 Adjusted $4.63 Actual or $4.82 Adjusted $50,318 Actual or $52,318 Adjusted Remarks This is a parcel of unimproved land located on the Southeast corner 6f McKee Road and Hughes Lane. The property is accessed along its northerly boundary from McKee Road, atwo-lane east-west residential street The parcel also fronts on the east line of Hughes Lane and along the west line of the future Ellashosh Street. The sale price included an approved tentatiee map for 157 buildable lots pursuant to TT 6362. The lots range from 6,720 to 14,293 SF, with an average lot size of 7,513 SF. A canal at the S WC of the parcel has to be relocated at a cost estimated at $314,000 ($2,000ILot}. Land Sale No. 7 fJV20f SEC29 `i"c9 S R27E- 7G-! t-22f aroe -Ol s<wo~ nisr 7Q_y 1-222 ~^ro -01 en f-2l6 1-267 ~ ~ _..... s pan J L t ~~ .T ~ .l n f i.sza~. 1 ACT' -, ~ rq ~., I ~ OB I A ~ t s~xa ~i f . l os i~ I U~ ~ i ~\ I BKItP _ _ __ S.-....__~_ ~ ° ~ w 1 }, ~`' ~ ~ 1 r ss ~.. i ~ 7~ T. Lea I i .~ ~ i i.. t uc#c ~ 1 7t ~~ i. ~, ice" t: 1. It r~ j', ,sq Y 1 ~ ~: < x `' 'iI. % I~ .~ ~ „ ~ u nz t 1l~ ~((( ASSESSORS MAP NO.3S$.Q'.... COUNTY OF KERN P[OpertV IdentlllCaCiOn Record ID 460 Property Type Residential Subdivision Land Property Name Residential Acreage Address SEC Glenn Street & Callaway Drive, Bakersfield, Kern County, California 93312 Location 2A01-E4 APN: 368-010-13 Sale Data Grantor EI Toro Viejo LLC Grantee john Balfanz Development LLC Sale Date Ocrober 27; 2006 Deed BooklPage 267513 Property Rights Fee Simple Financing Cash to setter Verification John Balfanz. Homes; Sale Price $7,? 12,000 Cash Equivalent $7,?12,000 Adjasted Price $7,'712,000 Land llata Zoning R-1, Single Family Topography Level at street grade Utilities Electricity, sewer, water, gas Dimensions See plat map Shape Flag shape Landscaping Natural. vegetation Parking Nvne Rail Service None Land Size Information Gross Land Size 51.320 Acres or 2,235,499 SF Useable Land Size 51.320 Acres or 2,235,499 SF , 100.00°/~ Actual Units 200 Front Footage 345 ft Calloway Frontage Indicators Sale PricelGross Acre Sale PricelGross SF Sate PricelUseable Acre Sale PricelL'seable SF Sale Price/Actual Units $15Q273 Aemal or $150,273 Adjusted $3.45 Actual or $3.45 Adjusted $150,273 Actual or $150,273 Adjusted $3.45 Actual or $3.45 Adjusted $38,560 Actual or $38,560 Adjusted Remarks We were provided a copy of a salelpurahase agreement dated December 16, 2005 for the subject property. The seller is identified as EI Toro Viejo, LLC. According to the escrow instructions, the seller entered into a purchase agreement with lohn Balfanz Development, LLC. The terms of the sale were a down payment of $1,000,000 to the seller {nvn-refundable) and the buyer loaned the seller $3,500,000 for the seller to complete acquisition from Nancy Lea 7ackson'LrusY (former owner). John Balfaztz recorded a First Trust Deed to porfect and secure hvs interest. Tho sales agreement sfipulated the seller obtain a General Plan Amendment changing the designation from ER to LK, a zone change from A to R-1 and an approved tentative map for at least 200 lots. The total purchase price was agreed to be fhe sum of $7,712,000, The closing date was agreed to be not later than January 10, 2007. We were unable fo confirm the details of the sale between Nancy Lea Jackson Trust and LI Toro Viejo. Land Sale No. 8 ~,. oa ~ r4.a .~,aa ! 35d iLElaAY1 ..+ W 4 (- i ' G~ ... ( ' F , ~ ~ (~ ~u e~me i i. ~F ~` { ;~~ 2x ~} a ;j# C1-1 tc .......:~,. ,.,_ ;....~ x 3-ter ~~,m ~. i. R Is ~ i ys ~t ~~ T ...y,w„.~ .~ __ ._, ._. @_,~„ a. ____.,~.~..~t usessansunn ew.a~e.:~.a.... cauwm w ~EVx Pronertv Identification Record ID 4R4 Property Type Residential Subdivision Land Property Name Lenox Homes Address East Panama Lane E!O S. Union Avenue, Bakersfield, Kern County, California 93307 Location 2512 H-1 APN: 518-030-03, 04 & 7.5 Sale Data Grantor Annette & Arthur Davis Grantee Union Berk, LLC Sale Date January 26, 2007 Property Rights Fee Simple b'inancing Cash to Seller Verification David Cates; 665-1282 Sale Price $7,626,000 Cash Equivalent 57,626,000 AdJusted Price 57,626,000 Land Data Zoning R-1, Single Family Topography Level Utilities Electricity, Gas, Water, Sewer Dimensions Irregular Shape Trapezoidal Land Size Information Gross Land Size 55.980 Acres or 2 438,489 SF Useable Land Size 48.010 Acres or 2,091,316 SF , 85.'76% Planned Units 190 Front Fnoage 1294 ft Total Frontage: 7294 ft Panama Line Indicators Sale PricelGross Acre Sale PrieelGross SF Sale PricefUseable Aere Sale Price/Useable SF Sale PricelPlanned Lnits Sate Price/Front Foot $136,227 Actual or $136,227 Adjusted $3,13 Actual or $3.13 Adjusted $158,842 Actual or $158,842 Adjusted $3.65 Actual or $3.65 Adjusted $40,137 Actual or $40,137 Adjusted $5,893 Actual or $5,893 Adjusted Remarks The subject property covers approxhnately 55.98 gross-acre parcel of land according to the Agreement of Sale that was submitted to the appraiser and upon which this appraisal is based. The Tentative Map No. 6712 submitted is a tentative map prepared by Stnithtech USA, Inc. dated 11-ll-2005. It shows a gross and net acreage of 48.01 and 36.01-acres, respectively, with a total of 190 buildable ]ots and one retention basin. The property is located in Southeast Bakersfield on the south line of Panama Lane between S. Union Avenue and Panama Lane. - The planned subdivision will eansist of primarily smaller lots that will be finished in preparatiop for improving with single-family dwellings. The ultimate development will be comprised of mostly entry-level housing product that will appeal to the first time homebuyer. Land Sale No. 9 m-14 t a _...._ s172 QP SCif4 SEC,i6 T295. R,28E. . ~ ~s.IC Ty g i ! ;' w._ _ P _-fit ~ ~ ~ ~ ~--, A A 3T ~r ? r' '~ nis_ c~j i ~ . l (( ; . t ~~-- ~ ~ - K ----- - ,. __ aueawsv ___ _ . -. '~' n~ Eta :se sa wz rum?-`_ Pronerh~ Identification Record ID 485 Property Type Residential Property Name Pacific Place Address NWC Hageman & Renfro Raads, Bakersfield, Kern County, California 93314 Location 2440 G-1 APN. 463-03, 04, 06,14 & 24 Sale Data Grantor Inland Valley LLC Grantee Correctional Institution LLC/JLJ Bakersfield, LLC Sale Date Octoher 10, 2006 Deed BooklPage 251181 Property Rights Fee Simple Financing Cash to Seller Verification Moreland Corporation; 661-322-1081, January 04, 2007; Closing Statement Sale Price $8,520,000 Cash Equivalent $8,520,000 Adjasted Price $8,520,000 Land Data Zoning K-1, Single Family Topography Level Utilities Electricity, Gas, Water, Sewer Dimensions Irregular Shape Irregular Land Size Information Groas Land Size 66.1>0 Acres or 2,881,494 SF Useable Land Size 66.1>0 Acres or 2,881,494 SF , 100.00% Planned Units Front Footage Indicators Sale Priee/Gross Acre Sale Price/Gross SF Sale PricetUseable Acre Sale PrieelUseahle SF Sale PricelPlanned Units Sale Price/Front Foot 212 927 ftTotal Frontage: 927 ft Hageman W/O Renfro $128,798 Actual or $128,798 Adjusted $2.96 Actual or $2.46 Adjusted $128,798 Actual or $128,798 Adjusted $2.96 Actual or $2.96 Adjusted $40,189 Actual or $40,189 Adjusted $9,191 Actual or $9,191 Adjusted Remarks This data represents the October 2006 sale of an irregular shaped parcel of land located along the north line of Hageman and the west line of Renfro in Nonhwest Bakersfield. It involvod the southerly portion of recorded Tentative Tract 6252; 212 buildable lots. The remainder of the ffact's 241 ]ots adjacent to the north is offered for sale. At the time of sale the land was fully graded and ready to commence with the installation of utilities. The lots range from 8,280 to nearly 18,000 square feet, with an average lot size of 9,600 square feet The seller has agreed to take the lots from its rough graded state to a finished lot state for the sum not to exceed $33,000 per lot. The purchaser intends to develop the lots with detached single-family residences ranging in size from 1,600 to 2,200 square feet in size. o¢~ ~ S ~ _ _ ~ 5 _ $ _ a q s x s a~ - a s x a ag >~ 5 _ ~ 3§ a ~ E A A .~ Y$ ~os S ` ~'.. s $ e ~ a e. 9 a = ~ $ - a ° 2 a ~ § ~ 7 9 `s g ° o m = _ , , ~§ ~~ cis x 2 2 3 3 3 R Y 8 $ ^ 3 q gg ~ ~ p x ~ ~' 3 3 ~ R ~ ~ s 'iY~~ ]''<~~ k ~ k ~ F m d m E ~ S p K a ~ ~ ¢¢ F qq „ ~ gr $$ $ "4 $ ~~( C 4 ~ i ffyy ~?i ~ ~ i y 6. o f R J R 9 d ^n ~ d , v { & . - ~ ~~s 3 a W d o 8 x a a = n £~ s a s '` 3 i ~S °~ _ _ '~a ~ 1 3~ i i ~ $ ~ $ ~ $ ~ $ ~ $ $ s ~ x ~ ~ j K s ffi ~ # A i ~4 g a a i i - i ~ ffig~ - ~ - "a ~ ~ ~ r_ a s ~ _ ~ s a s _ h ~ 9 $ w ~~ s ~ s z ® x s z _ ~ 3 ~ ¢ t4 ~ ~ S o e i3 ~ ~~ o ~~ ~ R~ t ~g v g ~ ~~ x ~3 e: ~ ` ~ ~ ~` ~~ ~ ~ a ~ ~~ 8 ~ " ~ 4 "sy $ ~ a i J V ~ A ~ ~ ~ e ~ ~ `z $ ° a ~g 5 ~ °. as 4 ~ ; ~ ' ~_ ~~ ~ E ~ g~ a ~ ~ c a `~ F ~N G~ ~ ~ ~ ag a ~~ ~ ~ f °a ~° 2 K~ OA K ~ P Q S o~ ~ ° 9 _ a t 3 ~~ ~ o ~~ a' ~ ~ q q ~nY ~ e$ 9 a8 $i P o ~ ~~ ~ t 3~ ~ ~ ~ Y ~~` Z ~ ~ ~~ ~ L e ~ ~ ~a Fl a ~ ~ ~g~ ~ ~ L r $~ n i g ~ ~ o $ ~ ~ ~. ~ ~~ F o $ ~ ~ Q ~ n g ~ ~ ~ > _ ~ ~ ~ ~ ~ ~ 2 ~ ~y > G G ~ 4~ Y ~ ~ - ` ~ ~ ~ J 6 ~ a.n ~ ~ w ` ~ n ~ ~ s s Qg Q APPENDIX C FORM OF OPINION OF BOND COUNSEL Closing Date. 2007 City Council City of Bakersfield 1501 Truxtun Avenge $akersfield, CA 93301 City of Bakersfield Assessment District No. 06-1 (EtcheverrylLin IWniversity Park) Limited Obligation Improvement Bonds (Final Opinion) Ladies and Gentlemen: We have gored as bond counsel in connection with the issuance by the City of Bakersfield (the "Issuer") of $5,010,000 aggregate principal amount of the City of Bakersfield Assessment District No. 06-1 (EtcheverrylLin IIlUniversity Park} Limited Obligation Impravement Bonds (the "Bonds"} pursuant to the previsions of the Municipal Improvetent Act of 1913 and the Improvement Bond Act of 1915 and Resolution No. 056-07, adopted by rho City Council an March 28, 2007 (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 docmnents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, zequirements and procedures contained or referred to in the Resolution, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limtitation, defeasanee of the Bonds) may be taken or onvtted tinder the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken ox omitted upon the advice or appxaval of counsel other than ourselves. The opinions expressed herein are based on an analysis of exisring laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inforns any person, whether any such actions are taken or omitted ar events do occur. Our engagement with respect io 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. «e have mat 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 paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolution and the Tax Certificate, including (without hmitation) covenants and agreements compliance with which is necessary to assure that fitture actions, omissions ax events will not cause interest on the Bonds to be included in gzoss 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 bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other simIlar laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of Califortia. c-t 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 Bonds which validity depends, in addition to the legal steps required, upon the accuracy of certain of the engineering details. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: I. The Bonds eonstimte valid and binding special assessment obligations of the Issuer, payable solely from and secured by the unpaid assessments and certain funds held under the Resolution. 2. The Resolution has been duly adopted and constitutes a valid and binding obligation of the Issuer. 3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the 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 abserve 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 & SliTCLIFFE LLC per c-z APPENDIX D ASSESSMENT DIAGRAM na (THIS PAGE INTENTIONALLY LEFT BLANK) ~ ~ I~ _`' ~ o i LL o l ws ~.mssp~~ ~ o le~m i °_ o°x i W~ w z ~ i z I ~~s c i ~q ~ °f~.~ j ~z< ~N~a i op ~o p0 o f o ~y c.1 G 9 i ~D~ ~~ °x 5° i< ~` ~ ~ pad Sp 6` °' cry "4 ~ ~ O ~. I `o ° ~ ~ °ES~ ~ ~D~ g q. ~°"„~ ~. 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The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolufion No. 056-09 (the "Resolution"), adopted by the City Council of the City nn March 2R, 2009. The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule I Sc2-12(b)(5}; as amended. Section 2. Definitions. In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described ht, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean any person wha has the power, directly or indirectly, to vote or consent with respect to, ox to dispose of ownership of, any Bonds (including parsons holding Bonds through nominees, depositories, or other intennedraries). "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 I and ending on the next following Lune 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 depasimry, any Beneficial (7wner 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 murent National Repositories are listed on the Securities and Exchange Commission website at httpalwwwsec.govlinfo/municipalJnrmsir.htm. "Official Statement' shall mean the final Official Statement, dated April 12, 2007, pertaining to the Bonds. "Participating Underwriter" shall mean Stone & Youngberg LLC, and any other original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National 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. f -1 "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. Section 3. Provision of Annual Reports. (a) The Ciry shall, or shall cause the Dissemination Agent to, not later than nine (9) months after the end of the City's Fiscal Year {i.e., currently not later than April 1 of each year), commencing with the report for the 2006-07 Fiscal Year, 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 separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited fmaneial 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 httpafwww.disclosureusa.org. 1f the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c}. (b) Not later than fifteen (IS) Business Days prior to the date required in subsection (a), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to each Repository an Annual Report by the date required in subsection (a), the City shall send to each Repository a notice in substantially the form attached hereto as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year, prior to the date for providing the Annual Report, the name and address of each Repository, and File the Annual Report with each Repository, and (ii) if the Dissemination Agent is other than the City, fle a report with the Ciry certifying that the Annual ReporC has been provided pursuant to this Disclosure Certificate, stating the date it was provided and fisting 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 Year, prepared in accordance with generally accepted accounting principtes as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant ro Section 3(a), the Annual Report shall contain unaudited fmaneial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Notwithstanding the foregoing, each Annual Report or other filing containing the City's financial statements may include the following ax other similar statement: TIIE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED SOLELY TO COMPLY WITH THE SECURITIES AND EXCHANGE COMMISSION STAFF'S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY OF BAKER5FIELD (OTHER THAN THE ASSESSMENTS LEVIED IN THE ASSESSMENT DISTRICT) ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND TIIE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FU'l~iDS FROM THE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDEfION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD, OR SELL THF. BONDS. F-2 (b) The following information with respect to the City for the Fiscal Year to which the Annual Report relates; which information may be provided by its inclusion in the audited 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 the end of such Fiscal Year in each of the following funds established pursuant to the Resolution: (A) the Improvement Fund; (B} the Redemption Fund; and (C) the Reserve Fund. (iii) Identification of each parcel fox which any installment of the unpaid assessment is delinquent together with the following information respecting each such parcel (A) the amount delinquent (exclusive of late charges and monthly penalties far reinstatement); (B) the date (December 10 oz April 10) of the first delingneney; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed in the Kern County Superior Court; and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale. (iv} A current statement of the status of completion or progress toward completion of the public improvements described in the Official Statement raider the subheading "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS -Description of the Community Areas and the Improvements.° (v) A current statement of the land-secured public financing information summarized in the Official Statement under the subheading "THE BONDS ~~-Priority of Lien.°' (vi) A current statement of the parcel information set forth in Columns 5 tluough 9, inclusive, of APPENDIX E to the f~fficial Statement, for bath existing and future parcels fox which a subdivision map has not been recorded. (c) In addition to any of the information expressly required to be provided under paragraphs (a} and (b) of this Section, the City shall provide such further information, if any, as may be necessary W make the specifically required statements, in the light of the circumstances under which they ue made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been subtnitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. {a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the oecurence of any of the following events (each, a "Listed Event") with respect to the Bonds, if material: (i) principal and interest payment delinquencies; (ii) non-payment related defaults; (iii) modifications to rights of Bond holders; (iv) optional, contingent, or unscheduled $ond calls; (v) defeasances; (vi) rating change; r-s (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) tmscheduled draws on credit enhancements reflecting financial difficulties; (x} substitution of credit or liquidity providers, or their failure to perform; or (xi) release, substitution, or sale of property securing repayment of the Bands. (b) Whenever the Ciry obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material tinder applicable federal securities law. {c) If the Ciry 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 the Repositories. Such notice may be filed using the SEC-Approved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at website http:lfwww.diselosureusa.org. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under this subsection auy earlier 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 Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bands, If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as foY a Listed Event under Section 5(c). Section 7. Dissemination Aeent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or withaut appointing a successor Dissennation Agent. Section 8. Amendment Waiver. Notwithstanding any otherprovision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a} if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in Che identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b} the tmdertakings 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 auy 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 $eneficial Owners of the Bonds. If the annual financial information or operating data in 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 aperating data or financial information being provided. 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 narative explanation of the r•-a 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 Ciry. If an amendment is made to the undertaking specifying the aceotmting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the now accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, ar including any other information in any Annual Report or notice of occurrence of a Listed Bvent, in addition to that which is required by this Disclosure Cert~cate. 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 Ciry shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate any Holder ox Beneficial Owner of tho Bands may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Ciry 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 solo remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties Immunities and Liabilities of Dissemination Anent. The Dissemination Agent shall have only such duties as are speeifioally 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 exet~cise or performance of its powers and duties heretmder, including the casts and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination AgenPs negligence or willful misconduct. The obligations of the Ciry under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Benefictaxies. This Disclostue Certificate shall inure solely ro the benefit of Che City, the Dissemination Agent, the Participating Underwriter, and Holdets and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date. [Closing Date CITY OF BAKERSEIELD By: Finance Director FJ EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL RF,PORT Name of Issuer: City of Bakersfield, California Name of Bond Issue: City of Bakersfield Assessment District No. 06-1 (EteheverryJLin IUUniversity Park} Limited Obligation Improvement Bonds Date of Issuance: [Ctosing Date] NOTICE IS HEREBY GIVF,N that the City of Bakersfield, California (the "City), has not provided an Annual Report with respect to the above-named Bonds as required Section 4{a) of the Continuing Disclosure Certificate executed by the City on [Clasing Date]. The City anticipates that the Annual Report will be filed by Dated: CITY OF BAKERSFIELD By: Finance Director F-6 (LENNAR HOMES FORM) This Continuing Disclosure Certificate (the "Disclosure Certificate"} is executed and delivered by Lennar Homes of California, Inc., a California corporarion (the "Landowner"), in connection with the issuance by the City of Bakersfield (the "City") of $5,010,000 in aggregate principal amount of the City of Bakersfield Assessment District No. 06-I (EtcheverrylLin II/Universiry Park) Limited Obligation Improvement Bonds (the "Bonds") for the Ciry of Bakersfield Assessment District No. 06-1 (EtcheverrylLin II/University Park) (the "Assessment DistricP'). The Bonds are being issued ptusuant to a resolution authorizing issuance of the Bands, being Resolution No. 056-09 (the "Resolution"), adopted by the Ciry Council of the City on March 28, 2009. The Landowner covenants and agrees as follows: SECTION L Purnose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Landowner for the benefit of the City, Stone & Youngberg LLC, as the underwriter of the Bonds {the "Participating Underwriter"}, and the Holders and Beneficial Owners (each as defined below) of the Bonds in ardor 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 directly or indirectly owning, controlling, or holding with power to vote, 5% oc more of the outstanding voting securities of such other Person, (b) any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by such other Person, or (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, "control" means the power to exercise a 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 ~'lgreement' means an agreement or certificate by a Successor Landowner, containing terms substantially similar to this Disclosure Certificate, whereby such Successor Landowner shall agree to provide Semi- Annual Reports and notieos of Listed Events with respect to the proporty in the Assessment District owned by such Successor Landowner and its Affiliates, if any. "Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of 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 (or LO Land, if applicable) intends to make, or cause to be made, in order for the Property to reach the Planned Development Stage, the fime frame in whieb such improvements are intended to be made, and the estimated costs of such improvements. The Landowner's Development Plan, as of the date hereof, is described in the Official Statement raider the heading "OWNERSHIP AND PLAA'NED FItii TANCINCr ANll DEVELOPMEIGT OF THE ASSESSMENT DISTRICT." "Disclosure Period" shall mean the six-month period beginning on July 1 or January 1 and ending on the next following Tune 30 or llecember 31, as applicable. "Dissemination AgenP' shall mean the Landowner, or any successor Disseminatian Agent designated in writing by the Landotimex and which has filed with the Landowner and the City a written acceptance of such designation. ra "Event of Bankruptcy" shall mean, with respect to a Persan, that such Person files a petition ax institutes a proceeding under any actor acts, state or federal, dealing with. or relating to the subject or subjects of bankruptcy or insolvency, ar under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks, seeks, or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person's debts or obligations, or affers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or obligations, ar 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 similar relief, or if any such petition or any such proceedings of the same or similar kind or character is 61ed or instituted or taken against such Person and the same shall remain undismissed for a 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 or LO Land, if applicable, nnends to finance its Development Plan, including specific sources of finding 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 OP THE ASSESSMENT DISTRICT." "Financial Statements" shall mean the full financial statements, special purpose financial statements, project operating statements, or other reports reflecting the financial posifion of the Landowner's parent company or, if such financial statements are prepared separately for the Landowner, reflecting the financial position of the Landawner; 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 parent company shall consist of a balance sheet, an income statement, and a statement of cash flows, all prepared in accordance with generally accepted accounting principles. "Holders" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system. `°Listed Event" shall have the meaning given to such term in Section 5 of this Disclosure Certificate. "LO Land" shall mean LO Land Assets, LP, a Delaware limited partnership. "National Repositor}~' shall mean any Nationally Recognized Municipal Securities lnfotmation Repository for purposes of the Rule. The current National Repositories ace listed ou the Securities and Exchange Commission websitc at http:Uwwwsec.gov(info/municipallnrmsir.htm. "Official Statement" shall mean the final Official Statement dated April 12, 2007, pertaining to the Sends. "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability eotnpany, a trust, any unincorporated organization, or a government or a political subdivision thereof. "Planned Development Stage" shall mean, with respect to the Property, the stage of development ro which the Landowner or its Affiliates or LO Land, if applicable, intends to develop the Property, as described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Property" shall mean the property within the Assessment District that, as of the date heeeof, is owned by the Landowner or LO Land, exclusive of property that, subsequent to the date hereof, is transferred to (i) a Successor Landowner that, along with its Affiliates, if any, owns property in the Assessment District 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 not more than twenty percent (20%) of the annual assessment securing payment of the Bonds, (ii) a Successor Landowner that, along with its Affiliates, if any, owns property in the Assessment District that, when aggregated with all other property in the Assessment District then-owned by sneh Successor Landowner and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the F-8 annual assessment securing payment of the Sonds and for which property such Successor Landowner has entered into an Assumption Agreement, or (iii) a homeowner or other end user. "Repository" shall mean each National Repository and each Stare Repository. "Rule" shall mean Ruie ISc2-12(b)(5} adopted by the Securities and Exchange Commission under the Securities Exchange AcC of 1934, as the same may be 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 far the putpose of the Rule and recognized as such by the Securities and Exchange Canvnission. As of the date of this Disclosure Certificate, there is no State Repository. "Successor Landowner" shall mean any property owner, other than the Landotivner or its Affiliates or LO Land, who purchases property in the Assessment District for the pulpose of developing the proporry and not merely as an end-user. SECTION 3. Provision of Semi-Amral Reports. (a) So long as the Landowner is obligated hereunder and said obligation has not been terminated pursuant to Section fi of this Disclosure Certificate, the Landowner shall provide, or sha[1 cause the Dissemination Agent to provide, not later than flues (3) months after the end of each Disclosure Period (i. e., not later than September 30 or March 31 of each year, as applicable), commencing with the report fox the Disclosm'e Period ending December 31, 2007, to each Repository aSemi-Annual Report relating to the immediately preceding Disclmsure Period that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Serni- Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross reference other information as provided in Section 4 of this Disclosure Certificate; provided, however, that if audited Financial Statements are required to be provided, such audited Financial Statements may be submitted separately from the balance of the Semi-Annual Report, and later than the date required above for the filing of the Semi-Annual Report, if not available by that date. The Semi-Annual Report may be feted using the SEC-Approved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at websiCe http:(/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 fifteen (] 5} calendar days prior tp the date required in subsection (a) hereof, the Landowner shall provide the Semi-Amoral Report to the Dissemination Agent. If the Landowner is unable to provide, or cause to be provided, tp each Repository aSemi-Amtual 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 year, prior to the date for providing the Semi-Annual Report, the name and address of each Repository, and file the Semi-Annual Report with each Repository, and (ii) following the filing of the Semi-Annual Report with each Repository, file a certificate with the City and the Landowner ceriiSying that the Semi-Annual Report has been filed with each Repository pursuant to this Disclosure Gertifieate, stating the date on which the Semi-Armual Report was filed, and listing each Repository (by name and address) with which it was filed. r-v SECTION 4. Content of Semi-Annual Renorts 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 aSemi-Annual Report for the preceding Disclosure Period with respect to the Property, which Semi-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 of the Landowner or LO Land, as applicable, and any significant changes in such 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. Tho Landowner shall track actual absorption relative to projected absorption descnbed in the Official Statement under the heading "OWNERSHIP AND PLANNED FINAIvTCING AND DEVELOPMENT OF THE ASSESSMENT DTSTRICT - Deee[opxnent and Financing Plans - Lennar Homes Development Plan." The Landowner shall identify any material deviations in actual versus expected sate 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 are not Affiliates of the Landowner or LO Laud. (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 describo any material change in the legal structure of the Landowner or of any of its Affiliates that owns or holds an option to purchase property within the Assessment District. (d) Each fiscal year, 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 applicable). All such references may contain the following caveat: The quarterly or annual reports provided with this Semi-Annual Report axe referred to for informational purposes only. In the event of a failure to pay any installment of assessments, and after depletion of the Reserne 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 installments does not constitute a personal indebtedness of the Landowner for which the funds ox assets (other than the property in the Assessment District) of the Landowner may be required, by operation of law ox otherwise, to be used to pay debt service on the Bonds, It should not be inferred from the reference to the quarterly ox annual reports provided with this Semi-Annual Report that such funds or assets (other than the property in the Assessment District} are available to cure any delinquencies in the payment of assessments. (,e) To the extent that Financial Statements are prepared separately for the Landowner, Financial Statemeuts prepared in accordance with generally accepted accounting principles, as in effect from time to time, shall be provided. To the extent that audited Financial Statetents are prepared separately fox the Landowner, if audited Financial Statements are required to be provided and such audited Financial Statements are noC available by the time the applicable Semi-Annual Report is required to be provided pursuant to Section 3(a) of this Disclosure Certificate, the applicable Semi-Annual Report shall contain unaudited Financial Statements, and the audited Financial Statements shall be filed in the same manner as the applicable Semi-Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby. To the extent that audited Financial Statements of the Landowner are prepared, 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 he applicable. All such audited Financial Statements of the Landowner, if any, may contain the following caveat: The audited financial statements of the Landowner are included for informational purposes only. In the event of a failure to pay any insNallmenY 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 installments does not constitute a pcrsona7 indebtedness of the Landowner for which the funds ox assets (other than the property in the Assessment District} of the Landowner may be required, by operation of law or F-l0 otherwise, to be used to pay debt service on the Bonds. It should not be inferred from audited financial statements of the Landowner that such funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments. (f) In addition to any of the information expressly required to be provided trader this Section, the Landowner shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents that have been submitted to each of the Repositories or the Securities and Exchange Cotmnission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemakittg Board. The Landowner shall clearly identify each such other document so included by reference. SECTION 5. Landowner's Renort af_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 13rovisions of this Section 5, the Landowner shall promptly give, or cause to be given notice of the oecun~ence of any of the following events (each, a "Listed Event") with respect to the Landowner or any of its Affiliates That own or hold an option to purchase property within the Assessment District or with respect to L,O Land: (i) Any conveyance by the Landowner or any of its Affiliates or LO Land 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, in the aggregate, to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds. Notwithstanding the foregoing, the purchase of Lots by the Landowner or any of its Affiliates shall not require the Landowner to report such event (ii) Any faIlure of the Landowner or any of its Affiliates, or LO Land to pay prior to delinquency general property taxes, special taxes, or assessments with respect to Che Property. (iii) Any termination of, ox uncured material default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse affect on the most recently disclosed Financing Plan or Development Plan, if any, of the Landowner or LO Land, or on the ability of the Landowner or any of its Affiliates, ar LO Laud, if applicable, to pay prior Yo delinquency assessment installments with respect to the Property. (iv} The occurrence of an Event of Bankruptcy with respect to the Landowner or LO Land or auy of their Affiliates thaC could have a material adverse affect on the most recently disclosed Financing Plan or Development Plan, if any, of the Landowner or LO Land or on the ability of the Landowner or any of its Affiliates or LO Land to pay prior to delinquency assessment installments with respect to the Property. (v} Any amendments to land use entitlements or environmental conditions or other governmental conditions that are necessty to complete the development of the Property. (vi) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Property, if material. (vii) Any previously midisclosed legislative, administrative, or judicial challenges to development of the Property, 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 thoroughfares, sewers, water conveyance systems, and similar facIlities that could have a material adverse effect on the ability to complete the development of the Property. F-ll (ix) The assumption of any obligations by a Successor Landowner pursuant to Section 6 of this Disclosure Certificate. (b) Whenever khe Landowner obtains knowledge of the occurrence of a Listed Event, the Landowner shall promptly notify the Dissemination Agent in writing, with a copy to the Ciry. Such notice shall instinct the Dissemination Agent to report the occurrence pursuant 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 the Repositories, with a copy to the Participating Underwriter. Such notice may be filed using the SEC-Approved Electronic Transmission Raeilities provided by the Texas Municipal Advisory Council at website httpalwww.disclosureusa.org. SECTION 6. Termination of Landowner's Reportin ~ Obli ag tion. The Landowner's continuing obligation to provide aSemi-Annual Report and natives of material Listed Events will terminate upon the earlier of (L) the legal defeasance, prior redemption, or payment in fall of all of the Bonds, or (2) the date upon which the Landowner and its Affiliates,'if any, cease to own property in Chv Assesstent District that, when aggregated with all other property in the Assessment District then-owned by the Landowner and its Afriliates, if any, is subject to the lien of greater than twenty percent (20°fo) of the annual assessment securing payment of the Bonds; provided, however, for purposes of determining the Landowner's ownership of property in the Assessment DistricC, it shall be assmned that the Landowner owns all property for which the Landowner and its Affiliates, if any, hold an exeroisable option to purchase such property, whether or not such option has been exercised, or (3) when the Landowner's property (determined in accordance with clause (2) above) within the Assessment District has reached the Planned Development Stage. Zf the Landowner or LO Land conveys to a Successor Landowner property in the Assessment District prior to the time at which such property reaches the Planned Development Stage, and such property conveyed, when aggregated with all other property in the Assessment District then-owned by such Successor 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, then the Landowner shall require a Successor Landowner to enter into an Assumption Agreement, but only to the extent and upon the Germs, if any, required by the Rule. SECTION 7. Dissemination Agent. The Landowner 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 Landowner may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. As of the date of this Disclosure Certificate, the Dissemination Agent is the Landowner. SECTION 8. Amendment: Waiver. Notwithstanding 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 agrees in writing and the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 3(a}, 4, or 5, it may only be made in connection with a change in circumstances that arises front a change in iogal requirements, change in law, or cha~ige 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 Kule at the time of the pritnary offering of the Bonds, after taking into account any amendments ox interpretations of the Rule, as well as any change in circumstances; and taz (c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in fhe 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 ox operating data to be provided in the Semi-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. In the event of any amendment or w~aiv er of a provision of this Disclosure Certiftoaee, 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 ar 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 m the undertaking specifying the accounting principles m be followed in preparing financial statements, the annual financial information fox the year in which the change is made shall present a comparison behveen the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the 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 infonuarion in any Semi-Annual Report or notice of ocemrence of a Listed Event, in addifion 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 infornation 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 Citu, or any Holder ox Beneficial Owner of outstanding Bonds may take such actions as may be 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 Ue deemed m 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 ll. IJuties Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as axe specifically set forth in this Disclosure Certificate, and the 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 or 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 Dissemination Agent's negligence or willful misconduct The obligations of the Landowner under this Secrion shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. r-t3 SECTION 12. Beneficiaries. 'This Disclosure Certificate shall be binding upon the Landowner and shall inure sole]y 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] LENNAR HOMES OF CALIFORNIA, INC., a California corporation F-14 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO RILE SEMI-ANNUAL REPORT Name of Landowner: Lennar Homes of California, Inc., a California corporation Name of Bond Issue: City of Bakersfield Assessment District No. 06-1 (EtcheverryJLin IIILJniversity Park) Limited Obligation Improvement Bonds Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that Lennar Ilomes of California, Inc., a California corporation (the "Landowner"), has not provided aSemi-Annual Report with respect to the aboee-named Bonds as required by Section 3 of the Landowner Continuing Disclosure CeniFicate, dated [Closing Date]. The Landowner anticipates that the Semi-Annual Report will be filed by Date LENNAR HOMES OF CALIFORNIA, INC., a California corporation, as Dissemination Agent By: ee: Landowner ras (C&C CALIFORNIA FORM) This Continuing Disclosure Certificate {the "Disclosure Certificate") is executed and delivered by Castle & Cooke California, Inc., a California wrporation (the "Landowner', in connection with the issuance by the City of Bakersfield (the "City") of $S,O1Q,000 in aggregate principal amount of the City of Bakersfield Assessment District No. 06-1 (EtchevenylLin IbUniversity Park) Limited Obligation Improvement Bonds (the "Bonds") for the City of Bakersfield Assessment District No. 06-I (EtcheverrylLinIIlUniversity Park) (the "Assessment DistrieP~. The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 056-07 (the "Resolution"), adopted by the City Council of the City on March 28, 2007. The Landowner covenants and agrees as follows: SECTION 1. Purpose of the Bisclasure Certificate. This Disclosure Certificate is being executed and delivered by the Landowner for the benefit of the City, Stone & Youngberg LLC, as the underwriter of the Bonds (the "Participating Underwriter"), and the Holders and Beneficial Owners (each as deftned 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 defmitions 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 Parson shall mean (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person 5°f° or more of whose outstanding voting securities are directly ox indirectly owned, controlled, or held with power to vote by such other Person, or (c} any Person directly or indirectly controlling, controlled by, or under Gammon control with, such other Person. For purposes hereof, "control" means the power to exercise a wntrolling influence over the management or policies of a Person, unless such power is solely the result of an official gosition with such Person. "Assumption Agreement" means an agreement or certificate by a Successor Landowner, containing ternts substantially similar to this Disclosure Certificate, whereby such Successor Landowner shall agree to provide Semi- Annual Reports and notices of Listed Events with respect to the property in the Assessment District owned by such Successor Landowner and its Affiliates, if any. "Beneficial Owner" shall mean any person who has the power, directly or indirecty, 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 intennediuies. "Development Plan" shall mean the specific improvements the Landowner intends to make, or cause to be made, in order for the Property to reach the Planned Development Stage, the time frame in which such improvements are intended to be made, and the estimated costs of such improvements. The Landowner's Development Plan, as of the date hereof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Disclosure Period" shall mean the six-month period beginning on Suly 1 or January 1 and ending on the next following Juno 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 designation. R-ib "Event of Bankruptcy" shall mean, with respect to a Person, that such Person files a petition or institutes a proceeding under any actor acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks, seeks, or prays to be adjudicated a bankrupt, or is to be discharged from any or all o£ such Person's debts or obligarions, 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 similar relief, ox if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person and the same shall remain undismissed for a 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 io the Official Statement under the heading "OWNERSHIP AND PLANNED FIlV~ANCING AIVTD 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 ftnaneial position of the Landowner's parent company or, if such financial statements are prepared separately 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 fmancial statements ox reports. The Financial Statements for the Landowner or its parent company shall consist of a balance sheet, an income statement, and a statement of cash flows, all prepared in accordance with generally accepted accounting principles. "holders" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company ox 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 I?isclasure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rnle. The cun~nt National Repositories are Bested on the Securities and Exchange Commission website at http:llwwwsec.gov/infohnunicipal/mmsir.htm. "Official Statement" shall mean the final Official Statement dated April 12, 2007, pertaining to the Bonds. "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a trust, any unincorporated organization, or a government or a political subdivision thereof. "Planned Development Stage" shall mean, with respect to the Property, the stage of development to which the Landowner or its Affiliate intends to develop the Property, as described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSBSSiVIENT DISTRICT." "Property" shall mean the property within the Assessment District that, as of the date hereof, is owned 6y the Landowner, exclusive of property that, subsequent to the date hereof, is transferred to (i} a Successor Landowner that, along with its Affiliates, if any, owns pzoperty in the Assessment DistricC that, when aggregated with all ether property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of not more than twenty percent (20%) of the annual assessment securing payment of the Bonds, (ii) a Successor Landowner that, along with its Affiliates, if any, o~ms property in the Assessment District 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 o£ greater than Cwenty percent (20%) of the annual assessment securing payment of the Bonds and for which property such Successor Landowner has entered into an Assmnption Agreement, or {iii) a homeowner or other end user. F-17 "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rnle I5e2-12{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. "Sethi-Annua] Report" shall mean any Semi-Annual Report provided by the Landowner pursuant ta, and as described in, Sections 3 and 4 of this Disclosure Certificate. "State Repository" shall mean any public or privafe repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. "Successor Landawner" shall mean any property owner, other than the Landowner or its Affiliates. which purchases property in the Assessment District for the purpose of developing Che property and noY merely as an end- user. SEC'T'ION 3. Provision of Semi-Annual Reports. (a} So Long as Che Landowner is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure C.ertiReate, 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 year, as applicable), commencing with the report for the Disclosure Period ending Deeember37, 2007, to each Repository aSemi-Annual Report relating to the immediately preceding Disclosure Period that is consistent with Che requirements of Section 4 of this Disclosure Certificate. The Semi- Annual Report may be submitted as a single docwnenY or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided, however, that if audited Financial Statements are required to be provided, such audited Financial Statements may be submitted separately from the balance of the Sethi-Annual Report, and later than the date required above for the filing of the Semi-Amwa7 Report, if not available by that date. The Semi-Annual Report may be filed using the SEC-Approved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at website httpJlwww.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 Certitcate, not later than fifteen (15) calendar days prior to the date required in subsection (a} hereof, the Landowner shall provide the Semi-Anneal Report to the Dissemination 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 year, prior to the date for providing the Semi-Annual Report, the tuune and address of each Repository, and file the Senu-Atmual Report with each Repository, and (ii) following the Filing of the Semi-Annual Report with each Repository, file a certificate with the City and the 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. r-ta SECTION 4. Content of Semi-Annual Reports. 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 a Semi-Annual Report for the preceding Disclosure Period with xespeet to the Property, which Semi-Annual Report shall contain or incorporate by zeferenee 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, oc 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 described in the Official Statement under the heading "OWNERSHIP AND PLANIvTED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT -Development and Financing Plans - C&C California Development Pfan.° 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 Pexsans 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 Invitation, changes in slams of the Landowner's credit line (or the credit line of any Affiliates of the Landowner that own property within the Assessment IlistrieY}, if applicable. (c) The Landowner shall describe any material change in the legal struct~e of the Landowner or of any of its Affiliates that own property within the Assessment District. (d) Each fiscal year, 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 applicable). All such references may contain the following caveat: The quarterly or annual reports provided with this Semi-Annual Report axe referred to for informational purposes only. In the event of a failure to pay any iristallmenC of assessments, and after depletion of the Reserve Fund, the real property in the Assessment District is the sole security for the Bonds. The obligarion 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 the Assessment District) of the Landowner maybe required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from the reference to the quarterly or annual reports provided with this Semi-Annual Report that such funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payutent of assessments. (e) To [he extent that Financial Statements are prepared separately for the Landowner, Financial Statements prepared in accordanoe with generally accepted accounting principles, as in effect from time to time, shall be provided. To the extent that audited Financial Statements are prepared separately fox the Landowner, if audited Financial Statements are required to 6e provided and such audited Financial Statements are not available by the time the applicable Semi-Annual ReporC is required to be provided pursuant to Section 3(a} of this Disclosure Certificate; the applicable Semi-Annual Report shall contain mtaudited Financial Statements, and the audited Financial Statements shall be filed in the sanie manner as the applicable Semi-Annual Report when they become avaIlable. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby. To the extent that audited Financial Statements of the Landowner are prepared, 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 are included for informational purposes only. In the event of a Failure to pay any installmment of assessments, and after depletion of the Reserve Fund, the real property iu the Assessment District is the sole security fox 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 the Assessment District} of tho Landowner may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from audited financial statements F-13 of the Landowner that such funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments. (t) In addition to any of the information expressly required rA be provided under this Section, the Landowner shall provide such further informarion, if any, as may he necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents that have been submitted to each of the Repositories or the Securities and Exchange Convnission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Soard. 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 obligatian has not been terminated pursuant to Section 6 of this Disclosure Certificate, pursuant Yo the provisions of this Section 5, the Landawner shall promptly give, or cause to be given notice of the occurrence of any of the following events (each, a "Listed Event") with respect to 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, in the a~eregate, 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 the Property. (iii) Any terminatiou of, or uncured material default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse affect on the 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 prior to deliuquency assessment installments with respect Yo the Property. (iv) The occurrence of an Evont of Bankruptcy 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 auy, or on the ability of the Landawner or any of its Affiliates to pay prior to delinquency assessment installments with respect to the Property. (v) Any amendments to land use entitlements or environmental conditions or other governmental conditions that are necessary to complete the development of the Property. (vi) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Property, if material. (vii) Any previously undisclosed legislative, administrative, or judicial challenges to development of the Property, if material. (viii} Any changes hr the alignment, design, or likelihood of completian of sigtuficant public improvements within a' serving the property in the Assessment District, including major thoroughfares, sewers, water conveyance systems, and similaz facilities that could have a material adverse effecC on the ability to complete the development of the Property. (ix) The assumption of any obligations by a Successor Landowner pursuant to Section 6 of this Disclosure Certificate. F-20 (b) Whenever the Landowner obtains knowledge of the occurrence of a Listed Event, the Landowner shall promptly notify the Dissemination Agent in writing, with a copy to the City. Such notice shall instinct the Dissemination Agent to report the occurrence pursuant 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 the Repositories, with a copy to the Participating Underrvriter. Such notice maybe filed using the SEC-Approved Electronic Transmission Faeilifies provided by the Texas Municipal Advisory Council at website http:(/www.disclosuteusa.org. SECTION 6. Termination of Landowner's Reporting Obligation. The Landowner's continuing obligation to provide a Serni-Annual Report and notices of material Listed Evente will terminate upon the gather 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 Districtthen-owned by the 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; provided, however, for purposes of determining the Landowner's ownership of property in the Assessment Dianict, it shall be assumed that the Landawner 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 (determined in accordance with clause (2) above) within the Assessment District has reached the Planned Development Stage. If the Landowner conveys to a Successor Landowner property in the Assessment District prior Co the time at which such property reaches the Planned Development Stage, and such property conveyed, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of greater than twenty percent (2U°lo) 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 Landowner may, from time to time, appointor engage a Dissemination Agent to assist the Landowner in carrying out its obligations under this Disclosure Certificate, and the Landowner may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. As of the date of this Disclosure Certificate, the Dissemination Agent is the Landawner. SECTION R. Amendment: Waiver. Notwithstanding 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 agrees in writing and the following conditions are satisfied: {a) if the aznendment or waiver eelates 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, nahne, 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 rho 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 I3olders of the Bonds in the mumer 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 comrsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. F'-21 If the annual financial information or operating data to be provided in the Semi-Annual Report is amended pursuant to the pro~zsions 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 operatng data or financial information being provided. In the event of any amendment ar 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 year in which the change is made shall present a comparison between the fmancial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial infarmation, in order ro 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 4. 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 connnunication 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-Amrual 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 Cettificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event. SECTION IQ. Default. In the event of a faIlure of the Landoumer m comply with auy provision of this Disclosure Certificate, the Participating Underwriter, the City, or any Holder or Beneficial Owner of outstanding Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by eourf order, to cause the Landowner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certilcate shall not be deemed to be an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in [he event of any failure of the Landowner to comply with this Disclosure Certificate shall be an action to compel performance. SECTION ll. Duties, Immunities, and Liabilities of Dissemination Arent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Landowner agrees to indemnify and save the City, the Dissemination Agent, and their respective office, directors, employees, and agents; harmless against any losses, expenses, and liabilities which either or both of them may incur arising out of or in the exercise or performance of the 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 Dissennation Agent's negligence or willful misconduct. The obligations of the Landowner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. r-zz SECTION 12. Beneficiaries. This Disclosure Certificate shall be binding upon the Landowner and shall inure solely to the benefit of the Landowner, the Dissemination Agent, the Participating Underwriter, tho City, and the Holders and Beneficial Owners from time to time of the Bonds,. and shall create no rights in any other person or entity. Date: [Closing Date] CASTLE & COOKS CALIFORNIA, LNC., a California corporation By: F-23 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE SEMI-ANAIJAL REPORT Name of Landowner. Castle & Cooke California, Inc., a Galifornia corporation Name of Bond Issue: City of Bakersfield Assessment District No. 06-] (EteheverrylLin II{IJniversity Park) Limited Obligation finpravement Bonds Date of Issuance: [Closing Date] NOTICB IS HEREBY GIVEN that Castle & Cooke California, inc., a California corporation (the "Landowner"), hoe not provided aSemi-Annual Report wikh respect to the above-named Bonds as roquired by Section 3 of the Landowner Continuing Disclosure Certifioate, dated [Closing Date]. The Landowner anticipates that the Serni-Annual Report will be filed by Date CASTLE & COOKS CALIFORNIA, ENC., a California corporation, as Dissemination Agent ce: Landowner F-2A