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SA1 - ADOPT A RESOLUTION OF THE SUCCESSOR AGENCY TO THE FORMER TUSTIN COMMUNITY REDEVELOPMENT AGENCY APPORVING FORM
Agenda Item SAI 60 AGENDA REPORT Reviewed. City Manager t Finance Director MEETING DATE: August 2, 2016 TO: JEFFREY C.PARKER, CITY MANAGER FROM: JENNY LEISZ, ACTING FINANCE DIRECTOR SUBJECT: ADOPT A RESOLUTION OF THE SUCCESSOR AGENCY TO THE FORMER TUSTIN COMMUNITY REDEVELOPMENT AGENCY APPROVING THE FORM AND AUTHORIZING THE DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE OFFERING AND SALE OF TAX ALLOCATION REFUNDING BONDS SUMMARY: In March, 2010, the Tustin Community Redevelopment Agency issued $26,170,000 Tustin Community Redevelopment Agency Tax Allocation Bonds, Series 2010 (the "2010 Housing Bonds") to refinance low and moderate income housing activities within the City, of which $21,225,000 principal amount remains outstanding, and in November, 2010, it issued $44,170,000 Tustin Community Redevelopment Agency Tax Allocation Bonds (MCAS -Tustin Redevelopment Project Area), Series 2010 (the "2010 Redevelopment Bonds") to finance redevelopment activities within and for the benefit of the MCAS -Tustin Redevelopment Project, of which $40,160,000 principal amount remains outstanding. The 2010 Housing Bonds are callable on any date on and after September 1, 2020 at par, while the 2010 Redevelopment Bonds are callable on any date on and after September 1, 2018 at 102% of par. Section 34177.5 of the California Health and Safety Code authorizes the Successor Agency to issue refunding bonds for the purpose of achieving debt service savings. Due to favorable market conditions, the Successor Agency is contemplating the issuance of bonds to refund the 2010 Housing Bonds and the 2010 Redevelopment Bonds on an advance basis. Based on current market conditions, it is anticipated that such refunding would generate approximately $507,000 of average annual debt service savings beginning in 2017. Any debt service savings as a result of the refunding will increase the amount of property tax revenues that can be distributed to all the taxing entities, including the City. Approval of POS and BPA August 2, 2016 RECOMMENDATION: PAGE 2 1. Adopt Resolution No. 16-03, a Resolution of the Successor Agency to the Tustin Community Redevelopment Agency approving the form and authorizing distribution of a preliminary official statement and approving the form and authorizing the execution of a bond purchase agreement in connection with the offering and sale of tax allocation bonds to refinance redevelopment activities within and for the benefit of the Tustin Redevelopment Project of the Former Tustin Community Redevelopment Agency and approving related documents and actions. FISCAL IMPACT: Based on current market conditions, the refinancing of the outstanding 2010 Housing Bonds and 2010 Redevelopment Bonds is projected to generate net present value savings in excess of $4.4 million over the remaining life of the indebtedness. The average annual savings are projected to be approximately $507,000 based on current market conditions starting in 2017, with the final maturity in September 2040. The annual savings will be distributed to the taxing entities by the Orange County Auditor Controller. These savings are net of the cost of refunding the outstanding bonds, which will be incorporated into the issuance cost of the refunding bonds. The costs of issuance include the fees of all consultants, including the Successor Agency's Bond Counsel and Disclosure Counsel, Quint & Thimmig, the Municipal Advisor, Fieldman, Rolapp & Associates, Fiscal Consultant, HdL, BNY Mellon's costs serving as trustee and escrow agent, the fee to obtain a credit rating from Standard & Poor's, the cost of municipal bond insurance and reserve fund surety, the underwriter's discount to be paid to Piper Jaffray & Co. as the underwriter for the refunding bonds, as well as other miscellaneous fees and expenses. All costs of issuance are incurred only if the refinancing closes, except for the costs of the fiscal consultant and rating agency. These costs are eligible to be included on the future Recognized Obligation Payment Schedule ("ROPS") pursuant to the provision of AB 1484 if the refunding bonds fail to close. The term of the refunding bonds is the same as the original term of the currently outstanding indebtedness and will not be extended. BACKGROUND: The Tustin Community Redevelopment Agency (the "Former Agency') issued its: (i) Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010 (the "2010 Housing Bonds") to refinance low and moderate income housing activities within the City, of which $21,225,000 principal amount remains outstanding and (ii) Tustin Community Redevelopment Agency Tax Allocation Bonds (MCAS -Tustin Redevelopment Project Area), Series 2010 (the "2010 Redevelopment Bonds"), to finance redevelopment activities within and for the benefit of the MCAS -Tustin Redevelopment Project, of which $40,160,000 principal amount remains outstanding. Approval of POS and BPA August 2, 2016 PAGE 3 Section 34177.5 of the California Health and Safety Code (the "Code") provides that the Oversight Board may direct the Successor Agency to commence proceedings for the issuance of bonds to refund bonds or other indebtedness of the Former Agency as permitted by Section 34177.5(a)(1) of the Code, so long as the Successor Agency is able to recover its related costs in connection with the transaction. On June 7, 2016 the City Council, acting in its capacity as the Governing Board to the Successor Agency, adopted a Resolution authorizing the issuance of refunding bonds, approving the form of Indenture in connection therewith and authorizing actions related thereto. On June 14, 2016, the Oversight Board approved the Successor Agency action and authorized the issuance of refunding bonds in accordance with the terms of the Indenture. DISCUSSION: Tonight's action is the last approval step in the process to refund the 2010 Housing Bonds and the 2010 Redevelopment Bonds. It is anticipated that the refunding will be completed in September, 2016. The key milestones to complete the refunding are identified below: • Successor Agency approving resolution to refund outstanding Former Agency Obligations and approving legal documents (June 7, 2016 — Completed) • Oversight Board's approval of Successor Agency action to issue the Refunding Bonds and make determination of savings (June 14, 2016 — Completed) • Submission of resolutions of both the Successor Agency and Oversight Board and all the related documents to the Department of Finance (June 15, 2016 — Completed) • Secure underlying credit ratings and bond insurance and reserve fund surety (July -August, 2016 — In Progress) • Receive Department of Finance Approval (August, 2016) • Successor Agency Approval of the Preliminary Official Statement and remaining financing documents (Tonight's Action) • Negotiated sale of Bonds (Late August, 2016) • Bond Closing and payoff of outstanding Former Agency Obligations (September, 2016) 4Jenny eisz Acting Finance Direc or Attachments: Resolution Preliminary Official Statement Bond Purchase Agreement SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY RESOLUTION NO. 16-03 RESOLUTION OF THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY APPROVING THE FORM AND AUTHORIZING DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE OFFERING AND SALE OF TAX ALLOCATION BONDS TO REFINANCE REDEVELOPMENT ACTIVITIES WITHIN AND FOR THE BENEFIT OF THE TUSTIN REDEVELOPMENT PROJECT OF THE FORMER TUSTIN COMMUNITY REDEVELOPMENT AGENCY AND APPROVING RELATED DOCUMENTS AND ACTIONS WHEREAS, pursuant to section 34172(a) of the California Health and Safety Code (unless otherwise noted, all section references hereinafter being to such Code), the Tustin Community Redevelopment Agency (the "Former Agency") has been dissolved and no longer exists as a public body, corporate and politic, and pursuant to section 34173, and the Successor Agency to the Former Tustin Community Redevelopment Agency (the "Successor Agency") has become the successor entity to the Former Agency; WHEREAS, redevelopment plans for the Former Agency's Town Center Redevelopment Project, South Central Redevelopment Project and MCAS -Tustin Redevelopment Project in the City of Tustin (the "City") have been adopted in compliance with all requirements of the Code; WHEREAS, prior to the dissolution of the Former Agency, the Former Agency issued the following obligations: (a) $26,170,000 Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010 (the "2010 Housing Bonds"), to finance low and moderate income housing activities within the City, of which $21,225,000 principal amount remains outstanding, and (b) $44,170,000 Tustin Community Redevelopment Agency Tax Allocation Bonds (MCAS -Tustin Redevelopment Project Area), Series 2010 (the "2010 Redevelopment Bonds" and, with the 2010 Housing Bonds, the "Former Agency Obligations"), to finance redevelopment activities within and for the benefit of the MCAS -Tustin Redevelopment Project, of which $40,160,000 principal amount remains outstanding; Successor Agency Resolution 16-03 Page 1 of 4 WHEREAS, section 34177.5 authorizes the Successor Agency to issue refunding bonds pursuant to Article 11 (commencing with section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law") for the purpose of achieving debt service savings within the parameters set forth in section 34177.5(a)(1) (the "Savings Parameters"); WHEREAS, to determine compliance with the Savings Parameters for purposes of the issuance by the Successor Agency of its tax allocation refunding bonds (the "Refunding Bonds"), the Successor Agency has caused its municipal advisor, Fieldman Rolapp & Associates, to prepare an analysis of the potential savings that will accrue to the Successor Agency and to applicable taxing entities as a result of the use of the proceeds of the Refunding Bonds to refund the Former Agency Obligations (the "Debt Service Savings Analysis"); WHEREAS, the Debt Service Savings Analysis has demonstrated that a refunding of both the 2010 Housing Bonds and the 2010 Redevelopment Bonds will satisfy the Savings Parameters; WHEREAS, the Successor Agency has determined to issue its Successor Agency to the Tustin Community Redevelopment Agency (Orange County, California) Tax Allocation Refunding Bonds, Series 2016, to refund the 2010 Housing Bonds and the 2010 Redevelopment Bonds (the "Bonds"), pursuant to an indenture of trust, by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as trustee; WHEREAS, the Successor Agency adopted its Resolution No. 16-01 on June 7, 2016, authorizing issuance of the Bonds and approving the form and authorizing execution of the various documents prepared in connection therewith; WHEREAS, the Oversight Board to the Successor Agency adopted its Resolution No. 16-06 on June 14, 2016, approving the issuance of the Bonds by the Successor Agency; and WHEREAS, a bond purchase agreement and a preliminary official statement to be used in connection with the offering and sale of the Bonds has been prepared and it is appropriate at this time for the Successor Agency to approve the forms thereof and the distribution of such preliminary official statement to prospective purchasers of the Bonds. NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DOES RESOLVE AS FOLLOWS: SECTION 1. Approval of Bond Purchase Agreement. The Successor Agency hereby authorizes the sale of the Bonds to Piper Jaffray & Co. (the "Underwriter"), so Successor Agency Resolution 16-03 Page 2 of 4 long as the Underwriter's discount, excluding original issue discount which does not constitute compensation to the Underwriter, does not exceed 0.60%. The Successor Agency hereby approves the bond purchase agreement, by and between the Underwriter and the Successor Agency, in the form on file with the Successor Agency Secretary (the "Bond Purchase Agreement"), together with such additions thereto and changes therein as the Chair, the Vice Chair, the Secretary or the Executive Director (the "Authorized Officers") shall deem necessary, desirable or appropriate, and the execution thereof by an Authorized Officer shall be conclusive evidence of the approval of any such additions and changes. The Authorized Officers are hereby authorized and directed to execute, and the Secretary is hereby authorized and directed to attest to, the final form of the Bond Purchase Agreement for and in the name and on behalf of the Successor Agency. SECTION 2. Approval of Preliminary Official Statement. The Successor Agency hereby approves and deems final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 except for permitted omissions, a preliminary official statement describing the Bonds in the form on file with the Secretary (the "Preliminary Official Statement"). Distribution of the Preliminary Official Statement by the Underwriter to prospective purchasers of the Bonds is hereby approved. The Authorized Officers are hereby authorized to execute the final form of an official statement, including as it may be modified by such additions thereto and changes therein as an Authorized Officer shall deem necessary, desirable or appropriate (the "Final Official Statement"), and the execution of the Final Official Statement by an Authorized Officer shall be conclusive evidence of the approval of any such additions and changes. The Successor Agency hereby authorizes the distribution of the Final Official Statement by the Underwriter. The Final Official Statement shall be executed in the name and on behalf of the Successor Agency by an Authorized Officer. SECTION 3. Official Actions. The Chair, the Vice Chair, the Executive Director, the Secretary, and any and all other officers of the Successor Agency, are hereby authorized and directed, for and in the name and on behalf of the Successor Agency, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and sale of the Bonds. Whenever in this resolution any officer of the Successor Agency is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person Authorized by such officer to act on his or her behalf in the case such officer shall be absent or unavailable. SECTION 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. Successor Agency Resolution 16-03 Page 3 of 4 SECTION 5. Certification. The Secretary shall certify to the passage and adoption hereof. ************ I, the undersigned hereby certify that the foregoing Resolution was duly and regularly adopted and passed by the Successor Agency to the Tustin Community Redevelopment Agency at a regular meeting assembled on the 28th day of June, 2016, by the following vote to wit: AYES: NOES: ABSENT: ABSTENTIONS: Secretary Successor Agency Resolution 16-03 Page 4 of 4 Quint & Thimmig LLP SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY Tax Allocation Refunding Bonds, Series 2016 BOND PURCHASE AGREEMENT August , 2016 Successor Agency to the Tustin Community Redevelopment Agency 300 Centennial Way Tustin, CA 92780 Ladies and Gentlemen: 05/05/16 05/16/16 Piper Jaffray & Co. (the "Underwriter") offers to enter into this Bond Purchase Agreement (the "Bond Purchase Agreement") with the Successor Agency to the Tustin Community Redevelopment Agency (the "Successor Agency"), which will be binding upon the Successor Agency and the Underwriter upon the acceptance hereof by the Successor Agency. This offer is made subject to its acceptance by the Successor Agency by execution of this Bond Purchase Agreement and its delivery to the Underwriter on or before 5:00 P.M., California time, on the date hereof. Terms not otherwise defined herein shall have the same meanings as set forth in the Indenture, described below. 1. Purchase and Sale. Upon the terms and conditions and in reliance upon the representations, warranties and covenants herein, the Successor Agency hereby agrees to sell to the Underwriter and the Underwriter hereby agrees to purchase from the Successor Agency for offering to the public, all (but not less than all) of the $ Successor Agency to the Tustin Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2016 (the "Bonds"), at the purchase price of $ (being the principal amount of the Bonds of $ , less an Underwriter's discount of $ , and plus a net original issue premium of $ ). As an accommodation to the Successor Agency, the Underwriter will pay, from the purchase price of the Bonds, the sum of $ to (the "Municipal Bond Insurer") as the premium for its municipal bond insurance policy issued for the Bonds (the "Municipal Bond Insurance Policy") and the sum of $ to the Municipal Bond Insurer as the premium for its reserve fund municipal bond insurance policy issued for the Bonds (the "Reserve Fund Municipal Bond Insurance Policy"). The net purchase proceeds of the Bonds in the amount of $ will be delivered to the Trustee, on behalf of the Successor Agency. 20033.01 The Successor Agency acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm's-length commercial transaction between the Successor Agency and the Underwriter; (ii) in connection with such transaction, including the process leading thereto, the Underwriter is acting solely as a principal and not as an agent or a fiduciary of the Successor Agency; (iii) the Underwriter has neither assumed an advisory or fiduciary responsibility in favor of the Successor Agency with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Successor Agency on other matters) nor has it assumed any other obligation to the Successor Agency except the obligations expressly set forth in this Bond Purchase Agreement, (iv) the Underwriter has financial and other interests that differ from those of the Successor Agency; and (v) the Successor Agency has consulted with its own legal and financial advisors to the extent it deemed appropriate in connection with the offering of the Bonds. The Successor Agency hereby acknowledges receipt from the Underwriter of disclosures required by the Municipal Securities Rulemaking Board ("MSRB") Rule G-17 (as set forth in MSRB Notice 2012- 25 (May 7, 2012)), relating to disclosures concerning the Underwriter's role in the transaction, disclosures concerning the Underwriter's compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any. The Bonds shall be dated the Closing Date and shall bear interest at the rates and shall mature on the dates and in the principal amounts, all as set forth in the attached Exhibit A. The Bonds are subject to redemption prior to maturity as set forth in the attached Exhibit A. The Bonds are being issued for the purpose of (a) providing funds to the Successor Agency to refund, on an advance basis, (i) the outstanding Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010 (the "2010 Housing Bonds"), and (ii) the outstanding Tustin Community Redevelopment Agency Tax Allocation Bonds (MCAS -Tustin Redevelopment Project Area), Series 2010 (the "2010 Redevelopment Bonds"), (b) purchase the Reserve Fund Municipal Bond Insurance Policy in lieu of cash funding a reserve fund for the Bonds, and (c) paying the costs of issuing the Bonds. The Bonds are being issued under and pursuant to that certain Indenture of Trust, dated as of August 1, 2016 (the "Indenture"), by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), and are special, limited obligations of the Successor Agency, payable from, and secured by a lien on Tax Revenues. The payment of principal of and interest on the Bonds, when due, will be insured by the Municipal Bond Insurance Policy issued by the Municipal Bond Insurer concurrently with the delivery of the Bonds. Pursuant to an escrow agreement (the "2010 Housing Bonds Escrow Agreement"), by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as escrow bank (the "Escrow Bank"), provision will be made for the defeasance of the 2010 Housing Bonds, and pursuant to an escrow agreement (the "2010 Redevelopment Bonds Escrow Agreement"), by and between the Successor Agency and the Escrow Bank, provision will be made for the defeasance of the 2010 Redevelopment Bonds. -2- Issuance of the Bonds is authorized by a resolution of the Successor Agency, adopted on June 7, 2016 (the "Successor Agency Resolution"), and a resolution of the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency, adopted on June 14, 2016 (the "Oversight Board Resolution"). 2. Bona Fide Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Bonds, at prices not in excess of the initial public offering yields or prices set forth on the cover page of the Official Statement. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices; provided, however, that the Underwriter may offer a portion of the Bonds for sale to selected dealers who are members of the Financial Industry Regulatory Authority and who agree to resell the Bonds to the public on terms consistent with this Bond Purchase Agreement, and the Underwriter reserves the right to change such offering prices or yields as the Underwriter shall deem necessary in connection with the marketing of the Bonds and to offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the initial offering prices or at yields higher than the initial yields set forth on Exhibit A attached hereto. The Underwriter also reserves the right to over -allot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market and to discontinue such stabilizing, if commenced, at any time. None of such activities shall affect the principal amounts, maturity dates, interest rates, redemption or other provision of the Bonds or the amount to be paid by the Underwriter to the Successor Agency for the Bonds. 3. Official Statement. The Successor Agency shall deliver or cause to be delivered to the Underwriter promptly after acceptance of this Bond Purchase Agreement copies of the Official Statement relating to the Bonds, dated the date hereof (the "Official Statement"). The Successor Agency authorizes the Official Statement, including the cover page and Appendices thereto and the information contained therein, to be used in connection with the sale of the Bonds and ratifies, confirms and approves the use and distribution by the Underwriter for such purpose, prior to the date hereof, of the Preliminary Official Statement dated August 8, 2016 (the "Preliminary Official Statement"). The Successor Agency deems such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended ("Rule 15c2-12"), except for information allowed to be omitted by Rule 15c2-12. The Successor Agency also agrees to deliver to the Underwriter, at the Successor Agency's sole cost and at such address as the Underwriter shall specify, as many copies of the Official Statement as the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of Rule 15c2-12 with Rule G-32 and all other applicable rules of the Municipal Securities Rulemaking Board. The Successor Agency agrees to deliver such copies of the Official Statement within seven (7) business days after the date hereof. The Underwriter agrees to promptly file a copy of the final Official Statement, including any supplements prepared by the Successor Agency, with a nationally recognized municipal securities information repository, and to take any and all other actions necessary to comply with applicable Securities and Exchange Commission rules and Municipal Securities Rulemaking Board rules governing the offering, sale and delivery of the Bonds to the ultimate purchasers thereof. -3- 4. Representations, Warranties and Agreements of the Successor Agency. The Successor Agency represents and warrants to the Underwriter that, as of the Closing Date: (a) The Successor Agency is a public body, corporate and politic, organized and existing under the laws of the State of California (the "State"), and is authorized, among other things, (i) to issue the Bonds, and (ii) to secure the Bonds in the manner contemplated by the Indenture. (b) The Successor Agency has the full right, power and authority (i) to enter into the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate (as hereinafter defined) and this Bond Purchase Agreement, (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by each of the aforesaid documents, and the Successor Agency has complied with all provisions of applicable law in all matters relating to such transactions. (c) The Successor Agency has duly authorized (i) the execution and delivery of the Bonds and the execution, delivery and due performance by the Successor Agency of the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate and this Bond Purchase Agreement, (ii) the distribution and use of the "deemed final" Preliminary Official Statement and the execution, delivery and distribution of the final Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Successor Agency to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals necessary to be obtained by the Successor Agency in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The information contained in the Preliminary Official Statement (excluding therefrom for any information relating to the Municipal Bond Insurer, the Municipal Bond Insurance Policy, the Reserve Fund Municipal Bond Insurance Policy, DTC and its book -entry system included therein and the information therein under the caption "UNDERWRITING") is true and correct in all material respects, and the Preliminary Official Statement did not on the date thereof contain any untrue or misleading statement of a material fact relating to the Successor Agency or the City or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) The information contained in the Official Statement (excluding therefrom for any information relating to the Municipal Bond Insurer, the Municipal Bond Insurance Policy, the Reserve Fund Municipal Bond Insurance Policy, DTC and its book -entry system included therein and the information therein under the caption "UNDERWRITING") is true and correct in all material respects, and the Official Statement will not contain any untrue or misleading statement of a material fact relating to the Successor Agency or the City or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (f) Neither the execution and delivery by the Successor Agency of the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate, this Bond Purchase Agreement and of the Bonds nor the consummation of the transactions on the part of the Successor Agency contemplated herein or therein or the -4- compliance with the provisions hereof or thereof will conflict with, or constitute on the part of the Successor Agency a violation of, or a breach of or default under, (i) any statute, indenture, mortgage, note or other agreement or instrument to which the Successor Agency is a party or by which it is bound, (ii) any provision of the State Constitution, or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the Successor Agency (or the members of the Successor Agency or any of its officers in their respective capacities as such) is subject. (g) The Successor Agency has never been in default at any time, as to principal of or interest on any obligation which it has issued except as otherwise specifically disclosed in the Preliminary Official Statement; and the Successor Agency has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Tax Revenues (as defined in the Indenture) pledged to the payment of the Bonds except as is specifically disclosed in the Preliminary Official Statement. (h) Except as will be specifically disclosed in the Preliminary Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, which has been served on the Successor Agency or, to the best knowledge of the Successor Agency, threatened, which in any way questions the powers of the Successor Agency referred to in paragraph (b) above, or the validity of any proceeding taken by the Successor Agency in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Disclosure Certificate, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, this Bond Purchase Agreement or the Indenture, or which, in any way, could adversely affect the validity or enforceability of the Indenture, the Bonds, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate or this Bond Purchase Agreement or, to the knowledge of the Successor Agency, which in any way questions the exclusion from gross income of the recipients thereof the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under federal or state tax laws or regulations or which in any way could materially adversely affect the availability of Tax Revenues. (i) Any certificate signed by any official of the Successor Agency and delivered to the Underwriter in connection with the offer or sale of the Bonds shall be deemed a representation and warranty by the Successor Agency to the Underwriter as to the truth of the statements therein contained. (j) The Successor Agency has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. (k) The Successor Agency will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter and at the expense of the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds, provided; however, that the Successor Agency will not be required to execute a special or -5- general consent to service of process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction. (1) All authorizations, approvals, licenses, permits, consents, elections, and orders of or filings with any governmental authority, legislative body, board, agency or commission having jurisdiction in the matters which are required by the Closing Date for the due authorization of, which would constitute a condition precedent to or the absence of which would adversely affect the due performance by the Successor Agency of, its obligations in connection with the Indenture, the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, have been duly obtained or made and are in full force and effect. (m) Between the date of this Bond Purchase Agreement and the Closing Date, other than the Bonds, the Successor Agency will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter. (n) The Successor Agency will apply the proceeds of the Bonds in accordance with the Indenture. (o) Except as otherwise described in the Official Statement, as of the Closing Date, the Successor Agency will not have outstanding any indebtedness which indebtedness is secured by a lien on the Tax Revenues on a parity with or senior to the lien provided for in the Indenture on the Tax Revenues. (p) Except as described in the Preliminary Official Statement and the Official Statement, and based on a review of their previous undertakings, neither the Former Agency nor the Successor Agency has failed, within the last five years, to comply in all material respects with any undertaking of the Successor Agency or the Former Agency, respectively, pursuant to Rule 15c2- 12. (q) If between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Bonds, an event occurs which would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information herein, in the light of the circumstances under which it was presented, not misleading, the Successor Agency will notify the Underwriter, and, if in the opinion of the Underwriter or the Successor Agency, or respective counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Successor Agency will cooperate in the preparation of an amendment or supplement to the Official Statement in a form and manner approved by the Underwriter, and shall pay all expenses thereby incurred. For the purposes of this subsection, between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Bonds, the Successor Agency will furnish such information with respect to itself as the Underwriters may from time to time reasonably request. As used herein, the term "End of the Underwriting Period" means the later of such time as: (i) the Successor Agency delivers the Bonds to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Notwithstanding the foregoing, unless the Underwriter gives notice to the contrary, the "End of the Underwriting Period" shall be the Closing Date. -6- (r) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (r) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is 25 days after the End of the Underwriting Period for the Bonds, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact required to be stated therein or necessary to make such information therein in the light of the circumstances under which it was presented, not misleading. (s) The Oversight Board has duly adopted the Oversight Board Resolution approving the issuance of the Bonds and no further Oversight Board approval or consent is required for the issuing of the Bonds or the consummation of the transactions described in the Preliminary Official Statement. (t) The Department of Finance of the State (the "Department of Finance") has issued a letter, dated , 2016, approving the issuance of the Bonds. No further Department of Finance approval or consent is required for the issuance of the Bonds or the consummation of the transactions described in the Preliminary Official Statement. The Successor Agency has received its Finding of Completion from the Department of Finance. (u) As of the time of acceptance hereof and as of the Closing Date, the Successor Agency has complied with the filing requirements of the Law, including, without limitation, the filing of all Recognized Obligation Payment Schedules as required by law, as well as sections 33080 to 33080.6 of the Law. 5. Covenants of the Successor Agency. The Successor Agency covenants with the Underwriter as of the Closing Date as follows: (a) The Successor Agency covenants and agrees that it will execute a continuing disclosure certificate, constituting an undertaking to provide ongoing disclosure about the Successor Agency, for the benefit of the owners of the Bonds as required by section (b)(5)(i) of Rule 15c2-12, substantially in the form attached to the Preliminary Official Statement (the "Disclosure Certificate"). (b) The Successor Agency agrees to cooperate with the Underwriter in the preparation of any supplement or amendment to the Official Statement deemed necessary by the Underwriter to comply with the Rule and any applicable rule of the Municipal Securities Rulemaking Board. (c) The Successor Agency will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Indenture or which would cause the interest on the Bonds to be includable in gross income for federal income tax purposes. 6. Closing. On August 31, 2016, or at such other date and times as shall have been mutually agreed upon by the Successor Agency and the Underwriter (the "Closing Date"), the Successor Agency will deliver or cause to be delivered the Bonds to the Underwriter, and the Successor Agency shall deliver or cause to be delivered to the Underwriter the certificates, opinions and documents hereinafter mentioned, -7- each of which shall be dated as of the Closing Date. The activities relating to the execution and delivery of the Bonds, opinions and other instruments as described in Section 7 of this Bond Purchase Agreement shall occur on the Closing Date. The delivery of the certificates, opinions and documents as described herein shall be made at the offices of Quint & Thimmig LLP, in Larkspur, California ("Bond Counsel"), or at such other place as shall have been mutually agreed upon by the Successor Agency and the Underwriter. Such delivery is herein called the "Closing." The Bonds will be prepared and physically delivered to the Trustee on the Closing Date in the form of a separate single fully registered bond for each of the maturities of the Bonds. The Bonds shall be registered in the name of the Cede & Co., as registered owner and nominee for The Depository Trust Company ("DTC"), New York, New York. The Bonds will be authenticated by the Trustee in accordance with the terms and provisions of the Indenture and shall be delivered to DTC prior to the Closing Date as required by DTC to assure delivery of the Bonds on the Closing Date. It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such number on any Bonds nor any error with respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept delivery of and pay for the Bonds in accordance with the terms of this Bond Purchase Agreement. At or before 8:00 a.m., Pacific Daylight time, on the Closing Date, the Successor Agency will deliver, or cause to be delivered, the Bonds to DTC, in definitive form duly executed and authenticated by the Trustee, and the Underwriter will pay the Purchase Price of the Bonds by delivering to the Trustee, for the account of the Successor Agency a wire transfer in federal funds of the Purchase Price payable to the order of the Trustee. 7. Closing Conditions. The obligations of the Underwriter hereunder shall be subject to the performance by the Successor Agency of its obligations hereunder at or prior to the Closing Date and are also subject to the following conditions: (a) the representations, warranties and covenants of the Successor Agency contained herein shall be true and correct in all material respects as of the Closing Date; (b) as of the Closing Date, there shall have been no material adverse change in the financial condition of the Successor Agency; (c) as of the Closing Date, all official action of the Successor Agency relating to this Bond Purchase Agreement, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate and the Indenture shall be in full force and effect; (d) as of the Closing Date, the Underwriter shall receive the following certificates, opinions and documents, in each case satisfactory in form and substance to the Underwriter: (i) a copy of the Indenture, as duly executed and delivered by the Successor Agency and the Trustee; (ii) a copy of the Disclosure Certificate, as duly executed and delivered by the Successor Agency; ME (iii) copies of the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, duly executed and delivered by the Successor Agency and the Escrow Bank; (iv) an opinion of Bond Counsel, dated the Closing Date and addressed to the Underwriter, in the form attached to the Official Statement as APPENDIX E—FORM OF OPINION OF BOND COUNSEL, accompanied by a letter of Bond Counsel to the effect that such opinion may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; (v) a certificate, dated the Closing Date, of the Successor Agency executed by the Executive Director (or other duly appointed officer of the Successor Agency authorized by the Successor Agency by resolution of the Successor Agency) to the effect that (A) there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body which has been served on the Successor Agency or, to the knowledge of the Successor Agency, threatened against or affecting the Successor Agency to restrain or enjoin the Successor Agency's participation in, or in any way contesting the existence of the Successor Agency or the powers of the Successor Agency with respect to, the transactions contemplated by this Bond Purchase Agreement, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement or the Indenture, and consummation of such transactions; and (B) the representations and warranties of the Successor Agency contained in this Bond Purchase Agreement are true and correct in all material respects, and the Successor Agency has complied with all agreements and covenants and satisfied all conditions to be satisfied at or prior to the Closing Date as contemplated by the Indenture and this Bond Purchase Agreement, provided that all references to the Preliminary Official Statement shall be to the Official Statement; (vi) an opinion of Woodruff, Spradlin & Smart, as counsel to the Successor Agency, dated the Closing Date and addressed to the Successor Agency and the Underwriter to the effect that: (A) the Successor Agency is a public body, organized and existing under the laws of the State; (B) the Successor Agency has full legal power and lawful authority to enter into the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate and this Bond Purchase Agreement; (C) the Successor Agency Resolution approving and authorizing the execution and delivery of the Bonds, the Indenture, the Disclosure Certificate, this Bond Purchase Agreement and the Official Statement has been duly adopted at a meeting of the governing body of the Successor Agency, which was called and held pursuant to the law and with all public notice required by law and at which a quorum was present and acting throughout and the Successor Agency Resolution is in full force and effect and has not been modified, amended or rescinded; -9- (D) the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate and this Bond Purchase Agreement have been duly authorized, executed and delivered by the Successor Agency and, assuming due authorization, execution and delivery by the other parties thereof, constitute the valid, legal and binding agreements of the Successor Agency enforceable in accordance with their terms; (E) The information in the Official Statement under the captions "SECURITY FOR THE BONDS," "THE REDEVELOPMENT PROJECT," FINANCIAL INFORMATION, and "THE SUCCESSOR AGENCY," insofar as such statements purport to summarize information with respect to the Successor Agency and its Tax Sharing Agreements, fairly and accurately summarizes the information presented therein; and (F) Except as otherwise disclosed in the Official Statement, there is no litigation, action, suit, proceeding or investigation (or any basis therefor) at law or in equity before or by any court, governmental agency or body, pending by way of a summons served against the Successor Agency or, to our knowledge, threatened against the Successor Agency, challenging the creation, organization or existence of the Successor Agency, or the validity of the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate or this Bond Purchase Agreement or seeking to restrain or enjoin any of the transactions referred to therein or contemplated thereby or contesting the authority of the Successor Agency to enter into or perform its obligations under the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate or this Bond Purchase Agreement, or under which a determination adverse to the Successor Agency would have a material adverse effect upon the availability of Tax Revenues, or which, in any manner, questions the right of the Successor Agency to enter into, and perform under, the Indenture, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Disclosure Certificate or this Bond Purchase Agreement; (vii) an opinion of counsel to the Trustee, dated the Closing Date and addressed to the Successor Agency and the Underwriter, to the effect that: (A) The Trustee is a national banking association organized and existing under the laws of the United States of America, having full power to enter into, accept and administer the trust created under the Indenture; (B) The Indenture has been duly authorized, executed and delivered by the Trustee and the Indenture constitutes a legal, valid and binding obligation of the Trustee enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles, if equitable remedies are sought; and -10- (C) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the execution and delivery of the Indenture or the consummation of the transactions contemplated by the Indenture; (viii) an opinion of counsel to the Escrow Bank, dated the Closing Date and addressed to the Successor Agency and the Underwriter, to the effect that: (A) The Escrow Bank is a national banking association organized and existing under the laws of the United States of America, having full power to enter into, accept and administer the obligations under the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, (B) The 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, have been duly authorized, executed and delivered by the Escrow Bank and the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, constitute the legal, valid and binding obligations of the Escrow Bank enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles, if equitable remedies are sought; and (C) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Escrow Bank that has not been obtained is or will be required for the execution and delivery by the Escrow Bank of the 2010 Housing Bonds Escrow Agreement or the 2010 Redevelopment Bonds Escrow Agreement, or the consummation of the transactions on the part of the Escrow Bank contemplated by the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, (ix) a certificate, dated the Closing Date, of the Trustee, signed by a duly authorized officer of the Trustee, to the effect that (A) the Trustee is duly organized and validly existing as a national banking association, with full corporate power to undertake the trust of the Indenture; (B) the Trustee has duly authorized, executed and delivered the Indenture and by all proper corporate action has authorized the acceptance of the trust of the Indenture; and (C) to the best of such officer's knowledge, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body which has been served on the Trustee (either in state or federal courts), or to the knowledge of the Trustee which would restrain or enjoin the execution or delivery of the Indenture, or which would affect the validity or enforceability of the Indenture, or the Trustee's participation in, or in any way contesting the powers or the authority of the Trustee with respect to, the transactions contemplated by the Indenture, or any other agreement, document or certificate related to such transactions; -11- (x) a certificate, dated the Closing Date, of the Escrow Bank, signed by a duly authorized officer of the Escrow Bank, to the effect that (A) the Escrow Bank is duly organized and validly existing as a national banking association, with full corporate power to undertake its obligations under the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, (B) the Escrow Bank has duly authorized, executed and delivered the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, and by all proper corporate action has authorized the acceptance of the obligations of the Escrow Bank under the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, and (C) there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body which has been served on the Escrow Bank (either in state or federal courts), or to the knowledge of the Escrow Bank threatened against the Escrow Bank which would restrain or enjoin the execution or delivery of the 2010 Housing Bonds Escrow Agreement or the 2010 Redevelopment Bonds Escrow Agreement, or which would affect the validity or enforceability of the 2010 Housing Bonds Escrow Agreement or the 2010 Redevelopment Bonds Escrow Agreement, or the Escrow Bank's participation in, or in any way contesting the powers or the authority of the Escrow Bank with respect to, the transactions contemplated by the 2010 Housing Bonds Escrow Agreement and the 2010 Redevelopment Bonds Escrow Agreement, or any other agreement, document or certificate related to such transactions; (xi) a supplemental opinion of Bond Counsel, dated the Closing Date and addressed to the Successor Agency and the Underwriter, to the effect that: (A) this Bond Purchase Agreement, the 2010 Housing Bonds Escrow Agreement, the 2010 Redevelopment Bonds Escrow Agreement, the Debt Service Reserve Agreement, dated the Closing Date, by and between the Municipal Bond Insurer and the Successor Agency, and the Disclosure Certificate have been duly authorized, executed and delivered by the Successor Agency, and assuming the valid execution and delivery by the other parties thereto, are valid and binding upon the Successor Agency, subject to the laws relating to bankruptcy, insolvency, reorganization of creditors' rights generally and to the application of equitable principles; (B) the Bonds are exempt from registration pursuant to section 3(a)(2) of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and (C) the statements contained in the Official Statement under the captions "THE BONDS," "SECURITY FOR THE BONDS," and "LEGAL MATTERS—Tax Matters" and in "APPENDIX D—SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE and in APPENDIX E— FORM OF OPINION OF BOND COUNSEL are accurate insofar as such statements purport to expressly summarize certain provisions of the Bonds, the Indenture and Bond Counsel's opinion concerning federal tax matters relating to the Bonds; -12- (xii) a letter of Quint & Thimmig LLP, as disclosure counsel to the Successor Agency, dated the Closing Date and addressed to the Successor Agency and the Underwriter stating that based upon its participation in the preparation of the Official Statement and without having undertaken to determine independently the fairness, accuracy or completeness of the statements contained in the Official Statement, such counsel has no reason to believe that, as of the date of the Closing, the Official Statement (excluding therefrom for any information relating to the Municipal Bond Insurer, the Municipal Bond Insurance Policy, the Reserve Fund Municipal Bond Insurance Policy, DTC and its book -entry system included therein, the information therein under the caption "UNDERWRITING" and the reports, financial and statistical data and forecasts therein, the information included in the Appendices thereto, as to which no opinion need be expressed) contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xiii) the opinion of Stradling Yocca Carlson & Rauth, P.C., Underwriter's counsel, satisfactory to Underwriter; (xiv) an Arbitrage Certificate in the form satisfactory to Bond Counsel; (xv) the final Official Statement executed by an authorized officer of the Successor Agency; (xvi) certified copies of the Successor Agency Resolution and the Oversight Board Resolution; (xvii) specimen Bonds; (xviii) evidence that the federal tax information form 8038-G for the Bonds has been prepared by Bond Counsel for filing; (xix) a copy of the Municipal Bond Insurance Policy; (xx) a copy of the Reserve Fund Municipal Bond Insurance Policy; (xxi) an opinion of counsel to the Municipal Bond Insurer, addressed to the Successor Agency and the Underwriter to the effect that: (A) the descriptions of the Municipal Bond Insurer, the Municipal Bond Insurance Policy and the Reserve Fund Municipal Bond Insurance Policy included in the Official Statement are accurate; (B) the Municipal Bond Insurance Policy and the Reserve Fund Municipal Bond Insurance Policy constitute legal, valid and binding obligations of the Municipal Bond Insurer, enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles -13- relating to or limiting creditor's rights generally and by the application of equitable principles if equitable remedies are sought, and (C) as to such other matters as the Successor Agency or the Underwriter may reasonably request; (xxii) a certificate of the Municipal Bond Insurer, signed by an authorized officer of the Municipal Bond Insurer, to the effect that: (A) the information contained in the Official Statement relating to the Municipal Bond Insurer, the Municipal Bond Insurance Policy and the Reserve Fund Municipal Bond Insurance Policy is true and accurate and (B) as to such other matters as the Successor Agency or the Underwriter may reasonably request; (xxiii) satisfactory evidence that the Bonds have been assigned the underlying rating of " from Standard & Poor's Ratings Services and that the Bonds have been assigned the insured rating of "AA" by Standard & Poor's Ratings Services; (xxiv) evidence of required filings with the California Debt and Investment Advisory Commission; (xxv) defeasance opinions of Bond Counsel with respect to the 2010 Housing Bonds and the 2010 Redevelopment Bonds, dated the Closing Date and addressed to the Successor Agency, the Trustee, the Escrow Bank and the Underwriter, in form and substance satisfactory to the Underwriter; (xxvi) A certificate of HdL Coren & Cone, as Fiscal Consultant, dated the date of the Closing, in form and substance acceptable to the Underwriter, consenting to the inclusion of such firm's Fiscal Consultant's Report in the Preliminary Official Statement and the Official Statement, and certifying as to the accuracy of APPENDIX C—FISCAL CONSULTANT'S REPORT and the information in the Official Statement under the caption "THE REDEVELOPMENT PROJECT" attributed to the Fiscal Consultant, and stating that to the best of such firm's knowledge, but without having conducted any investigation with respect thereto, nothing has come to such firm's attention between the date of such report and the date hereof which would materially alter any of the conclusions set forth in such report and information attributed to the Fiscal Consultant contained in the Official Statement; (xxvii) A certificate of Fieldman Rolapp & Associates, as Municipal Advisor, dated the date of the Closing, confirming satisfaction of the savings requirements set forth in section 34177.5(a) of the Dissolution Act and that the Savings Parameters have been achieved, as required by Oversight Board Resolution; and (xxviii) such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy as of the time of the Closing Date of the representations and warranties of the -14- Successor Agency contained in this Bond Purchase Agreement and the due performance or satisfaction by the Successor Agency at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Successor Agency pursuant to this Bond Purchase Agreement. 8. Termination. The Underwriter shall have the right to cancel its obligations to purchase the Bonds if between the date hereof and the Closing Date: (a) a decision with respect to legislation shall be reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported by such a committee or be introduced, by amendment or otherwise, in or be passed by the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted or a decision by a federal court of the United States or the United States Tax Court shall have been rendered, or a ruling, release, order, regulation or offering circular by or on behalf of the United States Treasury Department, the Internal Revenue Service or other governmental agency shall have been made or proposed to be made having the purpose or effect, or any other action or event shall have occurred which has the purpose or effect, directly or indirectly, of adversely affecting the federal income tax consequences of owning the Bonds, including causing interest on the Bonds to be included in gross income for purposes of federal income taxation, or imposing federal income taxation upon revenues other income of the general character to be derived by the Successor Agency or by any similar body under the Indenture or similar documents or upon interest received on obligations of the general character of the Bonds, or the Bonds which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of or market for the Bonds; or (b) legislation shall have been enacted, or considered for enactment with an effective date prior to the Closing Date, or a decision by a court of the United States shall have been rendered, the effect of which is that the Bonds, including any underlying obligations, or the Indenture, as the case may be, is not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (c) a stop order, ruling, regulation or offering circular by the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Bonds, including any underlying obligations, or the execution of the Indenture, as contemplated hereby or by the Official Statement, is or would be in violation of any provisions of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (d) any event shall have occurred or any information shall have become known to the Underwriter which causes the Underwriter to reasonably believe that the Official Statement as then amended or supplemented includes an untrue statement of a material fact, or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or -15- (e) there shall have occurred any outbreak of hostilities or any national or international calamity or crisis, including a financial crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (f) there shall be in force a general suspension of trading on the New York Stock Exchange, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (g) a general banking moratorium shall have been declared by federal, New York or California authorities; or (h) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Successor Agency; or (i) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; or (j) the New York Stock Exchange or other national securities exchange, or any governmental or regulatory authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of the Underwriter; or (k) any downgrade or placement on credit watch of any rating on the Bonds; or (1) any change, which in the reasonable opinion of the Underwriter, materially adversely affects the marketability of the Bonds or, the financial condition of the Successor Agency. 9. Contingency of Obligations. The obligations of the Successor Agency hereunder are subject to the performance by the Underwriter of its obligations hereunder. 10. Duration of Representations, Warranties, Agreements and Covenants. All representations, warranties, agreements and covenants of the Successor Agency shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter or the Successor Agency and shall survive the Closing Date. 11. Expenses. The Successor Agency will pay or cause to be paid all reasonable expenses incident to the performance of its obligations under this Bond Purchase Agreement, including, but not limited to, mailing or delivery of the Bonds, costs of printing the Bonds, printing, distribution and delivery of the Preliminary Official Statement, the Official Statement and any amendment or supplement thereto, the fees and disbursements of Bond Counsel, Disclosure Counsel, and counsel to the Successor Agency, the fees and expenses of the Successor Agency's accountants and fiscal consultants, fees of the Municipal Advisor, any fees charged by rating agencies for ratings assigned to the Bonds, the premiums to be paid to the Municipal Bond Insurer and fees of the Trustee and the Escrow Bank. In the event this Bond Purchase Agreement shall terminate because of the default of the Underwriter, the Successor Agency will, -16- nevertheless, pay, or cause to be paid, all of the expenses specified above. The Underwriter shall pay the fees and expenses of any counsel retained by it, all advertising expenses incurred in connection with the public offering of the Bonds, CDIAC fees, CUSIP fees and all other fees and expenses incurred by it in connection with the public offering and distribution of the Bonds (including out-of-pocket expenses and related regulatory expenses). 12. Notices. Any notice or other communication to be given to the Successor Agency under this Bond Purchase Agreement may be given by delivering the same in writing to the City Manager, City of Tustin, 300 Centennial Way, Tustin, CA 92780, and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing to Piper Jaffray & Co., 1100 South Coast Highway, Suite 300A, Laguna Beach, CA 92651, Attention: Ms. Katherine A. Koster, Managing Director. 13. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Successor Agency and the Underwriter (including the successors or assigns of the Underwriter) and no other person, including any purchaser of the Bonds, shall acquire or have any right hereunder or by virtue hereof. 14. Governing Lay. This Bond Purchase Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and performed in California. 15. Headings. The headings of the paragraphs of this Bond Purchase Agreement are inserted for convenience of reference only and shall not be deemed to be a part hereof. 16. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 17. Effectiveness. This Bond Purchase Agreement shall become effective upon acceptance hereof by the Successor Agency. -17- 18. Counterparts. This Bond Purchase Agreement may be executed in several counterparts which together shall constitute one and the same instrument. Accepted and agreed to as of the date first above written: SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY Jeffrey C. Parker Executive Director Time of Execution: -18- Very truly yours, PIPER JAFFRAY & CO., as Underwriter Utz Katherine A. Koster Managing Director Maturity Date (September 1) EXHIBIT A TO THE BOND PURCHASE AGREEMENT SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY (Orange County, California) Tax Allocation Refunding Bonds, Series 2016 MATURITY SCHEDULE Principal Interest Reoffering CUSIP Amount Rate Yield Price Number REDEMPTION PROVISIONS Optional Redemption. The Bonds maturing on or before September 1, , are not subject to optional redemption prior to maturity. The Bonds maturing on or after September 1, , are subject to redemption, at the option of the Successor Agency on any date on or after September 1, , as a whole or in part, by such maturities as shall be determined by the Successor Agency (and, in lieu of such determination, pro rata among maturities), and by lot within a maturity, from any available source of funds, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. Exhibit A Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, , are also subject to mandatory redemption from sinking fund payments made by the Successor Agency, in part by lot, on September 1, and on each September 1 thereafter, to and including September 1, , at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, as set forth in the following table: t Maturity. Redemption Date Principal (September 1) Amount Exhibit A PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 8, 2016 br NEW ISSUE—BOOK-ENTRY ONLY RATINGS: b � S&P:" " ( -Insured) S&P: " " (Underlying) c o See "RATINGS" herein No In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject to compliance by the Successor Agency with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax o for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. See s "TAX MATTERS" herein. y TvSTIN 22 $52,745,000* SUCCESSOR AGENCY TO THE r TUSTIN COMMUNITY REDEVELOPMENT AGENCY (Orange County, California) Tax Allocation Refunding Bonds, Series 2016 �' r 9GI G][NG OG& rirrunF v HONOR1Nc OUR PAST c o r Dated: Date of Delivery Due: September 1, as shown on the inside cover T T � r v The $52,745,000* Successor Agency to the Tustin Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2016 (the "Bonds"), are being issued by ° v the Successor Agency to the Tustin Community Redevelopment Agency (the "Successor Agency") pursuant to the provisions of section 34177.5 of the California Health and Safety Code and section 53580 etseq. of the California Government Code (collectively, the "Refunding Bond Law"), a resolution adopted by the Successor Agency and an indenture of trust, dated as of August 1, 2016 (the "Indenture"), by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as r trustee (the "Trustee"), to (a) refund certain outstanding obligations incurred by the former Tustin Community Redevelopment Agency (the "Former Agency"), the proceeds of which were used to finance redevelopment and low and moderate income housing activities within and for the benefit of the redevelopment project areas of the Former Agency, (b) purchase a reserve fund municipal bond insurance policy in lieu of cash funding a debt service reserve fund for the Bonds, and (c) provide for the costs g of issuing the Bonds. �w The Bonds will be 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 ultimate purchasers ("Beneficial Owners") in the denomination of $5,000 or any integral multiple thereof, under the book -entry system H maintained by DTC. Beneficial Owners will not be entitled to receive delivery of bonds representing their ownership interest in the Bonds. Principal of, premium if any, and semiannual interest on the Bonds due on March 1 and September 1 of each year, commencing March 1, 2017, will be payable by the Trustee to DTC for subsequent disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds. See "THE BONDS." �r The Bonds "0 are sub ect to optional redemption and mandatory sinldng account redemption prior to maturity.See "THE BONDS—Redemption" herein. "cam n The Bonds are payable from and secured by a first lien on the Tax Revenues, as defined in this Official Statement, and moneys in certain funds and accounts established b under the Indenture, as further described in this Official Statement. See "SECURITY FOR THE BONDS" herein. q In addition to the Bonds, the Successor Agency may issue or incur Parity Debt that is payable from Tax Revenues on a parity with the Bonds, but only for the purpose of w refunding the Bonds and any future parity debt. See "THE BONDS— Parity Debt" herein. .y c o s The Bonds and interest thereon are not a debt of the City of Tustin (the "City"), Orange County (the "County"), the State of California (the "State") or any of g vtheir political subdivisions except the Successor Agency, and none of the City, the County, the State nor any of their political subdivisions except the Successor Agency is liable thereon. The Bonds and interest thereon are not payable out of any funds or properties other than those set forth in the Indenture. Neither the b m v members of the Successor Agency, the Oversight Board (defined herein), the County Board of Supervisors nor any persons executing the Bonds are liable �w 4' personally on the Bonds. The Successor Agency has no taxing power. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrent) with the delivery of the T� PY P• P g P Y Y rY 5' Bonds by [MUNICIPAL BOND INSURER LOGO] b MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES OR YIELDS —s SEE THE INSIDE COVER This cover page and the inside cover page hereof contain information for quick reference only. They are not intended to be a summary of all factors relating to an 8 investment in the Bonds. Investors should review the entire Official Statement before making any investment decision with respect to the Bonds. "c w ° v The Bonds are offered, when, as and if issued, subject to the approval of Quint & Thimmig LLP, Larkspur, California, Bond Counsel to the Successor Agency. Certain legal 1 PP Q• g P g Y• g b matters will be passed on for the Successor Agency by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel, for the Successor Agency by Woodruff, .5 a Spradlin & Smart, Costa Mesa, California, and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about August 31, 2016. Hws Piperja ray Dated: August , 2016 *Preliminary, subject to change. $52,745,000* SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY (Orange County, California) Tax Allocation Refunding Bonds, Series 2016 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES OR YIELDS CUSIPt Prefix: Maturity Principal Interest (September 1) Amount* Rate 2017 $1,750,000 2018 1,670,000 2019 1,725,000 2020 1,795,000 2021 1,870,000 2022 1,935,000 2023 2,040,000 2024 2,140,000 2025 2,245,000 2026 2,360,000 2027 2,475,000 2028 2,185,000 2029 1,845,000 2030 1,935,000 2031 2,030,000 2032 2,135,000 2033 2,240,000 2034 2,360,000 2035 2,470,000 2036 2,600,000 2037 2,725,000 2038 2,860,000 2039 3,000,000 2040 2,355,000 *Preliminary, subject to change CUSIPt Yield Suffix t Copyright 2016, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services Bureau, operated by Standard & Poor's. 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 witb the Successor Agency or the Underwriter and are included solely for the convenience of the holders of the Bonds. Neither the Successor Agency nor the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 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 Bonds. TABLE OF CONTENTS Page INTRODUCTION.........................................................................1 34 Authority and Purpose...............................................................1 The City and the Successor Agency .......................................... 2 The Redevelopment Projects .................................................... 2 Tax Increment Financing.......................................................... 5 Authority to Issue Refunding Bonds ......................................... 5 Security for the Bonds............................................................... 5 Municipal Bond Insurance Policy; Reserve Account Insurance Policy.................................................................. 6 Limited Obligation.................................................................... 6 ParityDebt................................................................................ 7 Professionals Involved in the Offering ...................................... 7 Further Information.................................................................. 7 REFUNDING PLAN.................................................................... 8 Refunding of the Former Agency Obligations ........................... 8 Estimated Sources and Uses of Funds.....................................10 50 Debt Service Schedule.............................................................11 51 THEBONDS................................................................................11 51 Authority for Issuance..............................................................11 52 Description of the Bonds..........................................................12 Redemption..............................................................................12 54 THE DISSOLUTION ACT.........................................................13 54 Recognized Obligation Payment Schedules .............................15 54 SECURITY FOR THE BONDS..................................................17 Pledge Under the Indenture.....................................................17 Tax Revenues...........................................................................18 Flow of Funds Under the Indenture........................................18 Limited Obligation.................................................................. 22 County Administrative Fees ................................................... 23 Statutory Pass -Through Payments .......................................... 23 Pass -Through Agreements with Taxing Agencies .................. 24 No Developer Agreements...................................................... 25 ParityDebt.............................................................................. 25 MUNICIPAL BOND INSURANCE ........................................... 25 PROPERTY TAXATION IN CALIFORNIA ............................. 26 Property Tax Collection Procedures ....................................... 26 UnitaryProperty..................................................................... 28 Article XIIIA of the State Constitution ................................... 28 Appropriations Limitation—Article XIIIB ............................. 30 Proposition87......................................................................... 30 Appeals of Assessed Values .................................................... 30 Proposition8............................................................................31 Propositions 218 and 26...........................................................31 Future Initiatives..................................................................... 32 THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY ................. 32 Successor Agency Powers ....................................................... 32 Status of Compliance with Dissolution Act ............................ 32 PlanLimits...............................................................................33 66 ALL REDEVELOPMENT PROJECTS.......................................33 66 LandUse..................................................................................33 Historical Assessed Values ..................................................... 34 Page Fiscal Year Assessed Values ................................................... 34 Largest Taxpayers....................................................................35 Historical Tax Revenues..........................................................36 Assessment Appeals.................................................................36 Residential Real Estate Values ................................................ 38 New Development and Transfers of Ownership ..................... 38 Historical RPTTF Deposits.....................................................39 Projected Available Tax Revenues and Estimated Debt Service Coverage............................................................... 40 THE TOWN CENTER REDEVELOPMENT PROJECT ......... 44 LandUse................................................................................. 45 Historical Assessed Values ..................................................... 46 Historical Taxable Values and Tax Increment Revenues........ 47 THE SOUTH CENTRAL REDEVELOPMENT PROJECT..... 48 LandUse................................................................................. 49 Historical Assessed Values ..................................................... 50 Historical Taxable Values and Tax Increment Revenues ......... 51 THE MCAS-TUSTIN REDEVELOPMENT PROJECT ............ 51 LandUse................................................................................. 52 Historical Assessed Values......................................................53 Historical Taxable Values and Tax Increment Revenues........ 54 RISK FACTORS......................................................................... 54 Recognized Obligation Payment Schedule .............................. 54 Challenges to Dissolution Act..................................................56 Reduction in Taxable Value.....................................................56 Limitations on Remedies..........................................................57 Risks to Real Estate Market.....................................................57 Concentration of Property Ownership .................................... 58 Reduction in Inflationary Rate ................................................ 58 Development Risks................................................................. 58 Future Land Use Regulations and Growth Control Initiatives............................................................................59 Assessment Appeals.................................................................59 Levy and Collection of Taxes...................................................59 Bankruptcy and Foreclosure................................................... 60 Estimated Revenues................................................................ 60 Earthquake, Fire and Other Risks ........................................... 60 Hazardous Substances.............................................................61 Changes in the Law................................................................. 62 Loss of Tax-Exemption........................................................... 62 Secondary Market....................................................................63 TAX MATTERS..........................................................................63 VERIFICATION OF MATHEMATICAL COMPUTATIONS.................................................................65 Underwriting.................................................................................65 MUNICIPAL ADVISOR..............................................................65 LEGAL OPINIONS..................................................................... 66 LITIGATION.............................................................................. 66 RATING...................................................................................... 66 CONTINUING DISCLOSURE .................................................. 66 AUDITED FINANCIAL STATEMENTS.................................67 MISCELLANEOUS.....................................................................67 APPENDIX A - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE APPENDIX B - FORM OF OPINION OF BOND COUNSEL APPENDIX C - BOOK -ENTRY ONLY SYSTEM APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX E - THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF TUSTIN FOR THE FISCAL YEAR ENDED JUNE 30, 2015 APPENDIX F - CITY OF TUSTIN AND ORANGE COUNTY SUPPLEMENTAL INFORMATION APPENDIX G - FISCAL CONSULTANT'S REPORT APPENDIX H - SPECIMEN MUNICIPAL BOND INSURANCE POLICY GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended ("Rule 15c2-12 "), this Preliminary Official Statement constitutes an "official statement" of the Successor Agency with respect to the Bonds that has been deemed "final" by the Successor Agen- cy as of its date except for the omission of no more than the information permitted by Rule 15c2-12. No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any infor- mation or to make any representations with respect to the Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized by the Successor Agency. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official State- ment are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the Successor Agency or the Redevelopment Projects since the date of this Official Statement. Use of this Official Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Bonds. Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Document References and Summaries. All references to and summaries of the Indenture or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents. Stabilization ofand Changes to Offering Prices. The Underwriter may over -allot or take other steps that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabi- lization at any time. The Underwriter may offer and sell the Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. Bonds are Exempt from Securities Laws Registration. The issuance and sale of the Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities pro- vided under section 3(a)(2) of the Securities Act of 1933 and section 3(a)(12) of the Securities Exchange Act of 1934. Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking state- ments" within the meaning of the United States Private Securities Litigation Reform Act of 1995, section 21E of the United States Securities Exchange Act of 1934, as amended, and section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identi- fiable by the terminology used such as "plan," "expect," "estimate," "budget" or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR. Municipal Bond Insurance. (the "Municipal Bond Insurer") makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, the Municipal Bond Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Municipal Bond Insurer supplied by the Municipal Bond Insur- er and presented under the heading "MUNICIPAL BOND INSURANCE" and "APPENDIX H—SPECIMEN MUNICIPAL BOND INSURANCE POLICY". Website. The City of Tustin maintains an Internet website, but the information on the website is not incorporated in this Official Statement CTUSTIN •CALIFORNIA 101 �L San is k\ 134 en 1. Mend ivwdure usa° o lendora Mu Mo tain st 2 ° 210 e 0o Al bra bri a C 66 O mona g Los �-lo Ang ° E on ° j,' rem Rialt Mo ark oVa ind 57 O Pqrnnna Cul East L ge H Rowla ° GI n Santa 72 eight so Chino o ° Ingl w O ° ywood ° II rens C A I :.F O 1 A id onica Bay Cudahy O neY La H a 71 s s Manhattan Beach. ° ' Brea so Norco Co ° Ful rton oodc Hermosa Beach ° 81 orona Home Gard a n Lal wo p (241) Torra es Stanto R I V ° omi 1 Long G n rove ' 22 � Tus .. ° Rancho Palos ° Seal Beach nta Ana 261 Verdes Los Angeles Santiago Peak Harbor � � rvi e (D Huntington C to Me 1v Mis Cleveland Beach Viejo National' Newport L Forest ° Forest Beachgun Aliso Vielo_ Hills una iguel 13 Laguna Beach ANGE .) '3 SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY 300 Centennial Way Tustin, CA 92780 (714) 573-3000 http://www.tustinca.org SUCCESSOR AGENCY/CITY BOARD/COUNCIL MEMBERS John Nielsen, Chair/Mayor Dr. Allan Bernstein, Vice Chair/Mayor Pro Tem Rebecca Gomez, Boardmember/Councilmember Al Murray, Boardmember/Councilmember Charles E. Puckett, Boardmember/Councilmember SUCCESSOR AGENCY/CITY OFFICIALS Jeffrey C. Parker, Executive Director/City Manager Jenny Leisz, Acting Finance Director and City Treasurer Sean Tran, Administrative Services Manager Erica N. Rabe, Secretary/City Clerk Woodruff, Spradlin & Smart, Successor Agency Counsel/City Attorney SPECIAL SERVICES Municipal Advisor Fieldman Rolapp & Associates Irvine, California Bond and Disclosure Counsel Quint & Thimmig LLP Larkspur, California Fiscal Consultant HdL Coren & Cone Diamond Bar, California Trustee and Escrow Bank The Bank of New York Mellon Trust Company, N.A. Los Angeles, California Verification Agent Grant Thornton LLP Minneapolis, Minnesota OFFICIAL STATEMENT $52,745,000* SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY (Orange County, California) Tax Allocation Refunding Bonds, Series 2016 INTRODUCTION This Official Statement, including the cover page, is provided to furnish information in connec- tion with the sale by the Successor Agency to the Tustin Community Redevelopment Agency (the "Suc- cessor Agency") of its $52,745,000* Successor Agency to the Tustin Community Redevelopment Agency (Orange County, California) Tax Allocation Refunding Bonds, Series 2016 (the "Bonds"). Authority and Purpose The Successor Agency is issuing the Bonds pursuant to authority granted by the Constitution of the State of California, section 34177.5(a)(1) of the Health & Safety Code of the State of California, Article 11 (commencing with section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the "Refunding Law") and an Indenture of Trust, dated as of August 1, 2016 (the "Indenture") by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). See "THE BONDS—Authority for Issuance." The Successor Agency is issuing the Bonds to refund the following two outstanding obligations (collectively, the "Former Agency Obligations") of the former Tustin Community Redevelopment Agen- cy (the "Former Agency"): • $26,170,000 Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010 (the "2010 Housing Bonds"), to refinance low and moderate income housing activities within the City, of which $21,225,000 principal amount remains outstanding, and • $44,170,000 Tustin Community Redevelopment Agency Tax Allocation Bonds (MCAS -Tustin Redevelopment Project Area), Series 2010 (the "2010 Redevelopment Bonds"), to finance rede- velopment activities within and for the benefit of the MCAS -Tustin Redevelopment Project, of which $40,160,000 principal amount remains outstanding. The proceeds of the Bonds will be applied to refund the Former Agency Obligations, to purchase a reserve fund municipal bond insurance policy in lieu of cash funding a reserve fund for the Bonds and provide for the costs of issuing the Bonds. * Preliminary, subject to change. The City and the Successor Agency City. The City of Tustin (the "City") is located in Orange County (the "County"), approximate- ly 41 miles south of the City of Los Angeles and approximately 90 miles north of the City of San Diego. Incorporated in 1927, the City operates as a general law city with a Council -Manager form of government. The Mayor is selected by the City Council from among its members. For certain information with respect to the City, see APPENDIX F—CITY OF TUSTIN AND ORANGE COUNTY SUPPLEMENTAL INFORMATION. Former Agency. The Former Agency was a redevelopment agency that was established on Septem- ber 21, 1971) by the City Council of the City under the California Community Redevelopment Law, consti- tuting Part 1, Division 24 (commencing with section 33000) of the California Health and Safety Code (the "Redevelopment Law"), with the adoption of Ordinance No. 696-A, with all of the powers vested in such organizations under the Community Redevelopment Law (which is referred to in this Official Statement as the "Redevelopment Law"). The City Council of the City was the governing board of the Former Agency. Dissolution Act. On June 29, 2011, Assembly Bill No. 26 ("AB 1X 26 ") was enacted together with a companion bill, Assembly Bill No. 27 ("AB 1X 27"). The provisions of AB 1X 26 provided for the disso- lution of all redevelopment agencies statewide. The provisions of AB 1X 27 permitted redevelopment agencies to avoid such dissolution by the payment of certain amounts. A lawsuit was brought in the Cali- fornia Supreme Court, California Redevelopment Association, et al., v. Matosantos, et al., 53 Cal. 4th 231 (2011), challenging the constitutionality of AB 1X 26 and AB 1X 27. On December 19, 2011, in its decision in that lawsuit, the California Supreme Court largely upheld AB 1X 26, invalidated AB 1X 27, and held that AB 1X 26 may be severed from AB 1X 27 and enforced independently. As a result of AB 1X 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of Febru- ary 1, 2012, all redevelopment agencies in the State were dissolved, including the Former Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to expedi- tiously wind down the affairs of the former redevelopment agencies. The primary provisions enacted by AB 1X 26 relating to the dissolution and wind down of former redevelopment agency affairs are found in Parts 1.8 (commencing with section 34161) and 1.85 (commenc- ing with section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484 ("AB 1484"), enacted as Chapter 26, Statutes of 2012 (as amended from time to time, the "Dissolution Act"). Successor Agency. Pursuant to section 34173 of the Dissolution Act, the City Council of the City made an election to serve as the Successor Agency to the Former Agency. However, subdivision (g) of section 34173 of the Dissolution Act, added by AB 1484, expressly affirms that the Successor Agency is a separate legal entity from the City, that the two entities shall not merge and that the liabilities of the For- mer Agency will not be transferred to the City nor will the assets of the Former Agency become assets of the City. The Redevelopment Projects Town Center Redevelopment Project. The Agency adopted a redevelopment plan (the "Town Cen- ter Redevelopment Plan") for the Town Center Redevelopment Project on November 22, 1976. The Town Center Redevelopment Project encompasses approximately 360 acres in the center of the City -2- which includes historic Old Town and the Civic Center complex and all the commercial properties within the central city. The Town Center Redevelopment Project has already seen a number of major develop- ment projects including new retail, office, residential and public improvement efforts. The total assessed valuation of taxable property in the Town Center Redevelopment Project in fiscal year 2015-16 is $600,317,419, with $545,443,285 of such amount representing incremental assessed value. See "THE TOWN CENTER REDEVELOPMENT PROJECT" herein and APPENDIX G—FISCAL CONSULTANT'S REPORT. South Central Redevelopment Project. The Agency adopted a redevelopment plan (the "South Cen- tral Redevelopment Plan") for the South Central Redevelopment Project on August 1, 1983. The South Central Redevelopment Project encompasses approximately 398 acres, including a south area totaling 214.67 acres and a central area totaling 45.49 acres. The south area is generally bounded by a small portion of Bryan Avenue on the north, portions of Orange Avenue, Red Hill Avenue (south of the Southern Cali- fornia Regional Rail Authority right-of-way) and Newport Avenue (south of the Santa Ana (I-5) Freeway) on the east, Valencia Avenue on the south, the Costa Mesa (SR -55) Freeway on the west and Santa Ana (I-5) Freeway and Newport Avenue (north of the Santa Ana (I-5) Freeway) on the northwest. The amended area consists of 137.7 acres and is generally bounded by Edinger Avenue on the north, Red Hill Avenue on the east, Valencia Avenue on the south and the SR -55 Freeway on the west. The City adopted the Pacific Center Specific Plan (located in the South Central Redevelopment Project) which provided for an extension of Newport Avenue and much needed improvements to the SR -55 Freeway northbound off - ramp at Edinger Avenue. The South Central Redevelopment Project includes residential, commercial, office, hotel and limited light industrial technology uses. The total assessed valuation of taxable property in the South Central Redevelopment Project in fiscal year 2015-16 is $636,069,747, with $523,868,290 of such amount representing incremental assessed value. See "THE SOUTH CENTRAL REDEVELOPMENT PROJECT" herein and APPENDIX G—FISCAL CONSULTANT'S REPORT. MCAS -Tustin Redevelopment Project. The Agency adopted a redevelopment plan (the "MCAS - Tustin Redevelopment Plan") for the MCAS -Tustin Redevelopment Project on July 16, 2003. The MCAS -Tustin Redevelopment Project is comprised of 1,508.6 acres, including 1,504.5 acres that were part of the former Marine Corps Air Station Tustin and 4.1 acres that are located outside of the former base boundaries, at the northwest corner of Edinger Avenue and Jamboree Road in the City. Development of the MCAS -Tustin Redevelopment Project, known as Tustin Legacy, is expected to include 4,210 homes, over 10 million square feet of non-residential space including major office, retail, entertainment, business park, educational and community support facilities. Significant acreage will be dedicated to park- land and recreational open spaces which will feature a two-mile community lineal park with walking spac- es, playgrounds, tranquil natural areas and sports facilities. The total assessed valuation of taxable proper- ty in the MCAS -Tustin Redevelopment Project in fiscal year 2015-16 is $1,533,133,383, with $1,532,019,305 of such amount representing incremental assessed value. See "THE MCAS-TUSTIN REDEVELOPMENT PROJECT" herein and APPENDIX G— "FISCAL CONSULTANT'S REPORT. A map of all Redevelopment Projects is shown on the following page. -3- -❑ LL2 _1 o m mN J'� fit NIA-AMAGAN5ET WY, I _T. DNI —� Jo fil TTE FOURTN6 STREET IRVINE N � l BOIILEVAHD zv RF� �P No Scale —� ❑� ��_ aR�rErr r.x. N � r D - -7= . gi alPFs W. FIRST ESTREET ro 0❑ z m ❑ E.v FIRSTSTREET ❑❑ aka ❑❑ ❑ ❑� a� Ww r=--- oP .���?�--Li' ❑ ❑ ASCN ❑ ❑ a L� 24�e Gs ❑\ PD q9 �i\❑� '�a W. MAIN STREET •• E MAN STREET, \ nc s 4g eygp o � EL CAMINO REAL (\�\� RS3 3x. c ❑❑ PARKEITE Gh� ��❑C��ce��\ s \\/x�,. o �� a uuwo-- e / SJ — & $o-`{� erzm CT a^❑\vir cc�NGF❑� Nle 4/yT REq 4Nq gEEW4Y \l � Ys c ❑/ � � �l Ol AI 0.,<❑/ / ❑//`q o❑1 �^ \�����it l CITY` OF ❑IRVINE P Fite: Base Map.dwg nsRr✓o�r \ oq�N� 4E9 YI ❑ ❑ C�AR� 4N G / F 9� \ \ \ \ ❑ III 1, 11�LNEITIENIIAT� 11 El— BE . �// �1 —11— / \ IDILE AT // 2d L-1RONT wA, RTT TUSTIN LEGACY FL LN �v R 2111 w A\ $ © pP RI 99 P SUSS\tA/� ROgD yn`p AN z. suN Diu E E Ir ❑ TL ARE <2I ) aa.T— DI SPO 9y II\\❑ 0 veN°F tt" 01 LEGEND: 0 TOWN CENTER SOUTH CENTRAL 0 MCAS TUSTIINJ REDEVELOPMENT AGENCY PROJECT AREAS August 4, 2010 CITY OF AVN Tax Increment Financing Prior to the enactment of AB 1X 26, the Redevelopment Law authorized the financing of redevel- opment projects through the use of tax increment revenues. This method provided that the taxable valua- tion of the property within a redevelopment project area on the property tax roll last equalized prior to the effective date of the ordinance which adopted the redevelopment plan became the base year valuation. Assuming the taxable valuation never drops below the base year level, the taxing agencies receiving prop- erty taxes thereafter received only that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion of property taxes produced by applying then current tax rates to the increase in valuation over the base year. Such in- cremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of redevelopment agency obligations. Authority to Issue Refunding Bonds The Dissolution Act authorizes each successor agency to issue refunding bonds secured by a pledge of, and lien on, and repaid from moneys deposited from time to time in the Redevelopment Proper- ty Tax Trust Fund established and held by the County Auditor -Controller for the Successor Agency by the Dissolution Act (the "Redevelopment Property Tax Trust Fund"). Section 34177.5(a)(1) of the Dis- solution Act authorizes the issuance of refunding bonds, to be secured by a pledge of moneys deposited from time to time in the applicable Redevelopment Property Tax Trust Fund to provide savings to the successor agency, provided that (i) the total interest cost to maturity on the refunding bonds or other in- debtedness plus the principal amount of the refunding bonds or other indebtedness does not exceed the total remaining interest cost to maturity on the bonds or other indebtedness to be refunded plus the re- maining principal of the bonds or other indebtedness to be refunded, and (ii) the principal amount of the refunding bonds or other indebtedness does not exceed the amount required to defease the refunded bonds or other indebtedness, to establish customary debt service reserves, and to pay related costs of issu- ance. Security for the Bonds The Bonds are limited obligations of the Successor Agency entitled to the benefits of the Inden- ture and are payable solely from and secured by Tax Revenues, moneys on deposit in the Debt Service Fund (including in the accounts and subaccounts therein), including but not limited to the Reserve Ac- count. See "SECURITY FOR THE BONDS—Pledge Under the Indenture." The Dissolution Act requires the Orange County Auditor -Controller (the "County Auditor - Controller") to determine the amount of property taxes that would have been allocated to the Former Agency from the Redevelopment Projects had the Former Agency not been dissolved pursuant to the op- eration of AB 1X 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Successor Agency established and held by the County Auditor -Controller pursuant to the Dissolution Act. The Dissolution Act provides that any bonds or other indebtedness authorized thereunder to be issued by the Successor Agency will be considered indebtedness incurred by the dissolved Former Agency, with the same lien priority and legal effect as if the bonds or other indebtedness had been issued prior to effective date of AB 1X 26, in full con- formity with the applicable provisions of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency's Recognized Obligation Payment Schedules. See "THE DISSOLUTION ACT—Recognized Obligation Payment Schedules." -5- The Dissolution Act further provides that bonds or other indebtedness authorized thereunder to be issued by the Successor Agency will be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund, and that property tax revenues pledged to any bonds authorized under the Dissolution Act, such as the Bonds, are taxes al- located to the successor agency pursuant to the provisions of the Redevelopment Law and the State Con- stitution. Property tax revenues will be allocated to the Successor Agency on a semi-annual basis based on a Recognized Obligation Payment Schedule submitted by the Successor Agency to an oversight board estab- lished for the Successor Agency (the "Oversight Board") and the California Department of Finance (the "DOF"). The County Auditor -Controller will distribute funds from the Redevelopment Property Tax Trust Fund for each six-month period in the order specified in the Dissolution Act. See "THE DISSOLUTION ACT—Recognized Obligation Payment Schedules." In accordance with the Dissolution Act, the term "Tax Revenues" is defined under the Indenture to mean the moneys deposited from time to time in the Redevelopment Property Tax Trust Fund estab- lished pursuant to subdivision (c) of section 34172 of the Dissolution Act, as provided in paragraph (2) of subdivision (a) of section 34183 of the Dissolution Act, after payment of (a) County administrative fees pursuant to section 34183(a) of the Dissolution Act, and (b) all amounts due under the Statutory Pass - Through Payments and the Pass -Through Agreements (including any elections made pursuant to the former section 33676 of the Redevelopment Law) that have, by their terms, a senior lien on Tax Revenues. If, and to the extent, that the provisions of section 34172 or paragraph (2) of subdivision (a) of sec- tion 34183 of the Dissolution Act are invalidated by a final judicial decision, then Tax Revenues shall in- clude all tax revenues allocated to the payment of indebtedness of the Successor Agency pursuant to sec- tion 33670 of the Law or such other section as may be in effect at the time providing for the allocation of tax increment revenues to the Successor Agency in accordance with Article XVI, Section 16 of the Cali- fornia Constitution. Successor agencies have no power to levy property taxes and must rely on the allocation of taxes as described above. See "RISK FACTORS." Municipal Bond Insurance Policy; Reserve Account Insurance Policy The scheduled payment of the principal and interest with respect to the Bonds when due will be guaranteed under a municipal bond insurance policy (the "Municipal Bond Insurance Policy") to be is- sued by (the "Municipal Bond Insurer") simultaneously with the delivery of the Bonds. See "MUNICIPAL BOND INSURANCE." In addition, the Municipal Bond Insurer has made a com- mitment to issue a municipal bond insurance policy for the Reserve Account (the "Reserve Account In- surance Policy") in an amount equal to the Reserve Requirement for the Bonds. See "SECURITY FOR THE BONDS—Flow of Funds Under the Indenture." Limited Obligation The Bonds are special obligations of the Successor Agency and are secured by an irrevocable pledge of, and are payable as to principal, interest and premium, if any, from Tax Revenues and other funds. The Bonds, interest and premium, if any, are not a debt of the City, the County, the State or any of -6- their political subdivisions except the Successor Agency, and none of the City, the County, the State nor any of their political subdivisions except the Successor Agency are liable thereon. The Bonds, interest thereon and premium, if any, are not payable out of any funds or properties other than those set forth in the Indenture. No member, officer, agent, or employee of the Successor Agency, the Oversight Board, the County Board of Supervisors or any person executing the Bonds is liable personally on the Bonds by rea- son of their issuance. Parity Debt The Indenture permits the issuance of Parity Debt under certain circumstances for refunding purposes only. Other than the Bonds, there will be no other outstanding obligations secured by the Tax Revenues. See "SECURITY FOR THE BONDS—Parity Debt." Professionals Involved in the Offering Fieldman Rolapp & Associates, Irvine, California (the "Financial Advisor"), has served as finan- cial advisor to the Successor Agency and has advised the Successor Agency with respect to the financial structure of the refinancing and as to other financial aspects of the transaction. Payment of the fees and ex- penses of the Financial Advisor is contingent upon the sale and delivery of the Bonds. HdL Coren & Cone, Diamond Bar, California, has acted as fiscal consultant to the Successor Agency (the "Fiscal Consultant") and advised the Successor Agency as to the taxable values and Tax Revenues projected to be available to pay debt service on the Bonds as referenced in this Official State- ment. The report prepared by the Fiscal Consultant is referred to as the "Fiscal Consultant Report." See APPENDIX G—FISCAL CONSULTANT'S REPORT. The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, will act as Trustee with respect to the Bonds. All proceedings in connection with the issuance of the Bonds are subject to the approval of Quint & Thimmig LLP, Larkspur, California, Bond Counsel to the Successor Agency. Quint & Thimmig LLP is also acting as Disclosure Counsel to the Successor Agency. Woodruff, Spradlin & Smart, Costa Mesa, California, will render certain opinions on behalf of the Successor Agency as general counsel to the Suc- cessor Agency. Certain legal matters will be passed on for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel and Underwriter's Counsel is contingent upon the sale and delivery of the Bonds. Further Information Brief descriptions of the Redevelopment Law, the Dissolution Act, the Refunding Law, the Bonds, the Indenture, the Successor Agency, the Former Agency, South Central Redevelopment Project, the MCAS -Tustin Redevelopment Project, Town Center Redevelopment Project, the County and the City are included in this Official Statement. Such descriptions and information do not purport to be com- prehensive or definitive. All references in this Official Statement to the Redevelopment Law, the Dissolu- tion Act, the Refunding Law, the Bonds, the Indenture, the Constitution and the laws of the State as well as the proceedings of the Former Agency, the Successor Agency, the County and the City are qualified in their entirety by reference to such documents and laws. References in this Official Statement to the Bonds are qualified in their entirety by the form included in the Indenture and by the provisions of the Indenture. -7- During the period of the offering of the Bonds, copies of the forms of all documents are available from the Controller, City of Tustin, 300 Centennial Way, Tustin, CA 92780, Attention: Executive Director, telephone (714) 573-3000. The City may impose a charge for copying, mailing and handling. REFUNDING PLAN Refunding of the Former Agency Obligations 2010 Housing Bonds. A portion of the proceeds of the Bonds, together with amounts on deposit in the funds and accounts related to the 2010 Housing Bonds, will be deposited in an escrow fund (the "2010 Housing Escrow Fund") under an escrow deposit and trust agreement, by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as escrow bank (the "Escrow Bank"). A portion of such amounts will be invested in certain U.S. Treasury securities or obligations guaranteed by the United States (the "Treasuries") and the remaining amounts will be held in cash, uninvested. The maturing Treasuries, the interest thereon and the uninvested cash in the 2010 Housing Escrow Fund will generate sufficient amounts to pay the principal of and interest on the 2010 Housing Bonds to and includ- ing September 1, 2020, and to redeem the then outstanding 2010 Housing Bonds in full on September 1, 2020, at a redemption price equal to 100% of the principal amount thereof. The sufficiency of the moneys, investment earnings and maturing Treasuries for such purposes will be verified by Grant Thornton LLP (the "Verification Agent"). See "VERIFICATION OF MATHEMATICAL COMPUTATIONS." Assuming the accuracy of the Verification Agent's computa- tions, as a result of the deposit and application of funds in the 2010 Housing Escrow Fund, the obligations of the Successor Agency with respect to the 2010 Housing Bonds will be defeased and discharged. The 2010 Housing Bonds to be refunded are shown in the following table: Maturity Amount Interest Call Call CUSIP Date Refunded Rate Date Prince Number 9/1/2017 $ 850,000 4.000% 901048 DF2 9/1/2018 880,000 4.000 901048 DGO 9/1/2019 920,000 4.000 901048 DH8 9/1/2020 955,000 4.000 901048 DJ4 9/1/2021 995,000 4.125 9/1/2020 100.000 901048 DK1 9/1/2022 1,035,000 4.250 9/1/2020 100.000 901048 DL9 9/1/2023 1,080,000 4.250 9/1/2020 100.000 901048 DQ8 9/1/2024 1,125,000 5.000 9/1/2020 100.000 901048 DR6 9/1/2025 1,180,000 5.000 9/1/2020 100.000 901048 DM7 9/1/2030 4,620,000 5.000 9/1/2020 100.000 901048 DNS 9/1/2039 6,770,000 5.250 9/1/2020 100.000 901048 DPO The amounts held by the Escrow Bank in the 2010 Housing Escrow Fund are pledged solely to the pay- ment of amounts due and payable by the Successor Agency with respect to the 2010 Housing Bonds. The moneys and Treasuries deposited in the 2010 Housing Escrow Fund will not be available for the payment of debt service with respect to the Bonds or any other obligations of the Successor Agency. ME 2010 Redevelopment Bonds. A portion of the proceeds of the Bonds, together with amounts on de- posit in the funds and accounts related to the 2010 Redevelopment Bonds, will be deposited in an escrow fund (the "2010 Redevelopment Escrow Fund") under an escrow deposit and trust agreement, by and between the Successor Agency and the Escrow Bank. A portion of such amounts will be invested in cer- tain Treasuries and the remaining amounts will be held in cash, uninvested. The maturing Treasuries, the interest thereon and the uninvested cash in the 2010 Redevelopment Escrow Fund will generate sufficient amounts to pay the principal of and interest on the 2010 Redevelopment Bonds to and including Septem- ber 1, 2018, and to redeem the then outstanding 2010 Redevelopment Bonds in full on September 1, 2018, at a redemption price equal to 100% of the principal amount thereof. The sufficiency of the moneys, investment earnings and maturing Treasuries for such purposes will be verified by the Verification Agent. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS." Assuming the accuracy of the Verification Agent's computations, as a result of the deposit and application of funds in the 2010 Redevelopment Escrow Fund, the obligations of the Succes- sor Agency with respect to the 2010 Redevelopment Bonds will be defeased and discharged. The 2010 Redevelopment Bonds to be refunded are shown in the following table: Maturity Amount Interest Call Call CUSIP Date Refunded Rate Date Price Numbert 9/1/2017 $ 935,000 4.000% 901048 DY1 9/1/2018 970,000 4.000 901048 DZ8 9/1/2019 1,010,000 4.000 9/1/2018 100.000 901048 EA2 9/1/2020 1,050,000 4.000 9/1/2018 100.000 901048 EBO 9/1/2021 1,095,000 4.000 9/1/2018 100.000 901048 EC8 9/1/2022 1,135,000 4.250 9/1/2018 100.000 901048 ED6 9/1/2023 1,185,000 4.500 9/1/2018 100.000 901048 EE4 9/1/2024 1,240,000 5.000 9/1/2018 100.000 901048 EF1 9/1/2025 1,300,000 5.000 9/1/2018 100.000 901048 EG9 9/1/2026 1,365,000 4.750 9/1/2018 100.000 901048 EH7 9/1/2027 1,430,000 4.750 9/1/2018 100.000 901048 EJ3 9/1/2028 1,500,000 5.000 9/1/2018 100.000 901048 EKO 9/1/2029 1,575,000 5.000 9/1/2018 100.000 901048 EL8 9/1/2030 1,650,000 5.000 9/1/2018 100.000 901048 EM6 9/1/2032 3,555,000 5.000 9/1/2018 100.000 901048 EN4 9/1/2035 6,030,000 5.000 9/1/2018 100.000 901048 EP9 9/1/2040 12,230,000 5.000 9/1/2018 100.000 901048 EQ7 The amounts held by the Escrow Bank in the 2010 Redevelopment Escrow Fund are pledged solely to the payment of amounts due andpayable by the Successor Agency with respect to the 2010 Redevelopment Bonds. The moneys and Treasuries deposited in the 2010 Redevelopment Escrow Fund will not be available for the payment of debt service with respect to the Bonds or any other obligations of the Successor Agency. -9- Estimated Sources and Uses of Funds The estimated sources and uses of funds are summarized below. Sources: Principal Amount of Bonds Plus: Original Issue Premium 2010 Housing Bonds Released Moneys 2010 Redevelopment Bonds Released Moneys Total Sources Uses: Deposit to 2010 Housing Bonds Escrow Fund Deposit to 2010 Redevelopment Bonds Escrow Fund Costs of Issuance (1) Total Uses (1) Costs of Issuance include the Underwriter's discount, fees and expenses of Bond Counsel, Disclosure Counsel, the Munic- ipal Advisor, the Fiscal Consultant, the Trustee, the City, the Successor Agency administrative staff, Successor Agency counsel, printing expenses, rating fees, the premiums for the Municipal Bond Insurance Policy ($____) and the Reserve Account Insurance Policy ($____) and other costs related to the issuance of the Bonds. -10- Debt Service Schedule The following table shows the annual debt service schedule for the Bonds, assuming no optional redemption of the Bonds. Bond Year Ending Sept.1 Principal* Interest Total 2017 $ 1,750,000 2018 1,670,000 2019 1,725,000 2020 1,795,000 2021 1,870,000 2022 1,935,000 2023 2,040,000 2024 2,140,000 2025 2,245,000 2026 2,360,000 2027 2,475,000 2028 2,185,000 2029 1,845,000 2030 1,935,000 2031 2,030,000 2032 2,135,000 2033 2,240,000 2034 2,360,000 2035 2,470,000 2036 2,600,000 2037 2,725,000 2038 2,860,000 2039 3,000,000 2040 2,355,000 Total $52,745,000 *Preliminary, subject to change. THE BONDS Authority for Issuance The issuance of the Bonds and the Indenture were authorized by the Successor Agency pursuant to Resolution No. 16-01, adopted on June 7, 2016 (the "Successor Agency Resolution"), and approved by the Oversight Board for the Successor Agency pursuant to Resolution No. 16-06, adopted on June 14, 2016 (the "Oversight Board Resolution"). Section 34177.5 of the Dissolution Act provides that when, as here, a successor agency issues re- funding bonds with the approval of the oversight board and the DOF, the oversight board may not unilat- erally approve any amendments to or early termination of the bonds, and the scheduled payments on the -11- bonds shall be listed in the Recognized Obligation Payment Schedule and are not subject to further review and approval by the DOF or the California State Controller. Pursuant to the Dissolution Act, written notice of the Oversight Board Resolution was provided to the DOF on June 15, 2016. On , 2016, the DOF provided a letter to the Successor Agency stating that based on the DOF's review and application of the law, the Oversight Board Resolution ap- proving the Bonds is approved by the DOF. Description of the Bonds The Bonds will be issued and delivered in fully -registered form without coupons in the denomina- tion of $5,000 or any integral multiple thereof for each maturity, initially in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC "), as registered owner of all Bonds. The initially executed and delivered Bonds will be dated the date of delivery (the "Closing Date") and mature on Sep- tember 1 in the years and in the amounts shown on the inside cover page of this Official Statement. Interest on the Bonds will be calculated on the basis of a 360 -day year of twelve 30 -day months at the rates shown on the inside cover page of this Official Statement, payable semiannually on March 1 and September 1 in each year, commencing on March 1, 2017, by check mailed to the registered owners there- of or upon the request of the Owners of $1,000,000 or more in principal amount of Bonds, by wire trans- fer to an account in the United States which shall be designated in written instructions by such Owner to the Trustee on or before the close of business on the fifteenth (15th) calendar day of the month preceding each Interest Payments Date, whether or not such fifteenth (15th) calendar day of the month is a Business Day (the "Record Date") preceding the Interest Payment Date. One fully -registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX C—BOOK-ENTRY ONLY SYSTEM. Redemption Optional Redemption. The Bonds maturing on or before September 1, , are not subject to op- tional redemption prior to maturity. The Bonds maturing on and after September 1, , are subject to redemption, at the option of the Successor Agency on any date on or after September 1, , in whole or in part, by such maturities as are determined by the Successor Agency and by lot within a maturity, from any available source of funds, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. Notice of Redemption. The Trustee on behalf of and at the expense of the Successor Agency will mail (by first class mail, postage prepaid) notice of any redemption at least twenty (20) but not more than sixty (60) days prior to the redemption date, to (i) the Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, and (ii) to the Securities Depositories and to the Information Services designated in a Written Request of the Successor Agency filed with the Trus- tee at the time the Successor Agency notifies the Trustee of its intention to redeem Bonds; but such mail- ing will not be a condition precedent to such redemption and neither failure to receive any such notice nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessa- tion of the accrual of interest thereon. Such notice will state the redemption date and the redemption price, will designate the CUSIP number of the Bonds to be redeemed, state the individual number of each -12- Bond to be redeemed or state that all Bonds between two stated numbers (both inclusive) or all of the Bonds Outstanding (or all Bonds of a maturity) are to be redeemed, and will require that such Bonds be then surrendered at the Trust Office of the Trustee for redemption at the said redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any optional redemption of the Bonds, the notice of redemption shall state that the redemption is conditioned upon receipt by the Trustee of sufficient mon- eys to redeem the Bonds on the anticipated redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Bonds have not been deposited with the Trustee. In the event that the Trustee does not receive sufficient funds by the scheduled optional redemption date to so redeem the Bonds to be optionally redeemed, such event shall not constitute an Event of Default; the Trustee shall send written notice to the Owners to the effect that the redemption did not occur as anticipated, and the Bonds for which notice of optional redemption was given shall remain Outstanding for all purposes of the Indenture. Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Effect of Redemption. From and after the date fixed for redemption, if funds available for the pay- ment of the redemption price of and interest on the Bonds so called for redemption shall have been duly deposited with the Trustee, such Bonds so called shall cease to be entitled to any benefit under the Inden- ture other than the right to receive payment of the redemption price and accrued interest to the redemp- tion date, and no interest shall accrue thereon from and after the redemption date specified in such notice. Manner of Redemption. Whenever any Bonds or portions thereof are to be selected for redemption by lot, the Trustee shall make such selection, in such manner as the Trustee shall deem appropriate, and shall notify the Successor Agency thereof. All Bonds redeemed shall be canceled. Selection ofBondsfor Redemption. Whenever provision is made in the Indenture for the redemption of Bonds and less than all Bonds then currently outstanding are called for redemption, the Trustee will select Bonds for redemption from Bonds then currently Outstanding and not previously called for re- demption, at the written direction of the Successor Agency in such order of maturity as shall be designat- ed by the Successor Agency, and in the absence of such direction, pro rata among maturities and by lot within a maturity. The Trustee will promptly notify the Successor Agency in writing of the Bonds so se- lected for redemption. THE DISSOLUTION ACT The Dissolution Act requires the County Auditor -Controller to determine the amount of property taxes that would have been allocated to the Former Agency (pursuant to subdivision (b) of section 16 of Article XVI of the State Constitution) had the Former Agency not been dissolved pursuant to the opera- tion of AB 1X 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Successor Agency established and held by the County Auditor -Controller pursuant to the Dissolution Act. -13- The Dissolution Act provides that any bonds authorized thereunder to be issued by the Successor Agency will be considered indebtedness incurred by the Former Agency, with the same lien priority and legal effect as if the bonds had been issued prior to the effective date of AB 1X 26, in full conformity with the applicable provisions of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency's Recognized Obligation Payment Schedule. See "THE DISSOLUTION ACT— Recognized Obligation Payment Schedules." The Dissolution Act further provides that bonds authorized by the Dissolution Act to be issued by the Successor Agency will be secured by a pledge of, and lien on, and will be repaid from moneys deposit- ed from time to time in the Redevelopment Property Tax Trust Fund, and that property tax revenues pledged to any bonds authorized to be issued by the Successor Agency under the Dissolution Act, includ- ing the Bonds, are taxes allocated to the Successor Agency pursuant to subdivision (b) of section 33670 of the Redevelopment Law and section 16 of Article XVI of the State Constitution. Pursuant to subdivision (b) of section 33670 of the Redevelopment Law and section 16 of Article XVI of the State Constitution and as provided in the Redevelopment Plan, taxes levied upon taxable prop- erty in the Redevelopment Projects each year by or for the benefit of the State, any city, county, city and county, district, or other public corporation (herein sometimes collectively called "taxing agencies") after the effective date of the ordinance approving the applicable Redevelopment Plan, or the respective effec- tive dates of ordinances approving amendments to the Redevelopment Plan that added territory are to be divided as follows: (a) To Taxing Agencies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies up- on the total sum of the assessed value of the taxable property in the Redevelopment Pro- jects as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinance adopting the applicable Redevelopment Plan, or the respective effective dates of ordi- nances approving amendments to the Redevelopment Plan that added territory to the Re- development Projects, as applicable (each, a "base year valuation"), will be allocated to, and when collected will be paid into, the funds of the respective taxing agencies as taxes by or for the taxing agencies on all other property are paid; and (b) To the Former Agency/Successor Agency: Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and the interest on, any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency, that portion of the levied taxes each year in excess of such amount, annually allocated within limitations established by the applica- ble Redevelopment Plan, following the date of issuance of the Bonds, when collected will be paid into a special fund of the Successor Agency. Section 34172 of the Dissolution Act provides that, for purposes of section 16 of Article XVI of the State Constitution, the Re- development Property Tax Trust Fund shall be deemed to be a special fund of the Suc- cessor Agency to pay the debt service on indebtedness incurred by the Former Agency or the Successor Agency to finance or refinance the redevelopment projects of the Former Agency. -14- That portion of the levied taxes described in paragraph (b) above, less amounts deducted pursuant to section 34183(a) of the Dissolution Act for permitted administrative costs of the County Auditor - Controller, constitute the amounts required under the Dissolution Act to be deposited by the County Au- ditor -Controller into the Redevelopment Property Tax Trust Fund. In addition, section 34183 of the Dis- solution Act effectively eliminates the January 1, 1989 date from paragraph (b) above. In addition, pursuant to section 34187 of the Dissolution Act, funds associated with retired en- forceable obligations are required to be reallocated to taxing agencies as regular property taxes and not deposited into the Redevelopment Property Tax Trust Fund for the Successor Agency at all (however, section 34187(a)(2) of the Dissolution Act provides for retention of funds by the Successor Agency to the extent needed for payment of enforceable obligations upon authorization by the DOF). Recognized Obligation Payment Schedules Submission of Recognized Obligation Payment Schedule. Not less than 90 days prior to each January 2 and June 1, the Dissolution Act requires successor agencies to prepare, and submit to the successor agen- cy's oversight board and the DOF for approval, a recognized obligation payment schedule (the "Recog- nized Obligation Payment Schedule") pursuant to which enforceable obligations (as defined in the Disso- lution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Commencing on February 1, 2016, successor agencies were transitioned to an annual Recognized Obligation Payment Schedule process pursuant to which successor agencies are required to file Recog- nized Obligation Payment Schedules with the DOF and the County Auditor -Controller for approval on or before each February 1 for the July 1 through June 30 period immediately following such February 1. For example, on February 1, 2016, the Successor Agency was required to file a Recognized Obligation Pay- ment Schedule for the period commencing July 1, 2016 through June 30, 2017. In addition, commencing on September 22, 2015, successor agencies that have received a Finding of Completion and the concurrence of the DOF as to the items that qualify for payment, among other conditions, may at their option, file a "Last and Final" Recognized Obligation Payment Schedule. If ap- proved by the DOF, the Last and Final Recognized Obligation Payment Schedule will be binding on all parties, and the Successor Agency will no longer submit a Recognized Obligation Payment Schedule to the DOF or the Oversight Board. The county auditor -controller will remit the authorized funds to the Succes- sor Agency in accordance with the approved Last and Final Recognized Obligation Payment Schedule un- til each remaining enforceable obligation has been fully paid. A Last and Final Recognized Obligation Payment Schedule may only be amended twice, and only with approval of the DOF and the County Audi- tor -Controller. The Successor Agency currently has no plans to file a Last and Final Recognized Obliga- tion Payment Schedule. Payment of Amounts Listed on the Recognized Obligation Payment Schedule. As defined in the Disso- lution Act, "enforceable obligation" includes bonds, including the required debt service, reserve set - asides, and any other payments required under the indenture or similar documents governing the issuance of the outstanding bonds of the former redevelopment agency or the successor agency, as well as other obligations such as loans, judgments or settlements against the former redevelopment agency or the suc- cessor agency, any legally binding and enforceable agreement that is not otherwise void as violating the debt limit or public policy, contracts necessary for the administration or operation of the successor agency, -15- and, under certain circumstances, amounts borrowed from the successor agency's low and moderate in- come housing fund. A reserve may be included on the Recognized Obligation Payment Schedule and held by the suc- cessor agency when required by a bond indenture or when the next property tax allocation will be insuffi- cient to pay all obligations due under the provisions of the bonds for the next payment due in the following half of the calendar year. Sources of Payments for Enforceable Obligations. Under the Dissolution Act, the categories of sources of payments for enforceable obligations listed on a Recognized Obligation Payment Schedule are the following: (i) the low and moderate income housing fund, (ii) bond proceeds, (iii) reserve balances, (iv) administrative cost allowance (successor agencies are entitled to receive not less than $250,000, un- less that amount is reduced by the oversight board), (v) the Redevelopment Property Tax Trust Fund (but only to the extent no other funding source is available or when payment from property tax revenues is re- quired by an enforceable obligation or otherwise required under the Dissolution Act), or (vi) other reve- nue sources (including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the redevelopment agency, as approved by the oversight board). The Dissolution Act provides that only those payments listed in the Recognized Obligation Pay- ment Schedule may be made by a successor agency and only from the funds specified in the Recognized Obligation Payment Schedule. Order of Priority of Distributions from Redevelopment Property Tax Trust Fund. Typically, under the Redevelopment Property Tax Trust Fund distribution provisions of the Dissolution Act, a county auditor - controller is to distribute funds for each six-month period in the following order specified in section 34183 of the Dissolution Act: (i) first, subject to certain adjustments for subordinations to the extent permitted under the Dissolution Act, if any (as described above under "SECURITY FOR THE BONDS— Statutory Pass -Through Payments" and "—Pass -Through Agreements with Taxing Agencies") and no later than each January 2 and June 1, amounts required for pass-through payments such entity would have received under provisions of the Redevelopment Law, as those provisions read on January 1, 2011, including negotiated pass-through agreements and statutory pass-through ob- ligations; (ii) second, on each January 2 and June 1, to the successor agency for payments listed in its Recognized Obligation Payment Schedule, with debt service payments scheduled to be made for tax allocation bonds having the highest priority over payments scheduled for other debts and obligations listed on the Recognized Obligation Payment Schedule; (iii) third, on each January 2 and June 1, to the successor agency for the administrative cost allowance, as defined in the Dissolution Act; and (iv) fourth, on each January 2 and June 1, to taxing entities any moneys remaining in the Redevelopment Property Tax Trust Fund after the payments and transfers authorized by clauses (i) through (iii), in an amount proportionate to such taxing entity's share of property tax revenues in the tax rate area in that fiscal year (without giving effect to any pass-through obliga- tions that were established under the Redevelopment Law). -16- Failure to Submit a Recognized Obligation Payment Schedule. There are strong incentives for the Successor Agency to submit Recognized Obligation Payment Schedules on time. If the Successor Agency does not submit a Recognized Obligation Payment Schedule to the Oversight Board, the County Auditor - Controller and the DOF on or before each February 1 commencing February 1, 2016 (unless the Successor Agency submits and obtains approval from the DOF of a Last and Final Recognized Obligation Payment Schedule), then the Successor Agency will be subject to a $10,000 per day civil penalty for every day the schedule is not submitted to the DOF. See "THE DISSOLUTION ACT—Recognized Obligation Pay- ment Schedules" for discussion regarding submission of Last and Final Recognized Obligation Payment Schedule. Additionally, if the Successor Agency does not submit a Recognized Obligation Payment Schedule to the Oversight Board and the DOF within 10 days of the deadline, then the Successor Agen- cy's maximum administrative cost allowance may be reduced by up to 25%. For additional information regarding procedures under the Dissolution Act relating to late Recognized Obligation Payment Schedules and implications for the Bonds, see "RISK FACTORS - Recognized Obligation Payment Schedule." History of Submission of the Recognized Obligation Payment Schedules. The Successor Agency has policies and procedures in place to ensure full and timely compliance with the above-described covenant. See "Table 5—ALL REDEVELOPMENT PROJECTS—Redevelopment Property Tax Trust Fund De- posits" for a description of ROPS deposits for Fiscal Years 2011-12 through 2015-16. SECURITY FOR THE BONDS The County Auditor -Controller will deposit property tax revenues into the Redevelopment Prop- erty Tax Trust Fund pursuant to the requirements of the Health and Safety Code, including inter glia Health and Safety Code section 34183 and 34170.5(b). The Bonds are payable from and secured by the Tax Revenues to be derived from the Redevelopment Projects consisting of a portion of the property tax revenues deposited in the Redevelopment Property Tax Trust Fund. Pledge Under the Indenture Except as described in "—Redevelopment Obligation Retirement Fund" below and as required to compensate or indemnify the Trustee, the Bonds and any Parity Debt are equally secured by a pledge of, security interest in and lien on all of the Tax Revenues, including all of the Tax Revenues in the Rede- velopment Obligation Retirement Fund or in the Special Fund (if applicable), and by a first and exclusive pledge and lien upon all of the moneys in the Debt Service Fund (including the Interest Account, the Principal Account and the Redemption Account) without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. The Bonds are additionally secured by a first and exclusive pledge of, security interest in and lien upon all of the moneys in the Reserve Account estab- lished by the Indenture. The Bonds are also equally secured by the pledge and lien created with respect to the Bonds by section 34177.5(g) of the Dissolution Act on moneys deposited from time to time in the Re- development Property Tax Trust Fund. Except for the Tax Revenues and such moneys, no funds or prop- erties of the Successor Agency are pledged to, or otherwise liable for, the payment of principal of or inter- est on the Bonds. In consideration of the acceptance of the Bonds by purchasers of the Bonds, the Indenture will be deemed to be and will constitute a contract between the Successor Agency and the Trustee for the benefit of the Owners from time to time of the Bonds, and the covenants and agreements set forth in the Inden- -17- ture to be performed on behalf of the Successor Agency are for the equal and proportionate benefit, secu- rity and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof or the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or in the Indenture. Tax Revenues "Tax Revenues" means the moneys deposited from time to time in the Redevelopment Property Tax Trust Fund established pursuant to subdivision (c) of section 34172 of the Dissolution Act, as provid- ed in paragraph (2) of subdivision (a) of section 34183 of the Dissolution Act, after payment of (a) County administrative fees pursuant to section 34183(a) of the Dissolution Act, and (b) all amounts due under the Statutory Pass -Through Payments and the Pass -Through Agreements that have, by their terms, a senior lien on Tax Revenues. If, and to the extent, that the provisions of section 34172 or paragraph (2) of subdi- vision (a) of section 34183 of the Dissolution Act are invalidated by a final judicial decision, then Tax Rev- enues shall include all tax revenues allocated to the payment of indebtedness of the Successor Agency pursuant to section 33670 of the Law or such other section as may be in effect at the time providing for the allocation of tax increment revenues to the Successor Agency in accordance with Article XVI, Section 16 of the California Constitution. Before it was amended by the Dissolution Act, the Redevelopment Law required the Former Agency to set aside not less than 20% of all tax increment generated in the Redevelopment Projects into a low and moderate income housing fund to be used for the purpose of increasing, improving and/or pre- serving the supply of low and moderate income housing. These tax increment revenues were commonly referred to as "Housing Set -Aside." The Dissolution Act eliminated the Housing Set -Aside requirement. The housing fund into which these set-aside amounts were formerly deposited has been eliminated and any unencumbered amounts remaining in that fund have been identified through a mandated due diligence review. The amounts found to be unencumbered through this due diligence review have been paid to the County and these funds have been allocated to the taxing entities within the Redevelopment Projects. Since a deduction for the Housing Set -Aside is no longer required, amounts that were previously required to be deposited in the housing fund are now included in Tax Revenues. See "SECURITY FOR THE BONDS—Statutory Pass -Through Payments" and "SECURITY FOR THE BONDS—Pass-Through Agreements with Taxing Agencies." Flow of Funds Under the Indenture General. The Successor Agency previously established the Redevelopment Obligation Retirement Fund pursuant to section 34170.5(a) of the Dissolution Act and agrees to hold and maintain the Redevel- opment Obligation Retirement Fund as long as any of the Bonds are Outstanding. Deposit in Redevelopment Obligation Retirement Fund; Transfer to Debt Service Fund. The Indenture provides that the Successor Agency shall deposit all of the Tax Revenues received in any Bond Year in the Redevelopment Obligation Retirement Fund promptly upon receipt thereof by the Successor Agency, and promptly thereafter shall transfer amounts received therein to the Debt Service Fund established and held -18- by the Trustee under the Indenture until such time during such Bond Year as the amounts so transferred to the Debt Service Fund equal the aggregate amounts required to be deposited by the Trustee into the Interest Account, the Principal Account and the Redemption Account of the Debt Service Fund in such Bond Year pursuant to the Indenture and for deposit in such Bond Year in the funds and accounts estab- lished with respect to Parity Debt, as provided in any Supplemental Indenture. All Tax Revenues received by the Successor Agency in excess of the amount required to pay debt service on the Bonds and any Parity Debt, and except as may be provided to the contrary in any Parity Debt Instrument, shall be released from the pledge and lien under the Indenture and shall be applied in accordance with the Redevelopment Law, including but not limited to the payment of debt service on any Subordinate Debt. Prior to the payment in full of the principal of and interest and redemption premium (if any) on the Bonds and the payment in full of all other amounts payable under the Indenture and under any Supplemental Indentures, the Successor Agency shall not have any beneficial right or interest in the moneys on deposit in the Redevelopment Ob- ligation Retirement Fund, except as may be provided in the Indenture and in any Supplemental Indenture. Deposit of Amounts by Trustee. There is established a trust fund to be known as the Debt Service Fund, which will be held by the Trustee under the Indenture in trust. Concurrently with transfers with respect to Parity Debt pursuant to Parity Debt Instruments, moneys in the Redevelopment Obligation Re- tirement Fund shall be transferred by the Successor Agency to the Trustee in the following amounts, at the following times, and deposited by the Trustee in the following respective special accounts, which are established in the Debt Service Fund, and in the following order of priority: Interest Account. On or before the fifth Business Day preceding each Interest Payment Date, commencing with the March 1, 2017, Interest Payment Date, to the extent there are moneys available, the Trustee shall transfer funds from the Debt Service Fund for deposit in the Interest Account an amount which, when added to the amount contained in the Interest Account on that date, will be equal to the aggregate amount of the interest becoming due and payable on the Out- standing Bonds and Parity Debt on such Interest Payment Date. No such transfer and deposit need be made to the Interest Account if the amount contained therein is at least equal to the inter- est to become due on the next succeeding Interest Payment Date upon all of the Outstanding Bonds and Parity Debt. Subject to this Indenture, all moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds and Pari- ty Debt as it becomes due and payable (including accrued interest on any Bonds and Parity Debt redeemed prior to maturity pursuant to this Indenture). Principal Account. On or before the fifth (5th) Business Day preceding March 1, 2017 and September 1, 2017, to the extent there are moneys available, the Trustee shall transfer funds from the Debt Service Fund for deposit in the Principal Account an amount which, when added to the amount then contained in the Principal Account, will be equal to the principal becoming due and payable on the Outstanding Bonds on September 1, 2017. On or before the fifth (5th) Business Day preceding March 1 and September 1 in each year beginning March 1, 2018, the Successor Agency shall transfer to the Trustee on or before March 1 of such year fifty percent (50%) of the principal amount due on the following September 1, and shall transfer on or before September 1 of such year the remaining fifty percent (50%) of the principal amount due on September 1 of such year. No such transfer and deposit need be made to the Principal Account if the amount contained therein is at least equal to the principal to become due on the next September 1. All moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds as it shall become due and payable. -19- Reserve Account. In lieu of a cash deposit to the Reserve Account, the Reserve Policy, in an amount equal to the Reserve Requirement, shall be delivered to the Trustee on the Closing Date. The prior written consent of the Municipal Bond Insurer shall be a condition precedent to the deposit of any credit instrument in lieu of a cash deposit into the Reserve Account. "Reserve Requirement" means, as of any date of calculation, to be equal to the least of (a) Maximum Annu- al Debt Service for then current or every subsequent Bond Year, (b) 125% of average Annual Debt Service for then current or every subsequent Bond Year, and (c) 10% of the original principal amount of the Bonds and any Parity Debt. On the Closing Date, such amount is $ If, on any Interest Payment Date, the moneys available in the Interest Account and/or the Principal Account do not equal the amount of the principal or interest with respect to the Bonds then coming due and payable, the Trustee shall apply the moneys available in the Reserve Ac- count to makeup delinquent amounts by transferring the amount necessary for this purpose to the Interest Account and/or the Principal Account or shall draw on the Reserve Policy and apply amounts received from such draw to makeup delinquent amounts by transferring the amount nec- essary for this purpose to the Interest Account and/or the Principal Account. To the extent there is cash or investments on deposit in the Reserve Account, such cash or investments shall be ap- plied first before there is any draw on the Reserve Policy or any other credit facility credited to the Reserve Account in lieu of cash (a "Credit Facility"). Payment of any Policy Costs (hereinafter defined) shall be made prior to replenishment of any such cash amounts. Draws on all Credit Fa- cilities (including the Reserve Policy) on which there is available coverage shall be made on a pro rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Account. Payment of Policy Costs and reimburse- ment of amounts with respect to other Credit Facilities shall be made on a pro rata basis prior to replenishment of any cash drawn from the Reserve Account. For the avoidance of doubt, "availa- ble coverage" means the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instrument without regard to the legal or financial ability or willing- ness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw. Upon receipt of any delinquent amount with respect to which moneys have been advanced from the Reserve Account or there has been a draw on the Re- serve Policy, such amount shall be deposited in the Reserve Account to the extent of such advance and first applied to reimburse a draw on the Reserve Policy and then to replenish any cash drawn therefrom. The Reserve Account may be maintained at the specific direction of the Successor Agen- cy in the form of one or more separate sub -accounts which are established for the purpose of hold- ing the proceeds of separate issues of the Bonds and Parity Debt in conformity with applicable provisions of the Tax Code. The Successor Agency has no obligation to replace the Reserve Policy or to fund the Reserve Ac- count with cash if, at any time the Bonds are outstanding amounts are unavailable under the Reserve Policy. The Successor Agency shall repay any draws under the Reserve Policy and pay all related reasonable expenses incurred by the Municipal Bond Insurer. Interest shall accrue and be payable on such draws and expenses from the date of payment by the Municipal Bond Insurer at the Late Payment Rate. -20- Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, the "Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw. Amounts in respect of Policy Costs paid to the Municipal Bond Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Municipal Bond Insurer on account of principal due, the coverage un- der the Reserve Policy will be increased by a like amount, subject to the terms of the Reserve Poli- cy. All cash and investments in the Reserve Account shall be transferred to the Debt Service Fund for payment of the debt service on the Bonds before any drawing may be made on the Re- serve Policy or any other Reserve Fund Credit Instrument in lieu of cash. Payment of any Policy Cost shall be made prior to replenishment of any cash amounts. Draws on all Reserve Fund Credit Instruments (including the Reserve Policy) on which there is available coverage shall be made on a pro -rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Account. Payment of Policy Costs and reimbursement of amounts with respect to other Reserve Fund Credit Instruments shall be made on a pro rata basis prior to replenishment of any cash drawn from the Reserve Account. For the avoidance of doubt, "available coverage" means the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instru- ment without regard to the legal or financial ability or willingness of the provider of such instru- ment to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw. Draws under the Reserve Policy may only be used to make payments on Bonds (but not Parity Debt). If the Successor Agency shall fail to pay any Policy Costs in accordance with the require- ments of paragraph (a) above, the Municipal Bond Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under this Indenture other than (i) acceleration of the maturity of the Bonds, or (ii) remedies which would adversely affect owners of the Bonds. This Indenture shall not be discharged until all Policy Costs owing to the Municipal Bond Insurer shall have been paid in full. The Successor Agency's obligation to pay such amount shall expressly survive payment in full of the Bonds. The Trustee shall ascertain the necessity for a claim upon the Reserve Policy in accord- ance with the provisions of paragraph (a) hereof and provide notice to the Municipal Bond Insurer at least three business days prior to each date upon which interest or principal is due on the Bonds. The Reserve Policy shall expire on the earlier of the date the Bonds are no longer out- standing and the final maturity date of the Bonds. -21- With respect to the Reserve Policy, notwithstanding anything to the contrary set forth in this Indenture, the Successor Agency and the Trustee agree to comply with the terms of the Re- serve Agreement. Redemption Account. On or before the fifth Business Day preceding any date on which Bonds are to be redeemed, the Trustee shall withdraw from the Debt Service Fund and transfer to the Redemption Account (which the Trustee shall thereupon establish and hold in trust hereun- der) an amount required to pay the principal of and premium, if any, on the Bonds to be redeemed on such date, taking into account any funds then on deposit in the Redemption Account. The Trustee shall also deposit in the Redemption Account any other amounts received by it from the Successor Agency designated by the Successor Agency in writing to be deposited in the Redemp- tion Account. All moneys in the Redemption Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and premium, if any, on the Bonds. Limited Obligation The Bonds are not a debt of the City, the County, the State or any of their political subdivisions except the Successor Agency, and none of the City, the County, the State or any of their political subdivi- sions except the Successor Agency are liable therefor. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. No member of the Successor Agency, the Oversight Board or the Board of Supervisors of the County shall be individually or personally liable for the payment of the principal of or interest or redemption premium (if any) on the Bonds; but nothing contained in the Indenture relieves any such member, officer, agent or employee from the per- formance of any official duty provided by law. Dissolution Act Covenant by the Successor Agency. The Successor Agency covenants in the Inden- ture that it will comply with all of the requirements of the Redevelopment Law and the Dissolution Act. Pursuant to section 34177 of the Dissolution Act as modified by passage of Senate Bill 107, by Feb- ruary 1 of each year the Successor Agency shall submit to the Department of Finance, a Recognized Obli- gation Payment Schedule that has been approved by the Oversight Board and that will be applicable to the next two Semiannual Periods (hereinafter defined). The Successor Agency shall take all actions required under the Dissolution Act as amended to include in the Recognized Obligation Payment Schedule for each Semiannual Period debt service on the Bonds and any Parity Debt, so as to enable the County Auditor - Controller to distribute from the Redevelopment Property Tax Trust Fund for deposit in the Redevelop- ment Obligation Retirement Fund on each January 1 and June 1 amounts required to enable the Successor Agency to pay timely payments of principal of, and interest on, the Bonds and any Parity Debt coming due with respect the applicable Semiannual Period, including inclusion on the applicable Recognized Obliga- tion Payment Schedule of (a) the amounts of debt service set forth in the Recognized Obligation Debt Ser- vice Schedule and (b) the amounts of debt service set forth in the Recognized Obligation Debt Service Schedule attached to any Supplemental Indenture, and the inclusion of any amount required to be depos- ited in the Reserve Account, in order to maintain in the Reserve Account the amount of the Reserve Re- quirement. Notwithstanding the foregoing, the Successor Agency shall use its best efforts, subject to there being available funds for that purpose, to include on each Recognized Obligation Payment Schedule that is payable by the County Auditor -Controller on January 2 one-half of the principal payment on the Bonds that is payable on the following September 1 as a reserve for the principal payment payable on such Sep- tember 1. The Recognized Obligation Debt Service Schedule shall not be amended except by Supple- mental Indenture entered into pursuant to the Indenture. "Semiannual Period" means (a) each six-month -22- period beginning on January 1 of any calendar year and ending on June 30 of such calendar year, and (b) each six-month period beginning on July 1 of any calendar year and ending on December 31 of such calen- dar year. In addition, the Successor Agency shall place on the applicable Recognized Obligation Payment Schedule for approval by the Oversight Board and DOF, to the extent necessary, the amounts to be held by the Successor Agency as a reserve until the following half of the calendar year, as contemplated by par- agraph (1)(A) of subdivision (d) of section 34171 of the Dissolution Act and any amount required to be deposited in the Reserve Account in order to maintain in the Reserve Account the amount of the Reserve Requirement. The Successor Agency has no power to levy and collect taxes, and various factors beyond its con- trol could affect the amount of Tax Revenues available in any six-month period to pay the principal of and interest on the Bonds (see "RISK FACTORS"). County Administrative Fees Chapter 466, Statutes of 1990 (referred to as SB 2557), permits the County to withhold a portion of annual tax revenues for the recovery of County charges related to property tax administration services to cities in an amount equal to their property tax administration costs proportionately attributable to cities. SB 2557, and subsequent legislation under SB 1559 (Statutes of 1992), permitted counties to charge all jurisdictions, including redevelopment agencies, on a year-to-year basis. Section 34182(a)(3) of the Cali- fornia Health and Safety Code also provides for recovery of county costs in connection with performing duties related to the dissolution of redevelopment agencies. The actual fiscal year 2015-16 charges for the Successor Agency equate to 0.84% of gross RPTTF revenues. The Fiscal Consultant's projections includ- ed assume that the County administrative costs will continue to be charged at approximately 1.03% of gross revenue in subsequent fiscal years. For purposes of showing debt service coverage, the Fiscal Consultant has assumed that the Coun- ty administrative fees are senior to the Successor Agency's pledge of Tax Revenues to its obligation to make debt service payments on the Bonds. Statutory Pass -Through Payments Because the Town Center Redevelopment Project and the South Central Redevelopment Project were established prior to January 1, 1994, they are not subject to statutory pass through payments. The MCAS -Tustin Redevelopment Project was adopted after January 1, 1994 and is therefore, subject to the Law as it was amended by passage of AB 1290. As amended, the Law requires that for pro- ject areas adopted after January 1, 1994, a prescribed portion of the agency's tax increment revenue must be shared with all taxing entities within the project area. This defined tax -sharing amount has three tiers. The first tier began with the first year that the project area received tax increment revenue and continues for the life of the project area. This first tier tax -sharing amount is 25 percent of the Successor Agency's Tax Revenues. The second tier began in the eleventh year after the Former Agency first received tax increment revenue. The second tier payments began in fiscal year 2014-15. This second tier is 21 percent of the tax increment revenue that is derived from the growth in assessed value that is in excess of the assessed value of the project area in year ten (Fiscal Year 2013-14)- -23- The third tier begins in the 31st year after the Former Agency first received tax increment reve- nue. These third tier payments will begin in fiscal year 2034-35. This third tier is 14 percent of the tax in- crement revenue that is derived from the growth in assessed value that is in excess of the assessed value of the project area in the 30th year. These three tiers of tax sharing are calculated independent of one anoth- er and continue from their inception through the life of the MCAS -Tustin Project. Section 33607.5(e) of the Law specifies a procedure whereby the Successor Agency may request subordination of the statutory tax sharing payments to payment of debt service on bonded indebtedness by all of the MCAS -Tustin Project's taxing entities. As part of this request, the Successor Agency must pro- vide substantial evidence to the taxing entities that it will have sufficient funds to make the debt service payments on the bonds as well as making the required statutory tax sharing payments. The taxing entities may respond and agree to the subordination request, they may do nothing and after 45 days be deemed to have agreed to the subordination or they may disapprove the subordination request. A taxing entity may disapprove a subordination request only if it believes based on substantial evidence that the Successor Agency's financial estimates are incorrect and that the Agency will not be able to make debt service and the tax sharing payments. The Successor Agency is not currently consid- ering a request for taxing entities to subordinate their payments to the payment of debt service on the Bonds. Pass -Through Agreements with Taxing Agencies Pursuant to Section 33401(b) of the Law, redevelopment agencies were authorized to enter into agreements to pay tax increment revenues to any taxing agency that has territory located within a redevel- opment project area in an amount which, in the agency's determination, is appropriate to alleviate any financial burden or detriment caused by a redevelopment project. These agreements normally provided for a pass-through of tax increment revenues directly to the affected taxing agency and, therefore, are commonly referred to as "pass-through" agreements. The Dissolution Act requires the County Auditor -Controller to distribute payments under the pass-through agreements to other taxing agencies before amounts that constitute Tax Revenues are depos- ited in the Successor Agency's Redevelopment Obligation Retirement Fund unless such payments have been subordinated or, by their terms are subordinate, and the Successor Agency has insufficient funds to meet its enforceable obligations. Town Center Redevelopment Project. The Former Agency did not enter into any tax sharing agree- ments within the Town Center Redevelopment Project. The City Council did not amend the Town Cen- ter Redevelopment Plan as allowed under SB 211 which allows the elimination of the limitation on the is- suance of new indebtedness to be repaid with tax increment revenue. As a result, the Town Center Project is not subject to tax sharing payments to those taxing entities with which they do not already have tax shar- ing agreements pursuant to section 33607.7 of the Law. South Central Redevelopment Project. The Former Agency did not enter into any tax sharing agree- ments within the original area of the South Central Redevelopment Project. The City Council did not amend the South Central Redevelopment Plan as allowed under SB 211 which allows the elimination of the limitation on the issuance of new indebtedness to be repaid with tax increment revenue. As a result, the original area of the South Central Redevelopment Project is not subject to tax sharing payments to those taxing entities with which they do not already have tax sharing agreements pursuant to section 33607.7 of the Law. -24- At the time the amendment area of the South Central Redevelopment Project was adopted, the Former Agency entered into three tax sharing agreements. The agreement with the Orange County Water District requires that the Former Agency pay the District $2,000 per year as mitigation of impacts caused by the adoption of the amendment area of the South Central Redevelopment Project. The Former Agency also entered into agreements with the South Orange County Community College District (formerly known as the Saddleback Community College District) and with the Tustin Unified School District. The terms of these agreements are identical except for the fact that the Tustin Unified School District subse- quently signed a Memorandum of Understanding that specified that the payments to the District under the agreement would be subordinate to Former Agency indebtedness. The agreements provide that cer- tain taxing sharing payments would occur to each respective agency beginning after the Former Agency has expended $10 million dollars for construction of facilities within the amendment area of the South Central Redevelopment Project and or retired bonds or other indebtedness for such construction as pro- vided in the agreement. There is no limit on the amount of indebtedness that may be incurred in connec- tion with the expenditure of the $10 million for said facilities and the Successor Agency has to date deter- mined the amount of indebtedness on an annual basis in the amendment area of the South Central Rede- velopment Project and no tax share payments are required. If payments are, at some point, required they would be in an amount equal to 50% of the proportionate share of the tax increment related to the amend- ment area of the South Central Redevelopment Project. Within the amendment area of the South Central Redevelopment Project, the South Orange County Community College District's share of general levy tax increment revenue is 9.16% and the Tustin Unified School District's share of general levy tax increment revenue is 45.50%. The Successor Agency does not currently anticipate that tax sharing payments pursu- ant to these agreements will be initiated during the term of the Bonds. No tax sharing payments pursuant to these agreements have been factored into the projections. MCAS -Tustin Redevelopment Project. Because the MCAS -Tustin Redevelopment Project was es- tablished after January 1, 1994, the Former Agency Former Agency did not enter into any tax sharing agreements. No Developer Agreements The Successor Agency has entered into no disposition and development agreements with third parties that constitute a pledge of Tax Revenue nor have they entered into any such agreements that would have a superior lien on Tax Revenues to payment of debt service on the Bonds. Parity Debt "Parity Debt" means any loan, bonds, notes, advances or indebtedness payable from Tax Reve- nues on a parity with the Bonds as authorized by the Indenture. The Indenture permits the issuance of Parity Debt to refund the Bonds. With respect to any such refunding, (i) annual debt service on such Pari- ty Debt must be lower than annual debt service on the obligations being refunded during every year the obligations would otherwise be outstanding and (ii) the final maturity of any such Parity Debt must not exceed the final maturity of the obligations being refunded. MUNICIPAL BOND INSURANCE [TO COME] -25- PROPERTY TAXATION IN CALIFORNIA Property Tax Collection Procedures Classification. In the State, property which is subject to ad valorem taxes is classified as "secured" or "unsecured." Secured and unsecured property are entered on separate parts of the assessment roll maintained by the County assessor. The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not be- come a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens on the secured property arising pursuant to State law, regardless of the time of the creation of other liens. Generally, ad valorem taxes are collected by a county (the "Taxing Authority") for the benefit of the various entities (e.g., cities, schools and special districts) that share in the ad valorem tax (each a tax- ing entity) and successor agencies eligible to receive distributions from the respective Redevelopment Property Tax Trust Funds. Collections. Secured and unsecured property are entered separately on the assessment roll main- tained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The taxing authority has four ways of collecting unsecured personal prop- erty taxes: (i) initiating a civil action against the taxpayer, (ii) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer, (iii) filing a certificate of delinquency for record in the county recorder's office to obtain a lien on certain prop- erty of the taxpayer, and (iv) seizing and selling personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes to the State for the amount of taxes which are delinquent. Penalty. A 10% penalty is added to delinquent taxes which have been levied with respect to proper- ty on the secured roll. In addition, property on the secured roll on which taxes are delinquent is declared in default by operation of law and declaration of the tax collector on or about June 30 of each fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collec- tor. A 10% penalty also applies to delinquent taxes with respect to property on the unsecured roll, and fur- ther, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on varying dates related to the tax bill mailing date. Delinquencies. The valuation of property is determined as of the January l lien date as equalized in August of each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due January 1 and become de- linquent August 31. Supplemental Assessments. California Revenue and Taxation Code section 75.70 provides for the reassessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Such reassessment is referred to as the Supplemental Assessment and is determined by ap- plying the current year's tax rate to the amount of the increase or decrease in a property's value and pro- rating the resulting property taxes to reflect the portion of the tax year remaining as determined by the -26- date of the change in ownership or completion of new construction. Supplemental Assessments become a lien against real property. Prior to the enactment of this law, the assessment of such changes was permit- ted only as of the next tax lien date following the change, and this delayed the realization of increased property taxes from the new assessments for up to 14 months. Since fiscal year 1984-85, revenues derived from Supplemental Assessments have been allocated to redevelopment agencies and taxing entities in the same manner as the general property tax. The receipt of Supplemental Assessment revenues by taxing entities typically follows the change of ownership by a year or more. This statute provides increased reve- nue to the Redevelopment Property Tax Trust Fund to the extent that supplemental assessments of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the January l lien date. If a change in ownership results in a decrease in assessed value, a negative sup- plemental assessment may occur, requiring a refund of taxes paid to the property owner. To the extent such supplemental assessments occur within the Redevelopment Projects, tax increment may increase or decrease. Revenues resulting from Supplemental Assessments have not been included in the Fiscal Con- sultant's projections of tax increment available to pay debt service on the Bonds. County Property Tax Collection and Administrative Costs. In 1990, the Legislature enacted SB 2557 (Chapter 466, Statutes of 1990) which allows counties to charge for the cost of assessing, collecting and allocating property tax revenues to local government jurisdictions in proportion to the tax -derived reve- nues allocated to each. SB 1559 (Chapter 697, Statutes of 1992) explicitly includes redevelopment agencies among the jurisdictions which are subject to such charges. In addition, sections 34182(e) and 34183(a) of the Dissolution Act allow administrative costs of the County Auditor -Controller for the costs of adminis- tering the provisions of the Dissolution Act. For fiscal year 2015-16, the County charges were 0.84% of gross tax increment within the Redevelopment Projects. Based on the collection charges for fiscal year 2015-16, the Fiscal Consultant projects the charge for fiscal year 2016-17 and future fiscal years as a per- centage of gross tax increment to remain at 0.84%. For purposes of the Fiscal Consultant's projections of tax increment available to pay debt service on the Bonds, the Fiscal Consultant assumed that the County will continue to charge the Successor Agency for property tax collection and administration and that such charge will increase proportionally with any increases in revenue. Levy and Collection of Taxes. The Successor Agency has no independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the ability of the Agency to repay the Agency Bonds. Likewise, delinquencies in the payment of property taxes and the impact of bankruptcy proceedings on the legal ability of taxing agencies to collect property taxes could have an adverse effect on the Agency's ability to make timely Agency Bond payments. The County has not elected to follow the procedures of sections 4701 et seq. of the California Revenue and Taxation Code, known as the "Teeter Plan," as to general taxes entered and collected on the secured tax roll. Consequently, property tax revenues in the Redevelopment Projects reflects actual collections. A ta- ble illustrating the historical tax collection rates in the Redevelopment Projects is included in the Fiscal Consultant's Report. See APPENDIX G—FISCAL CONSULTANT'S REPORT—Table H—Historical Collection Rates. Substantial delinquencies in the payment of property taxes could impair the timely re- ceipt by the Successor Agency of Tax Revenues, although the Tax Revenues provide substantial debt ser- vice coverage on the Bonds. See "ALL REDEVELOPMENT PROJECTS—Projected Available Net Tax Increment and Estimated Debt Service Coverage." -27- Unitary Property Assembly Bill ("AB") 2890 (Statutes of 1986, Chapter 1457) provides that, commencing with fis- cal year 1988-89, tax revenues derived from unitary property and assessed by the SBE are accumulated in a single Tax Rate Area for the County. The tax revenues are then to be allocated to each taxing entity county -wide as follows: (i) each taxing entity will receive the same amount as in the previous year plus an increase for inflation of up to 2%; (ii) if utility tax revenues are insufficient to provide the same amount as in the previous year, each taxing entity's share would be reduced pro rata county wide; and (iii) any in- crease in revenue above 2% would be allocated in the same proportion as the taxing entity's local secured taxable values are to the local secured taxable values of the County. AB 454 (Statutes of 1987, Chapter 921) further modified Chapter 1457 regarding the distribution of tax revenues derived from property assessed by the State Board of Equalization. Chapter 921 provides for the consolidation of all State -assessed property, except for regulated railroad property, into a single tax rate area in each county. Chapter 921 further provides for a new method of establishing tax rates on State - assessed property and distribution of property tax revenue derived from State -assessed property to taxing jurisdictions within each county in accordance with a new formula. Railroads will continue to be assessed and revenues allocated to all tax rate areas where railroad property is sited. To administer the allocation of unitary tax revenues to redevelopment agencies, the County no longer includes the taxable value of utilities as part of the reported taxable values of a redevelopment pro- ject. Consequently, the base year values of redevelopment projects are reduced by the amount of utility value that existed originally in the base years. The Auditor Controller allocated a total of $276,152 of uni- tary tax revenue to the Redevelopment Projects for fiscal year 2015-16. The Fiscal Consultant estimates $276,152 of unitary revenues were allocated to the Successor Agency from the Redevelopment Projects in fiscal year 2015-16. For purposes of the Fiscal Consultant's projection of tax revenues available to pay debt service on the Bonds, the Fiscal Consultant assumed that the amount of unitary revenue allocated for fiscal year 2015-16 will continue to be allocated to the Redevelopment Projects in the same amount for the life of the projection. Article XIIIA of the State Constitution Article XIIIA limits the amount of ad valorem taxes on real property to 1% of "full cash value" of such property, as determined by the county assessor. Article XIIIA defines "full cash value" to mean "the County Assessor's valuation of real property as shown on the 1975-76 tax bill under `full cash value,' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in owner- ship has occurred after the 1975 assessment." Furthermore, the "full cash value" of all real property may be increased to reflect the rate of inflation, as shown by the consumer price index, not to exceed 2% per year, or may be reduced. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by substantial damage, destruction or other factors, and to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances. Article XIIIA (i) exempts from the 1% tax limitation taxes to pay debt service on (a) indebtedness approved by the voters prior to July 1, 1978 or (b) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on -28- the proposition; (ii) requires a vote of two-thirds of the qualified electorate to impose special taxes, or cer- tain additional ad valorem taxes; and (iii) requires the approval of two-thirds of all members of the State Legislature to change any State tax laws resulting in increased tax revenues. The validity of Article XIIIA has been upheld by both the California Supreme Court and the Unit- ed States Supreme Court. In the general election held November 4, 1986, voters of the State approved two measures, Propo- sitions 58 and 60, which further amended Article XIIIA. Proposition 58 amended Article XIIIA to provide that the terms "purchase" and "change of ownership," for the purposes of determining full cash value of property under Article XIIIA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children. This amendment to Article XIIIA may reduce the rate of growth of local property tax revenues. Proposition 60 amended Article XIIIA to permit the Legislature to allow persons over the age of 55 who sell their residence and buy or build another of equal or lesser value within two years in the same county, to transfer the old residence assessed value to the new residence. As a result of the Legislature's action, the growth of property tax revenues may decline. Legislation enacted by the Legislature to implement Article XIIIA provides that all taxable proper- ty is shown at full assessed value as described above. In conformity with this procedure, all taxable proper- ty value included in this Official Statement is shown at 100% of assessed value and all general tax rates re- flect the $1 per $100 of taxable value (except as noted). Tax rates for voter -approved bonded indebtedness and pension liabilities are also applied to 100% of assessed value. Each year the Board of Equalization announces the applicable adjustment factor. Since the adop- tion of Proposition 13, inflation has, in most years, exceeded 2% and the announced factor has reflected the 2% cap. The changes in the California Consumer Price Index from October of one year and October of the next year are used to determine the adjustment factor for the January assessment date. Through fiscal year 2010-11 there were six occasions when the inflation factor was less than 2%. Until fiscal year 2010-11 the annual adjustment never resulted in a reduction to the base year values of individual parcels; however, the factor that was applied to real property assessed values for the January 1, 2010 assessment date was -0.237% and this resulted in reductions to the adjusted base year value of parcels. The table below re- flects the inflation adjustment factors for the current fiscal year and 10 prior fiscal years . Historical Inflation Adjustment Factors Fiscal Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 -29- Inflation Adj. Factor 2.000% 2.000 2.000 -0.237 0.753 2.000 2.000 0.454 1.998 1.525 Appropriations Limitation—Article XIIIB Article XIIIB limits the annual appropriations of the State and its political subdivisions to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and ser- vices rendered by the government entity. The "base year" for establishing such appropriations limit is the 1978/79 fiscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Section 33678 of the Redevelopment Law provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness shall not be deemed the receipt by a redevelopment agency of proceeds of taxes levied by or on behalf of a redevelop- ment agency within the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purpose of the Constitution and laws of the State, including section 33678 of the Rede- velopment Law. The constitutionality of section 33678 has been upheld in two California appellate court decisions. On the basis of these decisions, the Successor Agency has not adopted an appropriations limit. Proposition 87 On November 8, 1988, the voters of the State approved Proposition 87, which amended Article XVI, section 16 of the State Constitution to provide that property tax revenue attributable to the imposi- tion of taxes on property within a redevelopment project for the purpose of paying debt service on certain bonded indebtedness issued by a taxing entity (not the Former Agency or the Successor Agency) and ap- proved by the voters of the taxing entity after January 1, 1989 will be allocated solely to the payment of such indebtedness and not to redevelopment agencies. Appeals of Assessed Values Pursuant to California law, a property owner may apply for a reduction of the property tax as- sessment for such owner's property by filing a written application, in a form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In the County, a property owner desiring to reduce the assessed value of such owner's property in any one year must submit an application to the County Assessment Appeals Board (the "Appeals Board"). Applications for any tax year must be submitted by September 15 of such tax year. Following a review of each application by the staff of the County Assessor's Office, the staff makes a recommendation to the Appeals Board on each application which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces the assessment or confirms the as- sessment. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal's filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as "ongoing hardship"), the Assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. Appeals for reduction in the "base year" value of an assessment, which generally must be made within three years of the date of change in ownership or completion of new construction that determined the base year, if suc- cessful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. -30- Moreover, in the case of any reduction in any one year of assessed value granted for "ongoing hardship" in the then current year, and also in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, the property tax revenues from which Tax Revenues are derived attributable to such properties will be reduced in the then current year. In practice, such a reduced as- sessment may remain in effect beyond the year in which it is granted. See "ALL REDEVELOPMENT PROJECTS—Assessment Appeals" for information regarding historical and pending appeals of assessed valuations by property owners in the Redevelopment Projects. Also, see APPENDIX G—FISCAL CONSULTANT'S REPORT—Table J—Historical Assessment Ap- peal Summary. Proposition 8 Proposition 8, approved in 1978 (California Revenue and Taxation Code section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions under this code section may be initiated by the County Assessor or requested by the property owner. After such reductions in value are implemented, the Assessor is required to review the property's market value as of each subsequent lien date and adjust the value of real property to the lesser of its base year value as adjusted by the inflation factor pursuant to Article XIIIA of the California Constitution or its full cash value taking into account reductions in value due to damage, destruction, depreciation, obsoles- cence, removal of property or other factors causing a decline in value. Reductions made under Proposition 8 to residential properties are normally initiated by the Assessor but may also be requested by the property owner. Reductions of value for commercial, industrial and other land use types under Proposition 8 are normally initiated by the property owner as an assessment appeal. After a roll reduction is granted under this code section, the property is reviewed on an annual ba- sis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for infla- tion, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. For a summary of the recent history of Proposition 8 reductions in the Redevelopment Projects, see "ALL REDEVELOPMENT PROJECTS—Residential Real Estate Values." Propositions 218 and 26 On November 5, 1996, California voters approved Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amend- ment. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property - related fees and charges. On November 2, 2010, California voters approved Proposition 26, the "Super - majority Vote to Pass New Taxes and Fees Act." Proposition 26 amended Article XIIIC of the California -31- Constitution by adding an expansive definition for the term "tax," which previously was not defined un- der the California Constitution. Tax Revenues securing the Bonds are derived from property taxes that are outside the scope of taxes, assessments and property -related fees and charges which are limited by Proposition 218 and Propo- sition 26. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID and certain other propositions af- fecting property tax levies were each adopted as measures which qualified for the ballot pursuant to Cali- fornia's initiative process. From time to time other initiative measures could be adopted, further affecting Successor Agency revenues or the Successor Agency's ability to expend revenues. THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY As described in "INTRODUCTION," the Dissolution Act dissolved the Former Agency as of February 1, 2012. Thereafter, pursuant to section 34173 of the Dissolution Act, the City became the Suc- cessor Agency to the Former Agency. Subdivision (g) of section 34173 of the Dissolution Act, added by AB 1484, expressly affirms that the Successor Agency is a separate public entity from the City, that the two entities shall not merge, and that the liabilities of the Former Agency will not be transferred to the City nor will the assets of the Former Agency become assets of the City. Successor Agency Powers All powers of the Successor Agency are vested in its five members who are elected members of the City Council. Pursuant to the Dissolution Act, the Successor Agency succeeds to the organizational status of the Former Agency but without any legal authority to participate in redevelopment activities, except to complete any work related to an approved enforceable obligation. The Successor Agency is tasked with expeditiously winding down the affairs of the Former Agency, pursuant to the procedures and provisions of the Dissolution Act. Under the Dissolution Act, substantially all Successor Agency actions are subject to approval by the Oversight Board, as well as review by the DOF. Status of Compliance with Dissolution Act The Dissolution Act requires a due diligence review to determine the unobligated balances of each successor agency that are available for transfer to taxing entities. The due diligence review involves sepa- rate reviews of each successor agency's low and moderate income housing fund and of all other funds and accounts. Once a successor agency completes the due diligence review and any transfers to taxing entities, the DOF will issue a finding of completion that expands the authority of each successor agency in carrying out the wind down process. A finding of completion allows a successor agency to, among other things, retain real property assets of the dissolved redevelopment agency and utilize proceeds derived from bonds issued prior to January 1, 2011. The Successor Agency has completed the due diligence process and received its Finding of Com- pletion on May 15, 2013. -32- After receiving a finding of completion, each successor agency is required to submit a Long Range Property Management Plan detailing what it intends to do with its inventory of properties. Successor agencies are not required to immediately dispose of their properties but are limited in terms of what they can do with the retained properties. Permissible uses include: sale of the property, use of the property to fill an enforceable obligation, retention of the property for future redevelopment, and retention of the property for governmental use. These plans must be filed by successor agencies within six months of re- ceiving a finding of completion, and the DOF will review these plans as submitted on a rolling basis. The DOF Approved the Successor Agency's Long Range Property Management Plan on Decem- ber 10, 2015. Plan Limits In accordance with the Redevelopment Law, redevelopment plans like the Redevelopment Plans were required to include certain limits on the financing of the redevelopment projects. These limits could include a time limit on the life of the redevelopment plan, a time limit on the incurrence of indebtedness, a time limit on the receipt of property tax increment and the repayment of indebtedness and a limit on the amount of bonded indebtedness outstanding at any time. SB 107 clarifies that former tax increment limits set forth in redevelopment plans such as the Redevelopment Plans no longer apply for purposes of paying approved enforceable obligations such as the Bonds. ALL REDEVELOPMENT PROJECTS Land Use The aggregate designated land use in all Redevelopment Projects for fiscal year 2015-16 is set forth in the Table 1 below. TABLE ALL REDEVELOPMENT PROJECTS Land Use Fiscal Year 2015-16 Category Residential Commercial Industrial Agricultural Vacant Land Government/Exempt Cross Reference (1) Unsecured Total Parcel 2015-16 % of Count Assessed Value Total 2,786 $1,720,270,883 62.11% 260 754,765,826 27.25 22 78,943,160 2.85 1 2,383,791 0.09 418 69,376,869 2.51 900 0 0.00 — 2,070,302 0.08 — 141,702,718 5.12 4,387 $2,769,520,549 100.00% Source: Fiscal Consultant. (1) Tax bills listed on the Cross Reference tax roll are typically properties that are taxed as possessory interest as the result of long term leasing of a secured property. In the Successor Agency, these values are mostly on mobile homes located in mobile home parks but also include a co-op property and several long term leases -33- Historical Assessed Values The historic reported taxable values for the Redevelopment Projects were reviewed in order to as- certain the rate of taxable property valuation growth over the most recent ten fiscal years beginning in 2006-07. The total taxable value within the Redevelopment Projects has increased by $1,193,429,103 since 2006-07. Growth in assessed value over the past 10 years has averaged 7.57% per year for fiscal years 2006- 07 through 2015-16. This average growth occurred despite the fact that the Redevelopment Projects lost $294.6 million (-11.33%) in value for 2009-10 and $91.6 million (-3.96%) in value for 2011-12. This was sub- stantially due to losses in value within the MCAS Redevelopment Project but also due to a $24.4 million loss of value in the Town Center Project for 2009-10. New development within the MCAS Redevelop- ment Project has been paired with steady growth in the Town Center and South Central Redevelopment Projects to completely erase the losses of value in 2009-10 and 2011-12. Assessed values within the Rede- velopment Projects are now at their highest levels in history. See "THE TOWN CENTER REDEVELOPMENT PROJECT—Historical Assessed Values," "THE SOUTH CENTRAL REDEVELOPMENT PROJECT—Historical Assessed Values," and "THE MCAS-TUSTIN REDEVELOPMENT PROJECT—Historical Assessed Values," for details of the changes in value since 2006-07 for each of the component Redevelopment Projects. Fiscal Year Assessed Values Taxable values are prepared and reported by the County Auditor -Controller each fiscal year and represent the aggregation of all locally assessed properties that are part of a redevelopment project. The assessments are assigned to Tax Rate Areas (TRAs) that are coterminous to the boundaries of a redevel- opment project. The locally assessed secured and unsecured taxable values attributable to the Redevel- opment Projects for the 2014-15 Fiscal Year are as reported by the County Auditor -Controller. The Coun- ty's report of values distinguishes between secured and unsecured assessed values. Utilizing County As- sessor roll data, values were further distinguished to the real (land and improvements) and personal prop- erty assessed values. In 2014-15, the assessed valuation within the Redevelopment Projects increased by $267,347,798 (10.68%). This increase in value was spread among the component Redevelopment Projects. The Town Center Project increased in value by the smallest percentage (2.43%) and MCAS -Tustin Redevelopment Project increased in value by the greatest percentage (16.28%). The increases in current year assessed val- ue and incremental value for each of the Redevelopment Projects is summarized in Table 2 below. -34- TABLE 2 ALL REDEVELOPMENT PROJECTS Summary of Redevelopment Projects Assessed Value Growth Fiscal Year 2014-15 to Fiscal Year 2015-16 Redevelopment Project Town Center South Central MCAS -Tustin All Redevelopment Projects Source: Fiscal Consultant. Largest Taxpayers 2014-15 2015-16 2015-16 Value Value $ 586,078,711 $ 600,317,419 597,560,712 636,069,747 1,318,533,328 1,533,133,383 $2,502,172,751 $2,769,520,549 Increase Value $ 14,238,708 38,509,035 214,600,055 $267,347,798 % Change from Prior Year 2.43% 6.44 16.28 10.68% The ten largest taxpayers for all Redevelopment Projects according to the 2015-16 assessed valua- tions are shown below. TABLE 3 ALL REDEVELOPMENT PROJECTS Ten Largest Property Taxpayers Fiscal Year 2015-16 See APPENDIX G—FISCAL CONSULTANT'S REPORT for the top ten property taxpayers in the individual Redevelopment Projects. -35- % of % of Redevelopment Primary Assessed Total Incremental Project Land Property Owner Value Value Value Location Use Vestar Kimco Tustin LLP (1)(2) $ 168,166,642 6.07% 6.46% MCAS -Tustin Shopping Center Legacy Villas LLC (1)(2) 100,997,664 3.65 3.88 MCAS -Tustin Apartments PK II Larwin Square SC LP (1) 49,508,974 1.79 1.90 Town Center Shopping Center B -K Tustin Courtyard LLC (1) 42,775,581 1.54 1.64 Town Center Shopping Center Schools First Federal Credit Union (2) 39,004,785 1.41 1.50 South Central Office/Industrial Apple Ten Hospitality Ownership 33,928,142 1.23 1.30 South Central Hotel Standard Pacific Corporation 33,509,591 1.21 1.29 MCAS -Tustin Vacant Residential Tustin Heights SC LP (1) 33,000,000 1.19 1.27 Town Center Shopping Center El Paseo Apartments Tustin LLC (1) 31,694,568 1.14 1.22 South Central Apartments Costco Wholesale Corporation (2) 29,581,282 1.07 1.14 MCAS -Tustin Warehouse Store Top Property Owner Total Value $ 562,167,229 20.30% 21.61% Redevelopment Project Assessed Value $2,769,520,549 Redevelopment Project Incremental Value $2,601,330,880 Source: Fiscal Consultant. (1) This taxpayer has a pending assessment appeal on parcels owned. (2) Includes unsecured values. See APPENDIX G—FISCAL CONSULTANT'S REPORT for the top ten property taxpayers in the individual Redevelopment Projects. -35- Historical Tax Revenues Table 4 below reflects the Successor Agency's historical assessed values, incremental values and allocated incremental revenues for the most recent five fiscal years. TABLE 4 ALL REDEVELOPMENT PROJECTS Historical Assessed Values, Incremental Values and Allocated Incremental Revenues Total Assessed Value Incremental Value Total Annual Increment (1) Gross RPTTF Collections (2) Less: SB 2557 Admin. Fees Less: Pass -Through Payments (3) Tax Revenues Fiscal Years 2011-12 to 2015-16 2011-12 2012-13 2013-14 2014-15 2015-16 $2,219,047,777 $2,231,724,857 $2,313,559,870 $2,502,172,751 $2,769,520,549 $2,052,750,098 $2,065,427,178 $2,146,148,113 $2,333,983,082 $2,601,330,880 $20,527,501 $20,654,272 $21,461,481 $23,339,831 $26,013,309 $20,564,296 $20,985,010 $22,052,486 $23,966,187 $27,677,134 214,847 232,489 220,463 223,942 231,432 2,311,368 2,308,289 2,455,931 3,685,921 4,524,530 $18,038,081 $18,444,232 $19,376,092 $20,056,324 $22,921,172 Source: Fiscal Consultant. (1) Includes regular secured and unsecured taxes computed based on the Incremental Value multiplied by the 1% general levy tax rate. (2) Includes regular secured, unsecured, Unitary, supplemental and other taxes collected for the given fiscal year. Collections shown for 2015-16 are through June, 2016. (3) The County's practice is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. Assessment Appeals Within the Town Center Redevelopment Project there have been 139 assessment appeals filed since 2010-11. Of the 139 appeals filed, 82 have been allowed with a reduction in value and 6 have been denied. There are 48 appeals currently pending on properties within the Town Center Redevelopment Project. Based on the historical averages for appeals allowed and value reduction per successful appeal, the Fiscal Consultant expects that 45 of the currently pending appeals will be allowed and that these suc- cessful appeals will result in an assessed value reduction of $20,971,794. The taxpayers that have currently pending assessment appeals are seeking reductions in value totaling $45.1 million based on their opinions of value. Reductions in revenue for refunds resulting from these successful appeals have not been estimat- ed. Four of the top ten taxpayers within the Town Center Redevelopment Project have filed assessment appeals that are currently pending. Within the original area of the South Central Redevelopment Project, there have been 67 assess- ment appeals filed since 2010-11. Of the 67 appeals filed, 39 have been allowed with a reduction in value and 4 have been denied. There are 24 appeals currently pending on properties within the original area of the South Central Redevelopment Project. Based on the historical averages for appeals allowed and value reduction per successful appeal, the Fiscal Consultant expects that 22 of the currently pending appeals will be allowed and that these successful appeals will result in an assessed value reduction of $9,904,905. The taxpayers that have currently pending assessment appeals are seeking reductions in value totaling $23.8 million based on their opinions of value. Reductions in revenue for refunds resulting from these successful appeals have not been estimated. -36- Within the amendment area of the South Central Redevelopment Project there have been 26 as- sessment appeals filed since 2010-11. Of the 26 appeals filed, 7 have been allowed with a reduction in value and 1 has been denied. There are 18 appeals currently pending on properties within the amendment area of the South Central Redevelopment Project. Based on the historical averages for appeals allowed and val- ue reduction per successful appeal, the Fiscal Consultant expects that 16 of the currently pending appeals will be allowed and that these successful appeals will result in an assessed value reduction of $5,027,291. The taxpayers that have currently pending assessment appeals are seeking reductions in value totaling $18.3 million based on their opinions of value. Reductions in revenue for refunds resulting from these suc- cessful appeals have not been estimated. Within the MCAS -Tustin Redevelopment Project there have been 256 assessment appeals filed since 2010-11. Of the 256 appeals filed, 115 have been allowed with a reduction in value and 58 have been denied. There are 78 appeals currently pending on properties within the MCAS -Tustin Redevelopment Project. Based on the historical averages for appeals allowed and value reduction per successful appeal, the Fiscal Consultant expects that 52 of the currently pending appeals will be allowed and that these suc- cessful appeals will result in an assessed value reduction of $30,808,347. The taxpayers that have current- ly pending assessment appeals are seeking reductions in value totaling $82 million based on their opinions of value. Reductions in revenue for refunds resulting from these successful appeals have not been estimat- ed. Three of the top ten taxpayers within the MCAS -Tustin Redevelopment Project have filed assessment appeals that are currently pending. Table 5 below summarizes the projected loss of assessed value that will result from the assessment appeals that are currently pending within the component Redevelopment Projects. TABLE 5 ALL REDEVELOPMENT PROJECTS Projected Result of Appeals Fiscal Years 2010-11 through 2014-15 See APPENDIX G—FISCAL CONSULTANT'S REPORT for a more detailed analysis of the assessment appeals for each Redevelopment Project. The estimated reduction in assessed values from pending appeals shown in Table 5 have been factored into the Fiscal Consultant's projections. -37- Estimated Reduction on Estimated Pending Total No. of No. of No. and Value No. of Appeals Redevelopment No. of Resolved Successful Average of Appeals Appeals (2016-17 Value Project Appeals Appeals Appeals Reduction Pending Allowed Reduction) Town Center 139 88 82 13.80% 48 ($163,100,000) 45 $20,971,794 South Central (Orig) 67 43 39 19.98 24 ($54,600,000) 22 9,904,905 South Central (Amend) 26 8 7 11.04 18 ($52)000,000) 16 5,027,291 MCAS -Tustin 256 173 115 26.63 78 ($174,100,000) 52 30,808,347 Total 488 312 243 18.86% 168 ($443,800,000) 135 $66,712,337 Source: Fiscal Consultant. See APPENDIX G—FISCAL CONSULTANT'S REPORT for a more detailed analysis of the assessment appeals for each Redevelopment Project. The estimated reduction in assessed values from pending appeals shown in Table 5 have been factored into the Fiscal Consultant's projections. -37- Residential Real Estate Values Residential properties make up 62.11% of the value of all properties within the Redevelopment Projects. Over the past five years, residential values in the Town Center Redevelopment Project increased modestly in 2011-12 through 2013-14 and then grew by larger amounts in 2014-15 and 2015-16. Total resi- dential growth in the Town Center Redevelopment Project over the past 5 years has been $18.5 million (14.8%). In South Central Redevelopment Project residential values have increased in a similar pattern. Total residential growth in the South Central Redevelopment Project over the past 5 years has been $44.3 million (14.15%). Within the MCAS Redevelopment Project, residential property, again, increased mod- estly in value in each year for 2011-12 through 2013-14 but has risen dramatically in 2014-15 and 2015-16. Total residential growth in the MCAS Redevelopment Project over the past 5 years has been $320.5 mil- lion (35.7%). Within the Redevelopment Projects there are still 499 homes that are enrolled at less than their adjusted base values as the result of Proposition 8. This number is down significantly from the peak num- ber of 1,325 in 2012-13. The amount of assessed value that could potentially be recovered is $53.8 million. From the $190.9 million peak amount of recoverable value in 2013-14, $94.1 million was recovered and added to the tax rolls for 2014-15 and another $34.9 million was recovered and added to the tax rolls for the current year. Smaller amounts are likely to be recovered by the County Assessor and added to the tax rolls over the next three years. New Development and Transfers of Ownership New value will be added to the Town Center Redevelopment Project for fiscal year 2016-17 as the result of 73 transfers of ownership that have occurred after the lien date for the 2015-16 tax roll. The combined added value of these transfers of ownership is $18.4 million and this additional value has been reflected in the Fiscal Consultant's projected assessed values for 2016-17. In addition, there have been 12 transfers of ownership since the January 1, 2016, lien date for the 2016-17 tax roll and these transfers will add $1.7 million in value to the 2017-18 rolls. These added values have been incorporated into the Fiscal Consultant's projections. Within the South Central Redevelopment Project there were 35 transfers of ownership after the January 1, 2016, lien date that will add $33.5 million in additional value to our projected assessed values for 2016-17. Additionally, there have been 8 transfers of ownership after the January 1, 2016, lien date for the 2016-17 tax rolls and that will add $860,000 in new value that has been included in the Fiscal Consultant's projections. New value will be added to the MCAS -Tustin Redevelopment Project for fiscal year 2016-17 as the result of 195 transfers of ownership that have occurred after the lien date for the 2015-16 tax roll. The combined value to be added to the 2016-17 tax roll from these transfers is $66.04 million. This added value has been incorporated in the Fiscal Consultant's projections for 2016-17. There were also 85 transfers of ownership after the January 1, 2016, lien date for the 2017-18 tax roll that will add $58.9 million in additional value to the 2017-18 tax rolls. This added value has been incorporated in the Fiscal Consultant's projected values for 2017-18. In addition, there is a considerable amount of new development that continues to occur within the MCAS -Tustin Redevelopment Project as part of the Tustin Legacy development. The current economic conditions have caused these planned projects to proceed quickly over the past two years. The -38- development of these residential and commercial projects will add large amounts of new value to the MCAS -Tustin Redevelopment Project. However, these developments have not been reflected in the Fiscal Consultant's projections. Historical RPTTF Deposits Table 6 below sets forth historical RPTTF deposits for all Redevelopment Projects. TABLE 6 ALL REDEVELOPMENT PROJECTS Redevelopment Property Tax Trust Fund Deposits Fiscal Years 2011-12 through 2015-16 Source: Fiscal Consultant. (1) Collections deposited in the RPTTF for allocation in January include June and July collections from the prior fiscal year and collections for August through December of the current fiscal year. (2) Collections deposited in the RPTTF for allocations in June include January through May collections for the current fiscal year. (3) Revenues for the January RPTTF Deposits are the total revenue amounts allocated to the Former Agency through January 31, 2012. Amounts for the June RPTTF Deposits are the total revenues for FY 2011-12 less amounts allocated to the Former Agency through January 31, 2012. -39- 2011-12(3) 2012-13 2013-14 2014-15 2015-16 January RPTTF Deposit (1) Town Center $ 2,879,787 $ 2,862,221 $ 2,920,614 $ 2,820,796 $ 3,105,678 South Central 2,297,744 2,338,219 2,502,889 2,885,069 3,167,455 MCAS -Tustin 6,252,748 6,482,058 6,927,290 7,540,788 9,062,877 Total January RPTTF Deposits $11,430,279 $11,682,497 $12,350,792 $13,246,653 $15,336,010 June RPTTF Deposit (2) Town Center $2,216,881 $2,257,344 $2,286,121 $ 2,269,960 $ 2,378,366 South Central 1,623,044 1,844,080 1,959,146 2,321,682 2,425,676 MCAS -Tustin 5,294,091 5,112,197 5,422,362 6,068,248 6,940,462 Total June RPTTF Deposits $9,134,017 $9,213,621 $9,667,629 $10,659,890 $11,744,505 Gross RPTTF Deposit $20,564,296 $20,896,118 $22,018,421 $23,906,543 $27,080,515 Less: SB 2557 Admin. Fees 214,847 223,968 220,463 223,942 231,433 Less: County RPTTF Admin. Fees 0 21,456 6,402 26,666 4,668 Less: Tax Sharing 2,311,368 2,308,289 2,455,931 3,685,921 4,524,530 Net RPTTF Available $18,038,081 $18,342,405 $19,335,625 $19,970,014 $22,319,884 Source: Fiscal Consultant. (1) Collections deposited in the RPTTF for allocation in January include June and July collections from the prior fiscal year and collections for August through December of the current fiscal year. (2) Collections deposited in the RPTTF for allocations in June include January through May collections for the current fiscal year. (3) Revenues for the January RPTTF Deposits are the total revenue amounts allocated to the Former Agency through January 31, 2012. Amounts for the June RPTTF Deposits are the total revenues for FY 2011-12 less amounts allocated to the Former Agency through January 31, 2012. -39- Projected Available Tax Revenues and Estimated Debt Service Coverage Table 7 below shows available net tax increment from the all Redevelopment Projects, assumes 1.525% growth (from 2015-16) in fiscal year 2016-17, 2% growth in each year thereafter and includes pro- jected debt service on the Bonds. Table 8 below shows available net tax increment from the all Redevel- opment Projects, assumes 0% growth and includes projected debt service on the Bonds. Tax Revenues presented in the projection in Tables 7 and 8 represent the amount available for debt service computed as gross Redevelopment Property Tax Trust Fund Revenue less (1) the County administration fees; (2) statutory pass-through payments, and (2) contractual pass-through obligations. The County's practice, however, is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. The projection commences with the 2017- fiscal year and 2015-16 assessed valuations and incorporates the valuation assumptions made in the Fiscal Consultant's Report. No increase in assessed value has been reflected in the projections based on new development. Personal Property values are assumed to remain constant. The projections include an adjustment for pending appeals. 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Cli N U Z U C u Z 0 THE TOWN CENTER REDEVELOPMENT PROJECT The City established the Town Center Redevelopment Project and approved the redevelopment plan for the Town Center Redevelopment Project (the "Town Center Redevelopment Plan") by Ordinance No. 701 enacted by the City Council of the City on November 22,1976, amended by Ordinance No. 855 enacted by the City Council of the City on September 8, 1981 (to amend the limitation of finances and bonded indebtedness), Ordinance No. 1021 enacted by the City Council of the City on March 20, 1989 (to adopt a Second Amendment which involved 32 comprehensive amendments to change, delete or add certain language to the Redevelopment Plan including the revision and update of the list of public improvements needed to further the goals and objectives of the plan, the extension on the time limit on the use of eminent domain and increases in the Plan financial limitations), Ordinance No. 1141, enacted by the City Council of the City on November 21, 1994 (to extend the time limit of the effectiveness of the Plan through November 22, 2016 and extend the time limit for payment of indebtedness and receipt of property taxes through November 22, 2026), Ordinance No. 1291, enacted by the City Council of the City on November February 22, 2005 (to extend the time limit of the effectiveness of the Plan through November 22, 2017 and extend the time limit for payment of indebtedness and receipt of property taxes through November 22, 2027), Ordinance No. 1306, enacted by the City Council of the City on October 17, 2005 (to extend the time limit of the effectiveness of the Plan through November 22, 2018 and extend the time limit for payment of indebtedness and receipt of property taxes through November 22, 2028), and Ordinance No. 1348, enacted by the City Council of the City on February 5, 2008 (to extend the time limit of the effectiveness of the Plan through November 22, 2019 and extend the time limit for payment of indebtedness and receipt of property taxes through November 22, 2029). The Town Center Redevelopment Project includes approximately 360 acres in the center of the City, an area which includes the historic "old town" and civic center and a majority of the commercial properties within the central portion of the City. The Town Center Redevelopment Project contains commercial, service -commercial, neighborhood commercial, and residential land uses. Although a precise breakdown of land uses is not available, the predominant land use in the Town Center Redevelopment Project is primarily commercial retail and service-oriented uses, which is estimated to be approximately 90% of the total area. Residential and public/institutional uses account for approximately 5% each of the Town Center Redevelopment Project's land. Residential uses are mostly multi -family with a very small proportion of the Town Center Redevelopment Project containing single-family and mobile home uses. Public institutional uses include two parks (Columbus -Tustin and Peppertree), the Civic Center, the Tustin Library, the Tustin School District administrative offices, Columbus -Tustin Intermediate School, and the Tustin Post Office. The Town Center Redevelopment Project is generally bounded by portions of Beneta Avenue and Irvine Boulevard on the north, Interstate Highway 5 (Santa Ana Freeway) on the south, portions of Prospect Avenue and "B" Street on the west, and portions of Newport Avenue and Main Street on the east. The Agency initiated proceedings to establish the Town Center Redevelopment Project in 1971 after central -city merchants and the Tustin Chamber of Commerce requested its help in revitalizing and expanding the El Camino Real commercial area in central Tustin. In the early 1970s, the El Camino Real area consisted of mixed residential and commercial uses on substandard lots. Most of the commercial fa- cilities lacked off-street parking. Some of the businesses dated back to the early 1900s; only one new struc- ture had been built in the area during the previous decade. -44- All real property in the Town Center Redevelopment Project is subject to the controls and restrictions of the Town Center Redevelopment Plan. The Town Center Redevelopment Plan requires that new construction shall comply with all applicable State statutes and local laws in effect, including, but not limited to, fire, building, electrical, heating, and zoning codes of the City. The Town Center Redevelopment Plan allows for commercial, residential and public uses within the Town Center Redevelopment Project. The Agency may permit an existing but nonconforming use to remain so long as the existing building is in good condition and is generally compatible with the development and uses in the Town Center Redevelopment Project. The owner of any property with a nonconforming use must be willing to enter into an owner participation agreement with the Agency and agree to the imposition of such reasonable restrictions as are necessary to protect the development and use of the Town Center Redevelopment Project. The total assessed valuation of taxable property in the Town Center Redevelopment Project in fiscal year 2015-16 is $600,317,419, with $545,443,285 of such amount representing incremental assessed value. See APPENDIX G—FISCAL CONSULTANT'S REPORT. Land Use The aggregate designated land use in the Town Center Redevelopment Project for fiscal year 2015-16 is set forth in the Table 10 below. TABLE 10 TOWN CENTER REDEVELOPMENT PROJECT Land Use Fiscal Year 2015-16 Category Residential Commercial Industrial Vacant Land Government/Exempt Cross Reference (1) Unsecured Total Parcel 2015-16 % of Count Assessed Value Total 439 $143,675,218 23.93% 201 406,690,756 67.75 1 36,141 0.01 27 6,553,554 1.09 62 0 0.00 — 700,719 0.12 — 42,661,031 7.11 730 $600,317,419 100.00% Source: Fiscal Consultant. (1) Tax bills listed on the Cross Reference tax roll are typically properties that are taxed as possessory interest as the result of long term leasing of a secured property. In the Successor Agency, these values are mostly on mobile homes located in mobile home parks but also include a co-op property and several long term leases -45- Historical Assessed Values Table 11 below sets forth the assessed value history of the Town Center Redevelopment Project. TABLE 11 TOWN CENTER REDEVELOPMENT PROJECT Assessed Values Fiscal Years 2011-12 through 2015-16 Source: Fiscal Consultant Between 2006-07 and 2015-16, the taxable value within the Town Center Redevelopment Project increased by $155,451,157 (34.94%). The secured assessed value increased in each year during this period except for 2010-11 when secured values declined by $24.6 million (-4.8%). Over the entire 10 year period, secured value rose by $164.5 million (41.83%). Unsecured values have varied widely during the period. This was substantially due to the County Assessor adding escaped real property values to the unsecured roll for collection. This was most pronounced when unsecured values grew by $49.7 million in 2008-09, only to drop by $46 million in 2009-10. The one year addition of escaped assessments for 2008-09 and their elimination from the 2009-10 unsecured tax roll was reflected as a major loss of value. Since 2009-10, unsecured values have waivered up and down but have declined by 10.9%. The Town Center Redevelop- ment Project has incremental value of $545,443,285 for 2015-16. Over the ten year period, annual growth in assessed value averaged 3.49% per year. Growth within the Town Center Redevelopment Project has been steady and, except for the large increase in unsecured value for 2008-09, has not experienced ex- treme increases or decreases in any year. -46- Assessed % Annual Fiscal Year Value Change 2011-12 $545,165,492 — 2012-13 $557,251,354 2.22% 2013-14 $578,527,088 3.82% 2014-15 $586,078,711 1.31% 2015-16 $600,317,419 2.43% Source: Fiscal Consultant Between 2006-07 and 2015-16, the taxable value within the Town Center Redevelopment Project increased by $155,451,157 (34.94%). The secured assessed value increased in each year during this period except for 2010-11 when secured values declined by $24.6 million (-4.8%). Over the entire 10 year period, secured value rose by $164.5 million (41.83%). Unsecured values have varied widely during the period. This was substantially due to the County Assessor adding escaped real property values to the unsecured roll for collection. This was most pronounced when unsecured values grew by $49.7 million in 2008-09, only to drop by $46 million in 2009-10. The one year addition of escaped assessments for 2008-09 and their elimination from the 2009-10 unsecured tax roll was reflected as a major loss of value. Since 2009-10, unsecured values have waivered up and down but have declined by 10.9%. The Town Center Redevelop- ment Project has incremental value of $545,443,285 for 2015-16. Over the ten year period, annual growth in assessed value averaged 3.49% per year. Growth within the Town Center Redevelopment Project has been steady and, except for the large increase in unsecured value for 2008-09, has not experienced ex- treme increases or decreases in any year. -46- Historical Taxable Values and Tax Increment Revenues Table 12 below sets forth historical taxable values and tax increment revenues for the Town Cen- ter Redevelopment Project. TABLE 12 TOWN CENTER REDEVELOPMENT PROJECT Historical Assessed Values, Incremental Values and Allocated Incremental Revenues Fiscal Years 2011-12 through 2015-16 Source: Fiscal Consultant. (1) Total Annual Increment includes regular secured and unsecured taxes computed based on the Incremental Value multiplied by the 1% general levy tax rate. (2) Includes regular secured, unsecured, Unitary, supplemental and other taxes collected for the given fiscal year. Due to the allocation process dictated by the Dissolution Statutes, allocation of taxes through the RPTTF in a given fiscal year will not equal collections for that fiscal year. Collections shown for 2015-16 are through June, 2016. (3) The County's practice is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. -47- Fiscal Year 2011-12 2012-13 2013-14 2014-15 2015-16 Total Assessed Value $545,165,492 $557,251,354 $578,527,088 $586,078,711 $600,317,419 Incremental Value 490,291,358 502,377,220 523,652,954 531,204,577 545,443,285 Total Annual Increment (1) $4,902,914 $5,023,772 $5,236,530 $5,312,046 $5,454,433 Gross RPTTF Collections (2) $5,096,668 $5,141,343 $5,214,790 $5,103,456 $5,603,519 Less: SB 2557 Admin. Fees 51,259 56,422 37,536 45,936 43,434 Less: Pass -Through Payments (3) 0 0 0 0 0 Tax Revenues $5,045,409 $5,084,921 $5,177,254 $5,057,520 $5,560,085 Source: Fiscal Consultant. (1) Total Annual Increment includes regular secured and unsecured taxes computed based on the Incremental Value multiplied by the 1% general levy tax rate. (2) Includes regular secured, unsecured, Unitary, supplemental and other taxes collected for the given fiscal year. Due to the allocation process dictated by the Dissolution Statutes, allocation of taxes through the RPTTF in a given fiscal year will not equal collections for that fiscal year. Collections shown for 2015-16 are through June, 2016. (3) The County's practice is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. -47- THE SOUTH CENTRAL REDEVELOPMENT PROJECT The City established the South Central Redevelopment Project and approved the redevelopment plan for the South Central Redevelopment Project (the "South Central Redevelopment Plan") by Ordinance No. 890, enacted by the City Council of the City on August 1, 1983, as amended by Ordinance No. 939, enacted by the City Council of the City on August 5, 1985 (to expand the project boundaries south from Edinger Avenue to Valencia Avenue), as amended by Ordinance No. 1142, enacted by the City Council of the City on November 21, 1994 (to amend the limitation on finances and bonded indebtedness), as amended by Ordinance No. 1223, enacted by the City Council of the City on November 1, 1999 (to make certain changes to the text of the Plan, including reestablishing the Agency's eminent domain authority for a period not to exceed 12 years), as amended by Ordinance No. 1290, enacted by the City Council of the City on February 22, 2005 (to extend the time limit of the effectiveness of the Plan through July 15, 2016 and the time limit for payment and receipt of property taxes through July 15, 2026), as amended by Ordinance No. 1307, enacted by the City Council of the City on October 17, 2005 (to extend the time limit of the effectiveness of the Plan through July 15, 2017 and the time limit for payment and receipt of property taxes through July 15, 2027), as amended by Ordinance No. 1333, enacted by the City Council of the City on April 3, 2007 (to describe the Agency's program to acquire real property by eminent domain), and as amended by Ordinance No. 1349, enacted by the City Council of the City on February 5, 2008 (to extend the time limit of the effectiveness of the Plan through July 15, 2018 and the time limit for payment and receipt of property taxes through July 15, 2028). The South Central Redevelopment Project, established in 1983 with additional land area added to the Project boundaries in 1985 (the "Amended Area"), encompasses approximately 370 acres and is gen- erally bounded by a small portion of Bryan Avenue on the north, portions of Orange Avenue, Red Hill Av- enue (south of the Southern California Regional Rail Authority right-of-way) and Newport Avenue (south of the Santa Ana (I-5) Freeways) on the east, Valencia Avenue on the south, the Costa Mesa (SR -55) Freeway on the west and Santa Ana (I-5) Freeway and Newport Avenue (north of the Santa Ana (I-5) Freeway) on the northwest. The South Central Redevelopment Project was created in response to the need for basic public improvements in the area, concern for deteriorating conditions of the residential neighborhoods, and the circulation deficiencies in the South Central Redevelopment Project. The Amended Area was included in the South Central Redevelopment Project because development of the area was constrained until proposed public improvements for the South Central Redevelopment Project were funded and completed, particularly the Newport Avenue extension and a new on/off ramp at Eding- er and the Costa Mesa (SR -55) Freeway. Portions of the area lack right-of-way improvements such as street lights, sidewalks, adequate street capacity and circulation. The City adopted the Pacific Center Spe- cific Plan (located in the South Central Redevelopment Project) to provide for an extension of Newport Avenue and much needed improvements to the Costa Mesa (SR -55) Freeway off -ramp at Edinger Ave- nue. The South Central Redevelopment Project will include residential, commercial, office, hotel and lim- ited industrial technology land uses. The only public institutional uses within the South Central Redevel- opment Project include the Tustin Unified School District's Lambert school site and the small McFadden Parkette. The general objectives of the South Central Redevelopment Plan are the elimination and preven- tion of blight in the South Central Redevelopment Project. The South Central Redevelopment Plan calls for constructing and improving streets, utilities or other public improvements; acquiring, disposing of and redeveloping real property; participation of owners and tenants in the South Central Redevelopment Pro- ject; management of property under Agency ownership and control; and demolition, rehabilitation or re- moval of buildings. In the South Central Redevelopment Project, the Agency's goal was to eliminate exist- ing blight and prevent the spread of blight and deterioration. -48- All real property in the South Central Redevelopment Project is subject to the controls and restrictions of the South Central Redevelopment Plan. The South Central Redevelopment Plan requires that new construction shall comply with all applicable State statutes and local laws in effect, including, but not limited to, fire, building, electrical, heating, and zoning codes of the City. The South Central Redevelopment Plan allows for commercial, residential and public uses within the South Central Redevelopment Project. The Agency may permit an existing but nonconforming use to remain so long as the existing building is in good condition and is generally compatible with the development and uses in the South Central Redevelopment Project. The owner of any property with a nonconforming use must be willing to enter into an owner participation agreement with the Agency and agree to the imposition of such reasonable restrictions as are necessary to protect the development and use of the South Central Redevelopment Project. The total assessed valuation of taxable property in the South Central Redevelopment Project in fiscal year 2015-16 is $636,069,747, with $518,643,390 of such amount representing incremental assessed value. See APPENDIX G—FISCAL CONSULTANT'S REPORT. Land Use The aggregate designated land use in the South Central Redevelopment Project for fiscal year 2015-16 is set forth in Table 13 below. TABLE 13 SOUTH CENTRAL REDEVELOPMENT PROJECT Land Use Fiscal Year 20156-16 Category Residential Commercial Industrial Vacant Land Government/Exempt Cross Reference (1) Unsecured Total Parcel 2015-16 % of Count Assessed Value Total 614 $357,226,726 56.16% 42 134,084,091 21.08 21 78,907,019 12.41 11 3,561,804 0.56 79 0 0.00 — 1,066,083 0.17 — 61,224,024 9.63 767 $636,069,747 100.00% Source: Fiscal Consultant. (1) Tax bills listed on the Cross Reference tax roll are typically properties that are taxed as possessory interest as the result of long term leasing of a secured property. In the Successor Agency, these values are mostly on mobile homes located in mobile home parks but also include a co-op property and several long term leases -49- Historical Assessed Values Table 14 below sets forth the five year assessed value history of the South Central Redevelopment Project. TABLE 14 SOUTH CENTRAL REDEVELOPMENT PROJECT Assessed Values Fiscal Years 2011-12 through 2015-16 Source: Fiscal Consultant Between 2006-07 and 2015-16, the taxable value within the South Central Redevelopment Project increased by $163,848,827 (34.70%). Secured assessed values increased in each of the years except for 2010-11 and 2011-12. Secured value loss for those two years totaled $47.2 million (-9.01%). Unsecured val- ues increased in 2007-08 by $15.6 million due to the addition of real property escaped assessments on property owned by Catellus Finance 1. The absence of these escaped assessments in 2008-09 reflected the values going back to normal levels but this shows up as a decrease in unsecured values of $14.12 million for 2008-09. Since 2008-09 unsecured values have increased substantially due to unsecured value increases not associated with escaped assessments. The South Central Redevelopment Project has incremental val- ue of $523,868,290 for 2015-16. Over the ten year period, annual growth in assessed value averaged 3.47%. Growth within the South Central Redevelopment Project has been steady and has not experienced ex- treme increases or decreases in any year. -50- Assessed % Annual Fiscal Year Value Change 2011-12 $510,528,862 — 2012-13 $511,040,112 0.10% 2013-14 $534,181,704 4.53% 2014-15 $597,560,712 11.86% 2015-16 $636,069,747 6.44% Source: Fiscal Consultant Between 2006-07 and 2015-16, the taxable value within the South Central Redevelopment Project increased by $163,848,827 (34.70%). Secured assessed values increased in each of the years except for 2010-11 and 2011-12. Secured value loss for those two years totaled $47.2 million (-9.01%). Unsecured val- ues increased in 2007-08 by $15.6 million due to the addition of real property escaped assessments on property owned by Catellus Finance 1. The absence of these escaped assessments in 2008-09 reflected the values going back to normal levels but this shows up as a decrease in unsecured values of $14.12 million for 2008-09. Since 2008-09 unsecured values have increased substantially due to unsecured value increases not associated with escaped assessments. The South Central Redevelopment Project has incremental val- ue of $523,868,290 for 2015-16. Over the ten year period, annual growth in assessed value averaged 3.47%. Growth within the South Central Redevelopment Project has been steady and has not experienced ex- treme increases or decreases in any year. -50- Historical Taxable Values and Tax Increment Revenues Table 15 below sets forth historical taxable values and tax increment revenues for the South Cen- tral Redevelopment Project. TABLE 15 SOUTH CENTRAL REDEVELOPMENT PROJECT Historical Assessed Values, Incremental Values and Allocated Incremental Revenues Fiscal Years 2011-12 through 2015-16 Source: Fiscal Consultant. (1) Total Annual Increment includes regular secured and unsecured taxes computed based on the Incremental Value multiplied by the 1% general levy tax rate. (2) Includes regular secured, unsecured, Unitary, supplemental and other taxes collected for the given fiscal year. Due to the allocation process dictated by the Dissolution Statutes, allocation of taxes through the RPTTF in a given fiscal year will not equal collections for that fiscal year. Collections shown for 2015-16 are through June, 2016. (3) The County's practice is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. THE MCAS-TUSTIN REDEVELOPMENT PROJECT The City established the MCAS Tustin Redevelopment Project and approved the redevelopment plan for the MCAS Tustin Redevelopment Project (the "MCAS Tustin Redevelopment Plan") by Ordi- nance No. 1276, enacted by the City Council of the City on June 13, 2003, as amended by Ordinance No. 1334, enacted by the City Council of the City on April 3, 2007 (to describe the Agency's program to ac- quire real property by eminent domain in the MCAS Tustin Redevelopment Project). The MCAS -Tustin Redevelopment Project, established in 2003, is comprised of 1,508.6 acres, including 1,504.5 acres that were part of the former Marine Corps Air Station Tustin (MCAS -Tustin) and 4.1 acres that are located outside of the former base boundaries, at the northwest corner of Edinger Ave- nue and Jamboree Road. Development of the MCAS -Tustin Redevelopment Project, known as Tustin Legacy, will include low to medium-high density residential uses, transitional/emergency housing, com- mercial retail, office, business park and educational and community support facilities with up to 4,210 homes anticipated and over 10 million square feet of non-residential space. Significant land area will also be dedicated to parkland and recreational open spaces and will feature a two-mile community lineal park with walking spaces, playgrounds, tranquil natural areas and sports facilities. -51- Fiscal Year 2011-12 2012-13 2013-14 2014-15 2015-16 Total Assessed Value $510,528,862 $511,040,112 $534,181,704 $597,560,712 $636,069,747 Incremental Value 399,105,317 399,616,567 422,758,159 485,359,255 523,868,290 Total Annual Increment (1) $3,991,053 $3,996,166 $4,227,582 $4,853,593 $5,238,683 Gross RPTTF Collections (2) $3,920,788 $4,200,091 $4,468,938 $5,219,742 $5,715,211 Less: SB 2557 Admin. Fees 43,037 46,371 48,973 49,148 48,676 Less: Pass -Through Payments (3) 2,000 2,000 2,000 2,000 2,000 Tax Revenues $3,875,751 $4,151,719 $4,417,965 $5,168,594 $5,664,535 Source: Fiscal Consultant. (1) Total Annual Increment includes regular secured and unsecured taxes computed based on the Incremental Value multiplied by the 1% general levy tax rate. (2) Includes regular secured, unsecured, Unitary, supplemental and other taxes collected for the given fiscal year. Due to the allocation process dictated by the Dissolution Statutes, allocation of taxes through the RPTTF in a given fiscal year will not equal collections for that fiscal year. Collections shown for 2015-16 are through June, 2016. (3) The County's practice is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. THE MCAS-TUSTIN REDEVELOPMENT PROJECT The City established the MCAS Tustin Redevelopment Project and approved the redevelopment plan for the MCAS Tustin Redevelopment Project (the "MCAS Tustin Redevelopment Plan") by Ordi- nance No. 1276, enacted by the City Council of the City on June 13, 2003, as amended by Ordinance No. 1334, enacted by the City Council of the City on April 3, 2007 (to describe the Agency's program to ac- quire real property by eminent domain in the MCAS Tustin Redevelopment Project). The MCAS -Tustin Redevelopment Project, established in 2003, is comprised of 1,508.6 acres, including 1,504.5 acres that were part of the former Marine Corps Air Station Tustin (MCAS -Tustin) and 4.1 acres that are located outside of the former base boundaries, at the northwest corner of Edinger Ave- nue and Jamboree Road. Development of the MCAS -Tustin Redevelopment Project, known as Tustin Legacy, will include low to medium-high density residential uses, transitional/emergency housing, com- mercial retail, office, business park and educational and community support facilities with up to 4,210 homes anticipated and over 10 million square feet of non-residential space. Significant land area will also be dedicated to parkland and recreational open spaces and will feature a two-mile community lineal park with walking spaces, playgrounds, tranquil natural areas and sports facilities. -51- The major objectives of the WAS Tustin Redevelopment Project as described in the WAS Tustin Redevelopment Plan and focus on the elimination and prevention of the spread of blight and dete- rioration of the WAS Tustin Redevelopment Project. All real property in the WAS Tustin Redevelopment Project is subject to the controls and re- strictions of the WAS Tustin Redevelopment Plan. The WAS Tustin Redevelopment Plan requires that new construction shall comply with all applicable State statutes and local laws in effect, including, but not limited to, fire, building, electrical, heating, and zoning codes of the City. The WAS Tustin Rede- velopment Plan allows for commercial, residential and public uses within the WAS Tustin Redevelop- ment Project. The Agency may permit an existing but nonconforming use to remain so long as the existing building is in good condition and is generally compatible with the development and uses in the WAS Tustin Redevelopment Project. The owner of any property with a nonconforming use must be willing to enter into an owner participation agreement with the Agency and agree to the imposition of such reasona- ble restrictions as are necessary to protect the development and use of the WAS Tustin Redevelopment Project. The total assessed valuation of taxable property in the MCAS -Tustin Redevelopment Project in fiscal year 2015-16 is $1,533,133,383, with $1,532,019,305 of such amount representing incremental assessed value. See APPENDIX G— "FISCAL CONSULTANT'S REPORT. Land Use The aggregate designated land use in the MCAS -Tustin Redevelopment Project for fiscal year 2015-16 is set forth in Table 16 below. TABLE 16 MCAS-TUSTIN REDEVELOPMENT PROJECT Land Use Fiscal Year 2015-16 Category Residential Commercial Agricultural Vacant Land Government/Exempt Cross Reference (1) Unsecured Total Parcel 2015-16 % of Count Assessed Value Total 1,733 $1,219,368,939 79.53% 17 213,990,979 13.96 1 2,383,791 0.16 380 59,261,511 3.87 759 0 0.00 — 310,500 0.02 — 37,817,663 2.47 2,890 $1,533,133,383 100.00% Source: Fiscal Consultant. (1) Tax bills listed on the Cross Reference tax roll are typically properties that are taxed as possessory interest as the result of long term leasing of a secured property. In the Successor Agency, these values are mostly on mobile homes located in mobile home parks but also include a co-op property and several long term leases -52- Historical Assessed Values Table 17 below sets forth the assessed value history of the MCAS -Tustin Redevelopment Project. TABLE 17 MCAS-TUSTIN REDEVELOPMENT PROJECT Assessed Values Fiscal Years 2011-12 through 2015-16 Source: Fiscal Consultant The MCAS -Tustin Redevelopment Project became eligible to receive tax increment revenue in 2004-05. Because the MCAS -Tustin Redevelopment Project consists of a former military base, after the County Auditor -Controller revised the base year value for 2009-10, the base year value has been $0. Se- cured values within the MCAS -Tustin Redevelopment Project rose in each of years from 2004-05 through 2008-09 but dropped by $285 million (19.92%) for 2009-10. These reductions in value are primarily due to reductions of value on parcels owned by two of the Project Area's top taxpayers, Tustin Legacy Commu- nity Partners and Vestar Kimco. The economic conditions that were experienced throughout the State negatively affected the developable properties within the MCAS -Tustin Redevelopment Project. Despite the reductions experienced on the secured tax roll, unsecured values increased for 2009-10 by almost $10 million. There were no significant real property escaped tax bills on the 2009-10 unsecured tax roll that artificially increasing the values for this fiscal year. In 2011-12, assessed values, again were reduced. Values in 2011-12 were $96 million (-7.62%) low- er than the values in 2010-11. The majority of this value loss (95%) resulted from successful assessment appeals on land value. Assessed values were effectively flat for 2012-13 but in the subsequent three fiscal years, growth in taxable value has accelerated due to the subdivision and development of large areas of vacant land. Growth in assessed value since 2012-13 has totaled $369.7 million (31.8%). For 2015-16, there are 380 vacant parcels. The majority of these parcels are vacant residential properties that are being built upon or are expected to be built upon over the next several years. The MCAS -Tustin Redevelopment Project has incremental value of $1,532,019,305 for 2015-16. Over the ten year period, annual growth in assessed value averaged 13.26%. Growth within the MCAS - Tustin Redevelopment Project has been very aggressive and will remain so for several years unless devel- opment of residential property is reduced by economic conditions. -53- Assessed % Annual Fiscal Year Value Change 2011-12 $1,163,353,423 — 2012-13 $1,163,433,391 0.01% 2013-14 $1,200,851,078 3.22% 2014-15 $1,318,533,328 9.80% 2015-16 $1,533,133,383 16.28% Source: Fiscal Consultant The MCAS -Tustin Redevelopment Project became eligible to receive tax increment revenue in 2004-05. Because the MCAS -Tustin Redevelopment Project consists of a former military base, after the County Auditor -Controller revised the base year value for 2009-10, the base year value has been $0. Se- cured values within the MCAS -Tustin Redevelopment Project rose in each of years from 2004-05 through 2008-09 but dropped by $285 million (19.92%) for 2009-10. These reductions in value are primarily due to reductions of value on parcels owned by two of the Project Area's top taxpayers, Tustin Legacy Commu- nity Partners and Vestar Kimco. The economic conditions that were experienced throughout the State negatively affected the developable properties within the MCAS -Tustin Redevelopment Project. Despite the reductions experienced on the secured tax roll, unsecured values increased for 2009-10 by almost $10 million. There were no significant real property escaped tax bills on the 2009-10 unsecured tax roll that artificially increasing the values for this fiscal year. In 2011-12, assessed values, again were reduced. Values in 2011-12 were $96 million (-7.62%) low- er than the values in 2010-11. The majority of this value loss (95%) resulted from successful assessment appeals on land value. Assessed values were effectively flat for 2012-13 but in the subsequent three fiscal years, growth in taxable value has accelerated due to the subdivision and development of large areas of vacant land. Growth in assessed value since 2012-13 has totaled $369.7 million (31.8%). For 2015-16, there are 380 vacant parcels. The majority of these parcels are vacant residential properties that are being built upon or are expected to be built upon over the next several years. The MCAS -Tustin Redevelopment Project has incremental value of $1,532,019,305 for 2015-16. Over the ten year period, annual growth in assessed value averaged 13.26%. Growth within the MCAS - Tustin Redevelopment Project has been very aggressive and will remain so for several years unless devel- opment of residential property is reduced by economic conditions. -53- Historical Taxable Values and Tax Increment Revenues Table 18 below sets forth historical taxable values and tax increment revenues for the MCAS - Tustin Redevelopment Project. TABLE 18 MCAS-TUSTIN REDEVELOPMENT PROJECT Historical Assessed Values, Incremental Values and Allocated Incremental Revenues Fiscal Years 2011-12 through 2015-16 Total Assessed Value Incremental Value Total Annual Increment (1) Gross RPTTF Collections (2) Less: SB 2557 Admin. Fees Less: Pass -Through Payments (3) Tax Revenues 2011-12 $1,163,353,423 1,163,353,423 $11,633,534 $11,546,840 120,551 2,309,368 $ 9,116,921 2012-13 $1,163,433,391 1,163,433,391 $11,634,334 $11,643,576 129,696 2,306,289 $ 9,207,590 Fiscal Year 2013-14 $1,200,851,078 1,199, 73 7,000 $11,997,370 $12,368,758 133,954 2,453,931 $ 9,780,873 2014-15 $1,318,533,328 1,317,419,250 $13,174,193 $13,642,989 128,858 3,683,921 2015-16 $1,533,133,383 1,532,019,305 $15,320,193 $16,358,404 139,322 4,522,530 $ 9,830,210 $11,696,552 Source: Fiscal Consultant. (1) Total Annual Increment includes regular secured and unsecured taxes computed based on the Incremental Value multiplied by the 1% general levy tax rate. (2) Includes regular secured, unsecured, Unitary, supplemental and other taxes collected for the given fiscal year. Due to the allocation process dictated by the Dissolution Statutes, allocation of taxes through the RPTTF in a given fiscal year will not equal collections for that fiscal year. Collections shown for 2015-16 are through June, 2016. (3) The County's practice is to deduct all pass-through obligations from the RPTTF, regardless of their lien priority, before remitting the balance to the Successor Agency to pay debt service. If subordinate pass-through amounts are required to pay debt service, upon request of the Successor Agency, those amounts will not be deducted by the County. RISK FACTORS The following information should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The various legal opinions to be delivered concurrently with the issuance of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by State and fed- eral laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors' rights, including equitable principles. Recognized Obligation Payment Schedule The Dissolution Act provides that only those payments listed in a Recognized Obligation Payment Schedule may be made by a successor agency from the funds specified in the Recognized Obligation Pay- ment Schedule. Pursuant to Section 34177 of the Dissolution Act, on or before each February 1 commenc- ing February 1, 2016, the Successor Agency shall submit to the Oversight Board and the DOF, a Recog- nized Obligation Payment Schedule unless, at the option of the Successor Agency and subject to DOF approval and satisfaction of certain other conditions, a Last and Final Recognized Obligation Payment -54- Schedule is filed by the Successor Agency and is approved by the DOF in which event no such periodic filing requirements apply. In instances where a Last and Final Recognized Obligation Payment Schedule is not filed, for each semiannual or annual period, as applicable, the Dissolution Act requires each successor agency to prepare and approve, and submit to the successor agency's oversight board and the DOF for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations (as de- fined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Consequently, in instances where a Last and Final Recognized Obligation Payment Schedule is not filed, Tax Revenues will not be withdrawn from the Redevelopment Property Tax Trust Fund by the County Auditor -Controller and remitted to the Successor Agency with- out a duly approved and effective Recognized Obligation Payment Schedule to pay debt service on the Bonds and to pay other enforceable obligations for each applicable annual period. In the event the Succes- sor Agency were to fail to file a Recognized Obligation Payment Schedule as required, the availability of Tax Revenues to the Successor Agency could be adversely affected for such period. See "SECURITY FOR THE BONDS—Recognized Obligation Payment Schedules." In instances where a Last and Final Recognized Obligation Payment Schedule is not filed, if a suc- cessor agency does not submit a Recognized Obligation Payment Schedule within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations, the DOF may determine if any amount should be withheld by the county auditor - controller for payments for enforceable obligations from distribution to taxing entities, pending approval of a Recognized Obligation Payment Schedule. The county auditor -controller is then required to distrib- ute the portion of any of the sums withheld as described above to the affected taxing entities in accordance with applicable provisions of the Dissolution Act upon notice by the DOF that a portion of the withheld balances are in excess of the amount of enforceable obligations. The Dissolution Act in accordance with a Recognized Obligation Payment Schedule approved by the DOF. Although the Successor Agency current- ly has no plans to file a Last and Final Recognized Obligation Payment Schedule nothing in the Indenture prevents it from doing so in the future. For a description of the covenant made by the Successor Agency in the Indenture relating to the obligation to submit Recognized Obligation Payment Schedules on a timely basis, and the Successor Agency's history of submissions of Recognized Obligation Payment Schedules, see "THE DISSOLUTION ACT—Recognized Obligation Payment Schedules." AB 1484 also added provisions to the Dissolution Act implementing certain penalties in the event a successor agency does not timely submit a Recognized Obligation Payment Schedule as required. Specif- ically, an oversight board approved Recognized Obligation Payment Schedule must be submitted by the successor agency to the county auditor -controller and the DOF, no later than each February 1 for the sub- sequent annual period. If a successor agency does not submit a Recognized Obligation Payment Schedule by such deadlines, the city or county that established the redevelopment agency will be subject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the DOF. Additionally, a successor agency's administrative cost allowance is reduced by 25% if the successor agency does not sub- mit an oversight board -approved Recognized Obligation Payment Schedule within 10 days of the February 1 deadline, with respect to the Recognized Obligation Payment Schedule for the subsequent annual peri- od. -55- Challenges to Dissolution Act Several successor agencies, cities and other entities have filed judicial actions challenging the le- gality of various provisions of the Dissolution Act. One such challenge is an action filed on August 1, 2012, by Syncora Guarantee Inc. and Syncora Capital Assurance Inc. (collectively, "Syncora") against the State, the State Controller, the State Director of Finance, and the Auditor -Controller of San Bernardino County on his own behalf and as the representative of all other County Auditors in the State (Superior Court of the State of California, County of Sacramento, Case No. 34-2012-80001215). Syncora are mono- line financial guaranty insurers domiciled in the State of New York, and as such, provide credit enhance- ment on bonds issued by state and local governments and do not sell other kinds of insurance such as life, health, or property insurance. Syncora provided bond insurance and other related insurance policies for bonds issued by former California redevelopment agencies. The complaint alleged that the Dissolution Act, and specifically the "Redistribution Provisions" thereof (i.e., California Health and Safety Code sections 34172(d), 34174, 34177(d), 34183(a)(4), and 34188) violate the "contract clauses" of the United States and California Constitutions (U.S. Const. art. 1, §10, cl.1; Cal. Const. art. 1, §9) because they unconstitutionally impair the contracts among the former redevelopment agencies, bondholders and Syncora. The complaint also alleged that the Redistribution Provisions violate the "Takings Clauses" of the United States and California Constitutions (U.S. Const. amend. V; Cal Const. art. 1 § 19) because they unconstitutionally take and appropriate bondholders' and Syncora's contractual right to critical security mechanisms without just compensation. After hearing by the Sacramento County Superior Court on May 3, 2013, the Superior Court ruled that Syncora's constitutional claims based on contractual impairment were premature. The Superior Court also held that Syncora's takings claims, to the extent based on the same arguments, were also prem- ature. Pursuant to a Judgment stipulated to by the parties, the Superior Court on October 3, 2013, entered its order dismissing the action. The Judgment, however, provides that Syncora preserves its rights to reas- sert its challenges to the Dissolution Act in the future. The Successor Agency does not guarantee that any reassertion of challenges by Syncora or that the final results of any of the judicial actions brought by others challenging the Dissolution Act will not result in an outcome that may have a material adverse effect on the Successor Agency's ability to timely pay debt service on the Bonds. Reduction in Taxable Value Tax Revenues allocated to the Redevelopment Property Tax Trust Fund and thereby available to pay principal of and interest on the Bonds are determined by the amount of incremental taxable value in the Redevelopment Projects and the current rate or rates at which property in the Redevelopment Pro- jects is taxed. The reduction of taxable values of property in the Redevelopment Projects caused by eco- nomic factors beyond the Successor Agency's control, such as relocation out of the Redevelopment Pro- jects by one or more major property owners, sale of property to a non-profit corporation exempt from property taxation, or the complete or partial destruction of such property caused by, among other eventu- alities or other natural disaster, could cause a reduction in the tax increment available to pay debt service on the Bonds. Such reduction of tax increment available to pay debt service on the Bonds could have an adverse effect on the Successor Agency's ability to make timely payments of principal of and interest on the Bonds; this risk could be increased by the significant concentration of property ownership in the Re- development Projects. see "ALL REDEVELOPMENT PROJECTS—Largest Taxpayers." -56- As described in greater detail under the heading "PROPERTY TAXATION IN CALIFORNIA - Article XIIIA of the State Constitution," Article XIIIA provides that the full cash value base of real prop- erty used in determining taxable value may be adjusted from year to year to reflect the inflation rate, not to exceed a two percent increase for any given year, or may be reduced to reflect a reduction in the consumer price index, comparable local data or any reduction in the event of declining property value caused by damage, destruction or other factors (as described above). Such measure is computed on a calendar year basis. Any resulting reduction in the full cash value base over the term of the Bonds could reduce tax in- crement available to pay debt service on the Bonds. In addition to the other limitations on, and required application under the Dissolution Act of Tax Revenues on deposit in the Redevelopment Property Tax Trust Fund, the State electorate or Legislature could adopt a constitutional or legislative property tax reduction with the effect of reducing Tax Revenues allocated to the Redevelopment Property Tax Trust Fund and available to the Successor Agency. Alt- hough the federal and State Constitutions include clauses generally prohibiting the Legislature's impair- ment of contracts, there are also recognized exceptions to these prohibitions. There is no assurance that the State electorate or Legislature will not at some future time approve additional limitations that could reduce the tax increment available to pay debt service on the Bonds and adversely affect the source of re- payment and security of the Bonds. Limitations on Remedies The enforceability of the rights and remedies of the owners of the Bonds and the obligations of the Successor Agency may become subject to the following: the federal bankruptcy code and applicable bank- ruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; equitable principles which may limit the specific enforcement under state law of certain remedies: the exercise by the United States of America of the pow- ers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain excep- tional situations of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exer- cise of powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may en- tail risks of delay, limitation, or modification of their rights. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent con- veyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion. 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 Bond Owners. Risks to Real Estate Market The Successor Agency's ability to make payments on the Bonds will be dependent upon the eco- nomic strength of the Redevelopment Projects. The general economy of the Redevelopment Projects will be subject to all of the risks generally associated with urban real estate markets. Real estate prices and de- velopment may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development within the Redevelopment Projects could be adversely affected by limita- -57- tions of infrastructure or future governmental policies, including governmental policies to restrict or con- trol development. In addition, if there is a significant decline in the general economy of the Redevelop- ment Projects, the owners of property within the Redevelopment Projects may be less able or less willing to make timely payments of property taxes or may petition for reduced assessed valuation causing a delay or interruption in the receipt of Tax Revenues by the Successor Agency from the Redevelopment Pro- jects. See "ALL REDEVELOPMENT PROJECTS—Projected Available Tax Revenues and Estimated Debt Service Coverage" for a description of the projected debt service coverage on the Bonds. Concentration of Property Ownership Based on fiscal year 2015-16 locally assessed taxable valuations, the top ten taxable property own- ers in the Redevelopment Projects represent approximately 19.86% of the total fiscal year 2015-16 taxable value and 21.14% of the fiscal year 2015-16 incremental value. Some of these property owners have pend- ing assessed value appeals with respect to their property in the Redevelopment Projects. Although the bankruptcy, termination of operations or departure from one of the Redevelopment Projects by one of the largest property owners from the Redevelopment Projects could adversely impact the availability of Tax Revenues to pay debt service on the Bonds, the Successor Agency believes any such adverse impact is un- likely in light of the debt service coverage provided by fiscal year 2015-16 available tax increment. See "ALL REDEVELOPMENT PROJECTS—Projected Available Tax Revenues and Estimated Debt Ser- vice Coverage" for a description of the projected debt service coverage on the Bonds. Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the State Constitution provides that the full cash value of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduc- tion in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual infla- tionary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. The Successor Agency is unable to predict if any further adjustments to the full cash value base of real property within the Project Area, whether an increase or a reduction, will be realized in the future. Development Risks The general economy of a redevelopment project will be subject to all the risks generally associat- ed with real estate development. Projected development within a redevelopment project may be subject to unexpected delays, disruptions and changes. Real estate development operations may be adversely affect- ed by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development operations within a redevelopment project could be adversely affected by future governmental policies, including governmental policies to restrict or control development. If projected development in a redevel- opment project is delayed or halted, the economy of the redevelopment project could be affected. If such events lead to a decline in assessed values they could cause a reduction in incremental property tax reve- nues. The Successor Agency believes that a decline in development activity in the Redevelopment Pro- jects is unlikely to adversely impact its ability to pay debt service on the Bonds in light of the debt service -58- coverage provided by fiscal year 2015-16 Tax Revenues. See "ALL REDEVELOPMENT PROJECTS— Projected Available Tax Revenues and Estimated Debt Service Coverage." Future Land Use Regulations and Growth Control Initiatives In the past, citizens of a number of local communities in Southern California have placed measures on the ballot designed to limit the issuance of building permits or impose other restrictions to control the rate of future growth in those areas. It is possible that future initiatives could be enacted that could be applicable to the City and have a negative impact on the ability of developers in the Redevelop- ment Projects to complete any existing or proposed development. Bond Owners should assume that any event that significantly affects the ability to develop land in the City could cause the land values within the Redevelopment Projects to decrease substantially and could affect the willingness and ability of the own- ers of land within the Redevelopment Projects to pay property taxes when due. There can be no assurance that land development within the City will not be adversely affected by future governmental policies, including, but not limited to, government policies to restrict or control de- velopment. Under current State law, it is generally accepted that proposed development is not exempt from future land use regulations until building permits have been issued and substantial work has been performed and substantial liabilities have been incurred in good faith reliance on the permits prior to the adoption of such regulations. Assessment Appeals Property taxable values may be reduced as a result of Proposition 8, which reduces the assessed value of property, or of a successful appeal of the taxable value determined by the County Assessor. An appeal may result in a reduction to the County Assessor's original taxable value and a tax refund to the applicant property owner. A reduction in taxable values within the respective redevelopment project and the refund of taxes which may arise out of successful appeals by property owners will affect the amount of Pledged Tax Revenues and, potentially, Revenues under the Indenture. The Successor Agency has in the past experienced reductions in its Tax Increment Revenues as a result of assessment appeals. The actual impact to tax increment is dependent upon the actual revised value of assessments resulting from values determined by the County Assessment Appeals Board or through litigation and the ultimate timing of suc- cessful appeals. For a discussion of historical assessment appeals in the Redevelopment Projects and summary information regarding pending and resolved assessment appeals for the Successor Agency, see APPENDIX G—FISCAL CONSULTANT'S REPORT. Certain of the top ten largest property taxpayers in the Redevelopment Projects have pending property tax appeals. See "ALL REDEVELOPMENT PROJECTS—Assessment Appeals" and "ALL REDEVELOPMENT PROJECTS—Largest Taxpayers" for a description of pending appeals and the potential impact on Tax Revenues if the appeals are granted. Levy and Collection of Taxes The Successor Agency has no independent power to levy or collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could re- duce the tax increment available to pay debt service on the Bonds. -59- Although delinquencies in the payment of property taxes by the owners of land in the Redevelop- ment Projects, and the impact of bankruptcy proceedings on the ability of taxing agencies to collect prop- erty taxes, could have an adverse effect on the Successor Agency's ability to make timely payments on the Bonds, the Successor Agency believes any such adverse impact is unlikely in light of the debt service cov- erage provided by fiscal year 2015-16 net tax increment. See "ALL REDEVELOPMENT PROJECTS— Projected Available Tax Revenues and Estimated Debt Service Coverage" for a description of the pro- jected debt service coverage on the Bonds. Bankruptcy and Foreclosure The payment of the property taxes from which Tax Revenues are derived and the ability of the County to foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Coun- sel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the liens to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. Alt- hough such delay would increase the possibility of delinquent tax installments not being paid in full and thereby increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds, the Successor Agency believes any such adverse impact is unlikely in light of the debt service cov- erage provided by fiscal year 2015-16 net tax increment. See "ALL REDEVELOPMENT PROJECTS— Projected Available Tax Revenues and Estimated Debt Service Coverage" for a description of the debt service coverage on the Bonds. Estimated Revenues In estimating that net tax increment will be sufficient to pay debt service on the Bonds, the Suc- cessor Agency has made certain assumptions with regard to present and future assessed valuation in the Redevelopment Projects, future tax rates and percentage of taxes collected. The Successor Agency be- lieves these assumptions to be reasonable, but there is no assurance these assumptions will be realized and to the extent that the assessed valuation and the tax rates are less than expected, the net tax increment available to pay debt service on the Bonds will be less than those projected and such reduced net tax in- crement may be insufficient to provide for the payment of principal of, premium (if any) and interest on the Bonds. See "ALL REDEVELOPMENT PROJECTS—Projected Available Tax Revenues and Esti- mated Debt Service Coverage." Earthquake, Fire and Other Risks Natural and man-made disasters and hazards, including, without limitation, earthquakes, fires, floods, mudslides and other calamities, may have the effect of reducing tax increment revenues through reduction of aggregate assessed valuations within the boundaries of the Redevelopment Projects. Accord- ing to the City's General Plan, the City is located in a seismically active region and the Redevelopment Projects could be impacted by a major earthquake originating from the numerous faults in the area includ- ing the Whittier Fault and the Newport -Inglewood Fault. The City's General Plan lists groundshaking -60- and liquefaction as the primary seismic risk from a major earthquake along 3 faults located 8 miles or less away from the City. The City lies outside the boundaries of the identified 100 -year flood plain of the Santa Ana River and the Santiago River. However, like most of the County, the City lies within the dam inundation area for failure of the Prado Dam and Reservoir. The City's Emergency Operations Plan includes a hazard analysis for earthquake, flood, and fire risk required to comply with FEMA requirements for disaster relief funding. Hazardous Substances An environmental condition that may result in the reduction in the assessed value of parcels in the Redevelopment Projects would be the discovery of a hazardous substance that would limit the beneficial use of the property. In general, the owners and operators of an assessed 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 1980, sometimes referred to as CERCLA or the Superfund Act, is the most well known and widely applicable of these laws but California laws with regard to hazardous substances are also stringent and similar. Under many of the- se laws, the owner (or operator) is obligated to remedy a hazardous substance condition on the property whether or not the owner (or operator) has anything to do with creating or handling the hazardous sub- stance. The effect, therefore, should any of the assessed parcels be affected by a hazardous substance would be to reduce the marketability and value of the parcel by the costs of remedying the condition, since the purchaser, upon becoming owner, will become obligated, along with the seller, to remedy the condi- tion. In the case of the MCAS -Tustin Redevelopment Project, the federal government under the De- partment of the Navy pursuant to their responsibilities as the previous occupant of the site has certain specific responsibilities for certain known contamination issues related to previous military operations on the site and for unknown contamination issues that might arise in the future on the subject site. The Navy conducted an Environmental Baseline Study (EBS) had has developed a Base Realignment and Closure Cleanup Plan for the site and commenced remediation of military contaminants to support reuse of the property as proposed in the Redevelopment Plan. Hundreds of sites at the former military facility have been investigated, documented and remediated by the Department of the Navy, as needed and required under CERCLA. Agency staff actively participate with Navy staff and state and federal regulatory agen- cies (the United States Environmental Protection Agency, California Environmental Protection Agen- cy/Department of Toxic Substances Control, and the Regional Water Quality Control Board) in reviewing and commenting on Navy remediation documents and in assisting the Navy in selecting remedies that support rapid economic redevelopment and reuse of the site. The following excerpts from the Federal statutes apply to hazardous materials located on sites transferred by the Navy, and are provided for infor- mation purposes only. Comprehensive Environmental Responses Compensation and Liability Act (CERCLA, 42 USC 9620). "The United States is required, at the time of transfer of title of real property, to provide covenants and warranties which: Assure that all response action necessary to protect human health and the environment with respect to any substance remaining on the property on the date of transfer has been taken before the date of trans- fer, and commit to undertake any additional remedial action found to be necessary after the date of such transfer. " -61- The National Defense Authorization Action for Fiscal Year 1993 as amended (Public Law No. 102-434), Section 330. "The Secretary of Defense, in the case of Base Closure Property transferred to any state or political subdivision of a state or to any other person or entity that acquires ownership or control, shall hold harmless defend and indemnify that person or entity from any suit, claim, demand or action, liability, judgment, cost or other fee arising out of any claim for personal injury or property damage that results from, or is in any manner predicated upon, the release or threatened release of any hazardous substance, pollutant or contaminant or petroleum orpetroleum derivative as a result of Department of Defense activities. " These two provisions above establish the responsibility of the United States to select and imple- ment remedies which protect human health and the environment prior to transfer; to return and remedi- ate any subsequently discovered contamination; and to hold a subsequent transferee harmless for certain consequences of pre -transfer of Department of Defense activities. Each quitclaim deed from the Navy is also expected to contain additional covenant language with regard to the above provisions, as well as the Finding of Suitability to Transfer (FOST) or Finding of Suitability to Lease (FOSL) and any Lease In Fur- therance of Conveyance (LIFOC) provided by the Navy for the identified carve -out areas not yet ready for conveyance by the federal government. An additional environmental condition that may result in the reduction in the assessed value of property would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the Redevelopment Projects. In general, the owners and operators of property may be re- quired by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required to remedy a hazardous substance condition of proper- ty whether or not the owner or operator has anything to do with creating or handling the hazardous sub- stance. The effect, therefore, should any of the property within the Redevelopment Projects be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of rem- edying the condition. Changes in the Law There can be no assurance that the California electorate will not at some future time adopt initia- tives or that the Legislature will not enact legislation that will amend the Dissolution Act, the Redevelop- ment Law or other laws or the Constitution of the State resulting in a reduction of tax increment available to pay debt service on the Bonds. Loss of Tax -Exemption As discussed under the caption "TAX MATTERS," interest on the Bonds could become includ- able in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of future acts or omissions of the Successor Agency in violation of its covenants in the Inden- ture. In addition, current and future legislative proposals, if enacted into law, may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation by, for example, changing the current exclusion or deduction rules to limit the aggregate amount of interest on state and local government bonds that may be treated as tax exempt by individuals. Should such an event of taxability occur, the Bonds are not subject to special redemption and will remain outstanding until maturity or until redeemed under other provisions set forth in the Indenture. -62- Secondary Market There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market exists, that the Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, second- ary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. TAX MATTERS Federal tax law contains a number of requirements and restrictions which apply to the Bonds, in- cluding investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The Successor Agency has covenanted to comply with all requirements that must be satisfied in order for the interest on the Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Subject to the Successor Agency's compliance with the above referenced covenants, under pre- sent law, in the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, interest on the Bonds is excludable from the gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In rendering its opinion, Bond Counsel will rely upon certifications of the Successor Agency with respect to certain material facts within the Successor Agency's knowledge. Bond Counsel's opinion rep- resents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result. The Code includes provisions for an alternative minimum tax ("AMT") for corporations in addi- tion to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation's alter- native minimum taxable income ("AMTI"), which is the corporation's taxable income with certain ad- justments. One of the adjustment items used in computing the AMTI of a corporation (with certain ex- ceptions) is an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss de- duction). "Adjusted current earnings" would include certain tax exempt interest, including interest on the Bonds. Ownership of the Bonds may result in collateral federal income tax consequences to certain tax- payers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax exempt obligations. Prospective purchasers of the Bonds should consult their tax advisors as to applicability of any such collateral consequences. -63- The issue price (the "Issue Price") for the Bonds is the price at which a substantial amount of the Bonds is first sold to the public. The Issue Price of the Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the cover page hereof. Owners of Bonds who dispose of Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase Bonds in the initial public offering, but at a price different from the Issue Price or purchase Bonds subsequent to the initial public offering should consult their own tax advisors. If a Bond is purchased at any time for a price that is less than the Bond's stated redemption price at maturity, the purchaser will be treated as having purchased a Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Bond is disposed of (to the extent such ac- crued discount does not exceed gain realized) or, at the purchaser's election, as it accrues. The applicabil- ity of the market discount rules may adversely affect the liquidity or secondary market price of such Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Bonds. An investor may purchase a Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as "bond premium" and must be amortized by an investor on a constant yield basis over the remaining term of the Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax exempt bond. The amortized bond premium is treated as a reduction in the tax exempt interest received. As bond premium is amortized, it reduces the investor's basis in the Bonds. Investors who purchase a Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Bond's basis for purposes of computing gain or loss in connection with the sale, exchange, redemp- tion or early retirement of the Bonds. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enact- ment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. The Internal Revenue Service (the "Service") has an ongoing program of auditing tax exempt ob- ligations to determine whether, in the view of the Service, interest on such tax exempt obligations is in- cludible in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures the Service may treat the Successor Agency as a taxpayer and the Bond owners may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome. Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt obliga- tions, including the Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Bond owner who is notified by the Service of a failure to report any interest or dividends required to -64- be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes. In the further opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding the applicability of any such state and local taxes. The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of the Bonds is set forth in APPENDIX B—FORM OF OPINION OF BOND COUNSEL—Bonds. VERIFICATION OF MATHEMATICAL COMPUTATIONS The Verification Agent will examine the arithmetical accuracy of certain computations included in the schedules relating to the refunding of the Former Agency Obligations. See "REFUNDING PLAN." The Verification Agent has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. UNDERWRITING Bonds. The Bonds are being purchased by Piper Jaffray & Co. (the "Underwriter"). The Under- writer has agreed to purchase the Bonds at a price of $ (the "Purchase Price") (being the principal amount of the Bonds of $ , less an Underwriter's discount of $ , and plus a net original issue premium of $ ). The Underwriter will purchase all of the Bonds if any are purchased. The Underwriter may offer and sell Bonds to certain dealers and others at a price lower than the offering price stated on the inside cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter. The Underwriter has entered into a distribution agreement (the "Distribution Agreement") with Charles Schwab & Co., Inc. ("CS&Co.") for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Distribution Agreement, CS&Co. will purchase the Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells. MUNICIPAL ADVISOR Fieldman Rolapp & Associates, Irvine, California, has served as municipal advisor (the "Munici- pal Advisor") to the Successor Agency in connection with the issuance of the Bonds. The Municipal Ad- -65- visor is not obligated to undertake, and has not undertaken to make, an independent verification or to as- sume responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement. The fees of the Municipal Advisor are contingent upon the sale and delivery of the Bonds. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. LEGAL OPINIONS The final approving opinions of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, will be furnished to the purchaser at the time of delivery of the Bonds. The proposed form of Bond Counsel's final approving opinion with respect to the Bonds is attached hereto in APPENDIX B—FORM OF OPINION OF BOND COUNSEL. In addition, certain legal matters will be passed on by Quint & Thim- mig LLP, as Disclosure Counsel, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Underwriter's Counsel. Certain legal matters will be passed on for the Suc- cessor Agency by Woodruff, Spradlin & Smart, Costa Mesa, California, general counsel to the Successor Agency. Compensation paid to Bond Counsel, Disclosure Counsel and Underwriter's Counsel is contingent upon the sale and delivery of the Bonds. LITIGATION There is no action, suit or proceeding known to the Successor Agency to be pending and notice of which has been served upon and received by the Successor Agency, or threatened, restraining or enjoining the execution or delivery of the Bonds or the Indenture or in any way contesting or affecting the validity of the foregoing or any proceedings of the Successor Agency taken with respect to any of the foregoing. See, however, "RISK FACTORS—Challenges to Dissolution Act." RATING S&P is expected to assign the rating of "AA" (stable outlook) to the Bonds based on the issuance of the Municipal Bond Insurance Policy by the Municipal Bond Insurer at the time of delivery of the Bonds. See "MUNICIPAL BOND INSURANCE." In addition, S&P has assigned the underlying rating of CC" (stable outlook) to the Bonds without regard to the issuance of the Municipal Bond Insurance Policy. These ratings reflect only the views of S&P and an explanation of the significance of such ratings may be obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by S&P, if in the judgment of the S&P, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. CONTINUING DISCLOSURE The Successor Agency has covenanted for the benefit of holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the Successor Agency (the -66- "Annual Report") by not later than March 31 after the end of the Successor Agency's fiscal year (the cur- rent end of the Successor Agency's fiscal year is on June 30), commencing with the report for the 2015-16 fiscal year, and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the Successor Agency with the Municipal Securities Rulemaking Board (the "MSRB"). The notices of enumerated events will be filed by the Successor Agency with the MSRB. The specific nature of the information to be made available and to be contained in the notices of material events is summarized below under the caption APPENDIX D—FORM OF CONTINUING DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2 - 12(b)(5) (the "Rule"). The Former Agency previously entered into disclosure undertakings under the Rule in connection with the issuance of the Former Agency Obligations. [CONTINUING DISCLOSURE HISTORY] AUDITED FINANCIAL STATEMENTS The City's Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2015 (the "City CAFR") is attached as APPENDIX E—THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF TUSTIN FOR THE FISCAL YEAR ENDED JUNE 30, 2015. The City CAFR includes the Successor Agency's audited financial statements for the fiscal year ended June 30, 2015. The Successor Agency's audited financial statements were audited by White Nelson Diehl Evans LLP (the "Auditor"). The Auditor has not been asked to consent to the inclusion of the City CAFR in this Official Statement and has not reviewed this Official Statement. As described in "SECURITY FOR THE BONDS—Limited Obligation," the Bonds are payable from and secured by a pledge of Tax Revenues and the Bonds are not a debt of the City. APPENDIX E— THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF TUSTIN FOR THE FISCAL YEAR ENDED JUNE 30, 2015, is included in this Official Statement only because it includes the Successor Agency's audited financial statements. MISCELLANEOUS All of the preceding summaries of the Indenture, the Redevelopment Law, the Dissolution Act, other applicable legislation, the Redevelopment Plans, agreements and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Successor Agency for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. -67- The execution and delivery of this Official Statement by its Executive Director has been duly au- thorized by the Successor Agency. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY UZ -68- Executive Director APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Appendix A Page 1 THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX B FORM OF OPINION OF BOND COUNSEL [Letterhead of Quint & Thimmig LLP] [Closing Date] Successor Agency to the Tustin Community Redevelopment Agency 300 Centennial Way Tustin, California 92780 OPINION.• $52,745,000* Successor Agency to the Tustin Community Redevelopment Agency (Or- ange County, California) Tax Allocation Refunding Bonds, Series 2016 Members of the Successor Agency: We have acted as bond counsel in connection with the issuance by the Successor Agency to the Tustin Community Redevelopment Agency (the "Successor Agency"), of its $52,745,000* Successor Agency to the Tustin Community Redevelopment Agency (Orange County, California) Tax Allocation Refunding Bonds, Series 2016 (the "Bonds"), pursuant to the provisions of section 34177.5 of the California Health and Safety Code and section 53580 et seq. of the California Government Code (collectively, the "Refunding Bond Law"), resolutions adopted by the Successor Agency on June 7, 2016, and , 2016, and an indenture of trust, dated as of August 1, 2016, by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Indenture"). In connection with this opinion, we have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Successor Agency contained in the Indenture and in the certified proceedings and certifica- tions of public officials and others furnished to us without undertaking to verify the same by independent investiga- tion. Based upon the foregoing we are of the opinion, under existing law, as follows: 1. The Successor Agency is duly created and validly existing as a public body, corporate and politic, with the power to enter into the Indenture, perform the agreements on its part contained therein and issue the Bonds. 2. The Indenture has been duly approved by the Successor Agency and constitutes a valid and binding obli- gation of the Successor Agency enforceable in accordance with its terms. 3. Pursuant to the Refunding Bond Law, the Indenture creates a valid lien on the funds pledged by the In- denture for the security of the Bonds on a parity with any Parity Debt that may be issued under and as such term is defined in the Indenture. 4. The Bonds have been duly authorized, executed and delivered by the Successor Agency and are valid and binding special obligations of the Successor Agency, payable solely from the sources provided therefor in the Inden- ture. * Preliminary, subject to change. Appendix B Page 1 5. Subject to the Successor Agency's compliance with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax prefer- ence in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such covenants could cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. 6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opin- ion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. Our opinion represents our legal judgment based upon such review of the law and the facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, Appendix B Page 2 APPENDIX C BOOK -ENTRY ONLY SYSTEM The information in this Appendix C concerning The Depository Trust Company ("DTC"), New York, New York, and DTC's book -entry system has been obtained from DTC and the Successor Agency takes no respon- sibility for the completeness or accuracy thereof. The Successor Agency cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of inter- est, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered cer- tificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corpo- rate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry trans- fers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust compa- nies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Secu- rities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information set forth on such website is not incorporated herein by reference. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will re- ceive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to re- ceive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Partici- pants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their owner- ship interests in Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. Appendix C Page 1 To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Benefi- cial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will re- main responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of signifi- cant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provid- ed directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being re- deemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds un- less authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Successor Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium (if any), and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Partici- pants' accounts upon DTC's receipt of funds and corresponding detail information from the Successor Agency or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the re- sponsibility of such Participant and not of DTC, the Trustee, or the Successor Agency, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal, premium (if any), and interest payments with respect to the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representa- tive of DTC) is the responsibility of the Successor Agency or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Successor Agency or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the Bonds are required to be printed and delivered. The Successor Agency may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, representing the Bonds will be printed and delivered to DTC in accordance with the provisions of the Indenture. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the Successor Agency believes to be reliable, but the Successor Agency takes no responsibility for the accuracy thereof. Appendix C Page 2 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and de- livered by the SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY (the "Successor Agency") in connection with the issuance of $52,745,000* aggregate principal amount of Successor Agency to the Tustin Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2016 (the "Bonds"). The Bonds are being issued pursuant to an Indenture of Trust, dated as of August 1, 2016 (the "Inden- ture"), by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). The Bonds shall be secured by a pledge, charge and lien upon Tax Revenues (as such term is de- fined in the Indenture). The Successor Agency covenants and agrees as follows: Section 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capital- ized term used in this Disclosure Certificate, unless otherwise defined in this Section 1, the following capitalized terms shall have the following meanings when used in this Disclosure Certificate: "Annual Report" shall mean any Annual Report provided by the Successor Agency pursuant to, and as de- scribed in, Sections 3 and 4 of this Disclosure Certificate. "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 Bonds (including persons holding Bonds through nominees, de- positories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "Dissemination Agent" shall mean Applied Best Practices, LLC, or any successor Dissemination Agent des- ignated in writing by the Successor Agency and which has filed with the Successor Agency a written acceptance of such designation. In the absence of such a designation, the Successor Agency shall act as the Dissemination Agent. "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" shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate. "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. "Participating Underwriter" shall mean the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds. "Rule" shall mean Rule 15c2-12 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 Certificate. This Disclosure Certificate is being executed and delivered by the Successor Agency for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5). * Preliminary, subject to change. Appendix D Page 1 Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The Successor Agency shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the Successor Agency's fiscal year (which currently ends on June 30), com- mencing with the report for the 2015-16 Fiscal Year, which is due not later than March 31, 2017, 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 Certificate. 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 Certificate; provided that the audited financial statements of the Successor Agency may be submit- ted separately from the balance of the Annual Report and later than the date required above for the filing of the An- nual Report if they are not available by that date. (b) Change of Fiscal Year. If the Successor Agency'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 nine 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 Successor Agency shall provide the Annual Report to the Dissemination Agent (if other than the Suc- cessor Agency). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissem- ination Agent shall notify the Successor Agency. If the Dissemination Agent has not received an Annual Report and Certification by 6:00 p.m. Eastern time on annual filing date (or, if such annual filing date falls on a Saturday, Sunday or holiday, then the first business day thereafter) for the Annual Report, a failure to file event shall have occurred and the Successor Agency irrevocably directs the Dissemination Agent to immediately send a notice to the MSRB in substantially the form attached as Exhibit A without reference to the anticipated filing date for the Annual Report. (d) Report of Non -Compliance. If the Successor Agency 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 Succes- sor Agency shall send, in a timely manner, a notice to EMMA substantially in the form attached hereto as Exhibit A. If the Successor Agency is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemina- tion Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send, in a timely manner, 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 Successor Agency, file a report with the Successor Agency certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the fol- lowing: (a) Financial Statements. Audited financial statements of the Successor Agency for the preceding fiscal year, prepared in accordance with generally accepted accounting principles. If the Successor Agency's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annu- al Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Appendix D Page 2 (b) Other Annual Information. To the extent not included in the audited financial statements of the Succes- sor Agency, the Annual Report shall also include financial and operating data with respect to the Successor Agency for the current fiscal year, as follows: [TO COME] (c) Cross References. Any or all of the items listed above may be included by specific reference to other doc- uments, including official statements of debt issues of the Successor Agency or related public entities, which are available to the public on EMMA. The Successor Agency 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 para- graph (b) of this Section 4, the Successor Agency 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 mis- leading. Section 5. Reporting of Listed Events. (a) Reportable Events. The Successor Agency shall, or shall cause the Dissemination Agent (if not the Suc- cessor Agency) 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 juris- diction 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 reorgani- zation, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substan- tially all of the assets or business of the obligated person. Appendix D Page 3 (b) Material Reportable Events. The Successor Agency shall give, or cause to be given, notice of the occur- rence 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. (5) The consummation of a merger, consolidation, or acquisition involving an obligated per- son 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 Successor Agency shall, or shall cause the Dissemination Agent (if not the Succes- sor Agency) 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 fore- going, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsec- tion any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Inden- ture. Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The Successor Agency's obligations under this Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such ter- mination occurs prior to the final maturity of the Bonds, the Successor Agency 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 Successor Agency may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate and may discharge any such agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the Successor Agency, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Successor Agency pursuant to this Disclosure Certificate. 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 Successor Agency. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Certificate and has no liability to any per- son, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemina- tion Agent or any affiliate thereof may have any fiduciary or banking relationship with the Successor Agency 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 Successor Agency. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the Suc- cessor Agency for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the Successor Agency from time to time and all expenses, legal fees and expenses and ad- vances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Appendix D Page 4 Agent shall not be deemed to be acting in any fiduciary capacity for the Successor Agency, owners or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the Successor Agency or an opinion of nationally recognized bond counsel. The Dis- semination Agent may at any time resign by giving written notice of such resignation to the Successor Agency. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Successor Agency may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amend- ment so requested by the Successor Agency that does not impose any greater duties or risk of liability on the Dissem- ination Agent), and any provision of this Disclosure Certificate 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 require- ments, 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 Certificate is amended or any provision of this Disclosure Certificate is waived, the Suc- cessor Agency 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 pre- sented by the Successor Agency. 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 un- der 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 Certificate shall be deemed to prevent the Successor Agency from disseminating any other information, using the means of dissemination set forth in this Dis- closure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Successor Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Successor Agency shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Successor Agency to comply with any provision of this Disclosure Certificate, any Certificate owner or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Successor Agency to comply with their obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the Successor Agency to comply with this Disclosure Certificate shall be an action to com- pel performance. Appendix D Page 5 Section 12. Duties, Immunities and Liabilities of Dissemination Agent. Article VIII of the Indenture is here- by made applicable to this Disclosure Certificate as if this Disclosure Certificate was (solely for this purpose) con- tained in the Indenture. The Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Trustee thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and no implied covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent, and the Successor Agency agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have the same rights, privi- leges and immunities hereunder as are afforded to the Trustee under the Indenture. The obligations of the Successor Agency under this Section 12 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Successor Agen- cy, the Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] ACKNOWLEDGED: APPLIED BEST PRACTICES, LLC, as Dis- semination Agent LIS Authorized Officer SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY By Appendix D Page 6 Executive Director EXHIBIT A NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Successor Agency to the Tustin Community Redevelopment Agency Names of Issue: Successor Agency to the Tustin Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2016 Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Issues as required by the Continuing Disclosure Certificate, dated [Closing Date], furnished by the Obligor in con- nection with the Issue. The Obligor anticipates that the Annual Report will be filed by Date: APPLIED BEST PRACTICES, LLC, as Dissemina- tion Agent By Authorized Officer Appendix D Page 7 THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX E COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF TUSTIN FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The Auditor was not requested to consent to the inclusion of its report in this Appendix E and it has not undertaken to update financial statements included in this Appendix E. No opinion is expressed by the Auditor with respect to any event subsequent to its report. Appendix E THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX F CITY OF TUSTIN AND ORANGE COUNTY SUPPLEMENTAL INFORMATION The following information concerning the City of Tustin and Orange County is included only for the purpose of sup- plying 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. Although reasonable efforts have been made to include up-to-date information in this Appendix F, some of the information is not current due to delays in reporting of information by various sources. It should not be assumed that the trends indicated by the following data would continue beyond the specific periods reflected herein. 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. The 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 Vie- jo, which was incorporated in 2001. While most population centers in the United States tend to be identified by a major city, there is no defined urban center in the County. The County is mostly suburban except for some tradition- ally 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 Coun- cil/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 2012 77,333 3,069,454 2013 79,534 3,103,654 2014 79,803 3,127,403 2015 80,968 3,151,910 2016 82,717 3,183,011 Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-2016, with 2010 Census Bench- mark. Appendix F Page 1 Employment years: The following table summarizes the historical numbers of workers by industry in the County for the last five ORANGE COUNTY SANTA ANA ANAHEIM IRVINE MD Labor Force and Industry Employment Annual Averages by Industry Total, All Industries Total Farm Mining and Logging Construction Manufacturing Wholesale Trade Retail Trade Transportation, Warehousing & Utilities Information Financial Activities Professional & Business Services Educational & Health Services Leisure & Hospitality Other Services Government 2011 2012 2013 2014 2015(l) 1,370,400 1,385,600 1,422,400 1,462,400 1,498,700 3,200 2,800 2,900 2,800 2,500 600 600 600 700 700 69,200 71,300 76,800 82,000 90,400 154,300 158,300 158,000 157,400 156,900 77,300 77,200 79,400 80,900 81,000 142,600 144,000 145,500 148,500 151,200 27,500 28,000 27,500 26,500 26,900 23,800 24,300 25,000 24,500 25,500 10 4, 800 10 8, 300 113,100 113,600 116,800 247,700 260,600 267,300 276,600 285,400 172,000 177,000 186,000 190,800 198,800 174,000 180,600 187,800 194,500 204,000 43,200 44,600 45,600 47,300 48,800 149,300 147,900 148,700 152,200 156,200 Source: California Employment Development Department, based on March 2015 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons in- volved 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. Appendix F Page 2 The following tables summarize historical employment and unemployment for the County, the State of Cal- ifornia and the United States for the past five years: ORANGE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) 2011-2015 Unemployment Year Area Labor Force Employment Unemployment Rate 1�1 2011 Orange County 1,546,400 1,406,400 140,000 9.1% California 18,419,500 16,260,100 2,159,400 11.7 United States 153,617,000 139,869,000 13,747,000 8.9 2012 Orange County 1,564,500 1,441,400 123,100 7.9 California 18,554,800 16,630,100 1,924,700 10.4 United States 154,975,000 142,469,000 12,506,000 8.1 2013 Orange County 1,569,200 1,465,900 103,300 6.6 California 18,671,600 17,002,900 1,668,700 8.9 United States 155,389,000 143,929,000 11,460,000 7.4 2014 Orange County 1,578,200 1,491,800 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 2015 (2) Orange County 1,597,100 1,525,600 71,500 4.5 California 18,981,800 17,798,600 1,183,200 6.2 United States 157,130,000 148,834,000 146,411,000 5.3 Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-2015, and US Department of Labor. (1) The unemployment rate is computed from unrounded data, therefore, it may differ from rates computed from rounded figures available in this table. (2) Latest available full -year data. Major Employers The table below sets forth the principal employers of the City and the County. CITY of TUSTIN 2015 Principal Employers Source: City of Tustin 2015 Comprehensive Annual Financial Report. Appendix F Page 3 % of Total Employer Employees Employment Tustin Unified School District 1,449 3.39% Rockwell Collins Inc 600 1.40 Ricoh Electronics Inc 500 1.17 Costco 450 1.05 City of Tustin 372 .87 Newport Specialty 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 4,824 10.27 Source: City of Tustin 2015 Comprehensive Annual Financial Report. Appendix F Page 3 ORANGE COUNTY 2015 Principal Employers Source: Orange County 2015 Comprehensive Annual Financial Report. Construction Activity The following tables reflects the five-year history of building permit valuation for the City and the County: % of Total Employer Employees Employment Walt Disney Co. 27,000 1.69% UC Irvine 22,385 1.40 Orange County 18,135 1.13 St. Joseph Health System 12,227 .76 Kaiser Permanente 7,000 .44 Boeing Co. 6,890 .43 Walmart 6,000 .38 Memorial Care Health System 5,650 .35 Bank of America 5,500 .34 Target Corporation 5,400 .34 Totals 116,187 7.26 Source: Orange County 2015 Comprehensive Annual Financial Report. Construction Activity The following tables reflects the five-year history of building permit valuation for the City and the County: CITY of TUSTIN Building Permits and Valuation (Dollars in Thousands) 2011 2012 2013 2014 2015(,) Permit Valuation: New Single-family 20,613 19,200 - 919 87,618 New Multi -family 25,667 6,570 105,137 - - Res. Alterations/Additions 5,041 1,785 2,171 1,780 2,846 Total Residential 51,321 27,555 107,309 2,700 90,464 Total Nonresidential 14,606 25,301 141,259 21,188 21,801 Total All Building 65,927 52,857 248,569 23,889 112,266 New Dwelling Units: Single Family 94 70 - 3 241 Multiple Family 237 27 758 - - Total 331 97 758 3 241 Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. Appendix F Page 4 ORANGE COUNTY Building Permits and Valuation (Dollars in Thousands) Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. 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 2011 2012 2013 20140) 20150) Permit Valuation: 374,766 474,101 509,977 119,143 130,725 New Single-family 518,681 752,931 1,237,994 1,234,498 1,288,428 New Multi -family 378,559 438,118 994,873 985,454 1,052,113 Res. Alterations/Additions 450,105 363,854 363,674 413,518 486,341 Total Residential 1,347,345 1,544,904 2,596,542 2,633,471 2,826,883 Total Nonresidential 1,188,198 1,271,034 4,208,209 2,000,167 2,203,105 Total All Building 2,535,543 2,825,938 6,804,752 4,633,639 5,029,988 New Dwelling Units: 447,231# 1,299,819 1,378,857 1,507,294 1,633,046 Single Family 1,908 2,438 3,889 3,646 3,667 Multiple Family 2,897 3,725 6,564 6,990 7,230 Total 4,805 6,163 10,453 10,636 10,897 Source: Construction Industry Research Board: "Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. 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 20130) 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 1,546,136 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. Appendix F Page 5 ORANGE COUNTY Taxable Sales, 2009-2013 (Dollars in thousands) 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. 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. Appendix F Page 6 2009 2010 2011 2012 20130) Retail and Food Services Motor Vehicles and Parts Dealers 4,902,480 5,244,266 5,777,582 6,551,466 7,147,516 Furniture and Home Furnishings Stores 850,889 869,868 909,455 964,018 1,050,308 Electronics and Appliance Stores 1,978,869 2,058,383 2,319,992 2,536,415 2,488,963 Bldg Mtrl. and Garden Equip. and Supplies 2,039,686 2,112,467 2,267,363 2,351,574 2,581,968 Food and Beverage Stores 1,894,642 1,911,192 1,990,893 2,056,803 2,111,209 Health and Personal Care Stores 784,067 824,719 894,003 948,220 983,067 Gasoline Stations 3,383,678 3,801,651 4,826,228 5,063,762 4,706,666 Clothing and Clothing Accessories Stores 2,742,626 2,923,680 3,164,857 3,510,757 3,764,088 Sporting Goods, Hobby, Book and Music Stores 1,074,579 1,075,996 1,101,159 1,133,702 1,176,097 General Merchandise Stores 4,376,154 4,527,201 4,771,143 5,026,911 5,169,057 Miscellaneous Store Retailers 1,625,880 1,611,739 1,656,162 1,738,855 1,766,848 Nonstore Retailers 484,692 481,563 459,841 635,707 893,254 Food Services and Drinking Places 5,024,379 5,109,383 5,449,177 5,853,267 6,186,883 Total Retail and Food Services 31,162,619 32,552,107 35,587,795 38,372,456 40,025,929 All Other Outlets 14,550,164 15,115,073 16,143,344 16,858,156 17,565,288 Totals All Outlets 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. 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. Appendix F Page 6 CITY OF TUSTIN, ORANGE COUNTY, STATE and UNITED STATES Effective Buying Income Source: The Nielsen Company (US), Inc. Education The City is served by the Tustin Unified School District, which operates 18 elementary schools, 5 middle schools, 4 high schools and alternative and adult education programs, totaling over 22,000 students. In addition, there are 10 private and parochial schools serving the community. Eight community colleges are located from 5 to 20 miles from the City. The Rancho Santiago Community College District (RSCCD) and South Orange County Community College District (SOCCCD) operate two facilities with the City; The RSCCCD operates the Regional Law Enforcement Training Facility and the SOCCCD operates and Advanced Technology Education Campus. Chapman University, CSU -Fullerton, Concordia College, UC -Irvine among several institutions also offer college and graduate level courses of study within easy reach of the City. Health Care The closest hospital services provided to the City are located on the City's northwesterly boundary within the City of Santa Ana at Western Medical Center. Western Medical Center is a 283 -licensed bed acute care hospital designated as a Level II trauma center and centrally located in the heart of the County. The trauma center services are composed of physicians in the specialties of General Surgery, Emergency Medicine, Anesthesiology, Orthopedic Surgery and Neurosurgery. The Trauma Services department at Western Medical provides immediate care and on-going follow-up for designated trauma patients in a collaborative setting. Multidisciplinary practice planning, coordinating and facilitating total care of all trauma admissions is under the di - Appendix F Page 7 Total Effective Buying Income Median Household Year Area (000's Omitted) Effective Buying Income 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 2015 City of Tustin 2,237,298 62,642 Orange County 90,963,458 64,420 California 981,231,666 53,589 United States 7,757,960,399 46,738 Source: The Nielsen Company (US), Inc. Education The City is served by the Tustin Unified School District, which operates 18 elementary schools, 5 middle schools, 4 high schools and alternative and adult education programs, totaling over 22,000 students. In addition, there are 10 private and parochial schools serving the community. Eight community colleges are located from 5 to 20 miles from the City. The Rancho Santiago Community College District (RSCCD) and South Orange County Community College District (SOCCCD) operate two facilities with the City; The RSCCCD operates the Regional Law Enforcement Training Facility and the SOCCCD operates and Advanced Technology Education Campus. Chapman University, CSU -Fullerton, Concordia College, UC -Irvine among several institutions also offer college and graduate level courses of study within easy reach of the City. Health Care The closest hospital services provided to the City are located on the City's northwesterly boundary within the City of Santa Ana at Western Medical Center. Western Medical Center is a 283 -licensed bed acute care hospital designated as a Level II trauma center and centrally located in the heart of the County. The trauma center services are composed of physicians in the specialties of General Surgery, Emergency Medicine, Anesthesiology, Orthopedic Surgery and Neurosurgery. The Trauma Services department at Western Medical provides immediate care and on-going follow-up for designated trauma patients in a collaborative setting. Multidisciplinary practice planning, coordinating and facilitating total care of all trauma admissions is under the di - Appendix F Page 7 rection of the Trauma Medical Director and the Associate Medical Director. The program operates 24 hours, 7 days a week and cares for a total spectrum of patients and of all ages. Emergency care is also provided for other conditions, including chronic medical problems and minor inju- ries and illnesses. The hospital provides emergency services for more than 20,000 patients per year. Other Community Facilities In November 2009, the City completed construction of an expanded new 32,000 square foot Tustin Li- brary. County Public Libraries leases the new Tustin Library from the City and operates the building through the County's library system services. The system contains over 124,195 volumes, and a collection of recordings, tapes and films. Transportation The Santa Ana Freeway (Interstate 5), a major northwest -southeast corridor, crosses through the central section of the City, the Costa Mesa Freeway (State Route 55) crosses north -south along the western edge of the City and the West Leg of the Eastern Transportation Corridor (State Route 261) is located to the east of the City's boundaries, with a transitional area of the West Leg of the Eastern Transportation Corridor traversing the southerly portion of the City adjacent to jamboree Road. The City is also within minutes of the San Diego Freeway (Interstate 405, traveling north to the Los Angeles International Airport), the Riverside Freeway (State Route 91, traveling east - west) to the north and the Orange Freeway (State Route 57, traveling north -south) to the west and the San Joaquin Toll Road. Air cargo and passenger flight services are provided at several nearby facilities, including John Wayne Air- port in Orange County (2 miles south) and the Ontario International Airport (50 miles northeast). The Orange County Transportation Authority (OCTA) also serves the area. Greyhound Bus Lines provides service to other local areas and additional transcontinental service. Commercial and passenger rail services are provided by Union Pacific and an Amtrak passenger station is located approximately two miles from the City. Trucking services are provided through numerous common and con- tract carriers. The Port of Long Beach is approximately 45 miles to the northwest and the Port of Los Angeles is approxi- mately 50 miles northwest of the City. Both ports are within easy freeway access. Recreation The City operates the Clifton C. Miller Community Center, the Tustin Area Senior Center, the Columbus - Tustin Sports Fields and Gymnasium, and the Tustin Family Youth Center. In addition, there are more than a dozen parks and recreational facilities located throughout the City. City residents are offered the use of the City's facilities depending on their intended purpose for both active recreational facilities and passive open space uses such as ball fields, multi-purpose fields and open turf, game courts, tot lots, and picnic facilities, natural open pace, pedestrian and bicycle paths, community buildings and on-site parking. The County also currently operates the Peters Canyon Regional Park within the northwesterly portion of the City, an 84 acre urban regional park is proposed in the MCAS Tustin Project Area, and the County maintains a coordinated system of trails including bikeways, equestrian trails and hiking trails within the City. Tustin also has many private recreational facilities. While some facilities (e.g., pri- vate parks, tennis courts, swimming pools) are available only to residents of a general area or development, others are available to the public for a fee (the Tustin Ranch Golf Course), In addition, the City is centrally located for a wide variety of entertainment and recreational activities, including, among many others, Disneyland and Knott's Berry Farm. The ocean to the south along the Southern California coastline offer a variety of water sports and the moun- Appendix F Page 8 tains to the north and east provide other kinds of outdoor recreational activities, including hiking, lake recreation, and water skiing. Appendix F Page 9 THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX G FISCAL CONSULTANT'S REPORT Appendix G THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX H SPECIMEN MUNICIPAL BOND INSURANCE POLICY Appendix H THIS PAGE INTENTIONALLY LEFT BLANK