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HomeMy WebLinkAbout15-ATTACHMENT 3ATTACHMENT NO. 3 Preliminary Official Statement (D O N O o L o � U � C C � C U morn O .? U O U o T O o � C U E O C U N O O (n 7 w � U N N C U � 0 C LD ° o gmm C L 0 O C C .O C E E m E 2 n -o E m O � U � o O CO O ` E .E C O 7 0 O d 0 — o � 3 � U C C O o r E m O C C N 0� o 0 C L m � E EL `O O U_ C L � 3 N C L -o Cj E w 15 T � C � O C U N N — ami N d � O �_ o 0 r E m PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER _, 2015 NEW ISSUE NOT RATED BOOK -ENTRY ONLY In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2015 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2015 Bonds is exempt from State of California personal income tax. See "CONCLUDING INFORMATION — Tax Matters" herein. Dated: Date of Delivery $27,045,000* CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/STANDARD PACIFIC) SPECIAL TAX BONDS, SERIES 2015A Due: September 1, as shown on inside cover The City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Special Tax Bonds, Series 2015A (the "2015 Bonds') are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (constituting Section 53311 et seq. of the California Government Code) (the "Law") and an Indenture of Trust (the "Indenture'), dated as of November 1, 2015, by and between the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) (the "District") and The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, as trustee. Proceeds of the 2015 Bonds will be used to finance certain infrastructure improvements and school facilities authorized to be funded by the District. The 2015 Bonds are payable from Net Special Tax Revenues derived from the levy of the Special Taxes (as such capitalized terms are defined in the Indenture) on real property located within the boundaries of the District, and are secured by a pledge of all of the Net Special Tax Revenues and moneys deposited in certain funds established under the Indenture. The 2015 Bonds when issued will be registered in the name of Cede & Co., as 2015 Bondowner and nominee for the Depository Trust Company ("DTC"), New York, New York. Purchases of beneficial interests in the 2015 Bonds will be made in book -entry only form. The 2015 Bonds will be issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof. See Appendix G — The Book Entry System herein. Interest on the 2015 Bonds is payable March 1 and September 1 of each year, commencing March 1, 2016. The 2015 Bonds are subject to optional redemption, mandatory redemption from prepayments of special taxes and mandatory sinking fund redemption, all as more fully described herein. See "THE 2015 BONDS — Optional Redemption," "— Mandatory Redemption from Prepayments of Special Taxes," and " — Mandatory Sinking Payment Redemption" herein. NEITHER THE FAITH AND CREDIT NOR ANY TAXING POWER OF THE CITY OF TUSTIN, OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE 2015 BONDS. EXCEPT FOR THE NET SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2015 BONDS. THE 2015 BONDS ARE NOT OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAX REVENUES AND AMOUNTS IN CERTAIN FUNDS ESTABLISHED UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN. This cover page contains certain information for quick reference only. It is not a complete summary of the terms of this bond issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the 2015 Bonds. See the section of this Official Statement entitled "SPECIAL RISK FACTORS" for a discussion of certain risk factors that should be considered, in addition to the other matters discussed herein, in considering the investment quality of the 2015 Bonds. MATURITY SCHEDULE (see inside cover) The 2015 Bonds are being offered when, as and if issued by the District, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the District by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa, California, acting as the City Attorney of the City of Tustin, and by Quint & Thimmig LLP, Larkspur, California, acting as Disclosure Counsel, and for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California, acting as Underwriter's Counsel. Delivery of the 2015 Bonds is expected to occur through the facilities of DTC on or about November 5, 2015. The date of this Official Statement is October , 2015. Preliminary, subject to change. STIFEL $27,045,000* CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/STANDARD PACIFIC) SPECIAL TAX BONDS, SERIES 2015A Maturity Schedule $ Serial Bonds; CUSIP Prefix: 901047t Maturity Date Principal Interest CUSIP Maturity Date Principal Interest CUSIP (September 1) Amount Rate Yield Suffixt (September 1) Amount Rate Yield Suffixt $ % Term Bonds due September 1, Price % to Yield % CUSIP 901047 $ % Term Bonds due September 1, 2045 Price % to Yield % CUSIP 901047 * Preliminary, subject to change. t Copyright © 2015 CUSIP Global Services. All rights reserved. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the owners of the 2015 Bonds. Neither the District nor the Underwriter is responsible for the selection or use of these CUSIP numbers, and no representation is made as to their correctness on the 2015 Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2015 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2015 Bonds. -i- GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT The information contained in this Official Statement has been obtained from sources that are believed to be reliable. No representation, warranty or guarantee, however, is made by the Underwriter as to the accuracy or completeness of any information in this Official Statement, including, without limitation, the information contained in the Appendices, and nothing contained in this Official Statement should be relied upon as a promise or representation by the Underwriter. Neither the District nor the Underwriter has authorized any dealer, broker, salesperson or other person to give any information or make any representations with respect to the offer or sale of 2015 Bonds other than as contained in this Official Statement. If given or made, any such information or representations must not be relied upon as having been authorized by the District or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the 2015 Bonds shall under any circumstances create any implication that there has been no change in the affairs of any party described in this Official Statement, or in the status of any property described in this Official Statement, subsequent to the date as of which such information is presented. This Official Statement and the information contained in this Official Statement are subject to amendment without notice. The 2015 Bonds may not be sold, and no offer to buy the 2015 Bonds may be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the 2015 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. When used in this Official Statement and in any continuing disclosure by the District, in any press release and in any oral statement made with the approval of an authorized officer of the District or any other entity described or referenced in this Official Statement, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized, and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. All summaries of the documents referred to in this Official Statement are qualified by the provisions of the respective documents summarized and do not purport to be complete statements of any or all of such provisions. 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 the completeness of such information. In connection with the offering of the 2015 Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market prices of the 2015 Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the 2015 Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. The 2015 Bonds have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption from the registration requirements contained in the Securities Act. The 2015 Bonds have not been registered or qualified under the securities laws of any state. The City of Tustin maintains an Internet website, but the information on the website is not incorporated in this Official Statement. THIS PAGE INTENTIONALLY LEFT BLANK CITY OF TUSTIN, CALIFORNIA City Council Charles E. "Chuck" Puckett, Mayor John Nielsen, Mayor Pro Tem Al Murray, Councilmember Rebecca 'Beckie" Gomez, Councilmember Dr. Allan Bernstein, Councilmember City Officials Jeffrey C. Parker, City Manager and City Clerk Pamela Arends-King, Finance Director and City Treasurer Sean Tran, Administrative Services Manager PROFESSIONAL SERVICES City Attorney Bond Counsel Woodruff, Spradlin & Smart, Stradling Yocca Carlson & Rauth, A Professional Corporation a Professional Corporation Costa Mesa, California Newport Beach, California Municipal Advisor Fieldman, Rolapp & Associates Irvine, CA Special Tax Consultant and Dissemination Agent Albert A. Webb Associates Riverside, California Disclosure Counsel Quint & Thimmig LLP Larkspur, California Appraiser Harris Realty Appraisal Newport Beach, California Market Absorption Consultant Empire Economics, Inc. Capistrano Beach, California Trustee The Bank of New York Mellon Trust Company, N.A. Los Angeles, California (1) The City Council of the City of Tustin acts as the legislative body of the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific), and City Staff provide administrative services for the District. -iv- THIS PAGE INTENTIONALLY LEFT BLANK -v- TABLE OF CONTENTS INTRODUCTION.............................................................1 General...........................................................................1 The Developer.............................................................32 Authority for Issuance.................................................1 Standard Pacific/ Ryland Merger Application of Proceeds...............................................2 Announcement............................................................ The Development..........................................................2 The Developer's Financing Plan ...............................33 Description of the 2015 Bonds.....................................3 Brookfield Homes.......................................................34 Sources of Payment for the 2015 Bonds.....................3 SPECIAL RISK FACTORS.............................................35 LandValue.....................................................................4 Concentration of Ownership.....................................36 TaxMatters....................................................................5 Failure to Develop Properties...................................36 Continuing Disclosure.................................................5 Failure to Achieve Market Projections ..................... RiskFactors....................................................................5 Competition.................................................................37 Limited Liability............................................................5 LandValue...................................................................37 Professionals Involved in the Offering......................6 Dependence upon the Developer for Additional Information................................................6 Construction................................................................37 THE FINANCING PLAN................................................7 Government Approvals.............................................38 Overview........................................................................7 Local, State and Federal Land Use Sources and Uses of Funds..........................................8 Regulations..................................................................38 Scheduled Annual Debt Service for the Insufficiency of Special Tax Revenues.....................38 2015 Bonds.....................................................................9 Bankruptcy and Foreclosure Delays ........................39 THE 2015 BONDS...........................................................10 Direct and Overlapping Indebtedness .....................40 Authority for Issuance...............................................10 Hazardous Materials..................................................42 Description of the 2015 Bonds...................................10 Geologic, Topographic and Climatic Optional Redemption.................................................11 Conditions....................................................................42 Mandatory Redemption from Prepayment Property Controlled by Federal Deposit of Special Taxes...........................................................11 Insurance Corporation...............................................43 Mandatory Sinking Payment Redemption .............11 Disclosure to Future Property Owners or Selection of Bonds for Redemption ..........................12 Lenders.........................................................................44 Notice of Redemption................................................12 Non -Cash Payments of Special Taxes......................44 Effect of Redemption..................................................13 Payment of the Special Tax is not a Transfer and Registration..........................................13 Personal Obligation of the Owners ..........................45 Discontinuation of Book Entry Only Limitations on Remedies...........................................45 System...........................................................................14 Loss of Tax Exemption...............................................45 SECURITY FOR THE 2015 BONDS..............................15 Proceedings to Reduce or Terminate the Limited Liability..........................................................15 SpecialTax...................................................................45 Pledge of Net Special Tax Revenues ........................15 Court Action Involving Landowner — LandValue...................................................................16 Voted Special Tax District.........................................46 Covenant for Superior Court Foreclosure...............19 Secondary Markets and Prices..................................47 No Teeter Plan.............................................................20 IRS Audit of Tax -Exempt Issues...............................47 Reserve Fund...............................................................20 No Acceleration Provision.........................................48 Additional Bonds Only for Refundings ..................21 CONCLUDING INFORMATION................................48 THE COMMUNITY FACILITIES DISTRICT..............22 Continuing Disclosure...............................................48 Location and Description...........................................22 Absence of Litigation..................................................49 Rate and Method of Apportionment of TaxMatters..................................................................50 SpecialTax...................................................................24 Legal Matters Incident to the Issuance of Authorized Facilities..................................................28 the 2015 Bonds.............................................................52 THE CITY OF TUSTIN...................................................28 Municipal Advisor......................................................52 THE DEVELOPER AND THE DEVELOPMENT ....... 28 The Development........................................................29 Underwriting...............................................................52 The Development Plan ...............................................31 Miscellaneous..............................................................53 Land Use Approvals and Environmental Review..........................................................................32 Public Utilities.............................................................32 SUMMARY OF THE INDENTURE The Developer.............................................................32 PROPOSED FORM OF OPINION OF BOND COUNSEL Standard Pacific/ Ryland Merger INITIAL APPRAISAL REPORT AND UPDATED APPRAISAL REPORT Announcement............................................................ 33 The Developer's Financing Plan ...............................33 RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX Brookfield Homes.......................................................34 GENERAL INFORMATION REGARDING THE CITY OF TUSTIN SPECIAL RISK FACTORS.............................................35 THE BOOK ENTRY SYSTEM Concentration of Ownership.....................................36 FORMS OF CONTINUING DISCLOSURE AGREEMENTS Failure to Develop Properties...................................36 Failure to Achieve Market Projections ..................... 37 Competition.................................................................37 LandValue...................................................................37 Dependence upon the Developer for Construction................................................................37 Government Approvals.............................................38 Local, State and Federal Land Use Regulations..................................................................38 Insufficiency of Special Tax Revenues.....................38 Bankruptcy and Foreclosure Delays ........................39 Direct and Overlapping Indebtedness .....................40 Hazardous Materials..................................................42 Geologic, Topographic and Climatic Conditions....................................................................42 Property Controlled by Federal Deposit Insurance Corporation...............................................43 Disclosure to Future Property Owners or Lenders.........................................................................44 Non -Cash Payments of Special Taxes......................44 Payment of the Special Tax is not a Personal Obligation of the Owners ..........................45 Limitations on Remedies...........................................45 Loss of Tax Exemption...............................................45 Proceedings to Reduce or Terminate the SpecialTax...................................................................45 Court Action Involving Landowner — Voted Special Tax District.........................................46 Secondary Markets and Prices..................................47 IRS Audit of Tax -Exempt Issues...............................47 No Acceleration Provision.........................................48 CONCLUDING INFORMATION................................48 Continuing Disclosure...............................................48 Absence of Litigation..................................................49 TaxMatters..................................................................50 Legal Matters Incident to the Issuance of the 2015 Bonds.............................................................52 Municipal Advisor......................................................52 NoRating.....................................................................52 Underwriting...............................................................52 Miscellaneous..............................................................53 APPENDIX A SUMMARY OF THE INDENTURE APPENDIX B PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX C INITIAL APPRAISAL REPORT AND UPDATED APPRAISAL REPORT APPENDIX D MARKET ABSORPTION STUDY APPENDIX E RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX APPENDIX F GENERAL INFORMATION REGARDING THE CITY OF TUSTIN APPENDIX G THE BOOK ENTRY SYSTEM APPENDIX H FORMS OF CONTINUING DISCLOSURE AGREEMENTS -vi- 1� rl�•�I�_� i Artesia ei'vd Ik dBuena Park Santa Ana li- Clty Iry Bolsa ss S e I A N G E Bo leve 'Sa to G ens G rden Ave Libe Pa o a ountain Valley _ o Hun,1, n -T— W ch Ve a O County AKWrl Costa Mesa t '�Atl nta A&, I � � Huntington Beach State / Lake Pa rk c Lido Isle C Sa utn Hills Newport Balboa Island Beach e Corona i3 del Mar Crystal Cove Stale Park Laguna Coast A _Crystal Cove Wilderness Park P a C i f i C O c e a n -vii- SAN BERNARDINO \\ Chino Hills Chino Hills State Park N Ste Limestone Canyon Regional Park F=" RN � � m Oro �Ission Viejo r , n Hills Oso lr �L 1 �:•J'Iti1'l=x'1'1 ��y�rr -- �; RUN W �f ���IHeights HeighStn. Santa Ana li- Clty Iry Bolsa ss S e I A N G E Bo leve 'Sa to G ens G rden Ave Libe Pa o a ountain Valley _ o Hun,1, n -T— W ch Ve a O County AKWrl Costa Mesa t '�Atl nta A&, I � � Huntington Beach State / Lake Pa rk c Lido Isle C Sa utn Hills Newport Balboa Island Beach e Corona i3 del Mar Crystal Cove Stale Park Laguna Coast A _Crystal Cove Wilderness Park P a C i f i C O c e a n -vii- SAN BERNARDINO \\ Chino Hills Chino Hills State Park N Ste Limestone Canyon Regional Park F=" RN � � m Oro �Ission Viejo r , n Hills Oso lr $27,045,000* CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/STANDARD PACIFIC) SPECIAL TAX BONDS, SERIES 2015A This Official Statement, including the cover page and appendices hereto, sets forth certain information concerning the issuance by the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) (the "District"), of its City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Special Tax Bonds, Series 2015A (the "2015 Bonds"). INTRODUCTION General This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in this entire Official Statement, including the cover page and appendices hereto, and the documents summarized or otherwise described herein. A full review should be made of this entire Official Statement and such documents prior to making an investment in the 2015 Bonds. The sale and delivery of the 2015 Bonds to potential investors is made only by means of the entire Official Statement. The 2015 Bonds are being issued under the provisions of the Mello -Roos Community Facilities Act of 1982, as amended (constituting Section 53300 et seq. of the California Government Code) (the "Law"), and an Indenture of Trust, dated as of November 1, 2015 (the "Indenture"), between the District and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings given to them in the Indenture. See Appendix A - Summary of the Indenture. Authority for Issuance Under the Law, the City Council (the "City Council") of the City of Tustin, California (the "City") is authorized to establish a community facilities district and act as the legislative body for the proposed district. Subject to approval by a two-thirds vote of the qualified electors voting, and compliance with the provisions of the Law, the City Council, acting as the legislative body of the district, may authorize the issuance of bonds by the district, and the levy and collection of a special tax within such district to repay such indebtedness. Pursuant to the Law, on May 6, 2014, the City Council adopted resolutions stating its intention to establish the District and to incur bonded indebtedness for the District. On June 17, 2014, the City Council adopted resolutions pursuant to which the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $29,000,000 was determined necessary for the District and an election was called pursuant to the Law. The sole owner of the land within the District at the time of the election, the City, voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $29,000,000 to finance certain infrastructure and other improvements to be owned by the City (the "City Facilities"), as well as certain school facilities (the "School Facilities," and together with the City Facilities, the "Facilities") to be owned by the Tustin Unified School District (the "School District"), in each case as authorized to be funded by the District. The landowner/ voter also voted in favor of the Preliminary, subject to change. -1- levy of a Special Tax A (referred to in this Official Statement as the "Special Tax") on certain property in the District to pay the principal and interest on the 2015 Bonds to be issued to finance the Facilities, to pay administrative expenses of the District, and to make any replenishments to the Reserve Fund consistent with the Rate and Method of Apportionment of Special Tax for the District (referred to in this Official Statement as the "Special Tax Formula"). The Special Tax Formula also provides for the levy of a Special Tax B on property in the District to pay annual costs of certain services the District is authorized to fund and related administrative expenses, but the Special Tax B is not in any way pledged to the payment of debt service on the 2015 Bonds and will not be used for that purpose. See "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax," and "- Authorized Facilities" herein. The 2015 Bonds were authorized to be issued by Resolution No. 14-60 adopted by the City Council on September 16, 2014 (the "Resolution of Issuance"), and on October 6, 2015 the City Council adopted a Resolution approving a revised version of the Indenture, as well as a Preliminary Official Statement and the preparation of a final Official Statement for the 2015 Bonds. The 2015 Bonds are being issued pursuant to the Resolution of Issuance, the Law and the Indenture. When used in this Official Statement, the term "2015 Bonds" means the initial series of the bonds to be issued under the Indenture, and the term "Bonds" means, collectively, the 2015 Bonds and any Additional Bonds issued and outstanding under and as such capitalized term is defined in the Indenture. See "SECURITY FOR THE BONDS - Additional Bonds Only for Refundings." Application of Proceeds Proceeds of the 2015 Bonds will be used to make deposits to a City Facilities Account and a School Facilities Account established within the Improvement Fund, to fund a reserve fund for the 2015 Bonds, and to pay the costs of issuance of the 2015 Bonds. See "THE FINANCING PLAN - Sources and Uses of Funds." The proceeds of the 2015 Bonds deposited to the City Facilities Account and the School Facilities Account of the Improvement Fund will be used to pay costs of City Facilities and the School Facilities, respectively, authorized to be funded by the District. See "THE COMMUNITY FACILITIES DISTRICT - Authorized Facilities." The Development The District's boundaries encompass an approximately 78.2 acre site for a proposed residential community currently identified as Greenwood in Tustin Legacy (the "Development"). The District and the Development are located in the southerly portion of the City within an area known as Tustin Legacy which was formerly the Tustin Marine Corps Air Station (the "MCAS"), and the Development is one of the phases of development of the former MCAS. The portion of the MCAS located in the City and certain adjacent property is being developed as an approximately 1,511 gross acre master planned community called Tustin Legacy. Approximately 95 acres of the former MCAS are located in the City of Irvine. The Development is expected to include, at buildout, 375 detached single family homes. Standard Pacific Corp., a Delaware corporation (the "Developer"), purchased the property comprising the Development from the City on August 15, 2014. The Developer plans to construct 298 of the homes planned for the Development with three product types. On February 9, 2015, the Developer entered into a contract with Brookfield Homes Southern California LLC, a Delaware limited liability company ("Brookfield Homes") which is a wholly owned subsidiary of Brookfield Residential Properties Inc., to sell lots for 77 homes expected to be constructed in the Development by an affiliate of Brookfield Homes with a fourth product type. The sale of the lots to Brookfield Homes is to occur in several "takedowns," with the first three takedowns (consisting of 28 lots) having been completed on August 28, 2015, and a fourth -2- takedown (consisting of 13 additional lots) having been completed on September 23, 2015, in each case with the subject lots being conveyed to Brookfield Huntley 77 LLC, a Delaware limited liability company ("Brookfield Huntley"), which is wholly owned by Brookfield Homes. The lots were conveyed in a finished lot condition. The remaining 36 lots are the subject of three future takedowns of 14 lots, 13 lots and 9 lots, respectively, which are expected to occur, subject to various conditions, between November of 2015 and May of 2016. No assurance can be given that future takedowns will occur as currently expected. The Developer is currently constructing infrastructure improvements in the Development, which construction commenced in October, 2014, and is expected to be completed by late 2015. Model home construction for each of the four home product types to be built for the Development, or a total of twelve model homes, has been completed and the model homes were opened to the public on May 29, 2015. Several construction phases were underway as of September 1, 2015, with a total of 123 homes (in addition to the completed twelve model homes) under construction as of such date. Sales of homes is ongoing, with 112 homes subject to contracts of sale as of September 1, 2015, and closings to individual home buyers of homes in all four product types expected to begin in November, 2015. No assurance can be given that construction and home sales activities will continue and be completed as currently projected by the Developer. Also, sales contracts are subject to cancellation by home buyers, so closings for all homes currently the subject of sales contracts may not occur. For more information regarding the Development, see "THE DEVELOPER AND THE DEVELOPMENT - The Development." Description of the 2015 Bonds The 2015 Bonds will be issued and delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the 2015 Bonds (the "Beneficial Owners") in denominations of $5,000 or any integral multiple of $5,000 in excess thereof, under the book - entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. See "THE 2015 BONDS - Description of the 2015 Bonds" and Appendix G - The Book Entry System. So long as the 2015 Bonds are in book -entry -only form, all references in the Official Statement to the owners or holders of the 2015 Bonds shall mean DTC and not the Beneficial Owners of the 2015 Bonds. The 2015 Bonds are subject to optional redemption and mandatory redemption as described herein. For more complete descriptions of the 2015 Bonds and the Indenture pursuant to which they are being issued and delivered, see "THE 2015 BONDS" and Appendix A - Summary of the Indenture. Sources of Payment for the 2015 Bonds Under the Indenture, the 2015 Bonds are payable from the Net Special Tax Revenues. As used in this Official Statement, "Special Taxes" means the Special Tax (which is the Special Tax A under the Special Tax Formula, see "INTRODUCTION - Authority for Issuance") levied by the City Council within the District under the Law, the ordinance of the City providing for the levy of the Special Taxes, and the Indenture. The term "Special Tax Revenues" means the proceeds of the Special Taxes received by the District, including any prepayments thereof, interest and penalties thereon, proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes and proceeds of any security for payment of Special Taxes taken in lieu of foreclosure after payment of administrative costs and attorney's fees payable from proceeds of such redemption, sale or security. The term "Net Special Tax Revenues" means Special Tax Revenues, less amounts required to pay Administrative Expenses of the District in any Fiscal Year not in excess of $30,000 per Fiscal Year escalating two percent (2%) each July 1, beginning July 1, 2016 (the "Administrative Expense Cap"). Under the -3- Indenture, the District has agreed to repay the 2015 Bonds from the Net Special Tax Revenues collected and received by the District, and from amounts on deposit in certain funds established under the Indenture. See "SECURITY FOR THE 2015 BONDS" and Appendix A - Summary of the Indenture. In the event that the Special Taxes are not paid when due, the only other source of funds to repay the 2015 Bonds will be the amounts held by the Trustee in certain of the funds established under the Indenture, including amounts held in the Reserve Fund and the proceeds, if any, from foreclosure sales of land with delinquent Special Taxes. A portion of the proceeds of the 2015 Bonds equal to the initial Reserve Requirement will be deposited in the Reserve Fund, which may be drawn upon as needed to pay the scheduled debt service on the Bonds, in accordance with the provisions of the Indenture. Amounts in the Reserve Fund may also be used to redeem Bonds in conjunction with prepayments of Special Taxes and to pay rebate payments to the federal government. See "SECURITY FOR THE 2015 BONDS - Reserve Fund" and Appendix A - Summary of the Indenture. Land Value In connection with the offering and sale of the 2015 Bonds, the City has been furnished with an initial appraisal report (the "Initial Appraisal Report") prepared by Harris Realty Appraisal (the "Appraiser"), dated June 15, 2015, and an Updated Appraisal Report (the "Updated Appraisal Report", and together with the Initial Appraisal Report, the "Appraisals"), dated September 24, 2015. The Initial Appraisal Report summarized the Appraiser's conclusion that the Market Value, as defined in the Initial Appraisal Report, of the property within the District, as of June 1, 2015, was $140,800,000. The Updated Appraisal Report, which states that it is to be used in conjunction with the Initial Appraisal Report, but which has a self-contained Valuation section due to significant changes in home construction since the Initial Appraisal Report, summarizes the Appraiser's conclusion that the Market Value, as defined in the Updated Appraisal Report, of the property in the District, as of September 1, 2015, was $178,215,000. See "SECURITY FOR THE 2015 BONDS - Land Value," and Appendix C - Initial Appraisal Report and Updated Appraisal Report. The valuation in the Initial Appraisal Report was based on a bulk sale methodology, representing a discounted value for the property in the District due to the single ownership by the Developer of the land in the District as of the June 1, 2015 date of value for the Initial Appraisal Report. However, the Updated Appraisal Report took into account the site development and dwelling unit construction conditions as of September 1, 2015, including the twelve completed model homes and the 123 homes under construction as of such date. See Appendix C - Initial Appraisal Report and Updated Appraisal Report. The Appraisals contain various assumptions and conditions and they should be read in their entirety by those interested in an investment in the 2015 Bonds. Complete copies of the Appraisals are included in Appendix C - Initial Appraisal Report and Updated Appraisal Report. In conducting the Initial Appraisal Report, the Appraiser took into account certain matters set forth in a Market Absorption Study, dated May 18, 2015 (and revised on June 15, 2015) prepared by Empire Economics, Inc. for the City. In connection with the Updated Appraisal Report, the Appraiser took into account the Market Absorption Study, as revised on September 21, 2015, to reflect current prices for and sales of homes in the Development. A complete copy of the Market Absorption Study, as updated on September 21, 2015, is included in Appendix D hereto. See "SECURITY FOR THE BONDS - Land Value" for various tables indicating value to lien ratios by development status and product type of the homes permitted and expected to be constructed in the District. -4- Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, subject, however, to certain qualifications set forth in its opinion, under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the 2015 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, Bond Counsel notes that, with respect to corporations, such interest (and original issue discount) may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2015 Bonds is exempt from State of California personal income tax. A copy of the form of Bond Counsel's opinion is set forth in Appendix B hereto. Although Bond Counsel is of the opinion that interest on the 2015 Bonds is excluded from federal gross income, the accrual or receipt of interest on the 2015 Bonds may otherwise affect a Bondowner's federal income tax liability. The nature and extent of these other consequences will depend upon the owner's particular tax status and the owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. See "CONCLUDING INFORMATION - Tax Matters" herein. Continuing Disclosure The District and the Developer each have agreed to provide, or cause to be provided, to the Electronic Municipal Market Access ("EMMA") maintained by the Municipal Securities Rulemaking Board certain annual financial and other information. The District and the Developer each have further agreed to provide notice of certain enumerated events, and the Developer has agreed to provide mid -year reports with certain limited information. The Developer's annual, mid -year and enumerated event reporting obligations will terminate if and when the Developer is no longer a "Major Developer" as defined in the Continuing Disclosure Agreement to which it is a party. Major Developer includes the Developer and any Affiliate if they own property in the District that has not reached the Planned Development Stage (as such capitalized terms are defined in the Developer's Continuing Disclosure Agreement) that is subject to twenty percent (20%) or more of the Special Tax levy for the then current fiscal year. The Continuing Disclosure Agreement of the District is being executed by the District in order to assist the Underwriter in complying with Rule 15c2 -12(b)(5) of the Securities and Exchange Commission. See "CONCLUDING INFORMATION - Continuing Disclosure" and Appendix H - Forms of Continuing Disclosure Agreements herein for a description of the specific nature of the reports to be filed by the District and the Developer, and the notices of material events to be provided by the District and the Developer. Risk Factors The purchase of the 2015 Bonds involves certain risks which should be considered by prospective Bond purchasers. See "SPECIAL RISK FACTORS" herein for a partial description of such risks. Limited Liability Although the unpaid Special Taxes constitute liens on parcels within the District, they do not constitute a personal indebtedness of the Developer or any future property owners or homeowners. There is no assurance that any landowner or homeowner will be financially able to pay the Special Taxes levied on their property in the District, or that they will pay the Special Taxes even though financially able to do so. -5- NEITHER THE FAITH AND CREDIT NOR ANY TAXING POWER OF THE CITY OF TUSTIN, OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE 2015 BONDS. THE 2015 BONDS ARE NOT OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAX REVENUES AND FROM AMOUNTS IN CERTAIN FUNDS ESTABLISHED UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN. Professionals Involved in the Offering The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, will serve as Trustee for the 2015 Bonds and perform the functions required of the Trustee under the Indenture. The firm of Fieldman, Rolapp & Associates, Irvine, California, is the Municipal Advisor to the City for the financing. Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, is acting as Bond Counsel to the District. Certain legal matters will be passed upon for the District by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa, California, acting as the City Attorney, and by Quint & Thimmig LLP, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California, Underwriter's Counsel. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel, the Municipal Advisor and Underwriter's Counsel is contingent upon the sale and issuance of the 2015 Bonds. The Appraisals were prepared by Harris Realty Appraisal, Newport Beach, California. Empire Economics, Inc., Capistrano Beach, California, prepared the Market Absorption Study and the updates thereto for the City. Albert A. Webb Associates, Riverside, California, acted as special tax consultant for the District and will serve as the initial dissemination agent under the Continuing Disclosure Agreements of the District and the Developer. Additional Information Brief descriptions of the 2015 Bonds, the security for the 2015 Bonds, certain special risk factors, the District, the City, the Developer, Brookfield Homes, the Development and other information are included in this Official Statement, together with summaries of certain provisions of the 2015 Bonds, the Indenture and other documents. Such descriptions and information do not purport to be comprehensive or definitive. The descriptions herein of the 2015 Bonds, resolutions and other documents are qualified in their entirety by reference to the complete text thereof and the information with respect thereto included in the Indenture. All such descriptions are further qualified in their entirety by reference to laws and principles of equity relating to or affecting generally the enforcement of creditors' rights. Unless the context clearly requires otherwise, capitalized terms used but not defined in this Official Statement have the meanings given to them in the Indenture, some of which are set forth in Appendix A hereto. Copies of the Indenture, and the resolutions and other documents described or referred to herein may be obtained, upon written request to the City of Tustin, 300 Centennial Way, Tustin, California 92780, Attention: City Clerk. The City may charge for the duplication and mailing of documents. S2 THE FINANCING PLAN Overview The net proceeds of the 2015 Bonds will be deposited to two accounts, a City Facilities Account and a School Facilities Account, established within the Improvement Fund under the Indenture. Amounts deposited to the City Facilities Account will be used to reimburse the City for infrastructure improvements that already have been completed by the City and to pay costs of additional improvements being constructed by the City that the District is authorized to fund. Amounts deposited to the School Facilities Account will be used to finance various facilities for the School District pursuant to a School Facilities Implementation, Funding and Mitigation Agreement, entered into as of August 25, 2015, by the District, the City and the School District, and a Joint Community Facilities Agreement, entered into as of August 24, 2015, by the City, the School District and the Developer. The amount to be deposited to the School Facilities Account has been calculated to be sufficient to satisfy in a lump sum payment the School District's impact fees attributable to the homes being constructed and to be constructed on the 375 lots in the Development. See "THE FINANCING PLAN - Sources and Uses of Funds" and "THE COMMUNITY FACILTIES DISTRICT - Authorized Facilities." While the Indenture allows for the issuance of Additional Bonds secured on a parity with the 2015 Bonds under the Indenture, any such Additional Bonds may only be issued to refund Bonds (including the 2015 Bonds) previously issued under the Indenture and to pay related costs of issuance of such Additional Bonds and to make any deposit to the Reserve Fund required under the Additional Bonds provisions of the Indenture. See "SECURITY FOR THE 2015 BONDS - Additional Bonds Only for Refundings." The Special Tax is authorized to be imposed on the land within the District pursuant to the Special Tax Formula at rates which, within the limits of the maximum Special Tax, are expected to be sufficient to pay the interest on, and principal of and mandatory sinking fund account payments for, the 2015 Bonds as they become due and payable, and to pay the Administrative Expenses as they become due and payable in accordance with the provisions in the Indenture. See "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax." When used in this Official Statement, "Special Tax" means only the "Special Tax A," as defined in the Special Tax Formula, and does not include the "Special Tax B" as defined therein. See "SECURITY FOR THE 2015 BONDS - Pledge of Net Special Tax Revenues" and "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax." -7- Sources and Uses of Funds The sources and uses of funds in connection with the 2015 Bonds are expected to be as follows: Source of Funds Principal Amount of Bonds Plus: Net Original Issue Premium Less: Underwriter's Discount Total Sources Application of Funds Deposit to City Facilities Account of the Improvement Fund(') $ Deposit to School Facilities Account of the Improvement Fund(2) Deposit to Reserve Fund(3) Deposit to Costs of Issuance Fund(4) Deposit to Administrative Expense Fund(5) Total Uses (1) To be used to pay costs of the City Facilities. See "THE COMMUNITY FACILITIES DISTRICT - Authorized Facilities." (2) To be used to pay costs of the School Facilities. See "THE COMMUNITY FACILITIES DISTRICT - Authorized Facilities." (3) An amount equal to the initial Reserve Requirement. See "SECURITY FOR THE 2015 BONDS - Reserve Fund." (4) To be used to pay Costs of Issuance, including fees and expenses of Bond Counsel, Disclosure Counsel, the Municipal Advisor, the Trustee, the Appraiser, the Absorption Consultant and the City, printing expenses and other costs related to the issuance of the 2015 Bonds. (5) To be used to pay Administrative Expenses of the District. Scheduled Annual Debt Service for the 2015 Bonds The table below sets forth the scheduled annual debt service payments on the 2015 Bonds, assuming no optional redemption or mandatory redemption from prepayments of Special Taxes of the 2015 Bonds. Year Ending September 1 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Totals: Principal Interest Total (1) Indicates a scheduled mandatory sinking payment redemption. See "THE 2015 BONDS - Mandatory Sinking Payment Redemption." 99 THE 2015 BONDS Authority for Issuance The District has been established under the provisions of the Mello -Roos Community Facilities Act of 1982, as amended (the "Law"). The District is authorized to incur bonded indebtedness in an amount not to exceed $29,000,000 pursuant to provisions of the Law. The propositions related to the incurring of the indebtedness, the levying of the Special Tax and the establishment of an appropriations limit for the District were submitted to and approved by the City, as the sole owner of the property in the District at the time of the election, on June 17, 2014. On September 16, 2014, the City Council, acting as the legislative body of the District, adopted Resolution No. 14-60 (the "Resolution of Issuance") authorizing the issuance of the 2015 Bonds. On October 6, 2015, the City Council adopted a Resolution approving a revised version of the Indenture as well as a Preliminary Official Statement and the preparation of a final Official Statement for the 2015 Bonds. The Special Tax Formula and the amount of the Special Tax that can be collected from the land within the District is more fully described in the section herein entitled "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax." The 2015 Bonds will be issued pursuant to the Law, the Indenture and the Resolution of Issuance. The 2015 Bonds are secured under the Indenture. Description of the 2015 Bonds The 2015 Bonds will be dated as of the date of initial delivery of the 2015 Bonds, and will mature in the principal amounts, and will bear interest at the respective rates shown on the inside cover page hereof. Interest on the 2015 Bonds will be payable on each March 1 and September 1, commencing March 1, 2016 (each an "Interest Payment Date"). Interest on the 2015 Bonds will be calculated on the basis of a 360 -day year comprised of twelve 30 -day months. The 2015 Bonds will initially be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository of the 2015 Bonds. Individual purchasers of the 2015 Bonds (the 'Beneficial Owners") will not receive 2015 Bonds representing their interest. So long as Cede & Co. is the registered owner of the 2015 Bonds, as nominee of DTC, references herein to the "owners" of the 2015 Bonds means Cede & Co. as aforesaid, and does not mean the Beneficial Owners of the 2015 Bonds. Upon receipt of payments of principal or interest on the 2015 Bonds, DTC is to remit such principal or interest to the DTC Participants (as such term is herein defined) for subsequent disbursement to the Beneficial Owners of the 2015 Bonds. See Appendix G - The Book Entry System. Purchases of the 2015 Bonds will be made in book -entry form only, in the principal amount of $5,000 or any integral multiple thereof. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest thereon shall be payable from such Interest Payment Date, (b) it is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or (c) interest on any Series 2015 Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has previously been paid or duly provided for. "Record Date" is defined in the Indenture as the 15th calendar day of the month preceding each Interest Payment Date, whether or not such day is a Business Day. -10- Interest on the 2015 Bonds shall be paid by check of the Trustee mailed by first-class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2015 Bonds at their respective addresses shown on the Registration Books for the 2015 Bonds maintained by the Trustee as of the close of business on the preceding Record Date, or by wire transfer at the written request of an Owner of not less than $1,000,000 aggregate principal amount of 2015 Bonds, which written request is received by the Trustee on or prior to the Record Date. The principal of the 2015 Bonds shall be payable upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee. The principal and interest of the 2015 Bonds are payable in lawful money of the United States of America. Optional Redemption* The 2015 Bonds maturing on or after September 1, are subject to optional redemption, in whole or in part, on any Interest Payment Date on or after September 1, from any source of available funds, at a Redemption Price equal to the principal amount of the 2015 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Mandatory Redemption from Prepayment of Special Taxes* The 2015 Bonds are subject to mandatory redemption, in whole or in part, on any Interest Payment Date on or after March 1, 2016, from and to the extent of any prepaid Special Taxes deposited in the Redemption Fund established under the Indenture and corresponding transfers from the Reserve Fund for the 2015 Bonds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the 2015 Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Redemption Dates Price March 1, 2016 through March 1, 2023 103% September 1, 2023 and March 1, 2024 102 September 1, 2024 and March 1, 2025 101 September 1, 2025 and any Interest 100 Payment Date thereafter For a description of the provisions of the Special Tax Formula that allow for the prepayment of Special Taxes, see Appendix E - Rate and Method of Apportionment of Special Tax. Mandatory Sinking Payment Redemption The 2015 Bonds maturing on September 1, 20_ (the "20_ Term Bonds") are subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20J at a Redemption Price equal to the principal amount of the 20_ Term Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: Preliminary, subject to change. -11- Sinking Fund Redemption Date Principal Amount (September 1) to be Redeemed The 2015 Bonds maturing on September 1, 20_ (the "20_ Term Bonds") are subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20J at a Redemption Price equal to the principal amount of the 20_ Term Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: Sinking Fund Redemption Date Principal Amount (September 1) to be Redeemed The amounts in the foregoing tables will be reduced in the manner specified in the Indenture as a result of any prior partial redemption of any of the 20 Term Bonds or the 20_ Term Bonds pursuant to the optional redemption or mandatory redemption from Special Tax prepayment provisions of the Indenture. See "THE 2015 BONDS - Optional Redemption," and "THE 2015 BONDS - Mandatory Redemption from Prepayment of Special Taxes" above. Selection of Bonds for Redemption Whenever provision is made in the Indenture for the redemption of less than all of the 2015 Bonds, the Trustee shall select the 2015 Bonds to be redeemed from all 2015 Bonds not previously called for redemption (a) with respect to any optional redemption of 2015 Bonds, among maturities of 2015 Bonds as directed in a Written Request of the District, (b) with respect to any mandatory redemption from special tax prepayments and the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued; and in any event by lot among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole discretion shall deem appropriate. For purposes of such selection, all 2015 Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate 2015 Bonds which may be separately redeemed. Notice of Redemption The Trustee on behalf of the District will mail (by first class mail) notice of any redemption to the respective Owners of any 2015 Bonds designated for redemption at least 30 but not more than 60 days prior to the date fixed for redemption. Each notice will state the date of the notice, the redemption date, the redemption place and the Redemption Price and will designate the CUSIP numbers, if any, the 2015 Bond numbers and the maturity or maturities of -12- the 2015 Bonds to be redeemed (except in the event of redemption of all of the 2015 Bonds of such maturity or maturities in whole), and will require that such 2015 Bonds be then surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such 2015 Bonds will not accrue from and after the date fixed for redemption. The Indenture provides that neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the 2015 Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. The Indenture also provides that, with respect to any notice of any optional redemption of 2015 Bonds, unless at the time such notice is given the 2015 Bonds to be redeemed shall be deemed to have been paid as provided in defeasance provisions of the Indenture, such notice shall state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the Redemption Price of, and accrued interest on, the 2015 Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to redeem such 2015 Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of 2015 Bonds as described in the conditional notice of redemption shall not be made and the Trustee shall, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption. Effect of Redemption The Indenture provides that, if on the date fixed for redemption of 2015 Bonds, moneys for the Redemption Price of all the 2015 Bonds to be redeemed, together with interest to the applicable redemption date, shall be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof shall have been mailed as specified in the Indenture and not canceled, then, from and after the redemption date, interest on the 2015 Bonds to be redeemed shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of 2015 Bonds is to be held in trust for the account of the Owners of the 2015 Bonds so to be redeemed without liability to such Owners for interest thereon. Transfer and Registration Any 2015 Bond may, in accordance with its terms, be transferred upon the Registration Books maintained by the Trustee by the Person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2015 Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any 2015 Bond or 2015 Bonds are surrendered for transfer, the District will execute and the Trustee will authenticate and will deliver a new 2015 Bond or 2015 Bonds of the same maturity in a like aggregate principal amount, in any authorized denomination. The Trustee will require the Owner requesting such transfer pay any tax or other governmental charge required to be paid with respect to such transfer. The 2015 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of 2015 Bonds of the same maturity of other authorized denominations. The Trustee will require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee will not be obligated to make any transfer or exchange of 2015 Bonds during the period established by the Trustee for the selection of 2015 Bonds for redemption, or with respect to any 2015 Bonds selected for redemption. -13- Discontinuation of Book Entry Only System Initially, The Depository Trust Company ("DTC") will act as securities depository (the "Depository") for the 2015 Bonds. See Appendix G - The Book Entry System. The Indenture provides that, in the event the District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated 2015 Bonds and that such 2015 Bonds should therefore be made available, and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated 2015 Bonds. In such event, the Trustee shall transfer and exchange certificated 2015 Bonds as requested by the Depository and any other Owners in appropriate amounts. In the event (i) DTC determines not to continue to act as securities depository for the 2015 Bonds, or (ii) DTC will no longer so act and gives notice to the Trustee of such determination, then the District shall discontinue the Book -Entry system with DTC. If the District determines to replace DTC with another qualified securities depository, the District will prepare or direct the preparation of a new single, separate, fully -registered 2015 Bond for each maturity date of the 2015 Bonds, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC, then the 2015 Bonds shall no longer be restricted to being registered in the Registration Books in the name of the Nominee of DTC, but shall be registered in whatever name or names the Owners transferring or exchanging the 2015 Bonds shall designate. Whenever DTC requests the District to do so, the District will cooperate with DTC in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the 2015 Bonds held in book -entry form to any Participant having such 2015 Bonds credited to its account with the Depository, and (ii) to arrange for another securities depository to maintain custody of certificates evidencing the 2015 Bonds. -14- SECURITY FOR THE 2015 BONDS Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, in order to secure the payment of the principal of, premium, if any, and interest on the 2015 Bonds and any Additional Bonds in accordance with their terms, the provisions of the Indenture and the Law, under the Indenture the District pledges to the Owners of the Bonds, and grants thereto a lien on and a security interest in, all of the Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. Said pledge constitutes a first lien on and security interest in such assets. See Appendix A - Summary of the Indenture for a description of the Special Tax Fund and the Bond Fund. The Reserve Fund is described under the subheading "Reserve Fund" below, and otherwise in Appendix A - Summary of the Indenture. Limited Liability NEITHER THE FAITH AND CREDIT NOR ANY TAXING POWER OF THE CITY OF TUSTIN, OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE 2015 BONDS. EXCEPT FOR THE NET SPECIAL TAX REVENUES, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2015 BONDS. THE 2015 BONDS ARE NOT OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAX REVENUES AND AMOUNTS IN CERTAIN FUNDS ESTABLISHED UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN. Pledge of Net Special Tax Revenues In accordance with provisions of the Law, the District was established by the City Council on June 17, 2014. On June 17, 2014, the City, as the sole owner at that time of all of the land within the District, voted to incur a bonded indebtedness in an amount not to exceed $29,000,000 to finance the Facilities, said indebtedness to be secured by a pledge of the Net Special Tax Revenues. At the same time, the City approved the levy of the Special Tax as provided in the Rate and Method of Apportionment of the Special Tax (referred to in this Official Statement as the "Special Tax Formula"), to pay the principal and interest on the Bonds, to pay the administrative expenses of the District, and to replenish the Reserve Fund to the Reserve Requirement, all consistent with the Special Tax Formula, the Law and the Resolution of Issuance. The Special Taxes Revenues will be transferred by the District to the Trustee for deposit by the Trustee in the Special Tax Fund established under the Indenture as soon as practicable after they have been received by the District. See Appendix A - Summary of the Indenture. As stated above, under the Indenture the District pledges, and grants a lien on and security interest in, the Net Special Tax Revenues to secure the payment of the Bonds. The Indenture defines the "Special Taxes" as the special taxes described in the Special Tax Formula as "Special Tax A" levied within the Community Facilities District pursuant to the Act, the Ordinance and the Indenture. The "Special Taxes" do not include the "Special Tax B" referred to in the Special Tax Formula. The Indenture defines the "Special Tax Revenues" as proceeds of the Special Taxes received by or on behalf of the District, including any prepayments thereof, interest and penalties thereon, proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes and proceeds of any security for payment of Special Taxes taken in lieu of foreclosure after payment of administrative costs and attorneys' fees payable from proceeds of such redemption, sale or security. The Indenture defines the "Net Special Tax Revenues" as the Special Tax Revenues, less amounts required to pay Administrative Expenses of the District not in excess of the Administrative Expenses Cap in any -15- Fiscal Year, and the Indenture defines the "Administrative Expense Cap" as $30,000 per Fiscal Year, escalating two percent (2%) each July 1, beginning July 1, 2016. The District has covenanted in the Indenture to levy the Special Taxes during each Fiscal Year in accordance with the Special Tax Formula, the Ordinance, the Indenture and the Law. Specifically, the Indenture provides that prior to August 1 of each year, the District shall ascertain from the Orange County Assessor the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August 10 that the Bonds are Outstanding, or otherwise such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll. The Special Tax to be levied each fiscal year will be determined according to the Special Tax Formula. See "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax" and Appendix E - Rate and Method of Apportionment of Special Tax. The District has provided the Auditor with the Special Tax levy on Taxable Property in the District for fiscal year 2015-16, which is expected to appear on the property tax bills sent out by the County for such fiscal year. The Indenture further provides that the District shall fix and levy the amount of Special Taxes within the District each Fiscal Year in accordance with the Special Tax Formula and, subject to the limitations in the Special Tax Formula as to the maximum Special Tax that may be levied, in an amount sufficient to yield Special Tax Revenues in the amount required for (a) the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the Bond Year commencing in such Fiscal Year, (b) any necessary replenishment of the Reserve Fund, and (c) the payment of Administrative Expenses estimated to be required to be paid from such Special Tax Revenues, taking into account the balances in the funds and accounts established under the Indenture. The Indenture provides that Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. Although the Special Tax will constitute a lien on property subject to taxation within the District, it does not constitute a personal indebtedness of the owner of such property. There is no assurance that the landowners and homeowners will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. The risk of the Developer, or subsequent landowners or homeowners, not paying the annual Special Tax is more fully described in "SPECIAL RISK FACTORS - Insufficiency of Special Tax Revenues." Land Value The City has been furnished with the Initial Appraisal Report prepared by the Appraiser dated June 15, 2015, and with the Updated Appraisal Report prepared by the Appraiser dated September 24, 2015. The Initial Appraisal Report summarized the Appraiser's conclusion that the Market Value, as defined therein, of the property within the District that is subject to the levy of the Special Tax, as of June 1, 2015, was $140,800,000. The Updated Appraisal Report, which states that it is to be used in conjunction with the Initial Appraisal Report, but which has a self-contained Valuation section due to significant changes in home construction since the Initial Appraisal Report, summarizes the Appraiser's conclusion that the Market Value, as defined in the Updated Appraisal Report, of the property in the District, as of September 1, 2015, was $178,215,000. See Appendix C - Initial Appraisal Report and Updated Appraisal Report. The valuation in the Initial Appraisal Report was based on a bulk sale methodology, representing a discounted value for the property in the District due to the single ownership by -16- the Developer of the land in the District as of the June 1, 2015 date of value for the Initial Appraisal Report. However, the Updated Appraisal Report took into account the site development and dwelling unit construction conditions as of September 1, 2015, including the twelve completed model homes and the 123 homes under construction as of such date. The Appraiser's estimate of the "Market Value" of the property in the District on which the Special Tax is levied as reflected in the Updated Appraisal Report is approximately 6.59* times the initial principal amount of the 2015 Bonds. Property in the District is also subject to certain overlapping indebtedness. See "SPECIAL RISK FACTORS - Direct and Overlapping Indebtedness." The Appraisals are subject to certain contingencies and limiting conditions which are set forth in detail in the Appraisals in Appendix C and which should be reviewed carefully. In conducting the Initial Appraisal Report, the Appraiser took into account certain matters set forth in a Market Absorption Study, dated May 18, 2015 (and revised on June 15, 2015) prepared by Empire Economics, Inc. for the City. In connection with the Updated Appraisal Report, the Appraiser took into account the Market Absorption Study, as revised on September 21, 2015, to reflect current prices for and sales of homes in the Development. A complete copy of the Market Absorption Study, as updated on September 21, 2015, is included in Appendix D hereto. The District makes no representation or warranty as to the accuracy or completeness of the Appraisals or the Market Absorption Study. Set forth below are three tables that show the expected value to allocable portion of bond debt (referred to as "lien" in the tables) of the Taxable Property in the District, based on the respective values of the parcels of Taxable Property reflected in the Updated Appraisal Report, the percentage of the fiscal year 2015-16 Special Tax levy on those parcels, the initial principal amount of the 2015 Bonds and the development status of the respective parcels as of May 1, 2015 (parcels for which a building permit has been issued as of May 1 of any year become "Developer Property" under the Special Tax Formula, see "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax"). Table 1 below sets forth value to lien ratios based on the classification of the Taxable Property in the District under the Special Tax Formula, Table 2 sets forth value to lien ratios based on the four types of production homes to be constructed in the District, and Table 3 sets forth the stratification of the value to lien ratios for all of the Taxable Property in the District. * Preliminary, subject to change. -17- Table 1 City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Value to Lien By Development Status as of May 1, 2015 (1) Reflects parcels for which building permits had been issued as of May 1, 2015. As of September 1, 2015 an additional 94 building permits had been issued for parcels in the District. (2) Reflects Net Taxable Acreage. (3) Appraised Value as of September 1, 2015. See Appendix C — Initial Appraisal Report and Updated Appraisal Report. (4) Amount includes amounts for District administration and estimated 2015 Bond debt service due in calendar year 2016 at time of submission of Special Tax levy to the County in August, 2015. (5) Preliminary, subject to change. (6) Amount allocated based upon Fiscal Year 2015-16 Special Tax levy and initial principal amount of the 2015 Bonds. Source: Albert A. Webb Associates. Table 2 City of Tustin Percentage Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Aggregate FY 2015- of FY Percentage Aggregate FY 2015- of FY Value - Appraised Maximum 16 Special 2015-16 Principal of Value - Count Count Count AcreageG) Value(2) Tax Rate Levy(3) Tax Levy Parcel Acre- Property Special Tax Special the 2015 to -Lien Development Status Count age(2) Value(3) Tax Rate Levy(4) Tax Levy Bonds(5),(6) Ratio(5) Developed(') 41 4.68 $ 30,279,466 $ 229,232 $168,083 11.87% $ 3,211,085 9.43:1 (Standard Pacific Owned) (4) Preliminary, subject to change. (5) Amount allocated based upon projected Fiscal Year 2015-16 Special Tax levy and initial principal amount of the 2015 Bonds. Source: Albert A. Webb Associates. Approved 306 35.61 131,108,412 1,710,856 1,142,990 80.74 21,835,862 6.00:1 (Standard Pacific Owned) Approved (Brookfield Owned) 28 2.99 16,827,122 156,549 104,587 7.39 1,998,053 8.42:1 Totals 375 43.28 $178,215,000 $2,096,638 $1,415,660 100.00% $27,045,000 6.59:1 (1) Reflects parcels for which building permits had been issued as of May 1, 2015. As of September 1, 2015 an additional 94 building permits had been issued for parcels in the District. (2) Reflects Net Taxable Acreage. (3) Appraised Value as of September 1, 2015. See Appendix C — Initial Appraisal Report and Updated Appraisal Report. (4) Amount includes amounts for District administration and estimated 2015 Bond debt service due in calendar year 2016 at time of submission of Special Tax levy to the County in August, 2015. (5) Preliminary, subject to change. (6) Amount allocated based upon Fiscal Year 2015-16 Special Tax levy and initial principal amount of the 2015 Bonds. Source: Albert A. Webb Associates. i Table 2 City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Value to Lien By Project Area Status as of May 1, 2015 Percentage Aggregate FY 2015- of FY Value - Production Approved Developed Total Appraised Maximum 16 Special 2015-16 Principal to - Type of Parcel Parcel Parcel Property Special Tax Special of the 2015 Lien Homes Count Count Count AcreageG) Value(2) Tax Rate Levy(3) Tax Levy Bonds(4),(5) Ratio(4) Crawford 84 15 99 12.30 $ 49,290,466 $ 553,512 $ 386,051 27.27% $ 7,375,179 6.68:1 Huntley 74 3 77 8.68 36,762,793 430,510 288,361 20.37 5,508,901 6.67:1 Sheldon 88 15 103 9.12 38,575,101 575,876 372,569 26.32 7,117,618 5.42:1 Stafford 88 8 96 13.18 53,586,641 536,739 368,679 26.04 7,043,302 7.61:1 Totals 334 41 375 43.28 $178,215,000 $2,096,638 $1,415,660 100.00% $27,045,000 6.59:1 (1) Reflects Net Taxable Acreage. (2) Appraised Value as of September 1, 2015. See Appendix C — Initial Appraisal Report and Updated Appraisal Report. (3) Amount includes amounts for District administration and estimated 2015 Bond debt service due in calendar year 2016 at time of submission of Special Tax levy to the County in August, 2015. (4) Preliminary, subject to change. (5) Amount allocated based upon projected Fiscal Year 2015-16 Special Tax levy and initial principal amount of the 2015 Bonds. Source: Albert A. Webb Associates. i Table 3 City of Tustin Community Facilities District No. 20141 (Tustin Legacy/Standard Pacific) Value to Lien Stratification based upon Development Status as of May 1, 2015 Percentage Percentage of of Appraised Appraised FY 2015-16 FY 2015-16 Principal of Value Value -to -Lien Parcel Property Property Special Tax Special the 2015 to Category Count AcreageM Value(2) Value Levy(4) Tax Levy Bonds(4),(5) Lien(4) Less than 5.00:1-) 69 6.03 $21,570,365 12.10% $257,733 18.21% $4,923,773 4.38 5.00:1 to 5.99:1 117 14.19 45,509,509 25.54 440,811 31.14 8,421,319 5.40 6.00:1 to 6.99:1 79 10.00 35,309,713 19.81 298,871 21.11 5,709,676 6.18 7.00:1 to 7.99:1 29 3.56 16,977,666 9.53 115,983 8.19 2,215,757 7.66 8.00:1 to 8.99:1 20 2.13 11,348,856 6.37 68,639 4.85 1,311,287 8.65 9.00:1 to 9.99:1 23 2.53 15,060,125 8.45 85,911 6.07 1,641,258 9.18 10.00:1 to 10.99:1 21 2.86 15,248,454 8.56 78,440 5.54 1,498,540 10.18 11.00:1 to 11.99:1 5 0.69 3,933,133 2.21 18,676 1.32 356,795 11.02 12.00:1 to 12.99:1 3 0.33 3,394,365 1.90 13,980 0.99 267,076 12.71 Greater than 12.99:1(6) 9 0.97 9,862,814 5.53 36,616 2.59 699,518 14.10 Total 375 43.28 $178,215,000 100.00% $1,415,660 100.00% $27,045,000 6.59 (1) Reflects Net Taxable Acreage. (2) Appraised Value as of September 1, 2015. See Appendix C - Initial Appraisal Report and Updated Appraisal Report. (3) Amount includes amounts for District administration and estimated 2015 Bond debt service due in calendar year 2016 at time of submission of Special Tax levy to the County in August, 2015. (4) Preliminary, subject to change. (5) Amount allocated based upon Fiscal Year 2015-16 Special Tax levy and initial principal amount of the 2015 Bonds. (6) Minimum Value to Lien is 4.04:1. (7) Maximum Value to Lien is 15.97:1. Source: Albert A. Webb Associates. Covenant for Superior Court Foreclosure Pursuant to Section 53356.1 of the Law, the District has covenanted in the Indenture with and for the benefit of the Bondowners that it will commence appropriate judicial foreclosure proceedings against parcels with total Special Tax delinquencies in excess of $7,500 (not including interest and penalties thereon) by the October 1 following the close of each Fiscal Year in which the last of such Special Taxes were due and will commence appropriate judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Taxes levied in such Fiscal Year, and diligently pursue to completion such foreclosure proceedings; provided, however, that, notwithstanding the foregoing, the District may elect to accept payment from a property owner of at least the enrolled amount but less than the full amount of the penalties, interest, costs and attorneys' fees related to a Special Tax delinquency, if permitted by law. Notwithstanding the foregoing, in certain instances the amount of a Special Tax delinquency on a particular parcel is so small that the cost of appropriate foreclosure proceedings will far exceed the Special Tax delinquency and in such cases foreclosure proceedings may be delayed by the District until there are sufficient Special Tax delinquencies accruing to such parcel (including interest and penalties thereon) to warrant the foreclosure proceedings cost. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. Subject to the maximum rates, the Special Tax Formula is designed to generate from all Taxable Property within the District an annual amount sufficient to pay the current year's debt service and administrative expenses. However, if foreclosure proceedings are necessary, and the Reserve Fund has been depleted, there could be a delay in payments to owners of the 2015 Bonds pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale. -19- The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the obligee in the event the property is owned by or in receivership of a federal government entity. See "SPECIAL RISK FACTORS—Property Interests of Government Agencies; Federal Deposit Insurance Corporation." No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the District) must cause a Notice of Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days from the date of service of the Notice of Levy in which to redeem the property to be sold, which period may be shortened to 20 days for parcels other than those on which a dwelling unit for not more than four persons is located. If a judgment debtor fails to redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made (Section 701.680 of the California Code of Civil Procedure). The constitutionality of the aforementioned legislation, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. Section 53356.6 of the Law requires that property sold pursuant to foreclosure under the Law be sold for not less than the amount of judgment in the foreclosure action, plus post- judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.6 of the Law, the District, as judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid," where the District could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the District becomes the purchaser under a credit bid, the District must pay the amount of its credit bid into the Redemption Fund under the Indenture, but this payment may be made up to 24 months after the date of the foreclosure sale. Neither the Law nor the Indenture requires the District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale, and the District has no current intent to be such a purchaser. The District will levy the Special Tax to pay the current year's debt service and related administrative expenses and to replenish the Reserve Fund to the Reserve Requirement, subject to Maximum Special Tax A rates. However, if superior court foreclosure proceedings are necessary to collect delinquent Special Taxes, and if the Reserve Fund is depleted, there could be a delay in payments of principal of and interest on the 2015 Bonds pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. See "SPECIAL RISK FACTORS—Bankruptcy and Foreclosure Delays." No Teeter Plan Collection of the Special Taxes is not subject to the "Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds," as provided for in Section 4701 et seq. of the California Revenue and Taxation Code (known as the "Teeter Plan"). Accordingly, collections of Special Taxes will reflect actual delinquencies, if any. Reserve Fund In order to secure further the payment of principal and interest on the 2015 Bonds, the District will initially deposit 2015 Bond proceeds into the Reserve Fund held by the Trustee in an amount equal to the initial Reserve Requirement. The Reserve Requirement is defined in the Indenture as an amount, as of any date of calculation, equal to the least of (a) Maximum Annual -20- Debt Service on the outstanding Bonds, (b) 125% of Average Annual Debt Service on the outstanding Bonds, and (c) 10% of the original aggregate principal amount of the Bonds (excluding Bonds refunded with the proceeds of subsequently issued Bonds). See Appendix A - Summary of the Indenture. Except as otherwise provided in the Indenture, the moneys in the Reserve Fund shall be used for payment of the principal of and interest on the 2015 Bonds. See Appendix A - Summary of the Indenture. The Indenture provides for amounts in the Reserve Fund to be transferred to the Bond Fund in such amounts as are needed, taking into account amounts available for such purpose in the Bond Fund, to pay the scheduled principal of and interest on the 2015 Bonds when due. Amounts in the Reserve Fund may also be used to redeem Bonds in connection with prepayments of Special Taxes in accordance with the provisions of the Indenture, and to make payments of rebate due to the federal government. Additional Bonds Only for Refundings The Indenture provides that, so long as any of the 2015 Bonds remain Outstanding, the District will not issue any Additional Bonds or obligations payable from Net Special Tax Revenues on a parity with the 2015 Bonds, except as described below. The Indenture further provides that, so long as any of the 2015 Bonds remain Outstanding, the District shall not issue any obligations payable from Net Special Tax Revenues on a basis senior to the 2015 Bonds. The District may at any time issue one or more Series of Additional Bonds payable from Net Special Tax Revenues on a parity with all other Bonds theretofore issued (including the 2015 Bonds), but only to provide funds to refund any Bonds previously issued under the Indenture (as well as to pay related Costs of Issuance and to make any required deposit to the Reserve Fund), and subject to the following conditions, which are conditions precedent to the issuance of such Additional Bonds: (a) The issuance of such Additional Bonds has been authorized under and pursuant to the Law and under and pursuant to the Indenture and has been provided for by a Supplemental Indenture which must specify certain matters required by the Indenture, including the purposes for which the proceeds of such Additional Bonds are to be applied, which purposes may only include one or more of (i) providing funds to refund any Bonds issued under the Indenture, (ii) providing funds to pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and (iii) providing funds to make any deposit to the Reserve Fund required by the Additional Bonds provisions of the Indenture; (b) Upon the issuance of such Additional Bonds, no Event of Default shall have occurred and be continuing under the Indenture; and (c) Annual Debt Service in each Bond Year, calculated for all Bonds to be Outstanding after the issuance of such Additional Bonds, will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds Outstanding immediately prior to the issuance of such Additional Bonds. Nothing contained in the Indenture limits the issuance of any special tax bonds payable from Special Taxes if, after the issuance and delivery of such special tax bonds, none of the Bonds theretofore issued under the Indenture are Outstanding. -21- THE COMMUNITY FACILITIES DISTRICT Location and Description The District's boundaries include approximately 78.2 acres located in the southerly portion of the City in an area known as Tustin Legacy, which was formerly the Tustin Marine Corps Air Station (the "MCAS"). The District is bounded by Park Avenue on the west, Jamboree Road on the east, the future Moffett Drive on the north and the Warner Avenue off - ramp of the 405 freeway on the south. The District is generally surrounded by undeveloped land to the north and west. The District encompasses approximately 5.2% of Tustin Legacy (based on gross acreage). Tustin Legacy is an approximately 1,511 acre planned community in central Orange County. Tustin Legacy is the City's proposed development for that portion of the former MCAS located in the City and an additional four acre parcel acquired from The Irvine Company. Approximately 95 acres of the original MCAS are located in the City of Irvine and are not a part of Tustin Legacy. Tustin Legacy is subject to the MCAS Tustin Specific Plan, which is described in the Appraisal included in Appendix C. Tustin Legacy currently includes over 1,680 homes (none of which are located in the District) and an additional 2,100 planned residential units (375 of which are planned to be built in the District), and includes or is expected to include schools, parks, and numerous business and commercial uses. Tustin Legacy is generally bounded by single-family residential and business park uses to the north, light industrial and research and development uses to the west, light industrial and commercial uses to the south, and residential uses to the east in the City of Irvine. The Tustin Legacy project area is bounded by the 405, 5 and 55 Freeways. Jamboree Road provides access to the Eastern Transportation Corridor. John Wayne Airport is located approximately three miles to the south. For more information regarding Tustin Legacy, see the website at www.tustinlegacy.com; however, neither the District nor the Underwriter has reviewed the website and they cannot make any representation regarding the accuracy or completeness of the information therein, and the information on the website is not incorporated into this Official Statement. The following page contains an aerial photo of the area included within the boundaries of the District. -22- :i 1 -23- The District was formed by the City Council of the City pursuant to Resolutions adopted on June 17, 2014, and the City Council, acting as the legislative body of the District, adopted the Resolution of Issuance (authorizing the issuance of the 2015 Bonds) on September 16, 2014. The District was formed in order to finance certain public infrastructure improvements and school facilities (see "THE COMMUNITY FACILITIES DISTRICT — Authorized Facilities"), and to provide funding for certain municipal services to be provided by the City, including, without limitation, police and fire protection, ambulance and paramedic services, street sweeping, traffic signal maintenance and the maintenance of City -owned parks, parkways and open spaces, lighting, flood and storm protection services and the operation of storm drainage systems. At the time of formation of the District, the City owned all of the land within the District. The City subsequently sold the land to the Developer. The area within the District is expected to be improved with 375 detached single family homes and public areas. See "THE DEVELOPER AND THE DEVELOPMENT — The Development." Rate and Method of Apportionment of Special Tax Special Taxes will be levied on and collected from each parcel in the District subject to such Special Taxes as set forth in the Special Tax Formula, the complete text of which is contained in Appendix E — Rate and Method of Apportionment of Special Tax. The Special Tax Formula provides for the levy of a Special Tax A, which is the "Special Tax" referred to in this Official Statement, and a "Special Tax B" that is to be levied to fund services authorized to be funded by the District and related administrative expenses. The Special Tax B is not in any way pledged to secure the payment of debt service on the 2015 Bonds and will not be used for that purpose. Capitalized terms used in the paragraphs below and not otherwise defined in this Official Statement have the meanings given to them in the Special Tax Formula. Maximum Special Tax rates that may be levied in any fiscal year have been established for the District as set forth in the Special Tax Formula, with maximum Assigned Annual Special Tax A rates for Single Family Residential Property that is classified as Developed Property for fiscal year 2015-16 varying from $2,819 per year for properties with homes with residential floor areas less than 2,250 square feet, to $4,997 per year for properties with homes with residential floor areas greater than 3,530 square feet. The Special Tax Formula specifies an annual maximum Special Tax A rate for fiscal year 2015-16 for Multifamily Residential Property and for Non -Residential Property of $48,441.84 per acre per year; however, it is not expected that the District will include any Multifamily Residential Property or Non -Residential Property. The maximum Special Tax rate for Undeveloped Property under the Special Tax Formula for fiscal year 2015-16 is $48,441.84 per acre per year; however, by reason of the recordation of the final tract map for the Development that occurred on December 30, 2014, all of the taxable parcels in the District are classified as Approved Property or Developed Property under the Special Tax Formula, so no property in the District is expected to be taxed at the Undeveloped Property tax rate. The Special Tax Formula also specifies a 'Backup Special Tax" for Approved Property (parcels included in a Final Subdivision but for which building permits have not yet been issued by a specified date each year); and Single Family Residential Property that is classified as Developed Property, which will apply for Fiscal Year 2015-16 as less than 375 single family homes have been constructed in the District. The Backup Special Tax A calculated for Fiscal Year 2015-16 as set forth in Section C.1.b. of the Special Tax Formula was $5,591.03 per parcel. The respective maximum Special Tax Rates increase each fiscal year by two percent (2%) of the respective maximum rate in effect for the prior fiscal year. It should also be noted that Section 53321(d) of the Law effectively provides that, with respect to the Special Tax to be levied against Single Family Residential Property used for residential purposes, under no circumstances will the Special Tax levied in any fiscal year against such Single Family Residential Property be increased as a consequence of delinquency or default by the owners of -24- any other parcels in the District by more than ten percent (10%) above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. Section D of the Special Tax Formula outlines the steps to be followed to effect the levy of Special Taxes each fiscal year, which can be summarized as follows: • Determine the Special Tax A Requirement for Facilities for the then current fiscal year. • Levy the Special Tax proportionately on Developed Property (expected to consist solely of Single Family Residential Property) up to 100% of the "Assigned" maximum Special Tax rates for such property. • If additional revenues are needed to satisfy the Special Tax A Requirement for Facilities, levy proportionately on Approved Property up to the maximum special tax for such property. • If additional revenues are needed to satisfy the Special Tax A Requirement for Facilities, levy proportionately on Undeveloped Property up to the maximum Special Tax for such property. • If additional revenues are needed to satisfy the Special Tax A Requirement for Facilities, levy on Developed Property at the 'Backup" maximum special tax for such property if the 'Backup" maximum special tax is greater than the "Assigned" maximum special tax for any such property. • If additional revenues are needed to satisfy the Special Tax A Requirement for Facilities, levy on Taxable Property Owner Association Property, and then Taxable Public Property, up to the maximum special tax for the respective property. The first Special Tax levy in the District for Fiscal Year 2015-16 has been transmitted by the City to the Auditor to be placed on property tax bills for parcels of Taxable Property in the District. One half of the Fiscal Year 2015-16 Special Tax levy (along with other taxes included by the Auditor on the property tax bills) will be delinquent if not paid by December 10, 2015 and the other half of which will be delinquent if not paid by April 10, 2016. The current and future Special Tax levies are expected to be collected on the County ad valorem real property tax bills, and the Special Taxes can only be levied for a forty -year period commencing with Fiscal Year 2015-16. The Special Tax for any parcel in the District may also be optionally prepaid in whole or in part. See Section H of the Special Tax Formula in Appendix E hereto for more specific information on optional prepayments of the Special Tax. See also "THE 2015 BONDS - Mandatory Redemption from Prepayment of Special Taxes." The City Council or its designee will determine the amount of Special Tax to be levied and collected in each Fiscal Year, including, but not limited to, amounts required to pay debt service on the Bonds for the calendar year which commences in such Fiscal Year, Administrative Expenses for such Fiscal Year, an amount (if any) necessary to replenish the Reserve Fund for the 2015 Bonds to the amount of the then Reserve Requirement, an amount to offset projected future Special Tax delinquencies, an amount to pay directly for the acquisition or construction of the Facilities, and an amount necessary to make any other payments required to be made in the applicable Fiscal Year by the District under the Indenture. Set forth below is Table 4 which estimates the percentage each year by which the possible maximum Special Tax for Single Family Residential Property (based on the estimated -25- maximum Special Tax using the Maximum Special Tax A, as well as the Fiscal Year 2015-16 Special Tax A levy) if all 375 homes are constructed in the District, will exceed the scheduled debt service on the 2015 Bonds after deduction of the Administrative Expense Cap for each such year. Table 4 City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Maximum Special Taxes and 2015 Bond Debt Service Coverage (1) Reflects the estimated annual Maximum Special Tax A determined by application of the Backup Special Tax A for 375 parcels of Single Family Residential Property that are Developed Property, based upon home product mix through build -out as provided by the Developer. (2) The scheduled debt service on the 2015 Bonds. (3) Preliminary, subject to change. (4) The amount of the annual Administrative Expense Cap. See "SECURITY FOR THE 2015 BONDS - Pledge of Net Special Tax Revenues." (5) Estimated annual Maximum Special Tax A for 375 parcels of Single Family Residential Property that are Developed Property determined by application of the Backup Special Tax A, less the annual Administrative Expense Cap, divided by annual scheduled 2015 Bond debt service. Source: Albert A. Webb Associates; except 2015 Bond Debt Service, which was provided by the Underwriter. See "SECURITY FOR THE 2015 BONDS - Pledge of Special Tax Revenues" for other information regarding the Special Tax. Set forth in Table 5 below are estimated, sample property tax bills for fiscal year 2015-16 that would be received by homeowners in the District if their respective property was classified for such fiscal year as Developed Property under the Special Tax Formula. See "SPECIAL RISK -26- Estimated Coverage Maximum Tax (at 2015 Bond Debt Maximum Year Buildout)(l) Service(2),(3) Administration(4) Tax(3),(5) 2016 $2,096,638 $1,384,106 $30,000 149% 2017 2,138,570 1,411,050 30,600 149 2018 2,181,342 1,438,650 31,212 149 2019 2,224,969 1,465,350 31,836 150 2020 2,269,468 1,494,750 32,473 150 2021 2,314,857 1,527,750 33,122 149 2022 2,361,154 1,557,000 33,785 149 2023 2,408,378 1,589,250 34,461 149 2024 2,456,545 1,619,250 35,150 150 2025 2,505,676 1,652,000 35,853 150 2026 2,555,789 1,687,250 36,570 149 2027 2,606,905 1,719,750 37,301 149 2028 2,659,043 1,754,500 38,047 149 2029 2,712,224 1,791,250 38,808 149 2030 2,766,469 1,824,750 39,584 149 2031 2,821,798 1,860,000 40,376 150 2032 2,878,234 1,901,750 41,184 149 2033 2,935,799 1,939,500 42,007 149 2034 2,994,515 1,978,250 42,847 149 2035 3,054,405 2,017,750 43,704 149 2036 3,115,493 2,057,750 44,578 149 2037 3,177,803 2,098,000 45,470 149 2038 3,241,359 2,138,250 46,379 149 2039 3,306,186 2,183,250 47,307 149 2040 3,372,310 2,227,500 48,253 149 2041 3,439,756 2,270,750 49,218 149 2042 3,508,551 2,317,750 50,203 149 2043 3,578,722 2,363,000 51,207 149 2044 3,650,297 2,411,250 52,231 149 2045 3,723,303 2,457,000 53,275 149 (1) Reflects the estimated annual Maximum Special Tax A determined by application of the Backup Special Tax A for 375 parcels of Single Family Residential Property that are Developed Property, based upon home product mix through build -out as provided by the Developer. (2) The scheduled debt service on the 2015 Bonds. (3) Preliminary, subject to change. (4) The amount of the annual Administrative Expense Cap. See "SECURITY FOR THE 2015 BONDS - Pledge of Net Special Tax Revenues." (5) Estimated annual Maximum Special Tax A for 375 parcels of Single Family Residential Property that are Developed Property determined by application of the Backup Special Tax A, less the annual Administrative Expense Cap, divided by annual scheduled 2015 Bond debt service. Source: Albert A. Webb Associates; except 2015 Bond Debt Service, which was provided by the Underwriter. See "SECURITY FOR THE 2015 BONDS - Pledge of Special Tax Revenues" for other information regarding the Special Tax. Set forth in Table 5 below are estimated, sample property tax bills for fiscal year 2015-16 that would be received by homeowners in the District if their respective property was classified for such fiscal year as Developed Property under the Special Tax Formula. See "SPECIAL RISK -26- FACTORS - Direct and Overlapping Indebtedness" for a table that describes the overlapping indebtedness for which taxes would be levied on the parcels in the District as shown in the table below. Home Prices Plan Range of Home Sizes in Square Feet per Special Tax Formula Estimated Home Size (Info from Market Absorption Study) Estimated Home Price (Info From Market Absorption Study) Less Homeowner's Exemption General Obligation Debt(1) Ad -Valorem Tax Rate (1.001t) TUSD 2012-1 Bond Series A (0.01406%) TUSD 2008-1 Bond Series A (0.01079%) TUSD 2008-1 Bond Series B (0.01006%) TUSD 2008-1 Bond Series C (0.00952%) TUSD 2002-1 Bond Series C (0.01127%) TUSD 2002-1 Bond 2002 Series D (0.01046%) TUSD 2002 Bond Series 2006B (0.00338%) TUSD 2002 Bond Series 2003A (0.00001%) Irvine Ranch Water District #213 (0.03800%)(2) Irvine Ranch Water District #113 (0.03000%)(z) Metropolitan Water District GO Bonds (0.00350%) Subtotal GO Bond Debt Special Assessments and Taxes City of Tustin Services CFD City of Tustin Proposed CFD 2014-1 Facilities Tax Subtotal Special Assessments and Taxes Total Annual Property Taxes(3) Annual Prop. Tax Rates as of Home Price Table 5 City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Fiscal Year 2015-16 Estimated Sample Tax Bill for a Developed Property Sheldon Carriage Court Huntley Crawford Stafford Less than Less than Less than 2,250 tc 2,570 to 2,570 to 2,890 to 2,890 to 3,210 to 3,530 to 3,530 to 3,530 to 3,530 to 2,250 2,250 2,250 2,569 2,889 2,889 3,209 3,209 3,529 or Greater or Greater or Greater or Greater 1,892 2,137 2,171 2,3 A3 2,597 2,807 3,008 3,012 3,412 3,612 3,720 3,831 3,880 $756,900 $817,900 $819,900 $853,900 $913,900 $948,900 $967,900 $1,057,000 $1,162,900 $1,235,900 $1,180,834 $1,214,553 $1,250,189 $0 $0 $0 $ $0 $0 $0 $0 $0 $0 $0 $0 $0 7756,900 $817,900 $819,900 $853,900 $913,000 $948,000 $967,000 $1,057,000 $1,162,900 $1,235,900 $1,180,834 $1,214,553 $1,250,189 $7,569.00 $8,179.00 $8,199.00 $8,539.00 $9,130.00 $9,480.00 $9,670.00 $10,570.00 $11,629.00 $12,359.00 $11,808.34 $12,145.53 $12,501.89 106.42 115.00 115.28 120.06 128.37 133.29 135.96 148.61 163.50 173.77 166.03 170.77 175.78 81.67 88.25 88.47 92.14 98.51 102.29 104.34 114.05 125.48 133.35 127.41 131.05 134.90 76.14 82.28 82.48 85.90 91.85 95.37 97.28 106.33 116.99 124.33 118.79 122.18 125.77 72.06 77.86 78.05 81.29 86.92 90.25 92.06 100.63 110.71 117.66 112.42 115.63 119.02 85.30 92.18 92.40 96.23 102.90 106.84 108.98 119.12 131.06 139.29 133.08 136.88 140.90 79.17 85.55 85.76 89.32 95.50 99.16 101.15 110.56 121.64 129.28 123.52 127.04 130.77 25.58 27.65 27.71 28.86 30.86 32.04 32.68 35.73 39.31 41.77 39.91 41.05 42.26 0.08 0.08 0.08 0.09 0.09 0.09 0.10 0.11 0.12 0.12 0.12 0.12 0.13 100.67 108.78 109.05 113.57 121.43 126.08 128.61 140.58 154.67 164.37 157.05 161.54 166.28 79.47 85.88 86.09 89.66 95.87 99.54 101.54 110.99 122.10 129.77 123.99 127.53 131.27 26.49 28.63 28.70 29.89 31.96 33.18 33.85 37.00 40.70 43.26 41.33 42.51 43.76 $8,302.05 $8,971.14 $8,993.07 $9,366.01 $10,014.26 $10,398.13 $10,606.55 $11,593.71 $12,755.28 $13,555.97 $12,951.99 $13,321.83 $13,712.73 $860.00 $860.00 $860.00 $1,020.00 $1,164.00 $1,164.00 $1,314.00 $1,314.00 $1,425.00 $1,522.00 $1,522.00 $1,522.00 $1,522.00 2,819.00 2,819.00 2,819.00 3,346.00 3,822.00 3,822.00 4,308.00 4,308.00 4,675.00 4,997.00 4,997.00 4,997.00 4,997.00 $3,679.00 $3,679.00 $3,679.00 $4,366.00 $4,986.00 $4,986.00 $5,622.00 $5,622.00 $6,100.00 $6,519.00 $6,519.00 $6,519.00 $6,519.00 $11,981.05 $12,650.14 $12,672.07 $13,732.01 $15,000.26 $15,384.13 $16,228.55 $17,215.71 $18,855.28 $20,074.97 $19,470.99 $19,840.83 $20,231.73 1.583% 1.547% 1.546% 1.608% 1.643% 1.623% 1.678% 1.629% 1.621% 1.624% 1.649% 1.634% 1.618% (1) Amounts projected based upon fiscal year 2014-15 Tax Rates of properties within the same Tax Rate Area. (2) Based upon land value only. Land value estimated to be 35% based upon Land to Structure Value of neighboring properties. (3) Additional annual Property Taxes may exist in the future which were not known as of June 1, 2015. Source: Albert A. Webb Associates. -27- Authorized Facilities Under the provisions of the Resolution of Formation for the District, the District is authorized to finance (a) backbone infrastructure needed for new development, such as roadway, bridge, sewer, water, reclaimed water, dry utilities, storm drain, street and parkway landscaping, curb and gutter, medians, median landscaping, traffic signals, entry signage, parks, trails, fire facilities, and appurtenances and appurtenant work (referred to in this Official Statement as the "City Facilities"), and (b) the construction, purchase, modification, expansion, improvement and/or rehabilitation of school facilities to be owned and operated by the School District (referred to in this Official Statement as the "School Facilities"). The City has advised that it expects that proceeds of the 2015 Bonds deposited in the City Facilities Account of the Improvement Fund will be used to reimburse the City for amounts it has expended in respect of the construction of Park Avenue and Moffett Avenue adjacent to the Development, and to pay costs to complete those improvements. The District, at the direction of the City Council as its legislative body may, however, at any time use amounts in the City Facilities Account of the Improvement Fund to pay costs of any other of the Facilities authorized to be financed by the District. Development in the District is not dependent upon the completion of Park Avenue or Moffett Avenue. Proceeds of the 2015 Bonds deposited to the School Facilities Account will be used to finance various facilities for the School District pursuant to a School Facilities Implementation, Funding and Mitigation Agreement, entered into as of August 25, 2015, by the District, the City and the School District, and a Joint Community Facilities Agreement, entered into as of August 24, 2015, by the City, the School District and the Developer. The amount to be deposited to the School Facilities Account has been calculated to be sufficient to satisfy in a lump sum payment the School District's impact fees attributable to the homes being constructed and to be constructed on the 375 lots in the Development. THE CITY OF TUSTIN Under the Law, the City Council of the City is authorized to establish and act as the legislative body for community facilities districts. However, the City has no liability in connection with the District or the 2015 Bonds, other than with respect to the pledge of Special Taxes and funds set forth in the Indenture. See "SECURITY FOR THE 2015 BONDS — Limited Liability" herein. See Appendix E hereto for general information regarding the City. THE DEVELOPER AND THE DEVELOPMENT The information provided in this section has been included because it may be considered relevant to an informed evaluation and analysis of the 2015 Bonds and the District No assurance can be given, however, that the proposed development of the property within the District will occur in a timely manner or in the configuration or to the density described herein, or that the Developer, any owners or affiliates thereof, affiliates of Brookfield Residential, or any other future property owner described herein will or will not retain ownership of its respective property within the District. Neither the 2015 Bonds nor any of the Special Taxes are personal obligations of any property owner within the District The 2015 Bonds are secured solely by the Net Special Tax Revenues and amounts on deposit in certain of the funds and accounts maintained by the Trustee under the Indenture. See "SPECIAL RISK FACTORS"for a discussion of certain of the risk factors that should be considered in evaluating the investment quality of the 2015 Bonds. -28- The Development The Development, currently identified as Greenwood in Tustin Legacy, is expected to include at buildout 375 detached single family homes constructed on 43.36 acres, a 6.1 acre focal park, and 3.73 acres of green belt areas. The Development is one of the phases of the Tustin Legacy project, which is described under the heading "THE COMMUNITY FACILITIES DISTRICT - Location and Description." The property is subject to the MACS Tustin Specific Plan Area 15, which is more fully described in the Initial Appraisal Report in Appendix C. The Development is subject to a Disposition and Development Agreement for Parcels 1B & 6A, dated February 18, 2014, between the City and the Developer (referred to in this Official Statement as the "DDA"), and a Development Agreement, recorded in the Orange County Recorder's Office on April 8, 2014, between the City and the Developer (referred to in this Official Statement as the "Developer Agreement"). Pursuant to the DDA, the Developer acquired the property in the District on which the Development is being constructed for a purchase price of $56,000,000, which was paid by the Developer to the City, and the property was conveyed to the Developer, on August 15, 2014. Under the DDA, the City is also entitled to a percentage of profits from the sale of homes in the Development, as set forth in an attachment to the DDA. Copies of the DDA and the Development Agreement may be obtained upon written request to the City Clerk of the City. See "INTRODUCTION - Additional Information." The Developer is currently constructing infrastructure improvements in the Development, which construction commenced in October, 2014, and is expected to be completed by late 2015. The construction of twelve model homes representing all four product types to be built in the District has been completed and the model homes were opened to the public on May 29, 2015. Several construction phases were underway as of September 1, 2015, with a total of 123 homes (in addition to the completed twelve model homes) under construction as of such date. Sales of homes is ongoing, with 112 homes subject to contracts of sale as of September 1, 2015, and closings to individual home buyers of homes in all four product types expected to begin in November, 2015. No assurance can be given that construction and home sales activities will continue and be completed as currently projected by the Developer and Brookfield Homes. The property in the Development is currently subject to a final tract map for the Development recorded on December 30, 2014, in the County Recorder's Office, which subdivided the property into 375 lots plus a park parcel and interior streets. The next page shows the final Tract Map for the property in the District. -29- �o , =�o k O � m HOZ Sy oS � f f o �oZ P ss �s ss £s,OP rws¢od QI 10 czzo¢ pp a Ci Ci 2f 60fZ7a W w_J aza}¢v )�U ¢ ¢ ¢ 61¢go: z m�z i 5 65 go: W f o W O�� \\ Jz- � = z meFim >y>yfl! U ¢ ~ 5� N zr�YWQ ZUFOO N Pb Q°J�opm¢ (� ® I �szSw�yOa U w Tiw W W=t=g-n w NO W wr3.3jN \ 4. 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FOW�F ¢�a o w¢z38w SdP \ W J z W r 0, \ W ¢ JI-1-rL J N N {p O O O s g CONSULTING REAL ESTATE APPRAISERS \ -30- The Development Plan The DDA requires that the Development include 375 homes with a product mix of 103 Carriage Court Homes (referred to in the Appraisals as the "Sheldon" product), 96 Stafford homes (referred to in the Appraisals as the "Stafford" product), 99 Greenwood homes (referred to in the Appraisals as the "Crawford" product), and 77 Huntley homes (referred to in the Initial Appraisal Report as the "Merchant Builder" product and in the Updated Appraisal Report as the "Huntley" product). The DDA also requires that the Developer complete the grading for the Development, that it construct a 6.1 acre park and 3.73 acres of green belt areas, as well as connection of all utilities (including sewer, water, electrical, gas, telephone, cable and telecommunication service connections) from their origin or from Tustin Legacy backbone infrastructure program locations, various landscaping improvements (including common areas and median landscaping, irrigation and/or hardscape improvements), all in accordance with applicable governmental regulations (including the Specific Plan, the Reuse Plan, the Approved Plans, and the Entitlements, as such terms are defined in the DDA) and the "conditions of approval" stipulated by the City for the Development. The DDA includes a schedule of performance, which obligates the Developer to complete the Development within the earlier of sixty (60) months following the opening of model homes in the Development or eighty four (84) months following August 15, 2014, subject in each case to certain force majeure delays. The DDA requires that a Tustin Legacy Backbone Infrastructure Program Fair Share Contribution of $45,159.21 be paid to the City for each home, with payment due at the time a building permit is issued by the City for a home. However, pursuant to the DDA, upon occurrence of the "Initial Channel Condition" the payment of such "Fair Share Contribution" for all remaining lots was due and payable to the City, and the "Fair Share Contribution" was subsequently paid in full by the Developer to the City. The School District, in whose jurisdiction the Development is located, has entered into a School Facilities Implementation, Funding and Mitigation Agreement with the District and the City, and has entered into a Joint Community Facilities Agreement with the City and the Developer, pursuant to which a portion of the proceeds of the 2015 Bonds will be deposited to the School Facilities Account of the Improvement Fund under the Indenture, and will be used by the School District to fund the School Facilities. The amount to be deposited to the School Facilities Account has been calculated to be sufficient to satisfy in a lump sum payment the School District's impact fees attributable to the homes being constructed and to be constructed on the 375 lots in the Development. See "THE FINANCING PLAN - Overview." The Initial Appraisal Report sets forth the expected minimum lot size for each of the four product types expected to be constructed in the Development (2,400 square feet for the Sheldon product, 3,772 square feet for the Huntley product, 5,000 square feet for the Crawford product and 5,250 square feet for the Stafford product), and the expected unit sizes for the four product types (1,860 to 2,343 square feet for the Sheldon product, 2,597 to 3,008 square feet for the Huntley product, 3,012 to 3,612 square feet for the Crawford product and 3,311 to 3,880 square feet for the Stafford product). The Developer has indicated that, as of September 1, 2015, base sales prices of the homes within the Development ranged from approximately $716,900 for the smallest Sheldon product home to approximately $1,211,900 for the largest Stafford product home. Base sales prices are subject to change and exclude lot premiums, options and upgrades, and any incentives or price reductions being offered. See the Updated Appraisal Report in Appendix C and the Market Absorption Study in Appendix D for additional information regarding the four product types being constructed in the District. Based on information from the Developer, as of September 1, 2015 rough grading of the property in the Development began mid-June 2014 and has been completed. A recreation center and a local park for the Development also have been completed as well as the green belt areas and the park required to be constructed under the DDA. Construction of the sewer, storm drain and water infrastructure improvements within the Development is complete. Dry utilities are -31- substantially complete. The model homes for all four product types have been completed and were opened to the public on May 29, 2015. Construction of 123 production homes is underway. Production homes are anticipated to be released in phases of generally 5 to 8 units for the three larger product types, and 6 to 12 units for the courtyard product type. No assurance can be given that the foregoing expectations regarding the timing of construction of the Development will be realized. See "SPECIAL RISK FACTORS." The Developer has advised that as of February 9, 2015, it was under contract with Brookfield Homes to sell the 77 lots for the Huntley product to Brookfield Homes. The agreement contemplates that only the lots will be sold, and the Developer will retain all of the obligations under the DDA with respect to grading, infrastructure construction and construction of the park and green belt areas. The sale of the lots to Brookfield Homes is to occur in several "takedowns," with the first three takedowns (consisting of 28 lots) having been completed on August 28, 2015, and a fourth takedown (consisting of 13 additional lots) having been completed on September 23, 2015, in each case with the subject lots being conveyed to Brookfield Huntley 77 LLC, a Delaware limited liability company ("Brookfield Huntley"), which is wholly owned by Brookfield Homes. The lots were conveyed in a finished lot condition. Under their agreement, Brookfield Homes pays the purchase price of lots at the time they are taken down, with a specified per lot price which is subject to adjustment. The remaining 36 lots are the subject of three future takedowns of 14 lots, 13 lots and 9 lots, respectively, which are expected to occur, subject to various conditions, between November of 2015 and May of 2016. No assurance can be given that future takedowns will occur as currently expected. However, based on its agreement with the Developer, in the event Brookfield Homes fails to close escrow for any takedown, Brookfield Homes is required to convey to the Developer, without any consideration as liquidated damages, all of Brookfield Homes' right, title and interest in the three model homes it or Brookfield Huntley has constructed and any remaining Huntley production units it or Brookfield Huntley has constructed which have not been sold to members of the home buying public. Land Use Approvals and Environmental Review The Development has obtained all environmental approvals needed to complete the plan of development described above. As previously stated, the Development is within the MACS Tustin Specific Plan area. A final EIS/EIR was adopted by the City Council for that area on January 16, 2001. An addendum to the Final EIS/EIR was adopted by the City Council in March of 2006. A negative declaration applicable to the area in which the Development is located was adopted by the City Council on February 4, 2014. Public Utilities All usual and typical public utilities are available to the Development. The Irvine Ranch Water District supplies water, sewer and recycled water service to the Development site. Southern California Edison supplies electricity and Southern California Gas Company supplies natural gas services, and AT&T/Cox Communications supplies telephone and cable communication services to the area. The Developer has entered into an agreement with the Irvine Ranch Water District, dated October 7, 2014, to provide residential potable water, sewer and recycled water service for the homes to be constructed in the Development. The Developer has also entered into agreements with Southern California Edison, Southern California Gas Company, AT&T and Cox Communication to provide electric, natural gas, telephone and cable communication services to the Development. The Developer As previously defined in this Official Statement, the "Developer" is Standard Pacific Corp., a Delaware corporation (referred to in this Section as "Standard Pacific"), which is a -32- homebuilder incorporated in Delaware in 1991 with principal executive offices located in Irvine, California. Standard Pacific is a publicly traded company with its stock listed on the New York Stock Exchange under the symbol "SPF." Standard Pacific is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the "SEC"). Such filings, particularly Standard Pacific's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed by Standard Pacific with the SEC on February 23, 2015, and Standard Pacific's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015, as filed by Standard Pacific with the SEC on May 1, 2015, set forth certain data relative to the consolidated results of operations and financial position of Standard Pacific and its subsidiaries as of such dates. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including Standard Pacific. The address of such Internet web site is www.sec.gov. All documents subsequently filed by Standard Pacific pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Standard Pacific's Annual Report and each of its other quarterly and current reports, including any amendments, are available from Standard Pacific's website at www.standardpacifichomes.com. These Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. Standard Pacific/Ryland Merger Announcement On June 14, 2015, Standard Pacific entered into an Agreement and Plan of Merger (the "Merger Agreement") with The Ryland Group, Inc. ('Ryland"). Subject to the terms and conditions of the Merger Agreement, which was unanimously approved by the boards of directors of Standard Pacific and Ryland, Standard Pacific and Ryland have agreed that Ryland will merge with and into Standard Pacific, with Standard Pacific continuing as the surviving corporation (the "Surviving Corporation"), and the separate corporate existence of Ryland will cease (the "Merger"). Simultaneous with the Merger, Standard Pacific, as the surviving entity, will change its name to CalAtlantic Group, Inc. The proposed Merger is subject to approval by the shareholders of the Standard Pacific and Ryland and other customary closing conditions. Standard Pacific currently expects to close the Merger on October 1, 2015. For a more complete description of the proposed Merger, please see Standard Pacific's preliminary Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on July 2, 2015. The Developer's Financing Plan As of June 30, 2015, the Developer had expended approximately $114,939,000 in land acquisition, site improvements, construction costs of the 298 homes that the Developer plans to construct, and other development, marketing and sales costs (exclusive of internal financing repayment and corporate overhead allocation) related to its property in the Development. The Developer expects the remaining site improvements, construction costs of the 298 homes that the Developer plans to construct, and other development, marketing and sales costs (exclusive of internal financing repayment and corporate overhead allocation) related to its property within the Development to be approximately $121,233,000 as of June 30, 2015. To date, the Developer has financed its land acquisition and various site development and home construction costs related to its property in the Development through internally generated funds. The Developer expects to use home sales, internal funding and funding under its revolving credit facility to complete its development activities for the Development. -33- However, home sales revenues for the Developer's projects in the Development are not segregated and set aside for the payment of costs required to complete its activities for the Development. Homes sales revenue is accumulated by the Developer and used to pay costs of the Developer's operations, to pay debt service on outstanding debt and for other corporate purposes, and may be diverted to pay costs other than the costs of completing its activities for the Development at the discretion of the Developer's management. Notwithstanding the foregoing, the Developer believes that it will have sufficient funds available to complete its proposed development activities for the Development in accordance with the development schedule described in this Official Statement. As of March 31, 2015, the Developer was party to a $450 million unsecured revolving credit facility (the "Revolving Facility"), which matures in July 2018. The Revolving Facility has an accordion feature under which the aggregate commitment may be increased up to $750 million, subject to the availability of additional bank commitments and certain other conditions. The Revolving Facility contains certain covenants and conditions which may limit the amount the Developer may borrow or have outstanding at any time. As of March 31, 2015, the Developer satisfied the conditions that would allow it to borrow up to $450 million under the Revolving Facility, of which $15 million in borrowings was outstanding, with $435 million of remaining availability. The Developer's ability to renew the Revolving Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and the Developer's financial condition and strength. Although the Developer expects to have sufficient funds available to complete its development activities for the Development in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from the Developer or any other source when needed. For example, borrowings under the Revolving Facility may not be available, and home sales revenue, which is accumulated daily for use in operations, to pay debt service on outstanding debt and for other corporate purposes, may be diverted to pay costs other than the costs of completing the activities for the Development at the discretion of the Developer management. Neither the Developer, nor its lenders, nor any of its related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on the Developer's property in the Development. Any contributions by the Developer to fund the costs of such development and home construction are entirely voluntary. If and to the extent that internal funding, including but not limited to home sales revenues, and borrowings under the Revolving Facility are inadequate to pay the costs to complete the planned development by the Developer within the Development and other financing by the Developer is not put into place, there could be a shortfall in the funds required to complete the proposed development by the Developer of the Development and the remaining portions of the Development may not be developed. Brookfield Homes Brookfield Homes Southern California LLC, a Delaware limited liability company (referred to in this Official Statement as "Brookfield Homes") is the sole owner of Brookfield Huntley 77 LLC, a Delaware limited liability company (referred to in this Official Statement as "Brookfield Huntley"). Brookfield Homes and its affiliates have built and sold over 5,000 homes in Southern California over the past 15 years of operations. Brookfield Homes is a wholly owned subsidiary of Brookfield Residential Properties Inc. ("Brookfield Residential"), one of the largest land development and home building companies in North America, with over 100,000 lots controlled in the United States and Canada. Brookfield Huntley is a single purpose entity formed to purchase 77 Huntley product lots in the District. -34- Other development projects currently under development by Brookfield Residential and its affiliates in Southern California include the following: Project Name cft No. of Lots Camden Los Angeles 72 Trevion Los Angeles 22 Camellia Azusa 57 Palmetto Azusa 66 Casita Anaheim 114 Cortile Anaheim 112 El Paseo Lake Forest 147 The Domain Anaheim 100 La Vita Irvine 72 Liberty French Valley 90 Descanso at Del Sur San Diego 39 Brookfield Sentinels at Del Sur San Diego 51 Palo Verde at the Foothills Carlsbad 109 Seaside Ridge Encinitas 23 As of August 1, 2015, within the area of the 77 Huntley lots, Brookfield Residential has spent approximately $7,500,000 to date and expects to expend approximately $2,200,000 in additional site development costs consisting of impact fees and approximately $13,000,000 in additional home construction costs until full build -out of the 77 homes proposed to be constructed on the Huntley lots. To date, Brookfield Residential has financed its land acquisition, site development and home construction costs related to its property in the area of the 77 Huntley lots through internally generated funds. Brookfield Residential expects to use home sales revenue and internally generated funds to complete its development of the 77 Huntley lots. If and to the extent the above sources of financing are inadequate to pay the cost to complete Brookfield Huntley's planned development of the 77 Huntley lots and other financing is not obtained, there could be a shortfall in the funds required to complete the proposed development of the 77 Huntley lots. There can be no assurance of the willingness or ability of Brookfield Residential to make such funds available in the future, or the ability of Brookfield Residential to obtain financing from other sources. There is no legal obligation to the 2015 Bond holders to make any such funds available for construction or development, or the payment of ad valorem property taxes or the Special Taxes. SPECIAL RISK FACTORS Investment in the 2015 Bonds involves risks which may not be appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the 2015 Bonds which are not rated by any municipal bond rating agency. This discussion does not purport to be comprehensive or definite, and the risk factors listed are in no particular order of importance. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failure to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the 2015 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. -35- Concentration of Ownership The Developer intends to develop the land within the District as a residential community known as Greenwood in Tustin Legacy. All of the land within the District is currently owned by the Developer, except for 41 lots that have been purchased to date from the Developer by Brookfield Homes. While the Developer is under contract with Brookfield Homes to sell it an additional 36 of the lots in the District in three remaining "takedowns", such sales have not yet closed. See "INTRODUCTION - The Development." Until homes are constructed and sold to homebuyers, the timely payment of the 2015 Bonds depends on the willingness and ability of the Developer (and the Brookfield Homes, with respect to the lots it has purchased and not yet sold to homebuyers) to pay the Special Taxes when due. This lack of diversity in the obligation to pay Special Taxes presents a significant risk to 2015 Bondowners. Failure of the Developer or owners of the property within the District to pay the annual Special Taxes when due could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon a foreclosure or otherwise. In that event, there could be a default in payments of the principal of, and interest on, the 2015 Bonds. See "SPECIAL RISK FACTORS - Insufficiency of Special Tax Revenues" below. Failure to Develop Properties Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. While the land in the District is entitled as to discretionary City approvals by reason of the DDA and the Development Agreement, and all other City land use approvals and zoning approvals have been obtained (as described under the caption "THE DEVELOPER AND THE DEVELOPMENT"), there is always the possibility that such approvals, even though obtained, will be challenged or subject to subsequent referendum, or that the issuance of additional building permits for the homes in the Development will be delayed. Revocation of any such agency approval could adversely affect the planned land development. See "SPECIAL RISK FACTORS - Government Approvals." Development of land is also subject to economic considerations such as the strength of the regional economy and the resulting demand for land and homes. Another economic downturn, similar to the recent national recession, for example, could adversely impact the demand for homes and land development operations generally throughout the Orange County Area. See "SPECIAL RISK FACTORS - Failure to Achieve Market Projections." Other factors out of the control of the Developer, such as weather conditions, may delay development. Substantial delays in the completion of the Development may reduce the value of the property within the District and increase the length of time during which Special Taxes will be payable from Undeveloped Property, and may affect the willingness and ability of the owners of property within the District to pay the Special Taxes when due. See "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax." Bondowners should assume that any event that significantly impacts the ability to develop land in the District could cause the property values within the District to decrease from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the Special Taxes when due. See "THE DEVELOPER AND THE DEVELOPMENT - The Development" for information regarding the status of development in the District. -36- Failure to Achieve Market Projections The Appraisals took into consideration the Market Absorption Study, which assumes a 39 month construction and absorption schedule for the Development. There can be no assurance that such level of dwelling unit absorption can be obtained in the Development. Failure to achieve the estimated absorption projection could adversely affect the Appraiser's estimated value of the property in the District, could impair the economic viability of the Development and could reduce the ability or desire of the property owners to pay the annual Special Taxes. In that event, there could be a default in the payment of principal of, and interest on, the 2015 Bonds. See Appendix D - Market Absorption Study. Prospective purchasers of the 2015 Bonds should not assume that the absorption of dwelling units will occur as estimated and should review the Market Absorption Study in its entirety in order to make an informed decision whether to purchase the 2015 Bonds. Competition The housing market in the area in which the Development is located has other pending and proposed projects that may be competitive with the Development. This competition could impact the future value of the property and the rate at which homes are sold and absorbed. See the Appraisal in Appendix C and "SPECIAL RISK FACTORS - Failure to Achieve Market Projections." Land Value The value of land within the District is a critical factor in determining the investment quality of the 2015 Bonds. If a landowner defaults in the payment of a Special Tax, the District's only remedy is to commence foreclosure proceedings in an attempt to obtain funds to pay the delinquent Special Tax. Prospective purchasers of the 2015 Bonds should not assume that the land within the District could be sold for the appraised value described under the heading "SECURITY FOR THE 2015 BONDS - Land Value" at a foreclosure sale for delinquent Special Taxes. For example, it is unlikely that common ownership would be maintained through foreclosure sales of multiple delinquent parcels because at foreclosure each parcel must be sold separately for the Special Tax lien claims against it and multiple parcels may not be foreclosed in a single "bulk" foreclosure sale. See Appendix C - Initial Appraisal Report and Updated Appraisal Report for descriptions of other assumptions made by the Appraiser in determining its appraised values for the property in the District. Additionally, reductions in the District land values could occur due to a downturn in the economy, physical events such as earthquakes or floods or other events all of which will adversely impact the security underlying the Special Tax. Dependence upon the Developer for Construction Neither the District nor the Underwriter makes any representation or gives any assurance with respect to the ability of the Developer to arrange for the construction of the infrastructure improvements or the homes within the Development. While the Developer expects to construct the infrastructure improvements required by the DDA and the homes within the Development, and to self -fund the construction costs, no assurance can be given that they will be completed and sales of homes in the District will occur as expected. Also, the Developer is under contract with an affiliate of Brookfield Residential to sell 77 lots in the Development, and no assurance can be given that if such sale occurs, the purchasing entity will complete the construction and sale of the homes on such lots. -37- Government Approvals The Developer has secured all of the discretionary City approvals, permits (other than individual building permits for homes for 240 of the lots in the Development not yet under construction) and government entitlements necessary to develop 375 homes in the District, including a final tract map that has been recorded among others listed in "THE DEVELOPER AND THE DEVELOPMENT - Land Use Approvals and Environmental Review" herein. Nevertheless, development within the District is contingent upon the issuance by the City of building and other ministerial permits for homes to be constructed in the Development. The failure to obtain any such permits in a timely manner could adversely affect land development within the District. Local, State and Federal Land Use Regulations There can be no assurance that land development operations within the District will not be adversely affected by future government policies, including, but not limited to, governmental policies which directly or indirectly restrict or control development. During the past several years, citizens of a number of local communities in California have placed measures on the ballot designed to control the rate of future development. Although the Developer entered into the DDA and the Development Agreement with the City with respect to the Development intended to provide protection against certain such measures, the validity of development agreements has not yet been conclusively established by the California Supreme Court (although a recent California appellate court case has passed on the constitutionality of the development agreement statute; see, Santa Margarita Area Residents Together v. San Luis Obispo City Council, 84 Cal. App. 4.221 (2000)), and therefore, it is possible that future initiatives applicable to the City or the District could be enacted and could negatively impact the ability of the property owners to further develop their land. In addition, the DDA and the Development Agreement cannot limit the application of state or federal laws and regulations which have preemptive effect on local land use regulations. During the past several years, state and federal regulatory agencies have significantly expanded their involvement in local land use matters through increased regulatory enforcement of various environmental laws, including the Endangered Species Act, the Clean Water Act and the Clear Air Act, among others. Such regulations can substantially impair the rate and amount of development without requiring just compensation unless the effect of the regulation is to deny all economic use of the affected property. While the Developer believes that it has obtained all relevant environmental approvals for the Development of the nature described in the second preceding sentence (See "THE DEVELOPER AND THE DEVELOPMENT - Land Use Approvals and Environmental Review"), 2015 Bondowners should assume that any event that significantly impacts the ability to develop land in the District could cause the land values within the District to decrease substantially and could affect the willingness and ability of the owners of land to pay the Special Taxes when due or to proceed with development of land in the District. See "SPECIAL RISK FACTORS - Governmental Approvals" and "SPECIAL RISK FACTORS - Land Values" herein. Insufficiency of Special Tax Revenues In order to pay debt service on the 2015 Bonds, it is necessary that the Special Tax levied against land within the City be paid in a timely manner. Should the Special Tax not be paid on time, the District has established the Reserve Fund to pay debt service on the 2015 Bonds to the extent other funds are not available therefore. Although the District may levy the Special Tax in an amount sufficient to replenish the Reserve Fund, the levy would be subject to the maximum annual Special Tax rates set forth in the Special Tax Formula and the limitation in the Law on increasing the Special Tax on property in residential use by no more than ten percent (10%) as a consequence of delinquencies in the payment of Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT - Rate and Method of Apportionment of Special Tax." As discussed below, Net Special Tax Revenues could be insufficient to pay the 2015 Bonds either due to nonpayment of the amounts levied or in the event that acreage within the District were to become exempt from taxation due to title being transferred to a public agency. The Law provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. The 2015 Bondowners will be dependent on the ability and/or willingness of the public entity to pay the Special Tax levied on such property when due. In addition, the Law provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Law have not been tested. If for any reason property subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, or another public agency, subject to the limitation of the maximum authorized rate of levy, the Special Tax will be reallocated to the remaining taxable properties within the District, but in no case more than the maximum authorized Special Tax for such properties. If a substantial portion of land within the District became exempt from the Special Tax because of public ownership or otherwise, the maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the 2015 Bonds when due and a default may occur with respect to the payment of such principal and interest. The District has covenanted to institute foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the 2015 Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SECURITY FOR THE 2015 BONDS - Covenant for Superior Court Foreclosure" for provisions which apply in the event foreclosure is required and which the District is required to follow in the event of delinquency in the payment of Special Taxes. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in payments to Bondowners pending prosecution of the foreclosure sale, if the Reserve Fund were depleted. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold, or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Law does not specify the obligations of the District with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the execution sale pursuant to the judgment in any such action if there is no other purchaser at such sale. Bankruptcy and Foreclosure Delays The payment of Special Taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax, as discussed in the section herein entitled "SECURITY FOR THE 2015 BONDS - Covenant for Superior Court Foreclosure," may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. In addition, the prosecution of a foreclosure could be delayed due to crowded local court calendars or legal delaying tactics. The various legal opinions to be delivered concurrently with the delivery of the 2015 Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the -39- enforceability of the various legal instruments by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Regardless of the priority of the Special Taxes securing the 2015 Bonds over non- governmental liens on a parcel, the exercise by the District of the foreclosure and sale remedy may be forestalled or delayed by bankruptcy, reorganization, insolvency, or other similar proceedings of the owner of, or anyone else who claims an interest in, a parcel. The federal bankruptcy laws provide for an automatic stay of foreclosure and sale proceedings, thereby delaying such proceedings perhaps for an extended period. Delay in exercise of remedies or the institution of bankruptcy proceedings may cause Special Tax collections to be insufficient to pay debt service on the 2015 Bonds. Further, should remedies be exercised under the bankruptcy law against a parcel, payment of Special Taxes may be subordinated to other claims in the bankruptcy proceedings. Thus, certain claims may have priority over a claim for unpaid Special Taxes, even though, in the absence of the bankruptcy proceedings, no such priority would exist. The Law provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem property taxes. Pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, enacted by Congress on April 14, 2005, the lien for special taxes established after the filing of a petition in bankruptcy will be treated thereafter as a lien for ad valorem taxes. However, the amount of any such lien on property with delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien. The amount of the delinquent Special Taxes in excess of the reduced lien would then be treated as an unsecured claim by the court. Any prohibition of or delay in the enforcement of the Special Tax lien would increase the likelihood of a delay or default in payment of the principal of and interest on the 2015 Bonds. Because a substantial portion of the taxable property in the District is initially owned by the Developer, the payment of Special Taxes and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax could be substantially curtailed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. No assurances can be given that any financial difficulties experienced by the Developer will not adversely affect the completion of the Development. Direct and Overlapping Indebtedness The ability of an owner of land within the District to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. In addition, other public agencies whose boundaries overlap those of the District could, without the consent of the District, and in certain cases without the consent of the owners of the land within the District, impose additional taxes or assessment liens on the property within the District in order to finance public improvements to be located inside of or outside of the District. The lien created on the property within the District through the levy of such additional taxes or assessments may be on a parity with the lien of the Special Taxes. Table 6 below sets forth the current direct and overlapping debt on the property in the District, as reported by the Special Tax Consultant: -40- Table 6 City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Direct and Overlapping Debt (as of September 1, 2015) I. District Value Appraised Valuation as of September 1, 2015(1) $178,215,000 II. Land Secured Bond Indebtedness(z) Total Unissued Land Secured Indebtedness TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESSM III. General Obligation Bond Indebtedness(7) Amount ADDlicable $27,045,000(3) $27,045,000 Amount ADDlicable 1,955,000(4) $1,955,000 $29,000,000 % Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding Applicable CITY OF TUSTIN CFD 2014-1 (TUSTIN Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 LEGACY/STANDARD PACIFIC) CFD $27,045,000(3) $27,045,000(3) 100.000% Total Land Secured Bonded Debt ELECTION Authorized but Unissued Direct and Overlapping 79,998,528 52,914,328 0.547621 % Indebtedness Type Authorized Unissued Applicable CITY OF TUSTIN CFD 2014-1 (TUSTIN ELECTION GO 95,000,000 90,495,000 LEGACY/STANDARD PACIFIC) CFD 29,000,000 1,955,000 100.000% Total Unissued Land Secured Indebtedness TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESSM III. General Obligation Bond Indebtedness(7) Amount ADDlicable $27,045,000(3) $27,045,000 Amount ADDlicable 1,955,000(4) $1,955,000 $29,000,000 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $31,467,340(6) TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS $41,182,206(6) IV. Ratios to Appraised Valuation(6) Outstanding Land Secured Bonded Debt 6.59:1 Total Outstanding Bonded Debt 5.66:1 (1) Based on the Updated Appraisal Report. See "SECURITY FOR THE 2015 BONDS — Land Value' and Appendix C — Initial Appraisal Report and Updated Appraisal Report. (2) The Special Tax Consultant advises that it is not aware of any other bonded indebtedness with associated tax levies on parcels in the District, as no ad valorem taxes were enrolled by the County for the parcels for Fiscal Year 2014-15 because the City owned all of the property in the District as of January 1, 2014 (the lien date for fiscal year 2014-15 ad valorem taxes), and so the property was exempt from such taxes. (3) The principal amount of the 2015 Bonds. Preliminary, subject to change. (4) The Indenture allows for issuance of Additional Bonds secured on a parity with the 2015 Bonds, but only for purposes of refunding outstanding Bonds (see "SECURITY FOR THE 2015 BONDS — Additional Bonds Only for Refunding). Preliminary, subject to change. (5) Includes $100,000,000 remaining authorization from a November 6, 2012 election. (6) Preliminary, subject to change. (7) Information pertaining to General Obligation Bond Indebtedness is as of June 1, 2015. Source: Albert A. Webb Associates. -41- % Amount Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding Applicable Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $110,420,000 0.003192% $ 3,525 TUSTIN UNIFIED SCHOOL DISTRICT 2002 ELECTION GO 79,998,528 52,914,328 0.547621 289,770 TUSTIN UNIFIED SCHOOL DISTRICT 2008 ELECTION GO 95,000,000 90,495,000 0.567979 513,993 TUSTIN UNIFIED SCHOOL DISTRICT 2012 ELECTION GO 35,000,000 32,535,000 0.374188 121,742 IRVINE RANCH WATER DISTRICT GO 38,600,000 35,387,500 9.871592 3,493,310 Total General Obligation Bonded Debt $4,422,340 Authorized but Unissued Direct and % Amount Overlapping Indebtedness Type Authorized Unissued Applicable Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $0 0.003192% $0 TUSTIN UNIFIED SCHOOL DISTRICT 2002 ELECTION GO 80,000,000 0 0.547621 0 TUSTIN UNIFIED SCHOOL DISTRICT 2008 ELECTION GO 95,000,000 0 0.567979 0 TUSTIN UNIFIED SCHOOL DISTRICT 2012 ELECTION GO 135,000,000 100,000,000(5) 0.374188 374,188 IRVINE RANCH WATER DISTRICT GO 113,417,500 74,817,500 9.871592 7,385,678 Total Unissued General Obligation Indebtedness $7,759,866 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $12,182,206 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $31,467,340(6) TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS $41,182,206(6) IV. Ratios to Appraised Valuation(6) Outstanding Land Secured Bonded Debt 6.59:1 Total Outstanding Bonded Debt 5.66:1 (1) Based on the Updated Appraisal Report. See "SECURITY FOR THE 2015 BONDS — Land Value' and Appendix C — Initial Appraisal Report and Updated Appraisal Report. (2) The Special Tax Consultant advises that it is not aware of any other bonded indebtedness with associated tax levies on parcels in the District, as no ad valorem taxes were enrolled by the County for the parcels for Fiscal Year 2014-15 because the City owned all of the property in the District as of January 1, 2014 (the lien date for fiscal year 2014-15 ad valorem taxes), and so the property was exempt from such taxes. (3) The principal amount of the 2015 Bonds. Preliminary, subject to change. (4) The Indenture allows for issuance of Additional Bonds secured on a parity with the 2015 Bonds, but only for purposes of refunding outstanding Bonds (see "SECURITY FOR THE 2015 BONDS — Additional Bonds Only for Refunding). Preliminary, subject to change. (5) Includes $100,000,000 remaining authorization from a November 6, 2012 election. (6) Preliminary, subject to change. (7) Information pertaining to General Obligation Bond Indebtedness is as of June 1, 2015. Source: Albert A. Webb Associates. -41- Hazardous Materials While government taxes, assessments and charges are a common claim against the value of a taxed 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 Special Tax is a claim with regard to a hazardous substance. In general, the owners and operators of a taxed parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1989, sometimes referred to as "CERCLA" or "Superfund Act," is a well known one of these laws, but California laws with regard to hazardous substances are also stringent and somewhat similar. Under many of these laws, the owner (or operator) is obligated to remediate hazardous substances on, under or about the property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance; however, an owner (or operator) who is not at fault may seek recovery of its damages from the actual wrongdoer. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, may be to reduce the marketability and value of the parcel, because the purchaser, upon becoming an owner, may become obligated to remedy the condition just as is the seller. The City has advised that due to the prior military use of the property, no remediation of the property was required. The Initial Appraisal Report makes reference to a Phase II Environmental Assessment Report for the property in the District, dated September 17, 2013. While that report did not detect any elevated concentrations of chlorinated pesticides or of lead or other California Title 22 metals, or any detection of selenium above its laboratory reporting limit, cobalt was detected in certain areas. The Developer has advised that the cobalt was detected in a single area, and that it was excavated and disposed of offsite. Geologic, Topographic and Climatic Conditions The market value of the land and improvements within the District can be adversely affected by factors which may affect infrastructure and other public improvements in the District, and the private improvements to the parcels in the District and the continued usability of such private improvements. These factors include, without limitation, geologic conditions (such as earthquakes), topographic conditions (such as earth movements) and climatic conditions (such as floods, droughts and fire hazard). The Appraiser notes in the Appraisal Report that the property in the District is not currently located in a designated Earthquake Study Zone as determined by the State Geologist. The Appraiser also notes in the Appraisal Report that the property in the District is located in a Zone "X" flood designated area according to the Federal Emergency Management Agency, indicating an area of minimal flooding. However, like other areas of Southern California, property in the District is subject to the risk of major earthquake damage. Known active faults that could cause significant ground shaking in the District include, but are not limited to, the San Andres Fault and the Newport Beach/ Inglewood Fault. It should be assumed, therefore, that an earthquake or one or more of such other conditions may occur and may cause damage to improvements on parcels in the District of varying seriousness, that such damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate usability or because other considerations may preclude such repair or replacement. Consequently, the occurrence of any of these conditions could result in a significant decrease in the market value of property in the District or in such property becoming unmarketable. -42- Property Interest of Government Agencies; Federal Deposit Insurance Corporation The District's ability to collect interest and penalties specified by State law and to foreclose the lien of a delinquent Special Tax payment may be limited in certain respects with regard to properties in which the Internal Revenue Service, the Drug Enforcement Agency, the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal agencies has or obtains an interest. General. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." The foregoing is generally interpreted to mean that, unless the United States Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including the Special Taxes), the applicable State and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the "Ninth Circuit"), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its proper tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. -43- The Policy Statement states that the FDIC generally will not pay non ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Law and a special tax formula which determines the special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes levied pursuant to the Law. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to a parcel in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed on at a judicial foreclosure sale would likely reduce the number of or eliminate the persons willing to purchase such a parcel at a foreclosure sale. Owners of the 2015 Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment of the 2015 Bonds. The District has not undertaken to determine whether the FDIC currently has, or is likely to acquire, any interest in any of the parcels, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the 2015 Bonds are outstanding. Disclosure to Future Property Owners or Lenders The District has recorded a Notice of Special Tax Lien in the Office of the County Recorder. While title insurance and search companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider the Special Tax obligation imposed on parcels in the District in the purchase of lots in the Development, or a portion thereof or the lending of money thereon. Under the Law, the Developer will also have an obligation to disclose the existence of the Special Taxes to homebuyers. Failure to disclose the existence of the Special Tax may affect the willingness and ability of future owners of the Development to pay the Special Tax when due. Non -Cash Payments of Special Taxes Under the Law, the District may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Tax applicable thereto by tendering a Bond. Such a practice would decrease the cash flow available to the District to make payments with respect to any 2015 Bonds then outstanding; and, unless the practice was limited by the District, the Special Tax paid in cash could be insufficient to pay the debt service due with respect to the 2015 Bonds. In order to provide some protection against the potential adverse impact on cash flows which might be caused by the tender of Bonds in payment of the Special Tax, the Indenture includes a covenant pursuant to which the District will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of Bonds unless the District shall have first obtained a report of an Independent Financial Consultant certifying that doing so would not result in the District having insufficient Net Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due. -44- Payment of the Special Tax is not a Personal Obligation of the Owners An owner of a property is not personally obligated to pay the Special Tax. The Special Tax is an obligation which is secured only by a lien against the property on which it is levied. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the payment of the Special Tax, the District has no recourse against the owner. See "SPECIAL RISK FACTORS - Direct and Overlapping Indebtedness" for a table showing overlapping indebtedness payable from taxes to be levied on parcels in the District. Limitations on Remedies Remedies available to the owners of the 2015 Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2015 Bonds or to preserve the tax-exempt status of the 2015 Bonds. Bond Counsel has limited its opinion as to the enforceability of the 2015 Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer, or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the 2015 Bonds. Loss of Tax Exemption As discussed under the caption "CONCLUDING INFORMATION - Tax Matters" herein, interest on the 2015 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2015 Bonds were issued, as a result of future acts or omissions of the City or the District in violation of its covenants in the Indenture. Should such an event of taxability occur, the 2015 Bonds are not subject to a special redemption and will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Indenture. In addition, legislation affecting the tax exemption of interest on the 2015 Bonds may be considered by the United States Congress and the State legislature. Federal and state court proceedings and the outcome of such proceedings could also affect the tax exemption of interest on the 2015 Bonds. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of delivery of the 2015 Bonds will not have an adverse effect on the tax exemption of interest on the 2015 Bonds or the market value of the 2015 Bonds. Proceedings to Reduce or Terminate the Special Tax An initiative measure commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." The provisions of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed by local agencies requesting the courts to interpret various aspects of the Initiative. Among other things, Section 3 of Article XIII states that.".. the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and -45- voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2015 Bonds. It may be possible, however, for voters or the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the 2015 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2015 Bonds. The District has covenanted in the Indenture that it will not initiate proceedings under the Law to modify the Special Tax Formula if such modification would adversely affect the Net Special Tax Revenues pledged as the security for the Bonds. The Indenture further provides that, if an initiative or referendum measure is proposed that purports to modify the Special Tax Formula in a manner that would adversely affect the security for the Bonds, the District shall, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Special Tax Formula in a manner that would adversely affect the security for the Bonds. No assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. Court Action Involving Landowner—Voted Special Tax District On August 1, 2014, in a decision in City of San Diego. v. Melvin Shapiro, an Appellate Court invalidated an election held by the City of San Diego (the term "City" as used in this paragraph and the next paragraph means the City of San Diego) to authorize the levying of special taxes on hotels City-wide pursuant to a City charter ordinance creating a convention center facilities district (the "CCFD") much like a community facilities district established under the provisions of the Act. While the CCFD is comprised of all of the real property in the entire City, the special tax was to be levied only on hotel properties located within the CCFD. At the election to authorize such special tax, the electorate was defined to consist solely of (a) the owners of real property in the City on which a hotel is located, and (b) the lessees of real property owned by a governmental entity on which a hotel is located. Such approach to determining who would constitute the qualified electors of the CCFD was based on Section 53326(c) of the Law, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that such landowners and lessees are neither "qualified electors" of the City for purposes of Articles XIII A, Section 4 of the California Constitution, nor a proper "electorate" under Article XIIIC, Section 2(d) of the California Constitution. The Court specifically noted that the decision did not require the Court to consider the distinct question of whether landowner voting to impose special taxes under Section 53326(b) of the Law (which was the nature of the voter approval through which the District was formed, as the City of Tustin was the sole owner of the land in the District at the time of the District formation) violates the California Constitution in districts that lack sufficient registered voters -46- to conduct an election among registered voters. In the case of the CCFD, at the time of the election all of the registered voters in the City were within the CCFD. With respect to the District, there were no registered voters within the District at the time of the election to authorize the Special Tax and issuance of bonds by the District. Thus, by its terms, the Court's holding does not apply to the formation and Special Tax election in the District. Moreover, Section 53341 of the Law provides that any "action or proceeding to attack, review, set aside, void or annul the levy of a special tax ... shall be commenced within 30 days after the special tax is approved by the voters." Similarly, Section 53359 of the Law requires that any action to determine the validity of bonds issued pursuant to the Law be brought within 30 days of the voters approving the issuance of such bonds. Also, Section 860 et seq. of the California Code of Civil Procedure effectively provides that any legal challenge to the 2015 Bonds and the Indenture be filed within 60 days of the date the Indenture and the 2015 Bonds were approved by the City Council of the City of Tustin. The City of Tustin, as the sole qualified elector in the District at the time, approved the Special Tax and the issuance of bonds for the District on June 17, 2014; and the 2015 Bonds were authorized to be issued and the Indenture and the Bonds were approved by a resolution adopted by the City Council of the City of Tustin, as the legislative body of the District, on September 16, 2014. The District is not aware of any action being filed challenging the formation of the District, the authority to levy the Special Tax on property in the District, or the validity or enforceability of the Indenture or the 2015 Bonds. See "CONCLUDING INFORMATION - Absence of Litigation - The District." Given the foregoing, the District believes that no successful challenge to the levy of the Special Tax in the District or the issuance or validity of the 2015 Bonds may now be brought. Secondary Markets and Prices The Underwriter will not be obligated to repurchase any of the 2015 Bonds, and no representation is made concerning the existence of any secondary market for the 2015 Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the 2015 Bonds, and no assurance can be given that the initial offering prices for the 2015 Bonds will continue for any period of time. Although the District and the Developer have committed to provide certain ongoing financial and operating information (see "CONCLUDING INFORMATION - Continuing Disclosure"), there can be no assurance that such information will be available to 2015 Bondowners on a timely basis. The failure to provide the required information does not give rise to monetary damages but only an action for specific performance. Occasionally, because of general market conditions, lack of current information, or the absence of a credit rating for bonds, or because of adverse history or economic prospects associated with a particular bond issue, secondary marketing practices in connection with a bond issue are suspended or terminated. Also, prices of bond issues for which a market may be made will depend upon current circumstances, and could be substantially different from the original purchase price. IRS Audit of Tax -Exempt Issues The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt issues, including both random and targeted audits. It is possible that the 2015 Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2015 Bonds might be affected as a result of such an audit of the 2015 Bonds (or by an audit of similar obligations). See also "CONCLUDING INFORMATION - Tax Matters." -47- No Acceleration Provision The 2015 Bonds do not contain a provision allowing for the acceleration of the unpaid principal of the 2015 Bonds in the event of a payment default or other default under the terms of the 2015 Bonds or the Indenture. CONCLUDING INFORMATION Continuing Disclosure The District and the Developer each have agreed for the benefit of the Owners of the 2015 Bonds, in separate Continuing Disclosure Agreements, to provide annually certain financial information and operating data, and to provide notices of the occurrence of certain enumerated events. In addition, the Developer has agreed to provide mid -year reports with certain limited information. See Appendix H - Forms of Continuing Disclosure Certificates. The covenants in the Continuing Disclosure Agreement of the District have been made by the District in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5) (the "Rule"). A failure by the District or the Developer to comply with its respective confirming disclosure obligations will not constitute a default under the Indenture. However, the Continuing Disclosure Agreements provide that, in the event of a failure of the District or the Developer, as applicable, to comply with any provision of their respective Continuing Disclosure Agreement, any 2015 Bond owner, any Beneficial Owner, the Trustee or the Underwriter may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause it to comply with its obligations under its respective Continuing Disclosure Agreement. The sole remedy under each Continuing Disclosure Agreement in the event of any failure of the District to comply with the respective Continuing Disclosure Agreement is an action to compel performance. The Developer has agreed in its Continuing Disclosure Agreement that, if a portion of the property owned by the Developer, or any Affiliate of the Developer, in the District is conveyed to a Person (as defined therein) that, upon such conveyance, will be a Major Developer (as described below), the obligations of the Developer thereunder with respect to the property owned by such Major Developer and its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major Developer, or an Affiliate thereof, intends or is obligated (contractually or otherwise) to make or cause to be made, may be assumed by such Major Developer or by an Affiliate thereof. The Developer has entered into a contract to sell 77 of the lots in the District to Brookfield Homes, which is not currently expected to, but may, result in an assumption of the obligations of the Developer under its Continuing Disclosure Agreement with respect to such 77 lots (the portion of the annual Special Tax obligation for such lots has been projected by the Special Tax Consultant to be slightly less than twenty percent (20%) of the overall Special Tax obligation of the parcels in the District for fiscal year 2015-16, and Brookfield Homes is acquiring the 77 lots in phases). However, no assurance can be given that such sale of lots or any otherwise -required assumption will occur. The Developer's obligation to provide continuing annual, mid -year and significant event disclosure will terminate if and when the Developer is no longer a "Major Developer" as defined in the Continuing Disclosure Agreement to which it is a party. Major Developer includes the Developer and any Affiliate if they own property in the District that has not reached the Planned Development Stage (as such capitalized terms are defined in the Developer's Continuing Disclosure Agreement) that is subject to twenty percent (20%) or more M. of the Special Tax levy for the then current fiscal year. The term "Planned Development Stage" is defined to mean, with respect to any portion of the property in the District, the stage of development to which the Developer intends to develop such property, as described in this Official Statement, which is the stage at which such portion of the property is ready to be presented to the marketplace as a finished residential unit. The District has not had any prior continuing disclosure obligations under the Rule. The City has advised that during the past five years, the City and the former Tustin Community Redevelopment Agency (the "Former Agency") have on occasion failed to comply in certain material respects with previous continuing disclosure undertakings pursuant to Rule 15c2 - 12(b)(5) promulgated under the Securities and Exchange Act of 1934, as amended, including, but not limited to, the failure to timely file annual reports and audited financial statements for some of the City's and the Former Agency's debt obligations. However, the City has since brought current all past delayed filings and is currently in compliance with its and the Former Agency's continuing disclosure undertakings. In addition, on December 16, 2014, the City Council of the City approved disclosure procedures for public debt issuances and related disclosure obligations applicable to the City and other entities created by the City Council, including the District. The Developer has advised the District that it may have entered into numerous continuing disclosure obligations for other bond issues, but over the past five years the Developer experienced various division consolidations and office closures. Additionally, various employees previously responsible for certain continuing disclosure compliance are no longer with the company and files from past bond issuance are not in a centralized location. Consequently, the Developer cannot accurately state whether or not it and all of its divisions have complied in all material respects with their prior continuing disclosure obligations undertakings. However, the Developer has advised the District that, to the actual knowledge of its Vice President of Finance for its Southern California Coastal Division (which is the division of the Developer that will be responsible for construction of the Development and complying with the obligations of the Developer under its Continuing Disclosure Agreement), such Division has not failed in the previous five years to comply in all material respects with any continuing disclosure obligations executed in connection with its developments in the area of such Division; except that (a) some reports may have been filed past their due dates and (b) pursuant to the terms of a continuing disclosure agreement executed by the Developer in connection with a 2006 issuance of special tax bonds by Community Facilities District No. 14 (Del Sur) of the Poway Unified School District, the Developer failed to file a Notice to Repositories of Termination of Reporting Obligations by the required report date; however, the Developer has subsequently made such filing. Absence of Litigation The District. At the time of delivery of and payment for the 2015 Bonds, the District will deliver a certificate to the effect that there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, public board or body, pending with respect to which the District has been served with process or known by the official of the District executing the Bond Purchase Agreement with the Underwriter for the 2015 Bonds to be threatened, which in any way questions the powers of the City Council or the District with respect to the District entering into the Indenture or the Continuing Disclosure Agreement, or the issuance, sale and delivery of the 2015 Bonds, or the validity of any proceeding taken by the City Council in connection with the issuance of the 2015 Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions on the part of the District contemplated by any of such documents, or which, in any way, could adversely affect the validity or enforceability of the resolutions adopted by the City Council with respect to the District and the ordinance levying Special Taxes in the District, the Indenture, the 2015 Bonds or the Bond Purchase Agreement or which in any way questions the exclusion from gross income -49- of the recipients thereof of the interest on the 2015 Bonds for federal income tax purposes or in any other way questions the status of the interest on the 2015 Bonds under State tax law or regulations. The Developer. At the time of delivery and payment for the 2015 Bonds, the Developer will deliver a certificate to the effect that to the Actual Knowledge of the Developer (as defined in such certificate), no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against the Developer (with proper service of process or proper notice to the Developer having been accomplished) or to the Actual Knowledge of the Developer, overtly threatened in writing against the Developer (a) which, if successful, is reasonably likely to materially and adversely affect the Developer's ability to complete the development and sale of the property owned by the Developer in the District (the "Property") as described herein, or to pay its Special Taxes, or ordinary ad valorem property tax obligations related to the Property when due,; or (b) which challenges or questions the validity or enforceability of the 2015 Bonds or the Continuing Disclosure Agreement to be executed by the Developer in connection with the issuance of the 2015 Bonds. Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2015 Bonds is excluded from gross income for federal income tax purposes, and not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2015 Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the 2015 Bonds may be included as an adjustment in calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. In the opinion of Bond Counsel, the difference between the issue price of a 2015 Bond (the first price at which a substantial amount of the 2015 Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such 2015 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable 2015 Bond. The amount of original issue discount that accrues to the Beneficial Owner of the 2015 Bonds is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest on the 2015 Bonds (including any original issue discount) is based upon certain representations of fact and certifications made by the District, the City, the Underwriter and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") that must be satisfied subsequent to the issuance of the 2015 Bonds to assure that interest on the 2015 Bonds (including any original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the 2015 Bonds (including any original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2015 Bonds. The District will covenant to comply with all such requirements. -50- The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in the applicable 2015 Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Beneficial Owner's basis in the applicable 2015 Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial Owner realizing a taxable gain when a 2015 Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2015 Bond to the Beneficial Owner. Purchasers of the 2015 Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2015 Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2015 Bonds might be affected as a result of such an audit of the 2015 Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the 2015 Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the 2015 Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE 2015 BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE INTEREST ON THE 2015 BONDS OR THE MARKET VALUE OF THE 2015 BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE 2015 BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE EXECUTION AND DELIVERY OF THE 2015 BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE 2015 BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE 2015 BONDS. Bond Counsel's opinion may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the 2015 Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Bond Counsel will render an opinion that interest on the 2015 Bonds (including any original issue discount) is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the accrual or receipt of interest on the 2015 Bonds (including any original issue discount) may otherwise affect the tax liability of the recipient. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the 2015 Bonds. -51- A copy of the proposed form of opinion of Bond Counsel for the 2015 Bonds is included in Appendix B. Legal Matters Incident to the Issuance of the 2015 Bonds Certain legal matters incident to the authorization and issuance of the 2015 Bonds are subject to the approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, acting in its capacity as Bond Counsel. Certain legal matters will be passed upon for the District by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa, California, acting as the City Attorney, and by Quint & Thimmig LLP, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California, Underwriter's Counsel. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel and Underwriter's Counsel is contingent upon the sale and issuance of the 2015 Bonds. The various legal opinions to be delivered concurrently with the delivery of the 2015 Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Municipal Advisor The District has retained Fieldman Rolapp & Associates, Irvine, California, as municipal advisor (the "Municipal Advisor") in connection with the preparation of this Official Statement and with respect to the issuance of the 2015 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. The Municipal Advisor is an independent registered municipal financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. No Rating The 2015 Bonds are not rated. No application has been made by the District to any rating agency for the assignment of a municipal bond credit rating for the 2015 Bonds. Underwriting The 2015 Bonds are being purchased by the Underwriter for a price of $ which is equal to the initial principal amount of the 2015 Bonds, plus a net original issue premium of $ and less an Underwriter's discount of $ . The Underwriter has committed to purchase all of the 2015 Bonds if any of the 2015 Bonds are purchased. The 2015 Bonds are being offered for sale to the public at the prices set forth on the inside cover page of this Official Statement, which prices may be changed by the Underwriter from time to time without notice. The 2015 Bonds may be offered and sold to dealers, including the Underwriter and dealers acquiring 2015 Bonds for their own account or an account managed by them, at prices lower than the public offering price. The initial public offering prices stated on the inside cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the 2015 Bonds to certain dealers, dealer banks, banks acting as agents and others at prices lower than said public offering prices. -52- Miscellaneous Any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, are intended as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract or agreement between the District or the Underwriter and the purchasers or the owners of any of the 2015 Bonds. The execution and delivery of this Official Statement by the District has been duly authorized by the City Council, acting as the legislative body of the District. CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/ STANDARD PACIFIC) LIM -53- City Manager, City of Tustin APPENDIX A SUMMARY OF THE INDENTURE [to come] A-1 APPENDIX B [Closing Date] City Council of the City of Tustin Tustin, California Re: $ City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) Special Tax Bonds, Series 2015A Ladies and Gentlemen: We have examined the Constitution and laws of the State of California, a certified record of the proceedings of City of Tustin (the "City") taken in connection with the formation of the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) (the "District") and the authorization and issuance of the District's Special Tax Bonds, Series 2015A in the aggregate principal amount of $ (the "Bonds") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the initial purchaser of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California), Resolution No. 14-60 adopted by the City Council of the City, acting in its capacity as the legislative body of the District, on September 16, 2014 (the "Resolution of Issuance"), and the Indenture of Trust by and between the District and The Bank of New York Mellon Trust Company, N.A., as Trustee (the "Trustee"), dated as of November 1, 2015 (the "Indenture"). All capitalized terms not defined herein shall have the meanings set forth in the Indenture. The Bonds are dated as of the date of hereof and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on each March 1 and September 1, commencing on March 1, 2016, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except M. for the Special Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. (2) The Indenture has been duly executed and delivered by the City Council on behalf of the District. The Indenture creates a valid pledge of, and the Bonds are secured by, the Net Special Tax Revenues and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification, penalty, contribution, choice of law, choice of forum or waiver provisions contained therein. (3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. (5) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues to the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations (as described in paragraph (3) above), and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code"); such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. The opinion expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue M discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5) and (6) above, we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material. Respectfully submitted, APPENDIX C INITIAL APPRAISAL REPORT AND UPDATED APPRAISAL REPORT C-1 APPENDIX D MARKET ABSORPTION STUDY D-1 APPENDIX E RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR THE CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/STANDARD PACIFIC) A Special Tax (all capitalized terms used herein are defined in Section A., "Definitions", below) shall be levied on all Assessor's Parcels of Taxable Property in the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) ("CFD No. 2014-1") and collected each Fiscal Year commencing in Fiscal Year 2014-2015, in an amount determined through the application of this Rate and Method of Apportionment as described below. All of the real property in CFD No. 2014-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The capitalized terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on the Assessor's Parcel Map, the land area as shown on the applicable Final Subdivision, parcel map, condominium plan, or other recorded County parcel map. The square footage of an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560. "Act" means the Mello -Roos Communities Facilities Act of 1982, as amended, being Chapter 2.5, Division 2 of Title 5 of the California Government Code. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2014-1: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City, the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs of the City, CFD No. 2014-1 or any designee thereof of complying with any arbitrage rebate requirements applicable to the Bonds; the costs of the City, CFD No. 2014-1 or any designee thereof of complying with City, CFD No. 2014-1 or obligated persons disclosure requirements of applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2014-1 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from any escrow account established for CFD No. 2014-1; and the City's annual administration fees and third party expenses in anyway related to CFD No. 2014-1. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 2014-1 for any other administrative purposes of CFD No. 2014-1, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure as a result of delinquent Special Taxes. "Annual Special Tax A" means the Special Tax A actually levied in any Fiscal Year on any Assessor's Parcel. E-1 "Annual Special Tax B" means the Special Tax B actually levied in any Fiscal Year on any Assessor's Parcel. "Approved Property" means all Assessor's Parcels of Taxable Property: (i) that are included in a Final Subdivision that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax A is being levied, and (ii) that have not been issued a building permit on or before May 1st preceding the Fiscal Year in which the Special Tax A is being levied. "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor Parcel Number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel Number. "Assessor's Parcel Number" means that number assigned to an Assessor's Parcel by the County for purposes of identification. "Assigned Annual Special Tax A" means the Special Tax A for each Land Use Category of Developed Property, as determined in accordance with Section C.1.a., below. "Authorized Facilities" means those facilities authorized to be financed by CFD No. 2014-1 pursuant to the Act and the proceedings to form CFD No. 2014-1. "Authorized Services" means those services authorized to be financed by CFD No. 2014-1 pursuant to the Act and the proceedings to form CFD No. 2014-1. "Backup Special Tax A" means the Special Tax amount set forth in Section C.1.b., below. "Bonds" means any bonds or other debt (as defined in Section 53317 (d) of the Act), whether in one or more series, issued by the City for CFD No. 2014-1 under the Act. "Building Permit" means the first legal document issued by the City giving official permission for new construction. For purposes of this definition, "Building Permit" may or may not include any subsequent building permits issued or changed after the first issuance, as determined by the CFD Administrator. "Calendar Year" means the period commencing January 1 of any year and ending the following December 31. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax A Requirement for Facilities and the Special Tax B Requirement for Services, and otherwise providing for the levy and collection of the Special Taxes. "CFD No. 2014-1" means City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific). "City" means the City of Tustin, California. "Consumer Price Index" means, for each Fiscal Year, the Consumer Price Index published by the U.S. Bureau of Labor Statistics for "All Urban Consumers: in the Los Angeles — Anaheim — Riverside Area, measured as of the month of December in the calendar year which ends in the previous Fiscal Year." In the event this index ceases to be published, the Consumer Price Index shall be another index as determined by the CFD E-2 Administrator that is reasonably comparable to the Consumer Price Index for the City of Los Angeles. "Council" means the City Council of the City, acting as the legislative body of CFD No. 2014-1. "County" means the County of Orange, California. "Developed Property" means for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, that are included in a Final Subdivision that was recorded prior to January 1st preceding the Fiscal Year in which the Special Tax is being levied and for which a Building Permit for new construction has been issued on or prior to May 1st preceding the Fiscal Year in which the Special Tax is being levied. "Dwelling Unit" or "DU" means a residential unit that is used or intended to be used as a domicile by one or more persons, as determined by the CFD Administrator. "Exempt Property" means all Assessor's Parcels designated as being exempt from Special Tax A and Special Tax B as provided for in Section E. "Final Subdivision" means a subdivision of property by recordation of a final subdivision map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that creates individual lots for which Building Permits may be issued without further subdivision. "Fiscal Year" means the period commencing July 1 of any year and ending the following June 30. "Indenture" means the indenture, Indenture, resolution or other instrument, pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time. "Land Use Class" means any of the classes listed in Table 1 below. "Maximum Special Tax" means the Maximum Special Tax A and / or Maximum Special Tax B, as applicable. "Maximum Special Tax A" means the Maximum Special Tax A determined in accordance with Section C that can be levied in any Fiscal Year on any Assessor's Parcel within CFD No. 2014-1. "Maximum Special Tax B" means the Maximum Special Tax B determined in accordance with Section C that can be levied in any Fiscal Year on any Assessor's Parcel within CFD No. 2014-1. "Multi -family Residential Property" means all Parcels of Developed Property that consist of a building or buildings comprised of attached Dwelling Units available for rental by the general public, not for sale to an end user, and under common management, as determined by the CFD Administrator. "Non -Residential Property" means all Assessor's Parcels of Developed Property for which a Building Permit permitting the construction of one or more non-residential units or facilities has been issued. E-3 "Outstanding Bonds" means all Bonds which are outstanding under the provisions of an Indenture. "Partial Prepayment Amount" means the amount required to prepay a portion of the Special Tax A obligation for an Assessor's Parcel, as described in Section H. "Prepayment Amount" means the amount required to prepay the Special Tax A obligation in full for an Assessor's Parcel, as described in Section H. "Property Owner Association Property" means, for each Fiscal Year, any property within the boundaries of CFD No. 2014-1 that was owned by a property owner association, including any master or sub -association, as of January 1 of the prior Fiscal Year. "Proportionately" means for Developed Property, that the ratio of the actual Special Tax A levy to the Assigned Special Tax A is equal for all Assessor's Parcels of Developed Property and that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of Developed Property. For Approved Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor's Parcels of Approved Property and that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of Approved Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax A levy per Acre to the Maximum Special Tax A per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section C below. "Public Property" means property within the boundaries of CFD No. 2014-1 owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public right-of-way has been granted, to the federal government, the State, the County, the City, or any local government or other public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. "Residential Floor Area" means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the Building Permit(s) issued for such Assessor's Parcel. "Residential Property" means all Assessor's Parcels of Developed Property for which a Building Permit permitting the construction thereon of one or more residential dwelling units has been. "Single Family Residential Property" means all Assessor's Parcels of Residential Property for which building permits have been issued for residential units, other than Multi- family Property. "Special Tax" means the Special Tax A and / or Special Tax B, as applicable. "Special Tax A" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property within CFD No. 2014-1 to fund the Special Tax A Requirement for Facilities. "Special Tax B" means the special tax authorized to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property within CFD No. 2014-1 to fund the Special Tax B Requirement for Services. E-4 "Special Tax A Requirement for Facilities" means the amount required in any Fiscal Year for CFD No. 2014-1 to: (i) pay the debt service on all Outstanding Bonds due in the Calendar Year commencing in such Fiscal Year, (ii) pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments with respect to the Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay actual and estimated Administrative Expenses related to the levy and collection of Special Tax A, the administration of the Bonds and the obligations of the City and CFD No. 2014-1 under the Indenture; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds, to the extent not included in a computation of the Special Tax A Requirement for Facilities in a previous Fiscal Year; (v) pay for reasonable anticipated Special Tax A delinquencies for the current Fiscal Year based on the delinquency rate for the Special Tax A levy in the previous Fiscal Year; (vi) pay directly for acquisition or construction of Authorized Facilities; less (vii) a credit for funds available to reduce the annual Special Tax A levy, as determined by the CFD Administrator in accordance with any Indenture. "Special Tax B Requirement for Services" means that amount required in any Fiscal Year for CFD No. 2014-1 to (i) pay directly for costs of the Authorized Services due in the calendar year commencing in such Fiscal Year; (ii) pay actual and estimated Administrative Expenses related to the levy and collection of the Special Tax B and the provision of the Authorized Services; less (iii) a credit for funds available to reduce the annual Special Tax B levy, as determined by the CFD Administrator. "State" means the State of California. "Taxable Property" means all Assessor's Parcels within the boundaries of CFD No. 2014-1, which are not exempt from the Special Tax pursuant to law or Section E below. "Taxable Property Owner Association Property" means, for each Fiscal Year, all Assessor's Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to Section E below. "Taxable Public Property" means, for each Fiscal Year, all Assessor's Parcels of Public Property that are not exempt from the Special Tax pursuant to Section E below. "Trustee" means the trustee or Trustee under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Public Property or Taxable Property Owner Association Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property shall be classified as Developed Property, Approved Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C, D, and E below. Parcels of Developed Property shall further be classified as Residential Property or Non- Residential Property. Parcels of Residential Property shall further be classified as Single Family Property or Multi -family Residential Property. Parcels of Single Family Property shall be further categorized into Land Use Classes based on the Residential Floor Area for each such Parcel. E-5 C. MAXIMUM SPECIAL TAX 1. Developed Property The Maximum Special Tax A for each Parcel of Single Family Residential Property shall be the greater of: (i) the applicable Assigned Special Tax described in Table 1 or (ii) the amount derived by application of the Backup Special Tax A. The Maximum Special Tax B for each Parcel of Single Family Residential Property shall be the applicable Maximum Special Tax B described in Table 1. The Maximum Special Tax A for each Parcel of Non -Residential Property, or Multi- family Residential Property shall be the Assigned Special Tax A described in Table 1. The Maximum Special Tax B for each Parcel of Non -Residential Property or Multi- family Residential Property shall be the Maximum Special Tax B described in Table 1. below: a. Assigned Special Tax The Assigned Special Tax for each Parcel of Developed Property is shown in Table 1 TABLE 1 Maximum Special Tax for Developed Property in Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) Fiscal Year 2014-2015 Land Assigned Maximum Use Residential Special Special Class Description DU/Acre Floor Area Tax A Tax B 1 Single Family Residential Property DU > 3,530 s.f. $4,997 $1,522 2 Single Family Residential Property DU 3,210-3,529 s.f. $4,675 $1,425 3 Single Family Residential Property DU 2,890-3,209 s.f. $4,308 $1,314 4 Single Family Residential Property DU 2,570-2,889 s.f. $3,822 $1,164 5 Single Family Residential Property DU 2,250 —2,569 s.f. $3,346 $1,020 6 Single Family Residential Property DU <=2,250 s.f. $2,819 $860 7 Multi -family Residential Property Acre N/A $47,492 $14,475 8 Non -Residential Property Acre N/A $47,492 $14,475 b. Backup Special Tax A When a Final Subdivision is recorded, the Backup Special Tax A for a Parcel classified or to be classified as Single Family Residential Property within such Final Subdivision shall be determined by multiplying the Undeveloped Property Maximum Special Tax A rate per acre, as defined in Section C3 below, by the total Acreage of Taxable Property within such Final Subdivision, excluding the Acreage associated with Multi -Family Residential Property, Non -Residential Property, Public Property and/or Property Owner's Association Property that is not Exempt Property pursuant to Section E. and dividing such amount by the number of Parcels within such Final Subdivision classified as either (i) Single Family Residential Property or (ii) Approved Property for which a Building Permit is expected to be issued for Single Family Residential Property (i.e., the number of residential lots). Notwithstanding the forgoing, if Parcels classified or to be classified as Single Family Residential Property are subsequently changed or modified by recordation of a lot line adjustment or similar instrument, then the Backup Special Tax shall be recalculated for the [9 area that has been changed or modified using the methodology described in the preceding paragraph. The Backup Special Tax A shall not apply to Multi -Family Residential Property, Non - Residential Property, Public Property, Property Owner's Association Property, or Undeveloped Property. c Increase in the Maximum Special Tax On each July 1, commencing on July 1, 2015, the Maximum Special Tax A, calculated pursuant to Section C.1 above shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. On each July 1, commencing on July 1, 2015, the Maximum Special Tax B shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. d. Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel shall be the sum of the Maximum Special Taxes for all Land Use Classes located on that Assessor's Parcel. 2. Approved Property a. Single Family Residential Propertg The Fiscal Year 2014-2015 Maximum Special Tax A for each Parcel of Approved Property expected to be classified as Single Family Residential Property shall be the Backup Special Tax computed pursuant to Section C.1.b above. The Fiscal Year 2014-2015 Maximum Special Tax B for each Parcel of Approved Property expected to be classified as Single Family Residential Property shall be $14,475 per acre. b. Multi -family Residential Property and Non -Residential Property The Fiscal Year 2014-2015 Maximum Special Tax A for each Parcel of Approved Property expected to be classified as Multi -Family Residential Property and Non -Residential Property shall be $47,492 per acre. The Fiscal Year 2014-2015 Maximum Special Tax B for each Parcel of Approved Property expected to be classified as Multi -Family Residential Property and Non -Residential Property shall be $14,475 per acre. c. Increase in the Maximum Special Tax A and Maximum Special Tax B On each July 1, commencing on July 1, 2015, the Maximum Special Tax A for Approved Property shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. On each July 1, commencing on July 1, 2015, the Maximum Special Tax B for Approved Property shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. E-7 3. Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property a. Maximum Special Tax A The Fiscal Year 2014-2015 Maximum Special Tax A for Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property shall be $47,492 per Acre. b. Maximum Special Tax B The Fiscal Year 2014-2015 Maximum Special Tax B for Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property shall be $14,475 per Acre. c. Increase in the Maximum Special Tax A and Maximum Special Tax B On each July 1, commencing on July 1, 2015, the Maximum Special Tax A for Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property, shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. On each July 1, commencing on July 1, 2015, the Maximum Special Tax B for Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property, shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX 1. SpecialTaxA Commencing Fiscal Year 2014-2015 and for each subsequent Fiscal Year, the Council or its designee shall determine the Special Tax A Requirement for Facilities and shall levy the Special Tax A until the total Special Tax A levy equals the Special Tax A Requirement for Facilities. The Special Tax A shall be levied each Fiscal Year as follows: First: The Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax A; Second: If additional moneys are needed to satisfy the Special Tax A Requirement for Facilities after the first step has been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the Maximum Special Tax A for Approved Property; Third: If additional moneys are needed to satisfy the Special Tax A Requirement for Facilities after the first step has been completed, the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Maximum Special Tax A for Undeveloped Property; Fourth: If additional moneys are needed to satisfy the Special Tax A Requirement for Facilities after the first three steps have been completed, the Special Tax A to be levied on each Parcel of Developed Property for which the Maximum Special Tax A is derived by the application of the Backup Special Tax A shall be increased in equal percentages from the Assigned Special Tax A up to the Maximum Special Tax A for such Parcel; Fifth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, then the Annual Special Tax A shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property at up to the Maximum Special Tax A for Taxable Property Owner Association Property; Sixth : If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first five steps have been completed, then Special Tax A shall be levied Proportionately on each Assessor's Parcel of Taxable Public Property at up to the Maximum Special Tax A for Taxable Public Property. 2. Special Tax B Commencing with Fiscal Year 2014-2015 and for each following Fiscal Year, the Council or its designee shall levy the Special Tax B until the total Special Tax B levy equals the Special Tax B Requirement for Services. The Special Tax B shall be levied each Fiscal Year as follows: First: The Special Tax B shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Maximum Special Tax B; Second: If additional monies are needed to satisfy the Special Tax B Requirement for Services after the first step has been completed, the Special Tax B shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the Maximum Special Tax B for Approved Property. Third: If additional monies are needed to satisfy the Special Tax B Requirement for Services after the first two steps have been completed, the Special Tax B shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax B for Undeveloped Property. E. EXEMPTIONS 1. Special Tax A No Special Tax A shall be levied on up to 46.57 Acres of Public Property and/or, Property Owner Association Property in the chronological order in which property becomes Public Property and Property Owner Association Property. However, should an Assessor's Parcel no longer be classified as Public Property or Property Owner Association Property, its tax-exempt status will be revoked as determined by the CFD Administrator. Property Owner Association Property or Public Property that is not exempt from the Special Tax A under this section shall be subject to the levy of the Special Tax A and shall be taxed Proportionately as part of the fifth and sixth steps in Section 0.1 as determined by the CFD Administrator. 2. Special Tax B No Special Tax B shall be levied on Public Property or Property Owner Association Property. F. APPEALS AND INTERPRETATIONS Any landowner or resident who feels that the amount of the Special Tax levied on such landowner's or resident's Assessor's Parcel is in error may submit a written appeal to CFD No. 2014-1. The CFD Administrator shall review the appeal and if the CFD Administrator E-9 concurs and the Special Tax is to be modified in favor of the Property owner or resident of the Assessor's Parcel, no cash refund shall be made for prior years' Special Tax levies, but an adjustment shall be made to the next Special Tax levy(ies). The Council may interpret this Rate and Method of Apportionment of Special Tax for purposes of clarifying any ambiguity and make determinations relative to the amount of Administrative Expenses. G. MANNER OF COLLECTION Special Tax A and Special Tax B will be collected in the same manner as ordinary ad valorem property taxes or in such other manner as the Council shall determine, including direct billing of the affected property owners. H. PREPAYMENT OF SPECIAL TAX A The following additional definitions apply to this Section H: "Build -out" means, for CFD No. 2014-1, that all expected Building Permits for the Assessors Parcels in CFD No. 2014-1 have been issued. "CFD Public Facilities" means either $26,000,000 in 2014 dollars, which shall increase by the Construction Inflation Index on July 1, 2015, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the Authorized Facilities, or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more Bonds (except refunding bonds) to be supported by the Special Tax A levy under this Rate and Method of Apportionment as described in Section 0.1 above. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct Authorized Facilities. "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full Only an Assessor's Parcel of Developed Property, or Taxable Property Owner Association Property, Taxable Public Property or Approved Property for which a building permit has been issued, may prepay Special Tax A. The obligation of the Assessor's Parcel to pay the Special Tax A may be permanently satisfied as described herein, provided that a E-10 prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax A obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel.The CFD Administrator may charge the owner prepaying Special Tax A a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of CFD No. 2014-1 Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax B may not be prepaid. The Special Tax A Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plusRedemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total: equals Special Tax A Prepayment Amount As of the proposed date of prepayment, the Special Tax A Prepayment Amount shall be calculated as follows: Paragraph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Property, Taxable Property Owner Association Property, or Taxable Public Property for which a Building Permit has been issued, compute the Maximum Special Tax A for the current Fiscal Year applicable for the Assessor's Parcel to be prepaid. For Assessor's Parcels of Approved Property for which a building permit has been issued, compute the Maximum Special Tax A for the current Fiscal Year applicable for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. 3. Divide the Maximum Special Tax A computed pursuant to paragraph 2 by the total estimated Maximum Special Tax A for the entire CFD No. 2014-1 based on the Developed Property Special Tax A which could be levied in the current Fiscal Year on all expected development through Build -out of CFD No. 2014-1, excluding any Assessor's Parcels which have been prepaid. 4. Multiply the quotient computed pursuant to paragraph 3 by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount"). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price -100%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. E-11 7. Multiply the quotient computed pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and / or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9.Determine any Special Tax A levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax A Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount). 12. The administrative fees and expenses of CFD No. 2014-1 are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2014-1 Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 13. If reserve funds for the Previously Issued Bonds, if any, are at or above 100% of the reserve requirement (as defined in the Indenture) on the prepayment date, a reserve fund credit shall be calculated as a reduction in the applicable reserve fund for the Previously Issued Bonds to be redeemed pursuant to the prepayment (the "Reserve Fund Credit"). No Reserve Fund Credit shall be granted if reserve funds are below 100% of the reserve requirement. 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and / or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and / or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax A prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax A Prepayment Amount"). From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Previously Issued Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by the CFD Administrator. The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of Previously Issued Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the E-12 Indenture to be used with the next prepayment of Previously Issued Bonds or to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tax A levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax A levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax A and the release of the Special Tax A lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax A shall cease. Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax A that may be levied on Taxable Property within CFD No. 2014-1 (after excluding Public Property and Property Owner Association Property as set forth in Section E) both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Previously Issued Bonds, plus the estimated annual Administration Expenses. 2. Prepayment in Part The Special Tax A on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Taxable Property Owner Association Property, Taxable Public Property, or Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section 1.1; except that a partial prepayment shall be calculated according to the following formula: PP = ((Pe -A) X F)+ A These terms have the following meaning: PP = the partial prepayment PE = the Special Tax A Prepayment Amount calculated according to Section 1.1 F = the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax A. A =Administrative Fees and Expenses The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax A and the percentage by which the Special Tax A shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax A for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the Council shall (i} distribute the funds remitted to it according to Section 1.1, and (ii) indicate in the records of CFD No. 2014-1 that there has been a partial prepayment of the Special Tax A and that a portion of the Special Tax A with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax A, shall continue to be levied on such Assessor's Parcel pursuant to Section D. Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax A that may be levied on Taxable Property within CFD No. 2014-1 (after excluding Public Property and Property Owner Association Property as set forth in Section E}both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Previously Issued Bonds, plus the cost of annual CFD administration. E-13 TERM OF SPECIAL TAX The Special Tax A shall be levied for a period not to exceed forty years commencing with Fiscal Year 2014-2015. The Special Tax B shall be levied as long as necessary to meet the Special Tax B Requirement for Services. E-14 APPENDIX F GENERAL INFORMATION REGARDING THE CITY OF TUSTIN The following information concerning the City of Tustin and surrounding areas is included only for the purpose of supplying general information regarding the community. The Bonds are not a debt of the City, County, the State or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor. General The City of Tustin (the "City') is located in central Orange County (the "County'). The City is located next to the county seat, Santa Ana. According to the United States Census Bureau, the City has a total area of 11.1 square miles (28.7 km2). The City was chosen in 2009 by Forbes as one of the top 25 towns to live well in America. The County is the third -most populous county in California, the sixth -most populous in the United States, and it more populous than twenty-one U.S. states. Orange County is included in the Los Angeles -Long Beach -Anaheim, CA Metropolitan Statistical Area. Thirty-four incorporated cities are located in the county; the newest is Aliso Viejo, which was incorporated in 2001. Whereas most population centers in the United States tend to be identified by a major city, there is no defined urban center in Orange County. The County is mostly suburban except for some traditionally urban areas at the centers of the older cities of Anaheim, Fullerton, Huntington Beach, Orange, and Santa Ana. Organization The City was incorporated on September 21, 1927 as a general law city. The City operates under a Council/Manager form of government. The five City Council members, are elected at large. The policies of the City Council are carried out by the appointed City Manager. Population The table below summarizes population of the City and the County for the past five years. CITY OF TUSTIN and ORANGE COUNTY Population Year City of Tustin Orange County 2011 75,771 3,028,846 2012 76,599 3,057,233 2013 78,129 3,087,715 2014 78,347 3,114,209 2015 79,601 3,147,655 Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-2015, with 2010 Census Benchmark. F-1 Employment The following table summarizes the historical numbers of workers by industry in Orange County for the last five years: ORANGE COUNTY SANTA ANA ANAHEIM IRVINE MD Labor Force and Industry Employment Annual Averages by Industry Source: California Employment Development Department, based on March 2014 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/ management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. (1) Last available full year data. The following tables summarize historical employment and unemployment for Orange County, the State of California and the United States for the past five years: ORANGE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) Unemployment Year 2010 2011 2012 2013 2014(1) Total, All Industries 1,370,400 1,385,600 1,422,400 1,462,400 1,498,700 Total Farm 3,700 3,200 2,800 2,900 2,800 Mining and Logging 600 600 600 600 700 Construction 68,000 69,200 71,300 76,800 82,000 Manufacturing 150,500 154,300 158,300 158,000 158,800 Wholesale Trade 77,800 77,300 77,200 79,400 81,700 Retail Trade 141,300 142,600 144,000 145,500 148,700 Transportation, Warehousing & Utilities 26,700 27,500 28,000 27,500 26,600 Information 24,800 23,800 24,300 25,000 24,200 Financial Activities 103,500 104,800 108,300 113,100 114,100 Professional & Business Services 244,900 247,700 260,600 267,300 275,800 Educational & Health Services 165,500 168,000 173,800 184,200 190,300 Leisure & Hospitality 168,600 174,000 180,600 187,800 193,500 Other Services 42,200 43,200 44,600 45,600 47,700 Government 152,300 149,300 147,900 148,700 151,900 Source: California Employment Development Department, based on March 2014 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/ management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. (1) Last available full year data. The following tables summarize historical employment and unemployment for Orange County, the State of California and the United States for the past five years: ORANGE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) Unemployment Year Area Labor Force Employment Unemployment RateG) 2010 Orange County 1,592,500 1,441,500 151,000 9.5% California 18,316,400 16,051,500 2,264,900 12.4 United States 153,889,000 139,064,000 14,825,000 9.6 2011 Orange County 1,600,100 1,460,100 140,000 8.8% California 18,384,900 16,226,600 2,158,300 11.7 United States 153,617,000 139,869,000 13,747,000 8.9 2012 Orange County 1,613,600 1,491,600 122,000 7.6% California 18,494,900 16,560,300 1,934,500 10.5 United States 154,975,000 142,469,000 12,506,000 8.1 2013 Orange County 1,610,900 1,510,600 100,400 6.2% California 18,596,800 16,933,300 1,663,500 8.9 United States 155,389,000 143,929,000 11,460,000 7.4 2014 Orange County 1,573,800 1,487,400 86,400 5.5% California 18,811,400 17,397,100 1,414,300 7.5 United States 155,922,000 146,305,000 9,617,000 6.2 Sources: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Averages 2010-2014 and US Bureau of Labor Statistics. Data not seasonally adjusted. (1) Last available full year data. F-2 Major Employers The table below sets forth the principal employers of the City and the County. CITY of TUSTIN 2014 Principal Employers Source: City of Tustin 2014 Comprehensive Annual Financial Report. ORANGE COUNTY 2014 Principal Employers of Total Employer Employees Employment Tustin Unified School District 1,313 3.07% Rockwell Collins Inc 600 1.40 Ricoh Electronics Inc 500 1.17 Costco 450 1.05 City of Tustin 360 .84 Newport Speciality Hospital 300 .70 Tustin Hospital Medical Center 300 .70 Toshiba America Medical Systems 300 .70 Micro Vention Inc. 300 .70 Balboa Water Group 253 .59 Totals 4,676 10.92 Source: City of Tustin 2014 Comprehensive Annual Financial Report. ORANGE COUNTY 2014 Principal Employers Source: Orange County 2014 Comprehensive Annual Financial Report. F-3 of Total Employer Employees Employment Walt Disney Co. 25,000 1.56% UC Irvine 22,253 1.39 Orange County 18,035 1.12 St. Joseph Health System 12,062 .75 Boeing Co. 6,890 .43 Kaiser Permanente 6,040 .38 Bank of America 6,000 .37 Walmart 6,000 .37 Memorial Care Health System 5,635 .35 Target Corporation 5,400 .34 Totals 113,315 7.06 Source: Orange County 2014 Comprehensive Annual Financial Report. F-3 Construction Activity The following tables reflects the five-year history of building permit valuation for the City and the County: Source: Construction Industry Research Board: `Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. ORANGE COUNTY Building Permits and Valuation (Dollars in Thousands) 2010 2011 2012 2013 2014(1) Permit Valuation: New Single-family 492,529 518,681 752,931 1,237,994 1,234,498 New Multi -family 208,046 378,559 438,118 994,873 985,454 Res. Alterations/ Additions """ "" r" " "r "I"r " "1 "' " "" r" " Total Residential Total Nonresidential Total All Building New Dwelling Units: Single Family Multiple Family Total 2,181,334 2,535,543 2,825,938 6,804,752 4,633,639 1,553 1,908 2,438 3,889 3,646 6,163 10,453 10,636 Source: Construction Industry Research Board: `Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. F-4 CITY of TUSTIN Building Permits and Valuation (Dollars in Thousands) 2010 2011 2012 2013 2014(1) Permit Valuation: New Single-family 2,835 20,613 19,200 - 919 New Multi -family - 25,667 6,570 105,137 - Res. Alterations/ Additions 2,326 5,041 1,785 2,171 1,780 Total Residential 5,162 51,321 27,555 107,309 2,700 Total Nonresidential 15,395 14,606 25,301 141,259 21,188 Total All Building 20,558 65,927 52,857 248,569 23,889 New Dwelling Units: Single Family 16 94 70 - 3 Multiple Family - 237 27 758 - Total 16 331 97 758 3 Source: Construction Industry Research Board: `Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. ORANGE COUNTY Building Permits and Valuation (Dollars in Thousands) 2010 2011 2012 2013 2014(1) Permit Valuation: New Single-family 492,529 518,681 752,931 1,237,994 1,234,498 New Multi -family 208,046 378,559 438,118 994,873 985,454 Res. Alterations/ Additions """ "" r" " "r "I"r " "1 "' " "" r" " Total Residential Total Nonresidential Total All Building New Dwelling Units: Single Family Multiple Family Total 2,181,334 2,535,543 2,825,938 6,804,752 4,633,639 1,553 1,908 2,438 3,889 3,646 6,163 10,453 10,636 Source: Construction Industry Research Board: `Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. F-4 Commercial Activity Taxable sales in the City and County are shown below. Beginning in 2009, reports summarize taxable sales and permits using the NAICS codes. As a result of the coding change, however, industry - level data for 2009 are not comparable to that of prior years. CITY OF TUSTIN Taxable Sales, 2009-2013 (Dollars in thousands) Retail and Food Services Motor Vehicles and Parts Dealers Furniture and Home Furnishings Stores Bldg Mtrl. and Garden Equip. and Supplies Food and Beverage Stores Gasoline Stations Clothing and Clothing Accessories Stores General Merchandise Stores Food Services and Drinking Places Other Retail Group Total Retail and Food Services All Other Outlets Totals All Outlets 2009 2010 2011 2012 2013(1) 313,105 335,458 374,766 474,101 509,977 119,143 130,725 129,782 115,242 115,965 66,179 68,929 70,497 70,845 75,361 71,396 74,366 79,920 87,379 86,907 91,745 104,183 133,217 142,931 139,527 95,627 96,688 100,836 107,726 114,935 234,341 261,861 279,384 # # 165,565 161,402 173,260 179,279 187,321 142,719 145,245 165,632 455,543# 447,231# 1,299,819 1,378,857 1,507,294 1,633,046 1,677,223 246,317 249,124 249,483 268,015 257,554 17,546,136 1,627,981 1,756,777 1,901,061 1,934,777 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add due to independent rounding. (1) Last available full year data. (#) Sales omitted because their publication would result in the disclosure of confidential information. ORANGE COUNTY Taxable Sales, 2009-2013 (Dollars in thousands) Retail and Food Services Motor Vehicles and Parts Dealers Furniture and Home Furnishings Stores Electronics and Appliance Stores Bldg Mtrl. and Garden Equip. and Supplies Food and Beverage Stores Health and Personal Care Stores Gasoline Stations Clothing and Clothing Accessories Stores Sporting Goods, Hobby, Book and Music Stores General Merchandise Stores Miscellaneous Store Retailers Nonstore Retailers Food Services and Drinking Places Total Retail and Food Services All Other Outlets Totals All Outlets 2009 2010 2011 2012 2013(1) 4,902,480 5,244,266 5,777,582 6,551,466 7,147,516 850,889 869,868 909,455 964,018 1,050,308 1,978,869 2,058,383 2,319,992 2,536,415 2,488,963 2,039,686 2,112,467 2,267,363 2,351,574 2,581,968 1,894,642 1,911,192 1,990,893 2,056,803 2,111,209 784,067 824,719 894,003 948,220 983,067 3,383,678 3,801,651 4,826,228 5,063,762 4,706,666 2,742,626 2,923,680 3,164,857 3,510,757 3,764,088 1,074,579 1,075,996 1,101,159 1,133, 702 1,176,097 4,376,154 4,527,201 4,771,143 5,026,911 5,169,057 1,625,880 1,611, 739 1,656,162 1,738,855 1,766,848 484,692 481,563 459,841 635,707 893,254 5,024,379 5,109,383 5,449,177 5,853,267 6,186,883 31,162,619 32,552,107 35,587,795 38,372,456 40,025,929 14, 550,164 15,115, 073 16,143, 344 16, 858,156 17, 565, 288 45,712,784 47,667,179 51,731,139 55,230,612 57,591,217 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add due to independent rounding. (1) Last available full year data. F-5 Median Household Income The following table summarizes the median household effective buying income for the City, the County, the State of California and the nation for the past five years. CITY OF TUSTIN, ORANGE COUNTY, STATE and UNITED STATES Effective Buying Income Total Effective Buying Income Median Household Year Area (000's Omitted) Effective Buying Income 2010 City of Tustin 1,810,838 54,397 Orange County 75,063,558 57,849 California 801,393,028 47,177 United States 6,365,020,076 41,368 2011 City of Tustin 1,786,448 52,614 Orange County 76,315,505 57,607 California 814,578,457 47,062 United States 6,438,704,663 41,253 2012 City of Tustin 2,026,168 56,223 Orange County 81,079,398 57,181 California 864,088,827 47,307 United States 6,737,867,730 41,358 2013 City of Tustin 2,012,100 57,740 Orange County 81,151,078 59,589 California 858,676,636 48,340 United States 6,982,757,379 43,715 2014 City of Tustin 2,074,525 59,744 Orange County 83,607,615 60,931 California 901,189,699 50,072 United States 7,357,153,421 45,448 Source: The Nielsen Company (US), Inc F-6 APPENDIX G THE BOOK ENTRY SYSTEM The following description of the procedures and record-keeping of the Depository Trust Company ("DTC") with respect to beneficial ownership interests in the 2015 Bonds, payment of principal, interest and other payments on the 2015 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representatives can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the following information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. DTC is a limited -purpose trust company organized under the laws of the State of New York, 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 Securities Exchange Act of 1934, as amended. DTC holds securities and facilitates the clearance and settlement of securities transactions through electronic book -entry changes in accounts of its participants (the "Participants"), thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of which (and/or their representatives) own DTC. Access to the DTC system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Purchases of the 2015 Bonds may be made through brokers and dealers who are, or act through, Participants. DTC or its nominee, and any successor securities depository, for all purposes under the Indenture, will be and will be considered to be the registered owner of the 2015 Bonds while the 2015 Bonds are in book -entry -only form. As long as a book -entry system is used, the Beneficial Owners of the 2015 Bonds or of interests in the 2015 Bonds will not receive or have the right to receive physical delivery of the 2015 Bonds, and will not be or be considered to be registered owners under the Indenture. The beneficial ownership of the 2015 Bonds, the transfer of ownership, and the payments to the Beneficial Owners is to be accomplished by records maintained by DTC, its Participants and certain persons acting through the Participants. DTC is responsible for maintaining records of the "positions" of Participants in the 2015 Bonds, and the Participants and persons acting through Participants are expected to maintain records of the purchasers of beneficial interests in those Bonds. Selling brokers and dealers are expected to send to their purchasers an initial transaction statement regarding and evidencing their purchase of beneficial interests in the 2015 Bonds and setting forth certain terms of the 2015 Bonds. The Trustee, as long as a book -entry method is used for the 2015 Bonds and the 2015 Bonds are retained in the custody of DTC, will only be responsible for sending Bondowners notices under the Indenture to DTC. Conveyance of notices and other communications by DTC to Participants, by Participants to persons acting through Participants and by Participants and persons acting through Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory and regulatory requirements as may be in effect from time to time. Any failure of DTC to advise any Participant, or of any Participant or person acting through a Participant to notify the Beneficial Owner, of any such notice and its content or effect G-1 will not affect the validity or sufficiency of the proceedings relating to the action premised on such notice. The Trustee, the District and the Underwriter have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership of the 2015 Bonds. Payments of principal of or interest on the 2015 Bonds will be made only to DTC or its nominee, Cede & Co., as the registered owner of the 2015 Bonds. Upon receipt of moneys, DTC's current practice is to immediately credit the accounts of the Participants in accordance with their respective holdings shown on the records of DTC. Payments by the Participants and persons acting through Participants to Beneficial Owners of the 2015 Bonds will be governed by standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant or person acting through a Participant and not of DTC, the Trustee or the District, subject to any statutory and regulatory requirements as may be in effect from time to time. The District cannot and does not give any assurances that DTC, Participants or others will distribute payments of debt service on 2015 Bonds paid to DTC or its nominee as the registered owner, or any notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. The District understands that the current "Rules" applicable to DTC are on file with the Securities and Exchange Commission, and that the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC may determine to discontinue providing its service with respect to the 2015 Bonds at any time by giving reasonable notice to the District and discharging its responsibility with respect thereto under applicable law. In the event (i) DTC determines not to continue to act as securities depository for the 2015 Bonds, or (ii) the District determines that continuation of the book -entry system would adversely affect the interest of the Beneficial Owners, the District will discontinue the book -entry only system with DTC. If the District determines to replace DTC with another qualified securities depository, the District shall prepare or direct the preparation of one or more fully registered 2015 Bonds, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC, then the 2015 Bonds shall no longer be restricted to being registered in the 2015 Bond register in the name of Cede & Co., but shall be registered in whatever name or names DTC or Cede & Co. shall designate, in accordance with the Indenture, and a new 2015 Bond or 2015 Bonds, for the same outstanding principal amount, maturity and interest rate and in authorized denominations will be issued. G-2 APPENDIX H FORMS OF CONTINUING DISCLOSURE AGREEMENTS CONTINUING DISCLOSURE AGREEMENT (for the District) THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of November 1, 2015, is by and between ALBERT A. WEBB ASSOCIATES, as dissemination agent (the "Dissemination Agent"), and the CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/STANDARD PACIFIC), a community facilities district duly established and existing under the laws of the State of California (the "Community Facilities District"). RECITALS: WHEREAS, the Community Facilities District has issued its City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific), Special Tax Bonds, Series 2015A (the "Bonds") in the initial principal amount of $ ; and WHEREAS, the Bonds have been issued pursuant to an Indenture of Trust, dated as of November 1, 2015 (the "Indenture"), by and between The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee") and the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Community Facilities District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2 -12(b)(5). AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.01 of the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following capitalized terms shall have the following meanings when used in this Disclosure Agreement: "Annual Report" means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. "Disclosure Representative" means the Finance Director of the City of Tustin, or such Finance Director's designee, or such other officer or employee as the Community Facilities District shall designate as the Disclosure Representative hereunder in writing to the Dissemination Agent from time to time. H-1 "Dissemination Agent" means Albert A. Webb Associates, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Community Facilities District and which has filed with the Community Facilities District a written acceptance of such designation. "EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Listed Events" means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statement" means the Official Statement, dated October 2015, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2 -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. Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Community Facilities District and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The Community Facilities District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the Community Facilities District's fiscal year (which currently ends on June 30), commencing with the report for the 2014-15 fiscal year, which is due not later than March 31, 2016, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The 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 Agreement; provided that any audited financial statements of the Community Facilities District 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 they are not available by that date. (b) Change of Fiscal Year. If the Community Facilities District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be made no later than six months after the end of such new fiscal year end. (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the Annual Report to EMMA), the Community Facilities District shall provide H-2 the Annual Report to the Dissemination Agent (if other than the Community Facilities District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Community Facilities District. (d) Report of Non -Compliance. If the Community Facilities District is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the Community Facilities District shall, in a timely manner, send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the Community Facilities District is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall, in a timely manner, send a notice to EMMA in substantially the form attached hereto as Exhibit A. (e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the Community Facilities District, file a report with the Community Facilities District certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed. Section 4. Content of Annual Reports. It is acknowledged that the Closing Date for the Bonds occurred after the end of the 2014-15 fiscal year of the Community Facilities District. In light of the foregoing, submission of the Official Statement shall satisfy the Community Facilities District's obligation to file an Annual Report for fiscal year 2014-15. The Annual Report for each fiscal year commencing with the Annual Report for the 2015-16 fiscal year, shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the Community Facilities District, if any, for the most recently completed fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Community Facilities District's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to that used for the Community Facilities District's audited financial statements, and the audited financial statements, if any, shall be filed in the same manner as the Annual Report when they become available. If there are no financial statements prepared for the Community Facilities District for any fiscal year, no unaudited financial statements need be so included with the Annual Report for such fiscal year. The Community Facilities District does not currently prepare, nor does it expect to prepare, audited financial statements. (b) Other Annual Information. To the extent not included in the audited financial statements of the Community Facilities District, if any, the Annual Report for each fiscal year commencing with the Annual Report for the 2015-16 fiscal year, shall also include the following information: (i) The principal amount of Bonds Outstanding as of the September 30 next preceding the date of the Annual Report. (ii) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the September 30 next preceding the date of the Annual Report. (iii) The balances in the City Facilities Account and the School Facilities Account of the Improvement Fund as of the September 30 next preceding the date of the Annual Report. H-3 (iv) The total assessed value of all parcels within the Community Facilities District on which the Special Taxes are levied, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the date of the Annual Report, and a statement of assessed value -to -lien ratios therefor, either by individual parcel or by categories (e.g. "below 3:1," "3:1 to 4:1" etc.), similar to the Table 3 of the Official Statement. (v) The total number of parcels within the Community Facilities District on which the Special Taxes are levied and the total levy amount in the most recently completed fiscal year, as well as the number of parcels delinquent in the payment of Special Taxes and the dollar amount of such delinquencies as of approximately June 30th of such recently completed fiscal year. Additionally, for all prior fiscal years, including the most recently completed fiscal year, the number of parcels and total dollar amount of remaining Special Tax delinquencies as of approximately September 30 next preceding the date of the Annual Report. (vi) The status of foreclosure proceedings for any parcels within the Community Facilities District on which the Special Taxes are levied and a summary or the results of any foreclosure sales, or other collection efforts with respect to delinquent Special Taxes, as of the September 30 next preceding the date of the Annual Report. (vii) The identity of any property owner representing more than five percent (5%) of the annual Special Tax levy who is delinquent in payment of such Special Taxes, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the date of the Annual Report. (viii) A land ownership summary listing property owners responsible for more than five percent (5%) of the annual Special Tax levy, as shown on the assessment roll of the Orange County Assessor last equalized prior to the December next preceding the date of the Annual Report. (ix) The most recent annual information required to be provided to the California Debt and Investment Advisory Commission pursuant to Section 6.12 of the Indenture. (x) A breakdown of the levy of Special Taxes by Developed Property and Approved Property, as such terms are defined in the Rate and Method of Apportionment of Special Tax for the Community Facilities District. (c) Cross References. 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 Community Facilities District or related public entities, which are available to the public on EMMA. The Community Facilities District shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the Community Facilities District 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. H-4 Section 5. Reporting of Listed Events. (a) Reportable Events. The Community Facilities District shall, or shall cause the Dissemination Agent (if not the Community Facilities District) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Material Reportable Events. The Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. H-5 (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Time to Disclose. The Community Facilities District shall, or shall cause the Dissemination Agent (if not the Community Facilities District) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Indenture. Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The Community Facilities District's obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Community Facilities District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Albert A. Webb Associates. If the Dissemination Agent is not the Community Facilities District, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Community Facilities District pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the Community Facilities District. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the Community Facilities District shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the Community Facilities District. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the Community Facilities District for its services provided hereunder as agreed to between the Dissemination Agent and the Community Facilities District from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Community Facilities District, the owners of the Bonds, the Beneficial Owners, or any other party. The Dissemination Agent may m rely, and shall be protected in acting or refraining from acting, upon any written direction from the Community Facilities District or a written opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the Community Facilities District. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the Community Facilities District to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the Community Facilities District under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Community Facilities District may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Community Facilities District that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. (c) Consent of Holders, Non -impairment Opinion. The amendment or waiver either (i) is approved by the Bond owners in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bond owners or Beneficial Owners. If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is waived, the Community Facilities District shall describe such amendment or waiver in the next following 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 Community Facilities District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of H-7 communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Community Facilities District 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 Agreement, the Community Facilities District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or future notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Community Facilities District to comply with any provision of this Disclosure Agreement, any Bond owner, any Beneficial Owner, the Trustee or the Participating Underwriter may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District to comply with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the Community Facilities District to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Community Facilities District, the Trustee, the Dissemination Agent, the Participating Underwriter and the owners and the Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. M IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 2014-1 (TUSTIN LEGACY/ STANDARD PACIFIC) By: Its: ALBERT A. WEBB ASSOCIATES, as Dissemination Agent Authorized Officer EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) Name of Bond Issue: $ City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific), Special Tax Bonds, Series 2015A Date of Issuance: October J 2015 NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Bonds as required by Section 6.09 of the Indenture of Trust, dated as of November 1, 2015, between the Obligor and The Bank of New York Mellon Trust Company, N.A., as trustee. The Obligor anticipates that the Annual Report will be filed by Date: Albert A. Webb Associates, as Dissemination Agent on behalf of the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) H-10 CONTINUING DISCLOSURE AGREEMENT — DEVELOPER THIS CONTINUING DISCLOSURE AGREEMENT - DEVELOPER (the "Disclosure Agreement"), dated as of November 1, 2015, is by and between STANDARD PACIFIC CORP., a Delaware corporation (the "Developer") and ALBERT A. WEBB ASSOCIATES, as dissemination agent (the "Dissemination Agent"). RECITALS: WHEREAS, pursuant to an Indenture of Trust, dated as of November 1, 2015 (the "Indenture"), by and between the City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific) (the "Community Facilities District") and The Bank of New York Mellon Trust Company, N.A., as trustee, the Community Facilities District has issued its City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/Standard Pacific), Special Tax Bonds, Series 2015A (the "Bonds") in the initial principal amount of $ and WHEREAS, the Bonds are payable from and secured by special taxes levied on real property within the Community Facilities District; WHEREAS, the Developer is developing property within the Community Facilities District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Developer and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds. AGREEMENT: NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.01 of the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following capitalized terms shall have the following meanings when used in this Disclosure Agreement: "Affiliate" means any Person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Developer, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Developer's ability to pay the Special Taxes related to the Property prior to delinquency). "Assumption Agreement" means an agreement between a Major Developer, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Agreement, whereby such Major Developer or Affiliate agrees to provide Semi - Annual Reports and notices of significant events with respect to the portion of the Property owned by such Major Developer or its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major Developer, or an Affiliate thereof, intends or is obligated (contractually or otherwise) to make or cause to be made. H-11 "Development Plan" means, with respect to a Major Developer, the specific improvements such Major Developer intends to make, or cause to be made, in order for the Planned Development Stage to be reached, the time frame in which such improvements are intended to be made and the estimated costs of such improvements; the Developer's Development Plan, as of the date hereof, is described in the Official Statement under the caption "THE DEVELOPER AND THE DEVELOPMENT — Development Plan." "Disclosure Representative" means the officer or authorized representative of the Developer executing this Disclosure Agreement or such other person as the Developer shall designate in writing to the Community Facilities District and the Dissemination Agent from time to time. "Dissemination Agent" means Albert A. Webb Associates, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Developer and which has filed with the Community Facilities District a written acceptance of such designation. "EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Event of Bankruptcy" means, with respect to a Person, that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of 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 or 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 offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts 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, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person and the same shall remain undismissed for a period of 60 days, or if a receiver of the business or of the 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" means, with respect to a Major Developer, the method by which such Major Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan; the Developer's Financing Plan, as of the date hereof, is described in the Official Statement under the caption "THE DEVELOPER AND THE DEVELOPMENT — Developer's Financing Plan." "Financial Statements" means, with respect to a Major Developer, the full financial statements, special purpose financial statements, project operating statements or other reports reflecting the financial position of each entity, enterprise, fund, account or other person (other than a financial institution acting as a lender in the ordinary course of business or an entity that is a party to a Land Bank Transaction with the Developer) identified in such Major Developer's Financing Plan as a source of funding for such Major Developer's Development Plan; provided, however, 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. "First Report Date" means April 1 of each year, commencing April 1, 2016. H-12 "Listed Events" means any of the events listed in Section 4(a) hereof. "Major Developer" means, as of any date, any Property Owner, including the Developer, that owns Property that has not reached the Planned Development Stage that, together with Property that has not reached the Planned Development Stage owned by Affiliates of such Property Owner, is subject to 20% or more of the Special Tax levy for the then current Fiscal Year. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statement" means the Official Statement, dated October J 2015, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. "Planned Development Stage" means, with respect to any portion of the Property, the stage of development to which the Developer intends to develop such property, as described in the Official Statement, which is the stage at which such portion of the Property is ready to be presented to the marketplace as a finished residential unit. '"Property" means the real property within the boundaries of the District that is not exempt from the levy of the Special Taxes. "Property Owner" means any Person that owns a fee interest in any Property. "Report Date" means, as applicable, the First Report Date or the Second Report Date. "Rule" means Rule 15c2 -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. "Second Report Date" means October 1 of each year, commencing October 1, 2016. "Semi -Annual Report" means any Semi -Annual Report provided by the Developer pursuant to, and as described in, Sections 2 and 3 hereof. Section 2. Provision of Semi -Annual Reports. (a) The Developer shall, or, upon furnishing the Semi -Annual Report to the Dissemination Agent, the Dissemination Agent shall, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, a Semi -Annual Report which is consistent with the requirements of Section 3 hereof, not later than the Report Date, commencing April 1, 2016. The Semi -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 3 hereof; provided, however, that the audited financial statements of the Developer, if any, may be submitted separately from the balance of the Semi -Annual Report that is to be provided no later than the First Report Date, and later than the date required above for the filing of such Semi -Annual Report if not available H-13 by that date. If the Developer's fiscal year changes, it shall instruct the Dissemination Agent to give notice of such change in the same manner as for a Listed Event under Section 4(c) hereof. (b) Not later than 15 business days prior to the date specified in subsection (a) for filing the Semi -Annual Report with EMMA, the Developer shall provide the Semi -Annual Report (in a form suitable for reporting to the Repositories) to the Dissemination Agent. If by such date, the Dissemination Agent has not received a copy of the Semi -Annual Report, the Dissemination Agent shall, in a timely manner, contact the Disclosure Representative to inquire if the Developer is in compliance with the first sentence of this subsection (b). (c) If the Dissemination Agent is unable to verify that a Semi -Annual Report has been filed with EMMA by the date required in subsection (a), the Dissemination Agent shall, in a timely manner, send a notice to EMMA in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) file any Semi -Annual Report received by it with EMMA, as provided herein; and (ii) file a report with the Developer and the Community Facilities District certifying that the Semi -Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was filed with EMMA. Section 3. Content of Semi -Annual Reports. The Developer's Semi -Annual Report shall contain or incorporate by reference the following: (a) The following information with respect to each Major Developer: (i) If information regarding such Major Developer has not previously been included in a Semi -Annual Report or in the Official Statement, the Development Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semi -Annual Report or in the Official Statement, a description of the progress made in the Development Plan of such Major Developer since the date of such information and a description of any significant changes in such Development Plan and the causes or rationale for such changes. (ii) If information regarding such Major Developer has not previously been included in a Semi -Annual Report or in the Official Statement, the Financing Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semi -Annual Report or in the Official Statement, a description of any significant changes to the Financing Plan of such Major Developer and the causes or rationale for such changes. (iii) A description of any sales of portions of such Major Developer's Property that has not reached the Planned Development Stage during the six- month period ending on the last day of the second month preceding the month in which the Report Date occurs (viz., the six-month period ending on January 31 for the First Report Date and the six-month period ending on July 31 for the Second Report Date), including the identification of each buyer and the number of acres or lots sold. (iv) The number of single family residences on such Major Developer's Property conveyed to individual buyers by such Major Developer during the six - H -14 month period ending on the last day of the second month preceding the month in which the Report Date occurs. (v) A description of how many lots of Property were owned by such Major Developer as of the last day of the second month preceding the month in which the Report Date occurs, and the number of such lots for which building permits have been issued. (vi) An update of the status of any previously reported Listed Event described in Section 4 hereof. (b) In addition to any of the information expressly required to be provided under paragraph (a) above, the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Major Developers that are Affiliates of each other may file a single Semi -Annual Report covering all such entities. Any or all of the items listed above may be included by specific reference to other documents which have been submitted to the MSRB. If the document included by reference is a final official statement, it must be available from the MSRB. The Developer shall clearly identify each such other document so included by reference. Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Developer shall promptly give, or cause to be given notice of the occurrence of any of the following events with respect to each Major Developer (other than with respect to a Major Developer that has entered into an Assumption Agreement): (i) Any conveyance by such Major Developer of Property owned by such Major Developer to an entity that is not an Affiliate of such Major Developer, the result of which conveyance is to cause the transferee to become a Major Developer. (ii) Any failure of such Major Developer, or any Affiliate of such Major Developer, to pay prior to delinquency general property taxes, special taxes or assessments with respect to its Property. (iii) Any denial or termination of credit, any denial or termination of, or default under, any line of credit or loan or any other loss of a source of funds that could reasonably be expected to have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer that owns any Property, to pay its Special Taxes prior to delinquency. (iv) The occurrence of an Event of Bankruptcy with respect to such Major Developer, or any Affiliate of such Major Developer, that could reasonably be expected to have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer that owns any Property, to pay its Special Taxes prior to delinquency. (v) Any significant amendments to land use entitlements for such Major Developer's Property that could reasonably be expected to have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer that owns any Property, to pay its Special Taxes prior to delinquency. H-15 (vi) Any previously undisclosed governmentally -imposed preconditions to commencement or continuation of development on such Major Developer's Property, that, if not satisfied, could reasonably be expected to have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer that owns any Property, to pay its Special Taxes prior to delinquency. (vii) Any previously undisclosed legislative, administrative or judicial challenges to development on such Major Developer's Property, that, if successful, could reasonably be expected to have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer that owns any Property, to pay its Special Taxes prior to delinquency. (viii) Any changes in the alignment, design or likelihood of completion of significant public improvements affecting such Major Developer's Property, including major thoroughfares, sewers, water conveyance systems and similar facilities, that could reasonably be expected to have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer that owns any Property, to pay its Special Taxes prior to delinquency. (ix) The assumption of any obligations by a Major Developer pursuant to Section 5 hereof. (b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, if there is no Dissemination Agent, the Developer shall promptly file a notice of such occurrence with the Community Facilities District and with EMMA. Whenever the Developer obtains knowledge of the occurrence of a Listed Event, if there is a Dissemination Agent, the Developer shall promptly notify the Dissemination Agent and the Community Facilities District in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c). The Developer shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to EMMA. (c) If the Dissemination Agent has been instructed by the Developer to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with EMMA. Section 5. Assumption of Obligations. If a portion of the Property owned by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be a Major Developer, the obligations of the Developer hereunder with respect to the Property owned by such Major Developer and its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major Developer, or an Affiliate thereof, intends or is obligated (contractually or otherwise) to make or cause to be made, may be assumed by such Major Developer or by an Affiliate thereof. In order to effect such assumption, such Major Developer or Affiliate shall enter into an Assumption Agreement. Section 6. Termination of Reporting Obligation. The Developer's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of (a) the date on which the Planned Development Stage has been reached for all of its Property, (b) the date on which (i) the Developer is no longer a Major Developer, and (ii) the Developer no longer has any obligations under this Disclosure Agreement with respect to any Major Developer as a result of such obligations having been assumed under one or more Assumption Agreements entered into pursuant to Section 5 hereof, or (c) the date on which all of the Bonds have been legally H-16 defeased, redeemed, or paid in full; upon such termination, the Developer shall have no obligation to provide any Semi -Annual Report or notice of occurrence of a Listed Event that it would otherwise have been obligated to provide after the date of such termination. The Developer's obligations under this Disclosure Agreement with respect to a Major Developer shall terminate upon the earliest to occur of (x) the date on which such Major Developer is no longer a Major Developer, as defined herein, or (y) the date on which the Developer's obligation with respect to such Major Developer are assumed under an Assumption Agreement entered into pursuant to Section 5 hereof; upon such termination, the Developer shall have no obligation to provide any Semi -Annual Report or notice of occurrence of a Listed Event with respect to such Major Developer that it would otherwise have been obligated to provide after the date of such termination, provided, however, that upon the occurrence of any of the events described in clauses (x) or (y), the Developer's obligations hereunder with respect to each other Major Developer, if any, shall remain in full force and effect. Upon the occurrence of any such termination prior to the final maturity of the Bonds, the Developer shall give notice of such termination in the same manner as for a Listed Event under Section 4 hereof. Section 7. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge, without cause, any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days' written notice to the Developer and the Community Facilities District. The Dissemination Agent shall have no duty to prepare the Semi -Annual Report. The Developer shall be responsible for paying the fees and expenses of the Dissemination Agent.• Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Developer and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Developer, so long as such amendment does not adversely affect the rights or obligations of the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to Sections 2(a), 3 or 4(a) hereof it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; and (b) the proposed amendment or waiver (i) is approved by owners of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of owners of the Bonds, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of owners of the Bonds. If the financial information or operating data to be provided in the Semi -Annual Report is amended pursuant to the provisions hereof, the first financial information 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. The Developer shall provide the Community Facilities District with written notice of any amendment to this Disclosure Agreement, including a copy of any such amendment. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Semi -Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the H-17 Developer 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 Agreement, the Developer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Semi -Annual Report or notice of occurrence of a Listed Event. Section 10. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 11. Default. In the event of a failure of the Developer or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee), or any owners or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Developer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Neither the Developer nor the Dissemination Agent shall have any liability to the owners of the Bonds or any other party for monetary damages relating to or arising from the default of the Developer or the Dissemination Agent under this Disclosure Agreement. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. The Developer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it or they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding any loss, expense and liabilities due to the Dissemination Agent's and its officers', directors', employees' and agents' negligence or willful misconduct. The Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Semi -Annual Report or any notice of a Listed Event. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. The Dissemination Agent may conclusively rely on the determination of the Developer as to the materiality of any event for purposes of Section 4 hereof. The Dissemination Agent makes no representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Developer's obligations under this Section shall survive the termination of this Disclosure Agreement. Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Agreement may be given as follows: To the Community Facilities District: City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) c/o City of Tustin 300 Centennial Way Tustin, CA 92680 Attention: Finance Director IM To the Trustee: The Bank of New York Mellon Trust Company, N.A. 400 South Hope Street, Suite 400 Los Angeles, CA 90071 Attention: Corporate Trust Services To the Dissemination Agent: Albert A. Webb Associates 3788 McCray Street Riverside, CA 92506-3927 Attention: To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Montgomery Street, 35- Floor San Francisco, CA 94104 Attention: To the Developer: Standard Pacific Homes, Southern California Coastal 15360 Barranca Parkway Irvine, CA 92618 Attention: Division President Standard Pacific Homes 15360 Barranca Parkway Irvine, CA 92618 Attention: [Vice -President -Treasury Any Person may, by written notice to the other Persons listed above, designate a different address to which subsequent notices or communications should be sent. Section 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Developer, the Trustee, the Dissemination Agent, the Community Facilities District, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. H-19 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. STANDARD PACIFIC CORP., a Delaware corporation LIM Name: Title: ALBERT A. WEBB ASSOCIATES, as Dissemination Agent Authorized Officer H-20 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE SEMI-ANNUAL REPORT Name of Issuer: City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) Name of Bond Issue: City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific), Special Tax Bonds, Series 2015A Date of Issuance: October J 2015 NOTICE IS HEREBY GIVEN that Standard Pacific Corp. (the "Developer") has not provided a Semi -Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of November 1, 2015, by and between the Developer and Albert A. Webb Associates, as Dissemination Agent. [The Developer anticipates that the Semi -Annual Report will be filed by .] Dated: cc: Standard Pacific Corp. City of Tustin Community Facilities District No. 2014-1 (Tustin Legacy/ Standard Pacific) H-21 Albert A. Webb Associates, as Dissemination Agent